Recovery Act grants provided to states and localities covered a broad  range of areas such as transportation, energy, and housing. Practices at Federal, State, and Local Levels Contributed to Improved Accountability of Recovery Act Grant Programs but Challenges Existed

		Strong Support by Top Leaders, a Collaborative Approach, and Systematic Use of Data Were Key to Managing Recovery Act Implementation

Under the Recovery Act, accountability for timely and effective  implementation of the law was a shared responsibility that included  agencies involved in directly implementing the law as well as the external  oversight community. On the operational side, among the practices that  facilitated accountability were (1) strong support by top leaders, (2)  centrally-situated collaborative governance structures, and (3) the regular  and systematic use of data to support management reviews. The Recovery Act Prompted Adjustments and Innovations in Oversight to Foster Accountability

Faced with the short time frames and accelerated roll out of Recovery Act  funds, both the oversight community and agencies adjusted their  oversight approach and innovated to foster accountability for Recovery  Act funds at the federal and state agency levels. These practices included (1) assessing and planning  for risks up front; (2) reviewing programs before and while they were  being funded rather than waiting until after programs were implemented;  (3) communicating findings quickly through informal processes as  opposed to regular full reports; and (4) using advanced data analytics. In  October 2009, the Recovery Board established an innovative center to  analyze the use of Recovery Act funds by employing data analytics (see  figure 3). DOT issued guidance seven times during the first year after  the act was signed to clarify how states were to calculate their planned or  actual expenditures for their maintenance-of-effort certifications. The Recovery Act Resulted in Increased Transparency but Also Presented Challenges

		Recovery Act Transparency Websites Embody Several Leading Practices

In an April 2009 memorandum, OMB directed agencies to follow leading  practices for federal website development and management, such as  those listed on HowTo.gov, a website managed by the Federal Web  Managers Council and the General Services Administration.makes available a list of the “Top 10 Best Practices” for federal websites  as a resource to improve how agencies communicate and interact with   HowTo.gov  customers and provide services.state and city Recovery websites, demonstrated several of these leading  practices including establishing a clear purpose of the website, using  social networking tools to garner interest in the website, tailoring websites  to meet audience needs, and obtaining stakeholder input when designing  the website. Recovery Act Performance Was Mostly Measured by Outputs Rather than Outcomes, and Challenges with Both Existed

			Recipients and Agencies Were Required to Report Amount and Speed of Funding but Faced Challenges in Doing So

The Recovery Act requires recipients to report on their use of funding and  agencies that provide those funds to make the reports publicly available. Many state and local  partners were limited in their capacity to meet spending reporting  requirements because they lacked knowledge and expertise. For example, one  city official stated that, in order to meet reporting deadlines, it was  necessary had to enter data manually, which created additional work. While  Recovery.gov provided a template for facilitating the reporting of this  information, the level of detail and specificity of outcomes varied greatly  for some of the agencies we reviewed, making it difficult to determine the  extent to which some were making progress toward their goals and  demonstrating results. DOT did  not implement our recommendation. By  increasing accountability and transparency requirements while at the  same time setting aggressive timelines for the distribution of funds, the  Recovery Act created high expectations as well as uncertainty and risk for  federal, state, and local governments responsible for implementing the  law. These  and other experiences, as well as the challenges identified in this report,  provide potentially valuable lessons for the future. Agency Comments

We provided a draft of this report to the Secretaries of the Departments of  Education, Energy, Housing and Urban Development, and  Transportation; and to the Director of the Office of Management and  Budget. The agencies generally agreed with our  findings and provided technical comments which were incorporated in the  report. Specifically, this report  identifies and provides examples of good practices employed and the  challenges faced by select federal, state, and local agencies  implementing grant programs funded by the Recovery Act, in the areas of  accountability and transparency. To obtain a broad view of lessons learned during the implementation of  grants funded by the Recovery Act, we conducted a detailed literature  review of relevant reports describing lessons learned from implementing  grants funded by the Recovery Act from GAO; federal and state  inspectors general; federal agencies; state and local governments;  accountability boards; state and local government advocacy  organizations; think tanks; and academia. To get a broader state  perspective, we also interviewed officials from the state Recovery Act  coordinators’ network, which included key state officials involved in  implementing the Recovery Act from several states.
Why GAO Did This Study

In response to the recent serious recession, Congress enacted the Recovery Act to promote economic recovery, make investments, and minimize or avoid reductions in state and local government services. Approximately $219 billion was distributed as grants for use in states and localities, making grants a major component of the act. These grants covered a broad range of areas including education, transportation, energy, infrastructure, the environment, health care, and housing.
GAO was asked to examine grant management lessons learned resulting from the Recovery Act. This report examines federal, state, and local experiences with implementing grants funded by the Recovery Act by identifying examples of good practices employed and challenges faced in meeting the act's accountability and transparency requirements. GAO reviewed relevant documents including OMB and Recovery Board guidance, relevant literature, and previous reports by GAO, federal inspectors general, and others. GAO also interviewed officials from OMB, the Recovery Board, four federal agencies, three state governments, and two local governments, among others. This report also draws on GAO's past bi-monthly reviews of selected states' and localities' use of Recovery funds.

What GAO Found

Federal, state, and local officials responsible for implementing grants funded by the American Recovery and Reinvestment Act of 2009 (Recovery Act) as well as the external oversight community reported lessons learned regarding both useful practices and challenges to ensuring accountability. Faced with aggressive timelines for distributing billions of dollars, they adopted a number of practices to foster accountability including (1) strong support by top leaders; (2) centrally-situated collaborative governance structures; (3) the use of networks and agreements to share information and work towards common goals; and (4) adjustments to, and innovations in, usual approaches to conducting oversight such as the increased use of up-front risk assessments, the gathering of "real time" information, earlier communication of audit findings, and the use of advanced data analytics. For example, in 2009, the Recovery Accountability and Transparency Board (Recovery Board) established the Recovery Operations Center which used advanced data analysis techniques to identify potential fraud and errors before and after payments were made. The Recovery Act's emphasis on accountability also presented challenges for several states and federal agencies. These included limited resources for oversight at the state and local levels, and the speed with which Recovery Act funds were distributed. One state addressed the challenge of limited resources by transferring funds from its central administration account to Recovery Act oversight. To facilitate the quick distribution of funds, maintenance-of-effort provisions concerning transportation projects (which prevented Recovery funds from being used for planned state projects) were rolled out before the Department of Transportation had time to issue sufficiently detailed definitions of what constituted "state funding." To address this challenge, the department had to issue clarifying guidance to states seven times during the first year of the Recovery Act.
Federal, state, and local officials also developed practices and encountered challenges related to the transparency of Recovery Act funds. An example of one good practice that was required by the Recovery Act was the creation of the Recovery.gov website. This site, as well as similar portals created by states and localities, demonstrated several leading practices for effective government websites. These included (1) establishing a clear purpose, (2) using social networking tools to garner interest, (3) tailoring the website to meet audience needs, and (4) obtaining stakeholder input during design. Efforts to increase transparency also led to challenges for several states and federal agencies. For example, some recipients lacked knowledge or expertise in using the data systems needed to report grant spending, while others faced challenges with reporting the same data to multiple systems. Early GAO reviews also found several problems with job reporting data including discrepancies in how full time equivalents were recorded and the capacity of recipients to meet reporting deadlines. The Office of Management and Budget (OMB) addressed these challenges by issuing additional guidance and providing technical support. Finally, agencies receiving Recovery Act funds were required to submit performance plans that identified measures on a program-by-program basis. The level of detail and the specificity of outcomes in these plans varied greatly for the agencies GAO examined, making it difficult to determine the extent to which some were making progress toward their goals and demonstrating results.

What GAO Recommends

GAO is not making any recommendations in this report. We provided a draft of this report to relevant agencies for comment. They generally agreed with our findings and provided technical comments.