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Highlights

What GAO Found

The nation is concurrently responding to, and recovering from, the COVID-19 pandemic, as the number of cases, hospitalizations, and deaths have declined in recent months. Among the factors that have contributed to the decline in these metrics, the development and administration of multiple vaccines across the nation have been key. About 53.1 percent of the U.S. population 12 years and older—almost 150.7 million individuals—had been fully vaccinated as of June 23, 2021, according to the Centers for Disease Control and Prevention (CDC).

Continuing to deliver “shots in arms” will be a priority for the federal government, as individuals yet to be vaccinated remain at risk from COVID-19 and as new variants of the virus continue to emerge. A successful vaccination program is seen as essential to further stabilizing the economy and safely returning to prepandemic activities, such as in-person learning for students in the 2021–22 school year.

The economic and public health recovery from the pandemic and its effects remains fragile. Data from the Department of Labor show that labor market conditions improved in March, April, May, and June 2021 but remained worse relative to the prepandemic period. Additionally, new reported COVID-19 cases from June 5 to June 18, 2021, averaged about 13,000 per day—less than a tenth of the peak reported in January 2021 (see figure).

Reported COVID-19 Cases per Day in the U.S., Mar. 1, 2020–June 18, 2021

Since GAO began reporting on the federal response to the pandemic in June 2020, it has made 72 recommendations. The agencies generally agreed with 57 of these recommendations and are in the process of implementing a majority of them; 16 of these recommendations have been fully implemented. GAO also made four matters for congressional consideration, three of which remain open. In this report, GAO is making 15 new recommendations in the areas of federal preparedness and response, delivery of benefits and services, and program integrity. GAO’s recommendations, if effectively implemented, can help improve the government’s ongoing response and recovery efforts as well as help it to prepare for future public health emergencies.

GAO’s new recommendations are discussed below.

COVID-19 Testing

CDC has opportunities to improve collaboration and communication with stakeholders. Prior to the COVID-19 response, CDC had not developed a plan for enhancing laboratory testing capacity that identifies objectives and outlines agency and stakeholder roles and responsibilities for achieving these objectives within defined time frames. Doing so would be consistent with the stated goal of its own memorandum of understanding with public health and private laboratory partners and would also be consistent with other leading principles on sound planning that GAO has identified in its prior work. GAO recommends that CDC work with appropriate stakeholders to develop a plan to enhance surge capacity for laboratory testing. CDC agreed with this recommendation.

CDC initially developed a flawed COVID-19 diagnostic test, which caused challenges for the rollout of testing nationwide. CDC has taken steps to improve its process for developing tests, but additional actions could help strengthen CDC’s preparedness and enhance the nation’s testing capacity during a future infectious disease outbreak. For example, establishing contracts with test kit manufacturers prior to a public health emergency could allow CDC to supplement the supply produced by CDC and aid in the rapid manufacturing and deployment of test kits during a future public health emergency. GAO recommends that CDC assess the agency’s needs for goods and services for the manufacturing and deployment of diagnostic test kits in public health emergencies, including the potential role of establishing contracts in advance of an emergency. CDC agreed with this recommendation.

Strategic National Stockpile

The Strategic National Stockpile (SNS) contains a multibillion dollar inventory of medical countermeasures—drugs, vaccines, supplies, and other materials—to respond to a broad range of public health emergencies. The SNS can be used as a short-term stopgap buffer when the supply of materials may not be immediately available in affected areas during a public health emergency. The Department of Health and Humans Services’ (HHS) Office of the Assistant Secretary for Preparedness and Response (ASPR) oversees the SNS.

The Public Health Emergency Medical Countermeasures Enterprise (PHEMCE), an interagency group of experts, advises the Secretary of Health and Human Services in prioritizing, developing, procuring, deploying, and effectively using medical supplies and other countermeasures for the SNS. In the years before the COVID-19 pandemic, ASPR began restructuring the PHEMCE. This led to concerns from interagency partners regarding the effectiveness of interagency collaboration and transparency, such as a lack of clarity on how ASPR makes decisions about medical countermeasure issues, including for the SNS inventory. In addition, while the PHEMCE was being restructured, ASPR did not conduct SNS annual reviews from 2017 through 2019; these reviews result in recommendations to HHS regarding SNS procurement and are provided to Congress.

According to the former Assistant Secretary who initiated the restructure, although PHEMCE was successful in advancing the development of medical countermeasures, its consensus-driven process did not reflect the urgency needed and PHEMCE proceedings created security vulnerabilities. ASPR officials acknowledged that the changes ASPR made to the PHEMCE from 2018 to 2020 did not fully achieve the desired aims and created other challenges. The office is in the process of reassessing and reestablishing new organizational processes for the PHEMCE, but it has not yet finalized planning documents, including an organizational charter and implementation plan, to guide those efforts. GAO recommends that ASPR develop and document its plans for restructuring the PHEMCE. The plans should describe how ASPR will ensure a transparent and deliberative process that engages interagency partners in PHEMCE responsibilities outlined in the Pandemic and All-Hazards Preparedness and Advancing Innovation Act of 2019, including those related to SNS annual reviews. These plans should also incorporate GAO’s leading practices to foster more effective collaboration, while ensuring that sensitive information is appropriately protected. HHS—which includes ASPR—agreed with this recommendation.

PHEMCE interagency partners raised concerns about the transparency of PHEMCE activities and deliberations, and ASPR lacked documentation of PHEMCE activities and deliberations after 2017. ASPR was unable to provide documentation to GAO regarding PHEMCE decisions or recommendations made from 2018 to 2020; the rationale for the changes to the PHEMCE; or PHEMCE meeting agendas and minutes from 2018 to 2020. Not maintaining such documentation is inconsistent with HHS’s policy for records management and leaves Congress and key stakeholders without assurance that steps taken are advancing national preparedness for natural, accidental, and intentional threats. GAO recommends that ASPR implement records management practices that include developing, maintaining, and securing documentation related to PHEMCE activities and deliberations, including those related to the SNS. HHS, including ASPR, agreed with this recommendation.

The nationwide need for supplies to respond to COVID-19 quickly exceeded the quantity of supplies contained in the SNS. Thus, ASPR used procurement processes in addition to its standard process, including direct shipment of supplies from vendors. Through this direct shipment process, supplies purchased by ASPR were not used to replenish the SNS but instead were primarily distributed from vendors directly to state, local, territorial, and tribal governments.

Although ASPR has documented policies and procedures for its standard procurement process, ASPR did not have documented policies and procedures, including related control and monitoring activities, to address payment integrity risks for its direct shipment procurement process. Without written policies and procedures documenting how ASPR tracks the direct shipment and receipt of supplies before issuing payments, there is an increased risk that ASPR may make improper payments to vendors for incorrect supplies or quantities or for supplies that the intended recipients did not receive. In addition, it is difficult for management to assess the adequacy of controls over the direct shipment procurement process, and ASPR lacks assurance that its staff fully understand the process and properly and consistently perform their duties. GAO recommends that, to strengthen the current procedures for the SNS, HHS update its policies and procedures for the SNS, including related control and monitoring activities, to document the direct shipment procurement process and address payment integrity risks. Although HHS, including ASPR, did not agree with GAO regarding the need to address payment integrity risks, it stated that HHS will update its policies and procedures, including related control and monitoring activities to document the direct shipment procurement process.

Domestic Medical Supply Manufacturing

Before the pandemic, the U.S. generally depended on foreign suppliers for certain types of personal protective equipment (PPE), including nitrile gloves and surgical gowns. Multiple stakeholders representing manufacturers, distributors, and other purchasers noted that meaningful, transparent federal engagement with industry could enhance the resilience of domestic manufacturing and the supply chain. According to some stakeholders, such engagement with the private sector could help ramp up private investment in domestic PPE manufacturing, among other things.

In January 2021, GAO reported that HHS had not developed a process for engaging with key nonfederal stakeholders and Congress for development of a supply chain strategy for pandemic preparedness, including the role of the SNS. GAO recommended that HHS do so, and the department generally agreed with GAO’s recommendation. However, as of May 2021, HHS had not implemented this recommendation. GAO continues to underscore that engaging with key nonfederal stakeholders—in meaningful, proactive ways to obtain their business and industry expertise—and with Congress is critical for developing strategies to build a sustainable domestic medical supply manufacturing base.

HHS COVID-19 Funding

As of May 31, 2021, Congress had appropriated to HHS approximately $484 billion in COVID-19 funds in six relief laws. The majority of HHS’s appropriations from the first five relief laws had been obligated and about half had been expended. Specifically, as of May 31, 2021, the department reported the following (see figure):
  • Of the $324 billion appropriated in the first five COVID-19 relief laws, about $253 billion had been obligated (about 78 percent) and about $168 billion had been expended (about 52 percent).
  • Of the $160 billion appropriated in the sixth law, the American Rescue Plan Act of 2021 (ARPA), about $75 billion had been obligated (about 47 percent) and about $3 billion had been expended (about 2 percent).

HHS’s Reported COVID-19 Relief Appropriations, Obligations, and Expenditures from COVID-19 Relief Laws, as of May 31, 2021

The percentage of obligations and expenditures varied across selected COVID-19 response activities for a variety of reasons, including the nature of the activities, their planned uses, and the timing of the funds provided through the six COVID-19 relief laws.

HHS uses spend plans to communicate information about its COVID-19 spending. The first five COVID-19 relief laws generally require the department to develop, update, and provide these spend plans to Congress every 60 days. The sixth relief law, ARPA, does not require a spend plan, but according to HHS officials, the department is preparing a consolidated plan that captures the first five relief laws and a separate spend plan for funding provided through ARPA. The consolidated spend plan is under internal review at HHS and the ARPA spend plan is still being finalized. As of May 2021, GAO had received and reviewed a total of 15 spend plans—the original spend plans and subsequent updates—provided by HHS. GAO found that the most current spend plans generally do not include time frames for obligating the remaining funds, which is useful information for oversight and informing future funding decisions by Congress.

Guidance from the Office of Management and Budget to federal agencies, including HHS, noted the importance of spending transparency and regular reporting to help safeguard taxpayer dollars. GAO recommends that HHS communicate information about, and facilitate oversight of, the department’s use of COVID-19 relief funds by providing projected time frames for its planned spending in the spend plans it submits to Congress. HHS partially concurred with the recommendation and stated that the department would aim to incorporate some time frames on planned spending where that information may be available such as time frames for select grants to states.

Higher Education Grants

The Department of Education (Education) has faced inherent challenges that increase the risk of improper payments for its Higher Education Emergency Relief Fund (HEERF) grants to institutions of higher education to prevent, prepare for, and respond to COVID-19. For example, funding needed to be processed and distributed expeditiously because of health and economic threats to institutions of higher education posed by the COVID-19 pandemic. GAO tested Education’s procedures for approving and processing HEERF grants through a sample of obligations and found that the department had not effectively designed and implemented procedures needed to identify erroneous obligations after awarding the grants. GAO estimated that for 5.5 percent of schools receiving HEERF grants (about 262 of 4,764 schools in GAO’s sample), Education awarded grants that exceeded the amounts allocated—including three instances in GAO’s sample for which Education obligated $20 million more than was allocated.

Officials from Education’s Office of Postsecondary Education stated that because of time and staffing constraints and the high volume of grants administered, they did not regularly perform quality assurance reviews after obligation to identify and correct erroneous obligations. GAO recommends Education design and implement procedures for regularly conducting quality assurance reviews of obligated amounts for higher education grants, including HEERF, to help identify and correct erroneous obligations in a timely manner. Education agreed with this recommendation.

Coronavirus State and Local Relief and Recovery Funds

COVID-19 relief laws appropriated $500 billion to the Department of the Treasury (Treasury) to provide direct funding to states, localities, tribal governments, the District of Columbia, and U.S. territories to help them respond to, and recover from, the COVID-19 pandemic. This amount includes $150 billion that the CARES Act appropriated to Treasury for the Coronavirus Relief Fund (CRF) in March 2020 as well as $350 billion that ARPA appropriated to Treasury for the Coronavirus State and Local Fiscal Recovery Funds (CSLFRF) in March 2021. Recipients can use CRF payments to offset costs related to either the pandemic’s direct effects (e.g., public health needs) or its indirect effects (e.g., harm to individuals or businesses as a result of COVID-19-related closures). The CSLFRF provides payments to these recipients to cover a broader range of costs stemming from the fiscal effects of the COVID-19 pandemic.

The Single Audit Act establishes requirements for states, localities, Indian tribes, the District of Columbia, U.S. territories, and nonprofit organizations that receive federal awards to undergo single audits of those awards annually when their expenditures meet a certain dollar threshold. Single audits are critical to the federal government’s ability to help safeguard the use of the billions of dollars distributed through the CRF and CSLFRF. Auditors who conduct single audits follow guidance in the Single Audit Act’s Compliance Supplement, which provides guidelines and policy for performing single audits. After consultation with federal agencies, OMB annually updates and issues the supplement. Auditors have reported that the timing of the supplement is critical in allowing them to effectively plan their work.

The timely issuance of single audit guidance is critical to ensuring timely completion and reporting of single audits to inform the federal government about actions needed to help safeguard the use of the billions of dollars distributed through the CRF and CSLFRF. GAO recommends that OMB, in consultation with Treasury, issue timely and sufficient single audit guidance for auditing recipients’ uses of payments from the CSLFRF. OMB neither agreed nor disagreed with this recommendation.

Economic Impact Payments

The CARES Act, the Consolidated Appropriations Act, 2021, and ARPA authorized Treasury and the Internal Revenue Service (IRS) to issue three rounds of economic impact payments (EIP) as direct payments to help individuals alleviate financial stress due to the pandemic. (See figure.) To publicize information about how to file a tax return with the IRS to receive an EIP, IRS partners with organizations that work with communities that may not traditionally interact with IRS, such as lower-income families, senior citizens, veterans, tribal communities, and families with mixed-immigration status. According to officials from IRS partner organizations, ensuring eligible nonfilers receive their payments continues to be a challenge. Partners also told GAO their outreach efforts to nonfilers could be more effective if the partners had current data that could help identify specific communities of nonfilers who may need assistance.

Total Number and Amount of Economic Impact Payments (EIP) Disbursed, Rounds 1, 2, and 3, as of May 28, 2021

In January 2021, Treasury began analyzing nearly 9 million notices it had sent to nonfilers who may be eligible for the first round of EIP payments. However, Treasury does not plan to complete this analysis until fall 2021, more than 6 months after the third round of EIP payments began to be issued. This timing would limit the findings’ usefulness for informing EIP outreach efforts. By waiting to complete the analysis, Treasury and IRS are missing an opportunity to identify communities that may have a higher number of nonfilers and to use that information to inform their outreach efforts as well as the efforts of their outreach partners. GAO recommends that Treasury, in coordination with IRS, release interim findings on the effectiveness of the notices it sent in September 2020 to potentially EIP-eligible nonfilers; incorporate that analysis into IRS outreach efforts as appropriate; and then, if necessary, release an update based on new analysis after the 2021 filing season. Treasury neither agreed nor disagreed with this recommendation.

Tax Relief for Businesses

To provide liquidity to businesses during the COVID-19 pandemic, the CARES Act and other COVID-19 relief laws included tax measures to reduce certain tax obligations, including measures related to net operating loss carryback claims. In some cases, these reductions of obligations led to cash refunds. The Internal Revenue Code and the CARES Act generally require IRS to issue certain refunds within 90 days from the date when a complete application for a tentative carryback adjustment is filed or 90 days from the last day of the month in which the return is due, whichever is later. IRS data show that the agency is not meeting the statutory refund requirement for these relief measures and that as of May 1, 2021, the average processing time for refunds was 154 days, excluding additional time for final processing and distribution.

IRS officials said it is taking longer to process returns because IRS facilities that process paper returns continue to operate at reduced capacity to accommodate social distancing. In the meantime, transparent communication about these issues could help taxpayers know when to expect their refunds. Specifically, an explanation on IRS’s website that processing times for tentative refunds may exceed the expected 90 days because of service disruptions would provide taxpayers with more accurate information and expectations for receiving a refund. GAO recommends that IRS clearly communicate on its website that there are delays beyond the statutory 90-day timeline in processing tentative refunds. IRS neither agreed nor disagreed with this recommendation.

2021 Tax Filing Season

IRS is experiencing delays in processing certain returns received in 2021, resulting in extended time frames for processing returns for some taxpayers. IRS reported that it is taking longer than usual to manually review some of these returns. Specifically, as of the end of the 2021 filing season, IRS had about 25.5 million unprocessed individual and business returns, including about 1.2 million returns from its 2020 backlog, and 13.7 million returns that it had suspended because of errors. IRS staff must manually review these returns with errors. IRS typically has unprocessed returns in its inventory at the end of the filing season, but not to this extent. For example, at the end of the 2019 filing season, IRS had 8.3 million unprocessed individual and business returns, including 2.7 million returns suspended for errors. IRS’s annual tax filing activities include processing more than 150 million individual and business tax returns electronically or on paper.

With significantly more returns currently being held for manual review than in prior years, more taxpayers are trying to get information about the status of their returns and refunds. However, taxpayers have had difficulty obtaining status updates on their refunds from IRS, either by phone or online. IRS’s website does not contain all of the relevant information regarding delays in processing 2021 returns and issuing taxpayers’ refunds. Additionally, IRS’s automated message on its toll-free telephone line for individual taxpayers has not been updated to explain refund delays or to include any other alerts associated with the 2021 filing season. GAO recommends that IRS update relevant pages of its website and, if feasible, add alerts to its toll-free telephone lines to more clearly and prominently explain the nature and extent of individual refund delays occurring for returns that taxpayers filed in 2021. IRS neither agreed nor disagreed with this recommendation.

This report contains additional recommendations related to disseminating information related to leave benefits for employees.

Why GAO Did This Study

As of mid-June 2021, the U.S. had about 33.4 million reported cases of COVID-19 and about 593,000 reported deaths, according to CDC. The country also continues to experience serious economic repercussions from the pandemic.

Six relief laws, including the CARES Act, had been enacted as of May 31, 2021, to address the public health and economic threats posed by COVID-19. As of May 31, 2021, of the $4.7 trillion appropriated by these six laws for COVID-19 relief—including about $1.6 trillion appropriated by ARPA, which was enacted in March 2021—the federal government had obligated a total of $3.5 trillion and had expended $3.0 trillion, as reported by federal agencies.

The CARES Act includes a provision for GAO to report on its ongoing monitoring and oversight efforts related to the COVID-19 pandemic. This report examines the federal government’s continued efforts to respond to, and recover from, the COVID-19 pandemic.

GAO reviewed data, documents, and guidance from federal agencies about their activities. GAO also interviewed federal officials; representatives from organizations for states and localities; and other stakeholders, including manufacturers of PPE (e.g., N95 respirators, surgical masks, and nitrile gloves).

What GAO Recommends

GAO is making 15 new recommendations for agencies that are detailed in this Highlights and in the report.

Recommendations

Recommendations for Executive Action

Recommendations for Executive Action

We are making a total of 15 recommendations to federal agencies:
NumberAgencyRecommendation
1Department of Health and Human Services : Public Health Service : Centers for Disease Control and Prevention

The Director of the Centers for Disease Control and Prevention should work with appropriate stakeholders—including public health and private laboratories—to develop a plan to enhance laboratory surge testing capacity. This plan should include timelines, define agency and stakeholder roles and responsibilities, and address any identified gaps from preparedness exercises. See the COVID-19 Testing enclosure. (Recommendation 1)
2Department of Health and Human Services : Public Health Service : Centers for Disease Control and Prevention

The Director of the Centers for Disease Control and Prevention should assess the agency’s needs for goods and services for the manufacturing and deployment of diagnostic test kits in public health emergencies. This assessment should evaluate how establishing contracts in advance of an emergency could help the Centers for Disease Control and Prevention quickly and cost-effectively acquire these capabilities when responding to future public health emergencies, including those caused by novel pathogens, and should incorporate lessons learned from the COVID-19 emergency. See the COVID-19 Testing enclosure. (Recommendation 2)
3Department of Health and Human Services : Office of the Assistant Secretary for Preparedness and Response

To improve the nation’s preparedness for a wide range of threats, including pandemics, the Office of the Assistant Secretary for Preparedness and Response should develop and document plans for restructuring the Public Health Emergency Medical Countermeasures Enterprise. These plans should describe how the Assistant Secretary will ensure a transparent and deliberative process that engages interagency partners in the full range of responsibilities for the Public Health Emergency Medical Countermeasures Enterprise outlined in the Pandemic and All-Hazards Preparedness and Innovation Act of 2019, including the annual Strategic National Stockpile Threat-Based Reviews. These plans should also incorporate GAO’s leading practices to foster more effective collaboration, while ensuring that sensitive information is appropriately protected. See the Strategic National Stockpile enclosure. (Recommendation 3)
4Department of Health and Human Services : Office of the Assistant Secretary for Preparedness and Response

To improve organizational accountability, the Office of the Assistant Secretary for Preparedness and Response should implement records management practices that include developing and maintaining, and securing documentation related to Public Health Emergency Medical Countermeasures Enterprise activities and deliberations, including those related to the Strategic National Stockpile. Documentation should include information such as the factors considered, the rationale for the action or decision, and the final outcomes of the Public Health Emergency Medical Countermeasures Enterprise processes. See the Strategic National Stockpile enclosure. (Recommendation 4)
5Department of Health and Human Services : Office of the Assistant Secretary for Preparedness and Response

To strengthen the current procedures, the Assistant Secretary for Preparedness and Response should update policies and procedures, including related control and monitoring activities, for the Strategic National Stockpile to document the direct shipment procurement process and to address payment integrity risks. See the Strategic National Stockpile Payment Integrity enclosure. (Recommendation 5)
6Department of Health and Human Services

To communicate information about and facilitate oversight of the agency’s use of COVID-19 relief funds, the Secretary of Health and Human Services should provide projected time frames for the planned spending of COVID-19 relief funds in the Department of Health and Human Services’ spend plans submitted to Congress. See the HHS COVID-19 Funding enclosure. (Recommendation 6)
7Department of Education : Office of the Assistant Secretary for Postsecondary Education

The Assistant Secretary for Postsecondary Education should design and implement procedures for regularly conducting quality assurance reviews of obligated amounts for higher education grants, including the Higher Education Emergency Relief Fund, to help identify and correct erroneous obligations in a timely manner. See the Higher Education Grants enclosure. (Recommendation 7)
8Executive Office of the President : Office of Management and Budget

The Director of the Office of Management and Budget, in consultation with the Secretary of the Treasury, should issue timely and sufficient single audit guidance for auditing recipients’ uses of payments from the Coronavirus State and Local Fiscal Recovery Funds. See the Coronavirus State and Local Relief and Recovery Funds enclosure. (Recommendation 8)
9Department of the Treasury

The Secretary of the Treasury, in coordination with the Commissioner of Internal Revenue, should release interim findings on the effectiveness of the notices it sent in September 2020 to nonfilers who are potentially eligible for economic impact payments; incorporate that analysis into Internal Revenue Service outreach efforts as appropriate; and then, if necessary, release an update based on new analysis after the 2021 filing season. See the Economic Impact Payments enclosure. (Recommendation 9)
10Department of Labor : Wage and Hour Division

The Administrator of the Department of Labor’s Wage and Hour Division should better monitor data across all statutes that the Wage and Hour Division enforces to ensure the division’s case management is consistent with established policies for assigning and prioritizing cases. See the Leave Benefits for Employees enclosure. (Recommendation 10)
11Department of Labor : Wage and Hour Division

The Administrator of the Department of Labor’s Wage and Hour Division should ensure that the new data system under development includes mechanisms to prevent staff from assigning and prioritizing cases in a manner inconsistent with established policies. See the Leave Benefits for Employees enclosure. (Recommendation 11)
12Department of Labor : Wage and Hour Division

The Administrator of the Department of Labor’s Wage and Hour Division should expand the Essential Workers, Essential Protections initiative on pandemic-related worker protections to include information about filing a complaint related to paid leave provided under the Families First Coronavirus Response Act. See the Leave Benefits for Employees enclosure. (Recommendation 12)
13Department of Labor : Wage and Hour Division

The Administrator of the Department of Labor’s Wage and Hour Division should engage in a comprehensive and timely effort to consult with employers, workers, and organizations that represent them, to identify and document lessons learned from the Wage and Hour Division’s administration and enforcement of COVID-19-related paid leave. See the Leave Benefits for Employees enclosure. (Recommendation 13)
14Department of the Treasury : Internal Revenue Service

The Commissioner of Internal Revenue should clearly communicate on the Internal Revenue Service’s website that there are delays, beyond the statutory 90-day timeline, in processing net operating loss and alternative minimum tax tentative refunds. See the Tax Relief for Businesses enclosure. (Recommendation 14)
15Department of the Treasury : Internal Revenue Service

The Commissioner of Internal Revenue should direct the appropriate officials to update relevant pages of irs.gov and, if feasible, add alerts to the Internal Revenue Service’s toll-free telephone lines to more clearly and prominently explain the nature and extent of individual refund delays occurring for returns taxpayers filed in 2021. See the 2021 Tax Filing Season enclosure. (Recommendation 15)
View recommendation(s) status

Introduction 


Congressional Committees

The nation is concurrently responding to, and recovering from, the Coronavirus Disease 2019 (COVID-19) pandemic, as the number of cases, hospitalizations, and deaths have seen overall declines nationally in recent months. While the decline in these metrics is attributable to a number of factors, the development and administration of multiple vaccines across the nation have been key among them.

About 53.1 percent of the U.S. population age 12 and over—almost 150.7 million individuals—had been fully vaccinated as of June 23, 2021, according to the Centers for Disease Control and Prevention (CDC).[1] Continuing to get “shots in arms” will be a priority for the federal government, as those yet to be vaccinated remain at higher risk from COVID-19 and as new variants of the virus continue to emerge. A successful vaccination program is seen as essential to further stabilizing the economy and safely returning to prepandemic activities, such as in-person learning for students for the 2021–22 school year.

As part of its recovery efforts, Congress passed, and the President signed into law, the American Rescue Plan Act of 2021 (ARPA) in March 2021.[2] The law provided, among other things, about $1.6 trillion to address the continued impact of COVID-19 on the economy, public health, state and local governments, individuals, and businesses. Since March 2020, Congress has provided about $4.7 trillion through ARPA as well as five other laws, including the CARES Act, that were previously enacted to fund efforts to help the nation respond to, and recover from, the COVID-19 pandemic (COVID-19 relief laws).[3]

As the administration implements the provisions in the COVID-19 relief laws, the size and scope of these efforts—from distributing the funding to implementing new programs—demand strong accountability and oversight. Furthermore, the government must remain vigilant and agile to address new COVID-19 variants and potential unexpected events or unintended consequences of recovery and response efforts while concurrently preparing for future public health emergencies.

Recognizing the need for robust monitoring and oversight of new authorities and funding, the CARES Act includes a provision for us to report regularly on the federal response to the pandemic. Specifically, the act requires us to monitor and oversee the federal government’s efforts to prepare for, respond to, and recover from the COVID-19 pandemic.[4] To date, we have issued seven recurring oversight reports in response to this provision; in these reports, we have made 72 recommendations to federal agencies, and raised four matters for congressional consideration to improve the federal government’s response efforts.[5] The agencies generally agreed with 57 of these recommendations, and are in the process of implementing a majority of those recommendations.

This report examines the federal government’s continued efforts to respond to, and recover from, the COVID-19 pandemic. We are making 15 new recommendations to federal agencies in areas including COVID-19 testing, the Strategic National Stockpile, tax relief, higher education grants, leave benefits for employees, and state and local funding.

This report also includes 28 enclosures about a range of federal programs and activities across the government concerning public health and the economy (see app. I). Figure 1 lists these enclosures by topic area and highlights those with new recommendations.

Figure 1: Report Enclosures by Topic Area

Given the government-wide scope of this report, we undertook a variety of methodologies to complete our work, including examining a wide range of data sources and conducting interviews with federal officials, representatives from organizations for state and local entities, and other stakeholder groups such as manufacturers of personal protective equipment (e.g., N95 respirators, surgical masks, and nitrile gloves). We examined federal laws and agency documents and guidance, among other things. In each enclosure, we include a summary of the methodology specific to the work conducted.

We have issued other targeted COVID-19-related reports in areas such as biomedical research, emergency financial aid for college students, and global health security, and we have reviews ongoing in other areas.[6] See appendix II for highlights pages from our recently issued work on COVID-19. See appendix III for a list of our ongoing work related to COVID-19, and see appendix IV for the status of matters for congressional consideration and recommendations for executive action presented in our June 2020, September 2020, November 2020, January 2021, and March 2021 CARES Act reports and in our November 2020 report on vaccines and therapeutics.

We conducted this performance audit from February 2021 to July 2021 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives.

Background 


Public Health and Economic Effects

The effects of the COVID-19 pandemic on public health and the economy over the past 17 months have been devastating, and recovery from the pandemic and its effects remains fragile. As of mid-June 2021, about 33.4 million cases and about 593,000 deaths had been reported in the U.S.[7] Since the pandemic began, the country has also continued to experience higher unemployment. As of May 2021, about 9.3 million individuals were unemployed, compared with nearly 5.8 million at the beginning of 2020.[8]

According to data from CDC’s National Center for Health Statistics, about 584,000 more deaths occurred from all causes (i.e., COVID-19 and other causes) in the U.S. from January 2020, through May 29, 2021, than would normally be expected (see fig. 2).

Figure 2: Higher-Than-Expected Weekly Mortality in the U.S., January 2020–May 29, 2021

Note: The data shown represent the number of deaths from all causes in a given week through May 29, 2021, reported in the U.S. that exceeded the upper-bound threshold of expected deaths calculated by CDC’s NCHS on the basis of variation in mortality in prior years. For further details of CDC’s methodology for estimating this upper-bound threshold, see CDC, National Center for Health Statistics, “Excess Deaths Associated with COVID-19,” accessed June 24, 2021, https://www.cdc.gov/nchs/nvss/vsrr/covid19/excess_deaths.htm. The number of deaths in recent weeks should be interpreted cautiously, as this figure relies on provisional data that are generally less complete.

However, recent trends in reported new cases indicate that the country is making progress in its response to the pandemic. The number of new reported COVID-19 cases has decreased since the peak in January 2021. From June 5 to June 18, 2021, new reported COVID-19 cases averaged about 13,000 per day—less than a tenth of the peak reported in January 2021 (see fig. 3).[9] During the same 2-week period, reported new COVID-19 cases per day, on average, increased in four jurisdictions, held steady in 11 jurisdictions, and decreased in 37 jurisdictions.[10] Further, deaths from all causes were within the estimated upper bound of expected variation in March 2021 for the first time since March 2020.

Figure 3: Reported COVID-19 Cases per Day in the U.S., Mar. 1, 2020–June 18, 2021

Note: Reported COVID-19 cases include confirmed and probable cases. Beginning April 14, 2020, states could include probable as well as confirmed COVID-19 cases in their reports to CDC. Previously, counts included only confirmed cases. According to CDC, the actual number of cases is unknown for a variety of reasons, including the fact that people who have been infected may not have been tested or may not have sought medical care. See CDC, “COVID Data Tracker: Trends in Number of COVID-19 Cases and Deaths in the U.S. Reported to CDC, by State/Territory,” accessed June 24, 2021, https://covid.cdc.gov/covid-data-tracker/#trends_dailytrendscases.

Providing the public with safe and effective vaccines to protect people from getting sick with COVID-19 is crucial to mitigating the public health and economic impacts of the virus and ending the pandemic. Two COVID-19 vaccines using a two-dose regimen were authorized for emergency use in December 2020 and a third, one-dose vaccine was authorized in February 2021.[11] Doses of COVID-19 vaccine administered each day have decreased from a peak in early April 2021, with a temporary dip in February due to severe weather across the country (see fig. 4). As of June 23, 2021, about 323 million doses had been administered, according to data reported to CDC. See the Vaccine Implementation enclosure in appendix I for more information.

Figure 4: Daily Count of COVID-19 Vaccine Doses Administered in the U.S. and Reported to CDC, Dec. 14, 2020–June 23, 2021

Notes: The data shown reflect COVID-19 vaccine doses administered in the U.S. as reported to CDC by state, territorial, and local public health agencies and by federal entities since the national vaccine program began on December 14, 2020. The data include doses administered through all vaccine partners, including jurisdictional partner clinics, retail pharmacies, long-term care facilities, Federal Emergency Management Agency and Health Resources and Services Administration partner sites, and federal entity facilities. See CDC, “COVID Data Tracker: COVID-19 Vaccinations in the United States,” accessed on June 28, 2021, https://covid.cdc.gov/covid-data-tracker/#vaccinations.
As of June 23, 2021, three COVID-19 vaccines were authorized for emergency use; two of these vaccines are two-dose regimens and the third vaccine requires one dose. The number of doses administered on a given day may be affected by several factors, such as weekend days, holidays, weather, and vaccine availability. The most recent days of reporting may be more impacted by reporting delays, and all reported numbers may change over time as historical data are reported to CDC.

In addition to affecting public health, the pandemic continues to cause economic challenges, particularly for the labor market, though the economy has improved in recent months. Monthly and weekly data from the Department of Labor (DOL) indicate that labor market conditions improved in March, April, May, and June 2021 but remained worse relative to the prepandemic period. Weekly initial unemployment insurance claims fell from March to June 2021, indicating improvements in the labor market in recent months. For example, in May 2021, the employment-to-population ratio, which measures the share of the population employed, was 58.0 percent—a slight increase from the previous month, but 3.1 percentage points lower than in the prepandemic period (see fig. 5).[12] See the Economic Indicators enclosure in appendix I for more information.

Figure 5: Employment-to-Population Ratio, January 2019–May 2021

Federal COVID-19 Funding and Spending

In response to the far-reaching public health and economic crises resulting from the COVID-19 pandemic, Congress has passed, and the President has signed, six COVID-19 relief laws. Figure 6 shows the COVID-19 relief laws enacted from March 2020, through May 31, 2021.

Figure 6: COVID-19 Relief Laws Enacted as of May 31, 2021

Note: The laws shown are those providing comprehensive COVID-19 relief. Additional COVID-19 relief legislation, such as legislation providing limited and targeted relief to certain individuals, also was enacted during this period. Amounts shown for the six COVID-19 relief laws are based on appropriation warrant information provided by the Department of the Treasury as of May 31, 2021. These amounts have increased over time and could increase in the future for programs with indefinite appropriations, which are appropriations that, at the time of enactment, are for an unspecified amount.
aThe Coronavirus Preparedness and Response Supplemental Appropriations Act, 2020, provided $7.8 billion to agencies for health emergency prevention, preparedness, and response activities related to the COVID-19 pandemic, with the Department of Health and Human Services receiving a majority of the funds. Pub. L. No. 116-123, 134 Stat. 146.
bThe Families First Coronavirus Response Act provided supplemental appropriations for nutrition assistance programs and public health services and authorized the Internal Revenue Service to provide tax credits for paid emergency sick leave and expanded family medical leave that the act required certain employers to provide. In addition, the act provided states with flexibility to temporarily modify provisions of their unemployment insurance laws and policies related to certain eligibility requirements and provided additional federal financial support to the states. Pub. L. No. 116-127, 134 Stat. 178 (2020).
cThe CARES Act provided supplemental appropriations for federal agencies to respond to the COVID-19 pandemic. In addition, the act funded various loans, grants, and other forms of federal financial assistance for businesses, industries, states, local governments, and hospitals; provided tax rebates for certain individuals; temporarily expanded unemployment benefits; and suspended payments and interest on federal student loans. Pub. L. No. 116-136, 134 Stat. 281 (2020).
dThe Paycheck Protection Program and Health Care Enhancement Act provided additional appropriations for small business loans, grants to health care providers, and COVID-19 testing. Pub. L. No. 116-139, 134 Stat. 620 (2020).
eThe Consolidated Appropriations Act, 2021, expanded or extended several CARES Act programs, including unemployment insurance programs, economic impact payments, and Paycheck Protection Program loans and rescinded unobligated funds for certain programs. Pub. L. No. 116-260, 134 Stat. 1182 (2020).
fThe American Rescue Plan Act of 2021 provided additional relief to address the continued impact of the COVID-19 pandemic on the economy, public health, state and local governments, individuals, and businesses. Pub. L. No. 117-2, 135 Stat. 4.

As of May 31, 2021, about $4.7 trillion had been appropriated to fund response and recovery efforts for—as well as to mitigate the public health, economic, and homeland security effects of—the COVID-19 pandemic.[13] As of May 31, 2021, the most recent date for which government-wide information was available at the time of our analysis, the federal government had obligated a total of $3.5 trillion and expended $3.0 trillion of the COVID-19 relief funds as reported by federal agencies to the Department of the Treasury’s (Treasury) Governmentwide Treasury Account Symbol Adjusted Trial Balance System (GTAS).[14] Obligations and expenditures relative to the amounts appropriated through COVID-19 relief laws have varied over time, as new relief laws have been enacted, appropriating additional relief funds, and as the federal government has obligated and expended these relief funds (see fig. 7).

Figure 7: Percentage of COVID-19 Relief Appropriations Obligated and Expended, July 31, 2020–May 31, 2021

Note: The percentages shown represent the portions of appropriated funds available as of each date shown that had been obligated and expended. An appropriation provides legal authority for federal agencies to incur obligations and make payments out of the U.S. Treasury for specified purposes. Appropriation amounts are based on appropriation warrant information provided by the Department of the Treasury as of July 31, 2020; September 30, 2020; November 30, 2020; January 31, 2021; and May 31, 2021, for the six COVID-19 relief laws, four of which were enacted before July 2020. These amounts have increased over time and could increase in the future for programs with indefinite appropriations, which are appropriations that, at the time of enactment, are for an unspecified amount.
An obligation is a definite commitment that creates a legal liability of the U.S. government for the payment of goods and services ordered or received, or a legal duty on the part of the U.S. government that could mature into a legal liability by virtue of actions on the part of the other party beyond the control of the U.S. government. An expenditure is the actual spending of money, or an outlay. Expenditures reflected in the percentages shown include some estimates, such as estimated subsidy costs for direct loans and loan guarantees. Increased spending in Medicaid and Medicare is not accounted for in the appropriations provided by the COVID-19 relief laws. Under Office of Management and Budget (OMB) guidance, federal agencies were not directed to report COVID-19 related obligations and expenditures until July 2020.

The 13 major spending areas shown in table 1 represent $4.1 trillion, or 87 percent, of the total amounts appropriated. For these 13 spending areas, agencies reported obligations totaling $3.2 trillion and expenditures totaling $2.8 trillion as of May 31, 2021. Table 1 provides additional details on appropriations, obligations, and expenditures of government-wide COVID-19 relief funds, including the 13 major spending areas.
Table 1: COVID-19 Relief Appropriations, Obligations, and Expenditures, as of May 31, 2021

Major spending areaa

Total appropriationsb
($ billions)

Total obligationsc
($ billions)

Total expendituresc
($ billions)

Unemployment Insurance
(Department of Labor)

858.6

575.6

566.2

Economic Impact Payments
(Department of the Treasury)

855.3

829.9

829.9

Business Loan Programs
(Small Business Administration)

838.0

834.6

805.4d

Public Health and Social Services Emergency Fund
(Department of Health and Human Services)

350.1

228.7

154.5
Coronavirus State and Local Fiscal Recovery Funds
(Department of the Treasury) e

350.0

140.2

131.0

Education Stabilization Fund
(Department of Education)

278.6

224.0

30.9

Coronavirus Relief Fund
(Department of the Treasury)

150.0

149.9

149.5

Disaster Relief Fundf
(Department of Homeland Security)

97.0

58.1

2.2

Transit Infrastructure Grants
(Department of Transportation)

69.5

27.1

19.6

Supplemental Nutrition Assistance Programs
(Department of Agriculture)

69.4

26.9

26.8

Emergency Economic Injury Disaster Loan (EIDL) Grants
(Small Business Administration)

55.0

21.4

21.1

Payment to States for the Child Care and Development Block Grant
(Department of Health and Human Services)

52.5

51.9

3.9

Disaster Loans Programs
(Small Business Administration)

51.0

27.1

25.5d

Other areasg,h

630.6

303.6

233.3

Totali

4,705.6

3,499.0

2,999.8
Source: GAO analysis of data from the Department of the Treasury (Treasury) and applicable agencies. | GAO-21-551

aMajor spending areas shown are based on federal accounts in Treasury’s Governmentwide Treasury Account Symbol Adjusted Trial Balance System (GTAS). Each spending area may include multiple programs.
bCOVID-19 relief appropriations shown reflect amounts appropriated under the American Rescue Plan Act of 2021 (ARPA), Pub. L. No. 117-2, 135 Stat. 4; Consolidated Appropriations Act, 2021, Pub. L. No. 116-260, 134 Stat. 1182 (2020); Paycheck Protection Program and Health Care Enhancement Act, Pub. L. No. 116-139, 134 Stat. 620 (2020); CARES Act, Pub. L. No. 116-136, 134 Stat. 281 (2020); Families First Coronavirus Response Act, Pub. L. No. 116-127, 134 Stat. 178 (2020); and Coronavirus Preparedness and Response Supplemental Appropriations Act, 2020, Pub. L. No. 116-123, 134 Stat. 146. These amounts are based on appropriation warrant information provided by Treasury as of May 31, 2021. These amounts have increased over time and could increase in the future for programs with indefinite appropriations, which are appropriations that, at the time of enactment, are for an unspecified amount. The amounts shown do not include transfers of funds that federal agencies may make between appropriation accounts or transfers of funds they may make to other agencies.
cObligation and expenditure data shown are based on data reported by applicable agencies. An obligation is a definite commitment that creates a legal liability of the U.S. government for the payment of goods and services ordered or received, or a legal duty on the part of the U.S. government that could mature into a legal liability by virtue of actions on the part of the other party beyond the control of the U.S. government. An expenditure is the actual spending of money, or an outlay. Expenditures shown include some estimates, such as estimated subsidy costs for direct loans and loan guarantees.
dThe Small Business Administration’s Business Loan Program account includes activity for the Paycheck Protection Program loan guarantees and certain other loan subsidies, and the Disaster Loans Program account includes activity for direct loans. Both of these expenditures relate mostly to the loan subsidy costs (i.e., the loan’s estimated long-term costs to the U.S. government).
eThe Coronavirus State and Local Fiscal Recovery Funds were established by section 9901 of ARPA, enacted on March 11, 2021, and are codified at 42 U.S.C. §§ 802, 803.
fAppropriations to the Disaster Relief Fund are generally not specific to individual disasters or events, including the COVID-19 response. The Disaster Relief Fund’s COVID-19-related spending includes funding from appropriations in addition to those in the six COVID-19 relief laws. Treasury’s methodology for determining COVID-19-related obligations and expenditures does not include obligations and expenditures from these other appropriations. In its Disaster Relief Fund Monthly Report dated June 10, 2021, the Department of Homeland Security reported COVID-19-related obligations totaling $75.2 billion and expenditures totaling $52.9 billion as of May 31, 2021.
gWe previously included Treasury’s Economic Stabilization and Assistance to Distressed Sectors in the major spending areas. Economic Stabilization and Assistance to Distressed Sectors programs received $500 billion in appropriations from the CARES Act, of which approximately $478.8 billion was rescinded in response to the Consolidated Appropriations Act, 2021. Therefore, Economic Stabilization and Assistance to Distressed Sectors is no longer included in our list of major spending areas.
hSeveral provisions in the Families First Coronavirus Response Act and ARPA authorized increases in Medicaid payments to states and U.S. territories. The Congressional Budget Office estimated that federal expenditures from these provisions would total approximately $76.9 billion through fiscal year 2030. The largest increase to federal Medicaid spending is based on a temporary formula change rather than a specific appropriated amount. Some of the estimated costs in this total are for the Children’s Health Insurance Program, permanent changes to Medicaid, and changes not specifically related to COVID-19. This increased spending is not accounted for in the appropriations provided by the COVID-19 relief laws and therefore not included in this table.
iThe sum of amounts shown may not agree due to rounding.

The COVID-19 relief laws provided more than $1 trillion to federal agencies to provide assistance related to the COVID-19 pandemic to U.S. states, the District of Columbia, localities, U.S. territories, Indian tribes (tribes), and tribal governments through existing and newly created programs and funds.[15]Table 2 lists programs and funds that each received $10 billion or more—exclusively or primarily for states, D.C., localities, U.S. territories, tribes, and tribal governments—in at least one of the six laws.
Table 2: Federal Programs and Funds Receiving $10 Billion or More in COVID-19 Pandemic-Related Aid for States, the District of Columbia, Localities, U.S. Territories, Tribes, and Tribal Governments, as of May 31, 2021

Program/fund and description

Appropriations
($ in billions)

Coronavirus State and Local Fiscal Recovery Funds

Administered by the Department of the Treasury (Treasury), these funds provide payments to states, the District of Columbia (D.C.), U.S. territories, tribal governments, and localities to mitigate the fiscal effects stemming from the COVID-19 pandemic, among other things.

350.0

Elementary and Secondary School Emergency Relief Fund

Administered by the Department of Education, this fund generally provides formula grants to states (including D.C. and Puerto Rico) for education-related needs to address the impact of the COVID-19 pandemic.

190.3

Coronavirus Relief Fund

Administered by Treasury, this fund provides payments to states, D.C., localities, U.S. territories, and tribal governments to help offset costs of their response to the COVID-19 pandemic.

150.0

Disaster Relief Fund

Administered by the Federal Emergency Management Agency, this fund provides federal disaster recovery assistance for state, local, and territorial governments when a major disaster occurs.a

95.0

Medicaid

Administered by states and U.S. territories according to plans approved by the Centers for Medicare & Medicaid Services, which oversees Medicaid at the federal level. This program finances health care for certain low-income and medically needy individuals through federal matching of states’ and U.S. territories’ health care expenditures. The Families First Coronavirus Response Act and American Rescue Plan Act of 2021 temporarily increased federal Medicaid matching rates under specified circumstances, among other changes.

76.9b

Transit grants

Administered by the Federal Transit Administration, these funds are distributed through existing grant programs to provide assistance to states, localities, U.S. territories, and tribes to prevent, prepare for, and respond to the COVID-19 pandemic.

69.5

Child Care and Development Block Grant

Administered by the Department of Health and Human Services (HHS), this block grant provides funds to states, D.C., territories, and tribes to subsidize the cost of child care for low-income families. Funding permits assistance to health care and other essential workers without regard to income eligibility requirements. Additional child care stabilization funding was provided for subgrants to eligible child care providers to support the stability of the child care sector during and after the COVID-19 pandemic.

52.5

Emergency Rental Assistance

Administered by Treasury, this program provides grants to states, D.C., U.S. territories, localities, and tribes to provide rental assistance to eligible households.

46.6

Public Health and Social Services Emergency Fund

Administered by HHS, this fund provides for grants to states, U.S. territories, localities, and tribal governments to support COVID-19 testing, surveillance, and contact tracing, among other uses.

33.4

Airport grants

Administered by the Federal Aviation Administration, these grants provide funds for eligible airports to prevent, prepare for, and respond to the effects of the COVID-19 pandemic.c

20.0

Highway infrastructure programs

Administered by the Federal Highway Administration, these programs provide funds to states, D.C., U.S. territories, and tribes for highway construction and authorize the use of these funds for maintenance, personnel, and other purposes to prevent, prepare for, and respond to the COVID-19 pandemic.

10.0

Coronavirus Capital Projects Fund

Administered by Treasury, this fund provides payments to states, D.C., U.S. territories, and tribal governments for critical capital projects that directly enable work, education, and health monitoring, in response to the COVID-19 pandemic.

10.0

State Small Business Credit Initiative

Administered by Treasury, this program provides funds to states, D.C., U.S. territories, tribal governments, and eligible localities to fund small business credit support and investment programs.

10.0
Source: GAO analysis of federal laws and data from the Congressional Budget Office. | GAO-21-551.

Note: The COVID-19 relief laws providing the amounts shown are the American Rescue Plan Act of 2021 (ARPA), Pub. L. No. 117-2, 135 Stat. 4 (2021), the Consolidated Appropriations Act, 2021, Pub. L. No. 116-260, div. M and N, 134 Stat. 1182 (2020), the Paycheck Protection Program and Health Care Enhancement Act, Pub. L. No. 116-139, 134 Stat. 620 (2020), the CARES Act, Pub. L. No. 116-136, 134 Stat. 281 (2020), and the Families First Coronavirus Response Act, Pub. L. No. 116-127, 134 Stat. 178 (2020). The Coronavirus Preparedness and Response Supplemental Appropriations Act, 2020 did not provide any specified amounts for these programs or funds for states, D.C., localities, territories, tribes, or tribal governments. The amounts shown are the cumulative amounts for each program or fund under the other five laws. Some appropriation amounts include an amount available for administration expenses or for the relevant inspectors general. Numbers are rounded to the nearest hundred million.
aThe Disaster Relief Fund may be used for various disaster assistance programs, including the Public Assistance program, which provides assistance to states, U.S. territories, and localities.
bSeveral provisions in the Families First Coronavirus Response Act and ARPA authorized increases in Medicaid payments to states and U.S. territories. The Congressional Budget Office estimated that federal expenditures from these provisions would be approximately $76.9 billion through fiscal year 2030. The largest increase to federal Medicaid spending is based on a temporary formula change rather than a specific appropriated amount. Some of the estimated costs in this total are for the Children’s Health Insurance Program, permanent changes to Medicaid, and changes not specifically related to COVID-19.
cFunds are available to eligible sponsors of airports. Nearly all of these airports are under city, state, county, or public-authority ownership.

Executive Summary 

Overview

As COVID-19 case and death counts decline and the nation looks toward fully reopening, we identify key considerations for the federal government moving forward. In this report, we are making 15 new recommendations across the federal government in the areas of public health and the economy, specifically aimed at enhancing pandemic preparedness and response, program integrity, and the delivery of benefits and services to the public.

In our prior seven CARES Act reports, we made 72 recommendations to agencies. Agencies have fully implemented 16 of these recommendations in areas such as inspections of state veterans homes, data on nursing home vaccination rates, and guidance on reassessing schools’ operating status.[16] As Congress and the administration carry out the federal government’s ongoing COVID-19 response, including the use of funding from ARPA, we urge action on our prior 55 recommendations that have not been fully implemented, as well as our 15 new recommendations. We continue to believe that these recommendations would enhance transparency and accountability over the federal government’s response to, and recovery from, the COVID-19 pandemic. For a summary and the status of all prior recommendations from these reports, see appendix IV.

COVID-19 Testing

CDC developed a COVID-19 test, which received an emergency use authorization (EUA) from the Food and Drug Administration (FDA) on February 4, 2020, and was distributed to public health and Department of Defense laboratories from February 6 to 10, 2020.[17] However, immediately after receiving the CDC test, many public health laboratories reported to CDC that the test was not working properly.[18] Following these reports, CDC worked to correct the issue and, by February 28, 2020, began distributing new test kits to the laboratories. The failure of CDC’s COVID-19 test limited testing capacity in the U.S. during the critical early weeks of the pandemic, when the nation needed to understand the spread of the novel virus.

CDC’s was the only COVID-19 test available in the U.S. until February 29, 2020, when FDA announced that it did not intend to object if certain laboratories began using their own tests while they prepared EUA requests. According to CDC, by February 29, 2020, its laboratory had tested a total of 3,291 specimens, representing approximately 1,195 individuals. In contrast, other countries around the world quickly scaled up testing in late January and early February. For example, the South Korean government reported that South Korea was conducting about 20,000 tests each day by the middle of February 2020.[19]

While CDC has begun making improvements to its process for developing diagnostic tests, additional actions could help strengthen CDC’s preparedness and enhance the nation’s testing capacity during a future infectious disease outbreak. For example, CDC has opportunities to improve communication and collaboration. The agency collaborated with public health and private stakeholders—including public health and private laboratories—beginning in 2018 to identify potential opportunities to enhance laboratory capacity to respond to a needed surge in testing. However, CDC has not yet developed a plan for enhancing laboratory surge testing capacity that identifies objectives and outlines agency and stakeholder roles and responsibilities for achieving these objectives within defined time frames.

We are recommending that CDC work with appropriate stakeholders to develop a plan to enhance surge capacity for laboratory testing. This plan should include timelines, define agency and stakeholder roles and responsibilities, and address any identified gaps from preparedness exercises. CDC agreed with this recommendation.

The COVID-19 pandemic demonstrated potential opportunities for CDC to improve its testing capacity for future public health emergencies by improving test kit manufacturing capacity. For example, if surge testing is required at the beginning of a future emergency, CDC could benefit from establishing contracts for the manufacturing of test kits before a public health emergency occurs. Establishing contracts with test kit manufacturers in advance of a public health emergency could allow CDC to supplement the supply produced by CDC and aid in the rapid manufacturing and deployment of test kits during a future public health emergency. CDC officials told us that responding to COVID-19 required surge capacity for additional laboratory testing. However, the agency did not have manufacturing contracts in place prior to the COVID-19 pandemic that could have supported the testing response.

We are recommending that CDC assess the agency’s needs for goods and services for the manufacturing and deployment of diagnostic test kits in public health emergencies. This assessment should evaluate how establishing contracts in advance of an emergency could help CDC quickly and cost-effectively acquire these capabilities when responding to future public health emergencies and incorporate lessons learned from the COVID-19 emergency. CDC agreed with this recommendation. See the COVID-19 Testing enclosure in appendix I for more information.

Domestic Medical Supply Manufacturing

Personal protective equipment (PPE)—safety products designed to help prevent the spread of infectious disease—has been critical to the COVID-19 response. Before the pandemic, the U.S. generally depended on foreign suppliers for certain PPE types, including nitrile gloves and surgical gowns. U.S. dependence on foreign manufacturers has increased over the past several decades in part because foreign manufacturers can produce their products at a lower cost.[20] Federal agencies have identified this dependence as a national security issue.

Multiple stakeholders representing manufacturers, distributors, and other purchasers we interviewed noted that meaningful, transparent federal engagement with industry could enhance domestic manufacturing and supply chain resilience and help ensure these perspectives are considered in strategies to support and sustain the domestic PPE industry. According to some stakeholders, such engagement with the private sector could help ramp up private investment in domestic PPE manufacturing, among other things.

In January 2021, we reported that the Department of Health and Human Services (HHS) had not developed a process for engaging with key nonfederal stakeholders and Congress for development of a supply chain strategy for pandemic preparedness, including the role of the Strategic National Stockpile (SNS). We recommended that HHS do so, and the department generally agreed with our recommendation. However, as of May 2021, the HHS Office of the Assistant Secretary for Preparedness and Response (ASPR)—which leads the nation’s medical and public health preparedness for, response to, and recovery from disasters and public health emergencies—had not proactively engaged any private or public partners in strategic discussions to implement this recommendation. However, ASPR officials told us that such discussions are important and that they are considering how to better engage their public and private partners.

We continue to underscore that engaging with key nonfederal stakeholders in meaningful, proactive ways to obtain their business and industry expertise, as well as engaging with Congress, is critical for developing strategies to build a sustainable domestic medical supply manufacturing base. See the Domestic Medical Supply Manufacturing enclosure in appendix I for more information.

Strategic National Stockpile

The SNS contains a multibillion dollar inventory of medical countermeasures—drugs, vaccines, supplies, and other materials—to respond to a broad range of public health emergencies. The SNS can be used as a short-term stopgap buffer when the supply of materials may not be immediately available in affected areas during a public health emergency. ASPR oversees the SNS. As of May 31, 2021, HHS reported it had obligated about $10.2 billion of the $13.9 billion it planned to use for the SNS and had expended about $6.3 billion.

ASPR leads an interagency group of experts, the Public Health Emergency Medical Countermeasures Enterprise (PHEMCE). The PHEMCE advises the Secretary of Health and Human Services in prioritizing, developing, procuring, deploying, and effectively using medical countermeasures held in the SNS. Comprising representatives from multiple agencies within HHS and other federal departments such as the Departments of Defense and Homeland Security, the PHEMCE also manages the SNS annual review, a year-long, multistep process that starts with an examination of the SNS inventory and results in recommendations to HHS on SNS medical countermeasure procurements and a report to Congress.

The Pandemic and All-Hazards Preparedness and Advancing Innovation Act of 2019 specified that the PHEMCE is to use a process to make recommendations to the Secretary of Health and Human Services regarding research, procurement, and stockpiling of medical countermeasures.[21] The PHEMCE is also to assist the Secretary in developing strategies for logistics, deployment, distribution, dispensing, and use of countermeasures that may be applicable to SNS activities.

In the years before the COVID-19 pandemic, ASPR began restructuring the PHEMCE. The changes, which began after December 2017, narrowed the scope of PHEMCE deliberations about medical countermeasures from a comprehensive range of issues to a focus on development and procurement. According to the former Assistant Secretary, in future iterations of the PHEMCE restructure, ASPR planned to broaden the PHEMCE’s scope to also focus on issues such as the deployment and utilization of medical countermeasures. The changes also shifted the structure of the deliberation process from bottom up to top down. According to the former Assistant Secretary, this shift was made to make the process more efficient and ensure medical countermeasure development focused on national security vulnerabilities.

However, the restructuring has led to concerns about:
  • the effectiveness of interagency collaboration and transparency and
  • lapses in SNS annual reviews, as ASPR did not complete statutorily required annual reviews for 2017, 2018, and 2019.[22]

ASPR is in the process of reassessing and reestablishing new organizational processes for the PHEMCE but, has not yet finalized planning documents, including an organizational charter and implementation plan, to guide those efforts. ASPR officials acknowledged that the changes made to the PHEMCE from 2018 to 2020 did not fully achieve the desired aims and created other challenges.

We are recommending that ASPR develop and document plans for restructuring the PHEMCE. These plans should describe how ASPR will ensure a transparent and deliberative process that engages interagency partners in the full range of responsibilities for the PHEMCE outlined in the Pandemic and All-Hazards Preparedness and Advancing Innovation Act of 2019, including those related to the SNS annual reviews. These plans should also incorporate GAO’s leading practices to foster more effective collaboration, while ensuring that sensitive information is appropriately protected. HHS—which includes ASPR—agreed with this recommendation. See the Strategic National Stockpile enclosure in appendix I for more information.

ASPR lacked documentation of PHEMCE activities and deliberations after 2017, raising concerns about its records management practices. For example, ASPR was unable to provide us with documentation related to PHEMCE decisions or recommendations made from 2018 to 2020; the rationale for the changes to the PHEMCE; or PHEMCE meeting agendas and minutes from 2018 to 2020. Not maintaining such documentation is inconsistent with HHS’s policy for records management and also leaves Congress and key stakeholders without assurances that steps taken are advancing national preparedness for natural, accidental, and intentional threats.[23]

We are recommending that ASPR implement records management practices that include developing, maintaining, and securing documentation related to PHEMCE activities and deliberations, including those related to the SNS. Documentation should include information such as the factors considered, the rationale for the action or decision, and the final outcomes of PHEMCE processes. HHS, including ASPR, agreed with this recommendation. See the Strategic National Stockpile enclosure in appendix I for more information.

ASPR procures supplies to maintain SNS inventory in preparation for bioterrorist attacks and other public health emergencies, using a standard procurement process. Because the nationwide need for critical supplies to respond to COVID-19 quickly exceeded the quantity of supplies contained in the SNS, ASPR also used additional procurement processes, including direct shipment of supplies from vendors. Under this direct shipment procurement, supplies purchased by ASPR were not used to replenish the SNS but instead were primarily distributed from vendors directly to state, local, territorial, and tribal governments.

Although ASPR has documented policies and procedures for its standard procurement process, ASPR did not have documented policies and procedures, including related control and monitoring activities, to address payment integrity risks for its direct shipment procurement process. Guidance from the Office of Management and Budget (OMB) states that agency management is responsible for managing payment integrity risks to reduce improper payments and protect taxpayer funds.[24]

Without written policies and procedures documenting how ASPR tracks the direct shipment and receipt of supplies prior to issuing payments, there is an increased risk that ASPR may make improper payments to vendors for incorrect supplies or quantities or for supplies the intended recipients did not receive. In addition, it is difficult for management to assess the adequacy of controls over the direct shipment procurement process, and ASPR lacks assurance that its staff fully understand the process and properly and consistently perform their duties.

We are recommending that, to strengthen the current procedures, ASPR update policies and procedures for the SNS, including related control and monitoring activities, to document the direct shipment procurement process and address payment integrity risks. Although HHS, including ASPR, did not agree with us regarding the need to address payment integrity risks, it stated that HHS will update its policies and procedures, including related control and monitoring activities to document the direct shipment procurement process. See the Strategic National Stockpile Payment Integrity enclosure in appendix I for more information.

HHS COVID-19 Funding

As of May 31, 2021, Congress had appropriated HHS approximately $484 billion in COVID-19 funds in six relief laws. The majority of HHS’s appropriations from the first five relief laws have been obligated and about half have been expended. Specifically, as of May 31, 2021, the department reported the following:
  • Of the $324 billion appropriated in the first five COVID-19 relief laws, about $253 billion had been obligated (about 78 percent) and about $168 billion had been expended (about 52 percent).
  • Of the $160 billion appropriated in the sixth law, ARPA, about $75 billion had been obligated (about 47 percent) and about $3 billion had been expended (about 2 percent).

The percentage of obligations and expenditures varied across selected COVID-19 response activities for a variety of reasons, including the nature of the activities, their planned uses, and the timing of the funds provided through the six COVID-19 relief laws.

HHS uses “spend plans” to communicate information about its COVID-19 spending. The first five COVID-19 relief laws generally require the department to develop, update, and provide these spend plans to Congress every 60 days.[25] The sixth relief law, ARPA, does not require a spend plan; however, according to HHS officials, the department is preparing a consolidated plan that captures the first five relief laws and a separate spend plan for funding provided through ARPA. The consolidated spend plan is under internal review at HHS, and the ARPA spend plan is still being finalized. As of May 2021, we had received and reviewed a total of 15 spend plans—the original spend plans and subsequent updates—provided by HHS. However, we found that the most current spend plans generally do not include time frames for obligating the remaining relief funds, which is useful information for oversight and for informing Congress’s future funding decisions.

Guidance from OMB encouraged federal agencies, including HHS, to act quickly to disburse relief funds and noted the importance of spending transparency and regular reporting to help safeguard taxpayer dollars.[26] To communicate information about, and facilitate oversight of, the department’s use of COVID-19 relief funds, we are recommending that HHS provide projected time frames for the planned spending of COVID-19 relief funds in the spend plans it submits to Congress. HHS partially concurred with the recommendation and stated that the department would aim to incorporate some time frames on planned spending where that information may be available such as time frames for select grants to states. However, HHS officials stated that the department would not be able to provide specific time frames for all relief funds since the evolving environment requires the department to remain flexible in responding to incoming requests for response activities. See the HHS COVID-19 Funding enclosure in appendix I for more information.

Higher Education Grants

Since March 2020, approximately $76.2 billion in relief funding has been appropriated for the Higher Education Emergency Relief Fund (HEERF), which provides grants to institutions of higher education to prevent, prepare for, and respond to COVID-19.[27] The Department of Education’s (Education) Office of Postsecondary Education (OPE) is responsible for administering HEERF.

In April 2020, Education notified schools of their individual funding allocations provided by the CARES Act and also began awarding HEERF grants to schools.[28] As of May 31, 2021, 14 months after the enactment of the CARES Act, OPE had obligated $66 billion in HEERF funding provided by the COVID-19 relief laws—more than 33 times the average of $2 billion in grants that OPE normally administers annually.

To administer HEERF grants, OPE relied primarily on existing staffing levels and its existing grant policies and procedures, including those documented in its Guide for Managing Formula Grant Programs. This guide establishes the structure and oversight responsibility for grant funding, including the requirement that OPE staff review the accuracy of award information, such as allocation information, before awarding the grants and recording the obligations.

Although OPE had policies and procedures in place, Education faced inherent challenges that increase the risk of improper payments—specifically, an unusually large volume of funding and a needed urgency to process and distribute the funding expeditiously because of health and economic threats posed by the COVID-19 pandemic. We tested Education’s procedures for approving and processing HEERF grants through a sample of obligations and determined that Education did not effectively design and implement procedures needed to identify erroneous obligations. We estimate that for 5.5 percent of schools receiving HEERF grants, (about 262 of the 4,764 schools included in our sample population), Education awarded grants in excess of the amounts allocated to those schools. We identified three such instances, totaling $20 million, in our sample of obligations.

OPE officials stated that because of time constraints and having the same staffing level to administer a significantly higher volume of grants, they did not regularly perform quality assurance reviews after obligating funding to identify and correct erroneous obligations, such as additional quality assurance reviews of HEERF grants. OPE officials told us that in some instances, schools have identified and self-reported discrepancies in their awards. Once noted, OPE then verified those errors and corrected them.

We are recommending that Education design and implement procedures for regularly conducting quality assurance reviews of obligated amounts for higher education grants, including HEERF grants, to help identify and correct erroneous obligations in a timely manner. Education agreed with this recommendation. See the Higher Education Grants enclosure in appendix I for more information.

Coronavirus State and Local Relief and Recovery Funds

COVID-19 relief laws appropriated $500 billion to Treasury to provide direct funding to states, localities, tribal governments, the District of Columbia, and U.S. territories to help them respond to, and recover from, the COVID-19 pandemic. This amount includes $150 billion that the CARES Act appropriated to Treasury for the Coronavirus Relief Fund (CRF) in March 2020, as well as $350 billion that ARPA appropriated to Treasury for the Coronavirus State and Local Fiscal Recovery Funds (CSLFRF) in March 2021.[29]

As of July 31, 2020, Treasury had disbursed $149.5 billion of the $150 billion appropriated for the CRF—$142 billion to states, localities, the District of Columbia, and U.S. territories and approximately $7.5 billion to tribal governments.[30] These recipients can use CRF payments to offset costs related to either the pandemic’s direct effects (e.g., public health needs) or its indirect effects (e.g., harm to individuals or businesses as a result of COVID-19 pandemic-related closures).[31] The CSLFRF provides payments to these recipients to cover a broader range of costs stemming from the fiscal effects of the COVID-19 pandemic.[32]

The Single Audit Act establishes requirements for states, localities, Indian tribes, the District of Columbia, U.S. territories, and nonprofit organizations that receive federal awards to undergo single audits of those awards annually (unless a specific exception applies) when their expenditures meet a certain dollar threshold.[33] Single audits are critical to the federal government’s ability to help safeguard the use of the billions of dollars distributed through the CRF and CSLFRF. Specifically, a single audit may identify deficiencies in an award recipient’s compliance with applicable provisions of laws, regulations, contracts, or grant agreements and in its financial management and internal control systems. Correcting such deficiencies can help to reasonably assure award recipients’ appropriate use of federal funds and reduce the likelihood of federal improper payments.

Auditors who conduct single audits follow guidance in the Single Audit Act’s Compliance Supplement, which provides guidelines and policy for performing single audits. After consultation with federal agencies, OMB annually updates and issues the supplement.[34] Auditors have reported that the timing of the supplement is critical in allowing them to plan their work effectively.

The timely issuance of single audit guidance is critical to ensuring timely completion and reporting of single audits to inform the federal government about actions needed to help safeguard the use of the billions of dollars distributed through the CRF and CSLFRF. We are recommending that OMB, in consultation with Treasury, issue timely and sufficient single audit guidance for auditing recipients’ uses of payments from the CSLFRF. OMB neither agreed nor disagreed with this recommendation. For more information about state and local relief and recovery funds, see the Coronavirus State and Local Relief and Recovery Funds enclosure in appendix I.

Economic Impact Payments

The CARES Act, the Consolidated Appropriations Act, 2021, and ARPA authorized Treasury and the Internal Revenue Service (IRS) to issue economic impact payments (EIP) as direct payments to help individuals address financial stress due to the pandemic. Starting on March 17, 2021, Treasury and IRS quickly issued a third round of direct payments (EIP 3) to most eligible individuals.[35] IRS reported that as of May 28, 2021, it had disbursed over 168.2 million payments totaling more than $394.3 billion.

To publicize information about how to file a tax return with IRS to receive an EIP, IRS partners with other organizations that work with communities that may not traditionally interact with IRS, such as lower-income families, senior citizens, veterans, tribal communities, and families with mixed-immigration status.[36] According to officials from IRS partner organizations, ensuring that eligible nonfilers—particularly among hard-to-reach groups such as those experiencing homelessness—receive their payments continues to be a challenge. Partners also told us their outreach efforts to nonfilers could be more effective if the partners had current data that helped identify specific communities of nonfilers who may need assistance. Treasury and IRS could also ensure any partial data releases were structured to not disclose taxpayer data.

Following our November 2020 recommendation, in January 2021, Treasury began analyzing nearly 9 million notices it had sent to nonfilers who may be eligible for an earlier round of EIPs. However, Treasury does not plan to complete this analysis until fall 2021, more than 6 months after the first EIP 3 payments were issued. This timing will limit the usefulness of the analysis for informing EIP 3 outreach efforts. By waiting to complete the analysis, Treasury and IRS are missing an opportunity to identify communities that may have a higher number of nonfilers and to use that information to inform their outreach efforts as well as the efforts of their outreach partners, and distribute payments to qualified individuals in a more timely manner.

We are recommending that Treasury, in coordination with IRS, release interim findings on the effectiveness of the notices it sent in September 2020 to potentially EIP-eligible nonfilers; incorporate that analysis into IRS outreach efforts as appropriate; and then, if necessary, release an update based on new analysis after the 2021 filing season. Treasury neither agreed nor disagreed with this recommendation and stated that it shares the underlying goal of reaching as many non-filers as possible to encourage them to claim economic impact payments online. However, Treasury does not plan to release any interim findings until it completes its analysis. See the Economic Impact Payments enclosure in appendix I for more information.

Leave Benefits for Employees

The Families First Coronavirus Response Act (FFCRA), as amended by the CARES Act, required employers covered under the act (covered employers) to provide emergency paid sick leave and expanded family and medical leave to eligible employees affected by COVID-19.[37] DOL’s Wage and Hour Division (WHD) administers and enforces FFCRA paid leave requirements for most employees. Covered employers generally face liability if they did not provide or improperly denied emergency paid sick leave or expanded family and medical leave or if they discharged, disciplined, or discriminated against any employee for taking either type of leave.[38] The requirements to provide paid leave benefits under the law were in effect from April 1, 2020, through December 31, 2020. Though the requirement for covered employers to provide paid leave has ended, employees can file a complaint against their employer up to 2 years after the date of an alleged violation or up to 3 years after an alleged willful violation. We identified several areas where WHD can improve its enforcement of FFCRA paid leave requirements:
  • WHD officials did not design or monitor its data system to support enforcement. WHD officials said they monitor the time taken to process FFCRA cases, but this monitoring did not include whether office audits and limited investigations were properly prioritized.[39] In addition, WHD did not include controls in its data system to prevent staff from incorrectly assigning cases to themselves or from assigning cases to an incorrect priority level. As a result, we identified cases that either were not assigned to a priority level because staff incorrectly assigned cases to themselves, or were assigned to an incorrect priority level. WHD officials said that all of the cases not assigned to a priority level or incorrectly assigned were ultimately investigated and concluded. The officials also said that nearly all of the cases were isolated to three offices in one region. The officials added that as of May 12, 2021, they had not yet determined whether any ongoing cases had also been assigned incorrectly.

    In addition, although the number of affected FFCRA paid leave cases may be relatively small, WHD officials acknowledged there may be cases under other statutes enforced by WHD that have not been assigned to a priority level because staff incorrectly assigned cases to themselves. In addition, cases under other statutes enforced by WHD may have been assigned to an incorrect priority level. By not regularly examining data on the assignment of cases or including controls to prevent errors in case assignment and prioritization, WHD may have failed to prioritize ongoing cases under FFCRA and other statutes and may continue making such errors in future cases. Cases that were not assigned to a priority level or were assigned to the wrong priority level may not have been investigated or concluded as rapidly as other cases that were properly assigned.
  • WHD lacks data that it can easily aggregate to identify the reasons FFCRA complaints were filed with no compliance action and the reasons FFCRA cases were dropped.[40] In December 2020, we reported the same concern with respect to Fair Labor Standards Act of 1938 complaint data and recommended that WHD develop a method for systematically collecting this information to ensure complaints are handled consistently and resources are allocated appropriately. WHD officials agreed with our recommendation and said that WHD’s new case management system will incorporate the ability to categorize, aggregate, and review data on the types of cases that are not investigated. According to the officials, changes to the enforcement database will apply to future cases filed under all statutes WHD enforces but will not apply retroactively.
  • WHD has done some outreach to stakeholders, including employers and employees, since the FFCRA paid leave requirements expired. However, WHD’s new Essential Workers, Essential Protections (EWEP) initiative about pandemic-related worker protections does not include information on filing a complaint related to FFCRA paid leave, even though employees can continue to file complaints for up to 2 years from the date of an alleged violation, or up to 3 years from the date of an alleged willful violation. According to WHD documents, WHD promotes compliance with the statutes it enforces by conducting education and outreach to ensure that employers are aware of their responsibilities and that employees understand and exercise their rights. By not including information about how to file a complaint about FFCRA paid leave in the scope of its EWEP initiative, WHD may be missing an opportunity to reach employees who did not obtain paid leave to which they were entitled but who could still file a complaint and receive benefits.
  • WHD officials said they had not actively sought information from stakeholders about their experiences with FFCRA paid leave. As a result, the information WHD is obtaining about stakeholder experiences with FFCRA paid leave will not be comprehensive. By not engaging with stakeholder organizations specifically about their experiences with FFCRA paid leave in a comprehensive and timely manner, WHD may be missing an opportunity to improve its administration and enforcement—including its education and outreach—for future emergencies that might require a rapid response.

We are recommending that DOL’s WHD (1) better monitor data across all statutes that WHD enforces, to ensure the division’s case management is consistent with established policies for assigning and prioritizing cases; (2) ensure that the new data system under development includes mechanisms to prevent staff from assigning and prioritizing cases in a manner inconsistent with established policies; (3) expand the EWEP initiative on pandemic-related worker protections to include information about filing a complaint related to paid leave provided under FFCRA; and (4) engage in a comprehensive and timely effort to consult with employers, workers, and organizations that represent them, to identify and document lessons learned from WHD’s administration and enforcement of COVID-19-related paid leave. DOL’s WHD agreed with these recommendations. See the Leave Benefits for Employees enclosure in appendix I for more information.

Tax Relief for Businesses

To provide liquidity to businesses during the COVID-19 pandemic, the CARES Act and other COVID-19 relief laws included tax measures to help businesses—including sole proprietors, estates, and trusts—by reducing certain tax obligations, which, in some cases, led to cash refunds.[41] These tax measures included expanded net operating loss (NOL) carrybacks and the acceleration of alternative minimum tax (AMT) credit refunds.[42]

The Internal Revenue Code and the CARES Act generally require IRS to issue certain refunds within a period of 90 days from the date on which a complete application for a tentative carryback adjustment is filed or 90 days from the last day of the month in which the return is due, whichever is later.[43]

According to IRS data, the agency is not meeting the statutory refund requirement and, as of May 1, 2021, the average processing time in 2021 was 154 days, excluding additional time for final processing and distribution. IRS officials said it is taking longer to process returns because IRS facilities that process paper returns continue to operate at reduced capacity to accommodate social distancing. IRS had about 11.7 million unprocessed returns as of May 11, 2021, and its processing backlog of tentative refund claims was about 15,000. Delays in processing refunds may continue until the backlog has reduced further.

In the meantime, transparent communication about these issues and delays could help the IRS follow the Taxpayer Bill of Rights and help taxpayers know when to expect their refunds. According to IRS’s Taxpayer Bill of Rights, taxpayers are entitled to clear explanations of the laws and IRS procedures. An explanation on IRS’s website that processing times for tentative refunds may exceed the expected 90 days because of service disruptions would provide taxpayers with more accurate information and expectations for receiving a refund.[44]

We are recommending that IRS clearly communicate on its website that there are delays beyond the statutory 90-day timeline in processing NOL and AMT tentative refunds. IRS neither agreed nor disagreed with this recommendation. However, IRS did say it would review messaging addressing tentative refund processing times and update it as necessary. See the Tax Relief for Businesses enclosure in appendix I for more information.

2021 Tax Filing Season

IRS’s annual tax filing activities include processing more than 150 million individual and business tax returns electronically or on paper; issuing hundreds of billions of dollars in refunds; and providing customer service to tens of millions of taxpayers on return processing issues, such as suspected identity theft and math errors. IRS is experiencing delays in processing certain returns received in 2021, resulting in extended time frames for some taxpayers. Specifically, as of the end of the 2021 filing season, IRS had about 25.5 million unprocessed individual and business returns, including about 1.2 million returns from its 2020 backlog, and 13.7 million returns that it had suspended because of errors. IRS staff must manually review these returns with errors. IRS typically has unprocessed returns in its inventory at the end of the filing season, but not to this extent. For example, at the end of the 2019 filing season, IRS had 8.3 million unprocessed individual and business returns, including 2.7 million returns suspended for errors. IRS reported that it is taking longer than usual to manually review some of the returns received in 2021.

Because IRS is holding significantly more returns for manual review than in prior years, more taxpayers are trying to get information about the status of their returns and refunds. However, taxpayers have had difficulty obtaining status updates on their refunds from IRS, either by telephone or online. For example, IRS’s website (https://www.irs.gov) does not provide all of the relevant information regarding delays in processing 2021 returns and in issuing taxpayers’ refunds. Additionally, IRS’s automated message on its toll-free telephone line for individual taxpayers has not been updated to explain refund delays or to include any other alerts associated with the 2021 filing season.

We are recommending that IRS update relevant pages of its website and, if feasible, add alerts to its toll-free telephone lines to more clearly and prominently explain the nature and extent of individual refund delays occurring for returns taxpayers filed in 2021. IRS neither agreed nor disagreed with our recommendation; however, IRS made some changes to its website and telephone line after it provided comments on our report. We will follow up with IRS on other planned updates to its website and taxpayer telephone line to determine if the agency’s actions are sufficient to fully address our recommendation. See the 2021 Tax Filing Season enclosure in appendix I for more information.

Conclusions 


The last 17 months of the COVID-19 pandemic have shown the devastating effects that a pandemic can have on public health and the economy. As the administration continues to respond to, and the nation recovers from, the current pandemic, the administration also needs to simultaneously prepare for the next public health emergency. We are pleased to see that 16 of our recommendations have been implemented. Our 70 remaining recommendations to federal agencies and three matters for congressional consideration, if swiftly and effectively implemented, can help further enhance these efforts.[45] We will continue to monitor the status of these recommendations as part of our ongoing oversight of the federal government’s COVID-19 response and recovery efforts.

Closing 


We are sending copies of this report to the appropriate congressional committees, the Office of Management and Budget, and other relevant agencies. In addition, the report is available at no charge on the GAO website at https://www.gao.gov.

If you or your staff have any questions about this report, please contact me at (202) 512-5500 or dodarog@gao.gov. Questions can also be directed to Kate Siggerud, Chief Operating Officer, at (202) 512-5600; A. Nicole Clowers, Managing Director, Health Care, at (202) 512-7114 or clowersa@gao.gov; or Orice Williams Brown, Managing Director, Congressional Relations, at (202) 512-4400 or williamso@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report.

Gene L. Dodaro
Comptroller General of the United States

Congressional Addressees

The Honorable Patrick Leahy
Chairman
The Honorable Richard Shelby
Vice Chairman
Committee on Appropriations
United States Senate

The Honorable Ron Wyden
Chairman
The Honorable Mike Crapo
Ranking Member
Committee on Finance
United States Senate

The Honorable Patty Murray
Chair
The Honorable Richard Burr
Ranking Member
Committee on Health, Education, Labor, and Pensions
United States Senate

The Honorable Gary C. Peters
Chairman
The Honorable Rob Portman
Ranking Member
Committee on Homeland Security and Governmental Affairs
United States Senate

The Honorable Rosa L. DeLauro
Chairwoman
The Honorable Kay Granger
Ranking Member
Committee on Appropriations
House of Representatives

The Honorable Frank Pallone, Jr.
Chair
The Honorable Cathy McMorris Rodgers
Republican Leader
Committee on Energy and Commerce
House of Representatives

The Honorable Bennie G. Thompson
Chair
The Honorable John Katko
Ranking Member
Committee on Homeland Security
House of Representatives

The Honorable Carolyn B. Maloney
Chairwoman
The Honorable James Comer
Ranking Member
Committee on Oversight and Reform
House of Representatives

The Honorable Richard Neal
Chair
The Honorable Kevin Brady
Republican Leader
Committee on Ways and Means
House of Representatives

Appendixes and Enclosures 


IN THIS SECTION


Appendix I: Enclosures

Economic Indicators

Based on data available in June 2021, the national economy continued to recover, and areas of the economy we are monitoring saw broad-based improvement in recent months. Gross domestic product (GDP) grew at a 6.4 percent annual rate in the 1st quarter of 2021, to a level that was about 1 percent smaller than the size of the economy in 4th quarter 2019. Indicators for areas of the economy supported by the federal pandemic response saw broad-based improvement in recent months, with notable gains in employment, particularly in the leisure and hospitality sector, and in state and local government finances (see table).[46] The strength of the economic recovery will continue to depend on the success of public health measures against the COVID-19 pandemic, particularly vaccinations.

Indicators for Areas of the Economy Supported by the Federal COVID-19 Pandemic Response, Feb.–May 2021, Cumulative Changes since Feb. 2020

aThe employment-to-population ratio represents the number of employed people as a percentage of the civilian noninstitutional population 16 years and over. The ratio is subject to a misclassification error with respect to identifying workers as employed and absent from work who are likely unemployed on temporary layoff.
bHigher levels in the Consumer Credit Default Composite Index rate indicate more defaults on consumer loans, including auto loans, bank cards, and mortgages. The Consumer Credit Default Composite Index could be subject to seasonal variation but is not seasonally adjusted.
cSeriously delinquent loans are 3 months or more past due or in foreclosure, based on mortgages insured by the Federal Housing Administration (FHA). Increases in serious delinquency rates on FHA loans could, to some extent, reflect borrowers taking advantage of mortgage forbearance provisions of the CARES Act, but may also indicate financial challenges facing the minority and low-to-moderate income households that disproportionately take out mortgages insured by FHA. We excluded February 2021 data from the figure because the delinquency rates for February 2021 are likely understated due to late reporting by a large servicer, according to FHA.
dLower levels of the small business credit card delinquency index indicate more delayed payments on credit. The small business credit card delinquency index is published under license and with permission from Dun & Bradstreet, and no commercial use can be made of these data.
eCorporate bond spreads are option-adjusted spreads on dollar-denominated investment grade corporate bonds from Bloomberg and are measured in basis points or 1/100th of a percentage point. Higher spreads reflect higher perceived risk among corporate borrowers by investors.
fSpreads on municipal bonds are calculated relative to interest rates on Treasury securities based on the Bloomberg-Barclays Municipal Bond Index and are measured in basis points or 1/100th of a percentage point. Higher spreads reflect higher perceived risk among municipal borrowers by investors.
gState and local government employment data from April 2021 and May 2021 are preliminary.

Key drivers of the economic outlook. The American Rescue Plan Act (ARPA), enacted in March 2021, includes economic provisions that are likely to influence supply and demand throughout the economy. Similar to the CARES Act, ARPA includes assistance for the unemployed and low-to-moderate income families through expanded unemployment benefits (see the Unemployment Insurance Programs enclosure in appendix I) and economic impact payments (see the Economic Impact Payments enclosure in appendix I), while offering further income support through child tax credits starting in July 2021.[47] These provisions of ARPA may reduce household financial stress and could increase demand for goods and services.

The act also includes financial support to state and local governments (see the Coronavirus State and Local Fiscal Recovery Funds enclosure in appendix I) to spend on services and infrastructure, which may boost demand and supply, as well as employment in this sector of the economy.[48] Other provisions of the act may reduce supply-chain disruptions in the agricultural and health care sectors. To the extent that these provisions are effective or that ARPA increases overall economic growth, we could see these effects reflected in the economic indicators we are monitoring.

The increasing availability of COVID-19 vaccinations has become a key aspect of the public health response to the pandemic and is likely to be an important driver of economic activity. The International Monetary Fund increased its 2021 forecast for the U.S. gross domestic product by 1.3 percentage points relative to the previous forecast, reflecting in part the impact of vaccinations on economic activity in the year.[49] For example, widespread vaccinations could increase consumer demand as concerns about COVID-19 decline.[50] In addition, as the number of people vaccinated has increased and COVID-19 cases and hospitalizations have declined, many states have lifted pandemic-related restrictions, including indoor capacity limitations.[51] Altogether, the easing of pandemic-related restrictions, declining health concerns, and the opening of schools and daycare centers following more widespread vaccinations could increase the number of individuals able to return to work and allow businesses to more effectively supply goods and services.[52] See the Vaccine Implementation enclosure in appendix I for more information on COVID-19 vaccinations.

The impact of ARPA and more widespread vaccinations against COVID-19 on supply and demand will have an important influence on the average level of prices in the economy and how fast those prices grow, known as inflation. A number of measures of actual and expected inflation have risen notably in recent months. For example, inflation forecasted for 2021 has risen from 1.7 percent to 3.5 percent over the last year.[53] Public debate is ongoing regarding whether such increases in inflation will be transitory or longer lasting, and how to address any persistent increases in inflation. If demand grows considerably faster than supply for an extended period of time, for example, then inflation could rise to levels that reduce long-term economic growth and exacerbate economic challenges facing low-income households.[54] While the level of inflation that is currently expected is unlikely to cause such problems, additional monitoring is warranted. Federal Reserve officials told us that the Federal Open Market Committee (FOMC) is acutely aware of the issues and has stated it feels well-prepared to act as necessary to achieve its monetary policy objectives. The FOMC is charged with conducting monetary policy to attain stable prices and maximum employment, and, in doing so, expects to achieve a rate of inflation that averages 2 percent over time.

Key trends in economic indicators. Federal debt held by the public rose to $22.0 trillion in May 2021 from $21.6 trillion in December 2020, but fell slightly as a share of GDP, from 100.6 percent in the 4th quarter of 2020 to 99.7 percent of GDP in 1st quarter 2021. Interest rates on 3-month Treasury securities were relatively stable, falling to 0.02 percent in May 2021 from 0.04 percent in February 2021. Interest rates on 10-year Treasury securities, in contrast, increased from 1.26 percent to 1.62 percent over the same period. As we have noted in previous CARES Act reports, the long-term fiscal challenges facing the U.S. have been exacerbated by the pandemic and will require attention once the economy has returned to consistent growth and public health goals have been attained.

Based on monthly and weekly data from the Department of Labor, labor market conditions improved in March, April, May, and June 2021 but remained worse relative to the prepandemic period. Weekly initial unemployment insurance claims fell from March to June 2021, indicating improvements in the labor market in recent months. The employment-to-population ratio in May 2021 was 58.0 percent, which was a slight increase from the previous month, but 3.1 percentage points lower than the prepandemic period (see figure).

Employment-to-Population Ratio, Jan. 2019–May 2021

Job growth across sectors continues to reflect the differential impact of the pandemic on different parts of the economy. For example, the industry responsible for much of the improvement in the labor market in March through May 2021 was the leisure and hospitality sector. Interest in leisure activities has improved as vaccinations have become more widespread, cases have fallen, and state and local governments have relaxed restrictions. However, despite job growth in the industry in the last few months, employment in the leisure and hospitality sector is still 15.0 percent lower than it was in February 2020.

Serious delinquency rates—loans that are 90 or more days past due or in foreclosure—for single-family mortgage loans insured by the Federal Housing Administration (FHA) decreased slightly from March to April 2021, to 10.58 percent of loans, but remained much higher than rates prior to the pandemic (see figure). FHA loans disproportionately serve minority and low-to-moderate income borrowers.[55] Falling delinquencies may to some extent reflect fewer borrowers taking advantage of mortgage forbearance provisions of the CARES Act.[56] In addition, falling delinquencies may indicate that FHA borrowers have seen some improvement in household finances in recent months.

Serious Delinquency Rates on Single-Family Residential Mortgages, Jan. 2019–Apr. 2021

Note: Seriously delinquent single-family loans are 3 months or more past due or in the foreclosure process. We excluded February 2021 data from the figure because the delinquency rates for February 2021 are likely understated due to late reporting by a large servicer, according to FHA.

Employment by state and local governments increased in March through May 2021 (see figure), and spreads on municipal bonds fell over the same period, suggesting some improvement in state and local government finances.[57]

State and Local Government Employment, Jan. 2019–May 2021

Methodology

To identify indicators for monitoring areas of the economy supported by the federal response to the COVID-19 pandemic, in particular by the six COVID-19 relief laws, we reviewed prior GAO work, data from federal statistical agencies, information from the Board of Governors of the Federal Reserve System (Federal Reserve) and relevant federal agencies responsible for the pandemic response and oversight of the health care system, data available on the Bloomberg Terminal, and input from internal GAO experts. We reviewed the most recent data from these sources as of April, May, or June 2021, depending on availability.

We assessed the reliability of the economic indicators we used through a number of steps, including reviewing relevant documentation, reviewing prior GAO work, and interviewing data providers. Collectively, we determined the indicators were sufficiently reliable to provide a general sense of how the areas of the economy supported by the federal pandemic response were performing.

Agency Comments

We provided the Department of Housing and Urban Development (HUD), the Department of Labor (Labor), the Department of the Treasury (Treasury), the Federal Reserve, and the Office of Management and Budget (OMB) with a draft of this enclosure. Labor and the Federal Reserve provided technical comments, which we incorporated as appropriate. HUD, Treasury, and OMB did not provide comments on this enclosure.

GAO’s Ongoing Work

We plan to monitor and report on changes in economic indicators, including developments in inflation, in future quarterly reports.

Contact information: Lawrance L. Evans, Jr., (202) 512-8678, evansl@gao.gov

Vaccine Implementation

To increase access to COVID-19 vaccination, the federal government has expanded the number of vaccine distribution channels and administration sites since COVID-19 vaccination began, and as of June 10, 2021, more than 372 million vaccine doses had been distributed in the United States.

Entities involved: Department of Defense; Department of Health and Human Services, including the Centers for Disease Control and Prevention, Food and Drug Administration, and Health Resources and Services Administration; Federal Emergency Management Agency within the Department of Homeland Security; and the White House COVID-19 Response Team.

Background

Since the pandemic’s start, the federal government has played a key role in the development and manufacturing of COVID-19 vaccines and the implementation of a vaccination program. Federal efforts to support vaccine development, manufacturing, and distribution to states and other jurisdictions have been led at the federal level by a partnership between the Department of Defense (DOD) and the Department of Health and Human Services (HHS). This partnership was formerly known as Operation Warp Speed, but since May 2021 it has been called the HHS-DOD COVID-19 Countermeasures Acceleration Group.[58]

COVID-19 vaccine implementation, which involves the prioritization, allocation, distribution, and administration of vaccine doses, relies on communication and coordination among various stakeholders. Stakeholders include federal agencies, private industry, states and other jurisdictions, local health departments, tribal officials, and health care providers, among others.

Since January 2021, the White House COVID-19 Response Team has been responsible for coordinating across the U.S. government on the COVID-19 response, including COVID-19 vaccine implementation, and for communicating to the public, state and local public health officials, and other stakeholders about these efforts. For example, since January 27, 2021, members of the Response Team have held regular public briefings to provide updates on the status of COVID-19 vaccine implementation, among other information on the federal response.

Status of COVID-19 vaccines. As of June 15, 2021, three COVID-19 vaccines were available in the U.S. under an emergency use authorization (EUA), which allows for the temporary use of vaccines without Food and Drug Administration (FDA) licensure, provided certain statutory criteria are met. [59] Two of the three vaccines—those from Moderna and Janssen—were authorized for individuals 18 years and older; the Pfizer vaccine was authorized for individuals aged 12 years and older.[60]

On May 7, 2021, the first biologics license application (BLA) for a COVID-19 vaccine was submitted to FDA, when Pfizer applied for licensure of its vaccine to prevent COVID-19 in individuals 16 years of age and older.[61] On June 1, 2021, Moderna submitted a BLA to FDA for its vaccine to prevent COVID-19 in individuals 18 years of age and older.[62]

All three companies with authorized vaccines have announced clinical trials for children and adolescents. On May 10, 2021, FDA granted Pfizer’s request to amend its EUA to expand use of its vaccine to adolescents 12 through 15 years of age.[63] Moderna submitted a similar request on June 10, 2021, asking FDA to amend the EUA for its COVID-19 vaccine to expand its use to adolescents 12 through 17 years of age, and as of June 15, 2021, was awaiting a decision from FDA.

The three authorized vaccines have varying storage requirements that may affect the type of setting where each vaccine can be administered. For example, some vaccine administration settings may not have equipment such as freezers that have the capability to store vaccine doses at ultra-cold temperatures, the recommended storage method for the Pfizer vaccine prior to use.[64] Additional research continues on storage and handling requirements to improve the vaccines’ stability and ease storage requirements, such as by increasing the amount of time the vaccine can be stored at a refrigerated temperature.[65] See table.
COVID-19 Vaccines FDA Authorized for Emergency Use, as of June 15, 2021

Vaccine company

Date FDA initially issued emergency use authorization (EUA)a

Individuals for whom vaccine is permitted for emergency use

Dosing and schedule

Storage requirements

(doses per vial and minimum lot size)

Pfizerb

12/11/2020

12 years of age and olderc

2 doses, 3 weeks apart

Stored frozen at ultra-cold temperatures.

Once thawed and diluted, must be used within 6 hours.

(6 doses per vial, minimum lot size 450 doses)

Moderna

12/18/2020

18 years of age and olderd

2 doses, 1 month apart

Stored frozen, but may be refrigerated for up to 30 days once thawed.

Once first dose is withdrawn from vial, other doses must be used within 12 hours.

(2 vial sizes: maximum 11 doses per vial (range 10-11) or 15 doses per vial (range 13-15), minimum lot size 10-multi-dose vials)

Janssene

2/27/2021f

18 years of age and older

1 dose

Refrigerated, but may be stored at room temperature for up to 12 hours.

After first dose is withdrawn may be stored at 36 to 46 degrees Fahrenheit for up to 6 hours or at room temperature for up to 2 hours.

(5 doses per vial, minimum lot size 100 doses)
Source: GAO analysis of vaccine company and Food and Drug Administration (FDA) information. | GAO-21-551

aDuring an emergency, as declared by the Secretary of Health and Human Services under 21 U.S.C. § 360bbb-3(b), FDA may temporarily authorize unlicensed vaccines through an EUA, provided certain statutory criteria are met. FDA has indicated that issuance of an EUA for a COVID-19 vaccine for which there is adequate manufacturing information would require a determination by FDA that the vaccine’s benefits outweigh its risks based on data from at least one well-designed phase 3 clinical trial that demonstrates the vaccine’s safety and efficacy in a clear and compelling manner. Any COVID-19 vaccine that initially receives an EUA from FDA is expected to ultimately be reviewed and receive licensure through a biologics license application (BLA), according to FDA guidance. As of June 15, 2021, Pfizer and Moderna had submitted BLAs for their COVID-19 vaccines.
bPfizer and BioNTech developed a COVID-19 vaccine together; for the purposes of this report we refer to it as the Pfizer vaccine.
cOn December 11, 2020, FDA authorized the Pfizer vaccine for emergency use in individuals 16 years of age and older, and on May 10, 2021, FDA amended the EUA to include adolescents 12 through 15 years of age.
dOn June 10, 2021, Moderna requested that FDA amend the EUA for its vaccine to include adolescents 12 through 17 years of age.
eJanssen Pharmaceutical Companies are a part of Johnson & Johnson.
fOn April 13, 2021, the Centers for Disease Control and Prevention (CDC) and FDA recommended a pause in use of the Janssen COVID-19 vaccine so the agencies could review data involving six reported U.S. cases of a rare and severe type of blood clot in individuals after receiving this vaccine. CDC and FDA lifted the pause on April 23, 2021, following a safety review, and revised the Janssen COVID-19 vaccine fact sheets for vaccination providers and recipients and caregivers to include information about the risk.

As we have previously reported, the federal government has also contracted to purchase COVID-19 vaccine doses from three other vaccine companies. As of June 15, 2021, none of these companies had submitted an EUA request to FDA.[66]

COVID-19 vaccine administration. COVID-19 vaccinations began on December 14, 2020, in the United States. As of June 10, 2021, data from the Centers for Disease Control and Prevention (CDC) showed the federal government had distributed about 372.8 million COVID-19 vaccine doses, and about 305.7 million doses had been administered, including both first and second doses of the three vaccines authorized for emergency use.[67] About 61 percent of the U.S. population aged 12 and older had received at least one dose of a COVID-19 vaccine and about 50 percent were fully vaccinated, as of June 10, 2021.[68]See figure for the number of vaccine doses administered each month since COVID-19 vaccine implementation began.

Number of COVID-19 Vaccine Doses Administered by Month in the United States, as of June 10, 2021

Note: Data show the number of COVID-19 vaccine doses administered in the U.S. as reported to CDC by state, territorial, and local public health agencies; and federal entities, since the national vaccine program began on December 14, 2020, and include doses administered through all vaccine partners including jurisdictional partner clinics, retail pharmacies, long-term care facilities, dialysis centers participating in the Federal Dialysis Center Program, Federal Emergency Management Agency partner sites, Health Resources and Services Administration-supported health centers, and federal entity facilities. According to CDC the most recent days of reporting may be more impacted by reporting delays, and all reported numbers may change over time as historical data are reported to CDC. As of June 10, 2021, three COVID-19 vaccines were authorized for emergency use; two vaccines were two-dose regimens and the third vaccine required one dose.

More than 70 percent of people in two age groups –those aged 75 and older and those aged 65 through 74–were fully vaccinated as of June 10, 2021. For those under 65, the percentage of people in each age group who were fully vaccinated decreased as age decreased. See figure.

Percentage of Age Group That Was Fully Vaccinated, by Age Group, in the U.S., as of June 10, 2021

Notes: Texas does not report demographic-specific dose number information to CDC, so data for Texas are not represented in this figure. As of June 10, 2021, the only COVID-19 vaccine authorized for emergency use in individuals under age 18 years of age was the Pfizer vaccine. On December 11, 2020, FDA authorized the Pfizer vaccine for emergency use in individuals 16 years of age and older, and on May 10, 2021, FDA expanded the emergency use authorization to include adolescents 12 through 15 years of age. As of June 10, 2021, of the three COVID-19 vaccines authorized for emergency use, two vaccines were two-dose regimens and the third vaccine required one dose. In this figure, fully vaccinated is defined as having received the second dose in a two-dose COVID-19 vaccine regimen or one dose of the single-dose vaccine.

CDC data, though incomplete, showed disparities in vaccine administration by race and ethnicity. Data on race and ethnicity were limited to about 61 percent of the individuals who were fully vaccinated as of June 10, 2021, or about 87 million people. These data indicated that of those who were fully vaccinated:
  • 62.7 percent were non-Hispanic White (compared to 61.2 percent of the U.S. population),
  • 13.4 percent were Hispanic or Latino (compared to 17.2 percent of the U.S. population),
  • 8.7 percent were non-Hispanic Black (compared to 12.4 percent of the U.S. population), and
  • 6 percent were non-Hispanic Asian (compared to 5.8 percent of the U.S. population).[69]

Funding for COVID-19 vaccine implementation. As of April 2021, CDC had awarded about $6.8 billion in funding, provided in three COVID-19 relief laws, to 64 jurisdictions for COVID-19 vaccine preparedness.[70] (See table.)
Department of Health and Human Services Centers for Disease Control and Prevention (CDC) COVID-19 Vaccine Implementation Funding for 64 Jurisdictions, as of April 2021

Legislation

Description of award

Month funds awarded

Amount awarded ($ millions)

CARES Act
(Pub. L. No. 116-136)

To plan for and implement COVID-19 vaccine programs.

September 2020 ($200M)

December 2020 ($140M)

340

Consolidated Appropriations Act, 2021
(Pub. L. No. 116-260)

To support a range of COVID-19 vaccination activities. According to CDC, it allocated funds using the population-based formula specified in the act.

January 2021 ($3B)

April 2021 ($1.29B)

4,290

American Rescue Plan Act of 2021 (ARPA)
(Pub. L. No. 117-2)

To support COVID-19 vaccine distribution, access, and administration efforts and to increase vaccine uptake. According to CDC, these funds are intended to ensure health equity as guided in the CDC COVID-19 Health Equity Strategy and expanded access to COVID-19 vaccines.b For example, funds could be used to identify and train trusted community members to conduct outreach to raise awareness about COVID-19 vaccines and help individuals sign up for appointments.

April 2021

2,189a

Total

6,819
Source: GAO analysis of CDC information and data. | GAO-21-551.

Notes: Total may not sum to exact amount awarded due to rounding. CDC awarded funds to 64 jurisdictions, including all 50 states, the District of Columbia, five major U.S. cities (Chicago, Houston, New York City, Philadelphia, and San Antonio), and eight territories (American Samoa, Guam, the Marshall Islands, the Federated States of Micronesia, the Northern Mariana Islands, Palau, Puerto Rico, and the U.S. Virgin Islands).
aThis total includes about $329.1 million in funding awarded to certain immunization grant recipients by using an alternative allocation formula established under ARPA, which is to be applied in addition to the base formula specified in the Consolidated Appropriations Act, 2021.This funding was awarded to 39 jurisdictions.
bSee CDC. “CDC Awards $3 Billion to Expand COVID-19 Vaccine Programs,” April 6, 2021, accessed on April 20, 2021 at https://www.cdc.gov/media/releases/2021/p0407-covid-19-vaccine-programs.html.

In addition to the awards provided by CDC to the 64 jurisdictions, other funding related to COVID-19 vaccination has been made available and includes but is not limited to the following examples:
  • In April 2021, HHS, through the Health Resources and Services Administration (HRSA), awarded about $6.1 billion in funds appropriated under the American Rescue Plan Act of 2021 to 1,377 health centers nationwide to expand COVID-19 vaccinations, testing, and treatment for vulnerable populations.[71]
  • As of June 1, 2021, the Federal Emergency Management Agency (FEMA) had provided more than $4.85 billion from the Disaster Relief Fund to states, Washington D.C., tribes, and territories for expenses related to COVID-19 vaccination.[72]

Overview of Key Issues

When COVID-19 vaccination began in December 2020, the federal government allocated and distributed nearly all available vaccine doses primarily to jurisdictions; some of the vaccine doses that went to jurisdictions were used to vaccinate residents and staff of long-term care facilities. The federal government also distributed vaccine doses to select federal entities, including the Department of Defense, Indian Health Service, and Veterans Health Administration. Beginning in February 2021, the federal government started distributing COVID-19 vaccine doses through additional channels, including directly allocating and distributing doses to retail pharmacies and to HRSA-supported health centers.[73] See the table below for a description of these federal distribution channels.
Description of Federal COVID-19 Vaccine Distribution Channels, as of June 2021

Federal channel for vaccine distribution (responsible agency)

Number of doses delivered, as of June 10, 2021a

Description

States and other jurisdictionsb
(HHS and DOD)

First doses delivered: Dec. 2020

Doses delivered: 243.8 million

Allocations of vaccine provided directly from the federal government to 50 states, the District of Columbia, three major cities, and eight territories based on the 62 jurisdictions’ adult population (i.e., those 18 years and older). States and other jurisdictions determine which providers in their jurisdictions are to receive the allocated doses. Vaccine doses may be further redistributed; for example, a state may redistribute its vaccine doses to a local health department or to a health care facility, such as a hospital.

Vaccine doses allocated to states and other jurisdictions may be directed to CDC’s Pharmacy Partnership for Long-Term Care Program or to FEMA-supported community vaccination centers.c

Some states also received additional doses in their state allocations as “sovereign nation” supplements. These additional doses were allocated for American Indian/Alaskan Native populations that elected to receive vaccine doses through the state in which they are located instead of through the Indian Health Service.

Selected federal entities
(HHS and DOD)

First doses delivered: Dec. 2020

Doses delivered: 12.2 milliond

Allocations of vaccine provided directly from the federal government to selected federal entities—including the Bureau of Prisons, the Departments of Defense and State, the Indian Health Service, and the Veterans Health Administration—to administer to their respective populations.

Federal Retail Pharmacy Program
(CDC)

First doses delivered: Feb. 2021

Doses delivered: 103.4 millione

Allocations of vaccine provided directly from the federal government to 21 national pharmacy and independent pharmacy networks—representing over 40,000 locations nationwide—through a collaboration with the federal government, states, and territories. CDC made recommendations of which pharmacy partners to initially include in the program. States and territories then made the final selections.

Initially, when the program began, allocations were provided on a weekly basis, based on the available vaccine supply and determined on a per capita basis for each jurisdiction, according to CDC. The allocation was then divided among the selected pharmacy partners based on each partner’s number of stores and the store’s reach (the percent of the total U.S. population living within 5 miles of a store location).f

As of June 2021, weekly allocations were based on vaccine availability, with more than half of each pharmacy partner’s vaccine supply proportional to each jurisdiction’s population, according to CDC. As the program has expanded and as vaccine supply has become more readily available, pharmacy partners are able to make additional adjustments to their allocations, according to CDC.

Community Vaccination Center Pilot Site and Mobile Vaccination Program
(FEMA and CDC)

First doses delivered: Feb. 2021

Doses delivered: 6.6 million

Allocations of additional vaccine doses are provided to FEMA and FEMA transfers its allocated vaccine doses to the states with pilot community vaccination centers for ordering vaccine doses. According to FEMA, allocations are determined by the size of the particular vaccination center being planned.g

Pilot vaccination centers are a partnership between FEMA, in coordination with CDC and other federal agencies, and states, tribes, territories, and local governments.

Locations for pilot community vaccination centers were chosen based on social vulnerability factors and population, according to FEMA.

As of June 4, 2021, a total of 39 FEMA pilot vaccination centers and 226 satellite sites had been established across the country since the beginning of the initiative, according to FEMA.

Health Center COVID-19 Vaccine Program
(HRSA and CDC)

First doses delivered: Feb. 2021

Doses delivered: 6.9 million

Allocations are provided directly from the federal government to HRSA-supported health centers. This program is to increase access to vaccines to the nation’s underserved communities and disproportionately affected populations. Vaccines distributed through HRSA supplement the vaccine supply to the HRSA-supported health centers provided by the state or other jurisdictions, according to CDC.

Allocations are made on a weekly basis and HRSA determines the number of doses that can be ordered by participating health centers based on factors such as the weekly allocation of vaccine the program receives, the number of participating health centers, the number of newly added participating health centers, and health center vaccine distribution capacity data, according to HRSA. Vaccine doses distributed by the program are sent directly to individual health center sites.

Initially 25 health centers were selected based on criteria such as the populations the facility serves, according to HRSA.h The program grew to include 500 health centers as of April 3, 2021, according to HRSA.

On April 7, 2021, HRSA and CDC invited all HRSA-supported health centers, including Health Center Program look-alikes, to participate in the program, increasing its reach to up to 1,470 health centers nationwide.i
Source: GAO analysis of data and information from officials from the Department of Health and Human Services (HHS), the Department of Defense (DOD), the Centers for Disease Control and Prevention (CDC), the Health Resources and Services Administration (HRSA), and the Federal Emergency Management Agency (FEMA). | GAO-21-551

Notes: In addition to the federal channels listed in the table, the federal government also allocates vaccine to two other programs: the HHS/National Institutes of Health Program, which is a small program managing doses allocated to federal departments and agencies for administration to critical federal infrastructure personnel and the Federal Dialysis Center Program, which began on March 29, 2021, and has made allocations directly to participating dialysis center participants to vaccinate patients on dialysis.
Additionally, some providers receiving vaccine doses through one of the federal channels may also receive vaccine allocations from their state or other jurisdiction. For example, health centers participating in the Health Center COVID-19 Vaccine Program might receive doses that have been allocated to their jurisdiction, in addition to a direct allocation of vaccine doses from the federal government.
aThe Pfizer vaccine is provided in 1,170 dose and 450 dose lots, Moderna’s vaccine is provided in 140 dose lots, and Janssen’s vaccine is provided in 100 dose lots.
bFor COVID-19 vaccination, the federal government allocates vaccine doses to 62 jurisdictions, including all 50 states, the District of Columbia, three major cities (Chicago, New York City, and Philadelphia), and eight territories (American Samoa, Guam, the Marshall Islands, the Federated States of Micronesia, the Northern Mariana Islands, Palau, Puerto Rico, and the U.S. Virgin Islands). Although there are 64 jurisdictions implementing COVID-19 vaccination and receiving federal funding for these efforts, allocations of vaccine doses are being made to 62 jurisdictions because two major cities considered jurisdictions—Houston and San Antonio—have their vaccine allocation consolidated with Texas.
cFor the Pharmacy Partnership for Long-Term Care Program, states and other jurisdictions allocated some of their doses to pharmacy partners including CVS and Walgreens, which then administered more than 8.3 million vaccine doses to staff and residents of eligible nursing homes and other long-term care facilities between December 2020 and May 2021, according to CDC. Additionally, between February 2021 and as of May 5, 2021, FEMA has supported a total of 1,779 community vaccination centers managed and operated by states and other jurisdictions by providing federal personnel, funding, and material, such as medical equipment and supplies, according to FEMA. See the enclosures on Nursing Homes and FEMA’S Disaster Relief Fund for more information.
dData on the number of doses delivered to and administered by these federal entities are available at https://www.cdc.gov/coronavirus/2019-ncov/vaccines/distributing/jurisdiction-portfolios.html, accessed on June 15, 2021.
eThis number also includes deliveries provided from states’ and other jurisdictions’ allocations, including as part of the Pharmacy Partnership for Long-Term Care Program.
fAccording to CDC, the goal is to have nearly 40,000 pharmacies participating in the program. As the Federal Retail Pharmacy Program expands and supply becomes more readily available, the allocation of vaccine doses to pharmacies may be adjusted to reflect the number of store locations nationwide, the percent of the total U.S. population living within 5 miles of a store location, and the store’s ability to vaccinate.
gPilot vaccination centers range in capacity from being able to administer approximately 3,000 vaccinations per day or 6,000 vaccinations per day. According to FEMA officials, one-third of the vaccines allocated to a pilot vaccination center can be redistributed to satellite sites such as mobile vaccination centers.
hFor example, HRSA initially included those health centers that served a large volume of disproportionally affected populations, such as individuals experiencing homelessness, public housing residents, migrant or seasonal agricultural workers, or patients with limited English proficiency.
iHealth Center Program look-alikes are community-based health care providers that meet the requirements of the HRSA Health Center Program, but do not receive Health Center Program funding.

As of June 10, 2021, CDC data showed that about 65 percent of vaccine doses had been allocated to states and other jurisdictions, and about 35 percent of the doses distributed had been provided through other federal distribution channels.[74] See figure.

Percentage of COVID-19 Vaccine Doses Distributed, by Federal Distribution Channel, as of June 10, 2021

Note: Percentages in figure may not total 100 due to rounding. Vaccine doses distributed include the approximately 373.1 million doses shipped and recorded through the CDC’s vaccine ordering system, Vaccine Tracking System (VTrckS), reported through June 10, 2021.
aThis distribution channel includes doses distributed to jurisdictions. Although there are 64 jurisdictions implementing COVID-19 vaccination and receiving federal funding for these efforts, allocations of vaccine doses are being made to 62 jurisdictions because two major cities considered jurisdictions—Houston and San Antonio—have their vaccine allocation consolidated with Texas. For this metric, the three major cities that do receive their own allocations—Chicago, New York City, and Philadelphia—are reported with their respective states. This distribution channel excludes additional doses transferred to jurisdictions by the Federal Emergency Management Agency (FEMA) for use within the Community Vaccination Center Pilot Sites and mobile vaccination program.
bThe Federal Retail Pharmacy Program includes vaccine allotments to 21 national pharmacy chains and independent pharmacy networks that represent approximately 48,000 potential vaccination sites across the country. It also includes deliveries provided from the jurisdiction allocations as part of the Pharmacy Partnership for Long-Term Care Program to vaccinate staff and residents of nursing homes and assisted living facilities. Jurisdictions may transfer doses directly to a pharmacy partner, and those doses are included in this category. Doses for states that have allowed vaccine provider pharmacies to order directly from the state are excluded here and included in the jurisdictions total.
cThe Health Center COVID-19 Vaccine Program provides allocations directly from the federal government to participating health centers for administration.
dFor the FEMA Community Vaccination Center Pilot Site and Mobile Vaccination Program, FEMA receives additional allocations of vaccine doses and transfers these doses to the states with pilot community vaccination centers for ordering and administration. FEMA provides logistical, financial, and other support for vaccination clinics.
eThe Other category includes two programs (1): the Department of Health and Human Services/National Institutes of Health Program, which is a small program managing doses allocated to federal departments and agencies for administration to critical federal infrastructure personnel; and (2) the Federal Dialysis Center Program, which began on March 29, 2021, and has made allocations directly to participating dialysis center participants to vaccinate patients on dialysis.
fThis distribution channel includes the allocations made to the Bureau of Prisons, Department of Defense, Indian Health Service, and Veterans Health Administration.

Representatives of state, territorial, and local stakeholders we interviewed said they appreciated the extra allocations of vaccine coming into jurisdictions through these different federal distribution channels. However, at the same time, they expressed concern about the level of coordination and communication between the federal government and states and providers regarding these other federal distribution channels for COVID-19 vaccine. For example, in February 2021, the National Governors Association stated that federal decisions to deliver vaccine doses directly to pharmacies and federally qualified health centers should be coordinated with state governments.

Additionally, representatives of state, territorial, and local health officials we interviewed said some pharmacies and health centers receiving direct allocations of vaccine doses from the federal government were also receiving vaccine allocations from their state and local jurisdictions. They said they were unaware when new federal channels were being initiated, resulting in confusion at the state and local levels. Not knowing when or how much vaccine was being distributed to a particular pharmacy or health center prevented state and local health officials from taking that information into consideration when making decisions on how to distribute their own vaccine supply to areas in need.

Vaccine implementation has continued to evolve as the supply of vaccine doses has increased and new distribution channels and groups eligible for vaccination have been added. For example, on May 4, 2021, the President announced plans to ship vaccine doses directly to rural health clinics to increase access to vaccine in rural areas.[75] And on May 10, 2021, FDA granted Pfizer’s request to expand authorized use of its COVID-19 vaccine to adolescents aged 12 through 15 years.[76]

Also, many of the people eligible in the U.S. who wanted to be vaccinated have been, according to some stakeholders we interviewed. These stakeholders said outreach and communication efforts now need to focus on those who remain unvaccinated, such as by targeting messaging to build vaccine confidence among those who may be facing vaccine hesitancy or by making vaccines more accessible.[77] The federal government has expanded its efforts to make COVID-19 vaccinations more accessible. For example, on May 4, 2021, the President announced additional efforts to make it easier for people to get vaccinated. These included plans to direct pharmacies in the Federal Retail Pharmacy Program to offer walk-in appointments and redirecting FEMA resources to support additional smaller vaccination sites and more mobile clinics.

Addressing these continuing changes in COVID-19 vaccine implementation—including vaccinating newly eligible adolescent populations and reaching those who have not yet been vaccinated despite increasing supply—will require continued coordinated efforts across federal, state, territorial, and local governments, and others. Stakeholder representatives we interviewed indicated that overall communication efforts with the federal government, such as calls between the White House COVID-19 Response Team, federal agencies, and state officials have facilitated the exchange of information related to federal vaccine distribution efforts, but often after they were publicly announced. The evolving challenges around COVID-19 vaccination and stakeholder concerns about coordination, reinforce the need for a national plan that clearly outlines how efforts are being coordinated across federal agencies and nonfederal entities, as we recommended in September 2020.

Methodology

To conduct this work, we reviewed CDC’s reported data on the distribution and administration of COVID-19 vaccine doses and reviewed relevant federal laws, agency guidance, and documentation from the DOD and HHS partnership, CDC, FDA, HRSA, and FEMA regarding COVID-19 vaccines and efforts to distribute these vaccines. Documentation we reviewed includes EUA fact sheets for the authorized COVID-19 vaccines, other agency fact sheets and advisories, and information posted on agency websites. We obtained written responses from officials at CDC, HRSA, and FEMA, and reviewed press releases from the vaccine companies. We also conducted interviews in April and May 2021, with organizations that represent state, territorial, and local stakeholders involved in vaccination efforts.[78] To report data on COVID-19 vaccine distribution and administration, we used data from CDC’s COVID Data Tracker. We assessed the reliability of this data by reviewing related documentation and reviewing the data to identify any obvious errors or omissions. We determined that the data were sufficiently reliable for the purpose of analyzing COVID-19 vaccine distribution and administration.

Agency Comments

We provided DOD; CDC, FDA, and HRSA within HHS; FEMA within the Department of Homeland Security; and the Office of Management and Budget (OMB) with a draft of this enclosure. DOD and OMB did not provide comments on this enclosure. CDC, FDA, HRSA, and FEMA provided technical comments, which we incorporated as appropriate.

GAO’s Ongoing Work

We will continue to monitor federal efforts related to COVID-19 vaccines, including the federal government’s COVID-19 vaccine distribution and administration efforts and its communication about these efforts.

GAO’s Prior Recommendations

The table below presents our recommendations on COVID-19 vaccines from prior CARES Act bimonthly/quarterly reports.
Prior GAO Recommendations Related to COVID-19 Vaccines

Recommendation

Status

The Secretary of Health and Human Services, with support from the Secretary of Defense, should establish a time frame for documenting and sharing a national plan for distributing and administering COVID-19 vaccines, and in developing such a plan ensure that it is consistent with best practices for project planning and scheduling and outlines an approach for how efforts will be coordinated across federal agencies and nonfederal entities (September 2020 report).

Open. The Department of Health and Human Services (HHS) neither agreed nor disagreed with our recommendation. In September and October 2020, HHS’ Centers for Disease Control and Prevention (CDC) released initial planning documents, and in January 2021 the White House issued a national COVID-19 response strategy that broadly outlined various channels for vaccine distribution. In addition, CDC provided a high-level description of its activities in a March 2021 COVID-19 vaccine distribution strategy and its June 2021 update. While these documents provide general information on federally supported vaccine distribution activities, they do not outline the approach the federal government is taking to coordinate its efforts or roles of the federal agencies and non-federal entities. We continue to maintain that it is important for HHS to have a national plan that outlines such an approach. We will continue to monitor HHS’ efforts in this area.

The Secretary of Health and Human Services should direct the Commissioner of the Food and Drug Administration (FDA) to identify ways to uniformly disclose to the public the information from FDA’s scientific review of safety and effectiveness data—similar to the public disclosure of the summary safety and effectiveness data supporting the approval of new drugs and biologics—when issuing emergency use authorizations (EUA) for therapeutics and vaccines, and, if necessary, seek the authority to publicly disclose such information (November 2020 report on vaccine and therapeutics).

Closed. In response to our recommendation, FDA said it would explore approaches to achieve the goal of transparency. On November 17, 2020, FDA made an announcement on the agency’s ongoing commitment to transparency for COVID-19 EUAs. FDA also developed a process to disclose its scientific review documents for therapeutic EUAs and released such summaries for one previous therapeutic EUA and the two additional therapeutic EUAs issued from November 2020—when we made our recommendation—through January 2021. These summaries disclosed information similar to what FDA releases to support new drug approvals and biologic licensures. Additionally, for the two vaccine EUAs FDA issued from November 2020—when we made our recommendation—through January 2021, FDA released decision memorandums containing detailed information about FDA’s review of safety and effectiveness data. FDA’s actions meet the intent of our recommendation and will improve transparency.
Source GAO. I GAO-21-551

Related GAO Product

COVID-19: Efforts to Increase Vaccine Availability and Perspectives on Initial Implementation. GAO-21-443. Washington, D.C.: April 14, 2021.

Contact information: Alyssa M. Hundrup, 202-512-7114, hundrupa@gao.gov

Nursing Homes

Nursing homes reported steep declines in COVID-19 cases and deaths starting in mid-December 2020, which generally coincided with the start of federal vaccination efforts through the Partnership for Long-Term Care Program.

Entities involved: Centers for Disease Control and Prevention and Centers for Medicare & Medicaid Services, both within the Department of Health and Human Services.

Background

The health and safety of the 1.4 million elderly or disabled residents in the nation’s more than 15,000 Medicare- and Medicaid-certified nursing homes—who are often in frail health and living in close proximity to one another—has been a particular concern during the COVID-19 pandemic.[79]

The Centers for Medicare and Medicaid Services (CMS), an agency within the Department of Health and Human Services (HHS), is responsible for ensuring that nursing homes meet federal quality standards to participate in the Medicare and Medicaid programs. To monitor compliance with these standards, CMS enters into agreements with state survey agencies within each state to conduct inspections, including recurring comprehensive standard surveys and as-needed investigations.

The CARES Act appropriated $100 million for this oversight, and it directed CMS to prioritize the use of funds for nursing home facilities in localities with community transmission of COVID-19.[80] HHS also designated about $10 billion from the Provider Relief Fund, which was established with funds provided under COVID-19 relief laws, as direct payments to assist nursing homes with responding to COVID-19.[81] Additionally, the American Rescue Plan Act of 2021 appropriated $250 million for the creation of state strike teams that will be deployed to nursing facilities with diagnosed or suspected cases of COVID–19 among residents or staff for the purposes of assisting with clinical care, infection control, or staffing during the COVID-19 emergency period and the following year.[82]

In response to the pandemic, HHS, primarily through CMS and the Centers for Disease Control and Prevention (CDC), has taken a range of actions to address infection prevention and control in nursing homes, which we reported on in five prior reports from June 2020 through March 2021. One of its actions was establishing the Pharmacy Partnership for Long-Term Care Program in October 2020 and agreeing with pharmacy partners to conduct COVID-19 vaccination clinics for residents and staff of long-term care facilities, including nursing homes, beginning in December 2020.[83]

In February 2021, CDC launched the Federal Retail Pharmacy Program for COVID-19 Vaccination, a collaboration between the federal government, pharmacy partners, and states and territories to increase access to COVID-19 vaccination across the U.S., including increased access to vaccines through long-term care pharmacy partners.[84]

COVID-19 cases and deaths in nursing homes. According to CDC case-reporting data, as of May 16, 2021, more than 99 percent of Medicare- and Medicaid-certified U.S. nursing homes had reported at least one confirmed resident or staff case, and more than 80 percent had reported at least one resident or staff COVID-19 death.[85] As we reported in May 2021, nursing homes commonly experienced multiple COVID-19 outbreaks, with 44 percent (5,943 of 13,380 reviewed nursing homes) having experienced four or more outbreaks between May 2020 and January 2021.[86]

New weekly confirmed cases of COVID-19 in nursing homes peaked in December and have since declined by more than 96 percent. The decline in cases for both residents and staff generally coincided with the initiation of the federal government’s nursing home vaccination program, the Pharmacy Partnership for Long-Term Care program, on December 21, 2020.[87] (See figure below.)

Similarly, new weekly resident deaths have steeply declined since peaking in the week ending December 20, 2020, again generally coinciding with the launch of federal vaccination efforts.[88] Combined nursing home resident and staff deaths from COVID-19, as a percentage of total COVID-19 deaths in the U.S., consistently represented about 30 percent of all COVID-19 deaths in the U.S., from May 2020 through February 2021. As of May 16, 2021, the combined percentage of total COVID-19 nursing home resident and staff deaths declined to 22 percent, indicating that the trajectory for nursing home COVID-19 related deaths had declined more than the decline in deaths in the country as a whole. (See figure below.)

New Weekly Confirmed COVID-19 Cases and Deaths among U.S. Nursing Home Residents and Staff, as Reported by Medicare- and Medicaid-Certified Nursing Homes, Weeks Ending May 31, 2020, through May 16, 2021

Notes: Dates refer to the end of a week (e.g., May 31 refers to the entire week from May 25 through May 31).
CDC defines a confirmed case as having a positive COVID-19 test resulting from a molecular test, a nucleic acid test, or an antigen test, including antigen point-of-care test results.
According to CDC, data used in this analysis are part of a live data set, meaning that facilities can make corrections to the data at any time. Data presented in this enclosure reflect the data downloaded as of May 27, 2021, which includes data through the week ending May 16, 2021. We excluded data for the week ending May 24, 2020, because it is the first week for which data are available from CDC and could include cases and deaths from multiple weeks dating back to January 1, 2020.
Weekly and cumulative case and death counts are likely underreported because they do not include data for the nursing homes that did not report COVID-19 data to CDC for that week or from nursing homes that submitted data that failed data quality assurance checks. Additionally, as we previously reported, the Centers for Medicare and Medicaid Services (CMS) does not require nursing homes to report data prior to May 2020, although nursing homes may do so voluntarily. We recommended that the Secretary of Health and Human Services—in consultation with CMS and CDC—develop a strategy to capture more complete data on confirmed COVID-19 cases and deaths in nursing homes retroactively to January 1, 2020.
Weekly staff deaths reported for the weeks ending May 31, 2020 through May 16, 2021, ranged from 5 (week ending May 16, 2021) to 59 (week ending May 31, 2020).
Certain individual nursing homes received their vaccinations outside of the Pharmacy Partnership for Long-
Term Care Program. Facilities were not required to participate in the program and could opt to have vaccine supply and management services coordinated by a pharmacy provider of its choice. According to the Department of Health and Human Services (HHS), 2 percent (374 out of 15,727) of nursing homes chose not to enroll in the program, in addition to the state of West Virginia, which opted to use other local pharmacy providers to administer nursing home vaccines starting the week of December 14, 2020.

Two CDC analyses of COVID-19 testing data released in April 2021 showed that vaccination generally protected individuals from COVID-19 infection and symptoms, but both studies identified post-vaccination (breakthrough infections) in a small number of Illinois and Kentucky nursing home residents and staff members.[89] Given that such breakthrough infection can occur, the studies emphasized the need for continued focus on infection prevention and control measures in nursing homes and vaccinating residents and staff.

Nursing home vaccinations through the Pharmacy Partnership for Long-Term Care Program. Vaccination clinics for nursing home residents and staff offered through the pharmacy partnership program, which began in mid-December, were completed in all participating nursing homes as of March 30, 2021. According to CDC, as of March 30, 2021, the program had completed 13,590 first vaccination clinics, 13,521 second vaccination clinics, and 13,145 third vaccination clinics in nursing homes.[90] Further, CDC reported that approximately 3.8 million vaccine doses were administered to residents and staff in nursing homes through the Pharmacy Partnership for Long-Term Care Program—45 percent of all doses administered through the program.[91] See table below.
CDC Data on COVID-19 Vaccinations Conducted through the Pharmacy Partnership for Long-Term Care Program by Recipient Type, as of May 12, 2021

Recipient

Number of vaccine doses administered in nursing homes

Number of vaccine doses administered in all long-term care facility types

Residents

1,926,170

4,564,290

Staff members

1,810,220

3,776,119

Total

3,736,390

8,341,409
Source: Centers for Disease Control and Prevention. | GAO-21-551

Note: According to the Centers for Disease Control and Prevention (CDC), data used in this table are part of a live data set, meaning that data can be corrected by CDC and the pharmacies participating in the pharmacy partnership program at any time. Data presented in this enclosure were reported to us by CDC as of May 12, 2021. Although CDC reports that all nursing home clinics have been completed, as CDC and its participating pharmacies review the data for accuracy, the exact numbers of doses may change. CDC said that the agency anticipates producing final data on the pharmacy partnership program at the end of May.

CDC states that ensuring steady access to vaccine will be necessary after the partnership program ends in order to vaccinate new residents, new staff, and residents or staff who may have initially been hesitant and now wish to be vaccinated.[92] To support these further vaccinations, in mid-March 2021, the federal government started providing a direct allocation of COVID-19 vaccine to long-term care pharmacies participating in the Federal Retail Pharmacy Program through four companies across the country — Managed Health Care Associates, Inc., GeriMed, Innovatix, and Omnicare.[93] These companies receive a proportion of vaccine through the program to distribute to their member long-term care pharmacies that can be accessed by individual facilities.

Methodology

To conduct this work, we reviewed CMS and CDC data, agency guidance, and other relevant information on HHS’s response to the COVID-19 pandemic. We also reviewed written responses from CMS and CDC.

In addition, we analyzed CDC data on COVID-19 reported by nursing homes through the week ending May 16, 2021.[94] We analyzed the CDC data as they were reported by nursing homes to CDC and publicly posted by CMS.

We did not otherwise independently verify the accuracy of the information with these nursing homes. We assessed the reliability of the data sets used in our analyses by checking for missing values and obvious errors and reviewing relevant CMS and CDC documents. We determined the data were sufficiently reliable for the purposes of our reporting objective.

Agency Comments

We provided HHS with a draft of this enclosure. HHS did not provide comments on this enclosure.

GAO’s Ongoing Work

We have released a recent report describing the frequency and duration of COVID-19 outbreaks in nursing homes from May 2020 through January 2021. We also continue to examine the oversight of infection prevention and control as well as emergency preparedness in nursing homes.

GAO’s Prior Recommendations

The table below presents our recommendations on nursing homes from prior bimonthly and quarterly CARES Act reports.
Prior GAO Recommendations Related to COVID-19 Outbreaks in Nursing Homes

Recommendation

Status

The Secretary of Health and Human Services should ensure that the Director of the Centers for Disease Control and Prevention collects data specific to the COVID-19 vaccination rates in nursing homes and makes these data publicly available to better ensure transparency and that the necessary information is available to improve ongoing and future vaccination efforts for nursing home residents and staff. (March 2021 report).

Closed. The Department of Health and Human Services (HHS) neither agreed nor disagreed with our recommendation. In March 2021, HHS said it was working towards better data transparency and noted that nursing homes have an opportunity to voluntarily report data through the National Healthcare Safety Network tracking system.

On May 13, 2021, the Centers for Medicare & Medicaid Services (CMS) issued an interim final rule establishing Long-Term Care Facility Vaccine Immunization Requirements for Residents and Staff, including for nursing homes. The rule requires facilities to report COVID-19 vaccination status of residents and staff to the Centers for Disease Control and Prevention (CDC). According to CDC, the new vaccination reporting requirement will not only assist in monitoring vaccine uptake amongst residents and staff, but will also aid in identifying facilities that may be in need of additional resources and assistance to respond to the COVID-19 pandemic. As of June 10, 2021, CMS has posted resident and staff vaccination rates for over 15,000 Medicare and Medicaid certified nursing homes on a public COVID-19 Nursing Home Data tracking website.

The Secretary of Health and Human Services should ensure that the Administrator of the Centers for Medicare & Medicaid Services, in consultation with the Centers for Disease Control and Prevention, requires nursing homes to offer COVID-19 vaccinations to residents and staff and design and implement associated quality measures (March 2021 report).

Open. HHS neither agreed nor disagreed with our recommendation at the time of publication. However, on April 15, 2021, CMS issued a proposed rule that includes, among other things, a proposal to adopt a new quality measure for skilled nursing facilities. The measure would require facilities to submit data on COVID-19 staff vaccination beginning October 1, 2021 and would be used as part of CMS’s quality reporting program beginning in fiscal year 2023.

On May 13, 2021, CMS also issued an interim final rule that establishes new requirements for nursing homes to develop and implement policies and procedures for educating residents, their representatives, and staff members about the COVID-19 vaccine and for offering these vaccines to each resident and staff member. Facilities will be assessed for compliance with the new requirements, which are effective on May 21, 2021. We will continue to monitor HHS’s progress towards implementing this recommendation.

The Administrator of CMS should quickly develop a plan that further details how the agency intends to respond to and implement, as appropriate, the 27 recommendations in the final report of the Coronavirus Commission on Safety and Quality in Nursing Homes, which CMS released on September 16, 2020.a Such a plan should include milestones that allow the agency to track and report on the status of each recommendation; identify actions taken and planned, including areas where CMS determined not to take action; and identify areas where the agency could coordinate with other federal and nonfederal entities (November 2020 report).

Closed. HHS neither agreed nor disagreed with our recommendation. HHS officials highlighted actions that CMS has taken related to Commission recommendations and said it would refer to and act upon the Commission's recommendations, as appropriate.

As of May 2021, CMS has developed an internal tracking document that notes the status of each of the Nursing Home Commission’s recommendations, the responsible agency for each recommendation, and planned actions for CMS-related recommendations. According to CMS, the agency will be: conducting quarterly reviews of the tracking document, holding interim meetings to discuss the recommendations, and conducting outreach to other Federal agencies to engage them in this work.

The Secretary of Health and Human Services, in consultation with the Centers for Medicare & Medicaid Services (CMS) and the Centers for Disease Control and Prevention (CDC), should develop a strategy to capture more complete data on confirmed COVID-19 cases and deaths in nursing homes retroactively back to January 1, 2020, and clarify the extent to which nursing homes had reported data before May 8, 2020. To the extent feasible, this strategy to capture more complete data should incorporate information nursing homes previously reported to CDC or to state or local public health offices (September 2020 report).

Open. HHS partially agreed with our recommendation. As of May 2021, no specific action had been taken by HHS, although according to HHS it continues to consider how to implement our recommendation. We will continue to monitor HHS’s progress towards implementing this recommendation.
Source: GAO. I GAO-21-551

aMITRE, Coronavirus Commission on Safety and Quality in Nursing Homes: Commission Final Report, PRS Release Number 20-2382, September 2020.

Related GAO Products

COVID-19 in Nursing Homes: Most Homes Had Multiple Outbreaks and Weeks of Sustained Transmission from May 2020 through January 2021. GAO-21-367. Washington, D.C.: May 19, 2021.

COVID-19 in Nursing Homes: HHS Has Taken Steps in Response to Pandemic, but Several GAO Recommendations Have Not Been Implemented. GAO-21-402T. Washington, D.C.: March 17, 2021.

Infection Control Deficiencies Were Widespread and Persistent in Nursing Homes Prior to COVID-19 Pandemic. GAO-20-576R. Washington, D.C.: May 20, 2020.

Science & Tech Spotlight: COVID-19 Testing. GAO-20-584SP. Washington, D.C.: May 20, 2020.

Nursing Homes: Better Oversight Needed to Protect Residents from Abuse. GAO-20-259T. Washington, D.C.: November 14, 2019.

Health Care Transparency: Actions Needed to Improve Cost and Quality Information for Consumers, GAO-15-11. Washington, D.C.: October 20, 2014.

Contact information: John E. Dicken, (202) 512-7114, dickenj@gao.gov

COVID-19 Testing

The Centers for Disease Control and Prevention initially developed a flawed COVID-19 diagnostic test in January and February 2020, which contributed to the delayed rollout of testing nationwide. The agency has taken steps to improve its process for developing tests, but additional actions could help strengthen its preparedness and enhance the nation’s testing capacity during a future infectious disease outbreak.

Entities involved: The Centers for Disease Control and Prevention and the Food and Drug Administration within the Department of Health and Human Services

Recommendations for Executive Action

The Director of the Centers for Disease Control and Prevention should work with appropriate stakeholders—including public health and private laboratories—to develop a plan to enhance surge capacity for laboratory testing. This plan should include timelines, define agency and stakeholder roles and responsibilities, and address any identified gaps from preparedness exercises.

The Director of the Centers for Disease Control and Prevention should assess the agency’s needs for goods and services for the manufacturing and deployment of diagnostic test kits in public health emergencies. This assessment should evaluate how establishing contracts in advance of an emergency could help CDC quickly and cost-effectively acquire these capabilities when responding to future public health emergencies, including those caused by novel pathogens, and should incorporate lessons learned from the COVID-19 emergency.

The Centers for Disease Control and Prevention agreed with both of these recommendations.

Background

According to the Centers for Disease Control and Prevention (CDC), one of its roles during an emergency response to an emerging infectious disease is to aid and equip public health laboratories around the country to conduct testing during the early stages of a response. CDC typically develops a diagnostic test for an emerging pathogen when no diagnostic test has been cleared by the Food and Drug Administration (FDA) and no adequate alternative is available, as it had during past emergencies, such as with the 2009 H1N1 influenza and Zika.

The FDA issued an emergency use authorization (EUA) for CDC’s COVID-19 test on February 4, 2020.[95] The EUA process allowed CDC to distribute its COVID-19 test kits to public health laboratories more quickly than would typically be necessary for FDA approval or clearance.[96] CDC distributed COVID-19 test kits to 93 public health and Department of Defense (DOD) laboratories between February 6 and 10, 2020.[97]

Immediately after receipt of the CDC test, many public health laboratories reported to CDC that the test was not working properly.[98] Specifically, a number of public health laboratories reported to CDC that they could not validate two of the test’s three primer-probe sets, short fragments of genetic code that can be used to detect a virus’s genetic code, specifically its N1 and N3 primer-probe sets. Following these reports, CDC worked to correct the issue and, by February 28, 2020, began distributing new test kits to the laboratories.

CDC’s was the only COVID-19 test available in the U.S. until February 29, 2020, when FDA announced that it did not intend to object if certain laboratories began using their own tests while they prepared EUA requests, provided the tests were validated and the laboratories notified FDA.[99] FDA played an important role in increasing access to testing during this public health emergency; we have ongoing work examining FDA’s role in authorizing and monitoring COVID-19 tests.

According to CDC, CDC’s laboratory tested 3,291 total specimens, representing approximately 1,195 individuals, on behalf of public health laboratories in January and February, 2020. In contrast, other countries around the world quickly scaled up testing in late January and early February. For example, the South Korean government reported that South Korea was conducting about 20,000 tests each day by the middle of February 2020.[100]

The failure of CDC’s COVID-19 test limited testing capacity in the U.S. during the critical early weeks of the pandemic when the nation needed to understand the spread of the novel virus. In addition, we previously reported that shortages of key testing supplies, such as swabs and testing reagents, also contributed to the delay in broad-scale testing early in the emergency response. These shortages were due to the unprecedented domestic demand and overall global competition.

Overview of Key Issues

The CDC’s test and the test adopted by the World Health Organization were developed concurrently. CDC began work on its first COVID-19 diagnostic test on January 10, 2020—the day that Chinese researchers publicly posted the COVID-19 virus’s genetic code—and had completed the test’s design by January 18.[101] At the same time, a research laboratory in Germany was also designing a diagnostic test. The World Health Organization (WHO) published the protocol of this German test online on January 13, 2020.[102] On January 24, 2020, CDC published its test protocol online. CDC officials told us they did this so that the global laboratory community, including private laboratories in the U.S., could use CDC’s design when developing their own tests. (See figure below.)

Timeline of the Development and Distribution of CDC and WHO COVID-19 Diagnostic Tests in 2020

Although the German laboratory made its test design public on January 13, 2020, CDC officials told us that any effort to use the test designed by the German laboratory would have further delayed testing in the U.S. due to the need to fully validate and manufacture all of the necessary components and obtain the required authorization from FDA. CDC officials told us that CDC developed its own test, in part, to ensure that distribution was not limited by the exercise of intellectual property rights.

On February 3, 2020, WHO announced that it would ship test kits using the German laboratory’s design to qualified laboratories around the world that lacked the materials to produce the test themselves. WHO’s effort helped to quickly scale up testing in some countries, particularly in Africa. However, because CDC possessed the materials to make tests, its laboratories were not among those targeted for assistance by WHO. CDC officials told us that WHO did not raise with CDC the possibility of WHO providing test kits to CDC.

Three primary factors contributed to the failure of CDC’s initial test. According to CDC, the agency’s failure to detect the problems with its test prior to distribution was a “quality process failure of incalculable cost.” The failure of CDC’s first diagnostic test for COVID-19 can largely be attributed to three primary factors, according to information we collected from CDC’s own internal review and interviews with CDC officials: laboratory quality control deficiencies, a lack of clearly defined approval criteria for test release and distribution, and poor communication within CDC about test performance problems.
  1. Laboratory quality control deficiencies. According to CDC’s internal review, the CDC laboratory that developed the test had multiple quality control deficiencies and used incorrect quality control procedures throughout the development process.[103]

    For example, according to CDC, because the laboratory used an incorrect testing procedure when it conducted its final quality control check on February 3, 2020, it did not detect problems then. Rather, by February 6, 2020, when problems with the test’s performance were identified, CDC had already manufactured and prepared kits for distribution to public health laboratories. At that time, although laboratory staff had discovered that one of the test’s three primer-probe sets produced some false results, the laboratory accepted the results and approved the test for distribution to public health laboratories that same day.[104]

    According to CDC, its laboratory that developed the COVID-19 test had never manufactured a diagnostic test before that one and had not implemented all quality system requirements that pertain to laboratories developing such tests.[105] CDC added that, although the laboratory operated under a quality system that was largely consistent with the requirements under the Clinical Laboratory Improvement Amendments of 1988 (CLIA), the laboratory did not have effective procedures or controls in place to assure that the test kit was fit for its intended purpose, according to the agency.[106] In an internal agency report, CDC acknowledged that the decision to assign manufacturing responsibility to a laboratory that had not implemented quality manufacturing regulatory requirements contributed to the incident.[107]

    Centers for Disease Control and Prevention’s (CDC) investigation of the problems with its first COVID-19 test kits

    After learning of the problems with its test kits from public health laboratories, CDC investigated the technical reasons for the failure, specifically within the sets of primers and probes—short fragments of genetic code—that could not be validated. CDC determined that the false results from the N1 primer-probe set likely had been caused by contamination during the development process. Problems with the N3 set were likely caused by a design flaw that led to the primers and probes attaching to each other during the reaction—known as a primer-dimer—and not as the result of contamination.
    Source: GAO interviews with CDC officials. | GAO-21-551
  2. Lack of clearly defined approval criteria. CDC officials told us the agency proceeded with distributing the test kits on February 6, 2020, even though the laboratory knew of its flaws, because the laboratory had not defined a pass/fail threshold for quality control checks of the test’s components and because there was no independent quality unit in place to oversee the laboratory’s manufacturing process.
  3. Poor communication of test performance problems within CDC. CDC officials told us no one with knowledge of the test’s failure rate communicated the information beyond the laboratory when problems were initially discovered and that CDC’s response leadership was not aware of the failure rate until after CDC began receiving notices from the state public health laboratories that they had been unable to use the test.

    In 2016, we reported problems within CDC related to the flow of critical information to leadership about inspections of high containment laboratories that work with hazardous biological agents. Our recommendation that the Secretary of Health and Human Services should develop policies for reporting laboratory incidents to senior department officials or direct the Director of CDC to incorporate these requirements into their policies has not been implemented as of June 25, 2021.[108]

    Upon learning of the problems with the test from the public health laboratories, CDC first attempted to re-manufacture test kits using all three primer-probe sets. However, CDC later determined that the third set—N3—was not necessary and that removing it did not affect the test’s overall performance. Thus, the new test kits CDC began distributing to public health laboratories on February 28, 2020, contained only two primer-probe sets.[109]

    According to CDC, the test’s design had originally included the N3 set because it was “more broadly reactive and would identify a wider family of coronaviruses, including SARS-CoV and bat-carried strains not known to have infected humans. The inclusion of a broadly reactive primer-probe set was meant to ensure that the test would be partially reactive if sequence variants arose.” During an interview with the Council on Foreign Relations, the Director of CDC at that time, said that CDC added the third set to the test because the agency was being “overly cautious.”

Other CDC actions contributed to slower testing in the early stages of the pandemic. Beyond the failure of the initial version of CDC’s COVID-19 test, three other areas contributed to testing limitations and challenges: CDC’s early testing guidelines, communication with laboratories, and selection of a testing platform.

CDC’s early testing guidelines. COVID-19 testing in the early stages of the pandemic was not widespread, in part, because of CDC’s narrow criteria for who should be tested at that time. Specifically, testing was limited in January 2020 to symptomatic individuals who had recently traveled from Wuhan City, China, or had been in close contact with individuals suspected or confirmed to have COVID-19. By late February, CDC expanded its COVID-19 testing guidelines to include symptomatic individuals who had traveled through multiple international areas and those with severe respiratory illness, regardless of their travel history.[110] According to CDC, these criteria were based on the best available information about the virus at that time and what was known about Severe Acute Respiratory Syndrome (SARS) and Middle East Respiratory Syndrome (MERS). CDC officials told us it would not have been appropriate to implement wide-scale testing at that point in the response. CDC’s criteria were generally consistent with the WHO’s criteria in place at that time.

CDC’s communication of test results to public health laboratories. According to the Association of Public Health Laboratories (APHL), which represents state and local-level public health laboratories, communication of test results from CDC back to public health laboratories in the period when they were unable to perform their own tests was inefficient and slow.[111] APHL and CDC attributed the slowness to the CDC laboratory’s lack of a laboratory information management system that could communicate test results back to the public health laboratories electronically and its reliance instead on telephone calls for positive results and emails for negative results.

Further, APHL officials told us that it often took days to receive negative test results from CDC and that it was difficult for laboratories to process the negative results received by email because these laboratories needed to match specimen numbers to separate patient identification numbers—a labor-intensive process for laboratory staff.

CDC’s selection of a testing platform. According to APHL, CDC’s first COVID-19 test kit required the laboratories to use an automated extraction platform that only 12 public health laboratories had in place at the time. CDC officials told us they were unaware of how many public health laboratories had the selected platform in place in early February 2020.

The only alternative to the automated platform CDC had intended for use with its test was manual extraction of viral material, a more time-consuming method for laboratory staff to employ. APHL officials said they believe CDC’s choice of platform indicated that agency officials did not appreciate the need to move quickly to scale up testing at that time.

Officials from APHL told us they worked with the CDC Foundation to purchase the new platform for use by 12 public health laboratories, and on March 15, 2020, the EUA for the CDC test kit was reissued to allow laboratories to use other types of testing platforms.[112] However, according to APHL, had the test worked as intended from the start, CDC’s selection of a platform most public health laboratories did not have would have slowed the testing response because many public health laboratories would have initially been limited in how many specimens they could have processed per day.

CDC has begun taking steps to remediate the problems associated with the development of its first COVID-19 test and communication of test results. CDC has identified and has begun to make improvements to its process for developing diagnostic tests.

To prevent the future distribution of a flawed test, CDC will require all tests it develops to have clearly defined approval criteria and management review. According to information posted on CDC’s website in June 2021 and agency officials, a new process, including specific release criteria and multiple levels of management review and sign-off has been developed.[113] The review process was implemented for the deployment of CDC’s latest COVID-19 test in July 2020, the Influenza SARS-CoV-2 Multiplex Assay, which was designed to test for influenza and COVID-19 simultaneously.

In addition, CDC’s website stated that the agency had begun developing an internal test review board.[114] According to CDC, once developed, the test review board will require all test development and validation data to be reviewed by CDC subject matter experts from infectious disease programs outside of the program developing the test to ensure an objective review and will require multiple levels of management sign-off.[115] If implemented effectively, a review board such as this should help prevent the recurrence of a test being distributed without management having reviewed key information about the test, as occurred with CDC’s first COVID-19 test.

To help ensure CDC laboratories meet high-quality standards, CDC has indicated that it will require laboratories to obtain appropriate accreditation. According to CDC, the agency began efforts in 2020 to require that CDC laboratories become accredited to an appropriate technical standard that assures compliance with regulatory requirements by October 1, 2024.[116] According to CDC officials, this would ensure that its laboratories maintain compliance with applicable regulatory requirements to the extent practicable and that quality practices, integrity and excellence in science are not compromised.[117] CDC is directing funding from the Paycheck Protection Program and Health Care Enhancement Act to support the investments necessary to bring laboratories into compliance with applicable quality system regulations and accreditations.[118]

To improve communication of test results with public health laboratories, CDC plans to upgrade and modernize CDC laboratories’ information management infrastructure. According to CDC officials, CDC plans to spend a combined total of $1.1 billion appropriated through the CARES Act, the American Rescue Plan Act of 2012, and its annual appropriations to support the agency’s data modernization efforts. According to CDC’s road map for these efforts, the agency intends to create interoperable laboratory information systems that will enhance data sharing between federal, state and local governments and the private health care system, and CDC has begun efforts towards this goal. For example, CDC officials told us the agency performed a gap analysis in fiscal year 2021 to identify laboratories’ current and future uses for an information management system and challenges that may hinder adoption of this system. APHL officials told us they believe this new information technology infrastructure will help prevent the inefficient communication of test results from CDC to public health laboratories described above from happening again.

To ensure CDC does not release tests that are incompatible with laboratories’ testing platforms and capabilities, CDC developed a new process that includes an assessment of the platforms available at the laboratories that will use each test. CDC officials told us they employed an improved process for the development of CDC’s Influenza SARS-CoV-2 Multiplex test that included reaching out to public health laboratories to identify the platforms currently in place at those laboratories. APHL officials told us they currently collect this information and provide it to CDC. According to the June 2021 information on CDC’s website, CDC will require that all tests the agency designs for use by public health laboratories are compatible with platforms commonly used by these laboratories.[119]

The COVID-19 pandemic demonstrated potential opportunities for CDC to improve its testing capacity for future public health emergencies. Reducing the spread of infectious diseases may require enhanced collaboration with laboratories across the nation and the rapid deployment of large quantities of test kits. CDC could take additional steps to improve its testing response in future public health emergencies.

Enhancing public-private partnerships for laboratory testing. CDC officials told us that responding to COVID-19 required additional laboratory testing surge capacity. Prior to COVID-19, CDC recognized that the need for diagnostic testing can exceed the capacity of the public health laboratory infrastructure, and that private laboratories can serve to supplement national testing capabilities during an emergency. CDC collaborated with public health and private partners beginning in 2018 to identify potential opportunities to enhance surge capacity for laboratory testing; however, CDC had not taken concrete steps to enable its partners to provide surge capacity by the time of the initial stages of the COVID-19 response. To date, CDC has not yet developed a plan for enhancing laboratory surge testing capacity that identifies objectives and outlines agency and stakeholder roles and responsibilities for achieving these objectives within defined time frames.

Following the Zika outbreak in 2016, CDC initiated three key actions to explore ways to enhance laboratory testing capacity during an emergency response by coordinating with public health and private sector laboratories.

1. CDC entered into a memorandum of understanding (MOU) with CDC, APHL, the American Clinical Laboratory Association (ACLA)—an association of private clinical laboratories, and the Council of State and Territorial Epidemiologists (CSTE), signed in April 2018. [120] CDC established the MOU, in part, in response to our May 2017 report on the 2016 Zika outbreak, which found issues in the transparency of CDC’s processes for the provision of its tests to manufacturers during an emergency.[121]

The stated goal of the MOU was to build a collaborative structure to address testing surge capacity needs during an emergency. However, officials from two of CDC’s three MOU partners told us that while the agreement improved communication ahead of and during the COVID-19 pandemic, it did not have a material effect on how the nation’s testing response unfolded at the beginning of the pandemic. For example, officials from MOU partners commented that:
  • The MOU represents the “vision” of how enhanced coordination might work. However, officials added that CDC has not used the MOU to change any processes during the COVID-19 emergency response.
  • The MOU is a good first step, but CDC needs to broaden it to include more organizations. Officials added that CDC’s vision for the role of private laboratories remained unclear to them.

According to CDC officials, the MOU was a low-level agreement with no agency resources provided for its implementation.

Additionally, FDA officials told us FDA is interested in joining CDC’s MOU to enhance communication and coordination related to test development with laboratories. CDC officials told us that adding agencies such as FDA to the MOU would allow for a more thorough and consistent response from the Department of Health and Human Services (HHS). They added that, given FDA’s role in facilitating surge test capacity, both agencies share responsibility in stakeholder engagement and planning for enhanced laboratory testing capacity.

2. CDC held a tabletop training exercise with stakeholders in May 2019 to assess laboratory preparedness during an emergency response that used a scenario where a highly infectious disease emerged that spread both before and after patients began showing symptoms. This exercise included representatives from ACLA, APHL, and CSTE, as well as other agencies in HHS.

During this exercise, participants identified a number of areas for further development, including ensuring early and accurate communication with partners, integrating data more effectively, coordinating the distribution of emergency diagnostic tests and test materials, and building public-private partnerships to support surge-testing capacity during an emergency response.

CDC officials told us that the tabletop exercise helped to open lines of communication with stakeholders that were vital in responding to COVID-19. For example, following this exercise, CDC began hosting quarterly conference calls with commercial laboratories to discuss challenges with electronic reporting and other private sector response-related needs. CDC held two of these calls before the COVID-19 emergency began. CDC added that it is currently hosting calls with laboratories on a monthly basis and will return to a quarterly schedule when the emergency response has ended.

3. CDC began a survey of 1,000 private sector and academic laboratories in January 2021 to identify laboratory testing surge capacity. Officials told us that this survey was originally intended to identify clinical laboratories that would be able to perform CDC-developed tests during an emergency response. They added that based on the large laboratory testing surge capacity needed during the COVID-19 pandemic, CDC has also begun using the survey to identify laboratories with the capability to independently develop diagnostic tests for use during future public health emergencies. CDC officials said they would use the results of this survey to expand partnerships and improve coordination with laboratories that can participate in future response efforts.

The Department of Homeland Security’s Homeland Security Exercise and Evaluation Program outlines principles for preparedness exercise programs, as well as a common approach to program management, design and development, conduct, evaluation, and improvement planning.[122] According to this program, agencies should use improvement planning to turn areas for improvement identified during an exercise into concrete, measurable corrective actions that strengthen capabilities.

Additionally, the National Biodefense Strategy, which explains how the U.S. government will manage its activities when responding to biological threats, states that agencies should develop plans that implement or support surge capabilities across response sectors in coordination with relevant entities, including private sector partners.[123] The strategy states that, among other things, these plans should include:
  • implementing enhanced surveillance and public health measures for disease control; and
  • clinical, environmental, food testing, and forensic surge laboratory operations.

Furthermore, in our prior work, we identified key elements of sound planning that can help agencies achieve their goals. Sound plans include elements such as what the plan is trying to achieve and how it will achieve these results, as well as priorities, milestones, and monitoring to assess progress toward achieving goals.

COVID-19 demonstrated that the risk posed by an emerging infectious disease could exceed the testing capacity of CDC and public health laboratories. Until CDC works with appropriate stakeholders—including public health and private laboratories—to develop a plan to enhance laboratory surge testing capacity that includes timelines, defines agency and stakeholder roles and responsibilities to meet objectives, and closes gaps identified in preparedness exercises, CDC and its partners will not be best positioned to fully support diagnostic testing needs during a future infectious disease outbreak.

Improving test kit manufacturing capacity. Enhancing its test kit manufacturing capacity is another way CDC could improve its ability to respond to a future infectious disease outbreak. CDC officials told us they manufactured the first batch of test kits that CDC sent to public health laboratories entirely in-house to allow the agency to make changes to the test during the design and validation process and to ensure that public health laboratories received test kits as quickly as possible. However, CDC officials told us they recognized early in the COVID-19 response that the need for tests exceeded the agency’s manufacturing capacity, and that it needed to engage private manufacturers to increase testing capacity.

According to CDC, the agency awarded a contract in 2018 to support the production and distribution of test kits for a number of pathogens, including, among others, influenza, meningitis, and a 2012 strain of coronavirus. However, this contract did not support the manufacturing of a test kit for COVID-19. Instead, CDC officials told us the agency procured services to supplement its internal test kit manufacturing process using purchase orders, which were issued by January 30, 2020. CDC also reported awarding contracts to two companies on February 20, 2020, for the manufacturing of its test kits. CDC and a contractor jointly manufactured the second batch of corrected test kits that CDC sent to public health laboratories beginning on February 28, 2020.[124] However, CDC did not have manufacturing contracts in place prior to the pandemic that could have supported the COVID-19 testing response.

We have previously reported that contracting during an emergency can pose a unique set of challenges, as officials face a significant amount of pressure to provide life-sustaining goods and services as quickly as possible. We have also previously reported that instead of initiating contracts during an emergency response, some agencies establish contracts and agreements in advance of an emergency or disaster to support their needs for certain goods and services, which could include manufacturing.

Establishing contracts prior to an emergency, also called advance contracting, is a tool that can be leveraged to help federal agencies rapidly and cost-effectively mobilize resources.[125] Further, according to the Federal Emergency Management Administration (FEMA), establishing contracts in advance of an emergency fills a critical gap in the emergency acquisition process and ensures that the agency can provide rapid support during an emergency response.[126] For example, contracts can be structured to include emergency response delivery time frames that require vendors to provide certain goods and services within a specific period of time to meet urgent needs. Additionally, the Office of Management and Budget encourages federal agencies to seek out pre-positioned contractors—which agencies may obtain through advance contracting—to facilitate a timely emergency response.[127]

CDC officials said they recognized that establishing contracts in advance could add some value during an emergency response but that they had not evaluated the potential benefits of establishing contracts in advance or considered how CDC could establish such contracts in the future. Specifically, they noted that having contracts in place before the COVID-19 pandemic could potentially have allowed the agency to distribute the second batch of test kits to public health laboratories one or two days sooner.

While we recognize the challenges of planning for unknown events, we maintain it is critical to think through these issues before, rather than during, the public health emergency to maximize efficiencies and potentially save lives. Further, distributing test kits more quickly, even by only one day, could be valuable because each day is critical for understanding the spread of a novel virus in the early weeks of a pandemic.

Having contracts with outside test kit manufacturers prior to a public health emergency is one tool that could help supplement the supply produced by CDC and aid in the rapid manufacturing and deployment of test kits during a future public health emergency. By assessing the types of goods and services that could be leveraged by advance contracting to support the manufacturing and deployment of diagnostic test kits in public health emergencies, CDC will be prepared to award advance contracts in areas it deems beneficial and be better positioned to respond to future public health emergencies, including those caused by novel pathogens.

Methodology

To conduct this work, we reviewed relevant CDC documents, such as the agency’s internal report summarizing the results of its investigation into the unanticipated failure of its COVID-19 test and its MOU with laboratory stakeholders.[128] We also reviewed transcripts of media briefings by CDC officials, academic publications, and World Health Organization documents describing international COVID-19 testing efforts.

In addition, we interviewed CDC and FDA officials. We also interviewed representatives from associations representing organizations and professionals involved in COVID-19 testing, including the American Clinical Laboratory Association, the Association of Public Health Laboratories, the Council of State and Territorial Epidemiologists, and the Infectious Diseases Society of America. We compared CDC’s efforts to Department of Homeland Security leading practices for exercise planning and improvement planning, the National Biodefense Strategy, Office of Management and Budget and FEMA leading practices for emergency preparedness, and key elements of sound planning from our prior work.

Agency Comments

We provided a draft of this enclosure to HHS for review and comment. Responses from the department, including from CDC and FDA, are reprinted in Appendix VI. CDC and FDA also provided technical comments, which we incorporated as appropriate.

In response to our first recommendation, CDC concurred and noted FDA’s shared role in improving the nation’s laboratory surge testing capacity. We agree and added language to more explicitly state FDA’s role in increasing access to testing by authorizing tests for use during a public health emergency and noted our ongoing work examining FDA’s regulation of COVID-19 tests.

In response to our second recommendation, CDC concurred and stated that CDC will investigate the possibility of setting up a contract mechanism that would allow for rapid capacity to work with commercial manufacturers, or in the event CDC is unable to set up a contract, CDC will draft contract language that can be used as needed for future public health emergencies.

GAO’s Ongoing Work

Our work on COVID-19 testing is ongoing. We are currently examining how FDA regulates COVID-19 tests. We are also planning to examine issues related to the deployment of testing at the beginning of the pandemic, including work to identify lessons learned from COVID-19 testing that can improve the nation’s ability to mount a robust diagnostic testing response in the future.

GAO’s Prior Recommendations

The table below presents our recommendations on testing from prior bimonthly and quarterly CARES Act reports.
Prior GAO Recommendations Related to COVID-19 Testing

Recommendation

Status

The Secretary of Health and Human Services should ensure that the Director of the Centers for Disease Control and Prevention clearly discloses the scientific rationale for any change to testing guidelines at the time the change is made (November report).

Open. The Department of Health and Human Services agreed with our recommendation and has begun to implement it. For example, on February 16, 2021, the Centers for Disease Control and Prevention (CDC) issued Interim Guidance on Testing Healthcare Personnel that stated asymptomatic health care personnel who have recovered from COVID-19 may not need to undergo repeat testing or quarantine in the case of another exposure within 3 months of their initial diagnosis. To support this guidance, CDC's website provided links to studies that explained the scientific rationale. Additionally, CDC told us that it continues to consult with scientific stakeholders when issuing or updating guidance documents, and outlined a series of steps the agency plans to take to strengthen its testing guidance. However, as of May 2021, CDC had not fully completed the recommendation. For example, clear linkage to a scientific rationale for recent changes related to testing after exposure for fully-vaccinated individuals appeared to be missing. We will continue to monitor the implementation of this recommendation to ensure that these efforts continue.

The Secretary of Health and Human Services should develop and make publicly available a comprehensive national COVID-19 testing strategy that incorporates all six characteristics of an effective national strategy. Such a strategy could build upon existing strategy documents that the Department of Health and Human Services has produced for the public and Congress to allow for a more coordinated pandemic testing approach (January report).

Open. The Department of Health and Human Services (HHS) partially agreed with our recommendation. In January 2021, HHS agreed that the department should take steps to more directly incorporate some of the elements of an effective national strategy, but expressed concern that producing such a strategy at this time could be overly burdensome on the federal, state, and local entities that are responding to the pandemic, and that a plan would be outdated by the time it was finalized or potentially rendered obsolete by the rate of technological advancement. In May 2021, HHS told us that the White House and Department of Health and Human Services plan to execute a National Testing Strategy that will act upon the Administration’s testing goals. According to HHS, a finalized document is forthcoming that includes specific actions as well as timelines to achieve these goals. The National Testing Strategy will speak to the country’s short-term COVID-19 needs as well as the long-term needs associated with the country’s broader bio-preparedness. We will continue to monitor the implementation of this recommendation.
Source: GAO. I GAO-21-551

Related GAO Products

Foreign Assistance: State Department Should Better Assess Results of Efforts to Improve Financial and Some Program Data. GAO-21-373. Washington, D.C.: May 10, 2021.

2017 Disaster Contracting: Action Needed to Better Ensure More Effective Use and Management of Advance Contracts. GAO-19-93. Washington, D.C.: December 6, 2018.

Emerging Infectious Diseases: Actions Needed to Address the Challenges of Responding to Zika Virus Disease Outbreaks. GAO-17-445. Washington, D.C.: May 23, 2017.

High-Containment Laboratories: Comprehensive and Up-to-Date Policies and Stronger Oversight Mechanisms Needed to Improve Safety. GAO-16-305. Washington, D.C.: March 21, 2016.

Disaster Response: Criteria for Developing and Validating Effective Response Plans. GAO-10-969T. Washington, D.C.: September 22, 2010.

Contact information: Mary Denigan-Macauley, 202-512-7114, DeniganMacauleyM@gao.gov

HHS COVID-19 Funding

As of May 31, 2021, the Department of Health and Human Services had been appropriated approximately $484 billion in COVID-19 relief funds in six relief laws. The department uses spend plans to communicate information to Congress about its COVID-19 relief funds; however, we found that the most recent spend plans generally lack information on projected time frames for obligating the remaining COVID-19 relief funds.

Entity involved: Department of Health and Human Services

Recommendation for Executive Action:

To communicate information about and facilitate oversight of the agency’s use of COVID-19 relief funds, the Secretary of Health and Human Services should provide projected time frames for the planned spending of COVID-19 relief funds in the Department of Health and Human Services’ spend plans submitted to Congress.

HHS partially concurred with the recommendation and stated that the department would aim to incorporate some time frames on planned spending where that information may be available such as time frames for select grants to states. However, HHS officials stated that the department would not be able to provide specific time frames for all relief funds since the evolving environment requires the department to remain flexible in responding to incoming requests for response activities.

Background

To assist the response to the COVID-19 pandemic, the Department of Health and Human Services (HHS) received approximately $484 billion in COVID-19 relief appropriations from six COVID-19 relief laws. Many HHS COVID-19 relief funds are available for a multiyear period or are available until expended. Of the $484 billion, approximately $160 billion (about 33 percent) was appropriated in the sixth COVID-19 relief law, the American Rescue Plan Act of 2021 (ARPA), enacted on March 11, 2021.

Overview of Key Issues

As of May 31, 2021, the department reported that about $253 billion of the $324 billion appropriated in the first five COVID-19 relief laws enacted as of December 27, 2020 had been obligated (about 78 percent) and about $168 billion had been expended (about 52 percent). Of the $160 billion in appropriations from the sixth law enacted on March 11, 2021, about $75 billion had been obligated (47 percent) and about $3 billion had been expended (about 2 percent). In total, approximately $156 billion remained unobligated from all six laws. (See figure.)

HHS’s Reported COVID-19 Relief Appropriations, Obligations, and Expenditures from COVID-19 Relief Laws, as of May 31, 2021

aThese amounts reflect appropriations provided in Divisions M and N of the Consolidated Appropriations Act, 2021 that are specifically designated for COVID-19 relief.

The table below shows HHS appropriations, obligations, and expenditures by COVID-19 relief law that HHS reported as of May 31, 2021. Three quarters of HHS’s appropriations from the first five relief laws have been obligated, and more than half have been expended. HHS also received significant additional appropriations in ARPA, about half of which had not been obligated as of May 31, 2021.
Department of Health and Human Services Reported COVID-19 Relief Appropriations, Obligations, and Expenditures, by Relief Law, as of May 31, 2021

Legislation

Date of enactment

Appropriations
($ millions)

Obligations
($ millions, (% obligated))

Expenditures
($ millions, (% expended))

Coronavirus Preparedness and Response Supplemental Appropriations Act, 2020
(Pub. L. No. 116-123)

March 6, 2020

6,497

5,381 (83)

3,202 (49)

Families First Coronavirus Response Act
(Pub. L. No. 116-127)

March 18, 2020

1,314

1,288 (98)

1,253 (95)

Coronavirus Aid, Relief, and Economic Security Act.
(Pub. L. No. 116-136)

March 27, 2020

142,833

135,532 (95)

112,760 (79)

Paycheck Protection Program and Health Care Enhancement Act
(Pub. L. No. 116-139)

April 24, 2020

100,000

56,729 (57)

46,951 (47)

Consolidated Appropriations Act, 2021
(Pub. L. No. 116-260) a

December 27, 2020

73,175

54,140 (74)

3,764 (5)

American Rescue Plan Act of 2021
(Pub. L. No. 117-2)

March 11, 2021

160,494

75,225 (47)

2,642 (2)

Total

484,313

328,294 (68)

170,573 (35)
Source: Department of Health and Human Services (HHS) data. | GAO-21-551

Note: The Department of Health and Human Services (HHS) reported that, of its total appropriations for COVID-19 relief, the agency transferred $289 million to the Department of Homeland Security, and $300 million are not available until HHS has taken certain actions.
aThis amount reflects appropriations provided in Divisions M and N of the Consolidated Appropriations Act, 2021 that are specifically designated for COVID-19 relief. An additional $638 million in COVID-19 relief funds were appropriated under Division H to the Administration for Children and Families, an agency within HHS, to prevent, prepare for, and respond to the coronavirus, for necessary expenses for grants to carry out a low-income household drinking water and wastewater emergency assistance program. However, these funds were not included in the HHS-reported data on HHS COVID-19 relief appropriations, obligations, and expenditures, as HHS noted that the funds were not considered COVID-19 relief funding for USAspending.gov reporting purposes.

Appropriations for HHS agencies or key funds. The table below provides COVID-19 relief appropriations to HHS under the six relief laws and the obligations and expenditures of these appropriations by HHS agency or fund as of May 31, 2021. The sixth COVID-19 relief law, ARPA, was enacted on March 11, 2021, and as of May 31, 2021, HHS had obligated $75 billion (47 percent), and expended $3 billion (two percent) of the appropriations provided under this law.
Department of Health and Human Services Reported COVID-19 Relief Appropriations, Obligations, and Expenditures, by Agency or Key Fund, as of May 31, 2021

Agency or key fund

Appropriations
($ millions)

Obligations
($ millions)

Expenditures
($ millions)

Administration for Children and Families

63,344.0

61,886.3

5,605.3

Administration for Community Living

3,200.0

2,904.7

912.5

Agency for Toxic Substances and Disease Registry

12.5

12.4

7.3

Centers for Disease Control and Prevention (CDC)

26,770.0

12,803.8

2,580.7

Centers for Medicare & Medicaid Servicesa

935.0

124.9

47.4

Enhanced Use of Defense Production Act

10,000.0

0.0

0.0

Food and Drug Administration (FDA)

696.0

64.2

27.6

Health Resources and Services Administration (HRSA)

10,750.0

7,523.3

1,241.3

Indian Health Service (IHS)

7,190.0

3,158.5

3,025.6

National Institutes of Health (NIH)

3,031.4

1,144.7

463.2

Office of Inspector General (OIG)

5.0

0.0

0.0

Public Health and Social Services Emergency Fund (PHSSEF)b

350,144.5

232,162.6

156,506.3

Office of the Assistant Secretary for Healthc

9,532.0

6,913.6

3,373.1

Office of the Assistant Secretary for Preparedness and Responsec

20,497.5

11,776.2

7,595.9

Biomedical Advanced Research and Development Authority c

38,107.3

28,073.3

8,035.4

Provider Relief Fundc, d

178,000.0

134,314.1

127,232.2

CDCc

1,000.0

419.2

204.3

FDAc

22.0

1.9

1.9

HRSAc

979.8

971.1

793.5

IHSc

1,640.0

1,005.9

507.6

NIHc

1,806.0

1,031.8

501.1

OIGc

12.0

3.6

3.1

Other PHSSEFc

98,547.9

47,651.9

8,258.2

Substance Abuse and Mental Health Services Administration

8,235.0

6,508.4

156.2

Grand Total

484,313.4

328,293.8

170,573.4
Source: Department of Health and Human Services (HHS) data. | GAO-21-551

Note: HHS reported that of the total COVID-19 relief appropriations the agency transferred $289 million to the Department of Homeland Security, and that $300 million in appropriations are not available until HHS takes certain actions. HHS’s reported appropriations specifically designated for COVID-19 relief in the Consolidated Appropriations Act, 2021 (Pub. L. No. 116-260) reflect only appropriations provided under Divisions M and N. Of the $324 billion appropriated in the five relief laws enacted as of December 27, 2020, about $253 billion (about 78 percent) had been obligated and about $168 billion (about 52 percent) had been expended, as of May 31, 2021.
aThese amounts do not reflect Medicaid and Medicare expenditures that resulted from statutory changes to these programs under the COVID-19 relief laws.
bPHSSEF is an account through which funding is provided to certain HHS offices, such as the Office of the Assistant Secretary for Preparedness and Response. Amounts have been appropriated to this fund for the COVID-19 response to support certain HHS agencies and response activities. For example, NIH received about $1.8 billion in transfers from the PHSSEF, and this amount is not included in the approximately $3 billion appropriated directly to NIH.
cThe italicized amounts are subtotals of the PHSSEF and are already reflected in the total $350,144.5 million listed for the PHSSEF. Italicized amounts listed under the PHSSEF appropriations column are HHS allocations based on appropriations made in the COVID-19 relief laws and approved allotment decisions made by HHS in coordination with the Office of Management and Budget. Some amounts were appropriated to the PHSSEF for transfer to specified HHS agencies.
dThe Provider Relief Fund reimburses eligible health care providers for health care-related expenses or lost revenues that are attributable to COVID-19. Provider Relief Fund expenditures also may be referred to as disbursements.

Allocations for selected COVID-19 response activities. HHS officials noted that allocations for COVID-19 response activities are determined by appropriations made by Congress in combination with approved spend plan decisions.[129] Some funding—such as funding for testing or vaccine-related activities—could apply to multiple response activity categories, making an exact accounting of the obligations and expenditures in certain areas difficult. For example, certain funds included in the response activity category for support to states, localities, territories, and tribal organizations were designated for testing or vaccine distribution.

As of May 31, 2021, the Provider Relief Fund (PRF), which reimburses eligible health care providers for health care-related expenses or lost revenues attributable to COVID-19, had the largest allocation—comprising about 37 percent ($178 billion) of HHS allocations from the six COVID-19 relief laws. Other activities with high allocations included testing-related activities; the Child Care and Development Block Grant; vaccine-related activities; and support to state, local, territorial, and tribal organizations for preparedness, which together comprised an additional 40 percent ($194.0 billion) of HHS allocations.

The following table provides HHS’s reported allocations, obligations, and expenditures by selected COVID-19 response activity. The sixth COVID-19 relief law, ARPA, was enacted on March 11, 2021, and as of May 31, 2021, HHS had obligated $75 billion (47 percent), and expended $3 billion (two percent) of the appropriations provided under this law.
Department of Health and Human Services (HHS) Reported Allocations, Obligations, and Expenditures by Selected COVID-19 Response Activity, as of May 31, 2021

COVID-19 response activity

Description

Allocations
($ millions)

Obligations
($ millions)

Expenditures
($ millions)

Provider Relief Fund

Includes reimbursements to eligible health care providers for health care-related expenses or lost revenues that are attributable to COVID-19.

178,000.0

134,314.1

127,232.2

Testing

Includes procurement and distribution of testing supplies, community-based testing programs, testing in high-risk and underserved populations and Indian Health Services’ programs, implementing a national strategy, Centers for Disease Control and Prevention (CDC) testing-related activities such as technical assistance, and other activities.

61,416.3

21,180.4

5,117.3

Child Care and Development Block Grant

Includes assistance to child care providers to help maintain or resume operations in the case of decreased enrollment or closures related to COVID-19.

52,465.0

52,087.8

4,043.1

Vaccines

Includes Biomedical Advanced Research and Development Authority (BARDA) funding for vaccine development and procurement; National Institutes for Health (NIH) research activities; and CDC vaccine distribution, administration, and technical assistance related activities.

40,221.5

25,063.6

6,387.7

Support to state, local, territorial, and tribal organizations’ preparedness

Includes funding for states and other governments to support testing, contact tracing, and surveillance; vaccines distribution; and other activities.

40,061.5

38,701.3

6,570.4

Strategic National Stockpilea

Includes acquiring, storing, and maintaining ventilators, testing supplies, and personal protective equipment (PPE) and increasing manufacturing capacity for certain PPE.

13,919.9

10,236.7

6,318.9

Drugs and therapeutics

Includes BARDA funding for development and procurement of therapeutics and NIH research activities.

11,379.4

6,874.7

2,049.5

Health centers

Includes support for COVID-19-related activities, such as testing, at health centers, which provide health care services to individuals regardless of their ability to pay.

9,620.0

8,178.1

1,825.4

Rural Provider Payments

Includes assistance for rural providers and suppliers that will be administered using the same mechanism as the Provider Relief Fund, according to HHS officials.

8,500.0

0.0

0.0

Mental health and substance use–related services

Includes substance abuse prevention and treatment, community-based mental health services, and other activities.

8,315.0

6,508.4

156.2

Diagnostics research and development

Includes BARDA diagnostic development programs and NIH projects, such as the Rapid Acceleration of Diagnostics Initiative.

3,321.6

1,761.6

715.1

Head Start

Includes grants to local programs for high-quality learning experiences and to respond to other immediate and ongoing consequences of COVID-19.

2,000.0

1,325.0

460.5

Testing for uninsuredb

Includes reimbursements to eligible providers for COVID-19 testing for individuals who are uninsured.

2,000.0

1,980.9

1,973.0

Global disease detection and emergency response

Includes support to governments and other organizations to rapidly diagnose cases and to ensure readiness to implement vaccines and therapeutics.

1,747.1

432.2

133.5

Telehealth

Includes efforts to support safety-net health care providers transitioning to telehealth, telehealth access—especially for vulnerable maternal and child health populations—and a telehealth website.

307.5

136.5

102.8

Other response activities

Includes additional activities such as activities conducted by the Administration for Community Living, certain CDC-wide activities and program support, and activities conducted by the Food and Drug Administration.

51,038.6

19,512.5

7,487.8

Total

484,313.4

328,293.8

170,573.4
Source: Department of Health and Human Services (HHS) data, written HHS responses, and GAO analysis of HHS spend plans. | GAO-21-551

Note: The selected response activities represent examples of certain targeted activities that fall within particular HHS agencies, such as funding for health centers or Head Start, as well as broader categories of response activities that may span HHS agencies, such as testing-, vaccine-, and therapeutics-related response activities. HHS reported allocations, obligations, and expenditures for these activities based on the primary programmatic recipient organization of the funds, although some activities apply to multiple categories. For example, certain funds in the “support to state, local, territorial, and tribal organizations for preparedness” category were provided for testing but are not reflected in the “testing” category. However, HHS also noted that testing-related funding awarded to states or localities that was appropriated under the American Rescue Plan Act of 2021 (ARPA) was included in the “testing” category. HHS officials explained that the activity names align with how funds were appropriated under different COVID-19 relief laws. According to HHS officials, the allocations reported for the key activities above are based on amounts appropriated for these activities in the COVID-19 relief laws, and on approved spend plan decisions made by HHS in coordination with the Office of Management and Budget. According to HHS, as of June 4, 2021, the agency used about $1.7 billion in appropriations provided under ARPA, including $1.2 billion appropriated for COVID-19 testing, contact tracing, and mitigation activities, for the Administration for Children and Families’ Unaccompanied Children Program, citing the Secretary’s authorities under the Public Health Service Act and the Consolidated Appropriations Act, 2021. See Pub. L. No. 116-260, div. H, tit. II, § 204, 134 Stat. 1182, 1589 (2020); 42 U.S.C. 238j(a).With respect to the Consolidated Appropriations Act, 2021, the amounts reflect appropriations specifically designated for COVID-19 in Divisions M and N of the act.
aAccording to HHS, the agency transferred $850 million from the Public Health and Social Services Emergency Fund, Strategic National Stockpile, to the Unaccompanied Children Program within the Administration for Children and Families, citing authority provided in the Consolidated Appropriations Act, 2021. See Pub. L. No. 116-260, div. M, tit. III, § 304, 134 Stat. at 1923 (2020).
bAccording to HHS officials, HHS has allocated an additional $4.8 billion to the testing for the uninsured program from section 2401 of ARPA, which HHS included in the “testing” response activity category.

The percentage of obligations and expenditures varied across selected COVID-19 response activities for a variety of reasons including the nature of the activities, their planned uses, and the timing of the funds provided through the six COVID-19 relief laws.
  • Nature of funded activities. The nature of some funded activities—such as financial assistance grants or awards to state, local, and other jurisdictions—means that the full amount of the grant or award may be obligated at the time of the grant or award, but expended incrementally over time based on the budget period for the activities. For example, support to state, local, territorial, and tribal organizations’ preparedness includes assistance to states and other jurisdictions for testing, contact tracing, laboratory capacity, and vaccine distribution. Centers for Disease Control and Prevention (CDC) officials told us that some expenditures for these awards, such as those for personnel costs, will take place over the time period for which the award is made, some of which are more than 2 years.
  • Planned use of funds. National Institutes of Health (NIH) officials reported that certain research programs are planned in phases so that additional funds will be obligated after grantees meet certain requirements or integrate new advancements. In addition, officials from the Biomedical Advanced Research and Development Authority told us that funds obligated for vaccine manufacturing and procurement are expended as vaccine doses are shipped to administration or distribution sites. Officials from the Office of the Assistant Secretary for Preparedness and Response said funds obligated for replenishing the Strategic National Stockpile (SNS) are not expended until products are manufactured and delivered into the SNS.
  • Timing of COVID-relief appropriations: About 34 percent (approximately $21 billion) of funds in the testing category had been obligated as of May 31, 2021. However, a majority of these funds—approximately $49 billion—were allocated from appropriations in the sixth COVID-19 relief law, which was enacted on March 11, 2021. According to HHS data, about 45 percent of allocations in this category from the first five COVID-19 relief laws had been obligated as of February 28, 2021. With respect to expenditures, 19 percent (approximately $1.8 billion) of allocations for health centers had been expended as of May 31, 2021, mostly due to the nearly four-fold increase in funding for this activity that was appropriated in the sixth COVID-19 relief law.

Spend plans. To communicate information about COVID-19 relief funds from the first five COVID-19 relief laws, HHS uses spend plans, which the laws required be developed, updated, and provided to Congress every 60 days.[130] According to HHS officials, the department is also preparing a spend plan for ARPA, which was enacted in March 2021. However, we found that the most current spend plans generally do not include time frames for obligating the remaining relief funds, which is useful information for oversight and for informing future funding decisions by Congress.[131]

Guidance from the Office of Management and Budget (OMB) encouraged federal agencies, including HHS, to act quickly to disburse relief funds and noted the importance of spending transparency and regular reporting to help safeguard taxpayer dollars.[132] In April 2020, OMB issued guidance to agencies noting that “time is of the essence, and the Administration is committed to the rapid delivery of relief funds and response activities” and that “agencies should rapidly issue awards and fund programs to meet crucial needs.” Further, OMB noted that agencies must report information on awards to provide the public with information in a clear, accurate, and timely manner.

In its effort to respond quickly to the pandemic and rapidly issue awards and fund programs consistent with OMB guidance, HHS funded some activities to support relief efforts shortly after funds were appropriated; for example, the Health Resources and Services Administration (HRSA) stated that its goal for the PRF was to distribute funds as quickly as possible. HRSA officials told us the first $30 billion was disbursed to providers by mid-April 2020—about a month after enactment of the first appropriation for provider relief. However, the timing for use of the remaining funds is unknown and highlights the importance of information to help ensure accountability for these funds. According to federal internal control standards, management should communicate quality information to external and internal stakeholders so that they can help the agency achieve its objectives and address related risks. In particular, quality information helps support Congress in making future funding decisions.

As of May 31, 2021, about $156 billion of $484 billion (about 32 percent) of COVID-19 relief funds appropriated to HHS were available to be obligated—this amount includes the funds appropriated in ARPA. By not communicating its plans about when it expects to obligate these remaining funds, HHS is missing an opportunity to provide information for oversight and to guide future congressional funding decisions.[133] The figure below shows obligated and unobligated HHS COVID-19 relief funds as of May 31, 2021.

Department of Health and Human Services (HHS) Obligated and Unobligated COVID-19 Relief Funds, as of May 31, 2021

We found that large amounts of funds for certain activities remained unobligated, and it is not clear when these funds will be obligated or expended. For example:
  • As of May 31, 2021, about 25 percent of PRF appropriations remained unobligated ($43.7 billion of $178 billion), and HRSA has not provided time frames for obligating this balance. Of the unobligated funds, according to HHS’s October 2020 spend plan, HRSA reserved a portion of the provider relief funds to respond to needs not identified in the spend plan, and in May 2021 HHS officials told us that the reserved funds were approximately $24 billion. HHS has not specified time frames for obligating these reserved funds or for the other $29.1 billion in unobligated provider relief funds. In addition, ARPA appropriated an additional $8.5 billion for rural providers, and as of May 31, 2021, all these funds remained unobligated.[134]
  • As of May 31, 2021, about 66 percent ($40.2 billion of $61.4 billion) of funds that HHS reported to us for testing activities remained unobligated—most of those allocated funds ($49 billion) were appropriated on March 11, 2021 when ARPA was enacted.[135] We found that the most current spend plans for the first five relief laws do not specify time frames for obligating these funds, and in April 2021 HHS officials told us that they were developing a spend plan for ARPA COVID-19 relief funds, but the plan was not yet completed.[136]
  • In other cases where funds remained unobligated, agency officials—NIH and CDC—did not provide time frames, but said that unobligated relief funds would be spent according to their spend plans and consistent with legislative requirements. HHS officials told us that the spend plans submitted to Congress contain information about future planned activities, however, officials said that they do not provide information on time frames for obligating relief funds.

Spend plans with information on projected timeframes for obligating the remaining relief funds would give Congress information useful to facilitate oversight of these resources to help ensure that relief funds are spent in an expedient and timely manner, as well as help inform future funding decisions.

Methodology

We requested, and HHS provided, data on appropriations, allocations, obligations, and expenditures of COVID-19 relief funds by HHS agency and by selected response activity, as of May 31, 2021. We also reviewed appropriation warrant information provided by the Department of the Treasury as of May 31, 2021. To assess the reliability of the data reported by HHS, we reviewed HHS documentation; Treasury appropriation warrant information; and information from the federal spending database, www.usaspending.gov; as well as HHS’s spending database, taggs.hhs.gov. We determined that the HHS reported data were sufficiently reliable for the purposes of our reporting objective.[137] We also reviewed the six COVID-19 relief laws to assist the response to COVID-19.

We requested, obtained, and analyzed HHS and agency information, including agency spend plans, and related documentation, to determine HHS and agency plans and information including time frames for spending COVID-19 relief funds on response activities.

Agency Comments

We provided HHS and OMB with a draft of this enclosure. HHS partially concurred with the recommendation and stated that the department would aim to incorporate some time frames on planned spending where such information may be available, such as time frames for select grants to states. However, HHS officials stated that they would not be able to provide specific time frames for all relief funds since the evolving environment requires the department to remain flexible in responding to incoming requests for response activities. For example, HHS cited field management activities that can change quickly depending on the incoming response requests.

We agree that estimating projected time frames can be challenging and subject to changes. However, providing projected time frames would not impinge on the Department’s ability to be flexible as these spend plans are required to be updated every 60 days. Offering projected time frames to spending would give Congress useful information to help ensure relief funds are spent in an expedient and timely manner, as well as help inform future funding decisions. HHS also provided technical comments on this enclosure, which we incorporated as appropriate. OMB did not provide any comments on this enclosure.

GAO’s Ongoing Work

As HHS works to distribute funds for COVID-19 relief activities and to eligible providers, it will continue to be important that HHS officials ensure funds are appropriately distributed and used. We plan to conduct additional work examining HHS’s COVID-19 relief funds.

Related GAO Product

Standards for Internal Control in the Federal Government, GAO-14-704G (Washington, D.C.: September 2014)

Contact information: Carolyn L. Yocom, (202) 512-7114, yocomc@gao.gov

Domestic Medical Supply Manufacturing

The U.S. faces challenges to building a sustainable domestic manufacturing base for personal protective equipment, including high relative labor costs and limited access to raw materials that make staying competitive with foreign manufacturers difficult. There are a number of factors for the federal government to consider as it moves forward with efforts to build a sustainable manufacturing base, including the broader goal of supply chain resilience, which may call for targeted reliance on foreign manufacturers.

Entities involved: The Department of Defense, the Department of Health and Human Services, and the Federal Emergency Management Agency

Background

Personal protective equipment (PPE)—safety products designed to help prevent the spread of infectious disease—has been critical to the COVID-19 response. Prior to the pandemic, the U.S. generally depended on foreign suppliers for certain types of PPE, such as nitrile gloves and surgical gowns. U.S. dependence on foreign PPE manufacturers has increased over the past several decades in part because foreign manufacturers can produce their products at a lower cost.[138] Federal agencies have identified this dependence as a national security issue.

The COVID-19 pandemic triggered a significant increase in worldwide demand for PPE and disrupted global supply chains, which limited availability of critical equipment for U.S. health care providers. Actions taken by some governments to halt or restrict exports of PPE further affected the availability of medical supplies in the U.S., including N95 respirators, surgical masks, surgical and isolation gowns, and nitrile and other gloves for use in health care settings.[139] Just-in-time supply chain strategies, in which manufacturers and distributors produce and maintain just enough product to meet immediate fulfillment demands, also exacerbated PPE shortages.

Use of the Defense Production Act (DPA) and other actions to address PPE supply chain shortages. Title III of the DPA authorizes the President to provide certain financial incentives to address industrial base capabilities essential for national defense, including maintaining, restoring, and expanding domestic manufacturing, when certain conditions are met.[140] The Department of Defense (DOD) reported awarding contracts and agreements valued at $574.1 million to expand domestic production of PPE during the COVID-19 pandemic, through May 2021.[141] These investments helped manufacturers produce an additional 58 million N95 respirators and 125,000 gowns per month and are expected to result in an additional 38 million nitrile gloves and 44 million surgical masks per month by the fall of 2021.

However, as shown in the figure below, the U.S. remains highly dependent on foreign manufacturers for certain types of PPE such as nitrile gloves and gowns.

Estimated Domestic Production Capacity and Domestic Demand for Select Personal Protective Equipment Types, March 2020 through May 2021

Overview of Key Issues

Federal planning for medical supply domestic industrial base sustainment is in its initial stages. Officials from the Department of Health and Human Services’ (HHS) Office of the Assistant Secretary for Preparedness and Response (ASPR), the Department of Homeland Security’s Federal Emergency Management Agency (FEMA), and DOD acknowledged that federal actions are needed to build a sustainable domestic PPE industrial base to respond to future public health emergencies, as well as to enhance the resilience of medical product supply chains more broadly.

Executive Order 14001 called for a national pandemic supply chain resilience strategy, which is due mid-July 2021.[142] ASPR officials told us that the strategy is under development, and they expect to issue it on time. Officials noted that the strategy will include a high-level discussion of the program and policies that may be needed for industrial base sustainment, as well as challenges the government faces. Once the strategy is released, ASPR and its federal partners will develop an implementation plan that includes more specific actions and timelines, as well as roles and responsibilities, according to officials, who did not provide a time frame for development or release of this implementation plan.

The American Rescue Plan Act of 2021 appropriated $10 billion to support the use of the DPA for medical supplies, which agency officials anticipate will result in additional industrial base expansion projects.[143] According to officials, ASPR and the Supply Chain Advisory Group developed and submitted a spend plan for this funding to the White House in April 2021, which is pending approval.[144] This draft spend plan identified $5 billion in medical supply projects for fiscal year 2021, including approximately $2.4 billion for PPE investments, according to an official. ASPR has not yet identified plans for the remaining $5 billion.

Challenges to sustainable domestic PPE manufacturing. The U.S. faces challenges to building a sustainable, competitive domestic PPE manufacturing base primarily due to labor costs and limited access to raw materials.

Higher U.S. labor costs result in higher product costs. Domestically produced PPE typically costs more, in part as a result of higher U.S. labor costs, making it less competitive on the global market, according to the U.S. International Trade Commission (USITC) and many of the stakeholders we interviewed.[145]

Certain PPE types, such as gowns and nitrile gloves, may be particularly challenging to manufacture in the United States because of the amount of labor required to produce them and the cost of labor. For example, according to USITC, surgical gowns, which may require workers to piece gowns together, cost $17 to $20 each for U.S.-made gowns, as compared to $4 to $7 per gown for those made in China.[146] The costs of U.S.-made nitrile gloves may also be higher because of the labor required to manufacture this type of PPE. According to USITC, each glove production line requires 30-40 workers on average, including workers who remove each glove manually from hand-shaped molds. Production also requires chemists, machinists, and quality assurance personnel.

Limited access to raw materials makes scaling production challenging and costly. Each type of PPE requires raw materials that may be difficult to obtain domestically. For example, nitrile rubber, a raw material used to make nitrile gloves, comes predominantly from Malaysia, and domestic production is limited.[147] A representative of one U.S. nitrile glove manufacturer that gets its nitrile rubber from overseas suppliers said the cost of imported nitrile rubber accounts for more than 50 percent of the production costs of the gloves. In addition, this manufacturer cited lengthy delivery delays of nitrile rubber from suppliers in Malaysia as significantly affecting the ability of the federal government to expand domestic manufacturing of gloves in response to ongoing shortages during the pandemic.

In addition, increased domestic manufacturing of PPE may affect access to raw materials also used to manufacture nonmedical products and could result in shortages of raw materials used for both, further increasing product costs. For example, some of the nonwoven fabrics needed to make N95 respirators, masks, and gowns are also used to make diapers and sanitizing wipes and in other industries such as automotive and construction.[148] Significant increases in the demand for N95 respirators and masks at the beginning of COVID-19 also contributed to short supply of these nonwoven fabrics, which contributed to the increased cost of N95 respirators.

Many stakeholders we interviewed, including manufacturers, distributors, and trade associations representing end users, cited additional challenges to building a sustainable domestic PPE manufacturing base. See the below figure for the challenges cited by these stakeholders, as well as USITC, for the four types of PPE included in our review.

Summary of Information from the U.S. International Trade Commission (USITC) and Other Stakeholders on Key Challenges Affecting Domestic Production for Certain Types of Personal Protective Equipment (PPE)

Note: Stakeholders included a nongeneralizable sample of 29 industry stakeholders, including PPE manufacturers; distributors and trade associations representing other purchasers, such as state governments, hospitals, and group purchasing organizations; and researchers.

Stakeholders noted the need for federal actions to help increase long-term demand for domestically made PPE. Without a clear signal of long-term demand for PPE to help ensure a return on investment, some manufacturers—including both those with existing federal domestic industrial base expansion contracts and those who pivoted to making PPE during COVID-19—told us that they were unsure if they would continue to produce PPE after the pandemic because future business longevity seemed too uncertain.

Stakeholders and federal officials provided their perspectives on actions that could help increase federal and nonfederal demand and sustain a long-term domestic base. The options presented below are being explored by ASPR, according to officials, as well as research institutes, such as the National Academies for Science, Education, and Medicine and others. Some of these actions would require regulatory action or legislation. We present the range of stakeholder perspectives on all options, even those that may be deemed less feasible or useful by some, as they may be helpful to HHS and its federal partners in their continued long-term planning.

Federal funding for capital investments and long-term purchases. Funding for capital investments, such as through manufacturing expansion projects like those executed during the pandemic, could help domestic manufacturers achieve economies of scale and be more price competitive, according to some stakeholders we spoke with including manufacturers, distributors, and trade associations. Such investments would allow manufacturers to purchase equipment to expand production capacity or automate manufacturing processes to reduce manual labor costs.[149]

Similarly, long-term federal funding, which could be used for contracts that commit the federal government to purchasing specified volumes of PPE over a number of years, would help create a sustainable base of demand that could justify manufacturers’ capital investments in machinery, technology, and other expansion or facility needs, according to many manufacturers we spoke with, as well as some distributors and trade associations.[150] Without federal purchasing contracts, some manufacturers who received federal contracts or agreements for PPE expansion for the COVID-19 response expressed concern about having idle manufacturing capacity after the pandemic subsides.

Transparent stockpile planning to include domestically manufactured PPE. Some stakeholders, including manufacturers, distributors, trade associations, and researchers, commented that having a clear and transparent understanding of future federal plans for stockpiling would help signal longer-term demand for PPE and help manufacturers with business planning.[151] We have reported on federal actions related to the Strategic National Stockpile during COVID-19 on a regular basis, beginning in June 2020.[152] (See the Strategic National Stockpile enclosure in this report for more information.)

Expanded legal requirements to prioritize federal purchasing of domestically manufactured PPE. Manufacturers, distributors, and trade associations we spoke with had mixed opinions on the effect of expanding federal purchasing requirements for domestically produced goods.

Specifically, one manufacturer suggested that the Berry Amendment, which governs DOD clothing purchases and, according to textile manufacturing stakeholders, is a significant driver of their domestic textile and apparel businesses, could be expanded to include a broader range of PPE.[153] Similarly, one distributor suggested that the amendment could be extended to agencies beyond DOD. However, some other stakeholders noted that even with such expansions, the Berry Amendment may not be feasible for certain PPE types, such as gloves, if raw materials for those products cannot be sourced domestically.

One manufacturer and one trade association representing manufacturers stated that expanding federal purchasing requirements under the Berry Amendment would be unlikely to provide significant or primary support to sustain a domestic manufacturing base because of the small federal share of the domestic medical supply market. One manufacturer and one company that manufactures and distributes PPE noted similar limitations to expanding purchasing requirements under the Buy American Act, which requires federal procurement of domestic products, subject to certain exceptions and waivers.[154]

Use of Medicare to incentivize nonfederal purchasing of domestically manufactured PPE. Some stakeholders, including manufacturers and distributors, also discussed restructuring Medicare in several ways to incentivize health care providers to purchase domestic PPE and help increase the demand signal for such PPE. These suggestions included:
  1. restructuring Medicare conditions of participation to require commitments to domestic medical supply purchasing in order to participate in the program,
  2. restructuring Medicare reimbursement policies to reimburse providers at higher rates for using domestically made PPE, and
  3. requiring hospitals to incorporate plans for purchasing domestically made PPE into their hospital supply inventories.

Officials from the Centers for Medicare & Medicaid Services told us that restructuring Medicare as suggested would be challenging for several reasons. According to officials, the agency lacks the statutory authority to implement such purchasing requirements. Further, officials stated that reimbursement for PPE is bundled into overall service charges.

Officials and other stakeholders, including some manufacturers, distributors, and a trade association representing end users, noted that it would be more feasible to incentivize domestic purchasing by requiring a certain percentage of providers’ PPE to be purchased from domestic manufacturers, or to provide a bonus payment for such purchases on a regular basis. However, they noted that it may be difficult for hospitals and other health care providers, as well as their suppliers, to identify which brands of PPE may be U.S.-made. Officials also agreed with a distributor who told us that any such requirements for purchasing generally higher-priced, domestically made PPE would place a bigger financial burden on smaller providers.

Tax credits for domestic purchases. Some PPE distributors and a manufacturer suggested that tax credits for purchases of domestically produced PPE could help generate demand, but opinions on the utility of such tax credits were mixed. Some stakeholders cited aforementioned difficulties in identifying which PPE products are U.S.-made, which could make such credits hard to obtain. In addition, some distributors noted that tax incentives would not incentivize nonprofit hospitals to purchase domestically manufactured PPE.

Domestic manufacturing is one part of broader supply chain considerations. Building a sustainable domestic PPE manufacturing base is just one part of broader supply chain considerations, according to stakeholders and federal officials we interviewed. Some manufacturers, one distributor, and several trade associations representing manufacturers and end users said that sustaining long-term demand for domestically produced PPE will require a significant shift in the way that U.S. manufacturers and purchasers, including the health care sector, conceive of effective models of just-in-time inventory and other cost control mechanisms. Other stakeholders, including two trade associations, a manufacturer, and a research group noted that investing in or sustaining domestic manufacturing will not necessarily ensure that domestic PPE supply chains alone are sufficient to respond to future public health emergencies.

Stakeholders and federal officials identified several areas for consideration as the federal government moves towards creating a more resilient supply chain for PPE to effectively respond to future public health emergencies.

Supply chain redundancies. Some stakeholders, including trade associations, an advocacy group, and a manufacturer, noted that it will be important to build redundancies into the domestic PPE supply chain, such as having multiple manufacturers of one kind of PPE and multiple manufacturing facilities located in geographically diverse U.S. locations. Several of these stakeholders cited the disruptions to medical supply production caused by the 2017 hurricanes in Puerto Rico and the 2021 winter storms in Texas as examples of the importance of redundant and resilient domestic supply chains that would help the U.S. to respond to future public health emergencies.[155]

Targeted reliance on foreign manufacturers. Some stakeholders, including a manufacturer and two manufacturing trade associations, two distributors, and a research group, as well as federal officials, noted that targeted reliance on, and engagement with, a variety of foreign manufacturers will remain appropriate given existing trade agreements, the U.S.’s participation in complex global supply chains, and challenges in accessing certain raw materials.

Supply chain visibility and mapping. Many stakeholders representing manufacturers, distributors, trade associations, and research groups we spoke with stated that developing a complete picture of the end-to-end supply chain for each type of PPE could help the federal government identify vulnerabilities and risks, determine strategies or actions to mitigate them, and plan for and respond to future disruptions. Supply chain mapping—documenting companies, suppliers, and individuals across the PPE supply chain to create a global map of the supply network—could help the federal government have a more complete picture to respond to disruptions and emergencies, according to stakeholders. However, two stakeholders, including a supply chain research group, acknowledged that such mapping would be complex and laborious.

Industry outreach and engagement. Many stakeholders representing manufacturers and distributors and trade associations representing purchasers and end users noted that meaningful federal engagement with industry will enhance domestic manufacturing and supply chain resilience. In addition, such engagement could help ensure these perspectives are considered in national strategies to support and sustain the domestic PPE industry. According to some of these stakeholders, such engagement with the private sector could help:
  • ramp up private investment in domestic PPE manufacturing;
  • connect manufacturers with purchasers;
  • aid in the collection of data needed for supply chain mapping; and
  • help the federal government understand the unique challenges of new and small PPE manufacturers, as well as those of veteran and minority-owned businesses, including challenges related to navigating the federal medical device approval or federal contracting processes.

In January 2021, we reported that HHS had not developed a process for engaging with key nonfederal stakeholders and the Congress for development of a supply chain strategy for pandemic preparedness, including the role of the Strategic National Stockpile. We recommended that HHS do so, and the department generally agreed with our recommendation. However, as of May 2021, ASPR had not proactively engaged any private or public partners in strategic discussions to implement this recommendation, although officials told us that such discussions are important and they are considering how to better engage their public and private partners.

We continue to underscore that engaging with key nonfederal stakeholders—in meaningful, proactive ways to obtain their business and industry expertise—as well as engaging with Congress, is critical for developing strategies to build a sustainable domestic medical supply manufacturing base. Such engagement includes for the development of the pandemic supply chain resilience strategy required by Executive Order 14001 and future stockpiling plans.

Methodology

To conduct our work, we reviewed federal strategies and reports, including ASPR’s 2020 draft strategy for modernizing the Strategic National Stockpile and USITC’s December 2020 report on the U.S. market for COVID-related goods.[156] We reviewed written information submitted by PPE industry stakeholders to USITC and the Department of Commerce in the fall of 2020 and early 2021.[157]

We also selected a judgmental sample of industry stakeholders from USITC and Department of Commerce submissions, as well as other sources, to interview for their perspectives on challenges to building a sustainable domestic manufacturing base for PPE and federal efforts that could help support and sustain such a base. Selected stakeholders included PPE manufacturers; distributors and trade associations that represent other purchasers and end users, such as state governments, hospitals, and group purchasing organizations; and researchers and policy advocates.[158]

We interviewed 29 industry stakeholders, including manufacturers that produce textiles for or finished products of each type of PPE (N95 respirators, surgical and procedural masks, reusable and disposable surgical and isolation gowns, and nitrile gloves); distributors; trade associations representing manufacturers, distributors, and other purchasers and end users including state and local government officials; researchers; and standards setting organizations. Our findings from interviews with these stakeholders are not generalizable to the entire PPE industry from manufacturers to end users.

We obtained information on federal domestic PPE industrial base planning efforts, including efforts to address current supply and demand needs from the Supply Chain Advisory Group and relevant federal agencies. We also interviewed officials from ASPR, the Centers for Medicare & Medicaid Services, DOD, FEMA, and USITC about their perspectives on challenges and potential actions, the feasibility of implementing such actions, and any longer-term sustainment planning the relevant agencies have conducted.

Agency Comments

We provided a draft of this enclosure to the Department of Homeland Security, DOD, HHS, Office of Management and Budget, and USITC. We incorporated technical comments from DOD, HHS, and USITC as appropriate. The Department of Homeland Security and Office of Management and Budget did not submit comments.

GAO’s Ongoing Work

We plan to continue to monitor federal funding and actions for domestic medical supply industrial base expansion and sustainment. This work will include evaluating the pandemic supply chain resilience strategy and related implementation plans when they become available and continuing to assess federal efforts to engage key nonfederal stakeholders and Congress to identify ways to overcome many of the challenges we identified in this enclosure.

GAO’s Prior Recommendations

See table below for our past related recommendations on domestic supply manufacturing from prior bimonthly CARES Act reports.
Prior GAO Recommendations Related to Domestic Medical Supply Manufacturing during COVID-19

Recommendation

Status

The Secretary of Health and Human Services in coordination with the Administrator of the Federal Emergency Management Agency—who head agencies leading the COVID-19 response through the Unified Coordination Group—should immediately document roles and responsibilities for supply chain management functions transitioning to the Department of Health and Human Services (HHS), including continued support from other federal partners, to ensure sufficient resources exist to sustain and make the necessary progress in stabilizing the supply chain, and address emergent supply issues for the duration of the COVID-19 pandemic (September 2020).

Open. HHS disagreed with our recommendation, noting, among other things, the work that the department had done to manage the medical supply chain and increase supply availability. In May 2021, the Office of the Assistant Secretary for Preparedness and Response (ASPR) noted that since March 2020, supply chain responsibility, coordination, and execution have been incorporated and integrated into ASPR. However, ASPR has not provided us with documentation of roles and responsibilities for these functions. See appendix IV for more information.

The Secretary of Health and Human Services in coordination with the Administrator of the Federal Emergency Management Agency—who head agencies leading the COVID-19 response through the Unified Coordination Group—should further develop and communicate to stakeholders plans outlining specific actions the federal government will take to help mitigate remaining medical supply gaps necessary to respond to the remainder of the pandemic, including through the use of Defense Production Act authorities. (September 2020 report).

Open. HHS disagreed with our recommendation, noting, among other things, the work that the department had done to manage the medical supply chain and increase supply availability. However, HHS has begun to take steps that help address this recommendation. For example, in May 2021, HHS provided several examples of ASPR’s efforts to restock the Strategic National Stockpile and mitigate potential supply shortages. In addition, ASPR cited its ongoing work to develop the pandemic resilience supply chain strategy called for under Executive Order 14001 and its integration in the interagency supply chain working group run by the White House, both of which are good steps toward developing plans to mitigate supply gaps. See appendix IV for more information.

The Secretary of Health and Human Services—who heads one of the agencies leading the COVID-19 response through the Unified Coordination Group—consistent with their roles and responsibilities, should work with relevant federal, state, territorial, and tribal stakeholders to devise interim solutions, such as systems and guidance and dissemination of best practices, to help states enhance their ability to track the status of supply requests and plan for supply needs for the remainder of the COVID-19 pandemic response (September 2020 report).

Open. Both HHS and the Department of Homeland Security (DHS) disagreed with our recommendation, noting, among other things, the work that the departments had done to manage the medical supply chain and increase supply availability, such as restocking the Strategic National Stockpile (as noted above). In March 2021, DHS reported that the medical supply situation has improved in both the commercial market and at the state level. The agency stated that most states have 30 to 60 days of personal protective equipment to account for spikes in demand or localized critical shortages.

Although both HHS and DHS have reported separate actions taken as part of supply management efforts within their separate purviews, neither has articulated how they have worked with each other and other relevant federal, state, territorial, and tribal stakeholders to devise interim solutions to help states better track, manage, and plan for supply needs for the remainder of the COVID-19 pandemic. See appendix IV for more information.

The Administrator of the Federal Emergency Management Agency—who heads one of the agencies leading the COVID-19 response through the Unified Coordination Group—consistent with their roles and responsibilities, should work with relevant federal, state, territorial, and tribal stakeholders to devise interim solutions, such as systems and guidance and dissemination of best practices, to help states enhance their ability to track the status of supply requests and plan for supply needs for the remainder of the COVID-19 pandemic response (September 2020 report).

The Assistant Secretary for Preparedness and Response should establish a process for regularly engaging with Congress and nonfederal stakeholders, including state, local, tribal, and territorial governments and private industry, as the Department of Health and Human Services refines and implements a supply chain strategy for pandemic preparedness, to include the role of the Strategic National Stockpile (January 2021 report).

Open. HHS generally agreed with our recommendation, while noting that the term "engage" is vague and unclear, and that they regularly engage with Congress and nonfederal stakeholders. HHS added that improving the pandemic response capabilities of state, local, tribal, and territorial governments is a priority. However, as of May 2021, HHS has not taken steps to engage with these stakeholders. See appendix IV for more information.
Source: GAO. | GAO-21-551

Related GAO Product

Defense Production Act: Opportunities Exist to Increase Transparency and Identify Future Actions to Mitigate Supply Chain Issues. GAO-21-108. Washington, D.C.: November 19, 2020.

Contact information: Mary Denigan-Macauley, 202-512-7114, DeniganMacauleyM@gao.gov; and William Russell, 202-512-4841, RussellW@gao.gov

DOD Vaccination Efforts for Civilians and Servicemembers

The Department of Defense has provided active-duty servicemembers and National Guard personnel to support the federal government’s COVID-19 response and vaccination efforts and simultaneously vaccinated military servicemembers (active and reserve), dependents, retirees, and civilian and contractor personnel.

Entities involved: Department of Defense, including the Defense Health Agency; the Department of Health and Human Services; and the Federal Emergency Management Agency, within the Department of Homeland Security

Background

The Department of Defense’s (DOD) primary mission is to defend the nation, but the department has also played a prominent role in supporting civil authorities. In that role, DOD has responded rapidly when called on during disasters and during declared natural or manmade emergencies. DOD, which has provided such support through its Defense Support of Civil Authorities mission, is authorized to provide this support when requested by another federal agency, with approval from the Secretary of Defense, or when directed by the President.[159] DOD provides support to civil authorities through military forces (Active-Duty, Reserve, National Guard); DOD civilian and contract personnel; and DOD component assets. To manage both its support for the federal government’s and its own internal COVID-19 response, the department established the DOD COVID-19 Task Force on February 28, 2020.

DOD’s Defense Health Agency (DHA) manages and oversees DOD’s immunization programs, leading efforts to distribute COVID-19 vaccines to eligible DOD personnel.[160] In March 2021, we reported that in mid-December 2020, DHA had begun a phased approach for vaccinating eligible personnel. Using that approach, DOD prioritized vaccination of individuals providing direct medical care, personnel maintaining essential national security and installation functions, deploying forces, and beneficiaries at highest risk for developing severe illness from COVID-19.

Overview of Key Issues

DOD has supported mass vaccination sites and other COVID-19-related civilian missions.

DOD personnel support over time. More than a year after the President declared COVID-19 a national emergency, DOD has consistently provided personnel to assist in the whole-of-government response. The figure below shows the number of DOD active-duty servicemembers and National Guard personnel supporting the response efforts from March 2020 through May 2021.

DOD Personnel Supporting the Federal Government’s COVID-19 Response, Mar. 2020–May 2021

Note: The totals shown are as of the end of each month. The totals refer to active-duty servicemembers—which includes reservists—and National Guard personnel providing support for the federal government’s COVID-19 response at mass vaccination sites and for other COVID-19-related missions. The total number of active-duty servicemembers who provided support in March 2020 is too small to be depicted.

Support at mass vaccination sites. In February 2021, DOD officials stated that the Federal Emergency Management Agency (FEMA) had requested the department to provide personnel to staff mass vaccination sites (i.e., federally supported community vaccination centers).[161] In response, active-duty servicemembers, including medical personnel, from the four military services began supporting community vaccination center operations in mid-February 2021.[162] These servicemembers have assisted with various activities such as registering and screening patients, distributing supplies, and administering COVID-19 vaccines.

From February 14, 2021, through June 22, 2021, more than 5,100 DOD active-duty servicemembers provided vaccine-related support, including administering more than 5 million vaccine doses at centers in 25 states and three territories. During this time, DOD provided active-duty servicemembers to support community vaccination centers on the basis of FEMA’s staffing needs at these centers. The figure below shows information about active-duty servicemembers’ aggregate COVID-19 vaccine support, including administering more than 5 million doses at federally supported community vaccination centers.

Locations Where Active-Duty Servicemembers Provided COVID-19 Vaccine Support at Federally Supported Community Vaccination Centers, Feb. 14, 2021–June 22, 2021

Notes: The shaded states and territories represent the locations where DOD provided active-duty servicemember personnel. From February 14 to June 22, 2021, DOD provided servicemembers on the basis of community vaccination centers’ needs.

National Guard personnel have also been supporting efforts to help vaccinate the civilian population in 47 states and three territories. Approximately 14,000 National Guard personnel have assisted with vaccine activities, including distributing vaccines, planning and coordinating at vaccination centers, providing transportation support, and administering the vaccine across static and mobile vaccination sites. As of June 11, 2021, National Guard personnel had administered about 12 million vaccine doses.

Support for other COVID-19-related missions. At the request of FEMA and the Department of Health and Human Services, DOD provided support for other COVID-19-related missions. From the pandemic’s initial emergency declaration in March 2020 until April 1, 2021, DOD provided more than 4,500 active-duty servicemembers, such as critical care nurses, to support civilian health care providers. These active-duty servicemembers supported 71 hospitals across 51 cities in 14 states and in the Navajo Nation.

Additionally, National Guard personnel continue to broadly support the COVID-19 pandemic response throughout the states and territories. As of June 15, 2021, approximately 28,000 National Guard personnel were providing support in all 50 states, three territories, and the District of Columbia. They continued carrying out a range of broad missions, such as:
  • testing and screening for COVID-19 cases;
  • cleaning sites and equipment;
  • distributing personal protective equipment;
  • storing and distributing supplies and equipment in warehouses;
  • collecting COVID-19 specimens;
  • supporting hospitals, long-term care facilities, food banks, and call centers;
  • recording data on, and performing contact tracing and mapping of, infected individuals; and
  • training civilian medical and other personnel.

As of June 9, 2021, DOD had at least partially vaccinated about 53 percent of its 2.1 million military servicemembers and was encouraging vaccinations through outreach and education.

DOD’s progress in vaccinating military servicemembers and others. As of June 9, 2021, DOD had at least partially vaccinated about 53 percent—1,124,624 servicemembers, including about 39 percent or 825,954 fully vaccinated servicemembers—of its 2.1 million active-duty, reserve, and National Guard servicemembers.[163] When considering only active-duty servicemembers, DOD had fully vaccinated about 51 percent (686,915 servicemembers). DOD’s goal was to fully vaccinate 60 percent of its active-duty servicemembers and provide at least one vaccine dose to approximately 70 percent by July 4, 2021.

Additionally, DOD was offering a COVID-19 vaccine to a larger population of 6.7 million individuals, which includes military servicemembers (active-duty, reserve, and National Guard) and their dependents; other uniformed personnel (members of the Coast Guard, U.S. Public Health Service, and National Oceanic and Atmospheric Administration); other beneficiaries (e.g., retired military servicemembers and their dependents); civilian employees; and selected contractor personnel. [164] DOD or a non-DOD vaccine provider had at least partially vaccinated about 45 percent (3,035,474 individuals) of this population as of June 9, 2021. However, the number of vaccinated individuals in this larger population may be higher, because, according to DHA officials, DOD has limited awareness of vaccinations administered to its target vaccine-eligible population at non-DOD sites, such as local retail pharmacies or through local public health vaccination sites.

DOD is tracking data on those who received the COVID-19 vaccine. The DHA Director monitors daily the department’s implementation of its vaccine plan, including vaccine administration, broken out by dose (initial and second) and category of eligibility (e.g., service component, contractors, civilian employees, and other beneficiaries).[165] The figure below shows COVID-19 vaccination rates for military servicemembers and others as of June 9, 2021.

COVID-19 Vaccinations in the Department of Defense (DOD), as of June 9, 2021

Notes: Percentages shown may not sum to 100 because of rounding. The 6.7 million eligible individuals targeted are those DHA assessed as eligible to receive a COVID-19 vaccine through DOD and who live within 40 miles of a DOD vaccination site. The target population includes eligible military servicemembers (those on active duty and members of the reserve component, including the National Guard), other uniformed personnel (those members of the Coast Guard, U.S. Public Health Service, and National Oceanic and Atmospheric Administration), military servicemembers who have retired and their dependent family members, dependent family members of active-duty servicemembers and of certain reserve component members, civilians, and contractors. This data shown refer to individuals vaccinated at DOD and non-DOD vaccination sites. DOD has vaccinated a majority of the individuals.

The percentage of fully vaccinated individuals aged 18 years and older in the U.S. population as of June 10, 2021, was larger than the percentage of fully vaccinated DOD military servicemembers as of June 9, 2021 (about 53 percent and 39 percent, respectively). However, when comparing the percentages of fully vaccinated individuals in the U.S. population and only the fully vaccinated active-duty servicemembers, the rates were more similar (53 percent and 51 percent, respectively).[166] Multiple reasons may account for the vaccination rate differences. For example, because military servicemembers tend to be younger and healthier, the majority of servicemembers did not become eligible for vaccination until April 19, 2021.

DOD officials use the term “vaccine acceptance” to categorize the proportion of individuals who have received a vaccine; however, the remainder of those eligible for the vaccine may not have declined it, as the department does not track or report on the percentage of individuals who declined the COVID-19 vaccine. According to DHA officials, the department does not currently have a reliable method to track and report vaccine declinations or hesitancy. Officials stated that this is due in part to the fact that DOD’s target population is encouraged but not required to receive a COVID-19 vaccine.[167] Individuals who show up for an appointment at a DOD vaccination site and decide not to receive the vaccine after reviewing educational material are asked to record their decision on DHA Form 207–COVID-19 Vaccine Screening and Immunization Document. However, DHA officials noted that this information does not reflect an accurate picture of declinations, because submitting the form is voluntary and the form reflects the individual’s decision at single point in time—that is, the individual may choose to receive the vaccine at a later date.

Outreach initiatives and education. To continue encouraging all of its eligible population to be voluntarily vaccinated, DOD is conducting various efforts designed to communicate the safety and efficacy of the authorized vaccines. Specifically, DOD’s outreach efforts include:
  • senior DOD leaders’ sharing their own vaccine experiences through social media and video recordings,
  • press events,
  • town halls,
  • internal news articles on TRICARE.mil and Health.mil webpages,[168]
  • direct email marketing,
  • scheduling vaccination events for entire military units (e.g., a Navy ship’s crew) and making medical personal available during those events to answer questions or address concerns about the vaccines,
  • radio and television stories on military broadcast services, and
  • a "Get the Vax" social media campaign (see figure).

Example of Department of Defense Social Media Graphic

On May 20, 2021, the Deputy Secretary of Defense and Vice Chairman of the Joint Chiefs of Staff published a memo reaffirming support for multiple initiatives to increase vaccination acceptance among all military servicemembers.[169] Further, the memo highlighted multiple techniques that military commanders and leaders at all levels can use to encourage and promote vaccinations. [170] Example of such techniques include:

  • incorporating vaccination opportunities into training events,
  • providing educational opportunities with medical professionals,
  • using routine personnel management tools such as time off for post-vaccination recovery, and
  • engaging with military servicemembers one-on-one to acknowledge concerns and answer questions.

Methodology

To conduct this work, we reviewed DOD guidance and documentation that DOD’s COVID-19 Task Force and DHA provided. The documentation included the most recent DOD COVID-19-related data available, which the task force and DHA maintained and reported to senior DOD leaders. We also interviewed DOD officials knowledgeable about the department’s COVID-19 response to corroborate our understanding of the data and DOD’s personnel support and vaccination efforts. Although we did not independently verify the accuracy of the data, we assessed their reliability by checking for obvious errors or outliers; discussing the ongoing levels of DOD personnel support and vaccination efforts with agency officials; and reviewing relevant documentation, including publicly available DOD media reports and statements. We determined that the data were sufficiently reliable for the purpose of characterizing DOD’s support to civil authorities and its progress in vaccinating the department’s target population.

Agency Comments

We provided a draft of this enclosure to DOD and the Office of Management and Budget for review and comment. DOD provided technical comments on this enclosure, which we incorporated as appropriate. The Office of Management and Budget did not provide comments on this enclosure.

GAO’s Ongoing Work

We plan to continue monitoring DOD’s support of the federal government’s COVID-19 response and progress in vaccinating the department’s eligible military servicemembers, dependents, retirees, and civilian and contractor personnel.

Related GAO Products

COVID-19: DOD Has Focused on Strategy and Oversight to Protect Military Servicemember Health. GAO-21-321. Washington, D.C.: June 3, 2021

Depot Maintenance: DOD Should Improve Pandemic Plans and Publish Working Capital Fund Policy. GAO-21-103. Washington, D.C.: Apr. 06, 2021

Contact information: Diana Maurer, (202) 512-9627, maurerd@gao.gov, and Brenda S. Farrell, (202) 512-3604, farrellb@gao.gov

Strategic National Stockpile Payment Integrity

The Department of Health and Human Services’ Office of the Assistant Secretary for Preparedness and Response procured and shipped critical Strategic National Stockpile supplies directly from vendors to state, local, territorial, and tribal governments and designated project areas during the COVID-19 pandemic. However, it did not have documented policies and procedures, including related control and monitoring activities, to address the payment integrity risks within the direct shipment procurement process.

Entities involved: The Office of the Assistant Secretary for Preparedness and Response within the Department of Health and Human Services.

Recommendation for Executive Action

To strengthen the current procedures, the Assistant Secretary for Preparedness and Response should update policies and procedures, including related control and monitoring activities, for the Strategic National Stockpile to document the direct shipment procurement process and address payment integrity risks. Although the Department of Health and Human Services did not agree with us regarding the need to address payment integrity risks, it stated that it will update its policies and procedures, including related control and monitoring activities to document the direct shipment procurement process.

Background

Payment integrity is the process of ensuring that a payment is proper, including the legality, propriety, validity, and accuracy of all payments. For procurements, one of the key steps in this process is for agencies to confirm that the goods and services have been received and conform to the requirements of the purchase order. In short, it is the primary means to ensure that the government gets what it pays for. Without this control, the government faces risks including paying for:
  • goods and services not received;
  • goods received in the wrong quantity;
  • goods that are damaged; and
  • goods that do not meet quality or other specifications.

According to the President’s budget proposal for fiscal year 2021, the Strategic National Stockpile (SNS) is the largest federally owned repository of pharmaceuticals, critical medical supplies, federal medical stations, and medical equipment available for rapid delivery. It is overseen by the Department of Health and Human Services’ (HHS) Office of the Assistant Secretary for Preparedness and Response (ASPR).

Through its standard procurement process, ASPR procures supplies to maintain SNS inventory in preparation for bioterrorist attacks and other public health emergencies. The SNS can be used as a short-term stopgap buffer when the supply of materials may not be immediately available in affected areas during a public health emergency.

Because the nationwide need for critical supplies to respond to COVID-19 quickly exceeded the quantity of supplies contained in the SNS, in addition to its standard procurement process, ASPR used two additional procurement processes:
  1. ASPR used a procurement process involving direct shipment from vendors. According to ASPR officials, the office initially established this direct shipment procurement process in response to the 2016 Zika virus outbreak in Puerto Rico. Under this direct shipment process, supplies purchased by ASPR were not used to replenish the SNS, but rather were primarily distributed from vendors directly to state, local, territorial, and tribal governments and designated project areas.
  2. Beginning in April 2020, ASPR worked with interagency partners, such as the Federal Emergency Management Agency and the Department of Defense, through interagency agreements to increase the availability of supplies to respond to COVID-19. Under these reimbursable agreements, contracting staff at interagency partners procured and distributed vital supplies on ASPR’s behalf.

As of May 31, 2021, HHS reported it obligated about $10.2 billion of the $13.9 billion it planned to use for the SNS. The table below summarizes the amount of ASPR’s SNS obligations from appropriations provided by the six COVID-19 relief laws by procurement process from March 16, 2020 through May 31, 2021.
Department of Health and Human Services’ Strategic National Stockpile Obligations from Appropriations Provided by the Six COVID-19 Relief Laws as of May 31, 2021

Procurement process

Obligations
($ millions)

Percent of obligations

Direct shipment

600

6

Interagency agreement

4,700

46

Standard

4,900

48

Totala

10,200

100
Source: GAO summary of Health and Human Services obligations data. | GAO-21-551

aNumbers may not total due to rounding.

Overview of Key Issues

SNS direct shipment procurement process was not documented in policies and procedures. ASPR did not have documented policies and procedures, including related control and monitoring activities, to address payment integrity risks for its direct shipment procurement process. Guidance from the Office of Management and Budget (OMB) states that agency management is responsible for managing payment integrity risks to reduce improper payments and protect taxpayer funds.[171] Accordingly, agencies are to develop control activities to help management achieve payment integrity objectives by establishing policies and procedures related to transaction authorization and approvals of program activities and implementing transaction reviews where detailed criteria are evaluated before funds are expended.

Additionally, federal internal control standards state that management should design control activities to achieve objectives and respond to risks and implement control activities through policies. Accordingly, as part of this internal control principle, agency management is to clearly document internal control, all transactions, and other significant events in a manner that allows the documentation to be readily available for examination. In addition, if there is a significant process change, management is to review the new process in a timely manner after the change to determine that the control activities are designed and implemented appropriately. Management should also establish and operate monitoring activities to monitor the internal control system and evaluate the results.

According to ASPR officials, the office used its direct shipment procurement process to expedite delivery and effectively manage costs during the pandemic. Although ASPR officials verbally explained this procurement process, the office did not have the process and related control and monitoring activities documented in its policies and procedures, in accordance with federal internal control standards.

ASPR officials stated that under the direct shipment procurement process, the office tracks the transportation and delivery of supplies shipped directly from vendors to recipients by requesting that vendors provide ASPR shipment tracking documentation as part of their contracted deliverables. Further, the delivery confirmation will come from an email or phone call from the recipient or a delivery confirmation from the carrier, such as a tracking report from the carrier’s website. ASPR provided examples of email communication with recipients and vendors to confirm delivery of supplies prior to authorizing payment. However, without properly documented procedures for this process, ASPR lacks assurance that this communication would take place consistently.

Although ASPR officials stated that the office’s procedures for invoice receiving apply to all SNS invoices, including those for direct shipment procurements, the policies and procedures did not include specific steps to address payment integrity risks for its direct shipment procurement process, such as to:
  1. confirm vendors provide such shipment tracking documentation, or
  2. verify intended recipients actually received the correct undamaged supplies prior to issuing payment.

Without a properly documented process, we could not determine if the control and monitoring activities were properly designed to provide reasonable assurance that SNS payments are properly authorized and made to eligible vendors at appropriate amounts.

Until ASPR updates its policies and procedures, including related control and monitoring activities, to document its direct shipment procurement process, there is an increased risk that taxpayer funds will not be appropriately protected. For example, without written policies and procedures documenting how ASPR tracks the direct shipment and receipt of supplies prior to issuing payments, there is an increased risk that ASPR may make improper payments to vendors for incorrect supplies or quantities, or supplies the intended recipients did not receive.

In addition, without adequate documentation, it is difficult for management to assess the adequacy of controls over the direct shipment procurement process and ASPR lacks assurance that its staff fully understand the process and properly and consistently perform their duties.

Certain interagency transactions lacked sufficient documentation. In November 2020, HHS’s independent financial statement auditor reported a deficiency, in part due to insufficient documentation to substantiate what was purchased and when it was received for certain SNS COVID-19-related transactions with interagency partners.[172] The auditor stated that HHS is currently reviewing its processes to identify lessons learned so that new processes are developed to address potential future crisis situations similar to the current pandemic.

According to ASPR officials, the office concurred with the interagency finding and is continuing to work with its interagency partners on accountability and documentation for COVID-19 relief funds expended through interagency agreements.[173] Further, according to officials, starting in March 2021, ASPR began meeting weekly with the HHS Corrective Action Planning team to discuss remediation strategies and develop Corrective Action Plans for the auditor’s SNS findings.

SNS designed control activities for its standard procurement process. For supplies purchased through its standard procurement process during the COVID-19 response, ASPR used its existing SNS policies and procedures for purchasing, receiving, distributing, and payment processing activities. ASPR’s policies and procedures for this standard SNS procurement process were designed consistent with federal internal control standards for the key eligibility, processing, and existence control activities we reviewed.

Methodology

We interviewed officials from ASPR, HHS’s Program Support Center, and the HHS Office of Inspector General and reviewed policies and procedures related to the SNS payment process. We also considered HHS’s fiscal year 2020 agency financial report and the accompanying independent auditor’s reports.

Based on HHS provided documentation, we assessed the design of HHS’s policies and procedures related to the SNS payment process against relevant statutory requirements, OMB guidance, and federal internal control standards to determine the extent to which HHS’s key control and monitoring activities are properly designed to achieve the SNS program’s payment integrity objectives and respond to such risks. For any key control and monitoring activities that were not properly designed and documented, we inquired with HHS officials to determine the reasons.

Agency Comments

We provided HHS with a draft of this enclosure. HHS provided written comments, reproduced in Appendix VI and technical comments on this enclosure, which we incorporated as appropriate.

ASPR did not concur with our recommendation. ASPR stated that it did not find that we found or provided evidence to support the statement that there were payment integrity risks for the direct shipment process and noted that ASPR has a three-way matching procedure that is followed for all invoices. However, ASPR acknowledged that it will update its policies and procedures, including related control and monitoring activities, and work to specifically document the direct shipment procurement process.

Although ASPR officials stated that the office’s procedures for invoice receiving apply to all SNS invoices, the policies and procedures did not include specific steps to address payment integrity risks for its direct shipment procurement process, such as procedures to (1) confirm vendors provide shipment tracking documentation, or (2) verify intended recipients actually received the correct undamaged supplies prior to issuing payment. Therefore, we continue to believe the recommendation is needed.

GAO’s Ongoing Work

We will monitor the status of our payment integrity recommendation for the Department of Health and Human Services and continue our oversight of government-wide payment integrity efforts.

Related GAO Product

Standards for Internal Control in the Federal Government. GAO-14-704G. Washington, D.C.: September 10, 2014.

Contact information: Beryl Davis, (202) 512-2623, DavisBH@gao.gov

Strategic National Stockpile

In the years prior to the COVID-19 pandemic, the Office of the Assistant Secretary for Preparedness and Response began restructuring an interagency body that recommends procurement of vaccines, supplies, and other materials for the Strategic National Stockpile to respond to public health threats. Such restructuring has led to concerns about the effectiveness of interagency collaboration, transparency, and a lapse in statutorily required reviews used to inform the contents of the stockpile.

Entities involved: Department of Agriculture; Department of Defense; Department of Health and Human Services, including the Office of the Assistant Secretary for Preparedness and Response, the Centers for Disease Control and Prevention, the Food and Drug Administration, and the National Institutes of Health; Department of Homeland Security; Department of Veterans Affairs; and the Office of the Director of National Intelligence.

Recommendations for Executive Action

To improve the nation’s preparedness for a wide range of threats, including pandemics, the Assistant Secretary for Preparedness and Response should develop and document plans for restructuring the Public Health Emergency Medical Countermeasures Enterprise. These plans should describe how the Assistant Secretary will ensure a transparent and deliberative process that engages interagency partners in the full range of responsibilities for the Public Health Emergency Medical Countermeasures Enterprise outlined in the Pandemic and All-Hazards Preparedness and Advancing Innovation Act of 2019, including those related to the Strategic National Stockpile annual threat-based reviews. These plans should also incorporate GAO’s leading practices to foster more effective collaboration, while ensuring that sensitive information is appropriately protected.

To improve organizational accountability, the Assistant Secretary for Preparedness and Response should implement records management practices that include developing, maintaining, and securing documentation related to Public Health Emergency Medical Countermeasures Enterprise activities and deliberations, including those related to the Strategic National Stockpile. Documentation should include information such as the factors considered, the rationale for the action or decision, and the final outcomes of the Public Health Emergency Medical Countermeasures Enterprise processes.

The Department of Health and Human Services concurred with the recommendations, noting that its Office of the Assistant Secretary for Preparedness and Response is initiating a review of the Public Health Emergency Medical Countermeasures Enterprise, which will be conducted by the National Academies of Sciences, Engineering, and Medicine. According to the Department of Health and Human Services, the review will examine multiple aspects of the Public Health Emergency Medical Countermeasures Enterprise processes, including interagency coordination, policies and practices, and transparency, with a final report expected in fall 2021.

Background

The COVID-19 pandemic has highlighted the importance of a readily available cache of medical products and supplies to treat patients and protect first responders during public health emergencies. The Strategic National Stockpile (SNS) contains a multibillion dollar inventory of medical countermeasures—drugs, vaccines, supplies, and other materials—to respond to a broad range of public health emergencies resulting from exposure to chemical, biological, radiological, and nuclear agents, as well as emerging infectious diseases, including pandemic influenza.[174]

Overseen by the Office of the Assistant Secretary for Preparedness and Response (ASPR) within the Department of Health and Human Services (HHS), the SNS mission has expanded since its inception in 1999 in response to statutory changes and a growing variety of threats.[175] During public health emergencies like COVID-19, the contents of the stockpile may be deployed to state and local entities when their supplies are depleted or when the necessary medical countermeasures are not commercially available, such as the antitoxin used to treat botulism.

The inventory of the SNS is informed by an interagency group of experts called the Public Health Emergency Medical Countermeasures Enterprise (PHEMCE), which is led by ASPR and comprised of multiple HHS and other federal agencies such as the Departments of Defense and Homeland Security, hereafter referred to as PHEMCE interagency partners. HHS established the PHEMCE in 2006 to advance national preparedness for natural, accidental, and intentional threats by coordinating medical countermeasure efforts within HHS and in cooperation with other federal agencies. Specifically, the key functions of the PHEMCE are to advise the Secretary of Health and Human Services in:
  • defining and prioritizing requirements for medical countermeasures in public health emergencies;
  • integrating and coordinating research, product development, and procurement activities; and
  • setting deployment and use strategies for medical countermeasures held in the SNS.

For example, in 2016, the PHEMCE recommended stockpiling goals for certain personal protective equipment, such as N95 respirators, which were in high demand during the COVID-19 pandemic.

The PHEMCE was later codified in law through the Pandemic and All-Hazards Preparedness and Advancing Innovation Act of 2019.[176] The act specified that the PHEMCE is to use a process to make recommendations to the Secretary of Health and Human Services regarding research, procurement, and stockpiling of medical countermeasures and assist the Secretary in developing strategies for logistics, deployment, distribution, dispensing, and use of countermeasures that may be applicable to the SNS, among other things.

The PHEMCE manages the SNS annual review, a year-long, multistep process that starts with an examination of the inventory. Based on PHEMCE deliberations of the gaps in the stockpile and threat priorities, this process results in recommendations for SNS medical countermeasure procurements. Required to be completed since 2006 and to be submitted to Congress since 2013, these reviews inform medical countermeasure procurements for the SNS inventory 3 years in the future.[177] For example, the 2016 SNS Annual Review examined the SNS’s inventory in 2016, was finalized in 2017, and made recommendations for the procurement of medical countermeasures for fiscal year 2019.

These recommendations are prioritized based on a number of factors, such as how critical the medical countermeasures are to response and life-saving efforts and how usable they are by clinicians or laypersons. They are informed by the anticipated budget of the SNS, and we have reported there have been tensions between the limitations of the budget and procurements in response to identified threats, according to ASPR officials.

As part of our CARES Act reports, we have discussed how the COVID-19 pandemic has highlighted challenges related to SNS funding prior to the pandemic, raising concerns about the SNS’s ability to respond to a wide range of threats in the future. For example, we reported in January and March 2021 that SNS funding has not kept pace with the increasing number of threats for which the SNS may be needed. We also noted that funding requests have not always fully reflected SNS funding needs due to competing priorities and tradeoffs involved in aligning SNS budgetary needs with broader HHS needs and the President’s budget priorities, according to ASPR officials.

We also reported in June 2020 that HHS previously noted the challenge of maintaining a stockpile of medical countermeasures to use against many low-probability, high-consequence threats, while also maintaining the capacity to rapidly respond to novel threats, like emerging infectious diseases.[178] Additionally, we reported in March 2021 that HHS did not replenish personal protective equipment to previous levels following the H1N1 influenza pandemic of 2009 prior to COVID-19 because of a lack of funding.

As of May 31, 2021, six relief laws had been enacted to assist the COVID-19 response.[179] These laws appropriated funding for HHS activities, and, in some cases, specifically authorized their use for the SNS. [180] As of May 31, 2021, HHS reported it obligated about $10.2 billion of the $13.9 billion it planned to use for the SNS to purchase personal protective equipment and ventilators for immediate use as well as to replenish SNS inventory, among other purposes, and had expended about $6.3 billion.

Overview of Key Issues

ASPR significantly changed PHEMCE operations after 2017. According to officials from ASPR and three of six PHEMCE partners, ASPR made changes to the PHEMCE in response to concerns raised by the Assistant Secretary, some of which PHEMCE partners shared, including that the PHEMCE’s decision-making process was too slow.[181] According to the former Assistant Secretary who initiated the PHEMCE changes, while the body was successful in advancing the development of medical countermeasures and a model for interagency coordination and collaboration, its consensus-driven process affected the urgency with which medical countermeasures were developed and, thus, the nation’s preparedness in addressing threats. ASPR officials responsible for the administration of the PHEMCE also noted that some changes made to the PHEMCE were designed to more closely align with the Assistant Secretary’s priorities, as each new Assistant Secretary comes to the position with specific expertise and ideas for how preparedness should be addressed.

The figure below illustrates the PHEMCE operations immediately prior to and after December 2017, including changes that occurred after December 2017, which narrowed the scope of issues on which the PHEMCE primarily focused its deliberations, and shifted the structure of the deliberation process about medical countermeasures from a bottom-up to a top-down approach.[182]

Public Health Emergency Medical Countermeasures Enterprise (PHEMCE) Organization

Note: In addition to the Integrated Program Teams, the PHEMCE also established working groups for specific purposes. For example, the PHEMCE established the Emerging Infectious Disease Working Group in April 2014 to evaluate the public health risks posed by emerging infectious diseases, excluding influenza. This group was sunset in 2016 after it completed its assigned task of developing a framework for prioritizing emerging disease threats, according to an ASPR official.
aThe Office of the Director of National Intelligence did not previously participate in the PHEMCE, but was identified as a PHEMCE partner in the Pandemic and All-Hazards Preparedness and Advancing Innovation Act of 2019.
bTen Integrated Program Teams were identified in the July 2015 PHEMCE Integrated Program Team charter; however, the PHEMCE was authorized to establish or disband Integrated Program Teams as needed.
cASPR officials told us the PHEMCE discussed other topics as needed. For example, a Botulinum Portfolio Assessment Team was in place for a limited period of time, according to a PHEMCE member who participated on that team.

Scope of PHEMCE deliberations. After 2017, ASPR narrowed the scope of work performed by the PHEMCE in terms of the range of issues for which it provided recommendations, according to officials from ASPR and three of six PHEMCE partners. Historically, the PHEMCE provided input on a comprehensive range of issues related to medical countermeasures, which ASPR officials currently responsible for the administration of the PHEMCE referred to as an end-to-end approach to planning. For example, the PHEMCE provided input on deployment strategies and clinical guidance for the use of medical countermeasures in the SNS for public health emergencies, according to officials from two of six PHEMCE partners.

However, after 2017, ASPR began narrowing the PHEMCE’s scope to focus its efforts on medical countermeasure development and procurement, according to ASPR officials. ASPR and Department of Defense (DOD) officials told us that through these PHEMCE changes, the office sought to better align medical countermeasure development and procurements between HHS and DOD—the primary purchasers of medical countermeasures—including coordinating different priorities for vaccine development. As part of this change, the former Assistant Secretary made DOD a co-chair, along with ASPR, on the Enterprise Governance Board, the most senior leadership level of the PHEMCE structure.

According to the former Assistant Secretary, in future iterations of the PHEMCE restructure, ASPR planned to broaden the PHEMCE’s scope to also focus on issues such as the deployment and utilization of medical countermeasures. In particular, it planned to incorporate the insight of public health organizations that represent states, local governments, tribes, and territories, such as the National Association of County and City Health Officials.

ASPR also aimed to limit access to national-security-sensitive or proprietary information, as part of its scope changes, according to ASPR’s 2020-2023 Strategic Plan and the former Assistant Secretary. According to the former Assistant Secretary, a critical PHEMCE vulnerability that needed to be addressed was the security of PHEMCE proceedings. Prior to 2018, PHEMCE proceedings were conducted in unclassified and unsecured settings which, according to the former Assistant Secretary, could have enabled hostile foreign entities or other individuals to access sensitive or propriety information related to both medical countermeasure vulnerabilities and development innovations.[183] According to officials from ASPR and two of six PHEMCE partners, discussions after 2017 primarily occurred among PHEMCE partners that had appropriate security clearances to enable access to real-time information from the intelligence community. A former senior ASPR official told us that this significantly limited subject matter experts’ ability to participate in discussions. However, according to the former Assistant Secretary, the views of subject matter experts could be communicated through their respective agency representatives who participated in discussions at senior leadership levels of the PHEMCE.

Structure and activities of the PHEMCE. After 2017, PHEMCE deliberations shifted from a bottom-up to a top-down approach. Prior to the reorganization efforts, the PHEMCE process consisted of 10 groups of subject matter experts (known as Integrated Program Teams, as illustrated above), which focused on a specific threat area and its associated medical countermeasures.[184] Among other responsibilities, these teams developed recommendations on the type and number of medical countermeasures HHS should buy for the SNS. These recommendations subsequently underwent further examination by increasingly senior PHEMCE leadership levels, which, according to officials from ASPR and a PHEMCE partner, took a significant amount of time.

To make the process more efficient and ensure medical countermeasure development focused on national security vulnerabilities, the former Assistant Secretary shifted the PHEMCE decision-making structure so that leadership at the highest level, specifically the Assistant Secretary, identified areas of concern related to threats or medical countermeasures and assigned them to subject matter experts for analysis and assessment, according to ASPR officials and the former Assistant Secretary.

Further, as illustrated in the previous figure, ASPR reduced the number of standing subject matter expert groups that convened to deliberate on specific threats and added others that met for a limited period of time. According to ASPR documentation, ASPR established two Portfolio Assessment teams in 2019 to focus on anthrax and smallpox, which have been identified by the PHEMCE as high-priority threats, among other things. The PHEMCE multiyear budget for fiscal years 2018-2022 projected that these threats would account for more than 50 percent of the SNS budget for this period and noted that estimated spending for anthrax and smallpox would increase by 15 and 47 percent, respectively. Senior ASPR officials told us that the PHEMCE also established Portfolio Assessment Teams for other threats, but ASPR did not provide us documentation of the goals of these other teams or evidence that they met regularly.

Additionally, activities and deliberations among the various PHEMCE levels became less frequent and regular after 2017, according to ASPR officials and all PHEMCE partners. The precise number of meetings that occurred at different levels is unclear; ASPR was unable to provide us documentation of these meetings. According to ASPR officials, some of the change in PHEMCE activity between 2017 and 2020 was due to uncertainty about which ASPR division was responsible for the administration of the PHEMCE, the lack of a PHEMCE governance structure, and the COVID-19 pandemic.[185] Consistent with leading collaboration practices we have identified, defining and sustaining leadership is beneficial for collaborative efforts; and as such, leadership transitions and inconsistency can weaken the effectiveness of any interagency collaborative effort.

PHEMCE partners’ concerns about changes. Three of six PHEMCE partners had concerns about changes to the body, including a reduced ability to provide input and reduced transparency of the process. All PHEMCE partners acknowledged that while the previous PHEMCE processes contributed to its inefficiency, these processes were effective in ensuring appropriate input and thorough deliberation on a broad range of medical countermeasure issues that affect all PHEMCE partners. For example, officials from one PHEMCE partner said that under the previous PHEMCE structure, concerns about the purpose and scientific rationale for a plan to purchase a product for the SNS inventory would have been vetted with all PHEMCE partners prior to its acquisition. In addition, two of six PHEMCE partners also told us the PHEMCE restructure resulted in a lack of clarity on how ASPR makes decisions about the medical countermeasure enterprise and the rationale behind decisions made, including for the SNS inventory.

According to the former Assistant Secretary, under the new structure, input of PHEMCE partners was appropriately considered. However, he noted that his responsibility was to make the best use of ASPR resources to advance the nation’s preparedness against threats, not to ensure consensus was reached. ASPR was unable to provide us with documentation to understand the extent PHEMCE partners were involved in deliberations.

Further, officials from two of six PHEMCE partners credited the prior process with enhancing preparedness and producing sound, scientifically based decisions, including recommendations on the SNS inventory. One PHEMCE partner also noted the importance of maintaining connectivity among interagency partners, which existed under the former PHEMCE operational structure. Consistent with leading collaboration practices we have identified, positive working relationships between participants from different organizations build trust and foster communication which facilitates collaboration that is vital in responding to an emergency.

In a hearing before the Senate Committee on Homeland Security and Governmental Affairs on April 14, 2021, the Assistant Secretary for Preparedness and Response from 2009-2017 noted the PHEMCE coordination process led to the development of over 50 medical countermeasures against recognized public health threats. However, she identified the degradation of the PHEMCE process as one of several actions that led to the nation being less ready for the COVID-19 pandemic than we otherwise might have been. In contrast, the former Assistant Secretary said that the revised top-down PHEMCE process was applied successfully during the COVID-19 response for Operation Warp Speed, which focused on portfolios of vaccines, diagnostic tests, and treatments, and were co-led by DOD and HHS.

ASPR did not conduct statutorily required annual reviews of the SNS for 3 years. ASPR did not conduct statutorily required SNS annual reviews for 2017, 2018, and 2019, while the PHEMCE was undergoing operational changes, according to ASPR officials. As noted earlier, the annual reviews examine inventory relative to threat priorities and inform procurements 3 years in the future. Therefore, the first fiscal year affected by the lack of an annual review was 2020.

According to ASPR officials, in the summer of 2020, they made some Congressional staff aware that these annual reviews had not been completed due to the transfer of the SNS from the Centers for Disease Control and Prevention (CDC) to ASPR and the PHEMCE reorganization, among other things. The former Assistant Secretary told us in July 2021 that he recognized the importance of conducting the annual reviews and was not aware that they had not been completed.

In the absence of the annual reviews that would have informed procurements for fiscal years 2020 and 2021, ASPR officials told us that they procured medical countermeasures based on PHEMCE recommendations from SNS annual reviews conducted prior to the PHEMCE restructure and real-time direction from the Assistant Secretary. ASPR plans to use a similar approach for fiscal year 2022. ASPR officials noted that, for many years, much of the annual appropriations for the SNS had been used to replenish medical countermeasures, including anthrax therapeutics and smallpox vaccines, which have always been high priority investments, adding that the SNS’s budget does not enable it to purchase all medical countermeasures identified as priorities in the SNS annual reviews. As a result, there are still many medical countermeasures left over from previous prioritization lists to procure.

Previous SNS annual reviews have identified similar challenges of competing priorities and tradeoffs due to budget limitations. The 2015 SNS Annual Review proposed reducing procurements of both anthrax vaccine and antibiotics to meet budget constraints. Additionally, the 2016 SNS Annual Review reported that the SNS inventory was below the stockpiling goals for several types of medical countermeasures, according to the PHEMCE multiyear budget for fiscal years 2018 to 2022.

ASPR officials stated that the 2020 SNS Annual Threat-Based Review is currently being finalized and will inform SNS procurement priorities for fiscal year 2023.[186] This review was required to be submitted to congressional committees by March 15, 2021, but had not been submitted as of June 21, 2021; ASPR officials told us they communicated this delay to Congress. ASPR officials noted that in comparison with prior SNS annual reviews, the 2020 review was not developed through deliberative discussions of the PHEMCE and will be fairly limited due to the ongoing COVID-19 response; ASPR officials told us they plan to conduct more robust annual threat-based reviews in the future.

New PHEMCE reorganization efforts underway. ASPR is in the process of re-assessing and re-establishing new organizational processes for the PHEMCE, but has not yet finalized planning documents, including an organizational charter and implementation plan, to guide those efforts.

Although ASPR developed some materials outlining the structure it began implementing in 2019, a revised PHEMCE charter was never finalized, according to officials from ASPR and a PHEMCE partner, and therefore, never shared with PHEMCE partners. ASPR officials acknowledged that the changes made to the PHEMCE in the 2018 to 2020 period did not fully achieve the desired aims and created other challenges. As a result, officials said they have paused PHEMCE operations while they assess how best to move forward.

ASPR officials told us they are currently developing the PHEMCE charter and policies that will describe how the PHEMCE will operate going forward, which they hoped to finalize in May 2021. However, as of June 21, 2021, the charter had not been finalized. Additionally, in April 2021, ASPR officials reported that they had engaged with PHEMCE partners to gather feedback and contracted with the National Academies of Sciences, Engineering, and Medicine to develop recommendations on how to improve PHEMCE operations but their review had not yet begun.

According to ASPR’s 2021-2022 PHEMCE Strategy and ASPR officials, the PHEMCE will return to having a broader scope of work, such as helping HHS to develop strategies for the logistics, deployment, distribution, dispensing, and use of medical countermeasures in the SNS.[187] The COVID-19 pandemic illustrated that medical countermeasure planning needs to be comprehensive, according to one ASPR official who noted that discussions among PHEMCE partner officials are underway to determine the best way to evaluate threats and develop strategies to ensure that medical countermeasures to counter those threats are available.

However, responding to the daunting and specific challenges of the COVID-19 response, as well as changes within ASPR (specifically the shifting of the division responsible for PHEMCE administration as recently as July 2020), have contributed to delays in re-establishing the PHEMCE, according to ASPR officials.

Developing and documenting plans for restructuring the PHEMCE would help ASPR to meet the requirements outlined in the Pandemic and All-Hazards Preparedness and Advancing Innovation Act of 2019. Such plans would help ASPR to ensure that it develops a transparent and deliberative process that also balances the need to protect sensitive, including proprietary information. The act stipulates that the functions of the PHEMCE shall involve several activities, including the following:
  • Making recommendations to the Secretary of Health and Human Services regarding research, development, procurement, stockpiling, deployment, distribution, and use of medical countermeasures;
  • Identifying national health security needs, including gaps in public health preparedness and response related to medical countermeasures; and
  • Assisting the Secretary of Health and Human Services in developing strategies related to logistics, deployment, distribution, dispensing, and use of medical countermeasures that may be applicable to SNS activities.[188]

The act also stipulates that the annual threat-based review should be conducted in consultation with the PHEMCE.[189]

In addition, developing and documenting plans that incorporate GAO’s leading collaboration practices would help ASPR ensure that its current plans for restructuring of the PHEMCE results in an effective interagency collaboration over the long term. Among our leading practices for collaboration ASPR should consider addressing the following in its plans:
  • identifying a leadership model and detailing how it will be sustained over time,
  • clearly identifying roles and responsibilities of interagency partners and steps for decision making,
  • developing ways to update or monitor collaborative agreements, and
  • establishing ways to operate across participating agencies’ boundaries to build positive relationships and bridge organizational cultures.

Until ASPR develops and documents plans for restructuring the PHEMCE that addresses a number of issues, ASPR risks being unable to fulfill its responsibilities in advancing national preparedness for a wide range of threats, including a pandemic. These include having a transparent and deliberative process that engages interagency partners in the full range of PHEMCE responsibilities outlined in the Pandemic and All-Hazards Preparedness and Advancing Innovation Act of 2019, including those related to the SNS annual threat-based reviews, and incorporates leading practices to foster more effective collaboration. These plans should also reflect the need to conduct deliberations securely, so as not to risk harming our nation’s homeland security. The completion of the PHEMCE reorganization aided through the development of these plans is crucial to ensuring that the most efficacious medical countermeasures—informed by the PHEMCE partners’ broad range of scientific, regulatory, and logistical expertise—are available for rapid deployment and effective administration and utilization during the next public health emergency.

ASPR lacks documentation of PHEMCE activities and deliberations. ASPR was unable to provide us with documentation of PHEMCE activities and deliberations after 2017, which raises concerns about the office’s records management practices. For example, the office was unable to provide the following items:
  • Documentation related to PHEMCE decisions or recommendations during the 2018 to 2020 period, which could have provided information on the factors that interagency partners considered when making decisions about the medical countermeasures enterprise, including the SNS.
  • Documentation that would support ASPR officials’ accounts of the rationale for the changes to the PHEMCE—information that was shared with PHEMCE interagency partners in 2019, according to three of six PHEMCE partner officials we interviewed.
  • PHEMCE meeting agendas and minutes for 2018 to 2020 to know, for example, who was involved.

For these reasons, we do not know whether PHEMCE partners were aware of the lapse in SNS annual reviews, which historically were managed by the PHEMCE, or if PHEMCE partners discussed the implications of this lapse for the SNS inventory. We also do not know if senior ASPR leadership provided any explicit guidance regarding the approach that should be used to determine medical countermeasure acquisition priorities for the SNS in the absence of SNS annual reviews. ASPR officials told us that several staff transitions during this time period made it challenging for them to locate documentation related to PHEMCE activities and deliberations, and acknowledged the need to improve records management going forward.

Not maintaining such documentation is inconsistent with HHS’s policy for records management, which implements the Federal Records Act of 1950 and other laws and regulations.[190] The policy requires HHS components to:
  • establish and maintain a records management program that includes managerial activities related to the creation, maintenance and use, and disposition of records, carried out in such a way as to achieve adequate and proper documentation of federal transactions and effective and economical management of agency operations;
  • implement a records maintenance program so that complete records are filed or otherwise identified and preserved and can easily be found when needed; and
  • ensure that departing employees’ federal records have been turned over to the appropriate successor or official to permit continued preservation of departmental federal records.[191]

Until ASPR implements records management practices that include developing, maintaining, and securing documentation related to PHEMCE activities and deliberations, including those related to the SNS, Congress and key stakeholders do not have assurance that steps taken are advancing national preparedness for natural, accidental, and intentional threats. Practices should ensure information such as the factors considered, the rationale for the action or decision, and the final outcomes of PHEMCE processes are properly documented. Creation and management of PHEMCE records facilitates transparency and accountability as it provides stakeholders, including interagency partners impacted by decisions and oversight bodies that assess them, with access to information regarding how and why decisions were made. Maintaining these records can also reduce the risks of losing organizational knowledge due to staffing volatility.

Methodology

To conduct this work, we reviewed PHEMCE documentation that described the PHEMCE prior to the restructuring, including charters, a past and current PHEMCE Strategy and Implementation Plan, and information publicly available on the PHEMCE internet site, among other things. We interviewed or obtained written responses from:
  • current and former ASPR officials that participated in the governance of the PHEMCE and that had responsibility for the administration of the PHEMCE prior to and after December 2017, including the former Assistant Secretary.
  • seven PHEMCE interagency partners: CDC, Department of Agriculture (USDA), Department of Defense (DOD), Department of Homeland Security (DHS), Department of Veterans Affairs (VA), Food and Drug Administration, and National Institutes of Health, in April and May 2021. One of the seven interagency partners was unable to provide relevant information due to staff turnover. Therefore, we only included responses from the remaining six partners in our findings.
  • officials within the Division of the Strategic National Stockpile responsible for developing the SNS budget and spend plans for the SNS and ASPR officials that liaised between the PHEMCE and the Division of the Strategic National Stockpile, including the Acting Director of the Division of the Strategic National Stockpile.

Lastly, we assessed ASPR’s actions related to the PHEMCE restructure against our leading practices for effective collaboration and relevant requirements in the Pandemic and All-Hazards Preparedness and Advancing Innovation Act of 2019, and the Department of Health and Human Services Policy for Records Management, which implements the Federal Records Act of 1950 and other laws and regulations.

Agency Comments

We provided HHS, DOD, DHS, the Office of Management and Budget (OMB), USDA, and VA with a draft of this enclosure. HHS provided comments, which are reproduced in Appendix VI .

In its comments, HHS stated that it concurred with our recommendations and that it is initiating a review of the PHEMCE by the National Academies of Sciences, Engineering, and Medicine to look at a number of issues including interagency coordination, appropriate policies and practices, scope, transparency and ethical conduct. HHS also noted that several meetings will be held to allow for stakeholder input and that the review will culminate in a report, which HHS anticipates receiving in fall 2021.

HHS also provided technical comments, which we incorporated as appropriate. DHS, DOD, OMB, USDA, and VA did not provide comments on this enclosure.

GAO’s Ongoing Work

We are conducting a comprehensive body of work on the SNS in response to the Pandemic and All-Hazards Preparedness and Advancing Innovation Act of 2019 and the CARES Act.[192] This work includes examining the contents and management of the SNS to include a review of procurements of medical countermeasures over time, the decisions behind these procurements, and how they help address emergency health security needs. We will also continue to monitor efforts to modernize and restructure the SNS.

GAO’s Prior Recommendation

The table below presents our recommendation on the Strategic National Stockpile from a prior bimonthly CARES Act report.
Prior GAO Recommendation Related to the Strategic National Stockpile

Recommendation

Status

To improve the nation’s response to and preparedness for pandemics, the Assistant Secretary for Preparedness and Response should establish a process for regularly engaging with Congress and nonfederal stakeholders—including state, local, tribal, and territorial governments and private industry—as the Department of Health and Human Services (HHS) refines and implements a supply chain strategy for pandemic preparedness, to include the role of the Strategic National Stockpile (January 2021 report).

Open. HHS generally agreed with our recommendation, while noting that the term “engage” is vague and unclear, and that they regularly engage with Congress and nonfederal stakeholders. HHS added that improving the pandemic response capabilities of state, local, tribal, and territorial governments is a priority.
Source GAO I GAO-21-551

Related GAO Product:

Managing for Results: Key Considerations for Implementing Interagency Collaborative Mechanisms, GAO-12-1022 (Washington D.C.: September 27, 2012).

Contact information: Mary Denigan-Macauley, (202) 512-7114, deniganmacauleym@gao.gov

Federal Contracts and Agreements for COVID-19

As of May 31, 2021, federal agencies reported obligating tens of billions of dollars in support of COVID-19 response efforts through contracts and other transaction agreements, with the predominant types of goods and services procured changing from medical equipment and supplies to drugs and treatments over the course of the pandemic.

Entities involved: U.S. Department of Agriculture; Department of Defense; Department of Health and Human Services; and Department of Homeland Security, among others

Background

Federal agencies have used a variety of contracting mechanisms to provide vital goods and services in support of federal, state, and local COVID-19 response efforts.[193] For example, federal agencies have reported billions of dollars in obligations on contracts subject to the Federal Acquisition Regulation—which provides uniform policies and procedures for acquisitions by all executive agencies.[194] Our prior work on disaster contracting has found that contracts play a key role in federal emergency response efforts, and that contracting during an emergency can present a unique set of challenges as officials can face significant pressure to provide critical goods and services as expeditiously and efficiently as possible. The January 2021 National Strategy for the COVID-19 Response and Pandemic Preparedness emphasizes the important role contracts will continue to play during the response. The strategy states that the federal government will fully leverage contract authorities to strengthen the vaccine supply chain; staff vaccination sites; and fill supply shortages for personal protective equipment, drugs, and therapeutics.

In addition, federal agencies like the Department of Defense (DOD) and Department of Health and Human Services (HHS) have relied on the use of other transaction agreements—which are not subject to the Federal Acquisition Regulation—for activities such as vaccine development and manufacturing in response to COVID-19.[195] Our prior work has noted that the flexibility to tailor other transaction agreements can help agencies attract companies that do not typically do business with the government. However, their use also carries a risk of reduced accountability and transparency. The CARES Act relaxed certain limitations on the use of other transaction agreements in response to COVID-19 for HHS and DOD, such as congressional reporting requirements and requirements for who can approve certain transactions.[196]

As federal contracting activity continues to play a critical role in response to the pandemic, it is important to ensure that contract actions made in response to COVID-19 are accurately reported and visible to congressional decision makers, entities with oversight responsibilities, and taxpayers. National Interest Action (NIA) codes were established in 2005 following Hurricane Katrina to enable the consistent tracking of emergency or contingency-related contracting actions in the Federal Procurement Data System-Next Generation (FPDS-NG). The COVID-19 NIA code—used to track contract actions and associated obligations in response to COVID-19 in FPDS-NG—was originally established on March 13, 2020, and set to expire on July 1, 2020. The Department of Homeland Security (DHS) and DOD subsequently extended the code three times—first to September 30, 2020, then to March 31, 2021, and more recently to September 30, 2021.[197]

Overview of Key Issues

Agencies obligated $61.4 billion on federal contracts, with DOD and HHS accounting for most obligations. In response to the COVID-19 pandemic, contract obligations totaled about $61.4 billion as of May 31, 2021. At the beginning of the response, HHS accounted for the most federal contract obligations. However, as the response has progressed, DOD’s contract obligations surpassed HHS’s, in part due to DOD’s support of interagency acquisition needs, which has included awarding contracts on behalf of HHS for vaccine and therapeutic production and medical supplies.

As of May 31, 2021, DOD accounted for about 40 percent and HHS for about 29 percent of the total obligations made by federal agencies. U.S. Department of Agriculture (USDA) obligations, almost all of which were in support of the Farmers to Families Food Box Program, accounted for $6.1 billion, or 10 percent of total obligations made in response to COVID-19 (see figure).[198]

Contract Obligations in Response to COVID-19 by Federal Agency, as of May 31, 2021

In our March 2021 report, we reported that government-wide contract obligations related to COVID-19 totaled $55.5 billion through February 28, 2021; by May 31, 2021, those obligations had increased by about $5.9 billion—to $61.4 billion. HHS accounted for about $1.9 billion, or about 33 percent of the increase in total contract obligations since February 28, 2021. See figure for government-wide obligations and confirmed COVID-19 cases by month.

Government-wide COVID-19-Related Contract Obligations and Confirmed COVID-19 Cases by Month, February 2020–May 2021

Types of goods and services purchased and extent of competition changed over the course of the pandemic. As the response to the pandemic has progressed, the types of goods and services purchased have shifted from being primarily medical equipment and supplies—such as ventilators and personal protective equipment—to drugs and treatments—such as COVID-19 vaccines and therapeutics.
  • As we reported in March 2021, drugs and treatments surpassed medical equipment and supplies as the largest area of government-wide obligations, accounting for 23 percent of total obligations. These obligations more than tripled from $3 billion as of November 2020, prior to the Food and Drug Administration’s emergency use authorizations for the Pfizer, Moderna, and Janssen vaccines, to about $14.3 billion as of May 31, 2021.[199] However, these contract obligations hit their peak and have declined by about $333 million since late February.
  • Medical equipment and supplies—including ventilators and personal protective equipment—increased by about $439.6 million since February 28, 2021, and accounted for about $9.4 billion, or 15 percent of government-wide contract obligations.
  • Obligations for fruits and vegetables—made primarily in support of the USDA’s Farmers to Families Food Box Program—increased by an additional $732.5 million, to $4.6 billion.

See figure for obligation amounts for the most-procured goods and services over time.

Contract Obligation Amounts for Top Five Goods and Services Procured in Response to COVID-19 by month, Feb. 2020–May 2021

Note: In addition to what is reflected in the figure, agencies canceled, or deobligated, $176.5 million and $335.1 million for drugs and treatments in July 2020 and April 2021, respectively.

As of May 31, 2021, COVID-19-related contracts for goods continued to be competed less frequently than contracts for services. About 69 percent of the obligations for goods were on contracts that were not awarded competitively, compared with about 41 percent of the obligations for services. For example, about $13.8 billion, or 97 percent, of the $14.3 billion in obligations for drugs and treatments and about $8 billion, or 85 percent, of the $9.4 billion in obligations for medical and surgical equipment were on contracts awarded noncompetitively.

The proportion of COVID-19 related contracts identified as having been awarded noncompetitively decreased slightly from about 60 percent of government-wide contract obligations as of February 28, 2021, to about 58 percent as of May 31, 2021—about $35.7 billion.[200] Throughout the course of the pandemic, the percentage of obligations on contracts identified as awarded noncompetitively has fluctuated from a low of 25 percent of obligations in February 2020 to a high of 88 percent of obligations in December 2020. The higher rate of obligations on noncompetitively awarded contracts was driven in part by large noncompetitive awards for vaccine production.

Agencies must provide for full and open competition when awarding contracts, unless one of several limited exceptions applies, such as when there is an unusual and compelling urgency for a needed supply or service. Agencies cited an urgent need for awarding contracts noncompetitively for about 79 percent, or about $28.3 billion, of the contract obligations associated with noncompetitive awards.[201] However, our prior work has noted that promoting competition—even in a limited form—increases the likelihood of acquiring quality goods and services at a lower price in urgent situations.

Federal agencies have obligated about $5 billion on undefinitized contracts. Undefinitized contracts are one technique that agencies have reported using to respond to COVID-19. Undefinitized contracts can enable the government to quickly fulfill requirements that are urgent or need to be met quickly by allowing contractors to begin work before reaching a final agreement with the government on all contract terms and conditions.[202] As of May 31, 2021, undefinitized contract obligations for COVID-19 totaled about $5 billion, and accounted for about 8 percent of government-wide contract obligations on contracts awarded in response to COVID-19. DOD reported the highest amount of undefinitized contract obligations, identifying about $4.1 billion, or about 17 percent of its COVID-19-related contract obligations as being undefinitized for goods and services such as N95 respirator production and constructing alternate care facilities to treat COVID-19 patients. Our prior work has shown that, while undefinitized contract actions can allow the government to fulfill requirements that are urgent or need to be met quickly, these types of contracts can pose risks to the government. For example, contractors may lack incentives to control costs before all contract terms and conditions are defined.

Federal agencies have obligated at least $12.5 billion through other transaction agreements. Three federal agencies—DOD, HHS, and DHS—have continued to report using other transaction agreements in response to COVID-19. From February 28, 2021, through May 31, 2021, obligations associated with other transaction agreements reported by DOD, HHS, and DHS increased from about $12.2 billion to $12.5 billion. Of the $12.5 billion, DOD reported obligating about $10.8 billion through other transaction agreements, including at least $8.5 billion on efforts to manufacture large-scale vaccines and therapeutics in response to COVID-19 through a DOD and HHS partnership formerly known as Operation Warp Speed.

Our analysis of FPDS-NG data and agreement documents found that HHS continues to misreport at least four other transaction agreements with about $1.6 billion in obligations as procurement contracts. These other transaction agreements supported the COVID-19 vaccine manufacturing efforts and other medical countermeasures, which can include therapeutic treatments and testing capabilities. In our January 2021 report, we recommended that HHS should accurately report data in the federal procurement database system and provide information that would allow the public to distinguish between spending on other transaction agreements and procurement contracts. HHS concurred with our recommendation and is exploring ways to address it.

Methodology

To identify agencies’ federal contract and other transaction agreement obligations and competition rate on contracts in response to COVID-19, we reviewed data reported in FPDS-NG through May 31, 2021.[203] We primarily identified contract obligations related to COVID-19 using the NIA code. We supplemented the use of the NIA code by searching for “COVID-19” and “coronavirus” in the contract description field to identify a limited number of additional contract obligations.[204] For contract actions over $1 million, we removed obligations that were identified in the contract description as not related to COVID-19.

We assessed the reliability of federal procurement data by reviewing existing information about FPDS-NG and the data it collects—specifically, the data dictionary and data validation rules—and by performing electronic testing. For the four other transaction agreements that HHS misreported as contracts, we removed the $1.6 billion associated obligations from our reported contract obligations and reported them instead as other transaction agreement obligations. We determined that the data were sufficiently reliable for the purposes of describing agencies’ reported contract obligations in response to COVID-19.

Agency Comments

We provided HHS, DOD, DHS, USDA, and the Office of Management and Budget with a draft of this enclosure. HHS, DHS, USDA, and the Office of Management and Budget did not provide comments. DOD provided technical comments, which we incorporated as appropriate.

GAO’s Ongoing Work

We have work underway related to the federal government’s use of contracts to respond to COVID-19, including assessing contracts awarded by selected agencies in response to COVID-19 and agencies’ efforts to review prospective contractors in advance of awarding a contract.

GAO’s Prior Recommendations

The table below presents our recommendations on federal contracts and agreements for COVID-19 from prior bimonthly and quarterly CARES Act reports.
Prior GAO Recommendations Related to Federal Contracts and Agreements for COVID-19

Recommendation

Status

The Secretary of Agriculture should direct the Administrator of the Agricultural Marketing Service to issue guidance—such as an acquisition alert or a reminder to contracting officials—on the use of the COVID-19 National Interest Action code for the Farmers to Families Food Box Program or successor food distribution program to ensure it accurately captures COVID-19-related contract obligations in support of the program (March 2021 report).

Closed-Implemented. The U.S. Department of Agriculture (USDA) neither agreed nor disagreed with our recommendation. In February 2021, following our identification of contract data reporting challenges using the COVID-19 National Interest Action code for the Farmers to Families Food Box Program, Agricultural Marketing Service officials said they conducted training with staff to review National Interest Action code data entry protocols. At that time, a senior Agricultural Marketing Service official also sent an email reminder to procurement division personnel about OMB’s guidance on the use of the COVID-19 National Interest Action code. Following this training and email, officials took action to retroactively report contract actions for the program with the National Interest Action code. In May 2021, the Agricultural Marketing Service updated its instructions for entering contract actions into the Federal Procurement Data System-Next Generation to include a reminder to utilize the proper National Interest Action code, if applicable.

The Secretary of Agriculture should direct the Administrator of the Agricultural Marketing Service to assess the contracting personnel needed to fully execute the award and administration of existing contracts in support of the Farmers to Families Food Box Program or successor future food distribution program, and take the necessary steps to ensure it has adequate contracting staff in place to award and administer any future contracts for the program (March 2021 report).

Open. USDA neither agreed nor disagreed with our recommendation, and as of May 2021 had not fully assessed the contracting personnel needed to execute and administer contracts in support of the Farmers to Families Food Box Program or successor food distribution program. According to Agricultural Marketing Service officials, they have discontinued the program, and are using other methods of hunger relief, so do not anticipate needing additional permanent staff. Agricultural Marketing Service officials are planning to use an existing contract vehicle to obtain additional staff support for contract documentation needs for the awards that have been made under the Farmers to Families Food Box Program and other food purchasing efforts. However, as of May 2021 Agricultural Marketing Service officials had not yet determined the staffing support levels to be obtained under the contract vehicle.

The Assistant Secretary for Preparedness and Response (ASPR), in coordination with the appropriate offices within the Department of Health and Human Services (HHS), should accurately report data in the federal procurement database system and provide information that would allow the public to distinguish between spending on other transaction agreements and procurement contracts (January 2021 report).

Open. ASPR agreed with our recommendation, and as of April 2021, ASPR officials stated that they have discussed within ASPR the need to consistently identify other transaction agreements in the Federal Procurement Data System-Next Generation (FPDS-NG) and explored how their contract writing system may interface with the FPDS-NG other transaction agreement module in the future. ASPR officials added that in the meantime, they have identified other transaction agreements in the procurement module by manually adding designators such as “other transaction agreement” into the description of requirement data field. We will continue to monitor ASPR’s efforts to implement our recommendation.

The Secretary of Homeland Security, in coordination with the Secretary of Defense, should (1) revise the criteria in the 2019 National Interest Action (NIA) code memorandum of agreement to clearly identify steps they will take to obtain input from key federal agencies prior to extending or closing a National Interest Action code, (2) establish timelines for evaluating the need to extend a National Interest Action code, and (3) define what constitutes a consistent decrease in contract actions and routine contract activity to ensure the criteria for extending or closing the National Interest Action code reflect government-wide needs for tracking contract actions in longer term emergencies, such as a pandemic (September 2020 report).

Closed-Implemented. The Department of Homeland Security (DHS) did not agree with our recommendation. However, in March 2021, DHS, in coordination with the Department of Defense (DOD), issued a revised memorandum of agreement. The revised agreement establishes a process and timelines for communicating and evaluating NIA code extensions by requiring the General Services Administration to notify other federal agencies no less than seven days before a NIA code is set to expire so that agencies can request an extension as needed. The revised agreement also more clearly defines what constitutes a consistent decrease in contract actions to ensure criteria for extending or closing a NIA code is consistently applied.

The Secretary of Defense, in coordination with the Secretary of Homeland Security, should (1) revise the criteria in the 2019 National Interest Action code memorandum of agreement to clearly identify steps they will take to obtain input from key federal agencies prior to extending or closing a National Interest Action code, (2) establish timelines for evaluating the need to extend a National Interest Action code, and (3) define what constitutes a consistent decrease in contract actions and routine contract activity to ensure the criteria for extending or closing the National Interest Action code reflect government-wide needs for tracking contract actions in longer term emergencies, such as a pandemic (September 2020 report).

Closed-Implemented. DOD did not agree with our recommendation. However, in March 2021 DOD, in coordination with DHS, issued a revised memorandum of agreement. The revised agreement establishes a process and timelines for communicating and evaluating NIA code extensions by requiring the General Services Administration to notify other federal agencies no less than seven days before a NIA code is set to expire so that agencies can request an extension as needed. The revised agreement also more clearly defines what constitutes a consistent decrease in contract actions to ensure criteria for extending or closing a NIA code is consistently applied.
Source: GAO. I GAO-21-551.

Related GAO Products

COVID-19 Contracting: Observations on Federal Contracting in Response to the Pandemic. GAO-20-632. Washington, D.C.: July 29, 2020.

Defense Acquisitions: DOD’s Use of Other Transactions for Prototype Projects Has Increased. GAO-20-84. Washington, D.C.: November 22, 2019.

DATA Act: Quality of Data Submissions Has Improved but Further Action Is Needed to Disclose Known Data Limitations. GAO-20-75. Washington, D.C.: November 8, 2019.

Disaster Contracting: FEMA Continues to Face Challenges with Its Use of Contracts to Support Response and Recovery. GAO-19-518T. Washington, D.C.: May 9, 2019.

2017 Disaster Contracting: Actions Needed to Improve the Use of Post-Disaster Contracts to Support Response and Recovery. GAO-19-281. Washington, D.C.: April 24, 2019.

2017 Disaster Contracting: Action Needed to Better Ensure More Effective Use and Management of Advance Contracts. GAO-19-93. Washington, D.C.: December 6, 2018.

Federal Contracting: Noncompetitive Contracts Based on Urgency Need Additional Oversight. GAO-14-304. Washington, D.C.: March 26, 2014.

Department of Homeland Security: Further Action Needed to Improve Management of Special Acquisition Authority. GAO-12-557. Washington, D.C.: May 8, 2012.

Defense Contracting: DOD Has Enhanced Insight into Undefinitized Contract Action Use, but Management at Local Commands Needs Improvement. GAO-10-299. Washington, D.C.: January 28, 2010.

Department of Homeland Security: Improvements Could Further Enhance Ability to Acquire Innovative Technologies Using Other Transaction Authority. GAO-08-1088. Washington, D.C.: September 23, 2008.

Contact information: Marie A. Mak, (202) 512-4841, makm@gao.gov

Unemployment Insurance Programs

The number of claims for unemployment insurance benefits generally declined during spring 2021, though they remained at a high level into June 2021 as compared to pre-pandemic levels. We continue to focus on the implications of the high number of claims, including timeliness of benefits and program integrity concerns.

Entity involved: Department of Labor

Background

The unemployment insurance (UI) system is a federal-state partnership that provides temporary financial assistance to eligible workers who become unemployed through no fault of their own. States design and administer their own UI programs within federal parameters, and the Department of Labor (DOL) oversees states’ compliance with federal requirements, such as by ensuring states pay benefits when they are due. Regular UI benefits—those provided under the state UI programs in place before the CARES Act was enacted—are funded primarily through state taxes levied on employers and are intended to typically be lower than a claimant’s previous employment earnings, according to DOL.[205]

Three federally funded temporary UI programs that expanded benefit eligibility and enhanced benefits were created by the CARES Act and amended by the Consolidated Appropriations Act, 2021 and the American Rescue Plan Act of 2021.[206]
  1. Pandemic Unemployment Assistance (PUA), generally available through September 6, 2021, generally authorizes up to 79 weeks of UI benefits for individuals not otherwise eligible for UI benefits, such as self-employed and certain gig economy workers, who are unable to work as a result of specified COVID-19 reasons.[207]
  2. Federal Pandemic Unemployment Compensation (FPUC) generally authorized an additional $600 weekly benefit through July 2020 for individuals eligible for weekly benefits under the regular UI and CARES Act UI programs. FPUC also generally authorizes an additional $300 benefit for weeks beginning after December 26, 2020, and ending on or before September 6, 2021, for these individuals.[208]
  3. Pandemic Emergency Unemployment Compensation (PEUC), generally available through September 6, 2021, generally authorizes an additional 53 weeks of UI benefits for those who exhaust their regular UI benefits.[209]

The Consolidated Appropriations Act, 2021 created, and the American Rescue Plan Act of 2021 extended, the Mixed Earner Unemployment Compensation (MEUC) program, which authorizes an additional $100 weekly benefit for certain UI claimants who received at least $5,000 of self-employment income in the most recent tax year prior to their application for UI benefits.[210] The $100 weekly benefit is in addition to other UI benefits received by claimants; however, individuals receiving PUA benefits may not receive MEUC payments. According to DOL, the MEUC program, which is voluntary for states, is intended to cover regular UI claimants whose benefits do not account for significant self-employment income and who thus may receive a lower regular UI benefit than the benefit they would have received had they been eligible for PUA.[211] As of June 8, 2021, 51 of 53 states and territories had elected to participate in the MEUC program, though just 23 had begun paying MEUC benefits, according to DOL.[212]

As of June 8, 2021, 25 states had announced their intention to terminate participation in at least one of the pandemic UI programs before their September 2021 expiration dates.[213] For example, according to DOL, 21 states submitted notice to DOL that they intended to end participation in the FPUC, PEUC, and PUA programs and 3 states submitted notice that they intended to end participation in the FPUC program.[214] In addition, 1 state publicly announced its intention to end participation in the FPUC program, but as of June 8 had not submitted notice to DOL.[215] States’ planned program termination dates range from mid-June through mid-July. In public announcements, states generally cited labor shortages among the reasons for their intended withdrawals from the programs. After the first states’ announcements, the Secretaries of Commerce and Treasury stated that, nationwide, data do not support the argument that unemployment benefits are keeping people from returning to work. They identified caregiving responsibilities and health concerns as key factors in people’s decisions. The Secretary of Commerce also noted that governors had to respond to their regional labor markets, which vary.

In addition to extending and expanding benefits, the Consolidated Appropriations Act, 2021 added new program integrity requirements for the CARES Act UI programs. For example, the act generally requires PUA claimants to provide documentation substantiating their prior employment or self-employment and to recertify with their state each week that they continue to meet the eligibility requirement of not being able to work as a result of COVID-19.[216] In addition, states are required to have procedures for identity verification or validation and for timely payment of PUA benefits, to the extent reasonable and practicable.[217] The American Rescue Plan Act of 2021 also appropriated $2 billion for DOL to detect and prevent fraud, promote equitable access, and ensure the timely payment of UI benefits.[218]

During the pandemic, regular UI claimants in certain states have also had access to the Extended Benefits program. The program, which existed prior to the pandemic and provides up to an additional 13 or 20 weeks of benefits, is activated in states during periods of high unemployment, according to DOL.[219] If unemployment is not high enough to activate the Extended Benefits program in a state, or if regular UI claimants exhaust their PEUC and Extended Benefits, they may be eligible for PUA benefits—provided they also meet PUA eligibility requirements.[220]

Overview of Key Issues

Although weekly numbers of initial and continued claims for UI benefits have declined, their levels suggest that more individuals are still losing jobs on a weekly basis than is typical and that many others are experiencing long-term unemployment. DOL reported that 393,078 initial claims for regular UI benefits and 104,682 initial claims for PUA benefits were submitted nationwide during the week ending June 19, 2021.[221] Weekly initial claims numbers are near their lowest point since the surge at the beginning of the pandemic. However, they remain at a level that indicates that more Americans are still experiencing job losses than was typical in the year before the pandemic. For example, the 393,078 regular UI initial claims submitted during the week ending June 19, 2021, is about 74 percent higher than the number submitted during the corresponding week in 2019.

Weekly Initial Claims Submitted Nationwide for Regular Unemployment Insurance (UI) and Pandemic Unemployment Assistance (PUA) Benefits, Mar. 1, 2020–June 19, 2021

Notes: The weekly counts of initial claims shown are not seasonally adjusted. Counts for weeks through June 5, 2021, are from Department of Labor (DOL) data files that include any adjustments submitted by states as of June 24, 2021. Counts for the weeks ending June 12 and 19, 2021, are from DOL’s weekly report released on June 24, 2021. Counts for the week ending June 19, 2021, reflect advance initial claims, which are preliminary and subject to revision. The number of states and territories reporting PUA claims is out of a potential total of 53. All 53 states and territories reported regular UI claims in each week shown.

The number of initial claims is not intended to measure how many claimants were determined eligible to receive benefits or how many of those who filed for benefits earlier in the pandemic are still unemployed. DOL officials have stated that continued claims (i.e., weeks of unemployment claimed by individuals during a reporting period) may be a better barometer than initial claims for measuring continuing demand for benefits. For example, states reported that about 14.8 million continued claims were submitted in all programs during the week ending June 5, 2021, including:
  • about 3.3 million in the regular UI program,
  • about 6.0 million in the PUA program,[222]
  • about 5.3 million in the PEUC program,[223]
  • about 0.2 million in the Extended Benefits program,[224] and
  • about 0.1 million in other programs.[225]

The number of regular UI continued claims submitted each week has declined overall since the peak in late April and early May 2020 (see figure). Some of this decline is due to claimants’ finding employment, though some of the decline is also likely due to other factors, such as claimants’ exhausting regular UI benefits and beginning to claim PEUC or other benefits.[226] For example, the persistently high numbers of PEUC continued claims since fall 2020 suggest that many individuals may be experiencing long-term unemployment and have likely exhausted their regular UI benefits.[227]

Notably, the combined total of continued claims submitted for regular UI, PEUC, and Extended Benefits remained at a relatively consistent level from the beginning of October 2020 through the beginning of March 2021 (see figure). Since then, the combined total of continued claims submitted in these three programs has generally declined, though the number remains high.

Weekly Continued Claims Submitted Nationwide for Regular Unemployment Insurance, Pandemic Emergency Unemployment Compensation, and Extended Benefits, Mar. 1, 2020–June 5, 2021

Notes: The weekly counts of continued claims shown in the figure are not seasonally adjusted. Counts for weeks through May 29, 2021, are from Department of Labor (DOL) data that include any adjustments submitted by states as of June 24, 2021. The count for the week ending June 5, 2021, is from DOL’s weekly report released on June 24, 2021. The number of states and territories reporting PEUC claims is out of a potential total of 53. All 53 states and territories reported regular UI claims in each week shown. The number of states reporting Extended Benefits claims each week varies, in part based on the number of states with the program activated each week. The Extended Benefits program, which existed before the pandemic, is activated in states during periods of high unemployment, according to DOL.

The persistently high number of claims across all programs suggests continued high demand for benefits. However, as we have previously reported, the number of continued claims has not approximated the number of individuals claiming benefits during the pandemic because of backlogs in processing historic numbers of claims in many states and other data issues. For example, backlogs in claims processing led to individuals claiming multiple weeks of benefits in single reporting periods and thus being counted as multiple claims for that reporting period, particularly in the PUA program. As a result, reliable conclusions about trends in the number of individuals claiming benefits cannot be drawn from data on continued claims.

In November 2020, we recommended that DOL address this issue by (1) revising its weekly news releases to clarify that the numbers it reports for weeks of unemployment claimed do not accurately estimate the number of unique individuals claiming benefits and (2) pursuing options to report the actual number of distinct individuals claiming benefits from January 2020 onward.

DOL fully agreed with our first recommendation and, starting with the December 10, 2020, weekly UI news release, clarified that the numbers it reports for weeks of unemployment claimed do not represent the number of unique individuals claiming benefits. We consider this recommendation closed.

DOL partially agreed with our second recommendation, taking issue with implementing a retroactive change in state reporting. In a letter dated March 30, 2021, DOL stated that it had begun developing a new state report that would capture data related to distinct individuals claiming regular UI benefits; DOL estimated that this data collection might begin in early 2022. DOL also reiterated its concerns about the feasibility of states’ reporting this information retroactively, including for the pandemic UI programs, without detracting from their primary obligation for timely and accurate claims processing.

We maintain that these data are vital to understanding the size of the population supported by the UI system during the pandemic. Even if the information is unavailable for some time, reporting the number of distinct individuals who claimed benefits for calendar year 2020 and later years will help DOL and policymakers identify lessons learned about the administration and utilization of regular and expanded UI benefit programs during the pandemic. We encourage DOL to pursue options to report this information in the most feasible and least burdensome way and at a time when providing this information retroactively will not detract from states’ primary obligation for timely and accurate claims processing.

Although timeliness of regular UI first payments improved nationally from fall 2020 through early 2021, timeliness has varied since then, including by state, and some claimants still face substantial delays in receiving benefits. The timeliness of first payments of regular UI benefits declined substantially early in the pandemic, as states faced extensive claims-processing backlogs resulting from historically high numbers of claims.[228] When we last reported in March 2021, we observed that, nationwide, first payment timeliness had improved from fall 2020 through January 2021. Since then, regular UI first payment timeliness, nationwide, declined in February 2021, improved again in March and April, and then declined again in May (see figure).[229] In some states, many regular UI claimants continue to face delays before receiving their first payments. For example, in six states, at least half of regular UI claimants who received their first benefits in May 2021 had been waiting longer than 3 weeks. In addition, nationwide, about 10.3 percent of regular UI claimants who received their first benefits in May 2021 had been waiting longer than 10 weeks. By comparison, of the regular UI claimants who received their first benefits in March 2020, nationwide, less than 3 percent had been waiting longer than 3 weeks and less than 1 percent longer than 10 weeks.

Timeliness of First Payments of Regular Unemployment Insurance (UI) Benefits, Jan. 2020–May 2021

Notes: We analyzed first payment timeliness data that states had reported to the Department of Labor (DOL) as of June 21, 2021. At that point, of the 53 states and territories, 46 had reported data for May 2021, 51 had reported data for April 2021, 52 had reported data for January through March 2021, and all 53 had reported data for all months in 2020. One of DOL’s core performance measures is the percentage of all regular UI first payments made within either 14 or 21 days of the first week of benefits for which claimants are eligible, depending on whether the state requires that individuals who are otherwise eligible for benefits serve a waiting period—generally 1 week—before receiving benefits. We focus on payments made within 21 days because in guidance released at the start of the pandemic, DOL recommended that states consider temporarily waiving their waiting week requirements. According to DOL, states must pay at least 87 percent of claims within 14 or 21 days to reach an acceptable level of performance.

As we have previously reported, although DOL has not tracked the timeliness of payments in the temporary PUA program, DOL officials told us that states have struggled with making PUA payments in a timely manner. For example, they said regional officials had observed a number of implementation challenges at the state level that likely contributed to claims processing backlogs and payment delays. In addition, in early 2021, DOL officials said they expected PUA program changes enacted in the Consolidated Appropriations Act, 2021 to slow the payment of PUA benefits as states implemented the new program integrity provisions.

More than half of the 47 states and territories submitting data reported average PUA benefits paid in April 2021 that were close to the minimum amount. Specifically, as of June 21, 2021, 31 states and territories reported average weekly PUA benefits paid in April 2021 that were up to 25 percent above the state’s minimum PUA benefit amount; 13 of these states and territories reported average benefits that were up to 10 percent above the minimum.[230] This suggests that many individuals in these states and territories were receiving the minimum PUA benefit in April 2021—because the average was close to the minimum. As we have previously reported, DOL officials told us that to facilitate implementation of the PUA program, most states decided to initially pay PUA claimants the minimum allowable benefit and then recalculate benefits at a later point based on claimants’ documentation of their prior earnings.[231] DOL officials said that through the regional offices’ monitoring efforts, DOL has found that some states have faced challenges and expressed confusion related to recalculating PUA benefit amounts and that DOL has required some states to implement corrective actions.

Persistently high numbers of UI claims during the pandemic have led some states to take out substantial federal loans to pay UI benefits.[232] As of June 18, 2021, 19 states and territories held federal loans totaling about $53.5 billion—approximately $1.4 billion more than we reported in March 2021. This total loan balance is also greater than the approximately $40.2 billion held by 30 states and territories at the end of 2010, after the 2007-2009 recession and early recovery.[233]

As we reported in March 2021, some states have used their Coronavirus Relief Fund payments, under guidance from the Department of the Treasury, to pay for UI benefits to reduce or prevent loan balances and avoid possible future increases in employer tax rates.[234] Generally, if a state holds a federal loan balance to pay UI benefits for 2 or more years, the rate of the federal tax on employers that is used to fund the UI program will increase.[235] States may continue to use these Coronavirus Relief Fund payments for expenses through the end of 2021.[236] In addition, the American Rescue Plan Act of 2021 provided funds to states, local governments, territories, and tribal governments. States and territories may use these funds, under an interim final rule from the Department of the Treasury, to restore their UI trust funds or to pay back federal loan balances.[237]

DOL and other federal and state agencies continue to take actions to address potential fraud in the UI programs.[238] As we have previously reported, DOL made two allotments of $100 million available to states, in September 2020 and January 2021, respectively, to address potential fraud and identity theft in the PUA and PEUC programs. According to DOL, states have reported using the funds from the September allotment to, among other things, hire additional staff to investigate suspicious claims, connect with the National Association of State Workforce Agencies’ (NASWA) Integrity Data Hub to utilize an identity verification service, and implement integrity tools and software to conduct further identity protections and fraud screening.[239]

The American Rescue Plan Act of 2021, enacted March 11, 2021, subsequently provided DOL with $2 billion to detect and prevent fraud, promote equitable access, and ensure the timely payment of UI benefits. As of May 20, 2021, DOL officials said that DOL was working to develop detailed plans for this $2 billion in coordination with the Office of Management and Budget, and noted that developing spending plans across 53 states and territories involves complex considerations.

In addition to providing funding, DOL continues to assist states with their fraud prevention and detection efforts. For example, on April 13, 2021, DOL issued guidance highlighting the importance of states’ identity verification efforts to stop potentially fraudulent UI claims.[240] The guidance outlines procedures that states must take when processing claims and determining UI eligibility in cases where an individual’s identity is in question. DOL officials also said that DOL is exploring new datasets that states could use to detect potential UI fraud.

In addition, according to DOL officials, DOL has ongoing efforts to connect state workforce agencies with banking institutions and law enforcement to recover potentially fraudulently obtained funds that banks have intercepted. On May 4, 2021, DOL issued guidance encouraging states to work with financial institutions to detect suspicious activity, ensure that accounts are not unduly suspended, and recover overpayments.[241] This guidance also establishes instructions for banks and financial institutions on how to return recovered overpayments, such as in instances when the recovered funds span multiple states.

In March 2021, DOL also launched a website to help the public better understand UI identity theft.[242] The website provides resources for those who may have been victims of identity theft, including a list of contact information for each state and territory to report UI identity theft.

DOL’s Office of Inspector General (OIG), the Department of Justice (DOJ), and the U.S. Secret Service also continue to investigate potential UI fraud and examine program integrity issues. As of June 10, 2021, DOL’s OIG had opened more than 17,000 complaints and investigations involving UI fraud since the pandemic began, according to the agency’s website. According to DOL’s OIG, its efforts have directly resulted in the identification and recovery of more than $160 million in UI fraud. In addition, DOL’s OIG reported that it is currently working on a range of audit work related to UI, covering topics such as DOL’s and states’ efforts to prevent and detect overpayments and states’ capabilities to process UI claims accurately and in a timely manner with outdated information technology systems.

In late May 2021, DOL’s OIG issued a report that found that DOL and states struggled to implement the three CARES Act UI programs (FPUC, PEUC, and PUA) and, among other things, that DOL’s guidance and oversight did not ensure states performed required and recommended improper payment detection and recovery activities.[243] For example, DOL’s OIG found that from March 27, 2020, to July 31, 2020, 20 states did not perform all required cross-matches, which could have prevented improper payments, including fraud.

According to DOJ, from March 2020 through April 2021, DOJ filed federal charges against 207 individuals for defrauding the UI programs, 41 of whom have pleaded guilty.[244] See the enclosure on Federal Fraud-Related Cases in appendix I for more information about DOJ charges.

As we previously reported, the U.S. Secret Service also conducts UI fraud investigations in coordination with various federal, state, and local partners. According to a May 2021 press release, over the last year the Secret Service has initiated more than 690 UI fraud investigations and investigative inquiries and seized more than $640 million in fraudulently obtained funds.[245]

Several state auditors have also issued reports on UI program integrity issues. According to the California State Auditor, California’s Employment Development Department did not take substantive action to bolster its UI fraud detection efforts until months into the pandemic, which resulted in payments of about $10.4 billion that the department has since determined may be potentially fraudulent because it cannot verify claimants’ identities. Also, the Kansas Legislative Division of Post Audit found that the Kansas Department of Labor’s fraud detection process was not designed to detect large-scale fraud. According to this audit, in December 2020, the Kansas Department of Labor reported that it had partnered with a private company to enhance its fraud detection capabilities.

States have continued to identify overpayments in the regular UI and CARES Act UI programs, and some states have begun reporting data to DOL on recovered PUA overpayments. Overpayments are not necessarily a result of fraud, though some may be. As we reported in January 2021, DOL data show that the dollar amount of state-reported overpayments in the regular UI program increased substantially during the pandemic, coinciding with historically high numbers of UI claims. States have also reported large amounts of overpayments in the CARES Act UI programs.

As of June 21, 2021, DOL reported that states and territories had identified approximately $12.9 billion in overpayments made in UI programs during the first four quarters of the pandemic combined (April 2020 through March 2021), including:
  • $4.3 billion in regular UI and Extended Benefits overpayments,[246]
  • $4.6 billion in PUA overpayments,[247]
  • $0.2 billion in PEUC overpayments, and
  • $3.8 billion in FPUC overpayments.[248]

These amounts are likely to increase as states shift their focus from program implementation and clearing claims processing backlogs to identifying overpayments, according to DOL officials.

States and territories also report the amounts of fraud overpayments—a subset of the total overpayment amounts.[249] During the first four quarters of the pandemic combined (April 2020 through March 2021), states and territories reported about $1.3 billion in overpayments identified as fraud across the UI programs.[250] However, according to DOL, states do not report these overpayments until investigations are complete and fraud has been established, which may take a long time. As a result, it is likely that states and territories have not yet reported substantial amounts of fraud overpayments, which could contribute to increasing amounts reported in the coming months. For example, 7 of the 45 states and territories that have reported PUA overpayments have reported no data on fraud overpayments.

States and territories may waive and not recover overpayments in certain circumstances.[251] States and territories reported waiving about $0.1 billion of regular UI, Extended Benefits, PEUC, and FPUC overpayments during the first four quarters of the pandemic combined (April 2020 through March 2021).[252] In response to a recommendation in our March 2021 report, DOL stated that it was preparing to update its state reporting requirements for the PUA program to include the collection of data on PUA overpayments waived. On June 17, 2021, DOL officials stated that the agency expected to release guidance by mid-July 2021.

States and territories report the amount of overpayments they have recovered in the period the recovery occurs. For example, states and territories have reported recovering about $0.3 billion in the PEUC and FPUC programs combined from April 2020 through March 2021 (i.e., during the first 4 quarters those programs existed).[253] In response to a recommendation in our January 2021 report, DOL updated its state reporting requirements for the PUA program to include the collection of data on PUA overpayments recovered. As of June 21, 2021, 27 states had reported some data on PUA overpayments recovered, reporting a combined total of about $0.2 billion recovered.[254]

Because of the limited number of states and territories reporting data to DOL as of June 21, 2021, our recommendations related to reporting PUA overpayments waived and recovered remain open. Sustained reporting by most states is needed to help inform DOL, policymakers, and the public about the amount of PUA overpayments that states have waived and recovered and about the amount that remains outstanding.

In addition to reporting actual overpayments established, states also conduct independent investigations of samples of regular UI claims to estimate accuracy rates for paid and denied claims. However, estimates of improper payments from this process are not yet available for the pandemic period.[255] We reported in November 2020 that DOL had not included the CARES Act UI programs in its improper payment estimation methods and that it planned to conduct a risk assessment after the first year of each program’s operations. On April 8, 2021, officials told us that DOL would be conducting this risk assessment during the second quarter of 2021. Officials also said that DOL had formed a working group to develop new sampling and investigative methodologies for the PUA program and that DOL planned to extrapolate regular UI data to the FPUC and PEUC programs.

Methodology

To conduct this work, we analyzed regularly reported DOL data for calendar years 2019, 2020, and 2021, having obtained the most recent data on June 24, 2021. We reviewed relevant federal laws, DOL guidance, and DOL OIG reports, and we interviewed DOL officials about program data and agency actions. We also reviewed data file documentation and written responses from DOL officials. In addition, we interviewed DOL officials about the UI database, PUA claims data files, and data on outstanding federal loans to pay UI benefits, specifically related to state-reported data on claims counts, overpayments, payment timeliness, and loan balance amounts by state. We examined the data for outliers, missing values, and errors. We determined the DOL data we used were sufficiently reliable for the purposes of this report.

Agency Comments

We provided DOL and the Office of Management and Budget (OMB) with a draft of this enclosure. DOL provided technical comments on this enclosure, which we incorporated as appropriate. OMB did not have any comments on this enclosure.

GAO’s Ongoing Work

We continue to examine the implementation and administration of CARES Act UI programs and the implications of high claims volumes during the pandemic on the timeliness of benefit payments and on overall program integrity. We plan to conduct additional work to examine selected claimants’ experiences during the pandemic and with accessing CARES Act UI programs. We are also continuing to analyze selected states’ data on PUA benefit receipt by race and ethnicity as part of our ongoing work on the PUA program.

GAO’s Prior Recommendations

The table below presents our recommendations on UI programs from prior bimonthly CARES Act reports.
Prior GAO Recommendations Related to Unemployment Insurance (UI) Programs

Recommendation

Status

The Secretary of Labor should ensure the Office of Unemployment Insurance collects data from states on the amount of overpayments waived in the Pandemic Unemployment Assistance (PUA) program, similar to the regular UI program (March 2021 report).

Open. The Department of Labor (DOL) agreed with our recommendation and noted that it intended to issue PUA program guidance that would include revised reporting requirements and instructions for states to provide information on the amount of PUA overpayments waived. On June 17, 2021, DOL officials stated that the agency expected to publish guidance by mid-July 2021. As of June 21, 2021, this recommendation remained open, as this guidance had not yet been issued and no states had begun reporting this data. We will continue to monitor state reporting of PUA overpayments waived.

The Secretary of Labor should ensure the Office of Unemployment Insurance collects data from states on the amount of overpayments recovered in the PUA program, similar to the regular UI program (January 2021 report).

Open. DOL agreed with our recommendation and on January 8, 2021, issued PUA program guidance and updated instructions for states to report PUA overpayments recovered. As of June 21, 2021, this recommendation remained open, as just 27 states had begun reporting some data on the amount of PUA overpayments recovered. Sustained reporting by most states is needed to help inform DOL, policymakers, and the public about the amount of PUA overpayments states have recovered. We will continue to monitor state reporting of PUA overpayment recovery data.

The Secretary of Labor should ensure the Office of Unemployment Insurance pursues options to report the actual number of distinct individuals claiming benefits, such as by collecting these already available data from states, starting from January 2020 onward (November 2020 report).

Open. DOL partially agreed with our recommendation. Specifically, DOL agreed to pursue options to report the actual number of distinct individuals claiming UI benefits. However, DOL did not agree with the retroactive effective date of the reporting. In a letter dated March 30, 2021, DOL stated that it had begun developing a new state report that would capture data related to distinct individuals claiming regular UI benefits; DOL estimated that this data collection might begin in early 2022. DOL also reiterated its concerns about the feasibility of states reporting this information retroactively, including for the pandemic UI programs, without detracting from their primary obligation for timely and accurate claims processing.

As of June 21, 2021, this recommendation remained open. We maintain that DOL should pursue options to report the actual number of distinct individuals claiming UI benefits, retroactive to January 2020. Even if the information is unavailable for some time, these data are vital to understanding how many individuals are receiving UI benefits as well as the size of the population supported by the UI system during the pandemic. Given the substantial investment in UI programs during the pandemic, an accurate accounting of the size of the population supported by this funding may be critical to understanding the efficiency and effectiveness of the nation’s response to unemployment during the pandemic. An accurate accounting may also be critical to helping DOL and policy makers identify lessons learned about the administration and utilization of regular and expanded UI benefit programs.

We encourage DOL to pursue options to report the actual number of individuals claiming benefits in the most feasible and least burdensome way and at a time when providing this information retroactively will not detract from states’ primary obligation for timely and accurate claims processing. Collecting data from states is one way to address the recommendation, but DOL could develop other ways of gathering and reporting this information.

The Secretary of Labor should ensure the Office of Unemployment Insurance revises its weekly news releases to clarify that in the current unemployment environment, the numbers it reports for weeks of unemployment claimed do not accurately estimate the number of unique individuals claiming benefits (November 2020 report).

Closed. DOL’s weekly news release of December 10, 2020, clarified that the numbers reported for weeks of UI benefits claimed do not represent the number of unique individuals claiming benefits.

The Secretary of Labor should, in consultation with the Small Business Administration (SBA) and the Department of the Treasury, immediately provide information to state unemployment agencies that specifically addresses SBA's Paycheck Protection Program (PPP) loans, and the risk of improper payments associated with these loans (June 2020 report).

Closed. DOL neither agreed nor disagreed with our recommendation. Following our recommendation, DOL issued guidance on August 12, 2020, that clarified that individuals working full-time and being paid through PPP are not eligible for UI, and that individuals working part-time and being paid through PPP would be subject to certain state policies, including state policies on partial unemployment, to determine their eligibility for UI benefits. Further, the guidance clarified that individuals being paid through PPP but not performing any services would similarly be subject to certain provisions of state law, and noted that an individual receiving full compensation would be ineligible for UI.
Source: GAO. I GAO-21-551

Related GAO Product

Management Report: Preliminary Information on Potential Racial and Ethnic Disparities in the Receipt of Unemployment Insurance Benefits during the COVID-19 Pandemic. GAO-21-599R. Washington, D.C.: June 17, 2021.

Contact information: Thomas M. Costa, (202) 512-7215, costat@gao.gov

Economic Impact Payments

The Department of the Treasury and the Internal Revenue Service quickly issued the third round of direct payments to most eligible individuals, and have taken steps to begin issuing advance payments of the Child Tax Credit starting in July 2021, but are still not using some available data to improve outreach efforts.

Entities involved: Internal Revenue Service and Bureau of the Fiscal Service, within the Department of the Treasury

Recommendation for Executive Action

The Secretary of the Treasury, in coordination with the Commissioner of Internal Revenue, should release interim findings on the effectiveness of the notices it sent in September 2020 to nonfilers who are potentially eligible for economic impact payments; incorporate that analysis into Internal Revenue Service outreach efforts as appropriate; and then, if necessary, release an update based on new analysis after the 2021 filing season.

Treasury neither agreed nor disagreed with this recommendation and stated that it shares the underlying goal of reaching as many nonfilers as possible to encourage them to claim economic impact payments online. However, Treasury does not plan to release any interim findings until it completes its analysis.

Background

The American Rescue Plan Act of 2021 (ARPA) authorized the Internal Revenue Service (IRS) and the Department of the Treasury (Treasury) to issue direct payments, known as economic impact payments (EIP), to eligible individuals to help address financial stress due to the pandemic.[256] Starting on March 17, 2021, Treasury and IRS quickly issued a third round of direct payments (EIP 3) to most eligible individuals.[257] As of May 28, 2021, IRS reported that it had disbursed over 168.2 million payments totaling over $394.3 billion (see figure). From March 2021 through May 2021, the Bureau of the Fiscal Service disbursed the third round of payments in the form of direct deposits, paper checks, and debit cards.

Total Number and Amount of Economic Impact Payments (EIP) Disbursed, Rounds 1, 2, and 3, as of May 28, 2021

Eligible individuals who did not receive EIP 1 or EIP 2—or their maximum amount of the credit for which they were eligible—can claim a recovery rebate credit (RRC) on their tax year 2020 income tax return equal to the amount of the credit for which they are eligible, as reduced by their EIP 1 and EIP 2 amounts. According to IRS data, as of May 26, 2021, 21 million returns, nearly 21 percent of the total number of filed returns, included a claim for the RRC. Of these returns, almost 2.4 million (11 percent) only claimed an RRC; 97 percent of these returns belonged to someone with an adjusted gross income of $15,000 or less. These individuals likely would not have filed a tax return other than to claim an RRC because their income is below the minimum filing threshold or all their income is derived from federal benefits. This very low-income population is one of the groups IRS has been trying to reach through their communications efforts.

ARPA also directed IRS to make supplemental payments to individuals who received an EIP 3 prior to the processing of their 2020 tax return, but who are eligible for an additional payment based on their recently processed 2020 tax returns. For example, in situations where individuals’ adjusted gross income was lower or if they claimed more qualifying dependents on their 2020 tax return than their 2019 tax return, they may be eligible for an additional supplemental payment. As of June 3, 2021, IRS had issued over 8.1 million supplemental payments totaling over $16 billion.

ARPA also made several temporary changes that expand the eligibility of the child tax credit (CTC) to more families and increase the amount. The law makes the following changes:
  • increases the maximum age of a qualifying child dependent from 16 to 17 years old,
  • eliminates the earned income requirement, and
  • increases the maximum amount of the CTC from $2,000 to $3,600 per qualifying child for a young child (0 to 5 years old) and $3,000 per child for an older child (6 to 17 years old).

As part of implementing ARPA, beginning in July 2021, IRS and Treasury are responsible for issuing half of the expected 2021 CTC in periodic advance payments.[258] Eligible individuals can claim the remaining amount of the total 2021 credit for which they are eligible when filing their 2021 income tax return in 2022. The amount of the CTC payments advanced in 2021 is estimated based on the taxpayer’s 2020 income tax data or, if unavailable, the taxpayer’s 2019 income tax data and may be adjusted based on any other information provided by the taxpayer during 2021. IRS is developing an online portal for qualified individuals to update personal information or opt out of the advance payments.

In May 2021, IRS released guidance that provides instructions for individuals who are not otherwise required to file tax returns to receive the advance CTC payments and the third-round EIPs, and also allowed those individuals to claim the 2020 RRC.[259] The guidance outlines two procedures for individuals to follow: The first procedure permits individuals to file simplified returns, while the second procedure enables these individuals to file complete returns electronically even if they have zero adjusted gross income.

Overview of Key Issues

IRS’s EIP communication and outreach efforts. To publicize information about how to file a tax return with IRS to receive an EIP, IRS continued to partner with other organizations that work with communities that may not traditionally interact with IRS, such as lower-income families, senior citizens, veterans, tribal communities, and families with mixed immigration status.[260] However, according to officials from IRS partner organizations with whom we spoke, it continues to be a challenge to ensure that eligible nonfilers, particularly among hard-to-reach groups, such as those experiencing homelessness, receive their payments.

IRS partners reported particular difficulties with reaching underserved communities with limited internet access. Partners said an IRS phone hotline or television and radio advertisements sponsored by IRS could be helpful outreach sources. Most partners we interviewed that have an ongoing relationship with a local IRS office that understands the unique circumstances of the local community—compared with partners that do not traditionally interact with IRS—said they had received IRS materials, that IRS had tailored those materials to meet their constituents’ needs, and that IRS was responsive to their questions and follow-up requests.

Partners also told us their outreach efforts to nonfilers could be more effective if they had current data that help identify specific communities of nonfilers who may need assistance. Following our November 2020 recommendation, in January 2021, Treasury began analyzing nearly 9 million notices it sent to nonfilers who may be eligible for EIP 1 payments. However, Treasury does not plan to complete this analysis until fall 2021, more than 6 months after the first EIP 3 payments were issued. This timing will limit the usefulness of the analysis for informing EIP 3 outreach efforts. According to Treasury officials, they are incorporating information from the 2021 filing season into their analysis. The filing season ended May 17, but there is a 5-month extension to file amended returns, which means complete data would likely not be available until October.

Federal standards for internal control state that management should obtain relevant data from reliable sources in a timely manner based on the identified information requirements. Moreover, Treasury issued a fact sheet in January 2021 outlining efforts Treasury planned to take to help households who had not yet been able to access payments.[261] One action Treasury identified was to analyze and better understand underserved populations to enhance outreach efforts. We acknowledge that having data from the entirety of the filing season will allow for a more robust analysis, which Treasury and IRS could use to inform their outreach efforts for the expanded child tax credit. However, by waiting to complete the analysis, Treasury and IRS are missing an opportunity to identify communities that may have higher numbers of nonfilers, and use that information to inform their outreach efforts and distribute payments to qualified individuals in a more timely manner.

Similar to the previous acts authorizing EIP 1 and 2, ARPA requires Treasury and IRS to carry out a robust and comprehensive outreach program to ensure that all individuals eligible for recovery payments are informed of their eligibility and are provided assistance in applying for these payments.[262] IRS officials said they do not have a new plan to implement this outreach program; rather, they are incorporating the legislative requirements into their current communication strategy. For example, IRS is developing a database to collect feedback from its stakeholders and outreach partners to help update and assess its communication strategy on a quarterly basis.

In our September 2020 report, we recommended that IRS update estimates of eligible recipients who have not received a payment and share that and other relevant information with outreach partners. Fully implementing these recommendations, along with our November 2020 recommendation to analyze notices sent to potentially eligible individuals, would provide Treasury and IRS more information on the nonfiler population and also potentially provide insights into the effectiveness of targeted outreach efforts to reach these populations. Treasury officials said they continue to work on implementing these recommendations but recent changes, such as the extension of the 2020 filing season, have further delayed their efforts.

Payments to federal benefit recipients and incarcerated individuals. Treasury and IRS were able to quickly disburse the majority of EIP 3 payments to most eligible individuals within 3 weeks of the enactment of ARPA. Payments to federal benefit recipients were the last significant batch of payments to be disbursed 3 weeks after the passage of ARPA. These payments arrived later because IRS and the Social Security Administration (SSA) had to work together to put a reimbursable Memorandum of Agreement (agreement) in place to provide funding to SSA to complete non-mission work by providing IRS with up-to-date data on Social Security beneficiaries. SSA officials said they did not receive direct funding to cover any costs associated with preparing the data for IRS. SSA signed the agreement with IRS on March 16, 2021, after starting discussions with IRS in January. According to SSA officials, the agreement could not be signed until ARPA was signed into law on March 11, 2021. The agreement covered SSA’s administrative costs associated with providing SSA benefit recipient data to IRS and conducting a marketing and communication campaign to inform individuals about EIPs. SSA then provided its data to IRS on March 25, 2021.

The fourth batch of payments was issued to recipients of SSA and Railroad Retirement Board benefits. The fifth batch of payments was issued to recipients of Department of Veteran Affairs benefits. According to IRS officials, all three agencies needed to submit updated payments files to IRS, but only SSA had the additional step of a new reimbursable agreement to cover the expenses incurred. SSA does not have the authority to use its funding outside of its mission. SSA officials said that IRS requested information about certain federal benefit recipients in place of using existing tax information within IRS, which required a different file format and transmission process from EIP 1.[263] According to IRS officials, IRS changed the way in which it requested data from the agencies so that it could process their data more quickly.

IRS continues to experience challenges in delivering timely payments to incarcerated individuals. According to the attorneys who represented incarcerated individuals in a class action suit against Treasury regarding their eligibility for the payments, there have been several EIP-related challenges that have created confusion among this population. According to IRS data, Treasury and IRS disbursed just over 1.4 million EIP 1 payments to incarcerated individuals in 2020. IRS data also show that nearly 300,000 incarcerated individuals filed tax returns after the deadline for IRS to issue an EIP 1 or EIP 2. Of those individuals, over 70,000 were able to claim an RRC on their 2020 tax return. IRS officials said the remaining 229,000 returns that it reviewed and processed did not claim the RRC or were not eligible for it.

Incarcerated individuals who filed paper returns or who filed after December 31, 2020, may be caught in an IRS backlog of unprocessed returns. IRS is experiencing delays in processing certain returns received in 2021—including millions of returns claiming the RRC—resulting in extended time frames for some taxpayers. For more information about how these errors related to the RRC are affecting the filing season, see the 2021 Filing Season enclosure in appendix I.

Finally, payments to incarcerated individuals are at a higher risk of garnishment. Only statutory authorization for EIP 2 provided protection against garnishment; the statutory authorization for EIP 1 and 3 did not.[264] Federal and state prisons also have different rules regarding how and what portion of payments to incarcerated individuals can be garnished when otherwise permitted by law. According to Treasury and IRS, they have no jurisdiction over the payments once they disburse them, and there is no centralized data on how widespread garnishment is. The Consumer Financial Protection Bureau found fewer than 10 incidents in one state where it investigated garnishments of incarcerated individuals’ payments, upon which the state subsequently returned the EIPs to the recipients. Federal Deposit Insurance Corporation officials said their agency has not received reports that incarcerated individuals’ EIPs were garnished.

Payments in the U.S. territories. Residents of the five U.S. territories are eligible for EIPs from the territory tax authorities if they meet the income thresholds and other eligibility requirements.[265] IRS disbursed three rounds of economic impact funds to the U.S. territory tax administrators totaling $9.7 billion.

Territory residents generally received payments later than mainland residents because territory officials were required to submit payment plans to Treasury for review and approval before receiving funds for each round of payments. The plans specify how the territory tax administrators plan to disburse payments to territory residents. According to IRS officials, improved coordination between Treasury and the territory tax administrators helped expedite the process in subsequent rounds. IRS officials said that once Treasury approved a territory plan, IRS transferred the funds within 24–48 hours.

According to IRS data, over 116,000 duplicate payments—instances where both IRS and the territory tax administrators made the same payment—were issued during the first round of EIP. IRS officials said that as of March 18, 2021, IRS recovered $4.5 million from payments it had issued to 3,632 individuals. IRS does not have data on how much each of the territories has recovered. To the extent provided in the territory plans, each territory tax administrator is responsible for using available methods for recovering duplicate payments and returning the funds to Treasury. IRS is assessing its capability to collect any duplicate payments the territories are unable to recover.

Expired EIP payments. As of May 31, 2021, 583,000 EIP 1 checks, totaling around $822 million, were set to expire if not cashed, representing slightly less than 1 percent of the total number of payments disbursed.[266] The majority of uncashed EIP 1 check payments will expire by July 2021 if they are not cashed. In addition, over 153,000 EIP 1 debit cards remained unactivated as of May 31, 2021. Bureau of the Fiscal Service officials said they did not send notices to remind individuals to cash checks but are considering using social media to remind individuals to activate debit cards. Additionally, around 817,000 EIP 2 checks and over 486,000 EIP 2 debit cards had not been cashed or activated, totaling over $1 billion. Bureau of the Fiscal Service officials said EIP 2 check payments will start expiring in spring 2022.

IRS preparation for advance child tax credit payments. IRS officials are taking steps to begin issuing advance payments of the CTC starting in July 2021. According to Treasury and IRS, roughly 39 million households—covering 88 percent of children in the U.S.—are slated to automatically begin receiving monthly payments on July 15, 2021. Treasury and IRS also announced that CTC payments will be made on the 15th of each month, unless the 15th falls on a weekend or holiday.

IRS officials are offering three online tools to help individuals with the CTC payments: a Non-filer Sign-Up Tool, a portal (CTC UP) that individuals can use to opt out of the advance payments and update personal information, and an eligibility calculator. On June 14, 2021, IRS opened the Non-filer Sign Up Tool to allow individuals who do not normally file a tax return the opportunity to file a simplified return. This simplified return will allow individuals the opportunity to receive the advance CTC payments and the EIP 3 and to claim the 2020 RRC. IRS officials said the online tool would be similar to the tool established for the first round of EIPs. The new Sign-Up Tool is not available in a mobile friendly version in that it doesn’t scale to fit a phone or tablet screen. Two IRS outreach partners had previously said that the first EIP nonfilers tool could be difficult to access and navigate, particularly on a mobile device, which may be the only device readily available to some individuals.

The CTC Up portal became available on June 21, 2021. Initially, individuals will use the portal to check if they are eligible to receive advance payments and opt out of receiving them. IRS estimates that between 15 and 16 million individuals will opt-out of the advance payments. IRS is planning updates to the portal throughout 2021 to increase its functionality. For example, IRS officials said that starting on June 30, 2021, individuals will be able to update their bank account information. In September 2021, individuals will also be able to update their personal information such as marital status, income, and number of children. Lastly, in November 2021, IRS anticipates launching a Spanish version of the CTC portal, and prior to the start of the 2022 Filing Season, IRS will provide a summary of the advanced payments received to help taxpayers complete their 2021 tax returns.

To raise awareness about CTC advance payments, officials said IRS plans to leverage the outreach channels it established with federal agencies for EIP and work with childcare facilities, educational organizations, and stakeholders who assist individuals experiencing homelessness. On June 14, 2021, IRS published frequently asked questions on the CTC on its website (https://www.irs.gov/credits-deductions/2021-child-tax-credit-and-advance-child-tax-credit-payments-frequently-asked-questions). IRS also sent two notices to alert potentially eligible taxpayers of the advance CTC payments, provide estimated amounts of monthly advance CTC payments, and explain the opt-out option.

The White House declared June 21, 2021 as Child Tax Credit Awareness Day to ensure parents know about the expansion of the CTC and how it will benefit their families. As part of Child Tax Credit Awareness Day, the administration encouraged elected officials, organizations that assist children, and faith-based organizations, to help low-income families use the Non-Filer Sign Up Tool. In addition, Treasury publicly released zip code level data showing the number of children who may be eligible to be claimed for the CTC, but who had not been claimed on a recent tax return. This information could potentially help IRS and its outreach partners tailor outreach efforts for the EIP and CTC to specific communities. IRS also plans to hold in person events in a dozen cities to help eligible families prepare and file tax returns in June and July, 2021.[267]

IRS officials said they are facing multiple challenges as they prepare to issue advance payments, such as the short amount of time between the enactment of ARPA in March and the July start of payments. Staffing is another challenge. The IRS team responsible for the online portal is also responsible for EIP 3, the 2021 filing season, and preparing for the 2022 filing season.

IRS officials said they are also concerned about how to provide sufficient customer support to individuals given the current demands at IRS taxpayer assistance centers and the high number of telephone calls to customer support. IRS reported it intends to set up a dedicated phone line for CTC assistance (1-800-908-4184) and to redirect at least 1,800 customer service representatives and at least 220 bilingual representatives—to provide telephone assistance. As of June 2021, IRS is anticipating 12 million phone calls and expects to be able to answer 17 percent of those calls. IRS officials said that individuals who cannot access the portal can receive assistance at taxpayer assistance centers, however, IRS identified providing sufficient customer service as a risk.

IRS officials said they hope a new authentication process, Secure Access Digital Identity (SADI), will help alleviate some of the pressure on customer support. While IRS has been developing SADI using a third-party service since 2019, the CTC Up portal is the first IRS system that will authenticate users’ identity using SADI. IRS officials estimate that 70 to 80 percent of online users will be able to successfully complete authentication using SADI. IRS officials anticipate that the more people who can successfully authenticate their identity and access the portal will result in fewer people calling the support line for assistance.

In its comments, reproduced in appendix VIII, IRS deferred to Treasury on the recommendation.

Methodology

To review how Treasury and IRS administered EIP 3 payments, we examined Treasury and IRS data as of May 31, 2021, federal laws, and agency guidance. We reviewed the data and interviewed Treasury and IRS officials to determine the data were sufficiently reliable to describe the number and amount of payments disbursed.

We interviewed officials from Treasury and IRS about the administration of EIP 3. We also interviewed officials from the Social Security Administration, Consumer Financial Protection Bureau, and Federal Deposit Insurance Corporation to understand their roles in relation to Treasury and IRS’s administration of the EIP and to understand any support they are providing in preparation for advance payments of the CTC. We interviewed tax administrators from American Samoa, Guam, the Commonwealth of the Northern Mariana Islands, the Commonwealth of Puerto Rico, and the U.S. Virgin Islands to understand how they administered EIP 1, 2, and 3.

We asked representatives from 21 selected IRS outreach partners to provide us with their perspectives on IRS’s outreach coordination with their organizations. We selected 11 partners for their national outreach to underserved populations such as low-income families, veterans, and seniors; we also selected 10 partners for their local outreach to communities in ZIP codes with high numbers of potential nonfilers (based on IRS data). This sample is not representative, but the interviews provided us with illustrative examples of how organizations worked with IRS to reach traditionally underserved communities and what aspects of the IRS communications plan worked well, and they also highlighted potential areas for improvement.

Agency Comments

We provided a draft of this enclosure to Treasury, IRS, the Office of Management and Budget, Social Security Administration, Consumer Financial Protection Bureau, and Federal Deposit Insurance Corporation. Treasury and IRS provided comments, which are summarized below. Treasury also provided technical comments, which we incorporated as appropriate. The Office of Management and Budget, Social Security Administration, Consumer Financial Protection Bureau, and Federal Deposit Insurance Corporation did not provide comments on this enclosure.

In its comments, reproduced in appendix XI, Treasury neither agreed nor disagreed with our recommendation, and stated that it shares the underlying goal of reaching as many nonfilers as possible to encourage them to claim EIPs online. However, Treasury also stated that it is unable to release interim findings and analysis at this time. According to Treasury, the analysis is not yet complete. Moreover, Treasury stated that disclosing partial analysis could limit the extent of its ability to publicize the currently outstanding data (as part of a future, complete data set) because of prohibitions on disclosure of taxpayer data under section 6103 of the Internal Revenue Code.

As stated in the report, we acknowledge that having data from the entirety of the filing season will allow for a more robust analysis. However, by waiting to complete the analysis, Treasury and IRS are missing an opportunity to identify communities that may have higher numbers of nonfilers, and use that information to inform their outreach efforts during the extended 2021 filing season. This type of information could support Treasury and IRS’s ongoing effort to reach eligible families to get them to register for the advance CTC payment before the nonfilers tool closes in October 2021. IRS’s outreach partners told us their outreach efforts to nonfilers could be more effective if they had current data that help identify specific communities of nonfilers who may need assistance. Treasury and IRS could also ensure any partial data releases are structured to not disclose taxpayer data. IRS has existing guidance for preparing statistical tabulations and does not allow releasing data tabulations with fewer than 10 or 20 observations, depending on the circumstances, so that the data cannot be associated with or otherwise identify a particular taxpayer.[268]

GAO’s Ongoing Work

We will continue to monitor IRS and Treasury's efforts to analyze data that could potentially improve communication and outreach to nonfilers. We will also continue to monitor IRS and Treasury’s progress to ensure eligible individuals receive their third EIP, and their efforts to issue the advance payments of the CTC.

GAO’s Prior Recommendations

The table below presents our recommendations on economic impact payments from prior bimonthly CARES Act reports.
GAO’s Prior Recommendations Related to Economic Impact Payments

Recommendation

Status

The Commissioner of Internal Revenue should periodically review control activities for issuing direct payments to individuals to determine that the activities are designed and implemented appropriately as the Internal Revenue Service (IRS) disburses a third round of economic impact payments (EIP) and prepares for advance payments on the child tax credit. These control activities should include appropriate testing procedures, quality assurance reviews, and processes that ensure payments distributed by tax partners reach the intended recipients (March 2021 report).

Open. IRS disagreed with the recommendation. However, IRS acknowledged that it established additional procedures and reviews upon discovering that it had sent millions of payments to the wrong account. IRS also stated that it plans to assess the effectiveness of these new controls during the next round of EIPs and will adjust them as warranted.

The Secretary of the Treasury, in coordination with the Commissioner of Internal Revenue, should begin tracking and publicly reporting the number of individuals who were mailed an EIP notification letter and subsequently filed for and received an EIP, and use that information to inform ongoing outreach and communications efforts (November 2020 report).

Open. The Department of the Treasury (Treasury) and IRS agreed with this recommendation. According to Treasury officials, Treasury began analyzing data in January 2021 on those individuals who received a notice and subsequently filed for and received a first-round EIP (EIP 1). However, Treasury does not plan to complete this analysis until fall 2021, more than 6 months after the first payments of the third round of direct payments (EIP 3) were issued, limiting how any findings could inform EIP 3 outreach efforts. According to Treasury officials, they are incorporating information from the 2021 filing season into their analysis. The filing season ended May 17, but there is a 5-month extension to file amended returns.

The Secretary of the Treasury, in coordination with the Commissioner of Internal Revenue, should make estimates of eligible recipients who have yet to file for an EIP, and other relevant information, available to outreach partners to raise awareness about how and when to file for EIPs (September 2020 report).

Open. Treasury and IRS neither agreed nor disagreed with our recommendation, but did take some actions that are consistent with our recommendation. For example, in September 2020, the agencies used tax return information to identify nearly 9 million individuals who had not received an EIP 1 and then notified these individuals that they may be eligible for a payment. The letters also provided instructions on how to request a payment. In addition, IRS publicly released detailed ZIP code data from the notices to help community outreach partners with their own outreach efforts.

The Secretary of the Treasury, in coordination with the Commissioner of Internal Revenue, should update and refine the estimate of eligible recipients who have yet to file for an EIP to help target outreach and communications efforts (September 2020 report).

Open. Treasury and IRS neither agreed nor disagreed with our recommendation, but did take some actions that are consistent with our recommendation. For example, in January 2021, Treasury revised its estimate of eligible recipients who have yet to file for an EIP 1 to 8 million. According to Treasury officials, this estimate is based on the 9 million notices IRS sent in September 2020. Treasury officials stated that it is likely that some of the 9 million recipients have since claimed the EIP, but Treasury did not provide data supporting this claim.

The Commissioner of Internal Revenue should consider cost-effective options for notifying ineligible recipients on how to return payments (June 2020 report).

Closed. Treasury and IRS took steps to implement our recommendation, such as providing instructions on the IRS website requesting that individuals voluntarily mail the appropriate EIP amount sent to the decedent back to IRS, for both electronic and paper check payments. Treasury has also held and canceled payments made to decedents, along with those that have been returned. As of April 30, 2021, around 57 percent (just over $704 million) of the $1.2 billion in EIP 1 sent to deceased individuals had been recovered.

As of March 2021, Treasury and IRS had not taken any further action to recoup payments made to decedents that had not been returned. IRS officials determined that further actions, such as initiating erroneous refund cases against the estates of the decedents to which payments were made and not returned, could be burdensome to taxpayers, the federal court system, and IRS. As such, IRS officials concluded that doing so is not prudent at this time.
Source: GAO. | GAO-21-551

Related GAO Product

Standards for Internal Control in the Federal Government. GAO-14-704G. Washington, D.C.: September 10, 2014.

Contact information: James R. McTigue Jr., (202) 512-6808, mctiguej@gao.gov

2021 Tax Filing Season

The Internal Revenue Service needs to clearly communicate the nature and extent of 2021 tax refund delays to clarify expectations for taxpayers.

Entity involved: Internal Revenue Service, within the Department of the Treasury

Recommendation for Executive Action

The Commissioner of Internal Revenue should direct the appropriate officials to update relevant pages of irs.gov and, if feasible, add alerts to the Internal Revenue Service’s toll-free telephone lines to more clearly and prominently explain the nature and extent of individual refund delays occurring for returns taxpayers filed in 2021. The Internal Revenue Service neither agreed nor disagreed with this recommendation.

Background

The Internal Revenue Service’s (IRS) annual tax filing activities include processing over 150 million individual and business tax returns electronically or on paper, issuing hundreds of billions of dollars in refunds, and providing customer service to tens of millions of taxpayers on return processing issues, such as suspected identity theft and math errors. During the 2021 filing season, IRS was also responsible for issuing a third round of economic impact payments to millions of taxpayers totaling over $388 billion as of May 12, 2021; updating its systems and procedures to incorporate tax law provisions enacted in early 2021; and processing millions of tax returns remaining from the 2020 filing season.[269]

According to IRS officials, these additional responsibilities, coupled with reduced staffing due to ongoing COVID-19 pandemic conditions and an increase in manual work, have impacted IRS’s ability to assist taxpayers and process returns during the 2021 filing season. As a result, taxpayers are experiencing unusually long delays in receiving refunds and difficulty reaching IRS for assistance.

Overview of Key Issues

Returns processing and refund delays. IRS is experiencing delays in processing certain returns received in 2021, resulting in extended time frames for some taxpayers. Specifically, as of the end of the 2021 filing season in mid-May, IRS had about 25.5 million unprocessed individual and business returns, including about 1.2 million returns from its 2020 backlog, and 13.7 million returns IRS suspended due to errors.[270] IRS staff must manually review these returns with errors. IRS typically has unprocessed returns in its inventory at the end of the filing season, but not to this extent. For example, at the end of the 2019 filing season, IRS had 8.3 million unprocessed individual and business returns, including 2.7 million returns suspended for errors.[271]

IRS officials stated that many of the returns are being held due to potential errors in the information taxpayers provided for both the Recovery Rebate Credit, which individuals can claim on their tax year 2020 income tax return if they were eligible for but did not receive their first or second 2020 economic impact payment or did not receive the full amount, and the temporary changes to the Earned Income Tax Credit, which allows taxpayers to use prior year income from 2019 to increase their benefits under this credit. For example, if a taxpayer entered a different amount for the Recovery Rebate Credit than IRS has in its records (such as if the taxpayer had a child since the previous filing season), the return would be suspended for manual review to resolve the discrepancy. IRS reported that it is taking longer than usual to manually review some of these returns, but it has not provided specific time frames. Further, as discussed below, information on the reasons for delayed returns and refunds is not easy for taxpayers to find.

As of May 14, 2021, IRS’s website stated that more than nine out of 10 refunds are issued in less than 21 days. This information provides taxpayers with a general sense of when they will likely receive their refund and at what point they should call IRS for more information. In interviews with representatives of the tax industry, such as software providers and tax preparer organizations, representatives noted that taxpayers were frustrated when they had not received their refunds within IRS’s posted time frames and that they could not get any explanation from IRS’s website, including the Where’s My Refund application, or when calling IRS’s toll-free telephone line.

Taxpayer service limitations. With significantly more returns being held for manual review than in prior years, more taxpayers are trying to get information on the status of their returns and refunds. However, taxpayers have had a difficult time getting a status update on their refund from IRS, either via phone or online:

Phone services. Specifically, during our review between January 1 and May 1, 2021, IRS’s level of telephone service—the percentage of taxpayers seeking and reaching live assistance—was 14.3 percent, compared to an average of about 78 percent level of service for the end of filing seasons 2017 through 2019. IRS’s call volume and demand for live assistors has been unprecedented this year: IRS data show that between January 1 and May 1, 2021, it received about 65.6 million calls from taxpayers, compared to about 15.6 million calls during the same period in 2019.

In addition, IRS’s automated message on its toll-free telephone line for individual taxpayers has not been updated to explain refund delays or to include any other alerts associated with the 2021 filing season. The message as of May 14, 2021, informs taxpayers about refund interest payments they may have received in August 2020. In early May 2021, IRS officials stated that once the filing season starts, it is difficult for IRS to make changes to its telephone system’s automated messages due to scheduled blackout periods and other potential risks to the telephone infrastructure. However, these officials stated that they had no plans to update the recorded messages when the blackout period ends in late May 2021.

Online services. IRS’s website does not contain all of the relevant information regarding 2021 return processing delays and delays in issuing taxpayers’ refunds. Rather, IRS’s webpages devoted to information on refunds state that IRS continues to process and issue refunds and that most of these are issued in 21 days or less.

Further, the information IRS has posted online is not easy for taxpayers to find. While IRS added information on its “IRS Operations and Services” web page about the status of its operations, including a partial explanation for why some refunds have been delayed this filing season, this information is difficult to find because it requires navigating through several pages from the irs.gov home page and is located on a page with information on COVID-19-related tax relief and mission-critical functions. Other web pages that taxpayers might easily access, such as the “Refunds” page or related “Frequently Asked Questions” page, do not include complete information about delays in 2021 returns processing.

After we explained these concerns to IRS officials in early May 2021, IRS updated its “Refunds” and “Frequently Asked Questions” pages to include some information on delays. However, the information IRS posted was inconsistent. For example, one page stated that IRS was experiencing delays in opening mail, and the other page indicated that IRS was current on opening mail. In addition, IRS updated its refund-related pages to include an alert linking to the “IRS Operations and Services” page, which contains status updates on return and refund processing (see figure). However, this alert does not clearly state that a taxpayer will learn about potential refund delays by clicking the link to the “IRS Operations and Services” page.

Internal Revenue Service (IRS) Web Page for Taxpayers on Refund Expectations

Note: We captured this screenshot from https://www.irs.gov/refunds/what-to-expect-for-refunds-this-year on May 6, 2021.

When we asked IRS about the limited information online about current refund delays, officials said that they did have some information online and they were not sure what additional information would be helpful. We provided some examples, such as updating specific web pages related to refund information and frequently asked questions. Officials indicated they would consider making changes, but as of May 20, 2021, had not yet done so.

Federal internal control standards state that management should externally communicate necessary quality information to achieve the entity’s objectives. Government entities should report this information to government leaders and regulators, as well as the general public. Without clear, timely information on reasons why some refunds are being delayed during the 2021 filing season, taxpayers lack information on when they should expect to receive their refunds. This may lead taxpayers to continue to call IRS with limited success, due to IRS’s limited ability to answer a high number of incoming calls or lack of information on returns being held for errors. Further, taxpayers that count on their refunds to cover certain expenses do not have essential information to make alternative plans. Providing updated and timely information on irs.gov may help reduce the volume of calls to IRS from taxpayers and help reset taxpayers’ expectations.

Methodology

To conduct this work, we reviewed 2021 filing season return processing and customer service performance data, reviewed federal laws and agency communications, and interviewed IRS officials. To assess the reliability of these data, we interviewed IRS officials and assessed the data for any limitations. Due to disruptions during the 2020 filing season affecting performance, we compared the most recent data available from the 2021 filing season to 2019 filing season data from the same period to determine the extent to which the 2021 filing season differs from a typical year. We determined the data were sufficiently reliable for the purposes of our reporting objective.

Agency Comments

We provided a draft of this enclosure to the Department of the Treasury, IRS, and the Office of Management and Budget. The Department of the Treasury and the Office of Management and Budget had no comments on this enclosure. IRS’s comments are reproduced in appendix VIII and summarized below. IRS also provided technical comments, which we incorporated as appropriate.

In its comments, IRS neither agreed nor disagreed with our recommendation. IRS stated that it will review its messaging on the general state of returns processing and provide clarity as needed. IRS also noted that its “Where’s My Refund” tool provides taxpayers with the most current information on the status of their return and refund. After IRS provided its comments in mid-June 2021, we found that IRS had updated irs.gov to provide clearer information about refund delays. We also found that IRS had removed outdated messaging from its automated toll-free telephone line for taxpayers. We will follow up with IRS on other planned updates to its website and taxpayer telephone line. Based on this information, we will determine if the agency’s actions are sufficient to fully address our recommendation.

GAO’s Ongoing Work

We have ongoing work to evaluate IRS’s 2021 filing season performance, including the ongoing impact of COVID-19.

Related GAO Product

Standards for Internal Control in the Federal Government. GAO-14-704G. Washington, D.C.: September 10, 2014.

Contact information: Jessica Lucas-Judy, (202) 512-6806, lucasjudyj@gao.gov

Nutrition Assistance

Expenditures for key federal nutrition assistance programs remain at record levels because of increased need and the federal response to the pandemic, as the Department of Agriculture works to ensure program integrity.

Entities involved: Food and Nutrition Service, within the Department of Agriculture

Background

Demand and expenditures for key federal nutrition assistance programs have remained high throughout the COVID-19 pandemic. According to the Food and Nutrition Service’s (FNS) most recent data, 42 million individuals participated in the Supplemental Nutrition Assistance Program (SNAP), the largest federal nutrition assistance program, in March 2021. SNAP benefits in that month totaled $9 billion, about 70 percent more than the amount of benefits issued in March 2020.[272] SNAP participation also grew during this period, but to a lesser extent.[273] FNS officials said the agency anticipates it will expend all of the approximately $101.8 billion appropriated for SNAP benefits for fiscal year 2021, which would exceed the previous historic high for the program by more than $25 billion.[274]

FNS, within the Department of Agriculture (USDA), administers SNAP and other federal nutrition assistance programs, including the new Pandemic Electronic Benefits Transfer program (Pandemic EBT); the Special Supplemental Nutrition Program for Women, Infants, and Children (WIC); the Emergency Food Assistance Program (TEFAP); and the Nutrition Assistance Program for the Commonwealth of Puerto Rico, American Samoa, and the Commonwealth of the Northern Mariana Islands. Eligibility criteria vary across FNS’s nutrition assistance programs, and individuals and households may receive assistance from multiple programs.

Throughout the COVID-19 pandemic, legislative and executive actions have resulted in increased funding and expenditures for FNS’s nutrition assistance programs. In March 2021, the American Rescue Plan Act of 2021 (ARPA) extended a temporary 15 percent increase in benefits for all SNAP participants through September 2021.[275] In April 2021, FNS announced that it would begin providing additional SNAP benefits through emergency allotments to households that were already receiving the maximum, or almost the maximum, SNAP benefit for their household size.[276] FNS estimated that this adjustment to eligibility for SNAP emergency allotments would result in approximately 25 million SNAP participants receiving additional benefits and would cost approximately $1 billion per month. FNS’s other nutrition assistance programs have also collectively received and expended billions of dollars in COVID-19 funding. The table below shows total COVID-19 funding and expenditures as of May 2021 for SNAP as well as a selection of other programs.
COVID-19 Funding and Expenditures for Selected Federal Nutrition Assistance Programs as of May 31, 2021

Program

Description

Total COVID-19 funding ($)a

COVID-19 expenditures as of May 31, 2021 ($)

SNAP

Provides low-income individuals and households with benefits to purchase allowed food items and achieve a move nutritious diet.

16.8 billionb

Indefinite appropriationc

15.5 billion

5.7 billion

Pandemic EBT

Provides households with children who would have received free or reduced-price school meals if not for school closures due to COVID-19, as well as eligible children in childcare, with benefits to purchase food.

Indefinite appropriationd

13.3 billione

WIC

Provides eligible low-income women, infants, and children up to age 5 who are at nutrition risk with nutritious foods to supplement diets, information on healthy eating, and referrals to health care.

1.4 billion

475.8 million

TEFAP

Provides low-income individuals with groceries through food banks.

1.25 billion

705.7 million

Nutrition Assistance Program

Provides block grants to Puerto Rico, American Samoa, and the Commonwealth of the Northern Mariana Islands to provide food assistance to low-income households in these territories.

1.9 billion

676.8 million
Legend: Pandemic EBT = Pandemic Electronic Benefits Transfer; SNAP = Supplemental Nutrition Assistance Program; TEFAP = the Emergency Food Assistance Program; WIC = Special Supplemental Nutrition Program for Women, Infants, and Children.
Source: GAO analysis of relevant provisions of the Families First Coronavirus Response Act; the CARES Act; the Consolidated Appropriations Act, 2021; and the American Rescue Plan Act of 2021 as well as information from the Food and Nutrition Service (FNS), within the Department of Agriculture. | GAO-21-551

Note: This table provides information about selected programs and is not intended to provide comprehensive information about all federal nutrition assistance funding provided during the COVID-19 pandemic.
aAmounts shown from the Consolidated Appropriations Act, 2021 reflect amounts appropriated in Division N, pertaining to COVID-19 response and relief.
bIn some cases, COVID-19 relief laws provided specific amounts of funding to carry out certain SNAP provisions, and in other cases such laws provided an indefinite appropriation for certain SNAP provisions. The $16.8 billion shown reflects total COVID-19 funding for SNAP provisions that included a specific amount in COVID-19 relief laws.
cThe Consolidated Appropriations Act, 2021 provided an indefinite appropriation for certain COVID-19 relief provisions, including a provision that temporarily increased SNAP benefits by 15 percent through June 2021. The American Rescue Plan Act of 2021 extended this increase in SNAP benefits through September 2021.
dThe Families First Coronavirus Response Act provided an indefinite appropriation for Pandemic EBT.
eThe $13.3 billion shown reflects Pandemic EBT expenditures through March 2021, the most recent data available as of June 2021. FNS officials noted that there is a lag in reporting Pandemic EBT expenditures because FNS must manually input state-reported Pandemic EBT data into its accounting system.

Our prior work has highlighted concerns with SNAP improper payments.[277] For example, in April 2020, we recommended that FNS develop and implement a process, documented in policies and procedures, to analyze the root causes of state SNAP estimated improper payments to identify potential similarities among states and develop and implement agency-level corrective actions, if appropriate, to help address them. FNS generally agreed with the recommendation and, in June 2021, officials said the agency had finalized a standard operating procedure to assist FNS in working with states to develop and implement corrective action plans for SNAP improper payments, among other things. We plan to review the standard operating procedure and monitor FNS’s implementation of it. According to the most recent FNS estimate available, the SNAP estimated improper payment rate was 7.36 percent in fiscal year 2019, totaling approximately $4 billion in estimated improper payments that year.

Overview of Key Issues

FNS will assess the susceptibility of Pandemic EBT to significant improper payments. FNS officials said the agency plans to assess Pandemic EBT’s susceptibility to significant improper payments in summer 2021.[278] Pandemic EBT is a new program, authorized in March 2020, to provide benefits to households with children who would have received free or reduced-price school meals if not for school closures due to COVID-19.[279] As of March 2021, Pandemic EBT had expenditures of $13.3 billion. This amount will likely increase significantly during the remainder of fiscal year 2021. For example, FNS estimates that issuing Pandemic EBT benefits in summer 2021 will cost approximately $13 billion. FNS officials previously told us they had not assessed Pandemic EBT for susceptibility to significant improper payments, because it is a temporary program and states have considerable discretion to determine eligibility. However, in April 2021, FNS determined that the agency would perform an improper-payment risk assessment for Pandemic EBT and expects to complete the assessment in summer 2021.

The Payment Integrity Information Act of 2019 (PIIA) directs the head of each executive agency to consider risk factors (examples of which are listed in the law) that are likely to contribute to susceptibility to significant improper payments.[280] See the table for examples of such risk factors that may apply to Pandemic EBT.
Examples of Risk Factors Listed in the Payment Integrity Information Act of 2019 (PIIA) Compared with Characteristics of the Pandemic Electronic Benefits Transfer Program (Pandemic EBT)

PIIA risk factors for improper payments

Characteristics of Pandemic EBT

The program or activity is new to the executive agency.

The program started in March 2020.

The volume of payments made through the program or activity.

The program had expenditures of $13.3 billion as of March 2021.

Payments or payment eligibility decisions are made outside the executive agency, such as by a state or local government.

State agencies make payment eligibility decisions.

There have been recent major changes in program funding, authorities, practices, or procedures.

Several changes have been made to the program since March 2020, including expansion to certain children younger than 6 years and children who are in child care as well as extension through fiscal year 2021.

The program has similarities to other programs or activities that have reported improper payment estimates or been deemed susceptible to significant improper payments.

Program benefits are often loaded onto Supplemental Nutrition Assistance Program (SNAP) electronic benefits transfer cards for households also receiving SNAP. The reported SNAP improper payment rate in fiscal year 2019 was 7.36 percent.
Source: GAO analysis of relevant federal law and information from the Food and Nutrition Service, within the Department of Agriculture. | GAO-21-551

Additionally, the Office of Management and Budget (OMB) issues guidance for federal agencies regarding improper payments.[281] OMB guidance provides that newly established programs should complete an improper payment risk assessment after the first 12 months of the program, a time span that the Pandemic EBT program has exceeded. Also, in general, we and many federal Inspectors General have identified reducing and preventing improper payments as a significant challenge under the COVID-19 relief laws, citing the large amount of money at issue and the need to distribute funds rapidly under emergency conditions.[282]

States have experienced challenges in implementing Pandemic EBT, some of which may indicate the program’s potential susceptibility to significant improper payments. To implement Pandemic EBT, state SNAP officials we interviewed said they needed to work with other state agencies, such as educational agencies, to identify eligible participants. Some state SNAP officials we interviewed identified multiple challenges experienced in securing data to identify and verify eligible participants. For example, officials in one state said state privacy laws impeded data sharing. Officials in another state said the data systems at the SNAP agency and the educational agency were incompatible, making data matching for payment integrity difficult. In that state, the SNAP agency tried to match its data to the list of eligible students from the educational agency’s data to verify addresses and identify any duplication of participants. However, state officials noted that differences between the state SNAP agency’s and the state educational agency’s data systems made this process challenging.

In one instance, a state SNAP official we interviewed noted that the agency had identified some ineligible individuals who had received Pandemic EBT benefits and that the state was unsure what recourse it could take, given the lack of FNS guidance or regulations on the issue. The official said colleagues in other states had identified similar concerns. Officials from the American Public Human Services Association similarly told us that state officials have expressed concern about ineligible individuals’ receiving Pandemic EBT and have also expressed confusion about the steps they should take if they identified ineligible recipients. Unlike for SNAP, FNS has not issued regulations on methods for recovering Pandemic EBT overpayments or states’ ability to disqualify a recipient from Pandemic EBT as a penalty.[283] Instead, for school year 2020–21, FNS’s Pandemic EBT state plan template required states to outline a process to recover or adjust benefits to correct payment accuracy errors.[284]

FNS’s forthcoming assessment of Pandemic EBT’s susceptibility to significant improper payments may inform agency efforts to ensure payment integrity and may guide the agency’s efforts to offer states technical assistance, mitigation strategies, or corrective actions.

FNS cannot calculate SNAP payment error rates for fiscal years 2020 and 2021 but has continued other work to ensure program integrity.

Payment error rate. The payment error rate is integral to SNAP program integrity.[285] In addition to being the basis for establishing the rate of improper payments for SNAP, the error rate is an important factor in FNS oversight of state SNAP agencies. The payment error rate determines state liability for errors that exceed the national target and informs the development of corrective actions to mitigate or reduce payment errors.

In February 2021, FNS announced that it cannot calculate SNAP national and state payment error rates for fiscal years 2020 and 2021.[286] FNS explained that it must develop SNAP payment error rates on the basis of a legislatively mandated Quality Control (QC) review process.[287] However, COVID-19 relief laws and FNS gave states the flexibility to suspend SNAP QC reviews from March 2020 through June 2021 in response to the pandemic.[288] According to FNS officials, all states opted to suspend QC reviews. As a result, FNS determined that it lacked the data necessary to determine error rates. USDA’s Office of General Counsel agreed with FNS’s determination that it could not calculate SNAP payment error rates for fiscal years 2020 and 2021. FNS officials said they also notified OMB of their inability to calculate the SNAP payment error rate.

FNS officials said the agency considered its options for analyzing the SNAP QC data that states submitted in fiscal year 2020 before the pandemic (i.e., from October 2019 through February 2020), but several factors limited the usefulness of these data for publication. For example, FNS officials said that because the available fiscal year 2020 SNAP QC data do not cover any months during the pandemic, FNS and states could not use those data to understand the pandemic’s effect on the SNAP error rate. Officials also explained that calculating a partial-year error rate with incomplete data could expose FNS to the risk of lawsuits from states because states with a high SNAP error rate are subject to sanctions. Last, FNS officials said that using fewer than 12 months of SNAP QC data could result in estimates of the SNAP payment error rate that would be too imprecise to be instructive for FNS and the states.

Oversight of state agencies. Though FNS has determined that it cannot calculate SNAP payment error rates, officials said other SNAP program integrity efforts have continued during the pandemic. Officials said they are currently developing guidance to assist states to resume SNAP QC reviews in July 2021. Several FNS regional officials we interviewed also said that, though all states had opted to suspend SNAP QC reviews, most states continued to perform QC reviews on their own, in some cases using smaller sample sizes as a part of their program integrity efforts. Officials from one regional office said that all states in their region continued to provide QC data to the regional office so that regional officials could review their cases and provide feedback.

Most state SNAP officials we spoke with said they received regular technical assistance regarding payment accuracy from their FNS regional offices during the pandemic. FNS held payment accuracy training for all SNAP QC offices at both the national and regional levels, and FNS regional officials said they were continuing to provide technical assistance on payment accuracy to states both periodically, through conference calls, and on demand. To ensure compliance with program requirements, regional officials also performed scheduled Management Evaluations of states during the pandemic.[289]

Finally, FNS officials told us that the lack of a payment error rate will not impede their work with states currently under sanction for having high SNAP error rates in prior years. Officials further explained that FNS will continue monitoring corrective action plans, including reviewing and updating them.

Demographic information. In addition to calculating the error rate, FNS uses data derived from the SNAP QC reviews to produce the annual report Characteristics of Supplemental Nutrition Assistance Program Households for a given fiscal year. The report describes the demographics of SNAP households and participants nationwide and provides an overview of SNAP benefit levels during that fiscal year. FNS officials said they are assessing the reliability of the available data to determine whether they will be able to produce the report given the SNAP QC suspension during the pandemic. They acknowledged that FNS, policymakers, and other stakeholders use information from this report for many purposes. As long as the agency determines the data are sufficiently reliable, FNS intends to issue Characteristics of Supplemental Nutrition Assistance Program Households for fiscal year 2020. The agency will follow a similar process to assess the fiscal year 2021 data after the fiscal year ends, according to officials.

Workforce capacity challenges affected states’ implementation of SNAP throughout the COVID-19 pandemic. The COVID-19 pandemic has strained the capacity of most states’ SNAP agency staff and slowed SNAP operations, according to officials we interviewed from each of FNS’s seven regional offices and from five selected state SNAP agencies. Overall, state and regional officials highlighted the following factors that affected the capacity of state SNAP agencies to administer the program during the pandemic:
  • Higher volume of applications. Many states received and processed substantially higher numbers of SNAP applications, especially at the outset of the pandemic. For example, officials we interviewed in one state said they received double the typical number of applications per week during the early months of the pandemic.
  • Sudden shift to remote work. Local SNAP offices were unprepared for teleworking and did not have the technology (e.g., laptops) to deliver SNAP services remotely. It was difficult for them to adjust workflow processes typically performed in person.
  • Shortages of personnel. In some states, COVID-19 caused personnel shortages as staff adjusted work schedules to quarantine and care for children.
  • Simultaneous operation of other programs. Some states redirected SNAP staff and resources toward planning and implementing Pandemic EBT. In a few states, the pandemic coincided with natural disasters such as hurricanes, causing these states to redirect SNAP staff toward Disaster SNAP operations.[290]

States relied on several strategies to mitigate the challenges of decreased workforce capacity during the pandemic. As we have previously reported, adjustments to SNAP operations allowed by COVID-19 relief laws have helped states streamline program operations and increased their ability to process the large influx of SNAP applications efficiently.[291] For example, officials from six FNS regional offices said states in their regions benefited immensely from adjustments related to certification processes (e.g., to determine participants’ eligibility and benefit levels for SNAP). Some states also pursued innovative technological solutions—such as equipping SNAP websites with chatbots to assist applicants or mass-texting participants and eligible populations about programmatic changes—that increased staff capacity to work on other pressing issues.[292] In addition, FNS officials said that states would spend fiscal year 2021 administrative funds authorized for Pandemic EBT in ways that will reduce SNAP staff’s Pandemic EBT workload. FNS officials anticipate common types of administrative spending will include contracting with call centers to provide customer support and translating program information into multiple languages.

FNS plans to modernize WIC to help promote access to WIC benefits. We have previously reported that FNS is taking steps to provide WIC participants options to purchase food online, similar to SNAP participants. FNS has several ongoing efforts in this area.

WIC Task Force. In response to a Consolidated Appropriations Act, 2021 requirement, FNS established a WIC Task Force in March 2021 to study how to streamline and promote convenience, safety, and equitable access to WIC benefits, including online and phone ordering, curbside pickup, and home delivery. According to FNS officials, although setting up the task force in a short period of time was a challenge, recruiting members who represent various interests (as required by the act) to serve on the task force was not difficult.[293] The task force held a kickoff meeting on March 24, 2021, and is now meeting regularly to complete its study and provide results and recommendations to USDA by September 30, 2021.

Grants to states. In fall 2020, FNS awarded a $2.5 million, 3-year competitive grant to the Gretchen Swanson Center for Nutrition to develop and test a safe and secure model for online ordering in WIC. According to FNS officials, the center plans to begin soliciting grant proposals from states in summer 2021. FNS officials said they are working closely with the center and are on track to award subgrants to states by fall 2021. In addition, FNS officials told us the center worked with experts to develop a document that includes policy, technical, and programmatic information to guide state agencies and other stakeholders as they adopt and implement WIC online ordering.

WIC benefit increase and outreach. ARPA provided $490 million to USDA to offer a temporary increase of up to $35 per month to the WIC cash-value voucher for fruits and vegetables during the pandemic.[294] On March 24, 2021, FNS sent a memo to state WIC agencies to implement this provision, allowing states to provide this increase for up to 4 consecutive months through September 30, 2021. As of June 11, 2021, FNS officials said all states had opted to provide this increase.

In addition, ARPA provided $390 million to USDA for fiscal year 2021 for WIC outreach, innovation, and program modernization efforts, including waivers and flexibilities, to increase participation and benefit redemption.[295] (This funding is available through fiscal year 2024.) FNS officials acknowledged that WIC is underused and said that the agency is giving high priority to conducting outreach to attract eligible people to the program, especially those in underserved populations.[296] Further, FNS officials told us that the agency’s other priorities are to simplify the WIC enrollment process and to support WIC through modernization and technology. They said FNS is currently developing strategic goals for the agency’s efforts to increase access to, and use of, WIC benefits and is also developing plans to engage with stakeholders, such as state and local agencies, on this effort.

FNS plans to offer new food options to help address the continuing challenge of canceled TEFAP orders during the pandemic. FNS plans to offer new food products and ways to buy food as states continue to face challenges with canceled TEFAP orders. We previously reported that TEFAP orders FNS canceled during the pandemic led to shortages of certain products, such as canned meats, soups, and vegetables, in food banks nationwide at a time of increased demand and made it difficult for states to spend TEFAP funds provided through COVID-19 relief laws. We reported that FNS canceled orders for several reasons, including a lack of vendor bids on the orders, unavailability of food due to supply chain issues, and increased costs for transportation and raw materials.

In April 2021, FNS officials told us that these factors continued to contribute to cancelations of TEFAP orders but that there were fewer canceled orders than in the past. According to FNS data from March 2020 to March 2021, the magnitude of canceled TEFAP orders in terms of both the estimated value of the food and total number of truckloads was highest in October 2020, at 33 percent, and decreased by March 2021 to 18 percent. Officials from the American Commodity Distribution Association and Feeding America agreed that canceled TEFAP orders continued to be a challenge and that the causes remained the same.

To address these challenges, according to FNS officials, the agency is working to add new food products and prepackaged, fresh produce to TEFAP to help ensure states can spend COVID-19 funds before they expire on September 30, 2021. On April 9, 2021, USDA announced that it would add prepackaged produce boxes as an option for TEFAP through the rest of fiscal year 2021, as it ends a similar program that provided boxes of food to food banks and other providers.[297] FNS officials told us that, although they believe states and food banks will appreciate the fresh-produce option, the agency is testing this approach to assess demand for prepackaged produce boxes and whether to continue offering them.

Officials from Feeding America said they appreciated how intentional USDA has been in gathering insight from Feeding America’s food bank network regarding adding new food products to TEFAP, including type, size, and method of packaging. Officials from the American Commodity Distribution Association said the box of mixed produce does not replace canceled shelf-stable items, as fresh produce must be distributed within 30 days of receipt and is extremely difficult to move. Further, according to Feeding America officials, although COVID-19 relief funds for TEFAP will help to some extent, they are expecting a 30 to 40 percent drop in USDA foods in Feeding America’s food bank network during 2021, given that a USDA trade mitigation program has ended.[298]

Methodology

To conduct our work, we reviewed FNS data on program participation through March 2021 that were released in June 2021 and FNS data on expenditures as of May 31, 2021—the most recent data available at the time of our analysis. We determined these data were sufficiently reliable for our purposes by reviewing program documentation, discussing the data with knowledgeable FNS officials, and conducting manual testing for outliers or other errors.

In addition, we interviewed officials from FNS’s National Office and all seven FNS regional offices. We also interviewed SNAP officials in five states—California, Illinois, Louisiana, Montana, and Virginia—selected on the basis of a variety of factors, including states’ overall SNAP participation rates, requests for certain SNAP adjustments during the pandemic, methods of issuing Pandemic EBT benefits for school year 2019–20, and geographic diversity. In interviews with FNS and state officials, we discussed their experiences in administering SNAP and Pandemic EBT during the pandemic, FNS’s guidance and assistance to states, and program integrity issues. Further, we reviewed relevant federal laws, FNS guidance, and relevant documents. Finally, we interviewed, or otherwise solicited input from, representatives of the American Commodity Distribution Association, the American Public Human Services Association, Feeding America, and the National WIC Association.

Agency Comments

We provided a draft of this enclosure to FNS and OMB for review and comment. FNS provided technical comments, which we incorporated as appropriate. OMB did not provide comments.

GAO’s Ongoing Work

Our work on FNS’s response to COVID-19 through its nutrition assistance programs is ongoing. We will continue to examine FNS’s use of COVID-19 relief funds, its efforts to ensure program integrity, and its efforts to help vulnerable populations access the programs. In addition, we will continue monitoring FNS’s actions to ensure stakeholders and the public have sufficient context to understand and interpret data on federal nutrition assistance programs during the pandemic. Moreover, we will continue monitoring FNS’s actions to ensure stakeholders and the public are aware of potential sources of error in its data on participation and expenditures for some of its nutrition assistance programs during the pandemic.

GAO’s Prior Recommendations

The table below presents our recommendation from a prior bimonthly CARES Act report.
Prior GAO Recommendation Related to COVID-19 Nutrition Assistance

Recommendation

Status

The Secretary of Agriculture should ensure that the Administrator of the Food and Nutrition Service (1) provides sufficient context to help stakeholders and the public understand and interpret data on federal nutrition assistance programs during the pandemic and (2) discloses potential sources of error that may affect data quality during the pandemic, such as manual processing. For example, the agency could publish key information from its internal communications plan that it developed for the January 2021 data release and include additional table notes in subsequent data releases to help explain these issues (March 2021 report).

Open. As of June 2021, the Food and Nutrition Service (FNS) had taken steps toward implementing this recommendation. For example, the agency added several table notes to data it released in April 2021 to help provide stakeholders and the public with sufficient context to understand and interpret key data. FNS officials said the agency is currently discussing next steps for disclosing potential sources of error, such as manual processing of participation and expenditures data for some programs.
Source GAO. I GAO-21-551

Related GAO Product

Payment Integrity: Selected Agencies Should Improve Efforts to Evaluate Effectiveness of Corrective Actions to Reduce Improper Payments. GAO-20-336. Washington, D.C.: April 1, 2020.

Contact information: Kathryn A. Larin, (202) 512-7215, larink@gao.gov

Child Nutrition

The Food and Nutrition Service has taken multiple steps to increase children’s access to meals during the COVID-19 pandemic; however, federal child nutrition programs continue to serve fewer meals than before the pandemic, and schools face ongoing challenges in increasing meal service in the 2021–22 school year.

Entity involved: Food and Nutrition Service, within the U.S. Department of Agriculture

Background

Federal child nutrition programs administered by the U.S. Department of Agriculture’s (USDA) Food and Nutrition Service (FNS) help improve children’s nutrition and combat child hunger by providing cash reimbursements for meals and snacks for eligible children in schools or at other locations when schools are closed. The largest programs, the National School Lunch Program (NSLP) and School Breakfast Program (SBP), subsidize meals for nearly 30 million children in approximately 95,000 elementary and secondary schools nationwide in a typical year.[299] NSLP and SBP typically serve children at school during the school year. In addition, the Summer Food Service Program (SFSP) and Seamless Summer Option (SSO) typically provide meals for school-age children during the summer months. Finally, the Child and Adult Care Food Program (CACFP) provides meals to younger children enrolled for care at participating childcare centers and day care homes, and to school-age children participating in CACFP At-risk Afterschool programs.[300] In general, FNS provides the largest subsidies for free- or reduced-price meals and snacks served to children from low-income households.

According to the Census Household Pulse Survey, from April 2020 through February 2021, the percentage of U.S. households with children reporting that they often or sometimes did not have enough to eat in the last 7 days fluctuated from roughly 12 to 15 percent.[301] As we reported in September 2020 and March 2021, FNS granted various nationwide waivers in response to pandemic-related school closures that began in spring 2020, to facilitate meal provision while limiting potential COVID-19 exposure. For example, these waivers allow meals to be served in noncongregate settings, enable parent and guardian meal pickup, and provide flexibility in foods served and meal times.[302]

In addition to granting the various waiver flexibilities, in spring 2020 FNS began allowing schools and other meal providers to operate under summer meal programs—SFSP and SSO—which are generally more flexible than NSLP. FNS also waived the requirement that summer meal sites providing free meals to all children must be located in areas where at least half of the children are from low-income households. This waiver expanded the population of children eligible for free meals, which eased the administrative burden of tracking and collecting payment for school meals while maintaining social distancing guidelines.

Various COVID-19 relief laws have provided funding or authority to USDA to support child nutrition programs during the pandemic. For example:
  • The CARES Act provided $8.8 billion in supplemental funds.[303] As of May 31, 2021, FNS had disbursed nearly all of this funding to states and other meal providers, using the majority of the funds, $8.615 billion, to reimburse providers for the cost of meals served during the pandemic. FNS used the remainder of the funds, $185 million, to operate Emergency Meals-to-You, a new partnership that delivered meals to address pandemic-related nutrition needs among children from low-income households in rural areas throughout spring and summer 2020.[304]
  • The Families First Coronavirus Response Act granted FNS authority to issue nationwide waivers in certain programs for specific purposes.[305] The Continuing Appropriations Act, 2021 and Other Extensions Act, enacted in October 2020, extended this authority and provided an indefinite appropriation to cover the costs incurred as a result of the waiver extensions.[306] As of May 31, 2021, FNS had not obligated any of this funding for child nutrition programs.
  • The Consolidated Appropriations Act, 2021, enacted in December 2020, provided additional funding to support CACFP childcare providers and school nutrition programs by replacing some of the decline in reimbursement funding in spring 2020.[307] As of May 31, 2021, FNS had not obligated any of this funding for child nutrition programs.

Overview of Key Issues

School districts and other providers served one-third fewer meals in March through November of school year 2020–21 than in the previous year, but changes varied by season. Although waiver flexibilities were in place to facilitate meal provision, according to the most recent available data from FNS, 32 percent—over 2 billion—fewer meals were served under NSLP, SBP, SFSP, and CACFP from March through November 2020 than during the same months in 2019 (see figure). In total, from March through November 2020, meals served under SFSP accounted for 40 percent of all meals served under the four child nutrition programs, compared with 2 percent during the same period in 2019. From March through November 2020, the number of meals served under NSLP, SBP, and CACFP dropped by a combined 58 percent. As we reported in March, school district nutrition officials we interviewed attributed this drop in meals served to several factors, including school closures. The flexibilities allowing operators to use SFSP—which has a higher reimbursement rate and provides free meals—contributed to an increase in meals served under SFSP during the pandemic; however, the increase in meals served under SFSP did not make up for the decreases in the other programs. Although children may be accessing nutrition assistance through food banks, pantries, and other programs, such as the Pandemic EBT program, the extent to which these programs may be filling the gap is not known.

Total Meals Served by Key Federal Child Nutrition Programs, Mar.–Nov. 2019 and Mar.–Nov. 2020

Notes: Totals shown for CACFP include child meals only. Totals shown for SBP and NSLP include meals served through the Seamless Summer Option, a program that allows school districts operating SBP and NSLP to continue using the same meal service rules and claiming procedures as in the regular school year throughout the summer and during unanticipated school closures. According to Food and Nutrition Service, the number of meals reported for any given month is subject to marginal revisions over time for a variety of reasons, including late claims and changes that come as a result of routine monitoring activity.

Although FNS data indicate the number of meals served under each child nutrition program, the expanded eligibility provided by the waivers may make it difficult to determine whether children of certain ages accessed meals through these programs. Specifically, waivers allowed more operators to offer summer meal programs, which can serve all children younger than 18 years rather than only school-age children.[308] As a result, young children who would have typically received meals from day care centers operating CACFP may have accessed meals through summer meal programs during pandemic-related day care closures.[309] At the same time, hunger advocacy officials we interviewed in one state suggested that families whose children were not yet school age may have been unaware of and therefore not accessing these meals, particularly if they did not have school-age siblings.

Differences in the numbers of total meals served through NSLP, SBP, SFSP, and CACFP in school year 2020–21 and in the prior year varied by season. During spring 2020 (March through May) and fall 2020 (September through November), school district nutrition programs and other providers served 42 and 33 percent fewer meals, respectively, than during the same months in 2019. In contrast, meal providers served roughly the same number of meals in the summer 2020 (June through August) as in summer 2019, although the number of meals served in June and July was slightly higher in 2020 than in 2019.

Officials from half of the district nutrition programs and most of the hunger advocacy groups we interviewed told us the flexibilities provided by FNS waivers reduced typical barriers to summer meals and presented an opportunity to expand summer food service.[310] This may explain why, in spite of the pandemic, the number of meals served was roughly the same in summer 2020 as in summer 2019. An official from one hunger advocacy group attributed an increase in meals served in July 2020 specifically to the waiver flexibilities allowing meals to be served in noncongregate settings (i.e., “grab-and-go”). In addition, nutrition program officials from two of the districts told us that schools and other providers in their areas provided more meals during summer 2020 than in prior summers. Officials from two of the hunger advocacy groups agreed, reporting that waiver flexibilities facilitated summer meal service. FNS officials said that after operating summer meal programs during the pandemic, some districts and providers may be more likely to continue to serve meals in future summers. Such an increase in summer meal providers could improve children’s access to summer meals after the pandemic.

FNS leveraged an existing pilot program to distribute meals to high-need children, but participation was regionally concentrated. FNS utilized other programs to serve meals to children whose schools were closed during the pandemic, including Pandemic EBT and Emergency Meals-to-You, which both served high-need children and reduced barriers to accessing food.[311] FNS established the Emergency Meals-to-You program by repurposing an existing summer pilot project (Summer Meals-to-You) to provide boxes of shelf-stable food via mail to children in rural, high-poverty areas in spring and summer 2020.[312] Through its cooperative agreement with FNS, the Baylor Collaborative on Hunger and Poverty operated Emergency Meals-to-You from April through August 2020 and provided approximately 39 million meals to more than 270,000 children in 345 school districts nationwide, according to FNS data.[313]

Access to meals during school closures in rural areas has been a persistent area of concern. For example, in May 2018, we reported challenges with summer meal–site operations that might contribute to underserving of rural communities, including Indian reservations. Officials from hunger advocacy groups whom we interviewed for our current report stated that during the pandemic, rural communities experienced limited access to federal child nutrition programs because of challenges such as lack of transportation. The Emergency Meals-to-You program addressed some of these challenges by shipping boxes of shelf-stable meals directly to eligible children in participating school districts, including several districts serving American Indian and Alaska Native children. According to our analysis, schools funded by the Bureau of Indian Education (BIE), within the Department of the Interior, made up 6 percent of districts participating in Emergency Meals-to-You.[314]

Although the program was available nationwide, almost 90 percent of meals served under Emergency Meals-to-You went to children in the South, and approximately 50 percent were served to children in Louisiana and Texas. Officials from FNS and the Baylor Collaborative on Hunger and Poverty attributed this trend to high rates of rural child poverty in the South and noted that southern state agencies actively encouraged districts to apply for Emergency Meals-to-You.[315] Officials from three of the six school district nutrition programs we interviewed in non-Southern states said they were not aware of Emergency Meals-to-You or of their district’s eligibility to participate while the program was ongoing.

Officials from one FNS regional office told us that state nutrition offices’ level of involvement was an important predictor of districts’ participation in the program. One state nutrition program official suggested states may not have understood that they played a critical role in notifying districts about the program. According to officials from the Baylor Collaborative on Hunger and Poverty, some states were less proactive than others because their resources were already strained during the pandemic.

As school year 2021–22 begins, school learning models and other factors may affect school district nutrition programs’ efforts to return meal service to prepandemic levels.

School learning models. The various learning models—remote, in-person, and hybrid—that schools nationwide adopted during school year 2020–21 may continue in some schools in 2021–22, presenting challenges for school nutrition programs.[316] In its April 2021 handbook on safe reopening of schools, the U.S. Department of Education stated that school leaders should design a variety of meal distribution schedules and feeding models, such as in-person and grab-and-go, to ensure equity among recipients.[317]

Nearly all of the district nutrition and hunger advocacy officials we interviewed described challenges that affected meal service under a hybrid model. For example, one district nutrition official reported that the district could use vans to deliver food when learning was fully remote in spring 2020 but had to stop food delivery when the school changed to hybrid learning, because the vans were needed for more traditional uses. In another district, a nutrition official said that variability in school learning models and student attendance made it difficult to plan meal service and estimate the number of students needing in-person versus grab-and-go meals. In addition, the official reported that the hybrid model required additional resources for serving meals in person while also packing and distributing boxes of meals for remote learners.

Enrollment and staffing. Almost all of the district nutrition and hunger advocacy officials also cited consequences of the pandemic that raised uncertainties for meal service in the coming year. Some district nutrition officials said that the changes in student enrollment, in some cases due to families changing districts or electing homeschooling, would make it difficult to anticipate the number of meals needed. Most district nutrition and hunger advocacy officials described ongoing staffing challenges as a result of the pandemic. For example, nutrition officials in three districts described concerns about staff retention and shortages. In addition, officials in two districts expressed concern that potential furloughs, being considered because of financial constraints, could exacerbate staffing shortages and make it difficult to fill these positions when normal operations resume. In its handbook, the Department of Education noted that schools that are reopening will need sufficient staff to maintain services for in-person, hybrid, and remote students. According to the National CACFP Sponsors Association, staffing may also be a challenge for childcare centers and day care homes that had to let staff go during the pandemic because of low enrollment.[318]

Waivers. Many officials from district offices and hunger advocacy organizations told us that the FNS waivers had been critical in enabling operators to serve meals throughout the pandemic and noted that it would be helpful if the waivers continued through school year 2021–22. In response to state and district requests for continued flexibilities, on April 20, 2021, FNS announced that it would extend through school year 2021–22 several key waivers to aid in social distancing, such as allowing meals to be served in noncongregate settings, enabling parent and guardian meal pickup, and providing flexibility in foods served and meal times. In addition, FNS issued a new waiver allowing schools to operate SSO when school is open during the regular school year.[319] FNS also issued a waiver allowing SSO operators to claim these meals at the higher SFSP reimbursement rate, with the intent of promoting nutritious meals while managing increases in pandemic-related costs. FNS officials noted that they are currently developing guidance related to these new waivers that will include instructions for submitting claims for reimbursements.

FNS did not extend the waiver allowing schools to operate SFSP when school is open during the regular school year. However, because they are allowed to operate SSO, schools may continue to provide free meals to all students in the upcoming school year without the administrative requirement of tracking and collecting payments from students. According to FNS officials, FNS made the decision not to extend the SFSP waivers in part because SFSP has lower nutritional standards than SSO, which emphasizes, among other things, fruits, vegetables, and whole grains.

Methodology

To conduct our work, we analyzed the most recent data available from FNS on meals served through four key child nutrition programs—NSLP, SBP, SFSP, and CACFP—and the Emergency Meals-to-You program. We also used data for school year 2019–20 (the most recent available) from the Department of Education’s CCD, matching and merging these data with the list of school districts participating in Emergency Meals-to-You, to identify school district characteristics, such as BIE status, from the CCD. To assess the reliability of these data, we reviewed existing information about the data and reporting processes, interviewed agency officials, and conducted electronic testing of the data. We determined that these data were sufficiently reliable for our purposes.

We also reviewed relevant federal laws and agency guidance and documents, and we interviewed officials from FNS’s national and regional offices. Additionally, in four states—Georgia, Maine, Texas, and Washington, which we selected in part on the basis of variation in geographic location and school operating policies at the time of selection—we interviewed state nutrition directors and officials from hunger advocacy organizations as well as district nutrition officials from three school districts in each state. Further, we interviewed officials from the School Nutrition Association and National CACFP Sponsors Association. The information presented from these interviews is not intended to be representative but instead to provide examples of meal providers’ experiences during the COVID-19 pandemic.

Agency Comments

We provided a draft of this enclosure to FNS and the Office of Management and Budget for review and comment. They did not provide comments on this enclosure.

GAO’s Ongoing Work

We will continue to monitor data on the number of meals served by the child nutrition programs FNS administers, FNS’s use of COVID-19 relief funds, and its efforts to provide flexibilities to states and school districts to support child nutrition. We plan to review FNS’s monitoring and oversight of child nutrition programs in our future work.

Related GAO Product

Summer Meals: Actions Needed to Improve Participation Estimates and Address Program Challenges. GAO-18-369. Washington, D.C.: May 31, 2018.

Contact Information: Kathryn A. Larin, (202) 512-7215 or larink@gao.gov

Employer Tax Relief

Employers have claimed about $17.6 billion of employer tax credits, as of May 2021; new information on the Small Business Administration’s Paycheck Protection Program loan forgiveness webpage, posted in response to a proposed recommendation, could help eligible borrowers make decisions to maximize their Employee Retention Credits.

Entities involved: Small Business Administration and Department of the Treasury, including the Internal Revenue Service

Background

The Families First Coronavirus Response Act (FFCRA) and the CARES Act provide tax credits to covered employers to mitigate the cost of paid sick and family leave for employees affected by COVID-19, as well as provide an Employee Retention Credit for all eligible employers, among other tax relief. The Consolidated Appropriations Act, 2021 (CAA, 2021), enacted in December 2020, and the American Rescue Plan Act of 2021 (ARPA), enacted in March 2021, amended and extended some aspects of these credits. The Internal Revenue Service’s (IRS) capacity to implement new initiatives, such as the relief laws’ tax credits, is an ongoing challenge cited in our 2021 High-Risk Report.

Tax credits for employers. The Joint Committee on Taxation (JCT) estimates that the COVID- related tax credit provisions in the four laws will result in about $246 billion in foregone revenue for the federal government for fiscal years 2021-2031.[320]

The paid leave credits and the Employee Retention Credit are both fully refundable payroll tax credits, meaning that they are credited first against certain payroll taxes (also referred to as employment taxes), and any excess over those payroll taxes is refunded to the employer. These payroll tax credits may be claimed on the employer’s employment tax return, typically Form 941, Employer’s Quarterly Federal Tax Return. To receive immediate relief, employers may reduce their semiweekly or monthly payroll tax deposits (or next day deposits, if applicable) by the amount of their anticipated credit.[321] If an anticipated credit amount remains after reducing deposits, employers may receive an advance payment by filing Form 7200, Advance Payment of Employer Credits Due to COVID-19.[322] Form 7200 must be submitted using electronic fax (e-fax). The tax credits include the following:
  • Leave credits.[323] Businesses and tax-exempt organizations with fewer than 500 employees and certain government entities are eligible for refundable tax credits for sick and family leave.[324] The tax credits under the FFCRA, as amended and extended by the CAA, 2021, for leave taken from April 1, 2020, through March 30, 2021, are equal to qualified leave wages paid to employees, plus the employer share of Medicare taxes paid with respect to qualified wages and allocable health plan expenses. The tax credits under the ARPA for leave taken from April 1, 2021, through September 30, 2021, are equal to qualified leave wages paid to employees, plus the employer share of Medicare tax and the employer share of Social Security tax paid with respect to the qualified leave wages, and allocable health plan expenses and certain collectively bargained contributions as shown below. In the table, we summarize the FFCRA and ARPA paid sick and family leave tax credits. Certain self-employed persons in similar circumstances are allowed equivalent credits.
Comparison of Tax Credits for Paid Leave under the Families First Coronavirus Response Act, as amended and extended by the Consolidated Appropriations Act, 2021 and the American Rescue Plan Act, 2021

Families First Coronavirus Response Act

American Rescue Plan Act of 2021

Periods of leave for which employers may claim credits

Apr. 1, 2020–Mar. 31, 2021

Apr. 1, 2021–Sept. 30, 2021

Eligible entities

Businesses and tax exempt organizations with fewer than 500 employees and self-employed individuals.

Expanded to include state and local governments, as well as 501(c)(1) tax-exempt federal government entities.

Employment tax against which the credit may be applied

Employer share of Social Security tax.

Changed to employer share of Medicare tax for periods of leave taken after March 31, 2021.

Qualifying paid leave definitions

Sick leave: Includes quarantine or isolation order (or caring for someone under these orders), seeking COVID-19 diagnosis, and childcare.

Family leave: Childcare when school or other care is unavailable due to COVID-19.

Sick leave: Expanded to include obtaining a COVID-19 vaccine or illness related to immunization, or waiting for COVID-19 test results.

Family leave: Expanded to include all qualifying reasons for paid sick leave.

Qualifying wages for the credits and credit maximums

Sick leave: Wages paid for up to 80 hours for a full-time employee and allocable health plan expenses and employer share of Medicare taxes. Credit maximum is dependent on the purpose for taking the sick leave.a

Family leave: After 10 days of other leave (unpaid, personal, etc.), employees receive leave that is at least two-thirds of their usual pay (max $200 per day and $10,000 total per employee) and allocable health plan expenses.

Sick leave: Credit also increased for certain collectively bargained contributions and the employer’s share of Social Security tax imposed on the wages.b A new 80-hour period for paid leave eligible for the credits for leave wages after March 31, 2021.

Family leave: Credit also increased for certain collectively bargained contributions and the employer’s share of Social Security tax imposed on the wages. The first 10 days of leave may qualify as paid family leave wages and the per-employee limit is increased to $12,000 and resets for periods of leave after March 31, 2021.
Source: GAO analysis. | GAO-21-551

aQualified sick leave wages cannot exceed $511 per day ($5,110 total) for employees if they are taking leave because of a government quarantine or isolation order, self-quarantine, or seeking a COVID-19 diagnosis or related to vaccination when ARPA is in effect. Qualified sick leave wages cannot exceed $200 per day ($2,000 total) for employees if they are caring for someone in quarantine or isolation or caring for a child.
bCertain collectively bargained contributions’ includes defined benefit pension plan contributions which are paid or incurred by an employer during the calendar quarter on behalf of its employees to a defined benefit plan which meets certain requirements, are made based on a pension contribution rate, and are required to be made pursuant to the terms of a collective bargaining agreement. The term also includes contributions which are paid or incurred by an employer on behalf of its employees with respect to the calendar quarter to a registered apprenticeship program, are made based on an apprenticeship program contribution rate, and are required to be made pursuant to the terms of a collective bargaining agreement.

  • Employee Retention Credit. Under the CARES Act as amended by the CAA, 2021 and ARPA, eligible employers of any size—including tax-exempt entities, certain governmental entities, and self-employed individuals with employees—can claim the refundable Employee Retention Credit.[325] The credit amount is based on qualified wages paid to employees, including certain health care expenses. Qualified leave wages for which leave credits are allowed are not included in qualified wages for which an employer may claim the Employee Retention Credit.[326] The table below describes statutory changes made to the Employee Retention Credit.
Selected Changes to the Employee Retention Credit in the American Rescue Plan Act, 2021 and Previous Legislation

CARES Act

Changes in the Consolidated Appropriations Act, 2021

Changes in the American Rescue Plan Act of 2021

Eligibility period for qualified wages paid

Mar. 13–Dec. 31, 2020

Extended Jan. 1–June 30, 2021

Extended through Dec. 31, 2021

Eligible entities

Any employer operating a trade or business or a tax-exempt organization, except governments and their agencies and instrumentalities

Expanded to include:
  • public colleges or universities,
  • government entities whose principal purpose is medical or hospital care, and
  • certain tax-exempt federal entities a

No change

Employment tax offset

Employer portion of Social Security tax

No change

Changed to employer portion of Medicare tax

Eligibility requirements

Employers must experience either:

full or partial suspension of operations due to governmental orders during any quarter or

significant decline in gross receipts, more than 50 percent for the same calendar quarter in 2019b

Amended to require that gross receipts decline to 80 percent of gross receipts for the same quarter in 2019; employers may elect to make the determination using the previous calendar quarterc

Amended to also allow “recovery startup businesses”, who otherwise would not meet eligibility criteria, to be eligible to claim the creditd

Percent of qualified wages eligible for credite

50 percent of qualified wages ($10,000 per employee for the year), including certain health care expenses

100 or fewer employees, all wages count toward qualified wages

Increased maximum to 70 percent ($10,000 per calendar quarter per employee) for wages paid between January 1 and June 30, 2021

500 or fewer employees, all wages count toward qualified wages

Maximums unchanged.

“Severely financially distressed employers” may treat all wages as qualified wages f

No change for small employer qualified wages

Credit maximums

Maximum credit of $5,000 per employee in 2020

Increased the maximum per employee to $7,000 per employee per quarter in 2021

Quarterly maximum unchanged, but extension of dates means $28,000 possible per employee in 2021

“Recovery startup businesses” may receive up to $50,000 per calendar quarter

Interaction with Paycheck Protection Program (PPP)

Generally, an employer receiving a PPP loan is not eligible for the employee retention credit (but see retroactive change for 2020).

PPP borrowers are eligible for the Employee Retention Credit retroactive to 2020. However, employers cannot use the same wages for the credit and to obtain forgiveness of the PPP loan.

No change
Source: GAO analysis. | GAO-21-551

aAn organization described in section 501(c)(1) of the Internal Revenue Code can claim the credit.
bEmployers are no longer eligible in the first quarter after the one in which gross receipts are more than 80 percent of the same quarter in the previous calendar year.
cBusinesses formed in 2020 may use the same quarter in 2020 to establish eligibility.
dEmployers which began carrying on any trade or business after February 15, 2020, with average annual gross receipts in the prior three tax years that do not exceed $1 million and that do not experience a full or partial suspension of operations due to a governmental order or a decline in gross receipts.
eSmall eligible employers may treat wages paid to employees for providing services and wages paid to employees for not providing services as qualified wages. Large eligible employers may treat only wages that are paid to employees who are not providing services as qualified wages.
fSeverely financially distressed employers are those with gross receipts that are less than 10 percent of what they were in the same calendar quarter in 2019.

  • Consolidated Omnibus Budget Reconciliation Act (COBRA) Premium Assistance Credit. Under federal COBRA requirements and comparable state laws, certain employers must provide employees who experienced specific events with the option for continued health insurance coverage.[327] Under ARPA, eligible individuals are provided with a 100 percent premium subsidy of COBRA coverage for periods of coverage from April 1, 2021, through September 30, 2021.