	Background

The purpose of the TAA for Firms program is to help trade-impacted,  economically distressed U.S. manufacturing, production, and service  firms make adjustments that may enable them to remain competitive in  the global economy. TGAAA Changes Led to Program Improvements and More Participation

The 2009 legislative changes to the TAA for Firms program resulted in  reduced firm certification processing times, new performance reporting,  and increased firm participation. However, EDA officials and TAA Center  staff said that the lapse of these legislative changes from February 2011  to October 2011 and the uncertainty regarding program funding  contributed to a decrease in firm participation in fiscal year 2011. Four changes mandated by the 2009 legislation contributed to  improvements in program operations and increased participation:
Creation of director’s and other full-time positions. EDA’s Performance Measures and Data Collection Limit Its Ability to Gauge Program Effectiveness, but Our Analysis Shows Positive Impact

EDA collects data on 16 measures reported in its annual report to  Congress and in Commerce’s performance and accountability report, but  we found that these performance measures, and EDA’s use of them, do  not adequately focus on program outcomes. Our data analysis showed that participation in the program was positively  associated with an increase in sales, and our survey respondents  reported satisfaction with the assistance they received from the program. Our Analysis Shows Participation in the TAA for Firms Program Is Statistically Associated with Increases in Firm Sales and Productivity

Given the weaknesses we found in EDA’s performance measures and  data collection, and because few other studies have examined the  effectiveness of the program, we undertook further analysis to determine  the impact of the TAA for Firms program. We found that participation in  the program was associated with increased sales, although other factors,  such as a firm having multiple plants, had a stronger effect on  performance. Over 80 percent reported that the program helped them to identify  projects and business process improvements, and 62 percent said that  the program helped them to identify management weaknesses. Though EDA deobligates  and reallocates any unspent funds, it uses its allocation funding formula  to do so, thus perpetuating the deficiency of failing to consider variable  needs and costs in allocating its funds. EDA’s  funding formula divides two-thirds of allocated funding equally among the  11 centers according to base funding and two fixed factors:
Geographic size: The TAA Center’s service region in square miles
Number of firms: The service region’s share of the nation’s firms in the  agricultural, mining, and manufacturing sectors  The funding formula divides the remaining one-third of allocated funding  among the TAA Centers according to three variable factors:
Approved business recovery plans: The center’s share of the total  number of business recovery plans approved by EDA within the past  2 fiscal years
Employees in approved recovery plans: The center’s share of the total  number of employees in the business recovery plans approved in the  last 2 fiscal years
Firms achieving expected results: The center’s share of the total  number of firms that reported achieving anticipated outcomes from  actions the firms took as a result of the program assistance they  received during the past fiscal yearOnce it had determined the funding formula factors and measures for  each, EDA weighted the factors to determine how it would distribute  annual funding to the 11 TAA Centers. Funding Allocation Formula Does Not Take into Account Differences in Program Need

EDA’s TAA for Firms funding formula does not include a direct measure  of the number of firms potentially in need of the program based on the  program’s key objective of providing technical assistance to firms that  have lost sales and employment because of increased competition from  imports. For example, there are wide differences in the numbers of  certified petitions and approved business recovery plans among the  centers. Funding Allocation Formula Does Not Take into Account TAA Centers’ Varying Costs

EDA’s allocation of funding also does not take into account variations in  TAA Centers’ costs of providing firms assistance. 7). 8). Five centers spent their  entire funding allocation by the conclusion of the 3-year cooperative  agreement period 2008 through 2010, while six centers did not. To ensure that the performance measures used to evaluate the TAA  for Firms program demonstrate program results and to help ensure  that EDA can comprehensively evaluate the effectiveness of the  program, broaden the program’s evaluation approach, for instance, by  developing additional quantifiable outcome-oriented performance  goals and measures for key program areas and conducting further  analysis of the data to isolate the impact of the TAA for Firms  program from other influences, such as economic trends. Appendix I: Scope and Methodology

The Trade and Globalization Adjustment Assistance Act of 2009  (TGAAA), part of the American Recovery and Reinvestment Act of 2009,  mandated that we report on the operation and effectiveness of the Trade  Adjustment Assistance (TAA) for Firms program. We examined (1) the  results of the legislative changes on program operations and participation,  (2) the performance measures and data that EDA uses to evaluate the  program and what these tell us about the program’s effectiveness, and (3)  how program funding is allocated and spent. We collected from the Department of Commerce’s (Commerce) Economic  Development Administration (EDA) and the 11 TAA Centers’ data on  certifications and approved adjustment plans from fiscal years 2008 to  2011.
Why GAO Did This Study

Over the past decade, U.S. imports of goods and services have almost doubled, reaching $2.7 trillion in 2011. Although trade expansion can enhance economic welfare, many firms and workers experience difficulties adjusting to import competition. The TAA for Firms program assists tradeimpacted, economically distressed U.S. firms in making adjustments that may enable them to remain competitive in the global economy. The Department of Commerce's EDA administers the $15.8 million program through 11 TAA Centers throughout the United States. In 2009, the Trade and Globalization Adjustment Assistance Act, as part of American Recovery and Reinvestment Act, amended the TAA for Firms program and mandated that GAO review its operation and effectiveness. GAO examined (1) the results of the legislative changes on program operations and participation, (2) the performance measures and data EDA uses to evaluate the program and what these tell us about the program's effectiveness, and (3) how program funding is allocated and spent.
GAO reviewed pertinent legislation, program documentation, and data; conducted an economic analysis and a survey of participant firms; and met with EDA officials, representatives of the 11 TAA Centers, and others.

What GAO Found

Changes to the Trade Adjustment Assistance (TAA) for Firms program mandated by the Trade and Globalization Adjustment Assistance Act led to program improvements and increased participation, but participation declined when the legislative changes lapsed and the program faced funding uncertainty. The changes resulted in reduced time to certify firms, new performance reporting, and increased participation. For example, officials told GAO that creating a director position and other full-time positions for the program reduced time to certify firms. In fulfilling new reporting requirements, the Economic Development Administration (EDA) collected information on performance measures and issued three annual reports. Also, EDA certified 26 services firms not previously eligible, as well as 32 additional firms based on more flexible certification requirements to demonstrate trade impacts. Although EDA increased the number of certified petitions and approved business recovery plans from fiscal years 2008 through 2010, the lapse in the legislative changes from February to October 2011 and uncertainty about program funding contributed to a decline in certified petitions and approved plans in fiscal year 2011.
EDA's performance measures and data collection for the TAA for Firms program provide limited information about the program's outcomes, although GAO's economic analysis found that participation in the program is statistically associated with an increase in firm sales. EDA collects data to report on 16 measures to gauge the program's performance, such as the number of firms that inquired about the program and the number of petitions filed, but most of these measures do not assess program outcomes. EDA is exploring better ways to assess the effect of their efforts on firms. In addition, EDA does not systematically maintain data collected by the TAA Centers on the firms they assist, resulting in gaps in centralized data that EDA could use to evaluate the program and meet reporting requirements. However, GAO's analysis of data collected from the centers showed that the program was associated with increased sales and productivity for manufacturing firms, although some factors were more strongly correlated with improved performance than was participation in the TAA for Firms program. GAO's survey of and interviews with firms participating in the program found that many firms reported satisfaction with the program's impacts. Notably, 73 percent reported that the program helped them with profitability; 71 percent that it helped them retain employees; and 57 percent that it helped them hire new employees.
To allocate funding to the TAA Centers, EDA uses a formula of weighted factors, such as each center's share of approved business recovery plans. However, the formula does not factor in differences in program need and costs in centers' service regions, even though centers varied in their use of program funds. For example, the formula does not take into account potential need for the program based on its objective of assisting firms that have lost sales and employment due to import competition. The formula also does not take into account the considerable differences in the costs of operating the centers to assist firms. As a result, some centers had spent their entire allocation by the conclusion of the most recent grant period, while other centers had not. Although EDA de-obligates and reallocates any unspent funds, it uses its allocation funding formula to do so, thus perpetuating the deficiency of failing to consider variable needs and costs.

What GAO Recommends

GAO recommends that Commerce establish more effective measures of program outcomes, improve its data collection, and allocate funds in a way that considers program needs and costs. Commerce concurred with GAO's findings and recommendations.