EDA’s two largest grant assistance programs are Public Works and EAA. EDA Offices Did Not Consistently Document Funding Decisions

EDA has a history of inconsistently documenting the results of committee  meetings in which proposed projects are recommended for funding. In March 2012, EDA implemented new procedures in response to the  Commerce OIG’s December 2000 recommendations. We reviewed a random and generalizable sample of IRC  record templates for 74 Public Works and EAA projects that EDA regional  offices funded in fiscal year 2012, and we estimate that the regional  offices filled out the template in its entirety for only 46 percent of all  projects funded that year. Standards for Internal Control in the Federal Government requires that all  transactions and other significant events be clearly documented and the  documentation be readily available for examination. Until EDA ensures that its regional offices  consistently and fully complete an IRC record template for all proposed  projects considered for funding, EDA will not have adequate assurance  that its funding decisions are consistent and transparent. Project Counties Were Generally Distressed Relative to National and State Averages and Located in Nonrural Areas

Based on our analysis of the economic distress characteristics of the  counties where EDA funded projects under its Public Works and EAA  programs in fiscal years 2007 and 2011, we found that counties where  EDA funded projects generally had lower per capita income and higher  unemployment rates than national and state averages. Furthermore,  some projects that EDA funded under the Public Works and EAA  programs in fiscal years 2007 and 2011 had a special need, as defined by  EDA. In addition, we found that for fiscal years 2007 and 2011, more than  half of the projects EDA funded were located in counties that were part of  nonrural areas, or areas with an urban center of more than 50,000  people. As previously discussed, EDA can determine  a project to be eligible for funding based on a special need arising from  actual or threatened severe unemployment or economic adjustment  problems resulting from severe short-term or long-term changes in  economic conditions. According to the U.S. Department of Agriculture Economic Research  Service’s Rural-Urban Continuum Codes, 52 percent of all EDA grants  awarded in fiscal year 2007 and 67 percent of those awarded in fiscal  year 2011 funded projects in nonrural areas. EDA Funded Various Types of Projects under Its Public Works and Economic Adjustment Assistance Programs

Based on our analysis of EDA-funded projects, EDA provided funding for  various types of economic-development-related projects under its Public  Works and EAA programs in fiscal years 2007 and 2011. As figure 9  shows, EDA most often funded projects in two categories under its Public  Works program:  infrastructure (projects that involve, among other things, constructing  and repairing various modes of transportation; constructing and  repairing water, sewer, gas, and electrical systems; and developing  telecommunications and broadband infrastructure) and  commercial and industrial (projects that involve the design,  construction, demolition, or renovation of commercial buildings and  industrial and business parks, including infrastructure to support the  parks and financial support to existing businesses). Recommendation

To increase transparency in the award selection process, the Secretary of  Commerce should direct the Deputy Assistant Secretary for Economic  Development to develop and implement procedures to ensure that EDA  regional offices consistently complete the required Investment Review  Committee record template for each proposed project considered for  funding. EDA agreed with our recommendation to develop and implement  procedures to ensure that regional offices consistently complete the  required Investment Review Committee (IRC) template. Appendix I: Objectives, Scope, and Methodology

This report examines, for the Economic Development Administration’s  (EDA) Public Works and Economic Development (Public Works) and  Economic Adjustment Assistance (EAA) programs, (1) the extent to which  EDA documented grant selection decisions; (2) the indicators of  economic distress for counties with EDA-funded projects and how these  funds have been distributed to rural and nonrural areas; and (3) the types  of projects that have been funded by these programs. EDA awarded more than 1,500 grants under the Public Works and EAA  grant programs in fiscal years 2006 through 2012 (the period of interest in  the congressional mandate).
Why GAO Did This Study

The Department of Commerce's EDA provides financial assistance through grants to rural and urban communities experiencing substantial and persistent economic distress. EDA grants are intended to leverage existing regional assets to support the implementation of economic development strategies that advance new ideas and creative approaches to promote economic prosperity in distressed communities. House Report 112-463 included a mandate that GAO review grants EDA made under its Public Works and EAA programs from fiscal years 2006 through 2012. This report discusses (1) the extent to which EDA documented its funding decisions (2) the levels of economic distress and population density of counties where EDA funded projects, and (3) the types of projects EDA funded. GAO reviewed EDA regulations and guidance; analyzed EDA project data from fiscal years 2007 (the year in the period covered by the mandate in which EDA awarded the most grants), 2011 (the most recent year with reliable data), and 2012 (the year in which EDA implemented new documentation procedures), as well as other federal data; and interviewed EDA staff.

What GAO Found

The Economic Development Administration (EDA) implemented a new procedure in fiscal year 2012 that requires its regional offices to complete a standard template to document the results of committee meetings in which proposed projects are discussed and potentially recommended for funding. However, GAO found that for the Public Works and Economic Development (Public Works) program and the Economic Adjustment Assistance (EAA) program—EDA's two largest grant assistance programs—EDA regional offices had not completed the template consistently. GAO estimated that only 46 percent of all projects recommended for funding in fiscal year 2012 under these programs were documented using the complete template. EDA has a history of inconsistent documentation: for example, in 2000 the Department of Commerce's Inspector General reported inconsistencies in how EDA's regional offices documented the project review process. Standards for internal control in the federal government require all transactions and significant events to be clearly documented and available for examination. Until EDA takes steps to ensure that all of its regional offices consistently and fully complete the standard template for all proposed projects considered for funding, EDA will not have adequate assurance that its funding decisions are consistent and transparent.
GAO found that counties where EDA funded projects in fiscal years 2007 and 2011 under its Public Works and EAA programs generally had lower per capita income and higher unemployment rates than national and state averages. Furthermore, some projects that EDA funded under the Public Works and EAA programs in fiscal years 2007 and 2011 had an EDA-defined special need arising from actual or threatened severe unemployment or economic adjustment problems. In addition, GAO found that counties where EDA funded projects under Public Works and EAA were generally part of nonrural areas (areas with an urban center of more than 50,000 people). Specifically, in fiscal years 2007 and 2011, respectively, 52 percent and 67 percent of all of EDA's funded projects under the two programs were in nonrural areas.
GAO found that various types of economic development projects received funding under Public Works and EAA in fiscal years 2007 and 2011. The most common types of projects funded under Public Works involved constructing or repairing infrastructure (such as water, sewer, gas, and electrical systems) or constructing or renovating commercial buildings and industrial and business parks. The most common types of projects funded under EAA involved helping businesses get started, planning and research to support job creation and retention, and constructing or repairing infrastructure.

What GAO Recommends

To increase transparency in the award selection process, GAO recommends that EDA develop and implement procedures to ensure that EDA regional offices consistently complete the required template for each proposed project considered for funding. EDA agreed with the recommendation and described its plans to address it.