Highlights
What GAO Found
As the nation continues to respond to, and recover from, the COVID-19 pandemic, increases in COVID-19 cases in July, August, and September 2021, primarily due to the Delta variant of the virus, have hampered these efforts. From the end of July 2021 to September 23, 2021, the number of new cases reported each day generally exceeded 100,000, according to Centers for Disease Control and Prevention (CDC) data. This was a daily case count not seen since February 2021 (see figure).
Meanwhile, COVID-19 vaccination efforts continue. As of September 23, 2021, about 64 percent of the U.S. population eligible for vaccination (those 12 years and older), or almost 183 million individuals, had been fully vaccinated, according to CDC.
The government must remain vigilant and agile to address the evolving COVID-19 pandemic and its cascading impacts. Furthermore, as the administration implements the provisions in the COVID-19 relief laws, the size and scope of these efforts—from distributing funding to implementing new programs—demand strong accountability and oversight. In that vein, GAO has made 209 recommendations across its body of COVID-19 reports issued since June 2020. As of September 30, 2021, agencies had addressed 33 of these recommendations, resulting in improvements including increased oversight of relief payments to individuals and improved transparency of decision-making for emergency use authorizations for vaccines and therapeutics. Agencies partially addressed another 48 recommendations. GAO also raised four matters for congressional consideration, three of which remain open.
In this report, GAO is making 16 new recommendations, including recommendations related to fiscal relief funds for health care providers, recovery funds for states and localities, worker safety and health, and assessing fraud risks to unemployment insurance programs. GAO’s recommendations, if swiftly and 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 findings and recommendations, where applicable, are discussed below.
Relief for Health Care Providers
A total of $178 billion has been appropriated to the Provider Relief Fund (PRF) to reimburse eligible providers for health care–related expenses or lost revenues attributable to COVID-19. As of August 31, 2021, the Department of Health and Human Services (HHS) had allocated and disbursed about $132.5 billion of this amount and had allocated but not yet disbursed about $21.5 billion; the remaining $24.1 billion was unallocated and undisbursed. On September 10, 2021, HHS announced that $17 billion of the previously unallocated $24.1 billion would be allocated for a general distribution to a broad range of providers who could document COVID-related revenue loss and expenses. HHS expected to begin disbursing the funds in December 2021.
As of September 2021, HHS’s Health Resources and Services Administration (HRSA) had not established time frames for implementing and completing post payment reviews for all PRF payments. In addition, the agency had not finalized procedures for recovery of overpayments or recovered the bulk of the overpayments that it had already identified.
Without post-payment oversight to help ensure that relief payments are made only to eligible providers in correct amounts and to identify unused payments or payments not properly used, HHS cannot fully address stated payment integrity risks for the PRF and seek to recover overpayments, unused payments, or payments not properly used. GAO recommends that HRSA take steps to finalize and implement post-payment oversight. Specifically, HRSA should establish time frames for completing post-payment reviews to promptly address identified risks and identify overpayments made from the PRF, such as payments made in incorrect amounts or payments to ineligible providers; and it should finalize procedures and implement post-payment recovery of any PRF overpayments, unused payments, or payments not properly used. HHS—which includes HRSA—partially agreed with these recommendations.
Coronavirus State and Local Fiscal Recovery Funds
In March 2021, the American Rescue Plan Act of 2021 (ARPA) appropriated $350 billion to the Department of the Treasury (Treasury) to provide payments from the Coronavirus State and Local Fiscal Recovery Funds (CSLFRF). The CSLFRF allocates funds to states, the District of Columbia, localities, tribal governments, and U.S. territories to cover a broad range of costs stemming from the COVID-19 pandemic’s fiscal effects. According to Treasury data, it had distributed approximately $240 billion from the CSLFRF to recipients as of August 31, 2021 (see figure).
Coronavirus State and Local Fiscal Recovery Funds Allocations and Treasury Distributions as of Aug. 31, 2021, by Recipient Type
As of July 2021, some of the 48 states that responded to GAO’s survey reported that they had somewhat less than or much less than sufficient capacity to report on their use of CSLFRF allocation consistent with federal requirements (17 of 48 states), capacity to disburse the funds (13 of 48 states), and apply appropriate internal controls and respond to inquiries about requirements (10 of 48 states). In addition, most states (44 of 48) reported that they had taken or planned to take additional steps—such as hiring new staff or reassigning existing staff—to help them manage their CSLFRF allocations.
As of August 2021, Treasury was developing—but had not finalized or documented—key internal processes and control activities to monitor recipients’ use of their CSLFRF allocations for allowable purposes and to respond to internal control and compliance findings. According to officials, these internal processes and control activities were in the development stage, partly because of the short time frame since ARPA’s enactment and because Treasury’s Office of Recovery Programs, established in April 2021, continues to work to recruit and onboard key team members.
Until Treasury properly designs and documents policies and procedures to guide CSLFRF program officials and other responsible oversight parties in the Office of Recovery Programs, there is a risk that key control activities needed to help ensure program management fulfills its recipient monitoring and oversight responsibilities may not be established or applied effectively and consistently. This risk may be particularly acute with respect to monitoring state and local recipients that face capacity challenges in managing their CSLFRF allocations in accordance with federal requirements, as some survey respondents noted. GAO recommends that Treasury design and document timely and sufficient policies and procedures for monitoring CSLFRF recipients to provide assurance that recipients are managing their allocations in compliance with laws, regulations, agency guidance, and award terms and conditions. Treasury agreed with the recommendation.
Unemployment Insurance Fraud Risk Management
GAO continues to have concerns about potential fraud in the unemployment insurance (UI) program, including concerns about Department of Labor (DOL) efforts to assess and manage program fraud risks. During the pandemic, fraudulent and potentially fraudulent activity has increased substantially and new types of fraud have emerged, according to DOL officials. For example, in June 2021, DOL’s Office of Inspector General reported that it had identified nearly $8 billion in potentially fraudulent UI benefits paid from March 2020 through October 2020. Improper payments have also been a long-standing concern in the regular unemployment insurance program, suggesting that the program may be vulnerable to fraud. While DOL continues to identify and implement strategies to address potential fraud and has some ongoing program integrity activities, it has not comprehensively assessed fraud risks in alignment with leading practices identified in GAO’s Fraud Risk Framework, which by law must be incorporated in guidelines established by the Office of Management and Budget for agencies.
DOL has not clearly assigned defined responsibilities to a dedicated entity for designing and overseeing fraud risk management activities. Without a dedicated entity with defined responsibilities to lead antifraud initiatives, including the process of assessing fraud risks to UI programs, DOL may not be strategically managing UI fraud risks. GAO recommends that DOL designate a dedicated entity and document its responsibilities for managing the process of assessing fraud risks to the unemployment insurance program, consistent with leading practices as provided in GAO’s Fraud Risk Framework. This entity should have, among other things, clearly defined and documented responsibilities and authority for managing fraud risk assessments and for facilitating communication among stakeholders regarding fraud-related issues. DOL neither agreed nor disagreed with this recommendation.
DOL also has not comprehensively assessed UI fraud risks in alignment with leading practices identified in GAO’s Fraud Risk Framework. These leading practices call for federal managers to plan regular fraud risk assessments and determine their fraud risk profile, among other things. Such assessments would provide reasonable assurance that DOL has identified the most significant fraud risks for the regular UI program that will exist after the pandemic. For example, some fraud risks identified in the CARES Act UI programs may continue to exist in the regular UI program after the temporary UI programs expire. GAO recommends that DOL (1) identify inherent fraud risks facing the unemployment insurance program, (2) assess the likelihood and impact of inherent fraud risks facing the program, (3) determine fraud risk tolerance for the program, (4) examine the suitability of existing fraud controls in the program and prioritize residual fraud risks, and (5) document the fraud risk profile for the program. DOL neither agreed nor disagreed with these recommendations.
FEMA’s Disaster Relief Fund and Assistance to State, Local, Tribal, and Territorial Governments
The Federal Emergency Management Agency (FEMA) has used the Disaster Relief Fund to respond to the COVID-19 pandemic—the first time the fund has been used during a nationwide public health emergency. For example, from September 1, 2020 to August 31, 2021, FEMA obligated a total of approximately $26.8 billion through one type of disaster assistance, Public Assistance, for emergency protective measures, such as eligible medical care, the purchase and distribution of food, and distribution of personal protective equipment.
GAO found that FEMA inconsistently interpreted and applied its policies for expenses eligible for COVID-19 Public Assistance within and across its 10 regions. For example, officials in one state said that FEMA at one point had deemed the provision of personal protective equipment at correctional facilities as ineligible for reimbursement in their region but that states in other regions had received reimbursement for the same expense. These inconsistencies were due to, among other things, changes in policies as FEMA used the Public Assistance program for the first time to respond to a nationwide emergency. FEMA officials stated that it was difficult to ensure consistency in policies as different states and regions are not experiencing the same things at the same time.
FEMA is likely to receive applications for reimbursement for a larger number of projects than it estimated earlier in 2021, given the surge in COVID-19 cases this summer. To improve the consistency of the agency’s interpretation and application of the COVID-19 Public Assistance policy, GAO recommends that FEMA further clarify and communicate eligibility requirements nationwide. GAO also recommends that FEMA require the agency’s Public Assistance employees in the regions and at its Consolidated Resource Centers to attend training on changes to COVID-19 Public Assistance policy. The Department of Homeland Security—which includes FEMA— agreed with both of these recommendations.
Loans for Aviation and Other Eligible Businesses
Treasury has executed 35 loan agreements with certain aviation businesses and other businesses deemed critical to maintaining national security. These loans have totaled about $22 billion of the $46 billion authorized by the CARES Act for loans and loan guarantees to such businesses. As directed by the CARES Act, Treasury required certain loan recipients to provide financial assets, such as warrants that give the federal government an option to buy shares of stock at a predetermined price before a specified date, to protect taxpayer interests.
According to Treasury officials, it is likely that, if the airline industry continues to recover and borrowers do not default, the warrants could have higher values than the predetermined price Treasury would have to pay to act on them. Treasury has not exercised any of the warrants for stock it received from nine businesses, nor has it developed policies and procedures for determining when to act on the warrants to benefit the taxpayer. GAO recommends that Treasury develop policies and procedures to determine when to act on warrants obtained as part of the loan program for aviation and other eligible businesses to benefit the taxpayers. Treasury agreed with this recommendation.
Payroll Support Assistance to Aviation Businesses
As of September 2021, Treasury had made payments totaling $59 billion of $63 billion provided for the Payroll Support Programs to support aviation business. These payments were to be used exclusively for the continuation of wages, salaries, and benefits.
Similar to Treasury’s requirement for loans for aviation and other eligible businesses, Treasury required certain Payroll Support Program recipients to provide warrants, as allowed by the CARES Act. As of September 2021, 14 recipients had provided a total of 58 million warrants.
As Treasury continues to hold these warrants for stock purchases, the warrants may increase in value as the airline industry recovers. Treasury has not exercised any of the warrants for stock it holds in the 14 businesses, nor has it documented policies and procedures to guide when to act on the warrants to fulfill the statutory purpose to provide appropriate compensation to the federal government. GAO recommends that Treasury develop policies and procedures to determine when to act on warrants obtained as part of the Payroll Support Program to provide appropriate compensation to the federal government. Treasury agreed with this recommendation.
COVID-19 Testing
Use is increasing for antigen tests, one of two types of COVID-19 diagnostic and screening tests for which HHS’s Food and Drug Administration has issued emergency use authorizations. These “rapid” antigen tests typically have a turnaround time of about 30 minutes or less for results, compared with 1 to 3 days for molecular tests, the second type of test HHS authorized. Antigen tests can be conducted at doctors’ offices or in homes or other settings; some antigen tests can be conducted without a prescription.
Since June 2020, HHS has worked to encourage and improve the reporting of antigen testing data to local, state, and federal health officials. However, HHS officials told GAO reporting of antigen test results is incomplete, which prevents HHS from using antigen testing data for COVID-19 surveillance. HHS is taking additional steps aimed at improving reporting of antigen test data. For example, officials told GAO that HHS will continue to make enhancements to data reporting by building reporting methods into the testing process, such as for testing in schools and workplaces.
HHS is also considering surveillance approaches to supplement or enhance current surveillance efforts. For example, HHS is exploring wastewater surveillance approaches, which provide data that can complement and confirm other forms of surveillance for COVID-19 and an efficient pooled community sample that is particularly useful in areas where timely COVID-19 clinical testing is underutilized or unavailable, according to HHS officials.
Worker Safety and Health
The Occupational Safety and Health Administration (OSHA) faced challenges in enforcing workplace safety and health standards during the COVID-19 pandemic, but the agency has not assessed lessons learned or promising practices. According to inspectors from area offices, they faced challenges related to resources and to communication and guidance, such as a lack of timely guidance from OSHA headquarters. GAO recommends that OSHA assess—as soon as feasible and, as appropriate, periodically thereafter—various challenges related to resources and to communication and guidance that the agency has faced in its response to the COVID-19 pandemic and take related actions as warranted. The Department of Labor—which includes OSHA—partially agreed with this recommendation.
Advance Child Tax Credit Payments
ARPA temporarily expanded eligibility for the child tax credit (CTC) to additional qualified individuals by eliminating a requirement that individuals must earn a minimum amount annually to be eligible. ARPA also temporarily increased the maximum amount of the CTC from $2,000 per qualifying child to $3,000 or $3,600, depending on the child’s age. As required by ARPA, the Internal Revenue Service (IRS) and Treasury are responsible for issuing half of the CTC through periodic advance payments, known as advance CTC payments.
IRS reported disbursing more than 106 million advance payments totaling over $45.5 billion as of September 25, 2021 (see figure).
IRS is conducting and planning several outreach efforts to increase the public’s awareness of advance CTC payments. However, IRS and Treasury have not developed a comprehensive estimate of individuals who are potentially eligible for advance CTC payments and the agencies have not set a participation goal. Such an estimate would enable Treasury and IRS to measure the tax credit’s participation rate, providing greater clarity regarding populations at risk of not receiving the payments. GAO recommends that Treasury, in coordination with IRS, estimate the number of individuals, including nonfilers, who are eligible for advance CTC payments, measure the 2021 participation rate based on that estimate, and use that estimate to develop targeted outreach and communications efforts for the 2022 filing season; the participation rate could include individuals who opt in and out of the advance payments. Treasury neither agreed nor disagreed with this recommendation.
Child Nutrition
Child nutrition programs administered by the Department of Agriculture’s Food and Nutrition Service (FNS) supply cash reimbursements to schools or other programs for meals and snacks provided to eligible children nationwide. In fiscal year 2019, before the pandemic, the four largest programs—the National School Lunch Program, School Breakfast Program, Summer Food Service Program, and Child and Adult Care Food Program—along with other child nutrition programs, received $23.1 billion in federal funds. During a typical year, two of these programs—the National School Lunch Program and the School Breakfast Program—subsidize meals for nearly 30 million children in approximately 95,000 elementary and secondary schools nationwide.
As of July 2021, FNS officials were unable to provide a plan showing how FNS intends to comprehensively analyze lessons learned during the pandemic, such as from operational and financial challenges. Further, according to FNS officials, while the School Meals Operations study—launched in spring 2021—is surveying school districts and state agencies that administer the federal child nutrition programs, the study is not gathering local perspectives directly from child care centers and day care homes or other local program sponsors that are not school districts. As a result, FNS may miss opportunities to identify lessons learned and will lack comprehensive information to aid its future planning. GAO recommends that the Department of Agriculture document its plan to analyze lessons learned from operating child nutrition programs during the COVID-19 pandemic. This plan should include a description of how the department will gather perspectives of key stakeholders, such as Child and Adult Care Food Program institutions and nonschool Summer Food Service Program sponsors. The Department of Agriculture—which includes FNS—agreed with this recommendation.
Why GAO Did This Study
As of September 23, 2021, the U.S. had about 43 million reported cases of COVID-19 and about 699,000 reported deaths, according to CDC. The country also continues to experience economic repercussions from the pandemic.
Six relief laws, including the CARES Act, had been enacted as of August 31, 2021, to address the public health and economic threats posed by COVID-19. As of that same date (the most recent for which government-wide data was available), the federal government had obligated a total of $3.9 trillion and expended $3.4 trillion of the $4.8 trillion in COVID-19 relief funds that had been appropriated by these six laws, 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 and state officials, stakeholders from organizations for localities, and other stakeholders.
What GAO Recommends
GAO is making 16 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 16 recommendations to federal agencies:
| Number | Agency | Recommendation |
|---|---|---|
| 1 | Department of Health and Human Services : Public Health Service : Health Resources and Services Administration | The Administrator of the Health Resources and Services Administration should establish time frames for completing post-payment reviews to promptly address identified risks and identify overpayments made from the Provider Relief Fund, such as payments made in incorrect amounts or payments to ineligible providers. See the Relief for Health Care Providers enclosure. (Recommendation 1) |
| 2 | Department of Health and Human Services : Public Health Service : Health Resources and Services Administration | The Administrator of the Health Resources and Services Administration should finalize procedures and implement post-payment recovery of any Provider Relief Fund overpayments, unused payments, or payments not properly used. See the Relief for Health Care Providers enclosure. (Recommendation 2) |
| 3 | Department of the Treasury | The Secretary of the Treasury should design and document timely and sufficient policies and procedures for monitoring recipients of Coronavirus State and Local Fiscal Recovery Funds to provide assurance that recipients are managing their allocations in compliance with laws, regulations, agency guidance, and award terms and conditions, including ensuring that expenditures are made for allowable purposes. See the Coronavirus State and Local Fiscal Recovery Funds enclosure. (Recommendation 3) |
| 4 | Department of Labor | The Secretary of Labor should designate a dedicated entity and document its responsibilities for managing the process of assessing fraud risks to the unemployment insurance program, consistent with leading practices as provided in our Fraud Risk Framework. This entity should have, among other things, clearly defined and documented responsibilities and authority for managing fraud risk assessments and for facilitating communication among stakeholders regarding fraud-related issues. See the Unemployment Insurance Fraud Risk Management enclosure. (Recommendation 4) |
| 5 | Department of Labor | The Secretary of Labor should identify inherent fraud risks facing the unemployment insurance program. See the Unemployment Insurance Fraud Risk Management enclosure. (Recommendation 5) |
| 6 | Department of Labor | The Secretary of Labor should assess the likelihood and impact of inherent fraud risks facing the unemployment insurance program. See the Unemployment Insurance Fraud Risk Management enclosure. (Recommendation 6) |
| 7 | Department of Labor | The Secretary of Labor should determine fraud risk tolerance for the unemployment insurance program. See the Unemployment Insurance Fraud Risk Management enclosure. (Recommendation 7) |
| 8 | Department of Labor | The Secretary of Labor should examine the suitability of existing fraud controls in the unemployment insurance program and prioritize residual fraud risks. See the Unemployment Insurance Fraud Risk Management enclosure. (Recommendation 8) |
| 9 | Department of Labor | The Secretary of Labor should document the fraud risk profile for the unemployment insurance program. See the Unemployment Insurance Fraud Risk Management enclosure. (Recommendation 9) |
| 10 | Department of Homeland Security : Directorate of Emergency Preparedness and Response : Federal Emergency Management Agency | The Federal Emergency Management Agency Administrator should improve the consistency of the agency’s interpretation and application of the COVID-19 Public Assistance policy within and across regions by further clarifying and communicating eligibility requirements nationwide. See the FEMA’s Disaster Relief Fund and Assistance to State, Local, Tribal, and Territorial Governments enclosure. (Recommendation 10) |
| 11 | Department of Homeland Security : Directorate of Emergency Preparedness and Response : Federal Emergency Management Agency | The Federal Emergency Management Agency Administrator should require the agency’s Public Assistance Program employees in the regions and at its Consolidated Resource Centers to attend training on changes to COVID-19 Public Assistance policy to help ensure it is interpreted and applied consistently nationwide. See the FEMA’s Disaster Relief Fund and Assistance to State, Local, Tribal, and Territorial Governments enclosure. (Recommendation 11) |
| 12 | Department of the Treasury | The Secretary of the Treasury should develop policies and procedures to determine when to act on warrants obtained as part of the loan program for aviation and other eligible businesses to benefit the taxpayers. See the Loans for Aviation and Other Eligible Businesses enclosure. (Recommendation 12) |
| 13 | Department of the Treasury | The Secretary of the Treasury should develop policies and procedures to determine when to act on warrants obtained as part of the Payroll Support Program to provide appropriate compensation to the federal government. See the Payroll Support Assistance to Aviation Businesses enclosure. (Recommendation 13) |
| 14 | Department of Labor : Occupational Safety and Health Administration | The Assistant Secretary of Labor for Occupational Safety and Health should assess—as soon as feasible and, as appropriate, periodically thereafter—various challenges related to resources and to communication and guidance that the Occupational Safety and Health Administration has faced in its response to the COVID-19 pandemic and should take related actions as warranted. See the Worker Safety and Health enclosure. (Recommendation 14) |
| 15 | Department of the Treasury | The Secretary of the Treasury, in coordination with the Commissioner of Internal Revenue, should estimate the number of individuals, including nonfilers, who are eligible for advance child tax credit payments, measure the 2021 participation rate based on that estimate, and use that estimate to develop targeted outreach and communications efforts for the 2022 filing season; the participation rate could include individuals who opt in and out of the advance payments. See the Advance Child Tax Credit and Economic Impact Payments enclosure. (Recommendation 15) |
| 16 | Department of Agriculture | The Secretary of Agriculture should document the Department of Agriculture’s plan to analyze lessons learned from operating child nutrition programs during the COVID-19 pandemic. This plan should include a description of how the department will gather perspectives of key stakeholders, such as Child and Adult Care Food Program institutions and nonschool Summer Food Service Program sponsors. See the Child Nutrition enclosure. (Recommendation 16) |
Introduction
Bookmark:
Congressional Committees
As the nation continues to respond to the Coronavirus Disease 2019 (COVID-19) pandemic, response and recovery efforts have been hampered by increases in COVID-19 cases, due primarily to the Delta variant of the virus.[1] Although the daily number of new cases had begun to decline earlier in the summer, the number of new cases reported each day from the end of July 2021, to September 23, 2021, generally exceeded 100,000, according to the Centers for Disease Control and Prevention (CDC)—a daily case count not seen since February 2021 and substantially higher than the approximately 8,000 new cases reported per day in mid-June. As a result of the rise in cases, CDC, state and local governments, and private businesses revised their mask guidance or requirements.[2]
While vaccination efforts continue, vaccination rates across the U.S. vary. As of September 23, 2021, about 64 percent of the U.S population eligible for vaccination (those 12 years and older)—about 183 million individuals—had been fully vaccinated, according to CDC.
Hospitals reported an average of more than 9,000 individuals hospitalized daily for the 7-day period from September 17 to September 23, 2021, a decrease from more than 12,000 individuals hospitalized daily during a 7-day period in August 2021.[3] According to CDC, at the end of August 2021, new admissions of patients with confirmed COVID-19 were at their highest levels since the beginning of the pandemic for all age groups under 50 years old.[4] As of the end of September 2021, CDC reported that weekly hospitalization rates for children aged 11 and younger due to COVID-19 were at their highest since the beginning of the pandemic, although hospitalizations due to COVID-19 are lower in children than they are in adults. As the pandemic continues, the U.S. and the world may continue to see fluctuating increases in new cases, making an agile federal response to the pandemic even more important.
Ongoing demand for medical supplies for the COVID-19 response, including testing materials and personal protective equipment, has resulted in fluctuating shortages. For example, on September 2, 2021, CDC announced a temporary shortage of point-of-care and over-the-counter COVID-19 testing supplies. In addition, the federal government continues to provide personal protective equipment—N95 respirators, surgical masks, surgical and isolation gowns, and nitrile and other gloves—to states, with gloves accounting for the largest number of shipments. For example, during the 7-day period from September 18 to September 24, 2021, the federal government and its commercial partners shipped close to 700 million units of gloves, over 44 million surgical masks, over 13 million surgical gowns, and close to 5 million N95 respirators to all 50 states, the District of Columbia, and Puerto Rico.
To help prevent medical supply shortages for future public health emergencies, the Department of Health and Human Services (HHS) released its pandemic supply chain resilience strategy, as called for in Executive Order 14001, in September 2021.[5] The strategy outlines the goals and objectives for a resilient public health supply chain and the “path for implementation” of the strategy.[6]
Since March 2020, Congress has provided about $4.8 trillion through the CARES Act and other laws that were enacted to fund efforts to help the nation respond to and recover from the COVID-19 pandemic (COVID-19 relief laws).[7]
Ongoing implementation of the provisions in the COVID-19 relief laws and the size and scope of these efforts—from distributing funding to implementing new programs—continue to demand strong accountability and oversight. Furthermore, the government must remain vigilant and agile to address the evolving COVID-19 pandemic well into its second year. The current annual hurricane and flu seasons could place further burdens on the already overtaxed health care, medical supply, and emergency management sectors.[8]
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.[9] To date, we have issued seven recurring oversight reports in response to this provision.[10]
This report examines the federal government’s continued efforts to respond to and recover from the COVID-19 pandemic. We are making 16 new recommendations to federal agencies in areas including fiscal relief funds for health care providers, worker safety and health, assessing fraud risks to unemployment insurance programs, and state and local recovery funds.
This report also includes 37 enclosures addressing 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.
In addition to the seven recurring oversight reports, we have issued over 100 targeted COVID-19-related reports, testimonies, and science and technology spotlights in areas such as housing protections, Medicare and Medicaid program flexibilities, and digital vaccine credentials. We also have reviews ongoing in other areas. See appendix II for highlights pages from our recently issued work on COVID-19 and appendix III for a list of our ongoing work related to COVID-19.
Across our body of COVID-19-related reports, we have made 209 recommendations to federal agencies and have raised four matters for congressional consideration to improve the federal government’s response efforts. As of September 30, 2021, agencies had addressed 33 of these recommendations and partially addressed 48.[11]
See figure 2 for an overview of the status of our COVID-19-related recommendations by department. For a complete list of our COVID-related products, see https://www.gao.gov/coronavirus.
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 and state officials and stakeholders, such as those from four antihunger organizations and organizations that represent landlords and lower-income households. We also examined federal laws, agency documents, and guidance, among other things. In each enclosure, we include a summary of the methodology specific to the work conducted.
We conducted this performance audit from March 2021 to October 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
Bookmark:The COVID-19 pandemic continues to have devastating effects on public health and the economy. As of September 23, 2021, the U.S. had about 43 million reported cases of COVID-19, according to CDC.[12] As of the week ending September 25, 2021, the U.S. had about 699,000 reported deaths attributed to COVID-19.[13] In addition, the country continues to experience high unemployment. As of September 2021, about 7.7 million individuals were unemployed, compared with nearly 5.8 million at the beginning of 2020.[14]
The number of newly reported COVID-19 cases began increasing at the end of July 2021, following a decrease in daily cases since the January 2021 peak. Between September 10 and September 23, 2021, new reported COVID-19 cases averaged about 138,000 per day—close to 60 percent of the peak that occurred during January 2021.[15] See figure 3 for 7-day case averages. During this same period, reported new COVID-19 cases per day, on average, increased in 14 jurisdictions, held steady in 20 jurisdictions, and decreased in 18 jurisdictions.[16]
Figure 3: Reported COVID-19 Cases per Day in the U.S., Mar. 1, 2020–Sept. 23, 2021
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According to data from CDC’s National Center for Health Statistics, the number of deaths in the U.S. has been higher during the pandemic than the expected number of deaths based on previous years’ data. For example, from January 1, 2020, through September 4, 2021, about 687,000 more deaths occurred from COVID-19 and other causes than would be normally expected (see fig. 4).
Figure 4: Higher-Than-Expected Weekly Mortality in the U.S., Jan. 2020 to Sept. 2021
Providing the public with safe and effective vaccines to protect people from getting critically ill with COVID-19 is crucial to mitigating the public health and economic impacts of the virus and ending the pandemic. Two COVID-19 vaccines requiring two doses were authorized by the Food and Drug Administration (FDA) for emergency use in December 2020 and a third vaccine, requiring one dose, was authorized in February 2021.[17] On August 23, 2021, FDA approved Pfizer’s biologics license application for its two-dose vaccine for individuals aged 16 years and older.[18]
On August 18, 2021, the administration recommended that individuals who received the two-dose vaccines should get a third “booster” shot 8 months after the second dose, pending FDA authorization and a recommendation from CDC’s immunization advisory committee.[19] On September 22, 2021, FDA amended the authorization for the Pfizer vaccine to allow for a booster shot to be administered to individuals aged 65 years and older, individuals aged 18 to 64 years who are at high risk of developing severe illness from COVID-19, and individuals aged 18 to 64 years whose frequent institutional or occupational exposure to COVID-19 puts them at high risk of serious complications from COVID-19, including severe illness. Boosters for these individuals are to be administered at least 6 months after completion of the first series of shots.[20] In mid-October, FDA’s vaccine advisory panel recommended boosters of the Moderna and Johnson & Johnson vaccines.[21]
As of September 23, 2021, almost 390 million doses of COVID-19 vaccine had been administered, according to CDC. Since the vaccination peak in early April 2021, the number of doses of COVID-19 vaccine administered each day have generally declined. As of September 23, 2021, the number of daily administered doses was less than one-fifth of those administered in the April peak (see fig. 5).
Figure 5: Daily Count of COVID-19 Vaccine Doses Administered in the U.S. and Reported to CDC, Dec. 14, 2020–Sept. 23, 2021
In addition to the impact on public health, the pandemic continues to present economic challenges, particularly for the labor market, though the economy has improved in recent months. According to data from the Department of Labor, labor market conditions improved in June, July, August, and September 2021 but remained worse relative to the prepandemic period. For example, although initial unemployment insurance claims generally declined through September 2021, initial claims remain high compared to the prepandemic period.
Moreover, in September 2021, the employment-to-population ratio, which measures the share of the population employed, was 58.7 percent—a slight increase from the previous month. However, this ratio was 2.4 percentage points lower than in the prepandemic period, indicating that labor market conditions remain worse than in the prepandemic period (see fig. 6).[22] See the Economic Indicators enclosure in appendix I for more information.
Federal COVID-19 Funding and Spending
Bookmark:As of August 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 $3.9 trillion and expended $3.4 trillion of the $4.8 trillion in appropriated COVID-19 relief funds as reported by federal agencies to the Department of the Treasury’s Governmentwide Treasury Account Symbol Adjusted Trial Balance System.[23] Obligations and expenditures relative to the amounts appropriated through COVID-19 relief laws have varied over time, as new relief laws have appropriated additional relief funds and as the federal government has obligated and expended those funds (see fig. 7).
Figure 7: Percentage of COVID-19 Relief Appropriations Obligated and Expended, July 31, 2020–Aug. 31, 2021
The nine major spending areas shown in table 1 represent $3.9 trillion, or 81 percent, of the total amounts appropriated. For these nine spending areas, agencies reported obligations totaling $3.3 trillion and expenditures totaling $3.0 trillion as of August 31, 2021. Table 1 provides additional details on appropriations, obligations, and expenditures of government-wide COVID-19 relief funds, including the nine major spending areas as of August 31, 2021.
Source: GAO analysis of data from the Department of the Treasury and applicable agencies. | GAO-22-105051
aMajor spending areas shown are based on federal accounts in Treasury’s Governmentwide Treasury Account Symbol Adjusted Trial Balance System. 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 August 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 another party that are 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. These expenditures relate mostly to the loan subsidy costs (i.e., the loan’s estimated long-term costs to the U.S. government).
eAppropriations to the Disaster Relief Fund are generally not specific to individual disasters. Therefore, Treasury’s methodology for determining COVID-19-related obligations and expenditures does not capture obligations and expenditures for the COVID-19 response based on appropriations other than those in the COVID-19 relief laws. Further, Treasury’s methodology includes all obligations and expenditures based on appropriations in the COVID-19 relief laws, including those for other disasters. In its Disaster Relief Fund Monthly Report dated September 9, 2021, the Department of Homeland Security reported COVID-19-related obligations totaling $80.0 billion and expenditures totaling $60.6 billion as of August 31, 2021.
fSeveral 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. This increased spending is not accounted for in the appropriations provided by the COVID-19 relief laws and therefore not included in this table.
gBecause of rounding, amounts shown in columns may not sum to the totals.
The COVID-19 relief laws provided more than $1 trillion to federal agencies to provide assistance related to the COVID-19 pandemic to states, the District of Columbia, localities, U.S. territories, and tribes through existing and newly created programs and funds.[24] Table 2 lists programs and funds that each received $10 billion or more—exclusively or primarily for states, the District of Columbia, localities, U.S. territories, and tribes—in at least one of the six laws. It also provides obligations and expenditures for these programs and funds as of August 31, 2021.
Source: GAO analysis of federal laws, data from the Congressional Budget Office, and obligations and expenditures data from Treasury and applicable agencies. | GAO-22-105051
Notes: The COVID-19 relief laws providing the appropriations 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, or tribes. 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.
We did not independently verify obligations and expenditures amounts.
aAppropriations for the Disaster Relief Fund generally are not specific to individual disasters and may be used for various disaster assistance programs, including the Public Assistance program, which provides assistance to state, local, territorial, and tribal governments.
bThe obligations and expenditures listed in the table are for the Public Assistance program for the COVID-19 response.
cSeveral 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 funding 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.
dMedicaid obligations and expenditures are as of June 30, 2021. COVID-19 related obligation and expenditure amounts for Medicaid only reflect provisions in the Families First Coronavirus Response Act. Obligation and expenditure amounts for COVID-19 related Medicaid provisions in the American Rescue Plan Act are not currently available from the Centers for Medicare & Medicaid Services.
eThe Child Care and Development Fund is made up of two funding streams: mandatory and matching funding authorized under section 418 of the Social Security Act, and discretionary funding authorized under the Child Care and Development Block Grant Act of 1990, as amended. See 42 U.S.C. §§ 618 and 9858m.
fExpenditures represent funding disbursed to grantees by Treasury for distribution to renters, landlords, and utility providers. As of August 31, 2021, grantees had spent about $7.7 billion of these amounts. For additional information on grantee spending, see the enclosure on the Emergency Rental Assistance program in appendix I.
gFunds are available to eligible sponsors of airports. Nearly all of these airports are under city, state, county, or public-authority ownership.
hObligations and expenditures for these funds are as of August 30, 2021.
iTreasury issued implementing guidance in September 2021 that provides that the application deadline for requesting allocations of the Coronavirus Capital Projects Fund from Treasury is (1) December 27, 2021, for states, D.C., and U.S. territories; and (2) June 1, 2022, for tribal governments.
jStates, the District of Columbia, territories, and tribal governments must initiate applications for the State Small Business Credit Initiative program with Treasury by December 11, 2021. Eligible jurisdictions must submit completed applications by February 11, 2022.
Executive Summary
IN THIS SECTION
- Overview
- Relief for Health Care Providers
- Coronavirus State and Local Fiscal Recovery Funds
- Unemployment Insurance Fraud Risk Management
- FEMA’s Disaster Relief Fund and Assistance to State, Local, Tribal, and Territorial Governments
- Loans for Aviation and Other Eligible Businesses
- Payroll Support Assistance to Aviation Businesses
- COVID-19 Testing
- Worker Safety and Health
- Advance Child Tax Credit Payments
- Child Nutrition
Overview
As the nation continues to respond to the pandemic and significant increases in COVID-19 cases from the Delta variant, this report provides key updates on the government’s pandemic response and makes 16 new recommendations aimed at improving the accountability and program effectiveness of the federal response.
In our prior CARES Act reports and other targeted COVID-19-related reports, we have made a total of 209 recommendations to federal agencies.[25] As of September 30, 2021, agencies had fully addressed 33 of these recommendations, resulting in improvements including increased oversight of relief payments to individuals and improved transparency of decision making for emergency use authorizations for vaccines and therapeutics. Agencies have also partially addressed an additional 48 recommendations. Fully addressing our previous recommendations as well as the new recommendations we are making will enhance the transparency and accountability of the federal government’s response to and recovery from the COVID-19 pandemic.
Relief for Health Care Providers
To respond to the pandemic, $178 billion has been appropriated to the Provider Relief Fund (PRF) to reimburse eligible providers for health care-related expenses or lost revenues attributable to COVID-19. As of August 31, 2021, HHS had allocated about $153.9 billion. Of the $153.9 billion allocated, HHS had disbursed about $132.5 billion and about $21.5 billion remained to be disbursed. Approximately $24.1 billion of PRF funds remained unallocated and undisbursed as of August 31, 2021. On September 10, 2021, HHS announced that $17 billion of the previously unallocated $24.1 billion would be allocated for a general distribution to a broad range of providers who could document COVID-related revenue loss and expenses. HHS expected to begin disbursing these funds in December 2021.
The Health Resources and Services Administration (HRSA) has taken some oversight actions regarding post-payment reviews of PRF payments and recovery of identified overpayments; however, it has not established key next steps. While the agency has conducted post-payment reviews for certain priority types of provider payments, it has not established time frames for implementing and completing all remaining post-payment reviews or set review schedules beyond the first quarter of calendar year 2022. In regards to recovery of identified overpayments, the agency has yet to recover most of the overpayments that had been identified as of September 2021. HRSA officials stated they had plans for recovering overpayments, but had not finalized procedures for doing so.
Without timely post-payment oversight that includes time frames for conducting reviews to help ensure that relief payments are made only to eligible providers in correct amounts and to identify unused payments or payments not properly used, HHS cannot fully address its stated payment integrity risks for the PRF and seek to recover overpayments, unused payments, or payments not properly used. Moreover, setting time frames for completion of these oversight efforts can help the agency achieve its objectives and increase the likelihood of recovering funds.
We are recommending that the Administrator of the Health Resources and Services Administration take several steps to finalize and implement post-payment oversight. Specifically, the Administrator should establish time frames for completing post-payment reviews to promptly address identified risks and identify overpayments made from the Provider Relief Fund, such as payments made in incorrect amounts or payments to ineligible providers. The Administrator should also finalize procedures and implement post-payment recovery of any Provider Relief Fund overpayments, unused payments, or payments not properly used. HHS, which includes HRSA, partially agreed with both recommendations. HRSA stated that it has a schedule for reviewing the payment types it initially prioritized, and that reviews for the remaining types and payment recovery efforts will occur in the future. We maintain that establishing time frames for completing reviews and finalizing procedures and implementing recovery efforts expeditiously will help the agency succeed in recovering overpayments.
See the Relief for Health Care Providers enclosure in appendix I for more information.
Coronavirus State and Local Fiscal Recovery Funds
In March 2021, the American Rescue Plan Act of 2021 (ARPA) appropriated $350 billion to Treasury for the Coronavirus State and Local Fiscal Recovery Funds (CSLFRF).[26] The CSLFRF allocates funds to states, the District of Columbia, localities, tribal governments, and U.S. territories to cover a broad range of costs stemming from the fiscal effects of the COVID-19 pandemic.[27] According to Treasury data, it had distributed approximately $240 billion in CSLFRF funds to recipients as of August 31, 2021.
As of July 2021, some of the 48 states that responded to a GAO survey reported that they had somewhat less than or much less than sufficient capacity to report on use of CSLFRF allocation consistent with federal requirements (17 of 48), to disburse the funds (13 of 48), and to apply appropriate internal controls and respond to inquiries about requirements (10 of 48). In addition, most states (44 of 48) reported that they had taken or planned to take additional steps—such as hiring new staff or reassigning existing staff—to help them manage their CSLFRF allocations.
As of August 2021, Treasury was developing its key internal processes and control activities for the timely monitoring of recipients’ use of their CSLFRF allocations for allowable purposes and for responding, as appropriate, to internal control and compliance findings. According to Treasury officials, the key internal processes and control activities had not been finalized or documented. The officials noted that program development has occurred within a short time frame since the enactment of ARPA in March 2021, and that finalizing and documenting internal processes and control activities for this new program requires time and resources. Further, vacancies in top-level leadership positions in the Office of Recovery Programs, which Treasury established in April 2021, have contributed to uncertainty about how the final program policies and procedures will be implemented.
Until Treasury properly designs and documents policies and procedures to guide CSLFRF program officials and other responsible oversight parties in the Office of Recovery Programs, there is a risk that key control activities needed to help ensure program management fulfills its recipient monitoring and oversight responsibilities may not be established or applied effectively and consistently. This risk may be particularly acute with monitoring state and local recipients that face capacity challenges in managing their CSLFRF allocations in accordance with federal requirements, as some noted in our survey.
We are recommending that the Secretary of the Treasury design and document timely and sufficient policies and procedures for monitoring CSLFRF recipients to provide assurance that recipients are managing their allocations in compliance with laws, regulations, agency guidance, and award terms and conditions, including ensuring that expenditures are made for allowable purposes. Treasury agreed with the recommendation and stated that it is in the process of designing, documenting, and implementing a risk-based compliance program to monitor recipient use of CSLFRF program funds.
See the Coronavirus State and Local Fiscal Recovery Funds enclosure in appendix I for more information.
Unemployment Insurance Fraud Risk Management
Federal and state entities continue to investigate and report on high levels of fraud, potential fraud, and fraud risks in the unemployment insurance (UI) programs overseen at the federal level by the Department of Labor (DOL). For example, in June 2021, DOL’s Office of Inspector General reported that it had identified nearly $8 billion in potentially fraudulent UI benefits paid from March 2020 through October 2020. In addition, from March 2020 through July 2021, 71 individuals pleaded guilty to federal charges of defrauding UI programs, and federal charges were pending against 192 individuals.
In addition to a substantial increase in fraudulent and potentially fraudulent activity in UI programs, DOL officials stated that the types of fraud observed during the pandemic differed from historical UI fraud risks and schemes observed before the pandemic. While DOL continues to identify and implement strategies to address potential unemployment insurance fraud and has ongoing program integrity activities to identify risks, it has not comprehensively assessed fraud risks in alignment with leading practices identified in our Fraud Risk Framework, which by law must be incorporated into guidelines established by the Office of Management and Budget for agencies.
First, DOL has not clearly assigned defined responsibilities to a dedicated entity for designing and overseeing fraud risk management activities such as managing the fraud risk assessment process. Without a dedicated entity with defined responsibilities to lead antifraud initiatives, including the process of assessing fraud risks to UI programs, DOL may not be strategically managing UI fraud risks. For example, a dedicated antifraud entity could, among other activities, manage the fraud risk assessment process and coordinate antifraud initiatives across an agency’s various programs to assure that agency activities called for by the Fraud Risk Framework are conducted.
We are recommending that the Secretary of Labor designate a dedicated entity and document its responsibilities for managing the process of assessing fraud risks to the unemployment insurance program, consistent with leading practices as provided in our Fraud Risk Framework. This entity should have, among other things, clearly defined and documented responsibilities and authority for managing fraud risk assessments and for facilitating communication among stakeholders regarding fraud-related issues. DOL neither agreed nor disagreed with this recommendation. DOL stated that the department’s Chief Financial Officer and the Employment and Training Administration’s Assistant Secretary are the designated senior executive officials responsible for risk assessment and management of the UI program. While this approach may incorporate the roles and responsibilities of a dedicated antifraud entity, it is important that, consistent with our Fraud Risk Framework, DOL clearly document this designation and these senior staff members’ antifraud responsibilities.
Second, DOL has not comprehensively assessed UI fraud risks in alignment with leading practices or documented a prioritized approach to managing fraud risks. Our Fraud Risk Framework calls for federal managers to plan regular fraud risk assessments and determine a fraud risk profile. Specifically, the fraud risk assessment should be tailored to the program and conducted at regular intervals as well as when there are changes to the program or operating environment, such as for program operations and expansions during emergencies.
Without comprehensively assessing UI fraud risks, DOL lacks reasonable assurance that it has identified the most significant fraud risks for the regular UI program that will exist after the pandemic. For example, some fraud risks identified in the CARES Act UI programs may continue to exist in the regular UI program after the temporary UI programs expire. An analysis of fraud risks across all UI programs would also help DOL determine whether additional fraud controls are needed for the regular UI program and could position DOL to deal more effectively with any future emergency UI programs.
We are also recommending that the Secretary of Labor (1) identify inherent fraud risks facing the unemployment insurance program; (2) assess the likelihood and impact of inherent fraud risks facing the program; (3) determine fraud risk tolerance for the program; (4) examine the suitability of existing fraud controls in the program and prioritize residual fraud risks; and (5) document the fraud risk profile for the program. DOL neither agreed nor disagreed with this recommendation. DOL said its current process allows it to identify, evaluate, and manage risks. However, DOL also said it will incorporate the recommended practices and approaches moving forward.
See the Unemployment Insurance Fraud Risk Management enclosure in appendix I for more information.
FEMA’s Disaster Relief Fund and Assistance to State, Local, Tribal, and Territorial Governments
The Federal Emergency Management Agency (FEMA) is using the Disaster Relief Fund to respond to the COVID-19 pandemic, which is the first time the fund has been used during a nationwide public health emergency.[28] For example, FEMA’s Public Assistance Program helps state, local, tribal, and territorial governments, and certain types of private nonprofit organizations respond to and recover from major disasters or emergencies. From September 1, 2020, to August 31, 2021, FEMA obligated a total of approximately $26.8 billion to Public Assistance projects for emergency protective measures, such as eligible medical care, the purchase and distribution of food, and distribution of personal protective equipment.
We found that FEMA inconsistently interpreted and applied its policies for expenses eligible for COVID-19 Public Assistance within and across its 10 regions. For example, officials in one state said that, at one point, FEMA had deemed the provision of personal protective equipment at correctional facilities as ineligible for reimbursement in their region but that states in other regions had received reimbursement for the same expense.
We identified four key areas that contributed to the inconsistent interpretation and application of COVID-19 policies for Public Assistance based on our discussions with FEMA headquarters officials and state emergency managers. These four areas are (1) changes in policy that were interpreted and applied differently by FEMA personnel as FEMA used the Public Assistance Program for the first time to respond to a nationwide emergency; (2) delegation of authority to FEMA regions for making final application eligibility determinations; (3) lack of required training on COVID-19 policies for staff handling Public Assistance applications; and (4) variation in the experience level of staff making eligibility determinations for applications. FEMA officials stated that it has been difficult to ensure consistency in policies as different states and regions are not experiencing the same things at the same time.
FEMA officials have acknowledged that in spite of efforts to ensure consistency in interpretation and application of its Public Assistance COVID-19 policy, inconsistent interpretation and application of its policy continue to occur within and across regions. Given the current rise in the COVID-19 Delta variant across the nation, FEMA is likely to receive applications for reimbursement for a larger number of projects than it estimated earlier in 2021.
We are recommending that the Federal Emergency Management Agency Administrator improve the consistency of the agency’s interpretation and application of the COVID-19 Public Assistance policy within and across regions by further clarifying and communicating eligibility requirements nationwide.
We are also recommending that the Federal Emergency Management Agency Administrator require the agency’s Public Assistance program employees in the regions and at its Consolidated Resource Centers to attend training on changes to COVID-19 Public Assistance policy to help ensure it is interpreted and applied consistently nationwide.
The Department of Homeland Security agreed with both recommendations and outlined actions it has taken to improve the consistency of its interpretation and application of COVID-19 Public Assistance policy and to train employees in the regions and at its Consolidated Resource Centers.
See the FEMA’s Disaster Relief Fund and Assistance to State, Local, Tribal, and Territorial Governments enclosure in appendix I for more information.
Loans for Aviation and Other Eligible Businesses
Treasury has executed 35 loan agreements with certain aviation businesses and other businesses deemed critical to maintaining national security (national security businesses).[29] These loans have totaled about $22 billion of the $46 billion authorized by the CARES Act for loans and loan guarantees. Of these 35 loans, as of October 1, 2021, 10 loans had been fully repaid and the total value of outstanding loans was about $1.1 billion.
As directed by the CARES Act, Treasury required certain loan recipients to provide financial assets, such as warrants—an option to buy shares of stock at a predetermined price before a specified date—which give the federal government the ability to protect taxpayer interests. In addition, the CARES Act provided that for the primary benefit of taxpayers Treasury may sell, exercise, or surrender financial instruments it obtained. Treasury received warrants from nine businesses equal to 10 percent of the total loan amount drawn. Treasury has not exercised any of the warrants for stock it holds in these nine businesses.
According to Treasury officials, it is likely that—if the airline industry continues to recover and borrowers do not default—the warrants could have higher values than the predetermined price Treasury would have to pay to act on them. For example, based on the stock price at market close on October 1, 2021, its warrants from one borrower would be valued at 159 percent above the initial value at which Treasury received them. However, Treasury has not developed policies and procedures to guide when to act on the warrants to benefit the taxpayer.
We are recommending that the Secretary of the Treasury develop policies and procedures to determine when to act on warrants obtained as part of the loan program for aviation and other eligible businesses to benefit the taxpayers. Treasury agreed with our recommendation and said it is in the process of creating a policy that will allow it to evaluate when and how to act to dispose of the warrants obtained as part of the loan program.
See the Loans for Aviation and Other Eligible Business enclosure in appendix I for more information.
Payroll Support Assistance to Aviation Businesses
As of September 2021, Treasury had made $59 billion in payments out of $63 billion provided to the Payroll Support Program to support aviation business.[30] These payments, made to air carriers and aviation contractors, were to be used exclusively for the continuation of wages, salaries, and benefits.
Similar to Treasury’s loan program for aviation and other businesses described above, the CARES Act allowed the department to receive financial instruments from these businesses to provide appropriate compensation to the federal government for providing the financial assistance, and Treasury required 14 recipients to provide warrants. These 14 recipients provided a total of 58 million warrants.
As Treasury continues to hold these warrants for stock purchases—and as the airline industry recovers—these warrants may increase in value. Treasury has not exercised any of the warrants for stock it holds in the 14 businesses, nor has the agency documented policies and procedures to guide when to act on the warrants to provide appropriate compensation to the federal government.
We are recommending that the Secretary of the Treasury develop policies and procedures to determine when to act on warrants obtained as part of the Payroll Support Program to provide appropriate compensation to the federal government. Treasury agreed with our recommendation and said it is in the process of creating a policy that will allow it to evaluate when and how to act to dispose of the warrants obtained as part of the Payroll Support Program.
See the Payroll Support Assistance to Aviation Businesses enclosure in appendix I for more information.
COVID-19 Testing
Antigen tests are one of two types of COVID-19 diagnostic and screening tests for which FDA has issued emergency use authorizations. These “rapid” tests typically have a turnaround time of about 30 minutes or less for results. Antigen tests can be conducted in doctors’ offices, pharmacies, and other health care settings, as well as in homes or other non-health care settings; some antigen tests can be conducted without a prescription. The second type of COVID-19 tests, molecular tests—which are considered the “gold standard” for diagnostic testing—typically have a 1–3 day turnaround period, mainly due to the time needed to send a sample to the laboratory, according to FDA officials.
The use of antigen testing is increasing. According to HHS data, the number of reported antigen tests per month increased from about 50,000 in June 2020 to nearly 12 million in August 2021. As a percentage of total tests reported, antigen tests increased from less than 1 percent in June 2020 to over 20 percent of all tests reported in July and August 2021. In addition, on September 9, 2021, the administration announced the “Path Out of the Pandemic” plan, which should further increase the use of antigen tests for COVID-19.
Since June 2020, HHS and its component agencies and testing-related working groups have worked to encourage and improve the reporting of antigen testing data to local, state, and federal health officials. However, HHS officials told us that limited reporting of antigen test results prevents HHS from using antigen testing data for COVID-19 surveillance.
HHS is taking additional steps aimed at improving reporting of antigen test data and exploring additional approaches for effective COVID-19 surveillance. For example, officials told us that HHS will continue to work with test manufacturers and make enhancements to data reporting by building reporting methods into the testing process and emphasizing reporting from specific settings, such as schools. HHS is also considering surveillance approaches to supplement or enhance current surveillance efforts. For example, HHS is exploring wastewater surveillance approaches, which provide data that can complement and confirm other forms of surveillance for COVID-19, and an efficient pooled community sample that is particularly useful in areas where timely COVID-19 clinical testing is underutilized or unavailable, according to HHS officials.
See the COVID-19 Testing enclosure in appendix I for more information.
Worker Safety and Health
The Occupational Safety and Health Administration (OSHA) is responsible for setting and enforcing workplace safety and health standards for the private sector in 29 states, the District of Columbia, and four territories. The other 21 states and Puerto Rico set and enforce their own workplace safety and health standards for private sector and state and local government employers under state plans approved by OSHA.
During the first 15 months of the pandemic, OSHA primarily relied on existing workplace safety and health standards and voluntary employer guidance for its enforcement. However, until June 2021, OSHA standards did not contain provisions specifically targeted at the COVID-19 hazard. As a result, OSHA inspectors faced challenges in applying OSHA requirements to COVID-19 cases.
OSHA took steps to help protect employees in high-risk industries from the hazard of COVID-19 by initiating a 1-year COVID-19 National Emphasis Program in March 2021 and issuing an emergency temporary standard in June 2021.[31] Although the emergency temporary standard covers only employers in the health care industry, in its other policies, OSHA has acknowledged the potential for high risk of workplace COVID-19 exposure in industries beyond health care. The agency is engaged in rulemaking on two standards: the June 2021 COVID-19 health-care emergency temporary standard and a separate infectious disease standard.
OSHA area offices faced challenges in enforcing workplace safety and health standards during the COVID-19 pandemic, but the agency has not assessed lessons learned or promising practices. According to inspectors from area offices, resource challenges included managing a high volume of incoming reports and working in a telework environment. Communication and guidance challenges for inspectors included a lack of timely guidance from OSHA headquarters and difficulty finding and using the most up-to-date guidance.
We are recommending that the Assistant Secretary of Labor for Occupational Safety and Health assess—as soon as feasible and, as appropriate, periodically thereafter—various challenges related to resources and to communication and guidance that the Occupational Safety and Health Administration has faced in its response to the COVID-19 pandemic and take related actions as warranted.
DOL partially agreed with our recommendation. DOL stated that it agrees that it is important to assess lessons learned and best practices for OSHA’s operational response to COVID-19. However, DOL officials said they believe that while the pandemic is ongoing, the agency’s resources are best used to help employers and workers mitigate exposures to COVID-19. Because it is unclear when the COVID-19 pandemic will end, we maintain that assessing—as soon as feasible—the challenges that OSHA faced in responding to the pandemic, and taking related actions, would enable the agency to improve its enforcement efforts during this pandemic and help it prepare for operations during any future pandemic.
See the Worker Safety and Health enclosure in appendix I for more information.
Advance Child Tax Credit Payments
ARPA made several temporary changes to the child tax credit (CTC). First, it temporarily expanded eligibility to additional qualified individuals by eliminating the earned income requirement to receive the CTC.[32] Second, it temporarily increased the maximum amount of the CTC from $2,000 per qualifying child to $3,000 or $3,600, depending on the child’s age.[33] As required by ARPA, the Internal Revenue Service (IRS) and Treasury are responsible for issuing half of the CTC through periodic advance payments (advance CTC).[34] IRS reported that as of September 25, 2021, it had disbursed more than 106 million advance payments totaling over $45.5 billion.
IRS is conducting several outreach efforts to increase the public’s awareness of advance CTC payments. For example, IRS continues to coordinate with community organizations to raise awareness of the advance CTC payments. IRS is also planning to include advance CTC messaging for the 2022 tax filing season in its annual Get Ready campaign, which IRS officials said typically begins in November.
However, IRS and Treasury have not developed a comprehensive estimate of individuals who are potentially eligible for advance CTC payments and have not set a participation goal. An eligibility estimate and participation rate, including individuals who have opted in and out of the advance CTC payments, would provide greater clarity about which populations may be at risk of not receiving the payments. These populations would benefit from targeted outreach and communications to learn more about the payments and how to claim the advance CTC during the 2022 filing season. Moreover, this information could inform IRS’s administration of other refundable tax credits as well as any future changes to the CTC that Congress is considering.
We are recommending that the Secretary of the Treasury, in coordination with the Commissioner of Internal Revenue, estimate the number of individuals, including nonfilers, who are eligible for advance child tax credit payments, measure the 2021 participation rate based on that estimate, and use that estimate to develop targeted outreach and communications efforts for the 2022 filing season; the participation rate could include individuals who opt in and out of the advance payments. Treasury neither agreed nor disagreed with this recommendation. Treasury stated that it supports the goal of the recommendation but has not estimated the eligible population for the advance CTC. Treasury also stated that it and IRS continue to undertake advance CTC outreach, education, and media campaign efforts. We maintain that without a comprehensive estimate of eligibility and a participation rate, which includes more nonfilers, Treasury and IRS are missing an opportunity to assess the effectiveness of their outreach efforts in reaching nonfilers who are more likely experiencing poverty or hardship and may be more in need of the CTC payments.
See the Advance Child Tax Credit and Economic Impact Payments enclosure in appendix I for more information.
Child Nutrition
Child nutrition programs administered by the Department of Agriculture’s (USDA) Food and Nutrition Service (FNS) supply cash reimbursements to schools or other programs for meals and snacks provided to eligible children nationwide. In fiscal year 2019, before the pandemic, the four largest programs—the National School Lunch Program, School Breakfast Program, Summer Food Service Program, and Child and Adult Care Food Program—along with other child nutrition programs, received $23.1 billion in federal funds. During a typical year, two of these programs, the National School Lunch Program and the School Breakfast Program, subsidize meals for nearly 30 million children in approximately 95,000 elementary and secondary schools nationwide.
Various COVID-19 relief laws have provided funding or authority to USDA to support child nutrition programs during the pandemic. For example, the Families First Coronavirus Response Act granted FNS authority to issue nationwide waivers in certain programs.[35] These waivers are intended to support access to nutritious meals, reduce the administrative burden associated with eligibility determinations, and minimize potential exposure to COVID-19.
Agencies can leverage lessons learned from an event to inform future efforts and limit the chance of recurring challenges. According to FNS officials, FNS is primarily using the existing FNS School Meals Operations study to gather information about lessons learned during the pandemic for child nutrition programs. The study, launched in spring 2021, will collect administrative and survey data on each of the four child nutrition programs from state agencies and will collect survey data from school district nutrition programs. However, as of July 2021, FNS was unable to provide us with a plan showing how FNS intends to comprehensively analyze lessons learned from the pandemic for child nutrition programs, such as from operational and financial challenges.
Although FNS is collecting some information on these topics from states and school districts, without documenting its plan for analyzing lessons learned from the pandemic, FNS may miss opportunities to comprehensively identify lessons learned. Further, according to FNS officials, while the School Meals Operations study will survey state agencies that administer the federal child nutrition programs, the study will not gather local perspectives directly from child care centers and day care homes or from other local program sponsors that are not school districts. Without gathering perspectives from a full range of meal program operators—rather than only from state agencies and school districts––FNS will lack comprehensive information to aid its future planning.
We are recommending that the Secretary of Agriculture document the department’s plan to analyze lessons learned from operating child nutrition programs during the COVID-19 pandemic. This plan should include a description of how the department will gather perspectives of key stakeholders, such as Child and Adult Care Food Program institutions and nonschool Summer Food Service Program sponsors. The Department of Agriculture generally agreed with this recommendation.
See the Child Nutrition enclosure in appendix I for more information.
Conclusions
Bookmark:
The federal government’s efforts to respond to and recover from COVID-19 continue. The spread of the Delta variant in the U.S. this summer—and the subsequent rise in cases and hospitalizations—illustrates the challenges to the nation’s response and recovery efforts and the work that remains. We are pleased that agencies have fully addressed 33 and partially addressed 48 of our 209 recommendations. Fully implementing our recommendations, including the new recommendations we are making in this report, can help improve the federal response and recovery efforts.
Closing
Bookmark:
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 Orice Williams Brown, Chief Operating Officer, at (202) 512-5600; Jessica Farb, Managing Director, Health Care, at (202) 512-7114 or farbj@gao.gov; or A. Nicole Clowers, Managing Director, Congressional Relations, at (202) 512-4400 or clowersa@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
Chair
The Honorable Kay Granger
Ranking Member
Committee on Appropriations
House of Representatives
The Honorable Frank Pallone, Jr.
Chairman
The Honorable Cathy McMorris Rodgers
Republican Leader
Committee on Energy and Commerce
House of Representatives
The Honorable Bennie G. Thompson
Chairman
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
Chairman
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
- COVID-19 Testing
- FDA Oversight of COVID-19 Vaccine Manufacturing Quality
- FDA Inspections of Biologic Manufacturing during the COVID-19 Pandemic
- Health Insurance Loss
- HHS COVID-19 Funding
- Relief for Health Care Providers
- Veterans Health Care
- HHS Cybersecurity
- Worker Safety and Health
- Child Care
- K-12 Education
- Child Nutrition
- Unemployment Insurance Programs
- Unemployment Insurance Fraud Risk Management
- Emergency Rental Assistance
- Advance Child Tax Credit and Economic Impact Payments
- Agricultural Debt Relief
- Shuttered Venue Operators Grant
- Restaurant Revitalization Fund
- Assistance for Fishery Participants
- Food Safety Inspections
- Airport Grants
- Payroll Support Assistance to Aviation Businesses
- Loans for Aviation and Other Eligible Businesses
- Aviation Manufacturing Jobs Protection Program
- Transit Industry
- Coronavirus Economic Relief for Transportation Services (CERTS)
- Paycheck Protection Program
- Coronavirus State and Local Fiscal Recovery Funds
- Federal Contracts and Agreements for COVID-19
- Vaccines Provided Abroad
- International Trade
- Federal Fraud-Related Cases
- FEMA’s Disaster Relief Fund and Assistance to State, Local, Tribal, and Territorial Governments
- COVID-19 Impact on IRS Enforcement
- Postal Service
- Appendix II: Highlights Pages from Recently Issued GAO COVID-19 Products
- Contracting Flexibilities
- VA CLC Infection Prevention
- Contractor Paid Leave Reimbursements
- Child Welfare
- Implementation of Paycheck Protection Program
- BOP Response to COVID-19
- Assessing Vendors and Contracting Lessons Learned
- Oversight of COVID-19 Assistance
- Economic Injury Disaster Loans
- Biodefense Preparedness
- Hospital Capacity Data Collection
- Federal Debt Management
- Immigration Courts
- Medicaid HCBS Waivers
- Food Box Program
- Exposure Notification
- Characteristics of Paycheck Protection Program Borrowers
- DOD Pandemic Response
- Dedicated User Fees
- Telework Cybersecurity
- HUD Oversight
- IHS COVID-19 Contracting
- Federal Reserve Lending Programs
- IRS IT Investments
- Appendix III: List of Ongoing GAO Work Related to COVID-19 as of September 30, 2021
- Appendix IV: Comments from the Department of Health and Human Services
- Appendix V: Comments from the Department of Homeland Security
- Appendix VI: Comments from the Internal Revenue Service
- Appendix VII: Comments from the Department of Labor, Employment and Training Administration
- Appendix VIII: Comments from the Department of Labor, Occupational Safety and Health Administration
- Appendix IX: Comments from the Department of the Treasury
- Appendix X: Comments from the United States Postal Service
- Appendix XI: Comments from the Department of Veterans Affairs
Appendix I: Enclosures
Bookmark:Economic Indicators
Bookmark:Based on data available in early October 2021, the national economy has continued to recover from the COVID-19 pandemic, and areas of the economy we are monitoring saw some improvement in recent months. Indicators for labor markets, household finances, and small business credit conditions improved in June and July 2021, with notable gains in leisure and hospitality and state and local government employment, while the labor market recovery slowed in August 2021 and state and local government employment fell in September 2021 (see table).[36]
Indicators for Areas of the Economy Supported by the Federal COVID-19 Pandemic Response, June–Sept. 2021, Cumulative Changes since Feb. 2020
Gross domestic product (GDP) grew at a 6.7 percent annual rate in the second quarter of 2021, and for the first time now exceeds its prepandemic level from the fourth quarter of 2019. The recovery from the pandemic has also been associated with a notable increase in inflation which, should it persist, could cause financial challenges that would be felt most acutely by low-income households. The strength of the economic recovery will continue to depend on the success of public health measures against the COVID-19 pandemic.
Key trends in economic indicators. Federal debt held by the public rose to $22.3 trillion in September 2021 from $22.0 trillion in March 2021, after falling slightly as a share of GDP, from 99.8 percent in the first quarter of 2021 to 98.3 percent of GDP in the second quarter 2021. Interest rates on 3-month Treasury securities were relatively stable, rising to 0.04 percent in September 2021 from 0.02 percent in May 2021. Interest rates on 10-year Treasury securities, in contrast, fell from 1.62 percent to 1.37 percent over the same period. The long-term fiscal challenges facing the U.S. have been exacerbated by the pandemic and will require attention as the economy continues to recover and public health goals are attained, as we reported in March 2021.
Based on monthly and weekly data from the Department of Labor, the labor market showed improvement in June, July, August, and September 2021 but remained worse relative to the prepandemic period. Although weekly initial unemployment insurance claims generally declined through September 2021, initial claims remain high compared to the prepandemic period (see the Unemployment Insurance Programs enclosure in app. I). The employment-to-population ratio in September 2021 was 58.7 percent, which was 0.2 percentage points higher than the previous month but 2.4 percentage points lower than the prepandemic period (see figure).
Changes in employment across sectors continue to reflect the differential impact of the pandemic on various sectors of the economy. For example, some industries that experienced strong gains in employment in the first half of 2021, including leisure and hospitality, experienced slower job growth in August and September 2021 as the Delta variant drove a resurgence in cases in the U.S. Employment in the leisure and hospitality sector is still 9.4 percent lower than it was in February 2020. State and local government employment decreased in September 2021 following months of increases, and employment in these sectors remains 4.3 percent lower than the prepandemic period.
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 from March through August 2021, to 8.64 percent of loans, but still remained much higher than rates prior to the pandemic (see figure). FHA loans disproportionately serve minority and low- to moderate-income borrowers, and therefore falling delinquencies may indicate some improvement in the finances of those households in recent months, as well as fewer borrowers relying on mortgage forbearance provisions of the CARES Act.[37] Trends in rent payments among low-income households suggest that these households remain under financial stress as well (see the Emergency Rental Assistance enclosure in app. I).
Serious Delinquency Rates on Single-Family Residential Mortgages, Jan. 2019–Aug. 2021
Key trends in inflation. Inflation has increased notably in recent months, while measures of underlying inflation pressure and longer-term inflation expectations have been more stable.
Inflation is the increase in the price of goods and services over time, and is typically measured as the percentage change in those prices over a set period, often 1 year.[38] As the prices of goods and services rise, inflation decreases the purchasing power of consumers. That is, inflation decreases the value of currency or other highly liquid assets, like checking accounts; as the prices of goods and services rise, each dollar will buy less. Some level of inflation on average can help promote stable economic conditions, but persistently high levels of inflation can cause financial challenges that are experienced more acutely by certain households. The Federal Reserve System’s Federal Open Market Committee (FOMC) aims for inflation of 2 percent on average over time, and aims to achieve rates of inflation that are above 2 percent for some time after periods in which inflation is persistently below 2 percent.[39]
Higher levels of inflation over short periods—described as transitory—are not unusual and are less cause for concern. The prices of goods and services regularly shift in response to economic changes, and any impact on household finances is more limited because prices increase more rapidly for only a short period of time. In addition, transitory inflation during an economic expansion can also be associated with improving labor market opportunities, including for some low-income and minority workers who could find more stable employment during a long economic expansion.
In contrast, high levels of inflation that persist for long periods are more cause for concern, and can reduce the pace of economic growth.[40] Higher inflation that persists for a longer period can also influence consumers’ and businesses’ expectation of future inflation, which can influence their current behavior. For example, consumers and businesses may make large purchases sooner, increasing current demand and making it more likely that those expectations of future inflation are realized.[41]
We identified a number of indicators of inflation to facilitate ongoing and consistent monitoring of the inflation experience of consumers to help assess the extent to which higher inflation may be transitory or persistent. We included both the Personal Consumption Expenditures (PCE) price index and the Consumer Price Index (CPI) as broad measures of the prices consumers pay for goods and services.[42] We also included the median and trimmed mean CPIs, which are less volatile because they omit both small and large price changes and may provide clearer signals of underlying inflation.[43]
We include two different time periods for each of these inflation measures: the percentage change over the last 12 months and the percentage change from the previous month. Measuring inflation over the last 12 months provides a longer and potentially less volatile perspective on inflation, while the percentage change from the previous month is more useful for assessing whether recent price pressures are waning or intensifying.[44]
Finally, we included two measures of expected future inflation, as inflation expectations can influence current economic behavior and indicate whether recent inflation experiences are changing views about future inflation (see table).
Indicators of Inflation, Feb.–Aug. 2021, and Average Inflation Rates, 2000–2019
Based on data available in early October 2021 covering price trends from February through August 2021, inflation has generally increased over the past several months. Indicators of inflation increased substantially relative to a year ago. While inflation remains higher than averages in recent decades, indicators of more recent price pressures (measured relative to the previous month) have recently been moderating somewhat (see figure). The median and trimmed mean CPI measures, as well as professional forecasts and investor expectations of future inflation, are generally below the broader inflation measures, although there has been some meaningful increase in expectations covering the next two years. As we note above, the FOMC aims to achieve rates of inflation that are above 2 percent for some time after periods in which inflation has been persistently below 2 percent, as it was leading up to and during the early months of the pandemic.
The effects of inflation on different populations. Different populations can experience higher or lower levels of inflation than the national average (e.g., the Consumer Price Index for All Urban Consumers, known as CPI-U, which is the broadest and most comprehensive CPI). A number of studies examining distributional consequences of inflation have found that low-income households and the elderly in particular have historically experienced higher levels of inflation than other groups.[45] Regarding low-income households, these studies found that inflation experienced in recent years by the lowest income quartile was notably higher than inflation experienced by the highest income quartile.[46] This trend has also been evident during recessions. For example, one study found that during the first several months of the COVID-19 pandemic, although inflation was low as demand for many goods and services fell, those in the lowest income quintile experienced higher inflation than others.[47] One potential explanation for these differences is that low-income populations spend a higher share of their income on specific goods and services with prices that have increased at a faster rate. For example, during COVID-19 the price of food purchased for consumption at home increased faster than other purchases, and those with the lowest incomes typically spent a higher share of their income in this category.
The elderly have also tended to experience higher rates of inflation than the national average. The Bureau of Labor Statistics produces an experimental inflation index based on a set of goods and services that reflects the spending patterns of elderly consumers (individuals 62 years or older), the CPI-E. Since 2011, annual growth in the CPI-E has been roughly 0.1 percentage point higher than the CPI-U. The rate of increase in the CPI-E has generally been higher than the CPI-U, primarily because the elderly generally spend a higher share of their income on health care and shelter, and, historically, health care and shelter prices have risen at a faster rate than most other goods and services.
How households experience a given level of inflation depends in large part on their sources of income and their assets.
- Labor income. As inflation rises, some workers are able to bargain for higher wages, and as a result, the effects of inflation on their purchasing power could be—at least partially—offset by higher wages. However, wages may fail to keep up with inflation, and if they do, it may take years for wages to adjust.[48]
- Asset holdings. During periods of high inflation, the value of currency depreciates more rapidly, while other sources of wealth, such as investments in the stock market or real estate, will typically increase in value to reflect higher rates of inflation, and therefore would mitigate or hedge against the impact of inflation on household savings. Households with a higher share of their savings in currency or in low-interest savings vehicles would have fewer opportunities to hedge against inflation. Because low-income households typically have a larger share of their financial assets in cash or transaction accounts, higher levels of inflation would be more likely to negatively affect these households. At higher levels of inflation, individuals may reduce holdings of convenient, liquid assets to better hedge against inflation.
- Government benefits and indexation. The impact of government transfers and large social programs on the distributional effects of inflation varies depending on the extent to which programs are adjusted (or indexed) for inflation. Public benefits typically make up a larger share of household income for low-income households and retirees who rely predominantly on Social Security retirement benefits or other government pensions. Therefore, if public benefits are indexed to inflation, low-income households and some retirees will be shielded from some of the effects of inflation. In the U.S., most large government transfer programs are adjusted for inflation and, as such, families who receive a considerable share of their income from public benefits are likely to be shielded somewhat from the effects of inflation. However, adjustments to public benefits are typically made annually, so during times of high inflation, low-income households and other program beneficiaries would continue to feel some effects of inflation in between periodic adjustments.
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 a number of sources. Specifically, we used 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 August and September 2021, depending on availability.
To identify indicators for monitoring inflation, we reviewed data from federal statistical agencies, academic and other research literature, information from the Federal Reserve, the Federal Open Market Committee, written responses to our questions provided by the Bureau of Labor Statistics and the Federal Reserve, data available on the Bloomberg Terminal, and input from internal GAO experts. We also reviewed selected academic research and government reports to better understand the distributional effects of inflation and how higher levels of inflation could affect certain households in different ways.
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 (1) how the areas of the economy supported by the federal pandemic response were performing and (2) trends in the inflation experience of consumers.
Agency Comments
We provided the Department of Housing and Urban Development (HUD), the Department of Labor (DOL), the Department of the Treasury (Treasury), the Federal Reserve, and the Office of Management and Budget (OMB) with a draft of this enclosure. Treasury and the Federal Reserve provided technical comments, which we incorporated as appropriate. HUD, DOL, 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.
Related GAO Product
The Nation’s Fiscal Health: After Pandemic Recovery, Focus Needed on Achieving Long-Term Fiscal Sustainability. GAO-21-275SP. Washington, D.C.: March 23, 2021.
Contact information: Lawrance L. Evans, Jr., (202) 512-8678, evansl@gao.gov
COVID-19 Testing
Bookmark:Antigen testing, also known as “rapid testing,” is on the rise. Limited reporting of test results has thus far prevented the Department of Health and Human Services from using antigen testing data to monitor COVID-19. The Department is taking further steps aimed at improving reporting and exploring additional approaches for effective COVID-19 surveillance.
Entities involved: The Department of Health and Human Services, including the Assistant Secretary for Preparedness and Response, the Centers for Disease Control and Prevention, the Food and Drug Administration, and COVID-19 testing-related working groups (Testing and Diagnostics Working Group and Data Strategy and Execution Workgroup) under the Department.
Background
Following a downward trajectory in reported COVID-19 cases nationally from about mid-April to mid-June, the Delta variant is driving a resurgence in cases in the U.S. This resurgence highlights the continued importance of diagnostic and screening testing, including antigen testing, in the COVID-19 response.[49]
COVID-19 testing types. Antigen tests are one of two types of COVID-19 diagnostic and screening tests for which the Food and Drug Administration (FDA) has issued emergency use authorizations:[50]
- Molecular tests are considered the “gold standard” for detecting an active SARS-CoV-2 infection, the coronavirus that causes COVID-19, but may require specialized laboratory equipment and often have a 1-3 day test turnaround time, mainly due to the time needed to send a sample to the laboratory, according to FDA officials.
- Antigen tests (sometimes known as “rapid tests”) have a faster turnaround time than molecular tests in most cases—about 30 minutes or less. Most antigen tests may be conducted at point-of-care or at-home settings.[51] Some point-of-care settings are health-care related—such as doctors’ offices, pharmacies, and nursing homes, while others are not related to health care, such as workplaces. There are two types of tests that are authorized for use at home: those requiring a prescription and those not requiring a prescription, also known as over-the-counter tests.According to FDA, antigen tests generally perform better in detecting active infections when there are high concentrations of virus found in upper respiratory specimens. Further, the probability of detecting an active infection is enhanced when testing is repeated more than once over a few days (referred to as “serial testing”). However, antigen tests generally have a lower sensitivity—or ability to correctly identify people with COVID-19—than molecular tests. As a result, the Centers for Disease Control and Prevention (CDC) recommends confirming some negative antigen tests for people with symptoms with molecular tests.
In general, antigen testing for COVID-19 provides two public health benefits:
- It helps reduce disease spread because antigen tests typically have a faster turnaround time and therefore individuals can more quickly identify whether they are infected and then self-isolate and take other precautions, accordingly; and
- It can help inform public health disease surveillance and response efforts to the extent that test results are reported to public health authorities.[52]
The Department of Health and Human Services (HHS) has emphasized the importance of data from reported tests, including antigen tests, for public health disease surveillance purposes. The department noted that access to clear and accurate testing data is essential to the public and community leaders as they use data to make response and reopening decisions.[53]
HHS entities and stakeholders involved in testing and data reporting. Test result data are reported to HHS through jurisdictional health authorities. In general, laboratories and point-of-care settings (such as doctors’ offices) report test results to local, state, territorial, and tribal public health authorities. These jurisdictional health authorities then report the data to CDC and HHS.
FDA plays a role in testing by issuing emergency use authorizations or approvals of test products. In addition, housed within HHS are two testing-related working groups (referred to as HHS working groups in this enclosure). The first is the Testing and Diagnostics Working Group, whose purpose is to accelerate and support U.S. testing capacity. This working group is under the Office of the Assistant Secretary for Preparedness and Response (ASPR), while members come from CDC, FDA and other HHS and non-HHS agencies and departments.[54] The second is the Data Strategy and Execution Workgroup, which is a multidisciplinary U.S. Government interagency team that was created in June 2020 under direction of the White House COVID-19 Task Force. ASPR and CDC serve as co-leads of the Data Strategy and Execution Workgroup.[55]
Overview of Key Issues
Antigen testing is on the rise. Over the course of the pandemic, the number of authorized antigen tests has increased. FDA authorized the first antigen tests for use at point-of-care settings in May 2020 and the first antigen tests for at-home testing in December 2020. As of October 14, 2021, FDA has issued 36 emergency use authorizations for antigen tests, including tests authorized for use in laboratory, point-of-care, and at-home settings (see table below). [56]
Source: GAO analysis of Food and Drug Administration (FDA) information. I GAO-22-105051
HHS working group officials told us that antigen testing has comprised a larger share of testing over time, which will likely continue to increase. Our analysis of CDC’s monthly counts of reported testing data also suggests that antigen testing has increased as a whole and as a percent of total tests reported (antigen and molecular). According to the CDC data, the number of reported antigen tests per month increased from about 50,000 in June 2020 to nearly 12 million in August 2021, and as a percentage of total tests, reported antigen tests increased from less than 1 percent in June 2020 to more than 20 percent of all tests reported in July and August 2021.[57]
In addition, on September 9, 2021, the Administration announced the “Path out of the Pandemic” plan, which is expected to further increase the availability of antigen tests for COVID-19.[58] According to the plan, the Administration will exercise authorities in the Defense Production Act to support sustained manufacturing capacity and will spend nearly $2 billion to procure 280 million antigen tests, including rapid point-of-care and over-the-counter COVID-19 tests. As part of the plan, the Administration announced that certain major retailers will sell over-the-counter tests at cost, resulting in discounts of up to 35 percent. The administration also plans to make antigen tests free for Medicaid beneficiaries and provide 25 million tests to 1,400 community health centers and hundreds of food banks.
HHS entities have taken actions in an effort to improve reporting of antigen test results. In June 2020, HHS issued guidance prescribing reporting requirements for laboratories and point-of-care settings conducting COVID-19 testing, which includes antigen tests.[59] However, federal reporting requirements do not pertain to individuals using at-home over-the-counter antigen tests. See figure below for information on reporting requirements by setting.
Since HHS published guidance in June 2020, the department and CDC have tried to improve the reporting of testing data—including antigen testing data—to local, state, and federal health officials, including by taking the following actions:
The department has updated its guidance to clarify test reporting requirements, including those for antigen testing, for laboratories and point-of-care settings. In January 2021, HHS updated its guidance on reporting requirements in an effort to further facilitate complete and comprehensive laboratory testing data reporting.[60] For example, the January 2021 guidance clarified the various methods for submitting test results. This guidance applies to antigen testing conducted in laboratory and point-of-care settings—including non-health-care settings such as workplaces and schools.
CDC issued guidance to encourage reporting of antigen test results from individuals and non-health-care settings. Although federal reporting requirements do not pertain to individuals using at-home over-the-counter antigen tests, CDC issued guidance for over-the-counter antigen testing in April 2021, intended in part, to encourage reporting. The guidance noted that users should report test results to their health care providers or to local or state health departments if they do not have a health care provider.[61]
CDC also issued guidance to employers about the importance of reporting antigen test results. It noted that employers operating a testing program as a point-of-care setting are required to report results to public health officials in accordance with the CARES Act. It also encouraged employers who collect test results from employees who self-test using over-the-counter tests to report these test results as well—stating that “sharing results with local public health authorities supports contact tracing efforts to slow the spread of COVID-19.”[62]
FDA and HHS working groups collaborated with test manufacturers to encourage and facilitate user reporting of results. FDA does not have the authority to require individuals to report over-the-counter test results. However, FDA officials told us they worked with manufacturers during the emergency use authorization application process, as well as during town halls they hosted with manufacturers, to identify approaches that encourage and facilitate such reporting by individuals. For example, one approach is a smart phone application that communicates tests results to the user and automatically transmits results to public health officials. In addition, HHS working group officials told us they have held collaborative discussions with test manufacturers to identify ways to ensure high-quality diagnostic data are captured from antigen tests used both in at-home and in point-of-care settings, such as schools.
Limited antigen test reporting prevents HHS and CDC from using these data for COVID-19 surveillance. HHS working group and CDC officials told us that limited antigen test reporting to jurisdictional health departments and from jurisdictions to CDC, prevents them from using these data for COVID-19 surveillance. Instead, these officials told us that they use antigen test data to track trends in tests distributed, test supply availability, and limited programmatic metrics.
HHS working group and CDC officials noted that the number of reported antigen test results is much lower than the expected number of administered tests. CDC officials also told us they do not presently have an approach to capture the number of antigen tests administered. This total number is needed to calculate the proportion of antigen tests in a given population that are positive for infection (also known as, the test positivity rate)—a key public health indicator for surveillance of COVID-19, as we reported in January 2021. As a result, test positivity rates have generally included only molecular tests.[63] As antigen test availability increases, especially over-the-counter tests, test positivity rates based only on molecular tests, or based on limited antigen test data, could be less useful as indicators of trends in COVID-19 spread.
At the state and local levels, representatives from four national stakeholder organizations told us that the limited reporting of antigen test data can hinder the use of these data for surveillance.[64] For example, representatives from one organization told us that some local health department officials are limited in their ability to use antigen testing data to understand the spread of COVID-19 in their communities, including helping to identify local outbreaks, perform contact tracing, and identify individuals where sequencing may need to be performed to monitor the spread of variants.[65]
HHS and CDC are taking steps aimed at improving reporting and exploring additional approaches for effective COVID-19 surveillance. HHS working group and CDC officials told us they are considering approaches to further improve antigen test data reporting, as they believe these data could be valuable for surveillance if reporting were more complete. For example, these approaches include continuing to work with test manufacturers and making enhancements to data reporting by building reporting methods into the testing process, such as for testing processes used in schools and workplaces. More complete data and reporting from such approaches could provide an earlier indication and fuller picture of where community transmission is occurring, especially among individuals who are asymptomatic or experiencing less severe symptoms, according to officials.
Representatives from one stakeholder group told us that targeted antigen testing in specific areas can have a role in surveillance. Additionally, representatives from another stakeholder group told us that not every antigen test result is expected or needs to be reported in order to use the data for surveillance purposes. Stakeholder groups also commented on the reporting challenge specific to over-the-counter test results, stating that there is likely no realistic way to mandate that individuals report the results from these types of tests.
HHS working group and CDC officials stated that while they are trying to improve reporting of antigen testing data, they are also considering surveillance approaches to supplement or enhance current surveillance efforts. For example, CDC is exploring wastewater surveillance approaches. According to CDC officials, wastewater surveillance provides data that can complement and confirm other forms of clinical case-based surveillance for COVID-19, and it can provide an efficient pooled community sample that is particularly useful in areas where timely COVID-19 clinical testing is underutilized or unavailable.
If antigen testing continues to expand as expected, especially with the increasing availability of over-the-counter tests, the ongoing limited reporting of antigen test results could reduce the ability of public health officials to more comprehensively monitor and effectively respond to COVID-19. These issues highlight the importance of HHS working group and CDC efforts aimed at improving reporting and exploring additional approaches for effective surveillance.
Methodology
To understand federal efforts to collect antigen test data and the role these data play in monitoring COVID-19, we reviewed relevant CDC, FDA, and HHS documentation, such as HHS and CDC guidance related to the reporting of antigen test results. We reviewed publicly available information from FDA’s website on its emergency use authorizations for COVID-19 antigen tests, including the conditions of the authorizations, as well as to determine the number of tests authorized and the authorized settings for these tests. In addition, we collected written responses to questions we submitted to CDC, FDA, and HHS working groups.
To gather perspectives from public health stakeholder groups involved in testing and surveillance, we interviewed representatives from four national organizations that collectively represent local, state, and territorial public health agencies and laboratories, and state epidemiologists: the Association of State and Territorial Health Officials, the Council of State and Territorial Epidemiologists, the National Association of County and City Health Officials, and the Association of Public Health Laboratories.
To describe public reporting of antigen test data, we assessed general trends in the numbers of monthly reported antigen tests relative to molecular tests as reported to HHS. We assessed the reliability of the monthly testing data by reviewing HHS and CDC information about the data and limitations. We determined that the data were sufficiently reliable for the purpose of assessing high level, general trends in antigen test data.
Agency Comments
We provided a draft of this enclosure to HHS and the Office of Management and Budget for review and comment. HHS provided technical comments, which we incorporated as appropriate. The Office of Management and Budget did not provide comments on this enclosure.
GAO’s Ongoing Work
We are continuing to review federal efforts related to COVID-19 testing and surveillance. Our ongoing work will further explore the evolving testing landscape and related data collection, as well as surveillance approaches CDC is using, or plans to use, to monitor COVID-19 in the continued response and into recovery.
GAO’s Prior Recommendations
The table below presents our recommendations on testing from prior bimonthly and quarterly CARES Act reports.
Source: GAO. I GAO-22-105051
Contact information: SaraAnn Moessbauer, 202-512-4943, MoessbauerS@gao.gov, and Mary Denigan-Macauley, 202-512-8552, DeniganMacauleyM@gao.gov
FDA Oversight of COVID-19 Vaccine Manufacturing Quality
Bookmark:The Food and Drug Administration took a variety of steps to help ensure the manufacturing quality of the COVID-19 vaccines authorized for emergency use.
Entity involved: Food and Drug Administration, within the Department of Health and Human Services
Background
The Food and Drug Administration’s (FDA) oversight of manufacturing establishments is a critical tool in how the agency helps ensure the manufacturing quality of vaccines, including those used to prevent COVID-19.
FDA generally licenses vaccines for marketing in the U.S. through approval of a biologics license application (BLA). BLAs contain data intended to support the application, including data from non-clinical studies and clinical studies on the safety and effectiveness of the product, as well as manufacturing data and information. According to FDA, as part of each BLA review, it assesses manufacturing processes, establishments involved in manufacturing, and the quality and consistency of the product.
FDA also inspects the establishments involved in manufacturing vaccines as part of the BLA review process or after the product is licensed for the U.S. market. These inspections are official examinations of establishments to determine compliance with the law and applicable regulations. Inspections may result in written observations provided to each manufacturer and an inspection classification, which is an assessment of the seriousness of the observations from the inspection. According to FDA, pre-license and pre-approval inspections are needed in about 20 percent of instances, usually in cases in which an establishment has a history of compliance issues or when FDA has not previously inspected the establishment.[66]
Under certain circumstances, such as the COVID-19 pandemic, FDA may temporarily allow the use of an unlicensed product through an emergency use authorization (EUA), provided certain statutory criteria are met.[67] For example, FDA may issue an EUA if it is reasonable to believe that the product may be effective and the known and potential benefits of the product outweigh the known and potential risks. FDA guidance indicates that companies requesting EUAs should provide information about manufacturing processes and controls for establishments involved in manufacturing. FDA may conduct inspections of manufacturing establishments prior to issuing an EUA, but the statutory criteria for EUAs do not require FDA to conduct such inspections prior to issuance. FDA guidance for COVID-19 vaccines states that any vaccine company that initially receives an EUA is expected to conduct further research and work towards submission of a BLA as soon as possible.
Overview of Key Issues
To help ensure manufacturing quality for the COVID-19 vaccines authorized for emergency use, FDA reviewed documentation and conducted on-site reviews. As of August 2021, FDA had authorized three COVID-19 vaccines (Pfizer, Moderna, and Janssen) for emergency use, and one of these vaccines (Pfizer) had also been licensed.[68] To assess each of the 18 establishments that manufactured these COVID-19 vaccines, FDA took a variety of steps, including reviewing documentation provided by the vaccine companies for their EUA requests and reviewing prior inspections reports.[69]
Documentation from EUA requests. According to FDA, the agency reviewed documentation and data that each of the COVID-19 vaccine companies included in their EUA requests about the establishments used in manufacturing the vaccines. Examples of key manufacturing information that FDA reviewed included:
- Quality systems and controls, the adequacy of the building design and equipment, and the container storage and closure conditions to ensure the sterility of the product in the final container.
- Cross-contamination controls to ensure they are suitable to mitigate risk of cross contamination.
- The adequacy of multiple product manufacturing areas used to manufacture the vaccine, including cleaning and changeover procedures.
- The qualification of critical equipment for manufacturing the drug substance and drug product.[70]
Documentation of prior FDA inspections. For the purpose of the EUA review process, FDA was not required to and did not conduct inspections specifically examining COVID-19 vaccine manufacturing for any of the establishments prior to authorizing the three vaccines for emergency use.[71] However, FDA did review the establishments’ inspection histories.
Our review found that 14 of the 18 establishments that manufacture COVID-19 vaccines had been previously inspected at least once by FDA from October 2011 through the date the initial EUA request for the COVID-19 vaccine was submitted to the agency.[72] This amounted to 90 total inspections. For all but one of these 14 establishments, FDA’s most recent inspection was within the last 4 years. (See figure.)
Establishments Manufacturing the COVID-19 Vaccines, by the Date of the Most Recent Historical FDA Inspection Prior to Initial Emergency Use Authorization (EUA) Request and Manufacturing Type
FDA classifies inspections based on the seriousness of the deficiencies identified during the inspections. FDA classified the 90 prior inspections of these establishments, which were conducted prior to the initial EUA requests, as follows:
- In 22 of 90 inspections, FDA found no objectionable conditions or practices or the conditions found did not justify further regulatory action (known as no action indicated).
- In 64 of 90 inspections, FDA found objectionable conditions or practices that were not deemed serious deficiencies and did not recommend any administrative or regulatory actions (known as voluntary action indicated).
- In two of the 90 inspections, FDA found serious deficiencies requiring regulatory and/or administrative actions (known as official action indicated).[73]
- One of the establishments was inspected in 2013. FDA reinspected this establishment later in 2013 and did not find serious deficiencies during that inspection or during subsequent inspections in 2014, 2015, and 2018.
- The second establishment was inspected in 2020. FDA later reinspected this establishment in 2021 and identified serious deficiencies.[74] In response, the establishment submitted a corrective action plan and worked with FDA to correct the deficiencies.
Other information sources. As needed, in addition to reviewing EUA requests and past inspection documentation, FDA also used a variety of other information sources including on-site reviews, record requests, reports from foreign regulators, and inspections to further collect information about and assess the establishments manufacturing the COVID-19 vaccines. FDA utilized some of these sources prior to issuing the initial EUAs, as well as after.
- On-site reviews. FDA conducted on-site reviews—investigations or site visits—for some of the establishments manufacturing the COVID-19 vaccines. During the COVID-19 pandemic, FDA conducted EUA investigations to assess the current operational status of establishments manufacturing the COVID-19 vaccines and provide feedback on manufacturing earlier in the process. Site visits are a longstanding tool used by FDA to learn and observe establishment operations to improve understanding and open a dialogue between industry and the agency. Investigations and site visits, unlike inspections, do not lead to written observations or inspection classifications.[75] As of August 2021, FDA conducted five investigations and three site visits to assess manufacturing quality for the COVID-19 vaccines at three establishments. For example, FDA conducted a site visit prior to issuing an EUA at one establishment that had not been inspected by FDA within the past 9 years.
- Record requests. FDA may request that establishments send records and other information in advance of or in lieu of certain types of inspections.[76] Such records include those that FDA commonly reviews during an on-site inspection, such as reports on product quality, lists of all products manufactured at a facility, and summaries of any discrepancies identified during manufacturing and testing and any corresponding investigations. FDA uses record requests to inform inspection planning or decisions to adjust the intervals in between inspections, or as substitutes for certain pre-license or pre-approval inspections as determined by the agency.[77] For the authorized COVID-19 vaccines, FDA requested records for three establishments prior to conducting inspections, as of August 2021.
- Foreign regulator reports. FDA also received reports from foreign regulators about COVID-19 vaccine manufacturing for all seven of the establishments that were located in foreign countries as of August 2021. Two of these establishments had not been inspected by FDA in almost 10 years, while another had not been inspected since 2013.
- Inspections. While FDA did not conduct any new inspections of these establishments prior to issuing the initial EUAs, FDA conducted several inspections after. Specifically, FDA subsequently inspected six establishments manufacturing the COVID-19 vaccines from April through July 2021. Three of the six inspections were for establishments manufacturing Pfizer’s COVID-19 vaccine, including one in Europe, and occurred after the company began submitting its BLA for review. One of these six inspections was for a Janssen contractor establishment (Emergent) in April 2021. This establishment had previously been inspected in April 2020 and FDA indicated that it found serious deficiencies. The April 2021 inspection occurred following a report of contamination with the drug substance for another COVID-19 vaccine not currently authorized in the U.S. (AstraZeneca).[78] This inspection identified multiple serious deficiencies related to manufacturing quality control systems, building design, equipment, and personnel training. Following the April 2021 inspection, manufacturing of new batches of the drug substance for the Janssen vaccine at the establishment and distribution of existing batches were halted. Manufacturing of the AstraZeneca vaccine was also removed. Emergent subsequently submitted a corrective action plan and worked with FDA to correct the deficiencies. In July 2021, FDA informed Emergent that it did not object to resuming manufacturing of the Janssen COVID-19 vaccine at the Emergent establishment, according to FDA officials.
FDA examined the manufacturing quality of the three other COVID-19 vaccines that have not been authorized or licensed. As of August 2021, three other vaccine companies (AstraZeneca, Novavax, and Sanofi/GSK) that also participated in the HHS-DOD COVID-19 Countermeasures Acceleration Group (previously known as Operation Warp Speed) had not requested EUAs or submitted BLAs.[79] FDA officials told us that they have been examining manufacturing quality for the establishments manufacturing these vaccines as part of the clinical trial process.
FDA used information from past FDA inspections and supplemented with information from on-site reviews and inspections as needed for the 13 establishments manufacturing these vaccines.[80]
Inspection history. In examining the establishments’ FDA inspection histories, we found that from October 2011 through May 2021, FDA had previously inspected 11 of the 13 establishments manufacturing these COVID-19 vaccines.[81] This resulted in a total of 73 inspections. All of the inspected establishments were inspected in the last 3 years. (See figure.)
Establishments Manufacturing the COVID-19 Vaccines Not Authorized or Licensed, by Date of Their Most Recent FDA Inspections and Manufacturing Type, as of May 2021
FDA classified these 73 inspections as follows
- In 16 of 73 inspections, FDA classified the inspection as no action indicated.
- In 49 of the 73 inspections, FDA classified the inspection as voluntary action indicated.
- In 3 of the 73 inspections, FDA classified the inspections as official action indicated.[82]
- One of these inspections was conducted in 2013. FDA later reinspected this establishment twice in 2014, and again in 2015, 2016, 2017, 2018, 2019, and 2021 and did not identify serious deficiencies.
- The second was conducted in 2019. FDA later reinspected this establishment in 2020 and did not identify any serious deficiencies.
- The third inspection was conducted in 2020. FDA later reinspected this establishment in 2021 and identified serious deficiencies.[83] In response, manufacturing of the COVID-19 vaccine at this establishment was removed.
Onsite reviews. As of August 2021, FDA had conducted seven EUA investigations and two site visits at six establishments manufacturing these vaccines. For example, FDA conducted an EUA investigation related to a COVID-19 vaccine in March 2021 for an establishment that had not been inspected by FDA in almost 10 years. This establishment is a contract manufacturer for Texas A&M University, which serves as one of three of the HHS Biomedical Advanced Research and Development Authority’s Centers for Innovation in Advanced Development and Manufacturing intended to develop and manufacture medical countermeasures for the federal government.
Inspections. FDA also reported that it conducted inspections specifically for the COVID-19 vaccines at two establishments in April and July 2021.
Methodology
To conduct this work, we obtained information from the six COVID-19 vaccine companies participating in the HHS-DOD COVID-19 Countermeasures Acceleration Group on the establishments involved in manufacturing their vaccines for the U.S. market as of June 2021. We used this information in our examination of FDA’s inspections from the agency’s Field Accomplishments and Compliance Tracking System. Specifically, we reviewed FDA data on vaccine and other biologic inspections from October 1, 2011 through May 26, 2021 and data on drug inspections from October 1, 2011 through April 29, 2021. We examined data from October 1, 2011, to provide a wide enough range to capture inspection activities over time. We also reviewed agency guidance and documents, as well as interviews and written responses from FDA officials related to the agency’s vaccine oversight activities during the COVID-19 pandemic.
To assess the reliability of the data, we conducted electronic data testing for missing data and outliers, reviewed relevant documentation, and obtained information from knowledgeable agency officials. We found the data sufficiently reliable for our purposes.
Agency Comments
We provided the Department of Health and Human Services (HHS) and the Office of Management and Budget (OMB) with a draft of this enclosure. HHS provided technical comments, which we incorporated as appropriate. OMB did not provide comments on this enclosure.
GAO’s Ongoing Work
We will continue to report on the federal efforts surrounding the development, manufacturing, and distribution of the COVID-19 vaccines, including the use of the HHS-DOD COVID-19 Countermeasures Acceleration Group (formerly known as Operation Warp Speed).
Related GAO Products
Operation Warp Speed: Accelerated COVID-19 Vaccine Development Status and Efforts to Address Manufacturing Challenges. GAO-21-319. Washington, D.C.: February 11, 2021.
COVID-19: Federal Efforts Accelerate Vaccine and Therapeutic Development, but More Transparency Needed on Emergency Use Authorizations. GAO-21-207. Washington, D.C.: November 17, 2020.
Contact information: Mary Denigan-Macauley, 202-512-7114, deniganmacauleym@gao.gov
FDA Inspections of Biologic Manufacturing during the COVID-19 Pandemic
Bookmark:The Food and Drug Administration significantly reduced inspections of biologic manufacturing establishments due to the COVID-19 pandemic but identified alternative tools it could use to help oversee manufacturing quality during this emergency.
Entity involved: Food and Drug Administration, within the Department of Health and Human Services
Background
The Food and Drug Administration’s (FDA) inspections of manufacturing establishments are a critical tool in how the agency oversees the manufacturing quality of biologics used to prevent, treat, and cure diseases and medical conditions, such as cancers and infectious diseases.
Biologics are a diverse category of products that include vaccines and allergenics, blood and blood components, and cells, certain human tissues, and gene therapy products.[84] Biologics are generally derived from living material, such as the human body or a microorganism, and are generally more complex than other, chemically synthesized drugs. Biologics tend to be heat sensitive and susceptible to microbial contamination, making the manufacturing process for biologics typically more complex than it is for other drugs.
Unlike chemically synthesized drugs, biologics marketed in the U.S. are mostly manufactured domestically, according to FDA. However, there is variation by product type. For example, blood and blood components are overwhelmingly manufactured at establishments located in the U.S. while vaccine and allergenic manufacturing establishments are mostly located both in Europe and the U.S.
Most biologics are regulated by FDA’s Center for Biologics Evaluation and Research.[85] FDA generally licenses biologics, such as vaccines, for marketing in the U.S. through approval of a biologics license application (BLA). BLAs contain data intended to support the application, including data from non-clinical studies and clinical studies on the safety and effectiveness of the product, as well as manufacturing data and information. According to FDA, as part of each BLA review, it assesses manufacturing processes, establishments involved in manufacturing, and the quality and consistency of the biologic.
FDA inspects the establishments involved in manufacturing biologics as part of the BLA review process or after the product is licensed for the U.S. market. These inspections are official examinations of establishments to determine compliance with the law and applicable regulations. Inspections may result in written observations provided to each manufacturer and an inspection classification, which is an assessment of the seriousness of the observations from the inspection. FDA conducts several types of inspections:
- Pre-license and pre-approval inspections. FDA may conduct pre-license and pre-approval inspections in response to new BLAs or manufacturing changes to existing BLAs.[86] According to FDA, pre-license and pre-approval inspections are needed in about 20 percent of instances, usually when an establishment has a history of compliance issues or if FDA has not previously inspected the establishment.
- Surveillance inspections. FDA conducts surveillance inspections after a product is marketed to determine an establishment’s ongoing compliance with current good manufacturing practice (CGMP) regulations.[87] FDA uses a risk-based approach to select biologic establishments for surveillance inspections.[88] According to FDA, the agency typically aims to inspect the highest risk establishments every 2 years and inspect the remaining establishments every 2 to 4 years.
- For-cause inspections. FDA conducts for-cause inspections after a product is marketed to investigate specific issues or follow up on a previous regulatory action, such as when serious deficiencies were identified during a prior inspection.
Overview of Key Issues
FDA inspections of biologic manufacturers had generally been declining since 2012 and mostly stopped during the COVID-19 pandemic. Prior to the COVID-19 pandemic, FDA inspections of biologic manufacturing establishments had declined slightly since 2012—from a high of 1,922 in fiscal year 2013 to 1,668 in fiscal year 2019 (see figure below). Surveillance inspections make up the majority of biologic inspections and particularly decreased in 2019. FDA officials attributed this decrease in inspections in fiscal year 2019 to a lapse in appropriations and to vacancies among the staff who conduct inspections.[89]
FDA Biologic Inspections by Year and Type of Inspection, Fiscal Years 2012–2021
Similar to what we reported in March 2021 for FDA’s drug inspections, due to the pandemic, beginning on March 17, 2020, FDA paused most biologic inspections and transitioned to focus solely on those deemed mission-critical, a designation which it determines on a case-by-case basis. During the COVID-19 pandemic, FDA gave higher priority to establishments that manufactured products related to the COVID-19 response or products used to treat serious diseases or medical conditions for which there is no substitute. Mission-critical inspections may include both domestic and foreign establishments.
In addition to mission-critical inspections, beginning in July 2020, FDA reported that it resumed certain other high priority domestic surveillance and for-cause inspections, such as following up on serious deficiencies identified in previous inspections, in areas where it is safe to do so. Citing concern for the safety of its employees, these prioritized domestic inspections have all been preannounced; whereas, prior to the pandemic, FDA generally did not announce domestic surveillance inspections.[90] As of August 2021, FDA officials said the agency had not set a date for when it planned to resume unannounced domestic inspections. FDA’s inspection priorities during the COVID-19 pandemic are generally the same for all medical products, including drugs, which we reported on in March 2021.
As a result of the pause and limited restart, inspections further declined significantly in fiscal years 2020 and 2021. In the year following the decision to pause inspections, from April 2020 through March 2021, FDA conducted 58 biologic inspections, compared to more than 1,500 inspections conducted during the same period in the year prior to the pause in inspections (see figure below). These 58 biologic inspections were all of domestic establishments.
Due to limited in-person inspections, FDA identified alternative tools it could use to help oversee the quality of biologic manufacturing establishments during the pandemic. These alternative tools include:[91]
Records requests. FDA may request that establishments send records in advance of or in lieu of certain types of inspections.[92] Such records include those that FDA commonly reviews during an on-site inspection, such as reports on product quality, lists of all drugs manufactured at a facility, and summaries of any discrepancies identified during manufacturing and testing and any corresponding investigations. FDA uses record requests to inform inspection planning or decisions to adjust the intervals in between inspections, or as substitutes for certain pre-approval inspections as determined by the agency.[93] FDA reported issuing record requests to 179 biologic establishments in fiscal year 2020 and 601 biologic establishments in fiscal year 2021 (as of May 2021). Prior to the pandemic, FDA did not use record requests as an alternative inspection tool for those biologics regulated by the Center for Biologics Evaluation and Research, according to FDA responses.
Investigations and site visits. During the COVID-19 pandemic, FDA conducted emergency use authorization (EUA) investigations to assess the current operational status of establishments manufacturing the COVID-19 vaccines and to provide feedback on manufacturing earlier in the process. Site visits are a longstanding tool used by FDA to learn and observe establishment operations for the purpose of improving understanding and opening a dialogue between industry and the agency. Unlike inspections, investigations and site visits do not lead to an inspection classification.[94] FDA utilized these tools for several of the establishments manufacturing the COVID-19 vaccines. For more information about the steps FDA used to help ensure manufacturing quality for the COVID-19 vaccines, see the FDA Oversight of COVID-19 Vaccine Manufacturing Quality enclosure.
Remote interactive evaluations. These evaluations include remote live-streaming video of operations, teleconferences, or screen sharing. In April 2021, FDA issued guidance noting that remote interactive evaluations, in which establishments have to agree to participate, do not constitute inspections. Instead, FDA would use these evaluations to determine the scope, depth, and timing of potential future inspections. At the conclusion of such a remote interactive evaluation, FDA provides establishments with written observations, as it would for an inspection. However, unlike what happens following an inspection, FDA does not issue inspection classifications for remote interactive evaluations.
Prior to the pandemic, FDA did not use remote interactive evaluations and, as of August 2021, FDA officials said the agency had not yet conducted any remote interactive evaluations of biologic establishments. Agency officials said that was because the agency is reviewing internal processes to help ensure implementation of remote interactive evaluations adequately provides the information needed to assess manufacturing quality.
Representatives of almost all biologic manufacturing associations we spoke to generally supported FDA’s use of alternative inspection tools both during the COVID-19 pandemic and in the future, but noted some challenges with the use of these tools. For example, representatives from three associations noted a lack of communication from FDA following record requests. According to FDA, the agency plans to revise its record request procedures in fiscal year 2022 to increase communication with manufacturers.
Representatives from three associations also noted a lack of clarity on whether the agency could use these alternative tools as substitutes for in-person inspections, such as to resolve findings from prior FDA inspections. FDA’s guidance does not state whether these alternative inspection tools may be used to resolve prior inspection findings. However, in a May 2021 FDA presentation to industry officials, the agency stated that they could be used in this way. FDA officials later told us that alternative inspection tools are not intended to replace inspections to resolve inspection findings and are reluctant to use these tools in lieu of an inspection.
FDA may face challenges resuming routine surveillance inspections of vaccine and allergenic manufacturing establishments, but said vaccine inspections are a priority. While inspections of vaccine and allergenic establishments represent a small number of total biologic inspections each year—2 percent in fiscal year 2019 (the last fiscal year prior to the pandemic)—inspections of these establishments are largely in foreign countries, such as the United Kingdom, Germany, and France. In contrast, inspections of other biologic product types, which comprise 98 percent of total biologic inspections, are mostly domestic (see figure below).
In July 2021, FDA announced it resumed routine domestic surveillance inspections, thereby putting the agency in a position to begin to return to its prepandemic inspection rates for blood and blood components and tissue and gene therapy products manufacturing establishments. However, in August 2021, FDA officials stated that the agency was uncertain whether the ongoing pandemic will impose additional disruptions to the domestic inspection operations in the future.
In addition, FDA officials said the agency does not have a time frame for resuming routine foreign inspections, as of August 2021, which may affect its ability to conduct routine surveillance inspections for vaccine and allergenics manufacturing establishments. Officials said that the additional challenges with resuming foreign inspections, including travel restrictions and the length of time needed for trip planning, make it difficult to estimate when foreign surveillance inspections will resume.
According to FDA officials, vaccine inspections are a high priority for the agency. They said FDA is continuously examining which establishments to prioritize for surveillance inspections as determined by the agency’s risk-based approach. FDA officials said they are shifting resources to address the highest inspection priorities, including vaccine oversight. Further, if FDA determines that a foreign manufacturing establishment becomes a high enough risk—for instance, the establishment has not been inspected in the typical period of time—then the agency may designate that inspection as mission critical and conduct an inspection, according to FDA officials.
Methodology
To conduct this work, we reviewed FDA data on biologic inspections from October 1, 2011 through May 26, 2021 (the most recent data available), from the agency’s Field Accomplishments and Compliance Tracking System. We examined this time frame to provide a wide enough range to capture inspection activities over time. We also reviewed agency guidance and documents, as well as interviews and written responses from FDA officials related to the agency’s biologic oversight activities during the COVID-19 pandemic.
To assess the reliability of the inspection data, we conducted electronic data testing for missing data and outliers, reviewed relevant documentation, and obtained information from knowledgeable agency officials. We found the data sufficiently reliable for our purposes.
Additionally, we interviewed AABB (formerly known as the American Association of Blood Banks), Alliance for Regenerative Medicine, Association for Accessible Medicines, Biotechnology Innovation Organization, Pharmaceutical Research and Manufacturers of America, Pharma & Biopharma Outsourcing Association, and Plasma Protein Therapeutics Association, which represent blood centers and manufacturers of tissue and cell products, generic drugs and biosimilars, drugs and biologics, brand-name drugs and biologics, contract manufacturers, and plasma manufacturers, respectively, on the effects of the temporary postponement of inspections and FDA’s use of alternative tools.
Agency Comments
We provided the Department of Health and Human Services (HHS) and the Office of Management and Budget (OMB) with a draft of this enclosure. HHS provided technical comments, which we incorporated as appropriate. OMB did not provide comments on this enclosure.
GAO’s Ongoing Work
As FDA’s inspections of manufacturing establishments remain a critical tool to oversee the manufacturing quality of biologics and other drugs, even during the pandemic, we will continue to monitor FDA’s inspection program.
Related GAO Product
Drug Safety: FDA’s Future Inspection Plans Need to Address Issues Presented by COVID-19 Backlog. GAO-21-409T. Washington, D.C.: March 4, 2021.
Contact information: Mary Denigan-Macauley, 202-512-7114, deniganmacauleym@gao.gov
Health Insurance Loss
Bookmark:Estimates of employer-sponsored insurance suggest more than 3.1 million non-elderly adults lost their insurance during the COVID-19 pandemic; some losing this insurance were able to obtain an alternative source of coverage, though complete data are not yet available.
Entity involved: The Centers for Medicare & Medicaid Services, within the Department of Health and Human Services
Background
Many Americans receive health insurance through their employer, which is known as employer-sponsored insurance (ESI).[95] COVID-19 and the associated economic downturn likely caused disruptions in ESI for millions of Americans, although estimates of the magnitude of ESI loss vary. For those who lost ESI, there were a number of health coverage alternatives available, including the following options:
- coverage through a federal or state health insurance exchange established under the Patient Protection and Affordable Care Act. Through federal and state health insurance exchanges, individuals can compare and select among plans that meet certain federal standards offered by participating private insurers.[96]
- Medicaid. Medicaid is a joint federal-state health financing program for certain low-income and medically needy individuals.
- benefits under the Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA) and COBRA-like provisions for state and local employees. COBRA provides certain individuals who lose their employer-sponsored health coverage with temporary access to continue it for limited periods of time under certain circumstances.
- short-term, limited duration insurance. Short-term, limited duration insurance is a type of health insurance coverage that was primarily designed to fill temporary gaps in coverage and is generally exempt from federal health insurance requirements.
- other sources of financial support for medical expenses. Other forms of financial support for medical expenses include health care sharing ministries, which are faith-based organizations that share resources for medical needs among their members but do not have to comply with federal health insurance requirements.
Congress included several provisions in COVID-19 relief laws to support access to health coverage, including for those who have lost ESI. For example, the American Rescue Plan Act of 2021 temporarily increases and expands eligibility for tax subsidies for individuals enrolled in coverage through a health insurance exchange.
Overview of Key Issues
ESI loss during the COVID-19-associated economic downturn. Though estimates vary widely, studies suggest millions likely lost their ESI during the COVID-19-associated economic downturn. Estimates of ESI loss range from 3.1 to 3.3 million non-elderly adults, or between 12 and 14.6 million workers and their dependents, depending on the methods used to develop the estimate and the time period and population studied (see table below).[97]
Source: GAO summary of selected studies. | GAO-22-105051
Note: We reviewed a number of studies that provided a numerical estimate of ESI loss during the COVID-19-associated time period and selected to report several here that represent a range of data sources and methods for developing an ESI loss estimate, including surveys and simulation models.
aThese studies vary in population studied. “Non-elderly adults” refers to adults age 18 through 64; “workers” refers to employed people who receive ESI through their job; “dependents” refers to those who receive ESI through another person, such as a spouse or parent.
The Congressional Budget Office estimated that 14.3 million people would lose their jobs in 2020, but not all job losses would result in a loss of ESI.
ESI loss was likely less than originally expected:
- Many people who lost their jobs during the COVID-19 pandemic had never been enrolled in ESI through their jobs. The highest COVID-19-related job loss has been seen in small companies and lower-wage industries less likely to offer health insurance, such as retail and food service.
- Many individuals were able to retain their ESI while furloughed as the pandemic continued through 2020. According to a Bureau of Labor Statistics survey, 42 percent of establishments surveyed paid a portion of health insurance premiums for some or all furloughed employees while they were not working in calendar year 2020.[98]
- Some job loss and any associated ESI loss may have been temporary. According to a Bureau of Labor Statistics survey, of the 13.5 million who reported not working in June 2020, 10.6 million (or 79 percent) expected to be recalled to work at some point.[99]
It is not yet clear how the COVID-19 pandemic has more recently affected ESI in 2021. A September 2021 study used data from U.S. Census Bureau surveys to estimate that nearly 3 million people lost ESI in 2020. However, based on its review of health care administrative data, the study estimated that many of the people who lost ESI and became uninsured during the spring and summer of 2020 may have eventually found an alternative source of coverage, particularly Medicaid, later in 2020 or in early 2021.[100]
Another recent study, a Commonwealth Fund survey fielded March through June 2021, found that 6 percent of working-age adults reported that they lost ESI because of a job loss during the COVID-19-associated time period; of those, 67 percent of those who reported losing ESI reported gaining other coverage.[101] Of those who lost ESI and gained other coverage, 20 percent reported they became insured through another ESI plan, 20 percent reported that they elected COBRA, 16 percent reported they gained Medicaid coverage, and 9 percent reported they gained coverage through an exchange plan.[102] Additional and updated estimates of the effect of the COVID-19-associated economic downturn on ESI may become available as new data from household surveys are released in late 2021 and 2022.
Health coverage alternatives for those losing ESI during the pandemic. Some of those losing ESI during the COVID-19 pandemic were able to obtain coverage through a health insurance exchange or Medicaid. Enrollment in other options, such as COBRA, may have also increased, but comprehensive data are not available.
Exchange coverage. Enrollment in exchange coverage increased during the COVID-19 pandemic, both during annual open enrollment periods available to all consumers and special enrollment periods available under certain circumstances.[103]
Plan selections during open enrollment in federal and state exchanges was at its highest level since 2017 during the 2021 open enrollment period, which occurred during the COVID-19 pandemic. (See figure.) The Centers for Medicare & Medicaid Services (CMS) data show that there were about 600,000 (about 5.2 percent) more plan selections during the 2021 open enrollment period than during the 2020 open enrollment period, which occurred before the COVID-19 pandemic.
Plan Selections during Open Enrollment Periods in Federal and State-Based Exchanges, 2017-2021
Special enrollment through the federally facilitated exchange was also higher in 2020, during the COVID-19 pandemic, than in any prior year data were collected.[104] Generally, special enrollment periods allow an individual to apply for health coverage after experiencing a qualifying event, such as losing minimum essential health coverage or getting married.
Compared to 2019, more than 300,000 (about 23 percent) more consumers obtained coverage through a special enrollment period in 2020.[105] Most of this increase resulted from consumers who qualified for the special enrollment period because of a loss of health insurance. Specifically, in 2020, there was a 293,563 (43 percent) increase in enrollments using a special enrollment period with loss of health coverage as the qualifying event compared to a 25,136 (3.7 percent) increase in enrollments among those using a special enrollment period who qualified for another reason. (See figure.)
Federal Exchange Special Enrollment by Qualifying Event, 2017-2020
Furthermore, on January 28, 2021, the administration announced a new special enrollment period for the federally facilitated exchange in response to the COVID-19 public health emergency, which was available from February 15, 2021, through August 15, 2021. This special enrollment period was open to all individuals and no qualifying event was required to obtain coverage.[106] According to CMS, the new federal special enrollment period in response to COVID-19 was accompanied by an outreach campaign to raise awareness among the uninsured about it and about the availability of financial assistance to pay for premiums for those who qualified.
CMS reported that 2.1 million people obtained coverage through the federal exchange during this special enrollment period, exceeding total special enrollment in each prior coverage year.[107] Reasons for this increase in enrollment may include the availability of the 2021 special enrollment period open to all consumers and its associated outreach campaign, and provisions supporting exchange coverage in COVID-19 relief laws. For example, the American Rescue Plan Act of 2021 expanded eligibility for exchange subsidies to those making above 400 percent of the poverty level and also increased subsidies for those making between 100 and 400 percent of the poverty level for 2021 and 2022.
Medicaid. Medicaid enrollment increased 8.7 million, or 13.5 percent, between January 2020 and December 2020, according to data available from CMS. [108] (See figure below)
Part of the increase in Medicaid enrollment in 2020 may be due to more applications for Medicaid coverage as well as requirements in the Families First Coronavirus Response Act. The federal government matches states’ spending for Medicaid services according to a statutory formula known as the Federal Medical Assistance Percentage (FMAP). The Families First Coronavirus Response Act provided a temporary 6.2 percentage point increase in the Medicaid FMAP funding states receive if they meet certain conditions, including providing continuous coverage to Medicaid beneficiaries who were enrolled in Medicaid on or after March 18, 2020, regardless of any changes in circumstances or redeterminations at scheduled renewals that otherwise would result in termination, through the end of the month in which the public health emergency ends.[109]
COBRA. There are no comprehensive data for the time period associated with COVID-19 on the take-up of COBRA. Generally, the employee must elect COBRA coverage within a 60-day election period and must pay the full premium plus an administrative fee, which may be prohibitively expensive. In May 2020, the administration effectively extended the election period within which individuals must elect COBRA until 60 days after the end of the COVID-19 public health emergency. Additionally, for certain qualifying individuals, the American Rescue Plan Act of 2021 included a 100 percent subsidy for COBRA premiums from April through September 2021.
Short-term, limited duration insurance. There are limited data available for the time period associated with COVID-19 on sales of short-term, limited duration insurance plans sold to individuals. While it is prohibited in several states and in some states no insurers choose to offer it, most states had issuers offering short-term, limited duration insurance during 2020.
Other sources of financial support for medical expenses. While other sources of financial support for medical expenses may be available, such as health sharing ministries, there are no comprehensive federal data on general use of these arrangements during the time period associated with COVID-19, or on their use by those who lost ESI.
Methodology
For this work, we conducted a literature search to identify studies of ESI loss during the time period associated with COVID-19. We reviewed a number of studies that provided a numerical estimate of ESI loss during the COVID-19-associated time period and selected to report several that represent a range of data sources and methods for developing an ESI loss estimate, including surveys and simulation models. We reviewed CMS data and reports on enrollment in exchanges from 2017 to 2021 and on enrollment in Medicaid from January 2020 to December 2020. We assessed the reliability of these data using manual checks and discussions with CMS officials and determined they were sufficiently reliable for our purposes. We also reviewed reports about other sources of health coverage, such as COBRA, from government agencies and research organizations for descriptive information about health coverage options.
Agency Comments
We provided the Department of Health and Human Services (HHS) and the Office of Management and Budget (OMB) with a draft of this enclosure. HHS provided technical comments, which we incorporated as appropriate. OMB did not provide us with comments on this enclosure.
GAO’s Ongoing Work
GAO will continue to assess the effect of the COVID-19-associated economic downturn on ESI and examine health coverage options.
Contact information: John Dicken, (202) 512-7114, dickenj@gao.gov
HHS COVID-19 Funding
Bookmark:The Department of Health and Human Services was appropriated approximately $484 billion in COVID-19 relief funds. The Department reported that it had obligated about $351 billion and expended about $196 billion of this amount—about 72 percent and 40 percent, respectively—as of August 31, 2021.
Entity involved: The Department of Health and Human Services.
Background
The Department of Health and Human Services (HHS) received approximately $484 billion in COVID-19 relief appropriations from six COVID-19 relief laws enacted as of August 31, 2021. HHS COVID-19 relief funds may be used for a range of purposes, such as assistance to health care or child care providers, testing, therapeutic, or vaccine-related activities, or procurement of critical supplies. Many HHS COVID-19 relief funds are available for a multiyear period or are available until expended.
Overview of Key Issues
As of August 31, 2021, of the approximately $484 billion in COVID-19 relief funds appropriated, HHS reported that it had obligated about $351 billion and expended about $196 billion—about 72 percent and 40 percent, respectively (see figure below).
The table below shows HHS appropriations, obligations, and expenditures by COVID-19 relief law that HHS reported as of August 31, 2021.
Source: Department of Health and Human Services (HHS) data. | GAO-22-105051
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 that is not included in the reported obligations or expenditures, and that $300 million in appropriations are not available until HHS has taken certain actions.
aHHS reported that it transferred $289 million from CARES Act appropriations to the Department of Homeland Security and this amount is not included in HHS’s reported obligations or expenditures.
bThis 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.
The table below shows allocations, obligations and expenditures of COVID-19 relief appropriations made to HHS under the six relief laws by HHS agency or fund as of August 31, 2021.
Source: Department of Health and Human Services (HHS) data. | GAO-22-105051
Note: For the purpose of this table, the term allocation includes both direct appropriations and transfers between HHS agencies. For example, according to HHS, the agency transferred $860 million to the Administration for Children and Families’ Unaccompanied Children Program from National Institutes of Health appropriations provided in the Consolidated Appropriations Act, 2021, Pub. L. No. 116-260, 134 Stat. 1182, 1913 (2020), citing the Secretary’s authorities under that act. HHS reported that of its total appropriation for COVID-19 relief, the agency transferred $289 million to the Department of Homeland Security that is not included in the reported obligations or expenditures, and that $300 million in appropriations are not available until HHS takes certain actions. 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.
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. Amounts appropriated to the PHSSEF and transferred to agencies within HHS listed in the table are included in the allocation amounts for the specified receiving agencies. For example, the National Institutes of Health (NIH) received about $1.8 billion in transfers from the PHSSEF and this amount is included in the NIH allocation listed above, and not in the PHSSEF total.
cThe italicized amounts are subtotals of the PHSSEF and are already reflected in amounts listed for the PHSSEF.
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.
HHS reported allocations, obligations, and expenditures of appropriations from the six COVID-19 relief laws for a variety of COVID-19 response activity categories (see table). When response activities had spending related to multiple categories, they were only assigned to one. For example, certain funds for testing and vaccine distribution were included in the response activity category for support to states, localities, territories, and tribal organizations rather than in the testing or vaccine activity categories. HHS officials noted that allocations for COVID-19 response activities are determined by appropriations made by Congress in combination with approved spend plan decisions. The timing of obligations and expenditures of allocations for response activities can vary due to a variety of factors, including the timing of the appropriations, and the planned uses of funds. For example, some research programs are planned in phases, which affects the timing of the release of the funds.
Source: Department of Health and Human Services (HHS) data, written HHS responses, and GAO analysis of HHS spend plans. | GAO-22-105051
Notes: 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, HHS transfers of funds, and approved spend plan decisions made by HHS in coordination with the Office of Management and Budget. According to HHS, 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. HHS reported that, of its total appropriation for COVID-19 relief, the agency transferred $289 million to the Department of Homeland Security that is not included in the reported obligations or expenditures.
aFor additional information about Provider Relief Fund allocations and disbursements, see the Relief for Health Care Providers enclosure.
bThe Child Care and Development Fund is made up of two funding streams: mandatory and matching funding authorized under section 418 of the Social Security Act, and discretionary funding authorized under the Child Care and Development Block Grant Act of 1990, as amended. See 42 U.S.C. §§ 618 and 9858m.
cAccording 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.
dAccording to HHS officials, the agency transferred $860 million from NIH appropriations for research and clinical trials related to long-term studies of COVID-19 and $850 million from the Public Health and Social Services Emergency Fund, Strategic National Stockpile, to the Administration for Children and Families’ Unaccompanied Children Program citing authority provided in section 304 of the Consolidated Appropriations Act, 2021 for both transfers. See Pub. L. No. 116-260, div. M, tit. III, § 304, 134 Stat. at 1913, 1916, 1923 (2020).
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 August 31, 2021. We also reviewed appropriation warrant information provided by the Department of the Treasury as of August 31, 2021. To assess the reliability of the data reported by HHS, we reviewed HHS documentation; Department of the Treasury appropriation warrant information; and other available information on HHS’s use of COVID-19 relief funds. We did not independently validate the data provided by HHS. We determined that the HHS-reported data were sufficiently reliable for the purposes of our reporting objective. We also reviewed the six COVID-19 relief laws to assist the response to COVID-19.
Agency Comments
We provided HHS and the Office of Management and Budget (OMB) with a draft of this enclosure. HHS provided technical comments, which we incorporated as appropriate. OMB did not provide comments on this enclosure.
GAO’s Ongoing Work
We will continue to examine HHS’s use of COVID-19 relief appropriations contained in COVID-19 relief laws.
GAO’s Prior Recommendation
The table below presents our recommendation related to HHS COVID-19 funding from a prior quarterly CARES Act report.
Source: GAO. I GAO-22-105051
Contact information: Carolyn L. Yocom, (202) 512-7114, yocomc@gao.gov
Relief for Health Care Providers
Bookmark:As of August 31, 2021, the Department of Health and Human Services had disbursed payments to providers totaling about $132.5 billion (about 74 percent) of the $178 billion appropriated by COVID-19 relief laws to the Provider Relief Fund. Health and Human Services has begun payment integrity efforts but lacks time frames to help ensure that post-payment oversight keeps pace with the distribution of Provider Relief Funds and the agency can expeditiously determine whether payments were appropriately made, used, and recovered as warranted.
Entities involved: Department of Health and Human Services, including its Health Resources and Services Administration
Recommendation for Executive Action
The Administrator of the Health Resources and Services Administration should establish time frames for completing post-payment reviews to promptly address identified risks and identify overpayments made from the Provider Relief Fund, such as payments made in incorrect amounts or payments to ineligible providers.
The Administrator of the Health Resources and Services Administration should finalize procedures and implement post-payment recovery of any Provider Relief Fund overpayments, unused payments, or payments not properly used.
HHS partially concurred with both recommendations. HRSA stated that it has a schedule for reviewing the payment discrepancy types it initially prioritized, and that reviews for the remaining discrepancy types and payment recovery efforts will occur in the future. We maintain that time frames are still needed for implementing recovery efforts.
Background
Relief funds to health care providers have been allocated and disbursed by Health and Human Services (HHS) through the following programs.
Provider Relief Fund. To respond to the pandemic, three of the six COVID-19 relief laws appropriated a total of $178 billion to the Provider Relief Fund (PRF) to reimburse eligible providers for health care-related expenses or lost revenues attributable to COVID-19. Specifically,
- the CARES Act appropriated $100 billion;
- the Paycheck Protection Program and Health Care Enhancement Act appropriated $75 billion; and
- the Consolidated Appropriations Act, 2021, appropriated $3 billion for this purpose.[110]
HHS’s Health Resources and Services Administration (HRSA) administers payments from the PRF, including allocations to the COVID-19 Uninsured Program and the COVID-19 Coverage Assistance Fund. In addition to the PRF, the American Rescue Plan Act of 2021 appropriated $8.5 billion for payments to eligible rural health care providers for health care related expenses and lost revenues that are attributable to COVID-19.[111]
HRSA’s planned oversight for the PRF includes post-payment (1) analysis and reviews to determine whether HRSA made PRF payments to eligible providers in the correct amounts, (2) audits to determine whether PRF funds were used by providers in accordance with laws and agency guidance, and (3) recovery of overpayments, unused payments, and payments not properly used.
Accelerated and Advance Payments. HHS’s Centers for Medicare & Medicaid Services (CMS) Accelerated and Advance Payments Program provides loans to active Medicare providers and suppliers. Section 3719 of the CARES Act authorized, due to the COVID-19 pandemic, the expansion of this program, though no new loans have been made since January 2021 as they relate to the COVID-19 pandemic. Of the $107.3 billion in COVID-19 related loans disbursed under the program as of September 7, 2021, $36.3 billion in repayments have been made by providers and suppliers and the current outstanding loan balance for the program is $71.0 billion. The remainder of this enclosure addresses the PRF and other distributions.
Overview of Key Issues
Provider Relief Fund allocations, disbursements, and returned funds. As of August 31, 2021, HHS had allocated $153.9 billion of the $178 billion appropriated to the PRF. Of that $153.9 billion allocated, HHS had disbursed about $132.5 billion, and about $21.5 billion remained to be disbursed. HHS allocated PRF funds, in phases, for general relief to health care providers, relief for seven targeted areas, and “other distributions,” including funding for treatment, testing, and vaccine administration, as well as administration of the program. Specifically, the PRF allocations included $72.4 billion for general distributions to health care providers; about $55.8 billion for targeted distributions to certain types of providers and facilities; and $25.8 billion for “other distributions.”
Approximately $24.1 billion of additional PRF funds remained unallocated and undisbursed, as of August 31, 2021. On September 10, 2021, HHS announced that $17 billion of the previously unallocated $24.1 billion would be allocated as part of Phase IV general distributions to a broad range of providers who could document COVID-related revenue loss and expenses between July 1, 2020 and March 31, 2021. HRSA opened up the application period for these funds on September 29, 2021, and expects to begin disbursing these funds in December 2021. According to HRSA officials, the remaining unallocated funds are reserved for future contingencies and emerging needs for the Uninsured Program.
See table below for a summary of PRF allocations and disbursements as of August 31, 2021.
Legend: n/a = not applicable
Source: Summary of Department of Health and Human Services funding data. | GAO-22-105051
aProvider Relief Fund disbursements may also be referred to as expenditures.
bIn March 2021, we reported that assisted living facilities were disbursed funds as part of Phase III. In May 2021, Health Resources and Services Administration (HRSA) officials told us that these funds were disbursed as part of phase II.
cHigh-impact hospitals are hospitals that have a high number of confirmed COVID-19 inpatient admissions.
dHRSA covers treatment, testing, and administering the vaccine for the uninsured through its COVID-19 Uninsured Program. In May 2021, HRSA announced that it would cover the cost of administering the vaccine for the underinsured through its COVID-19 Coverage Assistance Fund.
eHRSA officials told us that the amount of unallocated funds are available for other Provider Relief Fund allocations. On September 10, 2021, HHS announced that $17 billion of the previously unallocated $24.1 billion would be allocated as part of Phase IV general distributions to a broad range of providers who could document COVID-related revenue loss and expenses. According to HRSA officials, the remaining unallocated funds are reserved for future contingencies and emerging needs. HHS also refers to unallocated funds as reserved funds.
Fund disbursements and returned funds. According to our analysis of information provided by HRSA, as of August 31, 2021, HHS had disbursed about $64.3 billion from general distribution allocations, about $55.4 billion from the targeted allocations, and $12.8 billion for other distributions.[112] As of August 31, 2021, about 431,163 providers have received 674,549 payments made from the PRF.
Examples of disbursements from the PRF illustrate some of the variation in amounts and purposes for which the funds were disbursed:
- Providers enrolled in Medicare—some of which were also enrolled in Medicaid or the Children’s Health Insurance Program (CHIP)—received, on average, approximately $150,000 in relief funds under Phase I of the general distributions. The average COVID-19 relief disbursement for providers solely enrolled in Medicaid and CHIP was approximately $58,000, distributed through Phase II of the general distributions, beginning July 3, 2020. HRSA officials noted that providers solely enrolled in Medicaid and CHIP tended to be smaller entities with lower revenue than providers also enrolled in Medicare.
- As of August 31, 2021, approximately $6.2 billion from the PRF had been disbursed for COVID-19 treatment, testing, and vaccine administration of uninsured and underinsured individuals.[113] In addition to the allocation from the Provider Relief Fund for treatment, testing, and vaccine administration for uninsured individuals, the Families First Coronavirus Response Act and the Paycheck Protection Program and Health Care Enhancement Act each appropriated $1 billion to reimburse providers for the testing of uninsured individuals.[114]
Providers return funds on a regular basis. HRSA officials explained that providers may return funds if they believe
- the original payment calculation sent to them was too high or they expect a reissuance of a different amount from HRSA—possibly a corrected lower amount or a reissuance to a different entity in their health care system—or
- the funds were not needed, and they have no intention of receiving a new amount through a reissued payment.
According to HRSA officials, their system does not have a field for providers to indicate their reasons for returning funds.[115] Further, providers can return funds at any time.
According to HRSA, providers had returned about $8.8 billion from previous disbursements as of August 31, 2021, with about 75 percent ($6.6 billion of $8.8 billion) from general distributions, and about 25 percent ($2.2 billion of $8.8 billion) from targeted distributions.[116] In general, no funds were returned from providers from the “other distributions.”[117] When funds are returned, the disbursement totals reported are calculated after deducting the returned funds. Officials explained that the returned funds are not included in the disbursement totals shown in the above table, and are available for subsequent allocations.[118] For example,
- nearly three quarters (about 69 percent, $6.1 billion of $8.8 billion) of all returned funds were returned to HRSA based on Phase I Medicare payments, which were initially disbursed beginning on April 10, 2020; and
- about 14 percent or $1.2 billion of returned funds was returned after being disbursed as part of the targeted allocation for high-impact hospitals—those with a high number of confirmed COVID-19 inpatient admissions—which were initially disbursed beginning on May 7, 2020.
Provider Relief Fund payment integrity. While HRSA has taken actions to initiate PRF oversight, the agency has not established time frames to help ensure that its oversight keeps pace with the distribution of PRF funds and that HRSA expeditiously completes post-payment analysis and reviews, and recovery efforts to ensure that
- relief payments made by HRSA only went to eligible providers in the correct amounts (post-payment analysis and reviews), and
- any overpayments, unused payments, or payments not properly used are recovered as soon as possible (recovery).
Federal internal control standards state that management should design control activities to respond to identified risks and achieve objectives. As part of these standards, management designs specific actions to respond to the program’s risks, including the potential for fraud, on a timely basis.[119] These standards also state that management should define objectives, including clearly defining what is to be achieved, and the time frames for achievement. HRSA’s risk assessment plan for the PRF, dated September 30, 2020, identifies specific risks associated with disbursing funds to providers for use.
Post-payment review and analysis of relief payments made by HRSA. As of September 2021, HRSA was implementing a post-payment analysis and review process to identify overpayments from the nearly $120 billion in PRF general and targeted distributions—payments that were made in incorrect amounts or to ineligible providers. However, we found that agency documents did not specify time frames for implementing and completing all the remaining post-payment analysis and reviews. Further, in September 2021, agency officials provided documentation of time frames set through the first quarter of calendar year 2022, but officials told us that schedules beyond this date have not been set.
HRSA has developed a post-payment manual that includes procedures for post-payment analysis and reviews, as well as a post-payment matrix for scheduling and tracking the reviews. Officials told us in September 2021 that the draft was finalized and implemented in December 2020, and noted that the manual is evolving, with 11 versions documented between December 2020 and August 2021. In the matrix, HRSA has identified 54 types of payment discrepancies for review, and officials told us that they began pilot reviews in October 2020. HRSA officials told us that they define payment discrepancy types by reviewing provider data and PRF payment calculations to identify potential overpayments.[120]
In September 2021, HRSA provided us information that it was continuing to work on reviews and that it had closed post-payment reviews for six of the 54 payment discrepancy types identified. Officials told us that HRSA started with reviews of payment discrepancy types identified as a priority. Furthermore, they told us that some of the discrepancy types may not require review, and others will only be reviewed after the prioritized discrepancy types are closed.
According to HRSA officials, they have begun, but not completed, setting time frames for the remaining reviews. As of September 15, 2021, of the 48 payment discrepancy types remaining (54 total minus six closed), reviews for 19 are currently either underway or scheduled through the first quarter of 2022.[121] According to HRSA and agency documents, time frames for implementing reviews for the other 29 payment discrepancy types have not been specified. HRSA officials stated that due to the interdependencies of the payment discrepancy types, schedules beyond the first quarter of 2022 have not been made to date. However, establishing time frames for all payment discrepancy types, regardless of their interdependencies, will assist the agency in tracking the pace of its completion of reviews and assessing its progress in oversight and recovery efforts.
In addition to reviewing payment discrepancies, HRSA also reported taking action to address circumstances the agency identified in its risk assessment plan, which is currently being updated. In particular, HRSA reported that it was implementing reviews to address certain circumstances the agency identified in its risk assessment plan as having a high risk of occurring, such as:[122]
- Erroneous payments to providers with multiple taxpayer identification numbers. HRSA guidance allows provider organizations with multiple taxpayer identification numbers (TINs) to apply for, receive, and transfer PRF payments among both parent and subsidiary organizations for up to 1,200 subsidiary TINs. Such a high volume of TINs could make it difficult for HRSA to calculate and distribute PRF funds appropriately based on TINs.
- Overpayments to providers with a change in ownership. HRSA guidance to providers states that for those providers with a change in ownership, the original recipient must use funds for eligible expenses and lost revenues and return unused funds to HHS; the PRF funds do not transfer to the new owner. HRSA guidance states that providers that have not received payments under the PRF due to issues related to change of ownership will be eligible to apply for future PRF payments. However, ensuring the appropriate distribution of funds requires actions by HRSA to ensure that funds unused by the original recipient are tracked and returned.
Audit of providers’ use of payments. HRSA officials provided us an audit strategy manual dated September 30, 2021, that it says will guide the agency’s audits to determine whether providers complied with the requirements for the use of PRF funds, specifically that they used payments to cover only COVID-19 eligible expenses or related revenue losses not reimbursed from other sources in accordance with laws and HRSA guidance.[123]
HRSA officials noted that they would schedule their audits to coincide with the receipt of the first round of provider reports, which were due by September 30, 2021.[124] However, on September 10, 2021, HRSA announced that a 60-day grace period would be applied to the first reporting deadline, potentially delaying the submission of provider reports to as late as November 30, 2021. HRSA will not be able to use provider reports to determine whether funds were used appropriately until provider reports are received.
Recovery of overpayments, unused payments, and payments not properly used. HRSA officials told us that as of August 2021, they were in the process of planning to recover funds where they identify payment discrepancies. At that time, the officials reported that they had completed reviews for two of the 54 payment discrepancy types (representing 125 TINs) identified and recovered about $2.9 million (about 20 percent) of $15.1 million in potential overpayments identified for recovery.[125] For another eight payment discrepancy types (representing 3,048 TINs), agency documentation also identified an additional $356.4 million for recovery, but action to recover those funds had not been taken as of August 2021.[126] For the remaining 44 payment discrepancy types, overpayments have not yet been identified for recovery. In addition, HRSA has not yet identified unused payments or payments not properly used for recovery. In September 2021, HRSA officials told us that to more efficiently recover overpayments, they are planning to offset or reduce future PRF payments to be made at the end of 2021 by identified overpayment amounts, rather than incurring administrative costs associated with recovering funds directly from providers. However, some providers that received overpayments may not apply for future PRF payments, which could delay recovery of funds. Documenting overpayment amounts and beginning recovery efforts as soon as possible will increase the likelihood of recovering overpayments.
Without timely post-payment oversight to help ensure that relief payments are made only to eligible providers in correct amounts, HHS cannot fully address its stated payment integrity risks for the PRF and seek to recover overpayments. Similarly, unused payments or payments not properly used, if not identified through post-payment oversight, are at risk of not being recovered. Setting time frames for completion of these oversight efforts can help the agency achieve its objectives and increase the likelihood of recovering funds.
Methodology
To conduct our work, we examined publicly released HHS information, federal laws and agency guidance, and obtained information from CMS and HRSA in the form of written responses to questions, documents (including payment integrity oversight materials), and a dataset. Our review of the data sources provides reasonable assurance of the data’s reliability. The Provider Relief Fund dataset, which includes disbursements as of August 31, 2021, came from HRSA, which is the only available source for the disbursement data. The allocation amounts and categories that were provided by HRSA match publicly available information. CMS provided data on the current status for loans and repayments under the COVID-19 Accelerated and Advance Payments Program, as of September 7, 2021.
Agency Comments
We provided HHS and the Office of Management and Budget (OMB) with a draft of this enclosure. HHS provided written comments, reproduced in Appendix IV and technical comments on this enclosure, which we incorporated as appropriate. OMB did not provide comments on this enclosure.
HHS partially concurred with both recommendations. HRSA stated that it has a schedule for reviewing the payment discrepancy types it initially prioritized, and reviews for the remaining discrepancy types will occur after HRSA completes review of the prioritized discrepancy types. In addition, HRSA stated that recovery of payments not properly used cannot begin until after the provider reporting grace period ends on November 30, 2021, and recovery of unused payments cannot begin until January 1, 2022—another 30 days after the grace period ends. However, we believe that review of reports and recovery could start earlier, since HRSA officials told us in September 2021 that they were already receiving provider reports. Regardless, establishing time frames for completing reviews of all payment discrepancy types and implementing recovery efforts expeditiously will help the agency succeed in recovering overpayments.
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, including payment oversight and funds returned by providers.
GAO’s Prior Recommendation
The table below presents our recommendation related to a post-payment review process for the Uninsured Program, funded from the PRF, from a prior quarterly report.
Source GAO. I GAO-22-105051
Related GAO Products
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
Veterans Health Care
Bookmark:Health disparities among the nation’s veteran population have been well documented during the pandemic and before. Although addressing these disparities has been a goal of the Department of Veterans Affairs’ Veterans Health Administration for almost a decade, the agency continues to lack performance measures to evaluate its efforts, which we previously recommended it develop and with which the Department of Veterans Affairs agreed.
Entity involved: The Veterans Health Administration within the Department of Veterans Affairs
Background
The Veterans Health Administration provides care to a diverse veteran population. The Department of Veterans Affairs’ (VA) Veterans Health Administration (VHA) operates the nation’s largest integrated health care system with 171 VA medical centers and 1,112 community-based outpatient clinics across the country. VHA provides health care nationwide to a diverse population of enrolled veterans, including women, Black, American Indian or Alaska Native, Asian, Native Hawaiian or Other Pacific Islander, and Hispanic or Latino people. According to fiscal year 2017 data, the latest available data, females comprised about 9 percent of the 18.3 million total veteran population. Additionally, Black, American Indian or Alaska Native, Asian, Native Hawaiian or Other Pacific Islander, and Hispanic or Latino veterans comprised about 23 percent of the total veteran population and 35 percent of the total female veteran population.[127]
As the veteran population becomes increasingly more diverse, VHA has recognized the importance of ensuring health equity. According to VHA, “health equity is the attainment of the highest level of health for all people, and achieving health equity requires valuing everyone equally with focused and ongoing societal efforts to address avoidable inequalities, historical and contemporary injustices and the elimination of health and health care inequities.” However, VHA has identified racial and ethnic disparities in its health care outcomes, mirroring trends seen across the U.S. in public and private health care systems.[128] For example:
- In 2020, VHA reported sex-based disparities in some areas, such as immunization rates where women veterans older than 65 had a 10 percent lower pneumococcal immunization rate than men.[129]
- In 2019, VHA reported evidence of disparities in health care outcomes within VA medical centers in the form of lower survival rates for Black veterans with cancer and cardiovascular-related illnesses compared with veterans from other racial and ethnic groups and White veterans.[130]
- In 2021, VHA reported that from 2013-2018, female lesbian, gay, and bisexual veterans faced depressive and anxiety symptoms at double the rate of heterosexual female veterans.[131]
- In 2011, VHA found outcomes for controlling blood pressure, blood glucose, and cholesterol levels were significantly worse for Black veterans than they were for White veterans.[132]
In 2012, VHA established its Office of Health Equity (OHE) to identify and address health care outcome disparities and to develop an action plan to help achieve health equity. OHE is responsible for several efforts, including providing education, training, research, communications and information; promoting common awareness about health care disparities and working to improve health care outcomes; and serving as a liaison to support other governmental and non-governmental organizations working to achieve health equity.
Overview of Key Issues
VHA data show health disparities among minority veterans for some but not all COVID-19 indicators, including health care services provided virtually during the pandemic. Although there are issues with the completeness of data on race and ethnicity, VHA has found that health disparities exist.[133] For example, interviews with VHA officials and a review of agency studies based on varying time frames throughout the pandemic, show that minority veterans, such as Blacks and Hispanic or Latinos, experienced health disparities among COVID-19 cases, hospitalizations, and death rates earlier in the pandemic, but there were improvements seen over time in cases and death rates.[134] According to VHA officials, COVID-19 pandemic conditions are constantly evolving and VHA observes the data regularly to identify any patterns of concern.
Testing. According to a 2020 study conducted by VHA researchers based on data from February through July 2020, Black veterans were more likely to be tested than Hispanic or Latino veterans and White veterans.[135] A VHA official said there were no observed differences in the levels of COVID-19 testing by sex.
Cases. According to a study completed by VHA researchers in 2021 based on 2020 data, after adjusting for age, sex, and prior diagnoses of COVID-risk factors, veteran groups such as Blacks, Hispanics or Latinos, and American Indian/Alaska Natives had higher odds of testing positive for COVID-19 when compared to White veterans, though those gaps had closed somewhat by the fall of 2020.[136] For example, the odds of Black veterans and Hispanic or Latino veterans testing positive for COVID-19 were 2.32 and 2.24 times higher, respectively, when compared to White veterans during the spring and summer of 2020. By the fall of 2020, rates had declined for all groups, with only American Indian/Alaska Native veterans having substantially higher odds (1.33) of testing positive for COVID-19 than White veterans, suggesting an improvement in this indicator for some minority veterans.[137]
Hospitalizations. VHA examined COVID-19 related hospitalizations among veterans seeking VHA health care in March through May 2020.[138] After adjusting for racial and ethnic differences in age and sex,
- Black veterans were more likely to be hospitalized than White veterans (38 and 26 percent adjusted hospitalization rates, respectively);
- Hispanic or Latino veterans were also more likely to be hospitalized than White veterans (34 and 26 percent adjusted hospitalization rates, respectively).[139]
Conversely, female veterans tended to fare better than their male counterparts. Based on an internal VHA analysis of hospitalization among COVID-19 positive veterans using VHA health care based on 2020 data, after adjusting for sex and differences in age and underlying comorbidities, male veterans had higher odds of hospitalization (about 22 percent) compared to female veterans (about 10 percent). Among COVID-19-positive female veterans, there were no disparities in hospitalization rates for Black veterans or for Hispanic or Latino veterans when compared to White veterans.
Deaths. According to a 2021 study by VHA researchers, after adjusting for age, sex, and prior diagnoses of COVID-risk factors, in the spring of 2020, Black veterans had a higher adjusted case fatality rate (12 percent) and other racial and ethnic veteran groups had similar case fatality rates (10–13 percent) when compared to White veterans (10.2 percent).[140] However, adjusted case fatality rates declined from spring to summer of 2020 and were lower for American Indian/Alaska Native veterans (10.7 percent), Asian veterans (10.5 percent) and Hispanic or Latino veterans (7.2 percent), although these groups still had greater case fatality than White veterans (5.7 percent).
The adjusted case fatality rate declined further for all groups from summer to fall of 2020 when compared to White veterans in the same time period. The overall spring-to-fall 2020 decline was greatest for Black veterans; in the fall, Black veterans had a lower adjusted case fatality rate (1.9 percent) compared to White veterans (2.5 percent), whereas other groups (2.4–3.3 percent) were similar to White veterans.
Female veterans experienced lower rates of mortality due to COVID-19 than male veterans. For example, based on an internal VHA analysis of mortality among COVID-19 positive veterans using VHA health care based on 2020 data, after adjusting for sex, differences in age and underlying comorbidities, compared to COVID-19 positive male veterans, female veterans had lower rates of mortality (about 7 and 1 percent, respectively).
Vaccinations received within VHA. Certain minority veterans aged 65 and older were more likely to receive COVID-19 vaccinations than their White counterparts.[141] Specifically, according to VHA, based on an internal analysis of veterans aged 65 or older who received COVID-19 vaccinations through VHA from December 2020 through February 2021, Black, Hispanic or Latino, and Asian veterans were 5, 19, and 39 percent more likely (respectively) than White veterans to have received a COVID-19 vaccination during that time frame.[142] The analysis also found that American Indian/Alaska Native veterans were 18 percent less likely than White veterans to have received a COVID-19 vaccination, but according to VHA, this finding was limited to American Indian/Alaska Native veterans who resided in areas where they could potentially access vaccinations from Indian Health Service facilities. According to VHA, as of September 1, 2021, female veterans were slightly more likely (about 3 percent) than male veterans to receive a COVID-19 vaccination.
Virtual health care. According to a study by VHA researchers, by June 2020, 58 percent of VHA health care was provided virtually (by phone only or video) compared to 14 percent prior to the pandemic.[143] Veteran patients with lower incomes, higher levels of service-connected disability, and more chronic conditions were more likely to receive virtual care during the pandemic.
VHA actions to address and prevent disparities. According to VHA officials and relevant agency documents, VHA has used research on the COVID-19 pandemic, as well as other pandemics to inform the various actions it has taken to address and prevent disparities during the COVID-19 pandemic among veterans from different racial and ethnic groups, including the following:[144]
VHA held a focus group to identify accessibility gaps related to the COVID-19 pandemic for veterans of various races and ethnicities.[145] The focus group provided suggestions for VHA such as,
- instilling confidence in getting a COVID-19 vaccine by having veterans and leaders representing different racial and ethnic groups share their stories of receiving the COVID-19 vaccine;
- ensuring information communicated by VHA was factual and dispelled COVID-19 misinformation;
- addressing language barriers by translating communications; and
- communicating information about VHA and non-VHA COVID-19 resources through diverse media outlets.[146]
VHA developed an equity dashboard. Through the dashboard, created in May 2020, VHA generated and shared weekly reports to the Veterans Integrated Service Networks (VISN), which manage and oversee VA medical facilities within a defined geographic area. These reports allowed VISN staff to track and map positive COVID-19 test rates by demographic category; identify new community case rates to help direct outreach efforts; and track veteran vaccination rates by sex, race, ethnicity, and rurality.
VHA developed and communicated COVID-19 information to veterans. According to VHA officials, VHA used a number of ways to provide veterans with information about COVID-19 such as texts, weekly newsletters, virtual events, blog posts, videos, podcasts, and through resources found on its website.
Through these means, VHA addressed topics including concerns about the safety of the COVID-19 vaccine, dispelled COVID-19 vaccine misinformation, and detailed how to access COVID-19 testing and services during the pandemic. For example, to provide information to women and Black veterans, who had concerns about receiving the COVID-19 vaccine, VHA posted blog entries written by Black VHA leaders and disseminated vaccine information though a podcast for women veterans.
VHA also translated many of its communications such as VHA webpages and brochures on COVID-19 vaccine information into Spanish to ensure information was accessible to Hispanic or Latino veterans and their families.
VHA developed a social risks screening tool to be used when veterans make appointments. In May 2020, VA medical center staff began using the tool. According to VHA, the screening tool may help identify the risks of catching COVID-19 that Black and Hispanic or Latino people may experience disproportionately; for example, research shows Black and Hispanic or Latino Americans are more likely to hold jobs that are not amenable to social distancing that would put them at a higher risk for contracting the COVID-19 virus.
To prioritize individuals for COVID-19 testing, screening questions on the tool inquire about a veteran’s social risks, such as use of public transportation and living in overcrowded housing, which veterans from some racial and ethnic groups may more likely experience. The screener tool also asks questions on topics such as shopping during the pandemic, COVID-19 prevention strategies, and social interactions. These questions may also be used separately to assess an individual’s need for counselling or assistance to minimize COVID-19 exposure.
VHA developed resources for veterans with chronic medical conditions. In March 2021, VHA provided educational material and information on how to access services during the pandemic through brochures posted to its website. For example, a brochure for veterans exposed to airborne hazards and open burn pits during deployment, who are at higher risk for conditions like cancer, chronic kidney disease, and chronic obstructive pulmonary disease, provides information on how to refill prescriptions online and resources for setting up virtual health care appointments.[147]
VHA is expanding virtual care. To better target the expansion of virtual care to veterans from different racial and ethnic groups, VHA officials told us that they held four focus groups and one follow-up interview in June through August of 2021. These focus groups included women veterans, Black veterans, disabled veterans, and LGBT veterans. According to VHA, the focus groups were a way for VHA to learn more about some of the barriers and assistance veterans experienced in seeking or engaging in virtual care and to better understand priorities regarding virtual health care services. VHA officials also told us that they are working with the Navajo Health Foundation to complete a Memorandum of Agreement that will allow American Indian veterans to access VHA virtual care services from Sage Memorial Hospital.[148]
According to VHA officials, VHA has funded evaluation projects in fiscal years 2020 and 2021 that address health equity issues related to virtual care and expect results from these evaluations in fiscal year 2022. These studies broadly examine telehealth use by VHA during the pandemic and range from assessing health disparities in telehealth use, broadband access and telehealth utilization, quality of care, and access to resources bridging the digital divide.
VHA continues to lack performance measures to evaluate its actions to address health disparities, including for the COVID-19 response. OHE lacks performance measures to assess the effectiveness of its various COVID-19 response efforts to address and prevent health disparities among veterans from different racial and ethnic groups. OHE officials told us that they measure the effectiveness of their actions by tracking and analyzing data on a variety of key indicators during the COVID-19 pandemic, such as cases and vaccination rates. VHA officials noted that OHE uses data on key indicators as a way to assess the effectiveness of its various COVID-19 response efforts to address and prevent health disparities among veterans from different racial and ethnic groups. According to OHE, when staff observe changes in the data indicating that disparities are decreasing, this indicates that their actions are working.
Specific and measurable performance indicators for agency actions could help the office more accurately determine if any changes in data related to health disparities can be attributed to agency actions or other external influences. For the COVID-19 pandemic, changes in disparities data during the pandemic could be due to VA efforts or could also be due to factors, such as national, state, local, or other non-VHA response efforts. VHA officials told us that unlike national COVID-19 vaccination rates, within VHA, Black and Hispanic or Latino veterans are vaccinated at higher rates than White veterans. However, as previously noted, Black and Hispanic or Latino veterans, experienced health disparities among COVID-19 cases, hospitalizations, and death rates, and those disparities are also generally observed in the national population.
Our prior work on effectively managing performance shows that performance measures should assess how well the organization is meeting its goals and should be linked directly to offices that have responsibility for the program or activity. For example, as part of its goal to promote better health outcomes for racial and ethnic populations, VHA’s OHE is responsible for spreading the use of its COVID-19 equity dashboard among VHA’s 18 VISNs. However, OHE has no way of measuring how effective this effort has been in promoting better health outcomes for racial and ethnic populations.[149]
Additionally, OHE’s communication plan to promote awareness about health disparities states that it should regularly update OHE website with new information briefs, newsletters, Cyberseminar announcements, and other relevant publications and updates. While OHE has made COVID-19 specific updates to its website and has communicated information on COVID-19 though newsletters and other media outlets, it has no way of determining how successful these actions have been in raising awareness about health disparities during the pandemic.
In December 2019, we found that OHE’s Health Equity Action Plan—VHA’s action plan to address health equity across the agency—lacked performance measures to assess progress and we recommended that its action plan include such measures. VHA concurred with our recommendation and told us they plan to add performance measures to its Health Equity Action Plan. However, as of the date of this report, the recommendation remains unimplemented. It is important that VHA implement performance measures concerning its actions to address and prevent health dipartites among veterans. Until VHA implements these performance measures, VHA runs the risk of not knowing the effectiveness of its efforts for the COVID-19 pandemic or pandemics or public health emergencies that may occur in the future.
Methodology
To conduct this work, we reviewed VHA studies published in peer-reviewed journals and other internal analyses identified by VHA that examined the presence of disparities in COVID-19 indicators among veterans from different racial and ethnic groups.[150] We also reviewed VHA guidance and documents used to address and respond to health disparities among veterans. In addition, we interviewed and reviewed written responses from officials in VHA’s OHE and its Office of Women’s Health about identified disparities in COVID-19 indictors among veterans from different racial and ethnic groups, actions to address these disparities, and ways VHA is measuring the effectiveness of its actions.
Agency Comments
We provided VA and the Office of Management and Budget with a draft of this enclosure. VA concurred with our findings and provided technical comments, which we incorporated as appropriate. The Office of Management and Budget did not provide comments on this enclosure.
GAO’s Ongoing Work
We will continue to monitor racial and ethnic health disparities during the COVID-19 pandemic, including as they relate to the provision of equitable access to health care.
Related GAO Products
VA Health Care: Better Data Needed to Assess the Health Outcomes of Lesbian, Gay, Bisexual, and Transgender Veterans, GAO-21-69 (Washington, D.C.: October 19, 2020).
VA Health Care: Opportunities Exist for VA to Better Identify and Address Racial and Ethnic Disparities, GAO-20-83 (Washington, D.C.: December 11, 2019).
VA Health Care: Improved Monitoring Needed for Effective Oversight of Care for Women Veterans, GAO-17-52 (Washington, D.C.: December 2, 2016).
Contact information: Sharon M. Silas, (202) 512-7114, silass@gao.gov; Alyssa M. Hundrup, hundrupa@gao.gov, (202) 512-7114
HHS Cybersecurity
Bookmark:The U.S. National Institutes of Health has not consistently implemented security controls in its information security program or selected information technology systems that receive, process, and maintain sensitive information, putting confidentiality, integrity, and availability of information at risk. GAO has made numerous recommendations to Department of Health and Human Services component agencies to improve information security. Those component agencies have implemented, or are in the process of implementing, the recommendations.
Entity involved: U.S. National Institutes of Health, within the Department of Health and Human Services
Background
The U.S. National Institutes of Health’s (NIH) responsibilities include conducting research on the prevention of infectious diseases (such as COVID-19), administering over $30 billion annually in medical research grants, and supporting research on pathogens, including those that have the potential to pose a severe threat to public health and safety. In carrying out its mission, NIH relies extensively on information technology systems to receive, process, and maintain sensitive data. Accordingly, effective information security controls are essential to ensure the confidentiality, integrity, and availability of the information on the agency’s systems.
Overview of Key Issues
During the course of a prior audit we conducted from January 2019 to June 2021, we found that NIH implemented numerous security controls within its information security program and over the 11 systems we reviewed across four NIH entities. These controls included, among other things, taking steps to develop security plans, ensuring that the majority of personnel had basic security awareness training, and developing remedial action plans for correcting deficiencies.
However, the agency had not always effectively implemented other controls—both within its information security program and for the selected systems—to protect the confidentiality, integrity, and availability of these systems and the information maintained on them. Deficiencies existed in some of the controls intended to identify risks, protect systems from threats and vulnerabilities, detect and respond to cybersecurity events, and recover system operations in cases of system disruptions. As a result, NIH was at increased risk that sensitive research and health-related information could be disclosed or disrupted.
In June 2021, we issued a report with limited distribution because of the sensitive information it contained. In that report, we made 219 recommendations to NIH, including:
- 66 to improve NIH’s information security program by, among other things, assessing risks, as needed; documenting complete and accurate security controls; assessing controls more comprehensively; and remediating deficiencies in a timely manner; and
- 153 to resolve system control deficiencies by implementing stronger access controls, encrypting sensitive data, configuring devices securely, applying patches in a timely manner, strengthening firewall rules, improving incident response, and implementing monitoring controls more effectively, among other things.
NIH concurred with the recommendations to improve its information security program. Additionally, NIH agreed to implement 148 of the 153 recommendations to resolve system control deficiencies, and disagreed with the remaining five recommendations for various reasons. However, we believe these five recommendations are warranted in order to further improve the security over NIH’s systems. The table below shows the number of deficiencies and recommendations for NIH’s information security program and system control deficiencies across the core security functions of identify, protect, detect, respond, and recover.
Source: GAO. | GAO-22-105051
In commenting on our June 2021 report, NIH stated that it had taken corrective actions to address many of the deficiencies identified. We plan to issue a public report that provides the results of our determination of the status of the agency’s corrective actions in addressing our recommendations later in 2021 or early in 2022. Until these recommendations are addressed, NIH’s systems, and the information maintained in those systems, are at increased risk of unauthorized access.
Methodology
To conduct this work, we selected four entities for review from the agency’s 28 institutes, centers, and the director’s office. Our selection focused on entities that provide information technology and security for the agency and are essential to NIH’s mission. From the four entities, we selected 11 systems for review that, for example, (1) collect, process, and maintain private or potentially sensitive proprietary business, medical, and personally identifiable information; (2) are essential to NIH’s mission; (3) could have a catastrophic or severe impact on operations if compromised; and/or (4) share some common infrastructure.
To assess NIH’s information security program, we examined security policies, procedures, and other documents; compared selected systems’ risk assessments, security plans, security control assessments, remedial action plans, and contingency plans to federal guidance; and interviewed personnel at NIH entities. To assess controls over the 11 selected systems, we reviewed the agency’s network infrastructure and assessed the extent to which controls associated with system access, encryption, configuration management, and monitoring met federal guidance and industry best practices.
Agency Comments
We provided NIH, the Department of Health and Human Services, and the Office of Management and Budget with a draft of this enclosure. NIH provided technical comments, 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 issue a public report that describes the findings discussed in our June 2021 report, with references to sensitive information removed. In addition, we will report on the status of NIH’s actions to implement our recommendations related to improving its security program and resolving system control deficiencies.
GAO’s Prior Recommendations
The table below presents our recommendation on cybersecurity from the September 2020 CARES Act report.
Source: GAO. I GAO-22-105051
Contact information: Jennifer R. Franks, (404) 679-1831, franksj@gao.gov
Worker Safety and Health
Bookmark:The Occupational Safety and Health Administration should conduct an analysis of the challenges it has faced to ensuring worker safety during the pandemic to improve its response to this pandemic and prepare for a future one.
Entity involved: Occupational Safety and Health Administration, within the Department of Labor
Recommendation for Executive Action
The Assistant Secretary of Labor for Occupational Safety and Health should assess—as soon as feasible and, as appropriate, periodically thereafter—various challenges related to resources and to communication and guidance that the Occupational Safety and Health Administration has faced in its response to the COVID-19 pandemic and should take related actions as warranted.
The Department of Labor partially agreed with our recommendation. The Department of Labor stated that it agrees that it is important to assess lessons learned and best practices for the Occupational Safety and Health Administration’s operational response to COVID-19. However, Department of Labor officials said they believe that while the pandemic is ongoing, the agency’s resources are best used to help employers and workers mitigate exposures to COVID-19. Because it is unclear when the COVID-19 pandemic will end, we maintain that assessing—as soon as feasible—the challenges that the Occupational Safety and Health Administration faced in responding to the pandemic, and taking related actions, would enable the agency to improve its enforcement efforts during this pandemic and help it prepare for operations during any future pandemic.
Background
The Department of Labor’s (DOL) Occupational Safety and Health Administration (OSHA) helps ensure safe and healthful conditions for workers by setting mandatory workplace safety and health standards; conducting inspections; investigating complaints and reports of injuries, illnesses, and fatalities at workplaces; and offering training, guidance, and outreach; among other efforts.[151]
OSHA has 10 regional offices and 89 area offices that implement and oversee enforcement in the field.[152] OSHA is responsible for setting and enforcing workplace safety and health standards for the private sector in 29 states, the District of Columbia, and four territories.[153] Twenty-one states and Puerto Rico set and enforce their own workplace safety and health standards for private sector and state and local government employers under state plans approved by OSHA.[154]
OSHA has almost 1,900 employees, and its appropriation for fiscal year 2021 was approximately $592 million. OSHA received $105.8 million in additional funding under the CARES Act and the American Rescue Plan Act of 2021.[155]
Overview of Key Issues
OSHA conducted enforcement using existing worker safety standards during the pandemic. During the first 15 months of the pandemic, OSHA primarily relied on existing standards and voluntary employer guidance to conduct its enforcement. In March 2021, OSHA started a COVID-19 National Emphasis Program (NEP) to target its inspections on both health-care and non-health-care industries with high risk of worker exposure to COVID-19. In June 2021, OSHA issued an emergency temporary standard (ETS) related to COVID-19 exposure for the health-care industry. See figure for a summary of key OSHA actions during the COVID-19 pandemic.
Timeline of OSHA’s Key Actions to Respond to the COVID-19 Pandemic, from January 2020 through September 2021
OSHA has recorded data related to COVID-19 in the workplace since February 2020. From February 2020 through August 2021, related to COVID-19, OSHA received 16,667 complaints and referrals, 1,678 employer reports of severe injuries or illnesses, 1,225 reports of fatalities, and 3 reports of catastrophes.[156] During the same time period, OSHA conducted 16,820 informal inquiries, 1,621 on-site inspections, and 1,190 remote inspections related to COVID-19.[157] As a result of these inspections, OSHA cited 917 violations and issued about $6.4 million in penalties.[158] (See table.)
Source: GAO analysis of Occupational Safety and Health Administration (OSHA) Information System data. | GAO-22-105051
Notes: Complaints refer to reports notifying OSHA of alleged workplace safety or health hazards. Complaints can be made by employees, their representatives, or others.
Referrals and employer reports: OSHA uses the term “referrals” to encompass two different report types, (1) reports of work-related severe injuries and illnesses, which employers are required to submit to OSHA (which OSHA calls employer-reported referrals); and (2) reports of potential workplace hazards from selected other entities, such as local government agencies or media outlets. In this report, we use “referrals” to describe those reports from selected non-employer sources, and “employer reports” to describe those reports from employers. Employers are required to report all work-related in-patient hospitalizations, amputations, and losses of an eye within 24 hours. 29 C.F.R. § 1904.39(a)(2).
Fatalities: Employers are required to report the work-related death of an employee to OSHA within 8 hours. 29 C.F.R. § 1904.39(a)(1). According to OSHA officials, most reports of fatalities come from employers. However, officials noted that they do receive reports of fatalities from other sources, such as the media or emergency medical personnel. In this report we refer to all reported fatalities as “reports of fatalities.”
Catastrophes: OSHA’s Field Operations Manual defines a catastrophe as the hospitalization of three or more employees resulting from a work-related incident or exposure.
During the COVID-19 pandemic, OSHA’s pandemic-related enforcement policies have allowed area offices to conduct some inspections remotely, instead of being physically at the workplace. According to OSHA policy, data on remote inspections include only those inspections that were conducted completely off-site. Data in this table include enforcement activity performed by OSHA only, and not by state agencies that operate under OSHA-approved state plans.
aSince OSHA has 6 months from the occurrence of a violation to issue a citation and any related penalties, totals for the number of violations cited and penalties issued from March 2021 through August 2021 may not reflect the total that will eventually be cited or issued related to inspections initiated during those months. These data are current as of September 7, 2021.
bData reliability issues regarding COVID-19-related employer reports, specifically reports of hospitalizations, were discussed in an enclosure to our January 2021 CARES Act report and are summarized elsewhere in the current enclosure.
cSome of these cases are still open and may have been contested or appealed by the employers, which could ultimately result in changes to the violations cited or penalties issued.
From February 2020 through May 2021, without COVID-19-specific standards in place, OSHA enforced existing applicable standards, such as those related to respiratory protection, and issued general and industry-specific voluntary guidance for employers on COVID-19-related precautions.[159] OSHA also occasionally used the “general duty clause” for enforcement. According to OSHA’s Field Operations Manual, if hazards not covered by an OSHA standard are discovered during an inspection, a general duty clause violation may be cited, if certain criteria are met.[160] From February 2020 through August 2021, OSHA cited 20 COVID-19-related general duty clause violations (see table).
Source: Occupational Safety and Health Administration (OSHA) Information System data. | GAO-22-105051
aThe general duty clause requires employers to provide a workplace free from recognized hazards that are causing or are likely to cause death or serious physical harm to their employees. The general duty clause is a part of the Occupational Safety and Health Act of 1970, as amended, and is distinct from standards, which OSHA promulgates under the OSH Act. The general duty clause is used when no standard applies to a particular hazard. See 29 U.S.C. § 654(a)(1).
b29 C.F.R. § 1910.134 generally requires employers to provide respiratory protection to employees when necessary to protect employee health.
c29 C.F.R. § 1904.4 generally requires employers to keep an internal record of all work-related fatalities, injuries, and illnesses.
d29 C.F.R. § 1904.39 generally requires employers to report to OSHA all work-related in-patient hospitalizations, amputations, and losses of an eye within 24 hours, and all work-related fatalities within 8 hours.
e29 C.F.R. § 1910.132 generally requires employers to provide personal protective equipment to employees when necessary, such as for eyes, face, and head.
f29 C.F.R. § 1904.40 generally requires employers to provide records to government representatives within 4 business hours of a request.
g29 C.F.R. § 1910.1200 generally requires employers to provide employees information concerning chemical hazards.
hSome of these cases are still open and may have been contested or appealed by the employers, which could ultimately result in changes to the violations cited or penalties issued. Since OSHA has 6 months from the occurrence of a violation to issue a citation and any related penalties, totals for the number of violations cited and penalties issued may not reflect the total that will eventually be cited or issued. These data are current as of September 7, 2021.
OSHA inspectors faced some challenges applying OSHA requirements to COVID-19 cases. OSHA standards existing prior to OSHA’s June 2021 emergency temporary standard (ETS) for certain health-care employers do not contain provisions specifically targeted at the COVID-19 hazard. As a result, it has been difficult for employers and employees to determine what particular COVID-19 safety measures are required, or how existing standards are expected to work when applied to COVID-19. Moreover, according to the preamble to OSHA’s health-care ETS, OSHA’s efforts to enforce existing standards to address the COVID-19 hazard have been hindered by the absence of any specific requirements in these standards related to some of the most important COVID-19-mitigation measures. OSHA inspectors or managers from three of five area offices we spoke with said that it was difficult to apply existing OSHA standards to COVID-19 cases, for example, because existing standards did not cover certain COVID-19 hazard mitigations, such as wearing a face covering.
In addition, although not unique to COVID-19 inspections, violations of the general duty clause were challenging to cite since such violations require a large amount of documentation to demonstrate that all four elements required to use the clause are present.[161] According to the preamble to OSHA’s health-care ETS, the general duty clause does not provide employers with specific requirements to follow or a road map for implementing appropriate COVID-19 abatement measures. In addition, OSHA’s burden of proof to establish a general duty clause violation is heavier than a standard violation.
Inspectors from one area office told us that they did not have enough knowledge to determine what should be considered a dangerous level of COVID-19 exposure or risk in order to cite a related violation. Inspectors or managers from four of five area offices we spoke with said it was difficult to apply the general duty clause to COVID-19-related hazards, for example, because it would likely only be cited if an employer was making no effort to use any COVID-19 mitigation strategies.
According to the preamble to OSHA’s health-care ETS, in many cases during the pandemic, inspectors found that employers were following some minimal COVID-19 mitigation strategy, while ignoring other crucial components of employee protection.[162] The preamble further notes that, in such instances, because the employer had taken some steps to protect workers, successfully proving a general duty clause citation would have required OSHA to show that additional missing measures would have further materially reduced the COVID-19 hazard.
OSHA’s COVID-19 National Emphasis Program (NEP) is focused on high-risk industries and uses data that are incomplete. In March 2021, OSHA initiated a 1-year COVID-19 NEP that aims to ensure that employees in high-risk industries are protected from the hazard of COVID-19.[163] The NEP includes a specific focus to ensure that workers are protected from retaliation.[164]
Prior to the NEP, all COVID-19-related inspections were unprogrammed—conducted in response to incoming reports of hazardous working conditions at a specific workplace. In addition to continuing unprogrammed inspections, the NEP includes plans for OSHA to conduct programmed COVID-19 inspections—not in response to any specific report of a hazard—at workplaces where workers have higher risks of exposure to COVID-19. From February through August 2021, OSHA has performed a total of 960 COVID-19 NEP inspections, including 366 programmed and 594 unprogrammed.[165]
To implement the NEP, OSHA created two targeting lists of establishments within the local jurisdiction of each area office from which to select for programmed inspections—the first based solely on industries with a higher risk of exposure to COVID-19 and the second based on those higher-risk industries plus establishment-specific respiratory and other illness rates in 2020.
The first NEP targeting list includes establishments in industries where OSHA conducted the highest number of COVID-19-related enforcement activities from February 2020 through mid-June 2021. This list aims to identify where the highest number of workers are expected to perform tasks associated with exposure to COVID-19.[166] This includes establishments in health-care industries, such as hospitals and assisted living facilities, and non-health-care industries, such as poultry processing and grocery stores.[167]
The second NEP targeting list includes establishments with higher-than-average per capita respiratory and other illness rates, based on employer-reported Form 300A summary injury and illness data (or “300A data”).[168] However, as we found in a January 2021 report on summary injury and illness data reporting, these 300A data are incomplete and thus may be of limited effectiveness in developing targeting lists that identify workplaces most in need of COVID-19 inspections. Specifically, we estimated that employers did not submit 300A data for more than half of required establishments for calendar years 2016 through 2018. Further, not all employers with the potential for worker exposure to COVID-19 are required to submit 300A data.[169]
OSHA officials acknowledged that some establishments included in the first targeting list are not required to report 300A data, and thus will not show up in the second targeting list. According to the NEP Directive, area offices may add establishments to the NEP targeting lists, based on their local knowledge, among other things, so they are not limited to establishments selected based on incomplete data. However, because more than half of required establishments may not be reporting 300A data, OSHA’s second targeting list may be missing many establishments with higher rates of respiratory and other illness.[170]
As we found in our January 2021 report, because OSHA is less likely to conduct certain inspections on employers who do not report 300A data, employers have an incentive to avoid reporting these data.[171] Such employers that avoid reporting 300A data may still merit a COVID-19 NEP inspection. In our January 2021 report on summary injury and illness data reporting, we recommended that OSHA evaluate the agency’s procedures for ensuring that employers report their 300A data and make needed changes, and the agency generally agreed with our recommendation. As of September 2021, DOL had not addressed this recommendation.[172] By implementing this recommendation, OSHA could base its targeting on more complete workplace illness data—potentially including twice as many establishments—and thus, better target its COVID-19 NEP inspections.
OSHA issued a COVID-19 emergency temporary standard (ETS) for the health-care industry; a separate infectious disease standard and a vaccination ETS are in process. In June 2021, OSHA issued a COVID-19 ETS for certain health-care employers that treat suspected or confirmed COVID-19 patients, such as hospitals and long-term care facilities.[173] The health-care ETS may be in effect for up to 6 months after publication and may be superseded by a permanent standard. This ETS does not cover employers in other industries, some of which OSHA has identified as at high risk of COVID-19 exposure in its other policies.[174] The health-care ETS requires covered employers to comply with several provisions to protect workers from COVID-19 hazards, including
- developing and implementing a COVID-19 plan and related policies and procedures, and providing related training;
- screening and managing patients and visitors, including contractors, for COVID-19;
- implementing various COVID-19 mitigation measures, such as use of personal protective equipment for employees, physical distancing, physical barriers, cleaning and disinfection, and ventilation;
- providing time and paid leave for COVID-19 vaccination;
- ensuring anti-retaliation principles are upheld related to employee rights under the ETS;
- screening and managing employees for COVID-19, including, for example, daily screening and requiring employees to notify the employer of COVID-19 positive tests and symptoms;
- keeping a log of all employee COVID-19 cases, regardless of whether they are work-related; and,
- reporting work-related COVID-19 fatalities and hospitalizations to OSHA, regardless of the amount of time between the exposure to COVID-19 and the fatality or hospitalization.
The health-care ETS allows OSHA to obtain some worker safety data related to COVID-19 from covered health-care employers—which they would not otherwise be required to provide. Specifically, an enclosure to our January 2021 CARES Act report stated that OSHA did not receive employer reports of all work-related hospitalizations related to COVID-19 because disease symptoms do not appear within 24 hours, the required reporting time frame for work-related hospitalizations.[175] We recommended that OSHA determine what additional data may be needed from employers or other sources.
The new reporting requirement in the health-care ETS addresses this challenge for covered health-care employers by requiring them to report to OSHA all work-related COVID-19 fatalities and hospitalizations, regardless of the amount of time between worker exposure to COVID-19 and the death or hospitalization, and takes into consideration our prior recommendation. Thus, we are closing this recommendation. OSHA is not requiring COVID-19-related hospitalization or fatality reports under the adjusted time frames for workplaces where the health-care ETS does not apply.
The health-care ETS also adjusts the existing recordkeeping requirement, to require covered health-care employers to keep an internal log of all COVID-19 cases among their employees, regardless of whether they are determined to be work-related.[176] When conducting inspections, OSHA officials should be able to obtain these logs to better assess workers’ COVID-19 exposure and risk, and identify any COVID-19-related violations.
Although the health-care ETS covers only employers in the health-care industry, in its other policies, OSHA has acknowledged the widespread impact of COVID-19 on industries beyond health care. In its March and July 2021 updates to its pandemic-related enforcement policy, OSHA expanded its higher risk designation for COVID-19 exposure from applying only to health-care settings to applying to any workplace that can be crowded or involve a high level of interaction with people, providing poultry processing and correctional facilities, two non-health-care industries, as examples of higher-risk workplaces. Also, as previously discussed, OSHA’s COVID-19 NEP is designed to focus on industries where the agency has determined that workers face increased potential for exposure to COVID-19, and targets both health-care and non-health-care industries (see fig.).
COVID-19-Related Reports to OSHA among Industries Targeted by OSHA’s National Emphasis Program, February 2020 through August 2021
OSHA is engaged in rulemaking for the health-care ETS and a separate infectious disease standard, and is developing a vaccination ETS. An ETS may serve as a proposal for a permanent standard, and OSHA must generally take final action on the proposal within 6 months of publication, in the case of the health-care ETS, by December 2021.[177] In September 2021, OSHA officials said they were reviewing the comments they received on the health-care ETS during the public comment period, which ended on August 20, 2021. They further noted that they were reviewing the ongoing need for this ETS every 30 days and had not yet determined whether to extend this ETS beyond 6 months. Officials said they would continue to monitor trends in COVID-19 infections and deaths and would update the health-care ETS, as appropriate, if and when “new information indicates a change in measures necessary to address the grave danger [from the virus].” On June 24, 2021, the AFL-CIO and United Food and Commercial Workers unions petitioned the U.S. Court of Appeals for the D.C. Circuit to review OSHA’s decision not to issue an ETS applicable to employees outside the health-care industry who face occupational exposure to COVID-19, including but not limited to employees in the meatpacking and food processing industries.[178]
OSHA is also working on separate rulemaking for an infectious disease standard to protect workers in high-risk environments from long-standing and emerging infectious diseases, with a notice of proposed rulemaking currently projected to be published in December 2021. According to the White House Office of Information and Regulatory Affairs’ Spring 2021 regulatory agenda, the rulemaking considers targeting health-care workers and others who are exposed in high-risk environments, potentially covering workplaces such as hospitals, correctional facilities, some laboratories, and other occupational settings where workers can be at increased risk of exposure to infectious people.
On September 9, 2021, the White House announced a plan to increase COVID-19 vaccination. Specifically, OSHA is to develop an ETS that would require all employers with 100 or more employees to implement COVID-19 vaccination and testing requirements for employees and to provide vaccine-related paid time off. In September 2021, OSHA officials said the agency was working expeditiously to develop the vaccination ETS; officials did not provide an estimate for when it would be finalized.
OSHA’s updated COVID-19 enforcement policy separates health-care and non-health-care industries and reduces the use of some adapted methods used during the pandemic. In June 2021, soon after issuing the health-care ETS, OSHA published an ETS enforcement policy for inspectors designed to ensure uniform enforcement among ETS-covered health-care employers. For key requirements in the health-care ETS, the ETS enforcement policy provides detailed inspection guidance for what to include in an inspection, for example, determining whether the employer has a designated eating and drinking area with sufficient space to accommodate physical distancing. It also provides citation guidance for key requirements in the health-care ETS, such as specific examples for when a violation may be cited, as well as guidance for inspector safety, among other things.
In July 2021, OSHA released its updated pandemic-related enforcement policy, which generally covers non-health-care employers (as health-care employers are covered under the ETS enforcement policy).[179] The updated pandemic-related enforcement policy for non-health-care employers
- focuses enforcement on protections for workers who are unvaccinated or not yet fully vaccinated;
- revises its assessment of workplace risk, as discussed above, to include in its higher risk category any workplace that can be crowded or involve a high level of interaction with people; and
- provides updated guidance to protect OSHA inspectors.
Reflecting a progression toward a return to normal enforcement operations, the July 2021 policy continues to allow use of two of OSHA’s COVID-19-adapted enforcement methods that we described in our January 2021 enclosure—(1) remote inspections and (2) informal inquiries in place of inspections—but generally removes citation discretion.[180] The updated pandemic-related enforcement policy states that OSHA will perform on-site COVID-19 inspections, instead of remote inspections, in most cases.[181] According to the policy, citation discretion was intended to be time limited, applied on a case-by-case basis, and related to supply shortages, such as shortages in N95 masks. OSHA is generally ending use of citation discretion in this context based on updated Centers for Disease Control and Prevention and Food and Drug Administration guidance regarding supply availability, according to the policy.
Inspectors or managers from all five area offices we spoke with told us that the use of these adapted enforcement methods during the pandemic varied by factors such as industry, risk of worksite COVID-19 exposure, and severity of reported incidents. For example, according to inspectors at one area office, inspectors for the construction industry transitioned from remote inspections back to onsite inspections earlier than for other industries due to the nature of construction work and the lower risk of COVID-19 at construction sites. According to OSHA guidance, some construction work tasks are classified as low risk activities, as they may be outdoors and may allow for social distancing.
Data from the OSHA Information System (OIS), which the agency uses to track its enforcement activities, indicate that over the course of the pandemic, some COVID-19-adapted enforcement methods have generally declined. In addition, OIS data show that OSHA enforcement activities shifted substantially from inspections to informal inquiries at the start of the pandemic, and that then the proportion of informal inquiries generally declined through August 2021 (see fig.).[182]
OSHA Enforcement Activities Based on Report Type, for Selected Periods from March 2019 through August 2021
Area offices faced enforcement challenges during the COVID-19 pandemic, but OSHA has not assessed lessons learned or promising practices. Officials we interviewed in OSHA area offices reported facing operational challenges in enforcement throughout the COVID-19 pandemic. However, OSHA has not yet assessed these challenges to improve its response during the current pandemic and prepare for any future pandemic.[183] In particular, area office inspectors and managers identified challenges related to resources and to communication and guidance.
Resource challenge: staffing and volume of incoming reports. Inspectors from all five area offices we spoke with described challenges with processing a large volume of complaints and other reports of workplace hazards at the beginning of the pandemic. Inspectors from one area office said the number of incoming complaints was overwhelming, while inspectors from another area office described not being able to give cases the full attention they would have received, prior to the pandemic.
This workload was exacerbated by staffing challenges throughout the agency. Inspectors or managers from three of five area offices we spoke with described experiencing staffing challenges during the pandemic, including high turnover and high numbers of inexperienced staff, who could not conduct inspections on their own.
The volume of COVID-19-related work varied across the country because the pandemic’s impact differed from area to area. Staffing shortages varied among offices, and certain area offices developed useful strategies for addressing these challenges. For example, officials from one area office described a helpful practice of directing phone calls from the public, or other work, to another area office that had fewer COVID-19-related complaints.
Workload concerns also made citing COVID-19-related violations challenging because of the substantial time commitment needed for inspectors to collect the evidence and documentation necessary to support a citation. Inspectors or managers from three of five area offices we spoke with described challenges during the COVID-19 pandemic with meeting the requirement that citations must be issued within 6 months of the violation. Particular challenges included the large amount of paperwork required for a COVID-19 citation, and inspectors sometimes learning of a COVID-19-related fatality several months after it occurred—when much of the 6-month window had already expired.[184]
Resource challenge: telework and technology. OSHA headquarters officials said the agency was very well prepared to transition operations from in-person inspections and office work to telework in response to the pandemic, aside from occasional minor issues with technology. However, based on our interviews, comfort with telework and advance preparation for telework varied across area offices and individual OSHA staff.
Some inspectors from all five area offices we spoke with described challenges with technology, including scanning and printing enforcement-related documents, while other inspectors from two of these five offices described positive experiences working remotely. According to OSHA officials, many regions have electronic case file pilot programs in place, and the agency is working to implement electronic case files nationwide, though the standard OSHA case file remains paper-based. Officials noted that, even once electronic case files are implemented nationwide, OSHA will continue accepting paper materials from employers and workers, which would then need to be scanned into the electronic case files, and some documents that are generated electronically will still need to be printed and mailed to employers.
Communication and guidance challenge: Guidance and tools for inspectors provided later than needed. Inspectors from all five area offices we spoke with described challenges in performing their roles due to a lack of timely guidance from OSHA headquarters, or frequent guidance changes. An inspector from one area office stated that OSHA’s COVID-19-related guidance often conflicted with guidance and recommendations from other government agencies. OSHA headquarters officials said they provided information to inspectors regularly during the pandemic, including interim enforcement memoranda, via OSHA’s internal webpage, by email, and through meetings with regional offices. However, inspectors in the area offices said the lack of timely guidance affected their operations in the following ways:
- Inspectors from one area office described “scrambling” early in the pandemic to figure out how to apply existing standards to COVID-19 hazards and said they did not know how to advise employers and others who asked for guidance.
- According to inspectors from another area office, the lack of adequate guidance from the Solicitor of Labor made citing COVID-19-related violations time-consuming and difficult. Inspectors said they did not know, in advance of the Solicitor’s review of COVID-19-related violation cases, what supporting documentation would be required.[185] According to headquarters officials, as they conducted more COVID-19 violation reviews, OSHA issued guidance on common citation language to reflect lessons learned and guide inspectors going forward. Headquarters officials also said the agency posted templates for preparing COVID-19-related citations in November 2020—8 months into the pandemic.
- A tool to calculate the probability of exposure to COVID-19 was provided in April 2021, leaving the office without this type of resource for too long, according to inspectors from one area office.
Communication and guidance challenge: difficulty finding and using the most up-to-date guidance. OSHA headquarters officials told us that a COVID-19 team scans Centers for Disease Control and Prevention, National Institute for Occupational Safety and Health, and Food and Drug Administration websites for updates to COVID-19 employer guidance on a daily basis, and emails policy updates to regional offices. The regional offices would then send the updates to area office leadership, who would send them to inspectors.
This method resulted in communication inconsistencies and gaps. According to inspectors from three of five area offices we spoke with, the frequent changes in guidance were difficult to keep track of; this led to inspector confusion about which guidance was in effect, according to inspectors from one area office. For example, inspectors from another area office we spoke with said that they were unsure how to handle changing N-95 mask-fit testing requirements, particularly for employers like nursing homes that were unfamiliar with this requirement. Specifically, they noted it was challenging to determine whether to cite these workplaces for violation of a standard they were not familiar with due to the frequently changing guidance.
Communication and guidance challenge: managers unaware of inspectors using COVID-19-related adapted enforcement methods. In some selected area offices, managers seemed unaware of inspectors using enforcement methods that had been adapted due to the pandemic, limiting their ability to oversee and evaluate those methods. For instance, managers from one area office we spoke with said their inspectors had conducted only one inspection remotely, while inspectors from that office said they had regularly used remote inspections during the pandemic. OIS data indicate that inspectors have used adapted enforcement methods during the pandemic, including conducting inspections remotely. As shown in the above figure on enforcement activities based on report type, OSHA enforcement also shifted substantially from inspections to informal inquiries during the pandemic months.
Additionally, managers from the same area office said they had not used citation discretion (i.e., not citing a violation for an identified hazard, due to extenuating circumstances or employer good faith efforts), while inspectors from that office said they used this discretion.
Communication and guidance challenge: OSHA officials had different understandings of the OIS code developed to track inspectors’ use of citation discretion, and inspectors may have used it inconsistently throughout the pandemic.[186] From February 2020 through August 2021, the OIS code for citation discretion was used 4 times, indicating limited use of this discretion. While some OSHA headquarters officials said the OIS code should only apply to citation discretion involving certain requirements, other OSHA headquarters officials said that all instances of citation discretion should be tracked using this code.[187] In addition, inspectors from all five area offices we spoke with described using this citation discretion, but not consistently using the designated OIS code to track it.
Communication and guidance challenge: lack of process for sharing of promising practices among area offices. OSHA may have missed opportunities to share knowledge and tools among area offices throughout the pandemic. While some area offices and regional offices developed unique practices and tools to enhance their efforts during the pandemic, OSHA did not have a process in place for area offices to systematically share promising practices with each other during the pandemic. Inspectors or managers from all five area offices we spoke with described a number of unique practices that area and regional offices had implemented during the pandemic; for example, creating web-based document management sites to share templates, guidance, and other documents, developing systems to help area offices protect OSHA staff, and coordinating solutions to technology challenges. Managers from two of five area offices we spoke with said it would be good if OSHA were to compile promising practices and lessons learned to better prepare for another emerging issue.
In August 2021, OSHA headquarters officials said they had not yet conducted a formal evaluation or formally collected lessons learned or helpful practices for operating during a pandemic from area offices. Federal internal control standards state that agencies should evaluate issues and remediate deficiencies. OSHA officials cited the ongoing pandemic as the reason they had not performed such an assessment and said they intended to do so when feasible. However, even while the COVID-19 pandemic is ongoing, analyzing OSHA’s response—including its response to challenges it has faced, such as those related to resources and to communication and guidance—and taking related actions as warranted would enable OSHA to make improvements to better support ongoing enforcement efforts during the COVID-19 pandemic and prepare for operations during any future pandemic.
Methodology
To conduct this work, we reviewed OSHA guidance and enforcement policy, relevant federal laws and regulations, and the most recent OSHA data through August 2021.[188] To assess the reliability of OSHA’s data, we reviewed technical documentation and interviewed OSHA officials. We determined that OSHA’s data were sufficiently reliable for the purposes of our reporting objectives. We also interviewed OSHA headquarters officials, and managers and inspectors from 5 of OSHA’s 89 area offices, selected to represent areas with industries affected by COVID-19 and a higher than average number of COVID-19-related complaints, employer reports, and referrals from February through September 2020, among other things.
Agency Comments
We provided DOL and the Office of Management and Budget (OMB) with a draft of this enclosure. OMB did not provide comments on this enclosure. DOL provided written comments, reproduced in appendix VIII, and technical comments, which we incorporated as appropriate. In its comments, DOL partially agreed with our recommendation to assess—as soon as feasible and, as appropriate, periodically thereafter—various challenges related to resources and to communication and guidance that OSHA has faced in its response to the COVID-19 pandemic and take related actions as warranted.
DOL stated that the agency agrees that it is important to assess lessons learned and best practices for OSHA’s operational response to COVID-19. However, DOL officials said they believe that while the pandemic is ongoing, the agency’s resources are best used to help employers and workers mitigate exposures to COVID-19. DOL stated that the agency intends to conduct a review of OSHA’s response to the COVID-19 pandemic after operations return to normal.
However, it is unclear when the COVID-19 pandemic will end, and OSHA analyzing its response and taking related actions, as warranted, even as the pandemic is ongoing, would enable the agency to improve its enforcement efforts during this pandemic, in addition to helping it prepare for operations during any future pandemic. We continue to believe that assessing—as soon as feasible and, as appropriate, periodically thereafter—various challenges that OSHA faced in responding to the pandemic, and taking related actions, would enhance transparency and accountability in the federal government’s response to, and recovery from, the COVID-19 pandemic.
GAO’s Ongoing Work
Our review of worker safety and health during the COVID-19 pandemic is shifting to focus on the safety and health of workers at meat and poultry processing plants during the pandemic. We will continue to examine OSHA’s efforts to protect workers in these industries, and monitor developments in overall worker safety and health during the ongoing pandemic.
GAO’s Prior Recommendations
The table below presents our recommendations on Worker Safety and Health from prior bimonthly and quarterly CARES Act reports.
Source: GAO I GAO-22-105051
Related GAO Products
Workplace Safety and Health: Actions Needed to Improve Reporting of Summary Injury and Illness Data. GAO-21-122. Washington, D.C.: January 27, 2021.
Standards for Internal Control in the Federal Government. GAO-14-704G. Washington, D.C.: September 10, 2014.
Workplace Safety and Health: Multiple Challenges Lengthen OSHA’s Standard Setting. GAO-12-330. Washington, D.C.: April 2, 2012.
Contact information: Thomas M. Costa, 202-512-7215, costat@gao.gov
Child Care
Bookmark:The Office of Child Care is taking initial steps to ensure accountability over COVID-19 supplemental funds, and these funds—along with federal child care flexibilities—have been critical to states to help mitigate the impacts of the COVID-19 pandemic on child care, according to our 2021 national survey of state child care administrators.
Entity involved: Office of Child Care, Administration for Children and Families, within the Department of Health and Human Services
Background
The federal child care subsidy program known as the Child Care and Development Fund (CCDF) assisted, on average, about 1.3 million eligible children from low-income families per month in fiscal year 2018, the most recent year for which final data are available.[189] CCDF was appropriated nearly $62 billion in federal funds since the March 2020 declaration of COVID-19 as a national emergency—including more than $52 billion in CARES Act and other COVID-19 supplemental funds, in addition to annual appropriations, for CCDF to help states prevent, prepare for, and respond to the COVID-19 pandemic (see table).[190] CCDF is administered as a block grant to the states by the Office of Child Care (OCC), an office within the Department of Health and Human Services’ (HHS) Administration for Children and Families (ACF).[191]
Source: Pub. L. No. 116-136, div. B, tit. VIII, 134 Stat. 281, 557 (2020); Pub. L. No. 116-260, div. M, 134 Stat. 1182, 1914; and Pub. L. No. 117-2, §§ 2201, 2202, 135 Stat. 4, 31. I GAO-22-105051
aStates have until September 30, 2022, to obligate the CARES Act funds and until September 30, 2023, to spend them.
bDivision M of the Consolidated Appropriations Act, 2021 is the Coronavirus Response and Relief Supplemental Appropriations Act, 2021. States have until September 30, 2022, to obligate the Coronavirus Response and Relief Supplemental Appropriations Act, 2021 funds and until September 30, 2023, to spend them.
cThe American Rescue Plan Act of 2021 includes $24 billion in child care stabilization funds and $15 billion in supplemental CCDF funds. States have until September 30, 2022, to obligate the stabilization funds and until September 30, 2023, to spend them. States have until September 30, 2023, to obligate the supplemental CCDF funds and until September 30, 2024, to spend them.
In addition to COVID-19 supplemental funds for CCDF, the Small Business Administration’s (SBA) Paycheck Protection Program (PPP) provided a large potential source of funding to child care providers who applied and met program eligibility requirements, primarily to help keep workers employed.[192]
Overview of Key Issues
Availability of child care. COVID-19 notably impacted the availability of child care for families early in the pandemic, with the percentage of all open child care providers increasing throughout the year, according to our 2021 national survey of state CCDF administrators (see figure). States reported that, in March 2020, 59 percent of child care centers and 82 percent of home-based providers were open for business.[193] About one-half of states also reported that the availability of child care to meet the needs of essential and non-essential workers was greatly challenging in March 2020 (23 and 25 states, respectively).[194] However, five or fewer states reported child care availability for essential and non-essential workers as greatly challenging in December 2020.
Percentage of Open Child Care Providers Increased during 2020
The availability of child care exceeded demand at times during the pandemic, according to some state CCDF administrators we interviewed, which may have mitigated the impact that closures had on families.[195] For example, administrators from two of the eight states we interviewed cited insufficient demand for their child care programs targeted to essential workers, such as hospital workers. Overall, according to state officials, the need for child care may have decreased as a result of changes to parental preferences due to concerns for health and safety, and more parents working from home. State officials added that these types of changes make it difficult for providers and states to plan for future child care needs.
Child care challenges. Alongside closures, child care providers faced many other challenges due to the pandemic—most frequently financial—according to our national survey. In March 2020, 39 of 50 states that responded to our survey rated as greatly challenging financial problems for providers due to (1) decreased child care enrollment and (2) temporary closures. By December, fewer states did so (35 and 26, respectively). Closely behind, 37 states reported that providers being able to obtain personal protective equipment or cleaning supplies was greatly challenging in March 2020. Overall, each of the top challenges states reported in our survey showed improvement between March and December 2020, as illustrated in the figure below.
Restrictions on the capacity of child care during the pandemic, including whether child care was considered safe to open, added financial strain to providers, according to some CCDF administrators we interviewed. One state administrator told us some providers were unable to maintain operations due to state-mandated reductions in numbers of children, group sizes, and ratios of children to staff. Officials in several states also noted that the pandemic exacerbated pre-existing challenges with staff recruitment and retention, due to increased health and safety concerns. State administrators told us that they struggled to appropriately balance the financial struggles of child care providers while also ensuring health, safety, and oversight of public funds.
Federal child care flexibilities. To mitigate COVID-19-related challenges for child care providers and families, states implemented various federal child care flexibilities, according to our national survey.[196] Of these flexibilities, states most often preserved (1) pay for child care providers, by paying them based on more generous absence day policies; and (2) subsidies for eligible children, by increasing the time before their next eligibility redetermination.[197] As shown in the figure below, however, states sometimes implemented flexibilities only on a short-term basis; by December 31, 2020, about one-half of states or more no longer used some of them.
State CCDF administrators we interviewed said the use of federal flexibilities was vital to mitigate impacts of the pandemic. One administrator called the flexibility to change how states could pay providers (e.g., based on enrollment instead of attendance) the most useful. Others noted how their states’ use of certain flexibilities changed over time. For example, officials in one state said that from March through June 2020, the state paid providers based on enrollment, but since July 2020, it has continued to pay based on enrollment only if families attend child care at least 50 percent of the time.
Funding to respond to COVID-19. In our national survey, states most frequently reported using or planning to use CARES Act and Consolidated Appropriations Act, 2021, Division M (CAA) funds to help address their greatest COVID-19 related financial challenges.[198] Specifically, most states reported that they used or planned to use these funds to provide assistance to child care providers experiencing temporary closures or decreased enrollment, or to provide assistance to child care providers not receiving CCDF as of March 1, 2020 (see table). One administrator we interviewed said, for example, that being able to provide CARES Act funds to providers—whether they had previously received CCDF funds or not—helped to ensure as many providers as possible remained open during the pandemic.
Source: GAO Survey of State Child Care and Development Fund Administrators, 2021. | GAO-22-105051
Note: The CAA was enacted in December 2020, a few weeks before our survey was deployed, and the American Rescue Plan Act of 2021 was enacted in March 2021, after our survey had been sent to state child care administrators.
aOCC guidance states that CARES and CAA funds can be used to pay two providers for the same child should one of the providers be temporarily closed due to COVID-19.
OCC provides guidance to states regarding flexibility to spend their annually appropriated CCDF funds during times of national or state emergency, and 29 states reported in our national survey that they also used CCDF funds intended to improve the quality of child care services to respond to the pandemic.[199] States reported using these funds in various ways, including to help providers obtain critical supplies and personal protective equipment, complete health and safety training, and obtain financial assistance, through grants or direct payments, as a result of decreased enrollment or temporary closures. In deciding when to use CARES Act or CCDF funds, state administrators we interviewed said they considered various factors, such as when funding was available, allowable uses, and the period in which funds must be spent.[200]
Paycheck Protection Program. The Paycheck Protection Program (PPP) was also a large source of federal financial assistance for the child care market. According to our analysis of SBA data, child care providers received more than $5.5 billion in PPP loans. In total, 97,965 child care providers received 133,100 PPP loans, according to our analysis.[201]
Small child care providers received more PPP loans than larger providers, but a smaller share of the overall amount loaned, according to our analysis of SBA data. Providers that reported having zero to two employees received about 60 percent of the loans whereas larger providers with six or more reported employees received about 33 percent of the loans (see fig.).[202] In total, however, larger providers received about $4.4 billion of the approximately $5.5 billion loaned to child care providers through PPP, likely because the amount of the loan a borrower was eligible to receive was based on the size of their payroll. The median loan amount providers received ranged from about $10,200 for providers with zero or one employee to about $91,600 for providers with 11 or more employees.
Small Child Care Providers Received More Paycheck Protection Program Loans than Larger Providers
We also found that areas with high minority populations or high poverty received more PPP loans relative to their representation within the overall U.S. population.[203] Specifically, providers in areas with high minority populations, which include about 58 percent of the overall U.S. population, received about 67 percent of the PPP loans. High poverty areas, which include about 14 percent of the overall U.S. population, received about 20 percent of the PPP loans.[204]
OCC oversight. OCC has adapted or plans to adapt existing oversight practices to help ensure the accountability of COVID-19 supplemental funding. For instance, OCC added a column to its quarterly financial reporting form to capture information on state CARES Act expenditures, and officials said they will do the same for state CAA and American Rescue Plan Act of 2021 (ARPA) expenditures.[205] OCC also modified annual administrative reporting requirements and asked states to estimate, among other things, how many families and children were served whose subsidy was fully or partially paid using CARES Act funds.
OCC officials said they plan to also collect other information specific to CAA and ARPA funds, as appropriate. For instance, OCC officials said they will collect information about the number and characteristics of providers that receive an ARPA child care stabilization grant, and are seeking public comment.[206] OCC is also seeking public comment to collect information on state uses of CCDF quality funds, including funds designated specifically for quality infant and toddler care and ARPA child care stabilization grants. Additionally, OCC officials said they plan to discuss state uses of COVID-19 supplemental assistance during upcoming on-site or virtual monitoring visits beginning October 2021.[207]
Methodology
To conduct this work, we reviewed relevant federal laws and agency guidance and interviewed OCC and SBA officials, and CCDF administrators in eight states. We selected these states based on the prevalence of COVID-19 among adults and children and for geographic diversity. Additionally, we surveyed state CCDF administrators in 50 states and the District of Columbia between January and March 2021, and received responses from all but one state. We also analyzed SBA PPP loan data and used U.S. Census Bureau, American Community Survey data (2015 through 2019, the most recent data available) to identify census tracts with certain demographics. We determined that these data were sufficiently reliable by interviewing federal officials and performing data checks to identify any missing data, outliers, or errors.
Agency Comments
We provided HHS, SBA, and the Office of Management and Budget (OMB) with a draft of this enclosure. HHS provided technical comments, which we incorporated as appropriate. SBA and OMB did not provide comments on this enclosure.
GAO’s Ongoing Work
We will continue to review states' implementation of the various coronavirus relief and recovery packages to identify long-term strategies for improving the child care industry and supporting child care businesses, including the use of grants and/or contracts, improving payment practices, and strategies to recruit and retain the workforce.
Contact Information: Kathryn A. Larin, (202) 512-7215, larink@gao.gov
K-12 Education
Bookmark:Disruptions due to the COVID-19 pandemic led hundreds of thousands of students nationwide—primarily vulnerable students, such as those who are English learners or low-income—to miss days or weeks of virtual instruction or not show up for school at all during the 2020-2021 school year.
Several states conducted outreach to locate and re-engage these disconnected students. As education is primarily a state and local responsibility, these efforts undertaken by selected states may provide insights for educators nationwide attempting to reach these students, which is especially important as the pandemic continues to affect schools during the 2021-2022 school year.
Entity involved: The Office of Elementary and Secondary Education within the U.S. Department of Education (Education).
Background
The COVID-19 pandemic significantly disrupted the lives of students, families, and teachers nationwide, and the consequences may be felt for some time. For example, when school buildings closed during the 2020-2021 school year, many students, especially low-income students, did not have the devices and internet access they needed for virtual (online) learning. Even though many schools have provided students with computers and internet access to participate in virtual instruction, many students faced difficulties staying engaged in school. As a result, hundreds of thousands of students—possibly as many as three million students, according to one estimate—missed days or weeks of instruction or disappeared from school altogether.[208] Research and media reports have identified many reasons why students disconnect from school, such as having parents who are frontline workers and cannot stay home to help them with virtual learning, or the student having responsibility to assist younger siblings.
To help address the impact of the pandemic, Education has distributed to states COVID-19 relief funds that can be used for a broad range of needs, including efforts to address learning loss and engage students in virtual instruction.[209] In addition, Education has established the Student Engagement and Attendance Center, which supports states and school districts in a variety of activities, such as identifying strategies to reengage with students and families to facilitate learning recovery.
Overview of Key Issues
The pandemic caused or exacerbated many inequalities faced by students, making it more likely for some to disengage from school, particularly those who were already vulnerable. Public schools nationwide experienced significant declines in student enrollment during the 2020-2021 school year, according to the National Center for Education Statistics, with some students shifting to homeschooling.[210] States used a variety of efforts to locate unaccounted for students and re-engage them, but incomplete contact information for some students made this more difficult.
Vulnerable students were more likely to disengage from school. Officials in our four selected states said that certain groups of vulnerable students—such as students with disabilities, English learners, and those from low-income families—more often disengaged from school due to pandemic related barriers. (See table.)
Source: GAO analysis of information from state officials in California, Mississippi, New Mexico, and South Carolina. | GAO-22-105051
aWe found that a variety of factors complicated the delivery of special education services to students during the COVID-19 pandemic. These factors include the wide range of needs of students with disabilities served under the Individuals with Disabilities Education Act (IDEA); the services specified in their individualized education programs; and the capacity of parents or caregivers to assist teachers and service providers in delivering general education, specialized instruction, and related services to their children. See GAO, Distance Learning: Challenges Providing Services to K-12 English Learners and Students with Disabilities during COVID-19, GAO-21-43 (Washington, D.C.; Nov. 19, 2020).
bWe found that some English learners and their families had difficulty fully participating in distance learning during spring 2020 due to a lack of necessary technology, language barriers, and the demands of meeting basic family needs. Also, limited English comprehension affected the ability of families to assist students with the curriculum, according to representatives of professional associations and a technical assistance center. See GAO-21-43.
cBureau of Indian Education-funded schools faced additional pandemic difficulties related to distance learning and internet connected devices during the 2020-2021 school year. See GAO, Indian Education: Schools Need More Assistance to Provide Distance Learning, GAO-21-492T (Washington, D.C.: Apr. 28, 2021).
States reported outreach efforts to locate and re-engage disengaged students. Officials in our selected states said they took a variety of approaches to locate and re-engage disengaged students (see table). State officials stressed the importance of relationships between students and teachers as a key factor in re-engaging students who were not participating in virtual learning during the pandemic. In addition, representatives from a non-profit organization that works with disengaged students said state leadership in developing and implementing outreach efforts is important, as many school districts do not have the resources. However, incorrect contact information for families that was outdated due to the pandemic made it more difficult to locate or work with students, according to state officials and the non-profit organization.[211]
Source: GAO summary of information from state officials in California, Mississippi, New Mexico, and South Carolina. | GAO-22-105051
Note: States may also refer to disconnected students as chronically absent and academically at risk.
State officials also shared a number of school-district-level efforts to address unaccounted for and disengaged students, including virtual and in-person tutoring offered at various times, providing additional social-emotional support, and partnering with expanded service providers to make home visits and work with students, such as the Boys and Girls Clubs of America. Some school districts are providing targeted summer enrichment activities to students, according to state officials.
States have seen significant declines in public school enrollment, especially in kindergarten. Public school enrollment in our selected states was down by tens of thousands of students in the 2020-2021 school year, and officials in our selected states said that this decline was mostly due to the pandemic. Officials in California told us that over 160,000 fewer students (including over 60,000 fewer kindergarteners) enrolled in the 2020-2021 school year than in the previous school year. Although enrollments in California’s public schools had been decreasing annually, officials said the decline during the pandemic was far greater than in prior years. In all four states, the largest declines occurred in elementary school grades, in part because many families chose not to enroll their children in kindergarten, according to the some of the officials we interviewed. They said these students will be less prepared for first grade, and this condition would place more pressure on first grade teachers to cover missed material. Or, alternatively, the students could enter as older kindergarteners, which will put additional strain on kindergarten teachers and resources.
Students who left traditional public schools enrolled in private schools or public charter schools, were homeschooled, or reported no engagement in educational activities, according to officials we interviewed and data they provided. For example, officials in California shared information that showed parent registrations for private school and homeschool in school year 2020-2021 more than doubled over the previous year. In New Mexico, homeschool was the most common choice for families who did not re-enroll in public schools, according to information provided by state officials.[212]
Several thousand students were still unaccounted for toward the end of 2020-2021 school year. Even with these states’ outreach efforts, officials in our selected states told us that some students remained unaccounted for towards the end of the 2020-2021 school year.[213] For example, officials in Mississippi said that even though, as of December 2020, they had over 2,700 unaccounted for students, that was a significant improvement from about 23,000 unaccounted for students they had at the beginning of the school year. Similarly, New Mexico had 2,010 unaccounted for students as of July 2021 compared to the 12,000 unaccounted for students at the beginning of the school year.
Methodology
To review how states addressed the engagement of students in virtual learning as a result of the pandemic, we interviewed state education officials in California, Mississippi, New Mexico, and South Carolina. We selected these states based on their enrollment and attendance data related to disconnected students for the 2020-2021 school year, information about their efforts to engage disconnected students, and demographic information, including proportion of students from low-income families, in different racial and ethnic groups, and states’ diverse geographic locations.[214] We also reviewed related documentation provided by these states. We interviewed representatives of a non-profit organization that works with state educational agencies to address the needs of disconnected students, including in New Mexico and South Carolina.
Agency Comments
We provided Education and the Office of Management and Budget with a draft of this enclosure. Education provided technical comments, which we incorporated as appropriate. The Office of Management and Budget did not provide comments on this enclosure.
GAO’s Ongoing Work
We will continue to monitor Education’s efforts to help schools recover from the pandemic, how states and school districts are using the COVID-19 relief funds, and the challenges of pandemic-related learning loss and the approaches educators are finding to effectively address it.
Related GAO Products
Indian Education: Schools Need More Assistance to Provide Distance Learning. GAO-21-492T. Washington, D.C.: Apr. 28, 2021.
Distance Learning: Challenges Providing Services to K-12 English Learners and Students with Disabilities during COVID-19. GAO-21-43. Washington, D.C.: Nov. 19, 2020.
Contact information: Jacqueline M. Nowicki, (617) 788-0580, nowickij@gao.gov
Child Nutrition
Bookmark:The Food and Nutrition Service and states have used a variety of approaches to oversee child nutrition programs during the COVID-19 pandemic. However, states identified ongoing challenges with overseeing these programs, and the Food and Nutrition Service may be missing opportunities to fully leverage lessons learned from the pandemic to improve the management of child nutrition programs.
Entity involved: Food and Nutrition Service, within the Department of Agriculture
Recommendation for Executive Action
The Secretary of Agriculture should document the Department of Agriculture’s plan to analyze lessons learned from operating child nutrition programs during the COVID-19 pandemic. This plan should include a description of how the department will gather perspectives of key stakeholders, such as Child and Adult Care Food Program institutions and nonschool Summer Food Service Program sponsors. The Department of Agriculture generally concurred with this recommendation.
Background
Child nutrition programs administered by the Department of Agriculture’s (USDA) Food and Nutrition Service (FNS) supply cash reimbursements to schools or other programs for meals and snacks they provide to eligible children. In fiscal year 2019, before the pandemic, the four largest programs—the National School Lunch Program (NSLP), School Breakfast Program (SBP), Summer Food Service Program (SFSP), and Child and Adult Care Food Program (CACFP)—along with other child nutrition programs, received $23.1 billion in federal funds.[215]
During a typical year, NSLP and SBP subsidize meals for nearly 30 million children in approximately 95,000 elementary and secondary schools nationwide. These two programs are the largest of the child nutrition programs and typically serve children at school during the school year. In addition, SFSP and the Seamless Summer Option (SSO) typically provide meals for school-age children during the summer months.[216] Finally, CACFP provides meals to younger children enrolled for care at participating child care centers and day care homes and to school-age children participating in CACFP At-Risk Afterschool programs.[217]
The Families First Coronavirus Response Act (FFCRA) granted FNS authority to issue nationwide waivers in certain programs for specific purposes.[218] As we reported in July 2021, FNS extended several nationwide waivers in April 2021 for the 2021–22 school year.[219] FNS also issued a pair of waivers to allow schools to operate SSO during the school year and to claim SSO meals at the higher SFSP reimbursement rate. These waivers are intended to support access to nutritious meals, reduce the administrative burden associated with eligibility determinations, and minimize potential exposure to COVID-19.[220]
FNS’s National Office is responsible for providing regulatory guidance, policy materials, and monitoring tools to its seven regional offices, which have the primary responsibility for oversight of state agencies administering child nutrition programs. Typically, regional offices monitor program compliance through management evaluations. In the course of management evaluations during typical years, regional officials review program areas through a combination of off-site and on-site monitoring activities.
At the state level, state agencies—generally education or agriculture agencies—administer the programs and issue guidance to school district nutrition programs and other local program operators.[221] The state agencies responsible for child nutrition oversee school meal programs, which includes conducting administrative reviews of local operators’ administration of such programs. These reviews must include the accuracy of meal counting and claiming, nutritional quality, resource management, and other focus areas. State agencies also conduct regular reviews of local program operators’ administration of CACFP and SFSP. School district nutrition programs and other local program operators are responsible for certifying students as eligible for free or reduced-price meals and for counting and claiming eligible meals for federal reimbursement, among other monitoring activities.
FNS has issued several nationwide waivers related to program monitoring activities during the pandemic to facilitate state and local monitoring of the child nutrition programs while allowing for social distancing for staff. Most recently, FNS issued three waivers allowing state agencies and local operators to conduct monitoring entirely off-site, rather than both off-site and on-site, for the school meal programs (NSLP, SBP, and SSO) and CACFP until 30 days after the end of the public health emergency.
Various COVID-19 relief laws have provided funding or authority to USDA to support child nutrition programs during the pandemic. For example:
- The Families First Coronavirus Response Act (FFCRA), enacted in March 2020, authorized and provided an indefinite appropriation for a new program, Pandemic Electronic Benefits Transfer (Pandemic EBT), which provides benefits to purchase food to households with children who would have received free or reduced-price school meals if not for school closures due to COVID-19.[222] The program also provides these benefits to households with eligible children in child care. According to FNS, during the summer of 2021, Pandemic EBT benefits were offered to all eligible children who resided in states with approved Summer Pandemic EBT plans.[223] As of August 31, 2021, FNS had obligated $34.432 billion for Pandemic EBT.
- The CARES Act, enacted in March 2020, provided $8.8 billion in supplemental funds.[224] As of August 31, 2021, FNS had obligated nearly all of this funding for child nutrition programs. According to FNS, it provided nearly all of this funding to states and other meal program operators and used the majority of the funds—$8.615 billion—to reimburse operators for the cost of meals served during the pandemic.[225]
- The Continuing Appropriations Act, 2021 and Other Extensions Act, enacted in October 2020, extended certain waiver authority granted in the FFCRA through September 2021 and provided an indefinite appropriation to cover the costs incurred as a result of the waiver extensions.[226] As of August 31, 2021, FNS had obligated $1.470 billion of this funding for child nutrition programs.
- The Consolidated Appropriations Act, 2021, enacted in December 2020, provided an indefinite appropriation to support CACFP institutions and school district nutrition programs that replaced some of the decline in reimbursement funding in spring 2020.[227]
Overview of Key Issues
School districts and other meal program operators served fewer meals during the first year of the pandemic than in the previous year, but the number of meals served in spring 2021 approached prepandemic levels. According to the most recent available data from FNS, during the first year of the pandemic (March 2020 through February 2021), school districts and other meal program operators operating NSLP, SBP, SFSP, and CACFP served 2.8 billion fewer meals than in the prior year—an overall drop of 30 percent.[228] The decline in meals served during the pandemic’s first year was not uniform among meal types. Compared with the number of meals served in the prior year, the number of lunches served through NSLP, SFSP, and CACFP dropped by 40 percent while the number of breakfasts served through SBP, SFSP, and CACFP dropped by only 14 percent. FNS officials attributed the smaller decline in breakfasts served to the packaging of multiple meals at a time for grab-and-go service.[229]
The numbers of meals served during March and April 2021, as the pandemic entered its second year, were closer to the numbers of meals served during March and April 2019, a year before the pandemic began (see figure). Specifically, in April 2021, as vaccines became widely available for American adults and more schools offered in-person learning, the number of meals served was only 9 percent lower than in April 2019.[230]
Total Meals Served in Key Child Nutrition Programs in 2019, 2020, and 2021, by Month, as of Sept. 10, 2021
FNS officials told us that the numbers of meals served approached prepandemic levels during March and April of the 2020–21 school year because more schools were feeding more children who were attending school in person rather than virtually. In August 2021, officials from two of the four states where we conducted interviews told us that their states had mandated that all schools provide in-person learning during school year 2021–22, while officials from two other states told us that schools could decide whether to offer a virtual instruction option. FNS officials anticipated that the increase in students attending traditional, in-person schooling in 2021–22 would result in more meals served than during school year 2020–21. Although the most recent data show the numbers of meals served during March and April 2021 were closer to prepandemic levels, the extent to which meals were served to low-income students is not known because of the expanded eligibility for free meals during the pandemic.[231]
FNS and state agencies used a variety of monitoring approaches while balancing competing priorities, and state agencies identified ongoing challenges to maintaining program integrity. Recognizing that child nutrition programs may operate differently during the pandemic given the numerous flexibilities and waivers provided—including nationwide waivers that allow all monitoring to be conducted off-site—FNS allowed states to waive traditional program monitoring requirements. This flexibility was provided to state nutrition offices that provided a waiver request to FNS that included an alternative oversight plan that ensured continued program integrity. According to FNS officials, FNS had approved more than 60 of these oversight plans as of June 2021.[232] FNS provided state nutrition offices with a framework and template for these plans, and officials from two of the four FNS regional offices where we conducted interviews reported helping state nutrition offices in their region develop their plans, either directly or by facilitating best practice–sharing sessions with other states. According to FNS officials, much of the state oversight during the pandemic has taken the form of technical assistance.
FNS oversight and monitoring. To ensure that state nutrition offices were following their FNS-approved plans and implementing waivers correctly, the FNS National Office asked FNS regional offices to monitor, in real time, the state offices’ implementation of the plans. Regional officials conducted real-time monitoring, known as touchpoints, for each state nutrition office by participating in three oversight activities per child nutrition program (NSLP, SFSP, and CACFP) and then providing a brief report of the activities to the FNS National Office. For example, if a state’s oversight plan said the state would offer webinars to program operators operating CACFP under the nationwide waivers, a regional official would attend the webinar and, if any of the information conveyed in the webinar was incorrect, provide technical assistance to the state nutrition office to correct the information. According to FNS officials, this monitoring was important because it allowed the regional officials to provide real-time technical assistance as the pandemic evolved.
According to FNS officials, in addition to conducting the real-time monitoring, FNS regional offices continued to conduct traditional, retrospective management evaluations during the pandemic. However, owing to capacity constraints and pandemic complications, they reported conducting fewer management evaluations than they would in a typical year, targeting areas that were still applicable during the pandemic and focusing on specific areas of concern. To determine which states and programs to review, FNS officials used a risk-based assessment tool to identify those for which the evaluations were most critical.
According to FNS officials, all management evaluations were conducted virtually; as a result, some portions could not be completed. For example, according to officials from one FNS regional office, warehouse reviews—an optional component of management evaluations for NSLP—have been put on hold during the pandemic to allow for social distancing. Officials from each state nutrition office we interviewed told us they had taken part in virtual management evaluations during the pandemic; in general, both state and FNS regional officials said these evaluations went well despite challenges. Because these reviews are retrospective, FNS officials from the National Office said they were aided by the regional office touchpoint reviews that provide timelier monitoring and technical assistance.
State agency oversight and monitoring. In a typical year, state nutrition offices conduct administrative reviews of a portion of their school district nutrition programs operating NSLP.[233] As a result of a flexibility allowing school districts to operate summer meal programs (through SSO and SFSP) rather than operating traditional school meal programs (through NSLP and SBP) during the pandemic, states have conducted fewer administrative reviews than is typical, according to state nutrition officials we interviewed. Specifically, as of June 2021:
- Nutrition officials in two of the four states said they had conducted no administrative reviews during the previous school year. In one of the two states, nutrition official attributed this to the fact that none of the state’s school districts had operated NSLP. In the other state, where very few school districts chose to operate NSLP, state nutrition officials said they had focused their efforts on providing technical assistance rather than conducting administrative reviews.
- Nutrition officials in the two states that conducted administrative reviews of the school districts that chose to operate NSLP reported conducting more of the review components off-site than is typical. According to FNS guidance, strategies for conducting virtual monitoring include, for example, reviewing and verifying records by observing photographs or videos in situations where direct observation would normally occur and conducting interviews via telephone or video conference.
Some state nutrition officials we interviewed said that, in addition to conducting traditional monitoring such as administrative reviews, they used various strategies for conducting real-time oversight during the pandemic as outlined in their oversight plans. For example, officials from two state nutrition offices reported providing targeted technical assistance to local operators with identified risk factors, such as significant recent staff turnover. Specifically:
- Staff from one state nutrition office began in spring 2021 to make in-person coordinated support visits to high-risk school district nutrition programs. During these visits, they conducted components of administrative reviews with the local program operators to ensure the operators understood program requirements, including requirements concerning monitoring. Although the state nutrition office staff conducted most of these review components virtually before the visits, they conducted a limited portion of the reviews on-site by observing a meal service.
- Staff from the other state nutrition office provided one-on-one technical assistance to school districts where they identified potential risks—for example, if they noticed meals being served to numbers outside the expected range or if the school nutrition program had new leadership. As of June 2021, this state nutrition office had conducted all of its pandemic monitoring and technical assistance virtually, using a variety of technology platforms.
According to state nutrition officials, these forms of technical assistance were intended to minimize confusion and assist operators in meeting program requirements. Some state nutrition officials noted that it can be difficult for local program operators to keep track of changes in program requirements that resulted from waivers.
Effects of competing priorities on monitoring. Federal and state nutrition officials we interviewed said that competing priorities, such as implementing waiver flexibilities and providing technical assistance, had created challenges to monitoring throughout the pandemic, particularly early on. For example, officials from FNS regional offices said that they delayed program monitoring at the start of the pandemic to help states interpret and implement the various FNS waivers. In general, FNS regional officials we interviewed said that they had not seen new types of program integrity concerns during the pandemic. However, officials from one regional office noted that state nutrition offices are affected by constrained resources, including time.
Additionally, because of a flexibility that allowed districts to operate summer meal programs during the regular school year, a wider variety of child nutrition programs were operating at the same time during the pandemic.[234] State nutrition officials from two states said that this had made monitoring and oversight more difficult because they were not accustomed to so many different child nutrition programs’ operating concurrently.
Challenges and benefits of off-site monitoring. Nutrition officials we interviewed at the federal and state levels reported encountering both challenges and benefits in virtual monitoring. According to the officials, insufficient technology made off-site monitoring difficult, particularly at the start of the pandemic, when many staff were adjusting to remote work and implementing new technology. For example, officials from one FNS regional office noted that some state nutrition offices were not set up to telework at the start of the pandemic and did not have systems to forward their office phones, which hindered communication. Similarly, virtual desk-audits can require operators to scan large quantities of documents, which can be time consuming; also, in some instances, operators did not have access to the technology. Another challenge affecting virtual monitoring was the lack of physical presence and face-to-face interaction, according to some state and FNS officials.
Despite these challenges, in addition to health and safety benefits, in general, nutrition officials at the state and federal level said that off-site monitoring had offered benefits, such as cost savings and limited travel. One state nutrition official we interviewed said that offsite monitoring had facilitated innovation because it caused the state nutrition office to reassess and streamline its monitoring process.
Considerations and ongoing challenges for program monitoring in school year 2021–22. To facilitate administrative reviews in the 2021–22 school year, FNS issued a waiver in May 2021 that allows states to conduct administrative reviews of school district nutrition programs operating only SSO (in addition to those operating NSLP).[235] Specifically, FNS waived certain administrative review requirements for programs operating only SSO during the school year and allowed the reviews to count toward state monitoring requirements. According to FNS officials, because administrative reviews are conducted on a multiyear cycle, this will help state nutrition offices to fulfill state monitoring requirements, given the April 2021 waiver allowing school districts to operate SSO during the school year.
According to nutrition officials in one state, they requested a monitoring waiver to extend their review cycle time by 1 year because they recognized that their state had conducted few, if any, administrative reviews in the prior school year and that conducting the necessary number of reviews in school year 2021–22 might be difficult. Nutrition officials in a second state said they were considering requesting a monitoring waiver for the same reasons. One state nutrition official expressed concern that after programs return to normal operations, the high degree of staff turnover in child nutrition programs and the length of time that programs will have operated with waivers could result in program integrity issues, such as lack of adherence to program requirements. According to FNS, allowing administrative reviews to continue for school districts operating only SSO should help ease the transition back to traditional program monitoring after the pandemic.
FNS is taking some steps to identify lessons learned for child nutrition programs from the pandemic, but it may be missing additional opportunities. FNS officials told us that they are primarily using an existing FNS School Meals Operations (SMO) study to gather information about lessons learned during the pandemic for child nutrition programs.[236] According to a notice in the Federal Register, this study will help FNS obtain (1) general descriptive data on characteristics of the child nutrition programs to inform the budget process and answer questions about topics of current policy interest; (2) program operations data to identify potential topics for training and technical assistance for state and school district nutrition programs; (3) administrative data to identify program trends and predictors; and (4) information on the use and effectiveness of the child nutrition waivers, which will be used to satisfy states’ reporting requirements on those waivers under FFCRA.[237]
Launched in spring 2021, the study will collect administrative and survey data on each of the four child nutrition programs from state agencies and will collect survey data from school district nutrition programs.[238] For example, as part of the state survey, FNS is collecting, as part of the state survey, perspectives from state agencies regarding state and local operational and financial challenges during the pandemic. FNS stated that because it recognized that the pandemic changed the way school meal programs operated, it expanded the SMO study’s data collection efforts—initially planned prior to the pandemic—to include gathering survey and administrative data from the state agencies that oversee the CACFP and SFSP.[239]
Agencies can leverage lessons learned from an event to inform future efforts and limit the chance of recurring challenges. The experience of providing meals to children during the pandemic presents an opportunity for FNS to assess potential lessons learned for managing child nutrition programs.[240] Although FNS officials told us that the SMO study will be used to gather information about lessons learned from the pandemic, as of July 2021, FNS was unable to provide us with a plan for how it intends to comprehensively analyze lessons learned from the pandemic for child nutrition programs.[241] Further, the Federal Register notice mentioned above does not indicate whether FNS will analyze lessons learned to address operational and financial challenges.
Although FNS is collecting some information on these topics from states, FNS may miss opportunities to comprehensively identify lessons learned during the pandemic unless it documents a plan for analyzing them. Further, according to FNS officials, while the SMO study will survey state agencies that administer the federal child nutrition programs, the study will not gather local perspectives directly from CACFP institutions (e.g., child care centers and day care homes) or SFSP sponsors that are not school districts.[242] Without gathering perspectives from a full range of meal program operators—including CACFP institutions and SFSP sponsors (discussed below)—rather than only from state agencies and school districts, FNS will lack comprehensive information to aid its future planning.
District and state child nutrition officials identified challenges as well as opportunities during the pandemic. Nutrition officials we interviewed from districts, states, and organizations identified several challenges and opportunities related to operating child nutrition programs during the pandemic. Specifically, the officials identified challenges and, in some cases, opportunities with respect to information technology (IT) systems, food supply and storage, loss of revenue for local meal operators, waiver rollout and extensions, and the possibility of making some flexibilities permanent.
IT systems. State officials we interviewed identified financial and resource burdens and potential challenges to maintaining program integrity related to their child nutrition IT systems during the pandemic. For example:
- One state official explained that its state child nutrition information system was developed to be compatible with federal child nutrition programs under normal operations. The official said it took staff time and financial resources to update the state’s system to accommodate each new waiver that FNS announced.
- Officials in a second state said that IT changes they made to accommodate waivers meant that built-in program integrity checks no longer functioned correctly. Instead, staff had to spend additional time conducting manual reviews to check for claims errors and help ensure program integrity.
- Officials from the second state also said that institutions at the local level that operate CACFP are particularly prone to technological challenges. FNS officials in one regional office noted that day care homes that previously used libraries to submit claims electronically often had to mail hard-copy claims during the pandemic because of extended library closures.
- Officials from three state agencies said that the pandemic highlighted opportunities for the federal government to limit the financial and resource burdens on their states, such as by investing in software, establishing a standalone fund to assist states with IT maintenance costs, and providing communication and technical assistance to states’ IT software vendors.[243]
Food supply and storage. Officials from 11 of the 12 districts and three of the four states where we conducted interviews, and others, identified food supply or food storage challenges to operating child nutrition programs during the pandemic. These officials identified the following supply challenges, among others:
- Officials from two state nutrition programs said that districts experienced cancelations in their USDA Foods in Schools commodity orders because certain foods were no longer available.[244]
- Officials from 11 district nutrition programs told us it was difficult to acquire items such as individually wrapped foods or certain types of foods, such as milk, breads, and proteins because of food shortages, competition, or both.
- Officials from the National CACFP Sponsors Association told us that small, rural child care centers and day care homes may have found that required milk was not available on the day that they bought food for the week.
In addition, officials from half of the district nutrition programs in which we conducted interviews said that limits on storage space had prevented them from ordering food in large quantities or leveraging their USDA Foods in Schools commodities to offset pandemic-related costs. Officials from the Boys and Girls Clubs of America noted that storage space was also a challenge for local clubs providing food under SFSP and CACFP At-Risk Afterschool programs, especially if they were not colocated with schools, because they did not have access to additional storage located at schools.
State nutrition officials we interviewed suggested opportunities for a federal role in facilitating the use of USDA Foods in Schools commodities in a national emergency. For example, they suggested that USDA evaluate the food and menu items that would be needed in an emergency situation, identify vendors offering those items, and allow increased flexibility in timing of orders.[245]
Loss of revenue for local meal operators. In March 2021, we reported that a drop in revenue from meals served and an increase in program costs had caused financial challenges for local meal operators. In April 2021, FNS officials noted that the decline in meals served had been especially pronounced in spring 2020, when many institutions that provide meals—schools, child care centers, and day care homes—were closed. Helping offset these financial losses, in December 2020 the Consolidated Appropriations Act, 2021 was enacted, which provided additional funding for reimbursements for meals served in spring 2020.[246] Officials from three of the four state child nutrition programs cited challenges related to the process for receiving funding approval from FNS, noting that the information required was difficult or time consuming to compile.[247]
One state nutrition official we interviewed noted that CACFP institutions, such as child care centers, were especially in need of this funding because, unlike schools, they were less likely to have other sources of funding to compensate in the short term. Officials from the National CACFP Sponsors Association noted that some child care centers and day care homes, especially smaller providers, had to close before the funding became available.
Waiver rollout and extensions. As we reported in March 2021, nutrition officials in nearly all the districts where we conducted interviews found the waivers helpful in providing needed flexibilities to serve meals during the pandemic. However, they, along with officials from state child nutrition agencies and anti-hunger organizations in all four states, identified challenges related to the rollout of waivers. These challenges included the timing of waiver announcements and extensions, interpreting the waivers, delays in waiver-related guidance documents, and keeping up with the number of waivers announced.
State and local officials said that dealing with such challenges exhausted their financial and staff resources and made it difficult to plan for meal service and communicate accurate information to families. Officials from the Boys and Girls Clubs of America said that implementation of waivers was confusing for many of their clubs that operate under both SFSP and CACFP At-Risk because waivers were not always consistent across programs.
FNS officials told us they are examining potential policy changes, including identifying authority or legislative action that FNS may need to help prepare for future national emergencies. Additionally, officials in three of the four state child nutrition agencies and two of the FNS regional offices suggested that establishing a single emergency child nutrition feeding program or plan could help streamline the waiver implementation process and reduce the burdens on states and school district nutrition programs.
Potential to make some flexibilities permanent. Officials of some districts and states told us they believed that some of the child nutrition flexibilities provided during the pandemic should be made permanent. For example, officials from two state nutrition offices suggested that FNS should assess whether there are opportunities to expand off-site monitoring because of the cost and time savings. In June 2021, FNS officials told us that FNS is gathering information through the SMO study with the intent of assessing whether any flexibilities could be made permanent.
Methodology
To conduct our work, we reviewed relevant federal laws and agency guidance and documents. We also reviewed the most recent data available from FNS on meals served through child nutrition programs. To assess the reliability of these data, we reviewed existing information about the data and FNS’s reporting processes, interviewed agency officials, and conducted manual testing of the data. We determined the data were sufficiently reliable for our purposes.
We also interviewed officials from FNS’s National Office and four of its regional offices. Additionally, we interviewed state nutrition directors and officials representing anti-hunger organizations from 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—as well as district nutrition officials from three school districts in each state. Further, we interviewed officials from the Boys and Girls Clubs of America, the National CACFP Association, and the School Nutrition Association to gain additional perspectives on feeding children in and outside school settings. The information gathered from these interviews is intended to provide examples of experiences of meal operators, states, FNS officials, and nutrition organizations during the COVID-19 pandemic and is not intended to be representative.
Agency Comments
We provided FNS and the Office of Management and Budget with a draft of this enclosure. FNS provided technical comments, which we incorporated as appropriate. Although it did not provide a formal letter, FNS stated in it technical comments that it generally concurred with our recommendation. FNS also said that the COVID-19 pandemic may continue to affect Child Nutrition program operations.
FNS stated that it is developing a plan to interview every state agency to determine how they used waivers to operate and administer all Child Nutrition programs during the COVID-19 pandemic. According to FNS, it will evaluate the information it collects to capture crucial information, lessons learned, and best practices to inform future policy making. FNS also stated that in fiscal year 2022 it will gather information from stakeholders at conferences to obtain perspectives of key stakeholders such as CACFP institutions and nonschool SFSP sponsors.
We are encouraged by FNS’s plans to gather local perspectives directly from such stakeholders. Given the various efforts FNS is planning, we believe that now is an appropriate time to document the agency’s plans to analyze lessons learned during the pandemic.
GAO’s Ongoing Work
Our work on FNS’s response to COVID-19 through its nutrition assistance programs, including child nutrition, 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.
Related GAO Products
Federal Real Property Security: Interagency Security Committee Should Implement A Lessons-Learned Process. GAO-12-901. Washington, D.C.: September 10, 2012.
Grants Management: OMB Should Collect and Share Lessons Learned from Use of COVID-19-Related Grant Flexibilities. GAO-21-318. Washington, D.C.: March 31, 2021.
Standards for Internal Control in the Federal Government. GAO-14-704G. Washington, D.C.: September 2014.
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
Unemployment Insurance Programs
Bookmark:Although fewer weekly claims for regular and CARES Act unemployment insurance benefits were submitted during summer 2021 than earlier in the pandemic, millions of unemployed workers continued to claim the CARES Act benefits until those programs ended in early September. The historic numbers of claims during the pandemic contributed to challenges—such as delayed benefit payments and increased amounts of overpayments—that have implications for future crises.
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 that 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.[248]
The CARES Act created three federally funded temporary UI programs that expanded benefit eligibility and enhanced benefits, which were amended by the Consolidated Appropriations Act, 2021 and the American Rescue Plan Act of 2021.[249] These programs expired on September 6, 2021, although some states ended their participation before that date.
- Pandemic Unemployment Assistance (PUA) authorized UI benefits for individuals not otherwise eligible for UI benefits, such as self-employed and certain gig economy workers, who were unable to work as a result of specified COVID-19-related reasons.[250]
- Federal Pandemic Unemployment Compensation (FPUC) generally authorized an additional weekly benefit for individuals who were eligible for weekly benefits under the regular UI and CARES Act UI programs.[251]
- Pandemic Emergency Unemployment Compensation (PEUC) generally authorized additional weeks of UI benefits for those who had exhausted their regular UI benefits.[252]
In addition, the Consolidated Appropriations Act, 2021 created the Mixed Earner Unemployment Compensation (MEUC) program, which was extended by the American Rescue Plan Act of 2021.[253] According to DOL, the MEUC program was intended to cover regular UI claimants whose benefits do not account for significant self-employment income and who thus may have received a lower regular UI benefit than they would have received had they been eligible for PUA.[254]
During the pandemic, regular UI claimants who exhausted their regular UI and PEUC benefits in certain states also had access to the Extended Benefits program. The program, which existed before 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.[255]
Overview of Key Issues
About half of the states stopped participating in at least one CARES Act UI program before the programs expired in September 2021. As of August 17, 2021, 26 states had announced their intention to terminate participation in at least one of these programs.[256] For example, according to DOL, all 26 of these states notified DOL that they intended to end participation in the FPUC program, and 22 notified DOL that they also intended to end participation in the PEUC and PUA programs.[257] Of these 26 states, 24 proceeded to terminate their participation in these programs between mid-June and late July, according to DOL.[258] For the week ending on June 12, 2021, DOL reported that 1.8 million continued claims for PUA and PEUC benefits were submitted in states that proceeded to terminate these programs over the next several weeks. This suggests that demand for these benefits likely would have continued if these states had not ended their participation.[259]
In public announcements, states generally cited labor shortages among their reasons for withdrawing from the CARES Act UI programs. However, preliminary data from DOL’s Bureau of Labor Statistics (BLS) do not show an association between termination of participation in these programs and reductions in states’ unemployment rates.[260] Also, initial results from our review of the economic literature suggest that expanded UI benefits during the pandemic generally did not discourage unemployed workers from returning to work; however, this conclusion could shift over time with changes in economic conditions.[261]
In July 2021, DOL issued guidance to states regarding their responsibilities after they stopped participating in the CARES Act UI programs or after the programs expired, whichever came first.[262] For example, states must process and pay PUA, FPUC, PEUC, and MEUC benefits to eligible claimants for all weeks of unemployment before the programs ended. In addition, for 30 days after the PUA program ended, states were required to continue accepting new PUA applications for weeks of unemployment before the program ended. States were also required to accept new PEUC and MEUC applications for weeks of unemployment before those programs ended, if state law allowed claims to be backdated.
In August 2021, the Secretary of the Treasury and the Secretary of Labor issued a joint letter to Congress affirming that states can use American Rescue Plan Act of 2021 funding to provide additional weeks of UI benefits to workers whose benefits expired in September and to workers who are not covered by the regular UI program.
Although claims for UI benefits were generally lower during summer 2021, overall demand for benefits remained high through early September. During the week ending on September 25, 2021, DOL reported that 298,255 initial claims for regular UI benefits were submitted nationwide, which was close to the lowest number since the surge of initial claims at the beginning of the pandemic.[263] DOL reported that more than 100,000 initial claims for PUA benefits were submitted nationwide during each week in August 2021; the PUA program expired on September 6.[264]
Despite the overall decline in initial claims since the beginning of the pandemic, initial claims throughout summer 2021 remained at a level that indicated more Americans were continuing to experience job losses than was typical in the year before the pandemic.[265] For example, the number of initial claims for regular UI benefits submitted each week from late June through late September ranged from about 55 percent to more than 100 percent higher than the number of initial claims submitted during the corresponding weeks in 2019.
According to DOL officials, the number of continued claims may be a better measure of continuing demand for benefits than the number of initial claims. For example, states and territories reported that during the week ending on September 11, 2021, about 2.5 million continued claims were submitted for regular UI benefits and 431,340 continued claims were submitted for Extended Benefits.[266]
The number of regular UI continued claims submitted each week declined overall after the peak in late April and early May 2020 through September 2021 (see figure). Although some of this decline was due to claimants’ finding employment, the decline was also likely due to other factors, such as claimants’ exhausting regular UI benefits and beginning to claim PEUC or other benefits.[267] For example, the persistently high numbers of PEUC continued claims from fall 2020 through the program’s expiration in early September 2021 suggest that many individuals were experiencing long-term unemployment and had likely exhausted their regular UI benefits.[268]
Weekly Continued Claims Submitted Nationwide for Regular Unemployment Insurance, Pandemic Emergency Unemployment Compensation, and Extended Benefits, Mar. 1, 2020–Sept. 4, 2021
During the week ending on September 4, 2021, before the pandemic UI programs expired on September 6, states and territories reported about 8.5 million continued claims submitted in the PUA and PEUC programs. This large number of claims, in addition to the approximately 2.4 million regular UI continued claims submitted that same week, suggests that demand for unemployment benefits remained high as the CARES Act UI programs expired. During the week ending on September 4, 2021, regular UI continued claims were about 81 percent lower than in the corresponding week of 2020 but were about 62 percent higher than in the corresponding week of 2019, before the pandemic.
As we have previously reported, because of backlogs in processing historic numbers of claims in many states, among other data issues, the number of continued claims did not approximate the number of individuals claiming benefits during the pandemic. For example, backlogs in claims processing led to individuals submitting claims for multiple weeks of benefits in a single reporting period, which states 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.
Although the timeliness of regular UI first payments improved through early 2021, it has generally declined since April 2021, 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.[269] As we have previously reported, first-payment timeliness nationwide improved from fall 2020 through January 2021. Subsequently, regular UI first-payment timeliness nationwide fluctuated from February through April 2021, then generally declined through August 2021.[270] First-payment timeliness was about 23 percentage points lower in August than in January 2021 (see figure).
Timeliness of First Payments of Regular Unemployment Insurance (UI) Benefits, Jan. 2020–Aug. 2021
According to DOL officials, when they asked officials in some states about the reasons for the decrease in timeliness in May and June 2021, they cited the additional time and effort needed to process backlogs of claims needing adjudication and appeals, decreased numbers of staff, and enhanced fraud prevention efforts that have resulted in more adjudication issues for states to resolve. In some states, many regular UI claimants continue to face delays before receiving their first payments. For example, in 16 states, at least half of regular UI claimants who received their first benefits in August 2021 had been waiting longer than 3 weeks. In addition, nationwide, about 21.7 percent of regular UI claimants who received their first benefits in August 2021 had been waiting longer than 10 weeks. By comparison, of the regular UI claimants nationwide who received their first benefits in March 2020, less than 3 percent had been waiting longer than 3 weeks and less than 1 percent longer than 10 weeks.
The number of states holding federal loans to pay UI benefits, and the total amount of these loans, decreased slightly in late summer 2021.[271] Because of persistently high numbers of UI claims during the pandemic, some states have held substantial federal loans to pay UI benefits. As of September 24, 2021, 12 states and territories held federal loans totaling about $45.3 billion. This total loan balance is approximately $8.2 billion less than we reported in July 2021, and seven states that previously held these loans have repaid them.[272]
As we have previously reported, some states have used their Coronavirus Relief Fund payments, under guidance from the Department of the Treasury, to pay for UI benefits in order to reduce or prevent loan balances and avoid possible future increases in employer tax rates.[273] Generally, if a federal loan balance to pay UI benefits is held by a state for 2 or more years, the rate of the federal tax on employers that is used to fund the UI program will increase.[274] States may continue to use these Coronavirus Relief Fund payments for expenses through the end of 2021.[275] 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 repay federal loan balances.[276]
States have continued to identify overpayments in the regular UI and CARES Act UI programs, and 30 states are reporting data to DOL on recovered PUA overpayments. DOL reported that as of September 27, 2021, states and territories had identified approximately $18.3 billion in overpayments made in UI programs during the first 5 quarters of the pandemic combined (April 2020 through June 2021).[277] These reported overpayments are not necessarily a result of fraud, though some may be.[278] This $18.3 billion in reported overpayments includes
- $6.3 billion in FPUC overpayments,[279]
- $6.0 billion in PUA overpayments,[280]
- $5.4 billion in regular UI and Extended Benefits overpayments, and
- $0.7 billion in PEUC overpayments.[281]
States and territories may waive and not recover overpayments in certain circumstances.[282] States and territories reported waiving about $0.2 billion of regular UI, Extended Benefits, PEUC, and FPUC overpayments during the first 5 quarters of the pandemic combined (April 2020 through June 2021).[283] In response to a recommendation in our March 2021 report, DOL updated state reporting requirements for the PUA program in September 2021 to include the collection of data on waived PUA overpayments.[284]
In late May 2021, DOL’s Office of Inspector General (OIG) reported, among other things, that some states did not perform required overpayment recovery activities.[285] Specifically, DOL’s OIG found that 19 states (38 percent) did not perform the required overpayment recovery activities, such as benefit offsets, for the recipients to repay the UI overpayments.[286] The OIG further reported that once states identify overpayments, it is essential that they complete recovery activities to mitigate the risk of financial loss as a result of overpaid claims.[287] The OIG recommended that DOL assist states with reporting of claims, overpayments, and fraud to create clear and accurate information and then use the overpayment and fraud reporting to prioritize and assist states with fraud detection and recovery. DOL agreed with the OIG’s recommendation and said it would take steps to implement the recommendation.
When states and territories recover overpayments, they report the recovered amount in the period when the recovery occurs. For example, states and territories reported recovering about $0.4 billion in the PEUC and FPUC programs combined from April 2020 through June 2021 (i.e., during the first 5 quarters those programs existed).[288] 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 recovered PUA overpayments. As of September 27, 2021, 30 states had reported some data on recovered PUA overpayments, reporting a combined total of about $0.3 billion recovered from April 2020 through June 2021.[289]
Because of the limited number of states and territories that had reported data on recovered and waived PUA overpayments to DOL as of September 27, 2021, our related recommendations remained open. Sustained reporting by more 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.
States and territories also report the amounts of fraud overpayments—a subset of the total overpayment amounts.[290] During the first 5 quarters of the pandemic combined (April 2020 through June 2021), states and territories reported about $1.5 billion in overpayments they had identified as fraud across the UI programs.[291] However, according to DOL, states do not report these overpayments as fraud until investigations are complete and fraud has been confirmed, which may take a long time. As a result, states’ and territories’ ongoing investigations into whether overpayments were due to fraud could contribute to increasing amounts of fraud overpayments reported in the coming months. For example, four of the 47 states and territories that had reported PUA overpayments as of September 27, 2021, had not yet reported any fraud overpayments.
In addition to reporting overpayments they identify under program requirements, states conduct independent assessments of representative samples of paid and denied claims of permanent UI programs to determine the accuracy of UI benefit payments and estimate the amount and rate of improper payments.[292] According to DOL, by conducting these assessments, states can develop and implement corrective actions if the assessments identify improper payments, including potentially fraudulent payments.[293] For fiscal year 2020, DOL allowed states to suspend these assessments for 3 months to enable the states to reassign staff to address increased claims volume.[294] According to DOL officials, the methodology for fiscal year 2020, including the 3-month suspension, was approved by the Office of Management and Budget (OMB) and complied with OMB guidance.[295]
Additionally, as we reported in November 2020, DOL made the decision not to include claims filed exclusively under the CARES Act UI programs in its existing program for estimating improper payments.[296] According to DOL officials, because PUA has unique and distinct eligibility requirements, applying the improper payment methodology for the regular UI program would not be appropriate. We also reported that DOL planned to conduct an improper payment risk assessment after the first year of each CARES Act UI program’s operations.[297]
In July 2021, DOL officials told us that they were actively planning to conduct an improper payment risk assessment in accordance with OMB guidance and to then develop improper payment estimates for CARES Act UI programs.[298] Officials also said that DOL had formed a working group to develop new sampling and investigative methodologies to estimate improper payments for the PUA program and that DOL planned to extrapolate regular UI data to the PEUC program.[299] DOL officials stated that they anticipated the new improper payment estimates would be included in DOL’s fiscal year 2022 agency financial report. We have previously reported that the identification of improper payments could suggest that a program is vulnerable to fraud; however, it is important to note that fraud is a specific type of improper payment and that improper payment estimates are not intended to measure fraud in a particular program.
For more information about fraud risks in the UI programs, DOL’s efforts to address potential fraud, and the extent to which DOL has comprehensively assessed fraud risks, see the enclosure on Unemployment Insurance Fraud Risk Management in appendix I.
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 September 30, 2021. We reviewed relevant federal laws, DOL guidance, and DOL OIG reports. We interviewed DOL officials about program data and agency actions; we also interviewed DOL OIG officials and National Association of State Workforce Agencies staff. In addition, we reviewed data file documentation and written responses from DOL officials. Further, 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. We examined the data for outliers, missing values, and errors. We determined that the DOL data we used were sufficiently reliable for the purposes of this report.
Agency Comments
We provided DOL and OMB with a draft of this enclosure. DOL provided technical comments on this enclosure, which we incorporated as appropriate. OMB did not provide any comments.
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 are conducting additional work to examine selected claimants’ experiences during the pandemic and experiences 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. In addition, we are examining programmatic risks and challenges for the UI program as well as options for program transformation.
GAO’s Prior Recommendations
The table below presents our recommendations on UI programs from prior bimonthly CARES Act reports.
Source: GAO. I GAO-22-105051
Related GAO Products
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
Unemployment Insurance Fraud Risk Management
Bookmark:The amount of fraudulent and potentially fraudulent activity in unemployment insurance programs increased substantially after the three CARES Act temporary expansions, relative to the amount of such activity in the regular unemployment insurance program before the pandemic. Improper payments have also been a long-standing concern in the regular unemployment insurance program, suggesting the program may be vulnerable to fraud. The Department of Labor continues to identify and implement strategies to address potential unemployment insurance fraud and has ongoing program integrity activities to identify risks. However, it has not comprehensively assessed fraud risks in alignment with leading practices identified in GAO’s Fraud Risk Framework, which by law must be incorporated in guidelines established by the Office of Management and Budget for agencies.
Entity involved: Department of Labor
Recommendations for Executive Action
The Secretary of Labor should designate a dedicated entity and document its responsibilities for managing the process of assessing fraud risks to the unemployment insurance program, consistent with leading practices as provided in our Fraud Risk Framework. This entity should have, among other things, clearly defined and documented responsibilities and authority for managing fraud risk assessments and for facilitating communication among stakeholders regarding fraud-related issues.
The Secretary of Labor should identify inherent fraud risks facing the unemployment insurance program.
The Secretary of Labor should assess the likelihood and impact of inherent fraud risks facing the unemployment insurance program.
The Secretary of Labor should determine fraud risk tolerance for the unemployment insurance program.
The Secretary of Labor should examine the suitability of existing fraud controls in the unemployment insurance program and prioritize residual fraud risks.
The Secretary of Labor should document the fraud risk profile for the unemployment insurance program.
The Department of Labor neither agreed nor disagreed with our recommendation to designate a dedicated entity for managing the process for assessing fraud risks within the unemployment insurance program. The department stated that its Chief Financial Officer and the Employment and Training Administration’s Assistant Secretary are responsible for risk assessment and management in the UI program. However, it is important that, consistent with our Fraud Risk Framework, the Department of Labor clearly document this designation and these officials’ antifraud responsibilities.
The Department of Labor neither agreed nor disagreed with our other five recommendations. The department stated that its current process allows it to identify, evaluate, and manage risks. However, the department also said it will incorporate the recommended practices and approaches moving forward.
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.[300]
The CARES Act created three federally funded temporary UI programs that expanded benefit eligibility and enhanced benefits, which were amended by the Consolidated Appropriations Act, 2021 and the American Rescue Plan Act of 2021.[301] These programs expired on September 6, 2021, although some states ended their participation before that date.
- Pandemic Unemployment Assistance (PUA) authorized UI benefits for individuals not otherwise eligible for UI benefits, such as self-employed and certain gig economy workers, who were unable to work as a result of specified COVID-19-related reasons.[302]
- Federal Pandemic Unemployment Compensation (FPUC) generally authorized an additional weekly benefit for individuals who were eligible for weekly benefits under the regular UI and CARES Act UI programs.[303]
- Pandemic Emergency Unemployment Compensation (PEUC) generally authorized additional weeks of UI benefits for those who had exhausted their regular UI benefits.[304]
In addition, the Consolidated Appropriations Act, 2021 created the Mixed Earner Unemployment Compensation (MEUC) program, which was extended by the American Rescue Plan Act of 2021.[305] According to DOL, the MEUC program was intended to cover regular UI claimants whose benefits do not account for significant self-employment income and who thus may have received a lower regular UI benefit than the benefit they would have received had they been eligible for PUA.[306]
See the enclosure on Unemployment Insurance Programs in appendix I for additional background information.
Federal and state entities continue to investigate and report on high levels of fraud, potential fraud, and fraud risks in the UI programs.[307] At the federal level, DOL’s Office of Inspector General (OIG) and the Department of Justice (DOJ) continue to investigate potential UI fraud and highlight the level of fraud, potential fraud, and fraud risks in the UI programs. As of July 14, 2021, DOL OIG officials reported that they had opened more than 21,000 complaints and investigations involving alleged UI fraud since the pandemic began. The DOL OIG last reported that it had identified and recovered more than $160 million in UI fraud, according to the DOL OIG’s website.
DOL OIG efforts have also identified billions of dollars in potential UI fraud under investigation. In June 2021, DOL’s OIG reported that it had identified nearly $8 billion of potentially fraudulent UI benefits paid from March 2020 through October 2020.[308]
In addition, since March 2020, DOJ has publicly announced charges in numerous fraud-related cases related to the UI programs. Specifically, from March 2020 through July 2021, 71 individuals pleaded guilty to federal charges of defrauding UI programs and federal charges were pending against 192 individuals.[309] See the enclosure on Federal Fraud-Related Cases in appendix I for more information about DOJ charges.
Several state auditors have also reported on fraud, potential fraud, and fraud risks in the UI programs. For example, state auditors in California, Louisiana, and Kansas identified millions of dollars in potentially fraudulent payments.[310]
Overview of Key Issues
Our review of DOL OIG reports, state audits, and DOJ cases identified several fraud risks in UI programs. On the basis of our review of DOL OIG reports, state audit reports, and DOJ cases, we identified the following fraud risks in UI programs:[311]
- Applicants’ falsifying information on income or employment eligibility to receive benefits. For example, an individual who pleaded guilty to falsely reporting income information to receive UI benefits, including the additional $600 available through FPUC, obtained more than $13,000 in fraudulent benefits.
- Applicants’ using stolen identities or personally identifiable information (PII) to apply for benefits or receive benefits. For example, an individual who pleaded guilty to filing fraudulent UI claims used the stolen identities of dozens of individuals to obtain more than $500,000.
- Applicants’ applying for, or receiving, benefits by using fake identity information. For example, an individual who pleaded guilty to applying for UI benefits by using a fake Social Security number obtained an unspecified amount of fraudulent benefits.
- Applicants’ submitting fraudulent claims or erroneously receiving benefits in multiple states. For example, an individual who pleaded guilty to applying for, and in many cases receiving, UI benefits from state administrators in at least 40 different states and the District of Columbia obtained approximately $350,000 in fraudulent benefits.
- Prison inmates’ applying for benefits for which they were not eligible. For example, in a coordinated scheme, three individuals—two of whom have pleaded guilty—collected PII and filed fraudulent claims on behalf of more than 35 co-conspirators who were ineligible for benefits, including 15 incarcerated individuals. Using co-conspirators’ PII, the three individuals filed 37 fraudulent claims that resulted in payment of at least $499,000 in benefits.
- Current or former federal or state or territory employees’ misusing their positions to fraudulently obtain benefits for themselves or others. For example, a former territory employee pleaded guilty to federal program theft and accessing a protected computer in furtherance of fraud in connection with a scheme to defraud UI. He filed for pandemic-related unemployment benefits on his own behalf, falsely claiming that he was unemployed and eligible. In addition, he used his position as a customer service representative to submit fraudulent UI claims on behalf of others, and he directed the benefits from these fraudulent claims into a bank account he controlled. This individual obtained, or attempted to obtain, a total of $93,000 in benefits. He was sentenced to 10 months imprisonment followed by 3 years of supervised release and was ordered to pay more than $14,000 in restitution.
The amount of fraudulent and potentially fraudulent activity in UI programs increased substantially after the three CARES Act temporary expansions, relative to the amount of such activity in the regular UI program before the pandemic. The high benefit payment amounts offered during the pandemic created a significant financial incentive for fraudsters to target the UI program, according to officials from the National Association of State Workforce Agencies (NASWA).[312] In addition, DOL officials stated that the CARES Act UI programs are a key target for fraud because fraudsters can receive a large amount of money in one payment.
DOL, DOL OIG, and NASWA have identified factors that contribute to fraud risk in the UI programs. Information about fraud schemes in a program is a useful source for understanding fraud risks. According to DOL officials, fraud in the regular UI program has historically involved a misrepresentation of eligibility, such as an employee’s failing to report returning to work, failing to report earned wages, or failing to fulfill work search requirements or an employer’s failing to report a reason for separation. Officials stated that although DOL was aware of isolated occurrences of identity-related fraud before the pandemic, such as the use of false identities, it has seen an increase in the frequency and volume of identity-related fraud, as well as significantly more sophisticated fraud schemes, since the pandemic began.
According to DOL officials, the department is aware of fraud risks in CARES Act UI programs, particularly risks of fraudulent claim schemes and of fraudulent individual claims for benefits. In its fiscal year 2020 agency financial report, DOL acknowledged an increase in suspected fraudulent activity—specifically, organized fraud schemes targeting the CARES Act UI program.[313] Moreover, according to NASWA officials, the UI system has faced unrelenting attacks by foreign organized crime groups during the pandemic. According to DOL officials, the most common fraud schemes during the pandemic have included the use of stolen PII to file a claim or multiple claims; the use of synthetic identities (i.e., real identities mixed with fictitious information); and the use of bot attacks in attempts to overwhelm state UI systems or launch phishing schemes to obtain individual PII to perpetrate future fraud.[314]
DOL officials also told us that they have observed the use of new fraud schemes targeting CARES Act UI programs.
- Hijacking of bank accounts. After an individual submits a legitimate application for UI benefits and provides bank account information for the funds’ direct deposit, a fraudster will hack into the applicant’s UI system account and reroute the deposit from the applicant’s bank account to a bank account the fraudster can access.
- Mimicking of state UI websites. When people conduct Internet searches for their state’s UI office, they may find, and file claims on, a fraudulent website that looks like the state workforce agency’s website, thus providing their PII to fraudsters.
Factors contributing to fraud risk include conditions or actions that are most likely to cause or increase the possibility of fraud. Through our review of DOL OIG reports, state audit reports, and DOJ cases, we identified the following fraud risk factors in CARES Act UI programs:[315]
- Reliance on self-certification. The CARES Act allowed PUA applicants to self-certify their eligibility and did not require them to provide any documentation of self-employment or prior income. In October 2020, DOL’s OIG reported that states cited the PUA self-certification requirement as a top fraud vulnerability.[316] We have previously reported that relying on program participants to self-report and self-certify information on agency forms, instead of verifying such information independently, could cause an agency to miss opportunities to prevent program fraud and abuse. To help address this risk, the Consolidated Appropriations Act, 2021, enacted in December 2020, included a requirement for individuals to submit documentation of employment or self-employment when applying for PUA.[317]
- Waiver of waiting period. During the pandemic, states were encouraged to process and pay claims quickly while experiencing a historic number of claims. In an effort to speed claims processing, DOL encouraged states to temporarily suspend the existing waiting period for benefits and the CARES Act provided full federal funding for the first week of regular UI benefits to states that did so. According to DOL officials, under the regular UI program, DOL allows states to take up to 21 days to make the first payment of benefits, giving them time to detect potential fraud. Waiving the waiting period meant that some states had less time to employ tools for fraud prevention and detection, according to NASWA officials.
- Low staffing levels and antiquated IT systems. In the beginning of the pandemic, outdated IT systems and low staffing levels made it difficult for many states to efficiently process the unprecedentedly high volume of claims and conduct internal control activities, according to DOL OIG officials. These officials also told us that state agency staffing levels are determined on the basis of claim volume levels in previous years. At the start of the pandemic, many state UI programs had been experiencing their lowest claims volume, and thus their lowest staffing and funding levels, since the 1970s. To process the high volume of claims after the pandemic began, many states reassigned benefit payment control staff to claims processing, with the result that few staff were working to prevent and detect fraud, according to DOL OIG officials. Additionally, DOL OIG officials stated that some state IT systems were not equipped to handle the volume of claims and some may not have been easily compatible with the NASWA UI Integrity Center’s Integrity Data Hub resources.[318]
- Variation in data analysis across states. States’ use of data mining, cross matching, and identity verification resources varies. According to DOL officials, the department does not have authority to require states use the databases available in the UI Integrity Center’s Integrity Data Hub, such as the Identify Verification or Multi-State Cross Match databases. Additionally, not all states were able to cross-match claims with federal incarceration data and many states did not have access to state-level incarceration data.
DOL continues to identify and implement strategies to address potential fraud in the UI programs. DOL has taken steps to prevent and detect fraud in UI programs, including the CARES Act UI programs. In its fiscal year 2020 agency financial report, DOL highlighted a number of these steps, including (1) working with states and DOL’s OIG to employ data mining and data analytics to detect fraud when a claim is filed, (2) holding routine conference calls with DOL’s OIG and states to discuss and share information on UI fraud schemes, and (3) establishing training.
In May 2020, DOL began issuing specific fraud prevention and detection guidance in response to the challenges faced by state workforce agencies and the increase in suspected fraud, encouraging states to continue to uphold the integrity of the UI programs and to use the resources provided through the NASWA UI Integrity Center, including the Integrity Data Hub.[319] In addition, the guidance highlighted states’ responsibilities to perform required cross-matches to prevent potential fraud.[320] The UI Integrity Center also provides a fraud-alert application to facilitate information sharing about fraud schemes between states and the DOL OIG. According to DOL officials, the department continues to invest in the Integrity Data Hub to enhance cross-matching functionality and ensure states have access to key fraud detection services. Officials said that key investments include the Multi-State Cross-match, the Identity Verification solution, and Account Verification Services.
Also, 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.[321] According to DOL, states have reported using the funds from the January 2021 allotment to, among other things, hire additional data analytic and fraud investigator staff, hire third-party vendors to conduct fraud risk and cybersecurity assessments of states’ UI systems, subscribe to identity verification and identity proofing solutions, and coordinate with finance departments and law enforcement to aid in the recovery of overpaid benefits. States also reported using this funding to make updates to their systems, including purchasing fraud prevention software, fraud detection software, and data mining tools. In addition, states reported enhancing their UI systems by implementing multifactor authentication, automating claim validation, and creating portals for individuals to report fraud.[322]
The American Rescue Plan Act of 2021 provided DOL with $2 billion to combat potential fraud, among other things.[323] In response, in August 2021, DOL officials issued a four-part plan for using this $2 billion that includes the following actions:[324]
- Sending experts directly to states to help them address challenges related to fraud, benefit access, and benefit timeliness. DOL officials said they have sent teams of experts in fraud, technology, and equity to help states identify claims processing deficiencies as well as opportunities to address equity in the UI system.[325] According to officials, these teams will focus on operations, communications, and process flows. The officials said the teams will also focus on technologies that support the timely distribution of benefits, reduction of backlogs, equitable access to UI benefits, and fraud prevention and detection. Six states—Colorado, Kansas, Nevada, Virginia, Washington, and Wisconsin—have volunteered to work with the teams, and officials said they are recruiting the next group of states. Officials also plan to develop a federal team that will supervise the state-level teams and maintain a repository of common problems and solutions. According to DOL officials, the federal team will also enhance DOL’s technical assistance capacity.
- Providing states with grants to combat potential fraud and address equity. DOL officials said they plan to provide states with additional grants to help them combat potential fraud.[326] States will be able to use up to $140 million in grants provided under one of the allotments for the regular UI program, unlike previous allotments, which were focused on the PUA and PEUC programs. In addition, states receiving these grant funds must provide claims data to the DOL OIG during the duration of the grant for the purposes of investigating fraud and conducting audits. Officials also plan to provide states with grants to address equity issues, such as by improving access to the regular UI program for individuals with disabilities or individuals who have limited or no internet access.[327] According to DOL officials, states seeking these funds are required to identify the equity gaps they plan to address and the metrics they plan to use to measure improvement in equitable access.
- Supporting states in fully modernizing their IT systems. DOL officials said they plan to support states efforts to fully modernize their IT systems. The officials said they plan to select states that are in various stages of IT modernization and work with them to develop modular technology solutions that can be integrated with state systems.
- Contracting with vendors that can assist states in preventing identity fraud. According to DOL officials, they have awarded purchase agreements to three vendors that states can use to combat identity-related fraud. Officials noted that they have concerns about the equity of states’ processes for flagging claims for potential fraud. The officials also noted that they hope to identify any gaps in applicants’ access to benefits that may result from states’ identity verification efforts.
In addition to working with states, DOL officials said they continue to collaborate with a variety of other entities to address fraud prevention, detection, and recovery. According to officials, they are working with the Social Security Administration to establish a secure data exchange that will allow states to cross-match UI claims data with incarceration records. Officials said they also meet regularly with the DOL OIG to discuss emerging UI fraud issues, streamline communication with states, and coordinate fraud prevention and recovery efforts. In addition, officials said they continue to participate in biweekly banking work group calls to discuss ongoing recovery efforts and improve communication among banking organizations, federal government agencies, and law enforcement agencies. Further, DOL has issued guidance requiring states to share claims data with the DOL OIG relating to the federal pandemic-related UI programs.
Although DOL has taken steps to identify risks through program integrity activities, it has not comprehensively assessed UI fraud risks. Although DOL has various program integrity efforts in place to identify risks in the regular UI program and the CARES Act UI programs and is conducting ongoing efforts that could inform a fraud risk assessment, it has not comprehensively assessed UI fraud risks in alignment with leading practices or documented a prioritized approach to managing fraud risks.
DOL conducts various program integrity efforts focused on identifying risks, including fraud risks, such as the following:
- Enterprise risk management (ERM) effort. According to a DOL official, DOL developed a risk register in 2019 as part of an agency-wide ERM effort.[328] This official also told us that staff responsible for managing the UI programs provided input about the risk register and flagged identity-related fraud as an identified and targeted risk.
- Entity Level Controls Survey. DOL reported that it conducts the annual Entity Level Controls Survey of DOL agency management and personnel to review risks related to financial and internal controls. According to DOL, the Entity Level Controls Survey canvasses agencies to assess fraud at an agency and program level. These surveys assist in assessing and maintaining a well-informed and fraud-aware culture and, according to DOL, have affirmed the implementation of antifraud controls.
- Quarterly state risk assessments and reviews. DOL’s regional offices conduct quarterly state risk assessments and reviews. The risk assessments are designed to identify potential risk factors that may adversely affect a state’s program administration. During these quarterly reviews, DOL staff may also conduct program integrity reviews to ensure that states have operational processes in place to prevent, detect, and recover improper and fraudulent payments and to keep the UI improper payment rate as low as feasible.
- Benefit Accuracy Measurement Program. Officials told us that DOL collects information about UI fraud from states’ independent assessments of the accuracy of UI benefit payments and their estimates of improper payments, including fraud. See the enclosure on Unemployment Insurance Programs in appendix I for additional details about DOL’s improper payment estimates.
- Other antifraud efforts. DOL officials also cited the fiscal year 2020 agency financial report for a significant discussion of antifraud efforts. In its most recent agency financial report, DOL reported that in fiscal year 2020, it conducted a variety of efforts to ascertain fraud risk. These efforts included reviews of risks affecting all DOL programs, required by the Payment Integrity Information Act of 2019.[329]
The Office of Management and Budget (OMB) requires agencies to assess the full spectrum of an organization’s risks and to identify those that are enterprise-level risks. Agencies are expected to rate those enterprise risks in terms of impact, build internal controls to monitor and assess the risk developments at various points in time, and incorporate risk awareness into their culture and operations.[330] While fraud risks can be a part of a broader assessment of enterprise risk such as ERM, such assessments do not take into account actions that agencies must undertake to manage fraud risks.
Our Fraud Risk Framework acknowledges that agencies may use initiatives such as ERM to assess their fraud risks. However, agencies, including DOL, must nonetheless fulfill the separate and independent fraud risk management requirements initially established by the Fraud Reduction and Data Analytics Act of 2015. The act, enacted in June 2016, required OMB to establish guidelines for federal agencies to create controls to identify and assess fraud risks and to design and implement antifraud control activities.[331] The act further required OMB to incorporate the leading practices from the Fraud Risk Framework in the guidelines. In its guidelines, OMB directed that agencies should adhere to the Fraud Risk Framework’s leading practices as part of their efforts to effectively design, implement, and operate an internal control system that addresses fraud risks. Managers are responsible for determining the extent to which the leading practices in the framework are relevant to their program and for tailoring the practices, as appropriate, to align with the program’s operations.
Although DOL has various program integrity efforts focused on identifying risks, including fraud risks, DOL has not clearly assigned defined responsibilities to a dedicated entity for designing and overseeing fraud risk management activities such as managing the fraud risk assessment process.[332] DOL indicated that it has not previously designated officials to be dedicated specifically to managing fraud risks because it manages these risks within the execution of existing payment integrity and ERM activities. Specifically, DOL officials noted that the agency’s Chief Financial Officer and the Employment and Training Administration’s Assistant Secretary are the senior executive officials responsible for payment integrity. DOL officials further clarified that this responsibility concerns risk management for fraudulent and nonfraudulent improper payments. Additionally, officials stated that the Employment and Training Administration has created, and will continue to build, a designated fraud team that will coordinate antifraud efforts. However, DOL officials did not provide documentation on the structure and fraud risk management responsibilities and authorities planned for this entity.
The Fraud Risk Framework’s leading practices note that enterprise-wide risk management processes may have functions that overlap with fraud risk management. Thus, enterprise-wide risk management processes may incorporate the roles and responsibilities of the antifraud entity specified in our leading practices in order to implement a strategic approach for assessing and managing fraud risks.[333] The framework notes that such an approach includes designating an entity with defined responsibilities and the necessary authority across the program to lead fraud risk management activities.
Without a dedicated entity with defined responsibilities to lead antifraud initiatives, including the process of assessing fraud risks to UI programs, DOL may not be strategically managing its UI fraud risks. For example, a dedicated antifraud entity could be held responsible for, among other activities, managing the fraud risk assessment process and coordinating antifraud initiatives across an agency’s various programs to assure that agency activities called for by the Fraud Risk Framework are conducted. These activities include
- identifying inherent fraud risks facing the agency’s programs,
- assessing the likelihood and impact of inherent fraud risks facing these programs,
- determining fraud risk tolerance,
- examining the suitability of existing fraud controls and prioritizing residual fraud risks, and
- documenting the programs’ fraud risk profiles.
DOL’s ongoing program integrity efforts could inform a fraud risk assessment; however, the agency has not comprehensively assessed UI fraud risks in alignment with leading practices. The second component of the Fraud Risk Framework—“Assess”—calls for federal managers to plan regular fraud risk assessments and assess risks to determine a fraud risk profile. Specifically, leading practices include tailoring the fraud risk assessment to the program and planning to conduct the assessment at regular intervals and at the time of any changes to the program or operating environment.
DOL provided, as evidence of its assessment of fraud risks, the template it used to develop the 2019 risk register (i.e., a compilation of risk across the organization). According to DOL officials, DOL had developed this template for ERM efforts. In addition, DOL officials cited the department’s fiscal year 2021 Employment and Training Administration Operating Plan, which incorporates information from the risk register, according to the officials. They also pointed to a quarterly Integrity Strategic Plan progress report and additional ERM documents.
These documents demonstrate that the agency has taken some steps to develop an antifraud strategy and evaluate risk in business processes at DOL. However, these documents do not provide evidence that DOL has fully considered the specific UI fraud risks, analyzed the potential likelihood and impact of fraud schemes, and documented prioritized fraud risks, as called for in leading practices.
In addition, DOL developed the 2019 risk register before the implementation of the CARES Act UI programs so the register does not incorporate fraud risks specific to these programs. A fraud risk assessment is particularly informative when the volume and nature of fraud risk indicators signifies an evolving fraud risk landscape, such as that observed in the CARES Act UI programs. Such an assessment helps program managers determine whether they have the right controls in place to combat the most likely and impactful risks facing the program.
Without comprehensively assessing UI fraud risks—including risks during the pandemic—in accordance with leading practices, DOL lacks reasonable assurance that it has identified the most significant fraud risks for the regular UI program that will exist after the pandemic. For example, some fraud risks identified in the CARES Act UI programs may continue to exist in the regular UI program after the expiration of the temporary UI programs. An analysis of fraud risks across all UI programs would also help DOL determine whether to establish additional fraud controls for the regular UI program and whether to make adjustments to existing controls. In addition, incorporating this analysis in a documented fraud risk profile and its broader antifraud strategy could position DOL to deal more effectively with any future emergency UI programs.
Continuing to collaborate with state workforce agencies—consistent with leading practices for stakeholder involvement—could also help DOL communicate information on fraud risks and emerging fraud schemes and share lessons learned related to fraud control activities. In addition, DOL could benefit from involving state workforce agencies in assessing fraud risks to UI programs and sharing information about fraud risks with state auditors. Fraud risk assessments that involve relevant internal and external stakeholders are more likely to be successful and to reflect a complete understanding of fraud risks and control vulnerabilities.
Effective fraud risk management helps ensure that federal programs’ services fulfill their intended purpose, funds are spent effectively, and assets are safeguarded. If an agency is not managing fraud risks effectively in a steady state, it will not be positioned to do so during emergencies. The purpose of proactively managing fraud risks is to facilitate, not hinder, a program’s mission and strategic goals by ensuring that taxpayer dollars and government services serve their intended purposes and by maintaining public trust in government. If done well, fraud risk management would allow DOL to both enhance the efficient and effective delivery of UI benefits to those in need and help prevent and detect fraudsters seeking benefits to which they are not entitled.
Methodology
To conduct this work, we reviewed information from DOJ to identify federal fraud–related charges related to unemployment insurance as of July 31, 2021, and analyzed related federal court documents. We also reviewed relevant DOL OIG and state audit reports. In addition, we interviewed DOL officials about fraud risk management efforts; we also interviewed DOL OIG and NASWA officials. Further, we reviewed enterprise risk management guidance and written responses from DOL officials.
Agency Comments
We provided a draft of this enclosure to DOL and OMB. DOL’s Employment and Training Administration provided written comments, which are reproduced in appendix VII, as well as technical comments, which we incorporated as appropriate. OMB did not provide comments.
In its comments, DOL neither agreed nor disagreed with our six recommendations. More specifically, DOL neither agreed nor disagreed with our recommendation to designate a dedicated entity with responsibility for managing the process of assessing fraud risks to the UI program, consistent with leading practices as provided in our Fraud Risk Framework. DOL stated that the department’s Chief Financial Officer and the Employment and Training Administration’s Assistant Secretary are the designated senior executive officials responsible for risk assessment and management in the UI program, which includes both fraud and nonfraud improper payments. DOL stated that these officials make decisions on fraud risk management.
We acknowledge that the enterprise-wide risk management processes may incorporate the roles and responsibilities of the dedicated antifraud entity specified in the Fraud Risk Framework. However, as the framework discusses, it is a leading practice for this entity to have defined responsibilities, as well as the necessary authority across the program, to design and oversee fraud risk management activities. Until DOL has a dedicated antifraud entity, in alignment with leading practices, the department may not be well positioned to strategically manage UI fraud risks. We revised the recommendation slightly to reflect the importance of documenting the designation of the dedicated entity and its responsibilities.
In addition, DOL neither agreed nor disagreed with our five remaining recommendations to
- identify inherent fraud risks facing the unemployment insurance program,
- assess the likelihood and impact of inherent fraud risks in the unemployment insurance program,
- determine fraud risk tolerance for the unemployment insurance program,
- examine the suitability of existing fraud controls in the unemployment insurance program and prioritize residual fraud risks, and
- document the fraud risk profile for the unemployment insurance program.
DOL stated that its enterprise-wide risk management process allows it to identify, evaluate, and manage risks that could significantly disrupt the successful achievement of its mission and objectives. Additionally, DOL stated that it continues to identify fraud risks, assess the likelihood and impact of these risks, and identify and support controls regarding risks to the UI program as part of this enterprise-wide risk management process. However, DOL said that it will incorporate the practices and approaches from the Fraud Risk Framework in its risk assessment activities as it moves forward and will use these recommendations to build on its current risk assessment and management process. DOL further stated that the dedicated entity envisioned in the first recommendation will take on these responsibilities.
GAO’s Ongoing Work
We continue to examine programmatic risks and challenges for the UI program as well as options for program transformation.
Related GAO Products
Telecommunications: FCC Should Take Action to Better Manage Persistent Fraud Risks in the Schools and Libraries Program. GAO-20-606. Washington, DC: Sept. 16, 2020.
A Framework for Managing Fraud Risks in Federal Programs. GAO-15-593SP. Washington, DC: July 28, 2015.
Contact information: Seto J. Bagdoyan, (202) 512-6722, bagdoyans@gao.gov
Emergency Rental Assistance
Bookmark:The Department of the Treasury has taken steps to enable Emergency Rental Assistance grantees to spend their allocations more rapidly, but some grantees will be at risk of losing portions of their allocation when Treasury recaptures and reallocates excess funds.
Entity involved: Department of the Treasury
Background
Congress appropriated a total of $46.55 billion to the Department of the Treasury (Treasury) for the Emergency Rental Assistance (ERA) program, which Treasury disburses through two programs to state, territorial, and local governments (grantees) to provide financial assistance to eligible landlords and renter households.[334] Specifically, in December 2020, the Consolidated Appropriations Act, 2021 authorized Treasury to disburse about $25 billion to grantees to remain available until September 30, 2022 (referred to as ERA1 by Treasury).[335] In March 2021, the American Rescue Plan Act of 2021 authorized Treasury to disburse about $21.55 billion in additional funding to grantees to remain available until September 30, 2025 (referred to as ERA2 by Treasury).[336]
Treasury allocated ERA funds to grantees based primarily on their population, as required by the laws.[337] Landlords, renter households, and utility providers can then apply to grantees for assistance.[338] As of August 31, 2021, Treasury had disbursed all of the ERA1 appropriation to grantees (about $25 billion) and about $8.2 billion of the ERA2 appropriation to grantees that applied for funding, according to data from Treasury.[339] Beginning on September 30, 2021, the Consolidated Appropriations Act, 2021 required Treasury to begin recapturing and reallocating excess unobligated ERA1 funds.[340]
Overview of Key Issues
ERA grantees have spent about $7.7 billion of their ERA allocations and served about 1.5 million unique households, based on Treasury data collected from grantees through August 2021. Specifically, for ERA1, grantees spent about $7.5 billion of their allocations—about 30 percent of the total ERA1 appropriation—including about $7.1 billion for assistance to households through August 2021, as well as about $284 million for administrative expenses, $75 million for housing stability services, and $76 million for tribal expenses through June 2021.[341] For ERA2, grantees spent about $223 million through August 2021—about 1 percent of the total ERA2 appropriation—including $207 million for assistance to households through August 2021, as well as about $15 million for administrative expenses and $470,000 for housing stability services through June 2021 (see table).[342]
Source: GAO analysis of the Consolidated Appropriations Act, 2021; the American Rescue Plan Act of 2021; and Department of the Treasury (Treasury) data. | GAO-22-105051
Note: The amounts disbursed are through August 31, 2021. The amount spent includes expenditures for assistance to households through August 2021, as well as expenses for administration and housing stability services through June 2021. The Consolidated Appropriations Act, 2021 set aside $15 million for administrative expenses of the Secretary of the Treasury. The American Rescue Plan Act of 2021 also set aside a total of $33 million for administrative expenses of the Secretary of the Treasury and Inspector General. As required by law, Treasury has made available 40 percent of the ERA2 allocations to grantees and is disbursing additional ERA2 funds to grantees that have substantially expended their ERA1 allocation and obligated at least 75 percent of their initial ERA2 allocation.
Grantees have primarily provided ERA1 funds to the lowest-income renter households. According to Treasury’s data through June 2021, grantees provided about 63 percent of ERA1 funds to renter households with incomes at or below 30 percent of their area median (compared to 13 percent to those with incomes from 51 to 80 percent of their area median).[343] In addition, grantees have provided similar assistance for current and future payments versus arrears. At the end of June 2021, about 622,000 renter households had received assistance for current or future payments and 667,000 households had received assistance for arrears.
Although grantees were initially slow to spend ERA1 funds as they implemented and scaled up rental assistance programs, many have accelerated their spending in recent months. In August 2021, grantees provided about $2.3 billion in assistance to 399,000 unique households—a sharp increase from earlier reporting periods. For example, from January through March 2021, grantees provided about $282 million in assistance to about 89,000 renter households (see figure). At the same time, grantees have also spent more on each household served in recent months. In the first 3 months of the program (January–March 2021), grantees provided each household served with about $3,200 in assistance, on average. In comparison, grantees provided each household served in August 2021 with about $5,700 in assistance, on average.
Yet, some grantees continue to experience delays in delivering ERA1 funds and may not be fully meeting the needs of landlords and lower-income renter households. Local grantees have generally spent their ERA1 allocations more quickly than state and territorial governments. Through August 2021, local grantees spent about 47 percent of their allocations, on average, compared to about 23 percent among state grantees.[344] Territorial governments spent an average of 3 percent of their allocations. Further, about 13 of the 350 local grantees and two of the five territorial grantees did not report spending any of their ERA1 allocation. In total, spending among all grantees in each state and territory as a percentage of their total ERA1 allocations ranged from 0 percent to about 78 percent (see figure).[345]
Percentage of First-Round Emergency Rental Assistance (ERA1) Allocations Spent by Grantees in U.S. States and Territories through Aug. 2021
Grantees that continue to experience delays spending their ERA1 allocation may forfeit unused funds when Treasury recaptures and reallocates excess funds. On September 30, 2021, Treasury was required to begin recapturing excess ERA1 funds that grantees had not obligated and reallocate them among those that had obligated at least 65 percent of their allocation.[346] On October 4, 2021, Treasury issued reallocation guidance for ERA1 funds, which clarified that for the first assessment of excess funds,
- Grantees that had not obligated at least 65 percent of their allocation through September 30, 2021 must submit a program improvement plan by November 15, 2021 that describes how they will accelerate their delivery of assistance;
- Grantees that had not achieved an expenditure ratio of at least 30 percent through September 30, 2021 will be determined to have excess funds equal to the difference between their current expenditures on assistance and the amount needed to achieve an expenditure ratio of 30 percent; and
- Grantees can initially limit or avoid recapture if Treasury approves their program improvement plan, or it they can certify to obligating at least 65 percent or expending 30 percent of their allocation by November 15, 2021.[347]
Every 2 months thereafter, Treasury will reassess grantee expenditures and redistribute recaptured funds based on availability and confirmed need.
Data on expenditures through August 2021 suggest that many grantees may need to develop program improvement plans and some may be determined to initially have excess funds. Treasury will make reallocation decisions based on expenditures and obligations from grantees; however, Treasury has not yet collected data on obligations.[348] Nonetheless, based on expenditures through August 2021, about 74 percent of grantees have spent less than 65 percent of their ERA1 allocation and 42 percent have expenditure ratios below 30 percent. Further, expenditure data suggest that few state and territorial grantees are on track to initially receive reallocated funds. Through August 2021, three of the 51 state grantees and no territorial grantees (among the five) have spent 65 percent or more of their ERA1 allocation. In comparison, many local grantees—101 of the 350 (about 29 percent)—have spent at least 65 percent of their ERA1 allocation.
Data on applications for assistance and rental payments suggest that significant demand for ERA funds remains unmet. Grantees continue to process a backlog of applications for assistance. For example, according to its dashboard, the California COVID-19 Rent Relief Program has provided assistance to about 24 percent of the nearly 204,000 complete applications it received through September 21, 2021.[349] Further, the nearly 421,000 renter households that received assistance from ERA1 and ERA2 funds in August 2021 would be equal to about one-fourth (23 percent) of the estimated number of lowest-income renter households that reported being very likely or likely to be evicted, based on September 2021 survey data from the Census Bureau.[350] It is critical that grantees deploy funds in a timely and effective manner to help curtail avoidable evictions and limit financial burdens on landlords, especially given uncertainty about eviction moratoriums.[351]
Treasury has identified reasons why spending has lagged among some grantees. According to Treasury, most grantees could not deploy funds immediately because they needed additional time to enhance existing rental assistance programs or develop new programs in order to accommodate the significant increase in the scale of operations made possible through ERA1 funding. Specifically, grantees have had to develop new policies and procedures, hire additional staff, and develop electronic application and data collection systems. In addition, some grantees have experienced overwhelming demand for ERA1 funds and lack sufficient staff capacity to address all applications in a timely manner. Further, the distribution of ERA1 funds from grantees to landlords, renter households, and utility providers may have been delayed in some areas while state and local legislatures deliberated how to administer the new funds.
Treasury has encouraged grantees to speed up their deployment of ERA1 funds by publishing promising practices and issuing updated guidance. In June 2021, Treasury published a series of promising practices based on engagement with grantees that are intended to help grantees speed up program implementation and improve access to ERA funds, among other goals. For example, the promising practices encourage grantees to simplify and automate application processes, partner with community organizations and other grantees, and proactively engage landlords and utility providers to inform them and their customers about the availability of ERA assistance. In September 2021, Treasury also published guidelines and examples to help grantees develop effective ERA program websites and applications.
In addition, Treasury has updated its ERA grantee guidance (known as frequently asked questions) several times to assist grantees in delivering ERA funds more efficiently—most recently in August 2021. Among other updates, Treasury has modified the guidance to
- encourage greater reliance on self-attestations and fact-specific proxies (such as average income in an applicant’s geographic area) in lieu of more stringent documentation requirements;[352]
- shorten the required outreach period for landlords and utility providers before grantees can provide payments directly to renter households;
- allow grantees to make advance payments to landlords, utility providers, and nonprofit organizations while renters complete application and documentation requirements;
- expand the eligible uses of ERA funds to cover arrears at prior addresses and court costs associated with an eviction; and
- provide a pathway for households who are no longer renting due to eviction to receive assistance for relocation and other expenses.
Despite Treasury’s guidance, some grantees may be hesitant to modify their standard practices for documentation, payments, and other aspects of their ERA programs out of concern that noncompliance with the federal ERA laws and requirements could result in negative audit findings and recoupment of funds. According to data collected and analyzed by the National Low Income Housing Coalition, documentation and payment policies vary across ERA grantees. For example, just over half of grantees (57 percent) allow applicants to self-attest that they meet certain eligibility criteria, about 28 percent provide payments directly to tenants, and fewer than half (48 percent) provide assistance for housing expenses beyond rent and utility payments.[353]
At the same time, Treasury must balance its goal for grantees to deliver rental assistance quickly with the competing need to safeguard the use of funds. Treasury has developed and implemented reporting requirements for grantees and is beginning to collect detailed data on their use of ERA funds. In August 2021, Treasury officials told us that an internal monitoring and oversight group was preparing to review grantee-submitted data to identify potential compliance issues. In addition, Treasury officials and staff from Treasury’s Office of Inspector General told us that they continued to work together to finalize plans to monitor and oversee grantees’ use of funds. However, as of late September 2021, neither had finalized plans to do so.
Methodology
To conduct this work, we interviewed officials from Treasury and Treasury’s Office of Inspector General on efforts to implement and oversee the ERA program. We also analyzed Treasury’s compliance report data from January through August 2021 to identify trends and reviewed ERA program documentation published by Treasury on its website.[354] In addition, we interviewed or reviewed the recent publications of a selection of stakeholder groups that represent grantees, landlords, and lower income households in order to identify potential successes and challenges associated with the ERA program.[355]
Agency Comments
We provided a draft of this enclosure to Treasury and the Office of Management and Budget (OMB). Treasury provided technical comments, which we incorporated, as appropriate. OMB did not provide comments on this enclosure.
GAO’s Ongoing Work
We will continue to monitor Treasury’s administration of the ERA program, including plans to monitor and oversee grantees’ use of funds and reallocate excess funds.
Related GAO Product
COVID-19 Housing Protections: Moratoriums Have Helped Limit Evictions, but Further Outreach Is Needed. GAO-21-370. Washington, D.C.: March 15, 2021.
Contact information: John Pendleton, (202) 512-8678, pendletonj@gao.gov
Advance Child Tax Credit and Economic Impact Payments
Bookmark:The Department of the Treasury and the Internal Revenue Service quickly issued millions of advance child tax credit payments while also issuing the third round of economic impact payments, but they could do more to reach some eligible families.
Entities involved: Internal Revenue Service, within the Department of the Treasury
Recommendations for Executive Action
The Secretary of the Treasury, in coordination with the Commissioner of Internal Revenue, should estimate the number of individuals, including nonfilers, who are eligible for advance child tax credit payments, measure the 2021 participation rate based on that estimate, and use that estimate to develop targeted outreach and communications efforts for the 2022 filing season; the participation rate could include individuals who opt in and out of the advance payments.
The Department of the Treasury neither agreed nor disagreed with this recommendation, stating that while it supports the goal of the recommendation, it has not estimated the eligible population for the advance child tax credit. Treasury also stated that it and IRS continue to undertake advance child tax credit outreach, education, and media campaign efforts.
We maintain that without a comprehensive estimate of eligibility and a participation rate, which includes more nonfilers, Treasury and the Internal Revenue Service are missing an opportunity to assess the effectiveness of their outreach to nonfilers, who are likely experiencing poverty or hardship and may be in need of the CTC payments.
Background
The American Rescue Plan Act of 2021 (ARPA) authorized the Internal Revenue Service (IRS) and the Department of the Treasury to issue advance payments of the child tax credit (CTC), as amended by ARPA.[356] Additionally, IRS and Treasury continue to issue direct payments authorized by ARPA, known as economic impact payments (EIP), to eligible individuals to help address financial stress due to the pandemic.[357]
ARPA made several temporary changes that expanded eligibility for CTC to additional qualified individuals and increased the amount of the credit. These changes included temporarily eliminating the earned income requirement for eligible individuals to receive the refundable CTC.[358] ARPA also increased the maximum amount of the CTC—raising it from $2,000 per any qualifying child to $3,600 for a young qualifying child (0 to 5 years old) and $3,000 for an older qualifying child (6 to 17 years old) (see figure).[359]
Income Qualifications for the Expanded Child Tax Credit, Based on Tax Year 2021
As required by ARPA, IRS and Treasury are responsible for issuing half of the CTC through periodic advance payments (advance CTC).[360] IRS determines the amount of an individual’s advance CTC payment by estimating the individuals’ annual advance amount, which is 50 percent of the estimated amount of the CTC that the individual may claim on a 2021 tax return during the 2022 tax filing season. This annual advance amount for 2021 is generally based on an individual’s processed 2020 tax return or on the individual’s 2019 tax return if the IRS has not processed the 2020 tax return.
Eligible individuals automatically receive monthly advance CTC payments from July 2021 through December 2021, unless they unenroll from the payments. Eligible individuals may claim the remaining portion of their CTC when they file their 2021 tax return in 2022.
IRS reported that as of September 25, 2021, it had disbursed more than 106 million advance payments totaling over $45.5 billion—an average payment of $426 (see figure).
Advance Child Tax Credit Disbursals, by Month, as of Sept. 25, 2021
In addition to issuing advance CTC payments, Treasury and IRS issued a third round of economic impact payments (EIP 3) to most eligible individuals.[361] IRS reported that as of September 24, 2021, it had processed more than 174 million EIP 3 payments totaling over $405 billion.[362]
ARPA directed IRS to make supplemental payments to individuals who received EIP 3 before their 2020 tax returns were processed but who are eligible for an additional payment based on their recently processed 2020 tax returns.[363] IRS reported that as of September 30, 2021, it had processed more than 10 million supplemental EIPs totaling over $21 billion.
Overview of Key Issues
IRS is conducting outreach to increase awareness of the advance CTC. IRS is conducting several outreach efforts to increase the public’s awareness of advance CTC payments.
- IRS continues to coordinate with community organizations to raise awareness of the advance CTC payments.
- IRS provides multilingual outreach resources to improve communications to those with limited English proficiency and is urging nonfilers to use the CTC Non-filer Sign-Up Tool before it closes on October 15, 2021.[364]
- IRS is planning to include advance CTC messaging in its Get Ready campaign for the 2022 tax filing season. IRS officials said the annual campaign typically begins in November.
However, IRS and Treasury have not developed a comprehensive estimate of individuals who are potentially eligible for advance CTC payments and have not set a participation goal. IRS officials said the agency developed an updated estimate in April 2021 of 36.5 million filers. The estimate is based on processed tax year 2020 returns and includes individuals with dependent children who filed taxes for the first time to receive EIP 1. Yet this estimate is incomplete because it misses additional eligible nonfilers and their dependent children.
IRS officials said that they cannot estimate the number of eligible nonfilers and their dependent children because these individuals have not filed taxes. However, according to the officials, they plan to meet with Census Bureau officials to assess what data are needed to produce a CTC participation rate and to discuss next steps. IRS officials said it currently has a multiyear interagency agreement with the Census Bureau through March 2024 to obtain data to support its calculation of an Earned Income Tax Credit participation rate. Federal internal control standards state that management should obtain relevant data from reliable sources and use that information to achieve its objectives. This standard is reflected in Treasury’s strategic plan, which sets a goal of improving analytics to accomplish objectives.
With an estimate of all individuals who are eligible for the advance CTC, including nonfilers, Treasury and IRS could measure the tax credit’s participation rate. Participation rates for other refundable tax credits and federal benefit programs have helped policy makers better understand whether eligible recipients are aware of the credits’ and programs’ existence and accessibility.[365] For example, the Earned Income Tax Credit participation rate—over 75 percent, according to IRS—is at the high end of the range of participation rates for antipoverty programs. In contrast, we previously reported that the Temporary Assistance for Needy Families participation rate was about 34 percent.[366]
An advance CTC eligibility estimate and participation rate, including individuals who have opted in and out of the advance CTC payments, would provide greater clarity about which populations may be at risk of not receiving the payment. These populations would benefit from targeted outreach and communications to learn more about the payments and how to claim the CTC during the 2022 filing season. For example, officials from one IRS partner organization we spoke with said IRS could do more to enhance its coordination with federal and state agencies to reach more nonfilers.[367] Moreover, this information could inform IRS’s administration of other refundable tax credits as well as any future changes to the CTC that Congress is considering.
IRS conducted in-person events to help eligible taxpayers claim the advance CTC. In June and July 2021, IRS conducted in-person events in more than 27 cities across the country to help eligible individuals prepare and file their 2020 tax returns in order to receive the advance CTC. IRS conducted these events at Taxpayer Assistance Centers (TAC) and community outreach centers. Officials from the IRS Taxpayer Advocate Service and preparers from Low Income Tax Clinics who attended some of the events said the assistance helped people verify their identity to register for the advance CTC. They noted that two groups of individuals expressed confusion about their advance CTC eligibility—separated or divorced parents, who expressed confusion regarding which parent should receive the advance CTC, and individuals with mixed immigration status.
IRS assists individuals with the advance CTC. IRS and Treasury have provided several online tools to help individuals manage their CTC payments: the Advance Child Tax Credit Eligibility Assistant, the CTC Update Portal (CTCUP), and options for nonfilers to file simplified returns to register for payments. IRS has also established a dedicated phone line for CTC assistance.
Advance Child Tax Credit Eligibility Assistant. Individuals can use the Advance Child Tax Credit Eligibility Assistant to check their eligibility for the advance CTC. The tool provides generic questions and responses based upon the advance CTC qualifications, such as asking the user for the number of children claimed on the user’s 2019 or 2020 tax return.
CTCUP. This online portal allows qualified individuals to check their eligibility for the advance payments, opt out of receiving the payments, update their bank account information, and change their mailing address. According to IRS data, as of September 20, 2021, around 1.9 million individuals had accessed the portal to opt out of payments, around 1.6 million individuals had made changes to their bank account information, and around 216,000 individuals had made changes to their mailing address.
IRS officials said IRS is planning further updates to CTCUP that will allow users to change personal information, such as marital status, income, and number of children. IRS also plans new portal features, such as a summary of an individual’s 2021 advance CTC payments, and intends to make CTCUP available in Spanish.
To access the portal, individuals must log in using an established IRS online account or establish a new account with ID.me, a company that provides identity proofing and authentication. Users must upload documentary evidence, such as a driver’s license, to verify their identity. Once ID.me is able to verify the information, the user can access CTCUP to make changes. ID.me provides support to users who experience challenges verifying their identity.
According to IRS and ID.Me officials, they are working together to monitor CTCUP fraud and ease of use. ID.me provides IRS with weekly reports on the percentages of users who successfully authenticated their identity and users who were unsuccessful after exhausting ID.Me’s customer service options. According to ID.Me officials, they review their data with IRS to try to better understand users’ behavior, including challenges that users encounter in completing the authentication process. As we have previously reported, designing authentication programs involves a balancing act—IRS needs to prevent fraudsters from using stolen taxpayer information to authenticate, but it must balance that against the burden of authentication on legitimate taxpayers. If IRS makes the authentication process too stringent, legitimate taxpayers may not be able to successfully authenticate.
Nonfiler tools. Individuals who do not normally file a tax return had two online options to file a simplified return in order to receive the advance CTC, EIP 3, and recovery rebate credit.[368] The Free File Alliance, a consortium of tax preparation companies, developed the CTC Non-filer Sign-Up Tool for IRS in June 2021 in time for the first round of payments in July. A Treasury official said that the CTC Non-filer Sign-Up Tool did not fully meet the needs of intended users. Specifically, the CTC Non-filer Sign-Up Tool could be difficult to access and navigate, particularly on a mobile device, which may be the only device available to some individuals to access the internet. Also, it was not available in Spanish.
On August 13, 2021, Treasury and the White House announced that Code for America, a civic technology nonprofit organization, would create a new tool to assist individuals who do not regularly file taxes to claim the advance CTC. On September 1, 2021, Code for America launched GetCTC, which is mobile friendly and available in English and Spanish. Individuals can also use GetCTC to receive EIP 3 and claim the recovery rebate credit.
Individuals had the option to use either the CTC Non-filer Sign-Up Tool or GetCTC. According to IRS officials, the CTC Non-filer Sign-Up Tool will be taken offline on October 15, 2021. However, individuals can still use GetCTC until November 15, 2021. Code for America officials said GetCTC will be available until then to ensure that qualified individuals receive the December 2021 advance CTC payment.
Dedicated CTC phone line. Anticipating high demand for customer support related to the advance CTC payments, IRS established a dedicated phone line for CTC assistance (1-800-908-4184) and increased the number of IRS customer service representatives. As of September 30, 2021, IRS had received 1.8 million phone calls through the hotline since it went live in June. According to IRS, 80,000 individuals spoke to an IRS customer service representative. IRS officials said callers asked questions regarding accessing CTCUP, missing payments, payment amounts, eligibility requirements, and changing the number of dependent children.
IRS is taking steps to prevent advance CTC identify theft, fraud, and overpayments.
Steps to prevent identity theft and fraud. IRS officials said that, in addition to authenticating the identity of individuals who use CTCUP and CTC Non-filer Sign-Up Tool, they revised fraud filters that were used on the original EIP Non-filer Tool.[369] Additionally, IRS has 15 fraud indicators targeting high-risk behaviors including questionable bank account behavior. IRS is also sharing all bank account changes in CTCUP with the Bureau of the Fiscal Service to ensure the bank account is valid. ID.me also provides IRS reports on fraudulent attempts to access CTCUP.
Steps to prevent overpayments. Individuals who receive advance CTC payments exceeding the amount of CTC they can properly claim on their 2021 tax return may need to repay some or all of the excess payment.[370] Some lower-income taxpayers will qualify for repayment protection. Individuals cannot qualify for full repayment protection—and will need to repay any excess amount—if their modified adjusted gross income for 2021 is above an established amount.[371] IRS continues to work on guidance and related communications to address taxpayer concerns about repayment protection. In addition, in preparation for the 2022 filing season, IRS plans to send a letter to payment recipients in December 2021 after it issues the last advance payment that will provide the total amount of advance CTC payments received.
IRS officials said the agency is still determining how it will monitor and report on advance CTC overpayments. IRS reports an annual improper payment rate, including overpayments, for the Additional Child Tax Credit.[372] The Additional Child Tax Credit has provided tax benefits to taxpayers who are raising children. The annual improper payment rate for the Additional Child Tax Credit has been based on data collected through multiyear compliance studies.[373] According to IRS officials, IRS has not yet determined whether it will include the advance CTC payments with the Additional Child Tax Credit improper payment estimate or will report a separate estimate for the advanced payments. IRS officials said they are discussing options with Treasury and Office of Management and Budget officials.
EIP disbursements for dependents. In June 2021, we tested 79 transactions for the second round of the economic impact payment (EIP 2) as well as 217 EIP 3 transactions that IRS processed from December 31, 2020, through May 27, 2021.[374] As a result of our testing, we found instances in which IRS disbursed EIPs to individuals for ineligible dependents, such as dependents with invalid Social Security numbers, in four of the EIP 2 transactions and nine of the EIP 3 transactions.
IRS limited the processing of EIP 3 dependent credits to a maximum of 15 dependents to help prevent the disbursement of invalid EIPs.[375] IRS set the 15-dependents limitation on the basis of its experience with disbursing the first round of EIP. Specifically, for processing EIP 3 transactions, IRS stated that 15 dependents was a reasonable threshold for identifying errors related to dependent counts without affecting a significant number of transactions.
In March 2021, IRS developed program requirements to notify specific Wage and Investment (W&I) staff when the 15-dependent limitation was applied, so that the staff could review the accounts affected and determine whether the taxpayers had additional dependents who were eligible for the EIP 3 dependent credit. However, in discussions with W&I staff, we learned that they had not received any notifications when the 15-dependents limitation was applied.
When testing EIP 3 transactions, we found that IRS had applied the 15-dependents limitation to 27 transactions but that the affected accounts were not reviewed by W&I staff. As a result, the taxpayers had not received their additional payments as of June 2021. To address this issue, IRS stated that it plans to perform a one-time review of all accounts that were subject to the 15-dependents limitation and process any additional EIP 3 for taxpayers with more than 15 eligible dependents before the end of calendar year 2021.
Methodology
To review how Treasury and IRS issued and administered advance child tax credits and economic impact payments, we examined Treasury and IRS data as of September 30, 2021, as well as federal laws and agency guidance. We interviewed Treasury and IRS officials to determine whether the data were sufficiently reliable to describe the number and amount of payments disbursed, and we determined that the data were sufficiently reliable for this purpose. We also interviewed IRS officials at four Taxpayer Assistance Centers (TAC)—in Atlanta, GA; Houston, TX; Milwaukee, WI; and St. Louis, MO—that sponsored in-person events in June and July 2021 to help eligible families prepare and file tax returns to receive the advance CTC. We selected the four TACs to represent both high and low attendance at these events.
We asked representatives from 18 selected IRS outreach partners to provide us with their perspectives on IRS’s outreach coordination with their organizations. We selected eight partners on the basis of their national outreach to underserved populations such as low-income families, veterans, and seniors; we also selected 10 partners on the basis of their local outreach to communities in zip codes with high numbers of potential nonfilers (according to IRS data). This sample is not representative; however, these partners provided illustrative examples of how organizations worked with IRS to reach traditionally underserved communities and of aspects of the IRS communications plan that worked well. Their responses also highlighted potential areas for improvement. In addition, we interviewed representatives from Free File Alliance, Code for America, and ID.me.
To test IRS’s controls over the processing of EIP 2 and EIP 3 transactions and whether IRS conformed with the EIP provisions of the Consolidated Appropriations Act, 2021 and ARPA, we statistically selected two monetary unit samples.[376] The first sample consisted of 61 EIP 2 transactions, totaling $79,560, that were processed during the period from December 31, 2020, through January 28, 2021.[377] The second sample consisted of 166 EIP 3 transactions, totaling $536,717, that were processed during the period from March 11, 2021, through May 27, 2021.[378] In addition, during our review of the EIP 2 and EIP 3 populations, we identified transactions for married taxpayers filing jointly who claimed at least 15 dependents. These consisted of 18 EIP 2 transactions of $10,200 or more, totaling approximately $310,200, and 51 EIP 3 transactions of $23,800, totaling approximately $1.2 million. We selected all 69 transactions for testing.
Our tests consisted of reviewing IRS tax module records and related individual tax returns to validate the accuracy of IRS’s records, which IRS used to determine eligibility, calculate the EIPs, and determine whether any duplicate EIPs were issued. We also reviewed payment confirmations from the Bureau of the Fiscal Service to determine whether the EIPs were issued for the correct amounts and to the correct individuals and to confirm that no offsets were applied against the EIPs.
Agency Comments
We provided a draft of this enclosure to Treasury, IRS, and the Office of Management and Budget. Treasury provided written comments, which are reproduced in appendix IX, and technical comments, which we incorporated as appropriate. IRS also provided technical comments, which we incorporated as appropriate. The Office of Management and Budget did not provide comments.
Treasury neither agreed nor disagreed with our recommendation. Treasury stated that while it supports the goal of our recommendation, it has not estimated the eligible population for the advance child tax credit (CTC). Treasury said it has not performed this action because there are several eligibility requirements for the CTC that are not known to IRS until the taxpayer files an income tax return to claim the CTC. However, we note that IRS established an estimate of eligible taxpayers based on tax year 2020 returns. Nevertheless, this estimate is incomplete because it misses eligible nonfilers and their dependent children. An advance CTC eligibility estimate and participation rate, including individuals who opt in and out of the payments, would provide Treasury and IRS greater insight regarding populations, particularly nonfilers, that may be at risk of not receive the payments.
Treasury also stated in its comments that, with IRS, it continues to undertake advance CTC outreach, education, and media campaign efforts. Treasury stated that in June and July 2021, IRS sent two rounds of letters to inform more than 30 million families who previously filed taxes that they may be eligible to receive advance CTC payments. At the same time, IRS publicized the CTC Non-Filer Tool at numerous outreach events. Treasury also published a file containing zip code data that show the number of children who may be eligible for the advance CTC but who had not been claimed on a recent tax return. Treasury stated that this information is designed to help local governments and nonprofits target their outreach work so that this crucial relief gets to all eligible families. Last, Treasury stated that it and IRS have developed partnerships within and beyond the tax community to help eligible individuals access their payments.
Without an estimated eligibility rate that includes nonfilers and a participation goal, Treasury and IRS are missing an opportunity to use data to determine whether their outreach strategy, which will extend throughout the 2022 filing season, is effectively reaching those who are outside the tax system. These individuals are more likely to be experiencing poverty or hardship and may be more in need of the CTC payments.
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 the advance payments of the CTC and EIP 3.
GAO’s Prior Recommendations
The table below presents our recommendations on economic impact payments from prior bimonthly and quarterly CARES Act reports.
Source: GAO. | GAO-22-105051
Related GAO Products
Identity Theft: IRS Needs to Strengthen Taxpayer Authentication Efforts. GAO-18-418. Washington, D.C.: June 22, 2018.
Refundable Tax Credits: Comprehensive Compliance Strategy and Expanded Use of Data Could Strengthen IRS's Efforts to Address Noncompliance. GAO-16-475. Washington, D.C.: May 27, 2016.
Standards for Internal Control in the Federal Government. GAO-14-704G. Washington, D.C.: September 10, 2014.
Contact information: James R. McTigue, Jr., (202) 512-6806, mctiguej@gao.gov
Agricultural Debt Relief
Bookmark:The U.S. Department of Agriculture has identified about 21,564 socially disadvantaged agricultural producers who qualify for debt relief payments under the American Rescue Plan Act of 2021; as of September 2021, less than $1.2 million of the $4 billion initially set aside for the program had been expended pending the outcome of a legal challenge to the program.
Entities involved: Farm Service Agency, within the U.S. Department of Agriculture
Background
The U.S. Department of Agriculture (USDA) provides billions of dollars through loans and other farm programs to support agricultural producers (that is, farmers and ranchers). For example, according to USDA’s FY 2021 Budget Summary, in fiscal year 2020, the department provided about $8.4 billion in farm loans. In calendar year 2020, federal direct payments and federal crop insurance net payments to agricultural producers were projected to be about $52 billion, as we reported in March 2021.[379] Agricultural producers often require loans to buy agricultural real estate, make capital improvements, and purchase supplies and equipment. Several types of lenders provide credit to agricultural producers, including commercial banks and USDA’s Farm Service Agency (FSA). FSA focuses its lending on agricultural producers who are generally unable to obtain credit elsewhere.
However, as we noted in our July 2019 report on agricultural lending, some demographic groups are considered underserved by the credit market or have alleged discrimination by USDA and others in providing agricultural loans. USDA has, through public statements, acknowledged the department’s history of systemic discrimination in its policies and programs.
The American Rescue Plan Act of 2021 (ARPA) directs the Secretary of Agriculture to provide payments of up to 120 percent of the outstanding direct and guaranteed farm loan balances for each socially disadvantaged producer to pay off the balance of the producer’s loans.[380] Direct loans are funded and serviced by FSA as the lender. Guaranteed loans are made by USDA-approved traditional lenders, such as banks and credit unions, with the backing of FSA.
Under ARPA, socially disadvantaged agricultural producers are those who are members of a socially disadvantaged group whose members have been subjected to racial or ethnic prejudice.[381] According to USDA, under the ARPA debt relief program, payments may represent 120 percent of a loan balance (as of January 1, 2021) with 20 percent intended to cover tax liabilities and other fees. FSA is responsible for implementing the program.
Congress provided such sums as may be necessary for the program, and USDA set aside $4 billion dollars to implement it. However, as of September 2021, FSA had issued debt relief payments to only four agricultural producers before legal challenges stopped the agency from making further payments. In June 2021, a federal judge issued a temporary restraining order prohibiting USDA from forgiving loans under the debt relief program until such time as the court could rule on whether a preliminary injunction was warranted. A preliminary injunction would prevent FSA from issuing debt relief payments pending the outcome of a court case alleging discrimination. Later in that same month, before the first court could consider the matter, a separate court issued a preliminary injunction preventing USDA from making debt relief payments nationwide. Subsequently, additional lawsuits challenging the program on the basis of discrimination have been filed. Generally, the complaints allege that the race of the loan account holder, even a member of a socially disadvantaged group, should not be the basis in awarding debt forgiveness. According to USDA’s website, FSA plans to continue to process paperwork for eligible socially disadvantaged agricultural producers until the preliminary injunction is lifted and the agency is able to make payments.
Overview of Key Issues
FSA has identified loan accounts that are eligible or potentially eligible for the program. Socially disadvantaged agricultural producers do not apply to participate in USDA’s ARPA debt relief program. Rather, FSA identifies the producers with eligible direct loan accounts and potentially eligible guaranteed loan accounts.[382] In September 2021, FSA officials stated that the agency had identified 21,564 agricultural producers with direct (18,586) or guaranteed (2,978) loan accounts that are eligible or potentially eligible for the program.[383]
These agricultural producers have a total unpaid loan balance of about $4.6 billion. When accounting for tax liabilities and other fees on these loan balances, as of September 2021, FSA officials estimated that potential payments would total about $5.6 billion, which exceeds the $4 billion currently set aside to fund the program.[384] However, according to USDA, not all of the agricultural producers with eligible loan accounts may choose to participate in the program. FSA explained that, in rare instances, eligible agricultural producers elect to not receive a payment for various personal reasons.
FSA sent notification letters to the majority of agricultural producers with eligible direct loan accounts. Although the preliminary injunction prevents USDA from making payments under the program, USDA sent “notification letters” to the majority of agricultural producers it identified as having eligible direct loans; it plans to do so at a later date for guaranteed loans. These letters specified the terms of the debt relief, including FSA's calculation of payments for direct loan accounts. The letters also emphasized that agricultural producers will be sent notification regarding guaranteed loans at a later date and that they are still indebted for any debt not eligible for a payment. If the agricultural producers agreed to the terms, they were to sign the letter and send it back to USDA.[385]
As of September 16, 2021, FSA officials said that the agency sent notification letters to approximately 14,170 of the agricultural producers with eligible direct loans and received approximately 9,669 signed letters back. The remaining producers had not responded, as of September 2021. For those agricultural producers that returned signed letters, FSA is ready to make payments if the injunction is lifted, according to agency officials. FSA officials said that the agency did not send notification letters to all of the agricultural producers with eligible direct loan accounts at one time because it sends notification letters as it determines and validates planned payments, which officials said is a time-consuming process.
FSA plans to send notification letters related to guaranteed loan accounts after it issues a subsequent notice of funding availability, according to FSA.
FSA provided some characteristics of the agricultural producers with eligible direct and potentially eligible guaranteed loan accounts. FSA provided us with some information about the characteristics of agricultural producers with eligible direct loan accounts or potentially eligible guaranteed loan accounts, as of September 2021:
- More than 50 percent of producers with eligible accounts are located in Arkansas, Oklahoma, Texas, or Puerto Rico.
- Most of the eligible direct loan accounts and potentially eligible guaranteed loan accounts are for debts of less than $600,000.
USDA also provided information on participation in the debt relief program by agricultural producer group. USDA’s data suggest that the largest group of producers with eligible accounts were identified as American Indian or Alaskan Native, followed by producers that were identified as Hispanic or Latino, and producers that were identified as Black or African American. However, in September 2020, the USDA Office of the Inspector General found that, in violation of departmental policy, some of FSA’s data on race and ethnicity were based on USDA employees’ visual assessments of agricultural producers instead of being voluntarily provided by the agricultural producers themselves. According to FSA, for the ARPA debt relief program, agricultural producers are required to certify their race and ethnicity to receive payments. Because of this certification process, we requested information on the number of producers who voluntarily provided or certified their race and ethnicity data. These data will allow us to confirm the distribution of eligible loans by socially disadvantaged agricultural producer group for the loan programs included in the ARPA debt relief program. However, although FSA provided these data, the agency did not do so in time to be reviewed and incorporated into the report. We will be analyzing this information and reporting on it in our future updates.
Methodology
To conduct this work, we reviewed federal laws, agency guidance on USDA’s website, and FSA officials’ written responses to our questions about the notification letters sent and received by USDA and participation by socially disadvantaged producers, among other topics. We also reviewed summary data that USDA provided to us as of July 28 and September 15, 2021, as well as FSA data for direct loans as of January 1, 2021, and guaranteed loans as of December 31, 2020. Based on our review of the written responses from USDA officials, we determined that these data were reliable for our purposes of supporting the description of the total number, location, and loan size associated with eligible or potentially eligible accounts as of July 28 and September 15, 2021. We were unable to determine whether the data by socially disadvantaged agricultural producer group were sufficiently reliable for race and ethnicity.
Agency Comments
We provided FSA and the Office of Management and Budget with a draft of this enclosure. FSA provided technical comments, which we incorporated as appropriate. The Office of Management and Budget did not provide comments.
GAO’s Ongoing Work
We will continue to monitor USDA’s spending for and implementation of its ARPA debt relief program for socially disadvantaged agricultural producers.
Related GAO Products
Agricultural Lending: Information on Credit and Outreach to Socially Disadvantaged Farmers and Ranchers Is Limited. GAO-19-539. Washington, D.C.: July 11, 2019.
Indian Issues: Agricultural Credit Needs and Barriers to Lending on Tribal Lands. GAO-19-464. Washington, D.C.: May 9, 2019.
Contact information: Steve D. Morris, (202) 512-3841, morriss@gao.gov
Shuttered Venue Operators Grant
Bookmark:The Small Business Administration’s Shuttered Venue Operators Grant program, which had awarded $9.7 billion out of a total appropriation of $16.25 billion as of September 20, 2021, has faced information technology challenges and concerns about the agency’s ability to effectively oversee the program.
Entity involved: Small Business Administration
Background
In 2020 and 2021, businesses in the performing arts and entertainment industries experienced economic hardship due to the COVID-19 pandemic. To assist these businesses, the Consolidated Appropriations Act, 2021, enacted in December 2020, authorized and appropriated $15 billion to the Small Business Administration (SBA) to implement the Shuttered Venue Operators Grant (SVOG) program. The American Rescue Plan Act of 2021, enacted in March 2021, appropriated an additional $1.25 billion for the program and modified certain eligibility requirements.[386]
- Eligibility. Eligibility is limited to live venue operators, promoters, live performing arts organization operators, movie theater operators, museums, talent representatives, and theatrical producers. Entities must have been in operation as of February 29, 2020, and must have lost at least 25 percent in gross earned revenue during at least one quarter of 2020 (compared to the same quarter in 2019), among other eligibility criteria.[387]
- Prioritization of grant awards. During the first 28 days of the program, SBA was required to prioritize applicants that lost significant gross earned revenue between April and December 2020 (compared to the same period in 2019). Specifically, during the first 14 days of the program accepting applications, SBA could only award grants to otherwise eligible applicants that had experienced a 90 percent or greater revenue loss. During the next 14 days, SBA could only award grants to otherwise eligible applicants that had experienced a 70 percent or greater revenue loss. After the priority period, SBA was required to award grants to all other eligible entities. In addition, SBA had to reserve at least $2 billion for eligible entities with up to 50 full-time employees during the first 59 days of the program.
- Grant amounts. SBA is authorized to award initial grants equal to 45 percent of an eligible applicant’s 2019 gross earned revenue. SBA also is authorized to award supplemental grants, if funding is available, to initial grant recipients that lost at least 70 percent during the most recent calendar quarter of 2021 (compared to the same quarter in 2019). Grant recipients can receive a maximum of $10 million in combined funding for their initial and supplemental awards.
- Fund usage. Grant recipients may spend initial grants on certain expenses incurred between March 2020 and December 2021 that enabled ongoing business operations (e.g., payroll costs, rent/mortgage payments). Grant recipients must return any initial funds not spent within 1 year of disbursement and maintain and submit records within 15 days of expending their grant to demonstrate compliance with grant requirements.[388]
Through the program, SBA is responsible for awarding $16.25 billion in grants to replace revenue that eligible businesses in the performing arts and entertainment industries lost due to the pandemic. As of September 20, 2021, the agency had issued decisions on 95 percent of applications. As of this date, applicants had requested 82 percent of the $16.25 billion in grant funds and SBA had awarded $9.7 billion, of which $9.5 billion had been disbursed. Grant recipients—located in all 50 states, the District of Columbia, Guam, Puerto Rico, and the U.S. Virgin Islands—were awarded about $812,000 on average. Most grant recipients (70 percent) received $500,000 or less (see figure). In addition, of the funds awarded, $5.6 billion went to entities with up to 50 full-time employees.
According to SBA, the program stopped accepting new applications on August 20, 2021. On August 27, 2021, SBA began inviting grant recipients that meet the 70 percent loss requirement to request supplemental grants. SBA officials said that eligible grant recipients would have 2 weeks to indicate their interest in receiving supplemental grants, after which SBA could not guarantee those funds would remain available. On September 24, 2021, SBA announced that it had begun issuing supplemental award decisions.
Overview of Key Issues
Information technology issues delayed the intake and processing of SVOG applications, but SBA modified its review process to speed up award issuance. On March 19, 2021, SBA announced it would start accepting SVOG applications on April 8, 2021, through an online portal. However, SBA closed the online application portal within hours of opening due to an error in the software code that prevented applicants from completing the applications. SBA delayed the start of the program for 2 weeks while it worked with its contractor to make the portal operable. On April 23, 2021, SBA announced that it would reopen the portal on April 24, 2021, but shifted the date to April 26, 2021, due to concerns from stakeholders about reopening on a Saturday.
Upon reopening the portal to applicants on April 26, 2021, SBA had to work with its contractor to develop and integrate technical features necessary for the agency to review applications and award grants. As a result, SBA delayed its issuance of awards from the initially announced timeline of mid-May 2021 to May 26, 2021. According to one performing arts industry group, its membership had experienced significant financial hardship due to the pandemic and found these delays frustrating. Representatives from the industry group told us their members had been waiting to receive financial assistance since the program was authorized in December 2020. They explained that the delays meant their members’ access to much needed financial assistance kept being prolonged. See the figure below for a timeline of the SVOG program.
Even after additional features were added to the portal, SBA was not meeting internal goals for processing applications, according to SBA officials. SBA officials told us their initial goal was to issue decisions within the first 14 days of grant awards for all applicants that had experienced a 90 percent or greater revenue loss between April and December 2020 (compared to the same period in 2019). According to SBA data, by June 9, 2021, the program had issued only 90 awards, totaling $127.9 million. On June 10, 2021, SBA revised its goal for processing applications and set a new goal of internally finalizing decisions regarding eligibility for 10,000 applications by July 4, 2021, according to agency officials.
To process applications more quickly, SBA officials told us they revised the review process after June 10, 2021. According to SBA, the agency modified its review approach for verifying applicants’ information to align with standards used in other federal programs, such as the Restaurant Revitalization Fund. Previously, the agency had assessed and verified information that all applicants submitted using external government databases. Beginning in mid-June 2021, SBA started to rely more on applicants’ attestation and submitted documents to validate certain eligibility components for selected applicants. In addition, SBA began to disburse funds to grant recipients in a single lump-sum payment, rather than using its earlier method of disbursing funds in installments based on risk factors. The rate at which SBA awarded grants increased after it implemented these application revisions, among other changes.
SBA’s Office of Inspector General (OIG) raised concerns about SBA’s ability to conduct effective program oversight. On April 7, 2021, the SBA OIG issued a management alert expressing concerns about SBA’s implementation of the program, including policies and procedures to address potential misuse of program funds.[389] The management alert suggested four actions for strengthening program oversight (see table). Because the management alert does not make recommendations, OIG officials told us they are not following typical procedures to monitor SBA’s progress in implementing the four suggested actions. However, OIG officials had information on SBA’s progress from documents that SBA submitted following the management alert’s issuance. OIG officials said SBA had fully addressed two of the suggested actions.
Source: Small Business Administration (SBA). | GAO-22-105051
In some instances, SBA’s updates to guidance resulted in confusion for applicants. SBA has issued several types of program guidance for applicants, such as an application checklist and frequently asked questions. However, SBA reversed guidance under which many applicants had operated for multiple months. For example, on July 27, 2021, SBA issued modified guidance, stating that applicants could appeal or request a reconsideration of their application decisions. This reversed earlier guidance, in effect since February 2021, that prohibited appeals or reconsiderations. SBA has been making funding decisions since late May 2021, which means that applicants denied funding and operating under the old guidance did not know they would have an opportunity to appeal the denial. As a result, some applicants operating under the old guidance may have had to close their businesses or seek other financial support in the months before the guidance changed. According to SBA, the agency is retroactively applying the modified guidance. On August 2, 2021, SBA began inviting all declined applicants to appeal their denials. On August 6, 2021, SBA invited grant recipients awarded at least $100 less than they had requested to request reconsideration of their grant amount.
Representatives from five industry groups told us SBA’s approach to updating guidance sometimes made it difficult to understand program requirements, but they added that SBA has been responsive to their feedback. For example, representatives from two industry groups noted that SBA did not appear to fully understand their industries’ diverse business models when creating written descriptions of program eligibility requirements. SBA has also updated some guidance to improve its clarity in response to feedback from industry groups, according to representatives from a commercial theater industry group and museum industry groups. SBA officials said their iterative approach to disseminating program guidance was necessary for reasons that included wanting to ensure the guidance reflected lessons learned as the program progressed.
Methodology
We reviewed SBA data on applications and grants awarded as of September 20, 2021. We determined these data were sufficiently reliable for our purposes by discussing the data collection and quality-check processes with knowledgeable SBA officials. We also reviewed relevant laws and SBA program guidance, policies, and procedures. We interviewed SBA officials to discuss their experiences in administering the program and assistance to program participants. Further, we reviewed the SBA OIG’s management alert for the program and relevant agency documents that pertain to concerns raised in the alert. In addition, we interviewed OIG officials to discuss SBA’s responses to the alert. Finally, we interviewed five associations that represent SVOG-eligible businesses. Their views are not generalizable to all SVOG eligible businesses, but offered important perspectives.
Agency Comments
We provided SBA and the Office of Management and Budget (OMB) with a draft of this enclosure. SBA provided technical comments, which we incorporated as appropriate. OMB did not provide comments on this enclosure.
GAO’s Ongoing Work
Our work assessing SBA’s implementation of the SVOG program is ongoing. We plan to examine the characteristics and experiences of SVOG participants. We also plan to examine the safeguards SBA implemented to help ensure that grants were awarded to applicants that met program requirements and were used to pay for eligible expenses.
Contact information: William B. Shear, (202) 512-8678, shearw@gao.gov
Restaurant Revitalization Fund
Bookmark:The Small Business Administration awarded all of the $28.6 billion in Restaurant Revitalization Fund assistance by June 30, 2021.
Entity involved: Small Business Administration
Background
In 2020 and 2021, restaurants, bars, and other food service businesses experienced substantial revenue loss due to the COVID-19 pandemic and related business closures, disrupted business models, and decreased customer demand for indoor dining. On March 11, 2021, the American Rescue Plan Act of 2021 established the Restaurant Revitalization Fund (RRF) and appropriated $28.6 billion for the Small Business Administration (SBA) to provide support to eligible entities that suffered revenue losses related to the COVID-19 pandemic.
- Eligibility. Businesses eligible for RRF assistance included restaurants, food stands, caterers, bars, and similar places of business that serve food or drink.[390] Eligibility requirements included that businesses had to have fewer than 20 locations and had to not have been permanently closed.[391] Assistance may be used for 11 types of business expenses, including payroll, mortgage, rent, supplies, and food and beverages.[392]
- Assistance size and requirements. The maximum funding amount was $5 million per location and $10 million for businesses with multiple locations or affiliates. The minimum funding amount was $1,000. Assistance was awarded based on the recipients’ documented revenue losses.[393] The funds do not need to be repaid as long as they are used for eligible expenses by March 11, 2023. Recipients that do not fully expend award funds prior to December 31, 2021, will be required to complete annual reporting submissions until they fully expend the award funding or until March 11, 2023. SBA plans to put a new form in the application portal for recipients to report on their use of award funds in October 2021.
- Application period. SBA accepted RRF applications from May 3, 2021 to May 24, 2021.[394] SBA began approving applications on May 7, 2021, and disbursing funds on May 10, 2021.
The American Rescue Plan Act required that during the first 21 days of the program, eligible entities owned and controlled by women, veterans, or socially and economically disadvantaged small business concerns as defined in the Small Business Act receive priority in award assistance.[395] The 21-day period ended on May 24, 2021. After SBA launched the RRF, three federal lawsuits were filed challenging the 21-day priority period—one in the Eastern District of Tennessee (Vitolo et. al. v. Guzman) and two in the Northern District of Texas (Greer’s Ranch Café et. al. v. Guzman and Blessed Cajuns et. al. v. Guzman), which led to three adverse court rulings against SBA.
With the expiration of the 21-day priority period on May 24, 2021, and in light of certain court rulings issued on May 27 and May 28, 2021, SBA began processing RRF applications in the order received, without regard to priority status.[396] SBA continued to process applications and issue RRF assistance until the fund was exhausted on June 30, 2021.
Overview of Key Issues
All RRF funds had been awarded as of June 30, 2021. Specifically, SBA disbursed funds totaling $28.5 billion to 100,650 recipients (see figure). Thirty-six percent of applicants received funding. According to SBA, an estimated 177,300 applicants were not approved because the fund was exhausted. Businesses applied for a total of $72.2 billion in funding, which was $43.7 billion more than was appropriated for the program.
Funds were distributed across all U.S. states, but were concentrated in urban areas. According to SBA data,
- 85 percent of recipients were located in urban areas (85,128 recipients, $26 billion);
- 27 percent of recipients operated in low- to moderate-income areas (27,210 recipients, $7.3 billion), which include rural and urban areas;[397]
- states with the most recipients and funds were California (15,962 recipients, $5.7 billion), New York (9,753 recipients, $3.7 billion), and Texas (6,372 recipients, $1.7 billion); and
- states with the fewest recipients and funds were South Dakota (193 recipients, $25.6 million), North Dakota (170 recipients, $26 million), and Wyoming (123 recipients, $18.1 million).
Between 12 and 41 percent of potentially eligible recipients per state received funding, as shown in the figure below.[398] The states with the fewest recipients as a percentage of eligible restaurants were Idaho (304 recipients, $47.5 million), North Dakota (170 recipients, $26 million), and Wyoming (123 recipients, $18.1 million), each with 12 percent. The states with the greatest number of recipients as a percentage of potentially eligible recipients were Hawaii (1,145 recipients, $414.4 million) with 41 percent, the District of Columbia (729 recipients, $400.5 million) with 38 percent, and Oregon (2,337 recipients, $530.9 million) with 29 percent. Not every potentially eligible restaurant in each state applied for funding.
Restaurant Revitalization Fund Recipients, as a Percentage of the Total Number of Restaurants with 500 or Fewer Employees in Each State, as of June 30, 2021
Most funding amounts (87 percent) were for less than $500,000 (see figure). According to SBA data, approximately 10 percent of recipients were franchisees (businesses that purchase the right to sell a company’s goods or services under the company’s business model and trademark). Of those recipients, Subway franchisees were the largest group (2,868 recipients), followed by Dunkin’ Donuts franchisees (302 recipients) and IHOP franchisees (296 recipients). In addition, when considering total funding amount per franchise chain, 41 percent of the RRF funds disbursed to franchisees went to those representing 10 franchise chains.
Methodology
To conduct this work, we reviewed SBA documentation on the RRF program and interviewed SBA officials. We analyzed SBA’s recipient data and assessed the reliability of these data by interviewing SBA officials.[399] We determined that the data were sufficiently reliable for reporting aggregate recipient data, including the number and dollar amount by geography and other demographic descriptions. We also reviewed court decisions and other relevant legal documents related to the program. We interviewed two industry groups that represent eligible businesses; their views are not generalizable to all eligible businesses.
Agency Comments
We provided SBA and the Office of Management and Budget with a draft of this enclosure. SBA and the Office of Management and Budget did not provide comments on this enclosure.
GAO’s Ongoing Work
Our work assessing SBA’s implementation of the RRF program is ongoing. We continue to examine the characteristics and experiences of program participants and the safeguards SBA has implemented to help ensure that funds were disbursed to applicants that met program requirements and were used to pay for eligible expenses.
Contact information: William B. Shear, (202) 512-8678, shearw@gao.gov
Assistance for Fishery Participants
Bookmark:As of September 15, 2021, of the $298 million in CARES Act funding for fisheries participants, $214.4 million has been disbursed to eligible fisheries participants; none of the additional $300 million in COVID-19 relief funds made available under the Consolidated Appropriations Act, 2021, has been disbursed because the agency is still receiving and reviewing spend plans.
Entity involved: National Oceanic and Atmospheric Administration, within the Department of Commerce
Background
Commercial and recreational marine fisheries are critical to the nation’s economy, contributing approximately $99.5 billion to the U.S. gross domestic product and supporting approximately 1.7 million jobs in 2016, according to the National Oceanic and Atmospheric Administration (NOAA).[400] Widespread restaurant closures in the spring of 2020 led to a decrease in demand for seafood, adversely affecting the fisheries industry.
The 2020 CARES Act authorizes the Department of Commerce to provide assistance to eligible tribal, subsistence, commercial, and charter fishery participants affected by COVID-19, which may include direct relief payments.[401] The act appropriated $300 million to the Department of Commerce to assist fishery participants.[402] After $2 million in administrative fees were assessed by NOAA, $298 million of the $300 million was obligated for eligible fishery participants. These include tribes, persons, fishing communities, aquaculture businesses not otherwise eligible for certain assistance, processors, and other fishery-related businesses, who have incurred, as a direct or indirect result of COVID-19, certain specified economic revenue losses or other negative impacts.[403] Businesses such as vessel repair businesses, restaurants, and seafood retailers are not considered fishery-related businesses eligible to receive this CARES Act funding, according to NOAA’s website.
An additional $300 million for certain COVID-19-related fisheries disaster assistance was appropriated under the Consolidated Appropriations Act, 2021, signed by the President into law on December 27, 2020.[404] The amount provided is only to be allocated to states bordering the Atlantic, Pacific, or Arctic Oceans, the Gulf of Mexico, or the Great Lakes, as well as to territories and certain tribes.[405] As of September 7, 2021, all funds appropriated under the Consolidated Appropriations Act, 2021 have been obligated, according to NOAA officials.
Overview of Key Issues
CARES Act funding was allocated in May 2020, and most of it was obligated in July 2020. On May 7, 2020, the Secretary of Commerce announced the allocation of about $298 million of the $300 million in CARES Act funding for states, tribes, and territories with fishery participants.[406]
NOAA used these allocations to obligate almost $297 million of the available $298 million in funding to the three interstate marine fisheries commissions—Atlantic States, Gulf States, and Pacific States—from June 30 through July 2, 2020, and to the government of Puerto Rico on July 14, 2020. NOAA also obligated $993,000 to the government of the U.S. Virgin Islands on November 13, 2020.[407]
The commissions play an important role in disbursing funds as part of NOAA’s fishery disaster assistance program, which provides funding to fishery participants experiencing economic losses from specific events, such as hurricanes or oil spills.[408] For the CARES Act funding, the commissions worked with states, tribes, and territories in their regions to develop spend plans for NOAA’s review and approval. These plans explain how states, tribes, and territories will verify whether fishery participants meet the requirements of the CARES Act to receive funds.
- As of May 1, 2021, NOAA had received the 30 plans it anticipated from the states and territories. As of July 1, 2021, all 30 plans had been reviewed and approved.
- Additionally, as of May 1, 2021, 30 tribal spend plans had been submitted to NOAA and all had been approved.
Once a state, tribe, or territory’s spend plan has been approved by NOAA, that entity solicits and reviews applications from fishery participants, determines whether participants meet the eligibility criteria, and determines the direct payment amount based on the methodology outlined in its spend plan.[409] The respective interstate marine fisheries commissions disburse the appropriate amount of funds directly to the fishery participant consistent with the approved spend plan, though some states and tribes may disburse funds themselves.[410]
More than 70 percent of CARES Act funding had been disbursed to fishery participants as of September 15, 2021. As of September 15, 2021, the three interstate marine fisheries commissions had disbursed over 70 percent of obligated funds ($214.4 million out of the $298 million) to fishery participants in 22 states, 17 tribes, and 2 U.S. territories as shown in the table below.[411] As we previously reported in our March 2021 report, NOAA officials told us that they expected the vast majority of CARES Act funds to be disbursed to fishery participants by May 2021.
Source: GAO analysis of Department of Commerce data. | GAO-22-105051
Note: The CARES Act appropriated $300 million to the Department of Commerce to assist fishery participants. Pub. L. No. 116-136, § 12005(d), 134 Stat. at 518.
aPuerto Rico is not part of an interstate marine fisheries commission.
bAccording to National Oceanic and Atmospheric Administration officials, 16 of the 30 tribes from this group have received funding.
cAccording to National Oceanic and Atmospheric Administration officials, one eligible tribe from this group has received funding.
NOAA officials acknowledged that the vast majority of funds had not been disbursed by May 2021 for a few reasons. Officials told us that that the amount of funding provided under the CARES Act and the number of states involved in the process was larger than any past fishery disaster the agency has been involved with. In addition, Washington and Alaska, which together account for about one-third of the allocated funds ($99.3 million), took longer than the other states to submit spend plans and review applications. According to NOAA officials, this was due in part to the number of applications that needed to be reviewed by these states as part of implementing their spend plans and in part to the review process occurring during the fishing season when fishery participants were not available to meet with state officials to discuss identified issues in their applications. NOAA officials said that during conversations with state and commission officials, they have shared lessons learned from the disbursement process in an attempt to help other states disburse the funds in a more expedited manner.
An additional $300 million in COVID-19 relief funds was appropriated in December 2020, and as of September 7, 2021, all of the funds have been obligated but none have been disbursed. Of the $300 million in additional COVID-19 relief funds appropriated under the Consolidated Appropriations Act, 2021, $255 million has been allocated by NOAA to the three fisheries commissions, Puerto Rico, and the U.S. Virgin Islands. The remaining $45 million was allocated to specified tribal fishery participants and to fishery participants bordering the Great Lakes. As of September 7, 2021, all funding has been allocated and obligated but no funds have been disbursed, according to agency officials. Fourteen states have approved spend plans and have initiated their application processes to disburse funds. According to NOAA officials, the agency is still receiving and reviewing spend plans from the remaining marine coastal states and territories, and the Great Lakes states. As of September 15, 2021, NOAA has received 10 spend plans to review, and is still waiting to receive 12 spend plans.[412]
Methodology
To conduct this work, we reviewed NOAA data as of September 15, 2021; examined documents related to NOAA’s data system; and interviewed officials familiar with the data system. We determined that the data were sufficiently reliable for our purposes by reviewing agency documents and speaking with agency officials. We also reviewed relevant laws, including the CARES Act and the Consolidated Appropriations Act, 2021, and agency documents, and interviewed NOAA officials.
Agency Comments
We provided a copy of this enclosure to NOAA and the Office of Management and Budget (OMB) for review and comment. NOAA provided us with technical comments, which we have incorporated as appropriate. OMB did not provide comments on this enclosure.
GAO’s Ongoing Work
We will continue to monitor CARES Act assistance to fishery participants in ongoing and planned work.
GAO’s Prior Recommendations
The table below presents our recommendation on assistance for fishery participants from prior bimonthly and quarterly CARES Act reports.
Source: GAO. I GAO-22-105051
Contact information: Cardell Johnson, (202) 512-3146, johnsoncd1@gao.gov
Food Safety Inspections
Bookmark:The U.S. Department of Agriculture has taken steps to continue required inspections of meat and poultry and track the COVID-19 status of inspectors.
Entity involved: Food Safety and Inspection Service, within the U.S. Department of Agriculture
Background
COVID-19 has caused disruptions in the U.S. food supply chain, from the farms that produce raw agricultural commodities to the food-processing and distribution network that enables consumers to use these commodities. The 7,799 inspectors and other frontline staff from the U.S. Department of Agriculture’s (USDA) Food Safety and Inspection Service (FSIS) work in more than 6,500 federally inspected meat and poultry plants and other establishments.[413] These inspectors help ensure the safety and wholesomeness of meat and poultry that enter interstate commerce. FSIS also has responsibility for inspecting meat and poultry products at U.S. ports and conducting audits of foreign food safety inspection systems.
During the pandemic, some FSIS inspectors have been exposed to COVID-19, and the risk of such exposure has posed a potential challenge for FSIS in continuing food safety inspections. According to April 2020 interim guidance from the Centers for Disease Control and Prevention (CDC) and the Occupational Safety and Health Administration, working in close conditions, as is common in meat and poultry plants, may contribute to exposure to COVID-19. In January 2021, the Occupational Safety and Health Administration published COVID-19 worker safety guidance, including recommendations for workplace COVID-19 prevention programs and policies.[414] See the enclosure on Worker Safety and Health in appendix I for more information on the Occupational Safety and Health Administration’s efforts during the pandemic.
As of July 2021, USDA had obligated and spent $32 million of the $33 million in CARES Act funds that Congress appropriated to FSIS in March 2020 to prevent, prepare for, and respond to COVID-19 with regard to food safety inspections.[415] FSIS spent almost $24 million for food safety inspections, including to cover costs to maintain staffing of FSIS inspectors and to fund achievement awards.[416] For example, officials told us that USDA most recently used $13.9 million of these funds for achievement awards to frontline and other FSIS employees who volunteered to perform in-plant inspection from March 2020 through June 2020.[417] Of the remaining $8 million, FSIS used these funds for supplies and materials, such as personal protective equipment. USDA plans to use any remaining CARES Act funds for award payouts to in-plant personnel, according to officials.
Overview of Key Issues
FSIS continued U.S. inspection activities and conducted remote audits to evaluate foreign inspection systems during the COVID-19 pandemic. According to USDA officials, during the COVID-19 pandemic, FSIS has maintained required inspection services to ensure that establishments including meat and poultry plants can operate. FSIS also continued to execute its fiscal year 2021 testing plan—sampling of pathogens in meat and poultry products—with no impact from the COVID-19 pandemic.
In addition to inspections at U.S. plants, FSIS took steps to continue monitoring and verifying that foreign food safety inspection systems met U.S. standards. In carrying out this responsibility, FSIS typically uses a three-pronged approach—point-of-entry reinspection of imported meat and poultry products, reviews of annual self-reporting tools by countries that export to the U.S., and on-site verification audits—and it largely maintained this approach during the pandemic.[418]
Although FSIS was not able to conduct on-site audits in foreign countries because of COVID-19, the agency implemented a remote audit process, consisting of virtual meetings and electronic information exchanges, to evaluate the effectiveness of foreign food safety inspection systems through document review and interviews.[419] According to officials, FSIS also used available data streams to monitor for food-related recalls, illness outbreaks, natural disasters, issuance of inspection system audit reports by third parties, and animal disease outbreaks in countries exporting to the U.S. The remote audit approach is similar to the one taken by some trading partners for auditing the U.S. inspection system during this time, according to FSIS officials.
According to agency documentation, as of December 2020, the remote audit is to assess inspection records for a designated period within the last 12 months and seek to verify ongoing effectiveness of foreign inspection programs. Throughout the pandemic, these remote audits, among other things, have not shown evidence of any systemic failures to comply with U.S. equivalency standards representing an immediate threat to public health, according to FSIS officials.
FSIS may leverage performance-monitoring data used by foreign authorities, if available, to assess the effectiveness of foreign authorities’ inspection systems. This approach is similar to how FSIS collects and utilizes data to monitor and verify the effectiveness of the U.S. inspection system. The remote audit process has proven to be a useful tool for reviewing foreign inspection systems in the absence of being able to travel internationally to perform on-site audits, according to officials. FSIS is currently in the process of scheduling on-site audits in locations where it is safe to do so; however, lessons learned from the remote audit process will be applied to enhance the efficiency and effectiveness of future audits, according to officials. They noted that such audits will incorporate a blend of virtual meetings and document review with on-site observations.
USDA has tracked FSIS inspectors’ and other staff’s COVID-19-related absences and identified lessons learned. According to USDA documentation, as of August 23, 2021, 1,692 inspectors and staff (or about 22 percent of total inspectors and other frontline staff) had reported a COVID-19 diagnosis confirmed by a test or medical professional since the first reported case in March 2020. Of these employees, 1,620 had returned to work, seven were self-quarantining, and 14 were deceased.[420]
Although FSIS does not specifically require employees to report COVID-19 infections and relies on staff to self-report, FSIS employees are required to report an absence from work. According to USDA’s FSIS Human Pandemic Operations Plan, under the agency’s leave directive, FSIS employees are required to report to their supervisors if they will be absent from duty and, in the event of a human pandemic, supervisors and managers should initiate a follow-up for any unscheduled employee absence.[421] Upon notification of a positive COVID-19 test result from an employee, FSIS gathers pertinent information such as illness onset, testing date and result, last time in the building, and contact with other employees at the workplace. The agency uses the information to determine any necessary notifications to FSIS and meat and poultry plant personnel, according to officials.
In response to the pandemic, USDA and the meat and poultry industry implemented intervention measures.
- Earlier in the pandemic, some meat and poultry plants closed temporarily as an intervention measure in response to COVID-19 cases among workers, according to CDC.
- In accordance with the department’s COVID-19 workplace safety plan dated July 28, 2021, USDA began requiring its employees to wear a mask in federal buildings and vehicles owned or leased by the government, regardless of the employee’s vaccination status, if located in an area of “substantial” or “high” community COVID-19 transmission.[422] In an update to the plan on August 23, 2021, the department also stated federal employees who work in areas that have stricter state, local, or tribal mask mandates should follow those masking requirements.
- According to the company’s website, as of August 2021, as an intervention measure, a national meat and poultry company is requiring all of its employees to be fully vaccinated against COVID-19 by November 1, 2021.
USDA officials said that, as of August 2021, there were no establishments that had to close because of a lack of available FSIS inspectors during the pandemic.
For future pandemics, FSIS intends to update its emergency plan—the FSIS Human Pandemic Operations Plan—annually and apply lessons learned, according to officials. The plan will inform leadership preparation and decision-making for any future pandemics, according to officials. They also said that storing up personal protective equipment is one lesson learned from the COVID-19 pandemic experience.
According to these officials, another lesson learned is to rely on the expertise of federal partners such as CDC, the Occupational Safety and Health Administration, and state and local health departments. For example, FSIS recently issued a notice for establishments (meat and poultry plants) to follow the latest CDC guidance—wearing masks when FSIS personnel are present, regardless of vaccination status, if located in an area of “substantial” or “high” community COVID-19 transmission—by August 9, 2021.[423] According to FSIS, if an establishment does not meet these expectations, the agency may take additional measures to reduce COVID-19 exposure for FSIS plant personnel, such as not providing inspection service to the establishment until it follows CDC guidance.
Methodology
To conduct this work, we reviewed the most recent USDA data on COVID-19 illnesses and exposures among FSIS employees available as of August 23, 2021; the CARES Act; agency policy and other guidance; USDA expenditure data as of July 23, 2021; and written responses to questions we emailed FSIS officials. We assessed the reliability of agency data by reviewing relevant USDA and FSIS documents, our prior use of the data sources, and written responses from the agency about the data. We determined the data were sufficiently reliable for estimating the number of FSIS staff who had become ill with COVID-19.
Agency Comments
We provided a draft of this enclosure to USDA and the Office of Management and Budget for review and comment. USDA and the Office of Management and Budget did not have any comments related to this enclosure.
GAO’s Ongoing Work
We plan to assess federal efforts to protect worker safety and health in meat and poultry plants during the COVID-19 pandemic in ongoing work.
Contact information: Steve D. Morris, (202) 512-3841, morriss@gao.gov
Airport Grants
Bookmark:The Federal Aviation Administration is administering grants to help the nation’s airports respond to and recover from the economic effects of the COVID-19 pandemic.
Entity involved: Federal Aviation Administration, within the Department of Transportation
Background
Historic decreases in passenger demand for air travel due to the COVID-19 pandemic significantly affected U.S. airports’ abilities to generate the revenue needed for operating and infrastructure costs. According to data filed with the Department of Transportation (DOT), U.S. airlines carried about 47 percent fewer passengers in March 2021 than in March 2019. One airport association estimates that U.S. airports will face $40 billion in operating losses and additional costs related to COVID-19 from March 2020 to March 2022. Airport associations reported that passenger traffic increased over the summer months of 2021, particularly at airports serving domestic leisure travelers. However, airports serving more international or business travelers have not had the same levels of recovery. Additionally, it is unclear how the delta variant, or other COVID-19 variants, will affect air travel demand in the fall and winter months of 2021. The CARES Act, the Consolidated Appropriations Act, 2021, and the American Rescue Plan Act of 2021 provided a combined total of $20 billion in federal funding for U.S. airports to respond to the COVID-19 pandemic, although funding allocation and certain allowable uses differ under each act.
Obligations and expenditures. Of the $20 billion combined total in federal COVID-19 relief funding provided by the CARES Act, Consolidated Appropriations Act, 2021, and the American Rescue Plan Act of 2021 for U.S. airports, about $16 billion has been obligated and $8 billion expended by FAA as of September 27, 2021, according to FAA officials.
CARES Act. The CARES Act, signed into law on March 27, 2020, provided $10 billion to support U.S. airports of all sizes to prevent, prepare for, and respond to the COVID-19 pandemic.[424] Airport owners—also known as airport sponsors—may use CARES Act funds for any purpose for which airport revenues may be lawfully used, including for airport operating expenses and debt service. As of September 27, 2021, the Federal Aviation Administration (FAA) had obligated over $9 billion and expended over $7 billion to reimburse airports for eligible costs and to increase the federal share for 2020 Airport Improvement Program (AIP) grants, according to FAA officials (see table). As of September 27, 2021, FAA had processed CARES Act grant applications for 3,229 U.S. airports.
Source: GAO analysis of CARES Act, Pub. L. No. 116-136, 134 Stat. 281 (2020) and data from the Federal Aviation Administration (FAA). | GAO-22-105051
aThe CARES Act directed FAA to allocate funding to these groups through various formulas. Approximately 3,300 airports in the U.S. are part of the national airport system and are eligible to receive federal AIP grants to fund infrastructure projects. The CARES Act appropriated at least $500 million to increase the federal share to 100 percent for grants awarded for airport infrastructure projects under fiscal year 2020 and supplemental discretionary grants.
bCommercial service airports are publicly owned airports with at least 2,500 passenger boardings per year and scheduled air service.
cPrimary airports are large, medium, and small hub and non-hub airports with more than 10,000 passenger boardings per year.
dGeneral aviation airports are public-use airports with fewer than 2,500 passenger boardings per year and no scheduled air service.
eUnder the Consolidated Appropriations Act, 2021, unallocated CARES funds as of December 27, 2020 were to be allocated under the Consolidated Appropriations Act, 2021 using the primary commercial service and certain cargo airports allocation formula. According to FAA officials, FAA calculated that $290,774,557 in CARES Act funds are available for reallocation under the Consolidated Appropriations Act, 2021.
Consolidated Appropriations Act, 2021. The Consolidated Appropriations Act, 2021, enacted on December 27, 2020, provided $2 billion in additional federal aid to help eligible airports and certain tenants to prevent, prepare for, and respond to COVID-19.[425] Airports must use Consolidated Appropriations Act, 2021 grant funding for costs related to operations, personnel, cleaning, sanitization, janitorial services, combating the spread of pathogens at the airport, and debt service payments.[426] Certain amounts are also available to provide relief from rent and minimum annual guarantees to airport concessions. As of September 27, 2021, FAA had obligated about $2 billion and expended about $570 million to reimburse airports for eligible costs, according to FAA officials (see table). As of September 27, 2021, FAA had processed Consolidated Appropriations Act, 2021 grant applications for 2,966 U.S. airports.
Source: GAO analysis of the Consolidated Appropriations Act, 2021, Pub. L. No. 116-260, div. M, tit. IV, 134 Stat. 1182, 1939-41 (2020), and data from the Federal Aviation Administration (FAA). | GAO-22-105051
aThe Consolidated Appropriations Act, 2021 directed FAA to allocate funding to these groups through various formulas. Primary commercial service airports are publicly owned airports with more than 10,000 passenger boardings per year and scheduled air service. Cargo airports are airports that, in addition to any other air transportation services that may be available, are served by aircraft providing air transportation of only cargo with a total annual landed weight of more than 100 million pounds.
bNon-primary commercial service airports have at least 2,500 and no more than 10,000 passenger boardings each year. General aviation airports are public-use airports with fewer than 2,500 passenger boardings per year or no scheduled air service.
cNon-primary airports are the same as non-primary commercial service airports, and have at least 2,500 and no more than 10,000 passenger boardings each year. The Federal Contract Tower Program, established in 1982, allows the agency to contract out the operation of certain towers.
dThe Small Community Air Service Development Program is a grant program designed to help small communities address air service and airfare issues.
American Rescue Plan Act of 2021. The American Rescue Plan Act of 2021, enacted on March 11, 2021, provided an additional $8 billion for airport assistance.[427] The allowable uses of funds are similar to those for the Consolidated Appropriations Act, 2021, and are available for costs related to operations, personnel, cleaning, sanitization, janitorial services, combating the spread of pathogens at the airport, and debt service payments. Certain amounts are available to increase the federal share for AIP grants, and to provide relief from rent and minimum annual guarantees to airport concessions. As of September 27, 2021, FAA had obligated over $4 billion and expended about $300 million to reimburse airports for eligible costs, according to FAA officials (see table). As of September 27, 2021, FAA had processed American Rescue Plan Act of 2021 grant applications for 1,147 U.S. airports.
Source: GAO analysis of the American Rescue Plan Act, 2021, Pub. L. No. 117-2, § 7102, 135 Stat. 4, 96-98, and data from the Federal Aviation Administration (FAA). | GAO-22-105051
aThe American Rescue Plan Act of 2021 directed FAA to allocate funding to these groups through various formulas. Primary commercial service airports are publicly owned airports with more than 10,000 passenger boardings per year and scheduled air service. Cargo airports are airports that, in addition to any other air transportation services that may be available, are served by aircraft providing air transportation of only cargo with a total annual landed weight of more than 100 million pounds.
bNon-primary commercial service airports have at least 2,500 and no more than 10,000 passenger boardings each year. General aviation airports are public-use airports with fewer than 2,500 passenger boardings per year or no scheduled air service.
cPrimary commercial airport sponsors may only use these funds to provide relief from rent and minimum annual guarantees to in-terminal airport tenants, subject to additional conditions. An eligible large airport concession is one that is in-terminal and has maximum gross receipts, averaged over the previous three fiscal years, of more than $56,420,000. An eligible small airport concession is one that is in-terminal and is a small business with maximum gross receipts, averaged over the previous three fiscal years, of less than $56,420,000, and is a joint venture.
Overview of Key Issues
Airport grant administration, challenges, and oversight. With regard to COVID-19 relief funding appropriated by the CARES Act, Consolidated Appropriations Act, 2021, and the American Rescue Plan Act of 2021, FAA is processing airport grant applications, obligating funds, and reviewing invoices to reimburse airport sponsors. FAA has also provided guidance on airport grant requirements for these programs, including for workforce retention and tenant relief, which we discuss further below.
As we previously reported, FAA has identified challenges to administering CARES Act airport grants, including the need to process grants for over 3,000 airport sponsors under expedited time frames, with expanded eligible uses for these funds. To address the increased workload of processing and monitoring three new airport relief grant programs, FAA has established a dedicated team, including two full-time employees and three annuitants with prior airport grant management experience, to review and process airport payment requests. Since we last reported, FAA identified additional workload challenges related to administering the airport tenant relief portions of the Consolidated Appropriations Act, 2021 and the American Rescue Plan Act of 2021. Airport association representatives also noted that FAA was slow to administer and implement the American Rescue Plan Act of 2021 in the spring and summer of 2021, in part because FAA was administering other airport grant programs at the same time. According to airport association representatives, delays and uncertainty around grant rollout for the American Rescue Plan Act of 2021 funds have created challenges for airports’ financial planning efforts. To address some of these challenges, FAA reported that it has detailed additional personnel to assist in reviewing concessions rent relief plans, which we will discuss in further detail below under airport tenant relief.
With regard to monitoring and oversight, FAA officials also reported that the agency hired a contractor in the fall of 2020 to review FAA’s reimbursement processes for CARES Act grants and provide recommendations on auditing policies and procedures. FAA officials said that the contractor had completed its review of FAA’s reimbursement processes for CARES Act funding, and issued several recommendations for improvement.[428] Specifically, the contractor recommended that FAA (1) provide airport sponsors with job aids (including a guide and checklist) on how to submit reimbursement requests to ensure completeness and consistency, (2) create a centralized document to improve reviews of reimbursement requests, and (3) standardize how the agency communicates its decisions to airports. FAA officials reported that FAA has taken steps to streamline its reimbursement process and publish updated guidance on its CARES Act website for airports, and will continue to improve its processes based on these recommendations. FAA officials reported that they have hired the same contractor to conduct reviews of the Consolidated Appropriations Act, 2021 funds.[429] FAA is also currently in the process of searching for and hiring a contractor to oversee the American Rescue Plan Act of 2021 funds.
As non federal entities, public airport sponsors that receive federal grants are also subject to the Single Audit Act, and they must undergo a single audit of those awards annually when their expenditures meet a certain dollar threshold—currently $750,000 or more in a fiscal year.[430] Single audits of an entity’s financial statements and federal awards can help identify deficiencies in an award recipients’ compliance with applicable laws and regulations, help ensure the appropriate use of federal funds, and reduce the likelihood of federal improper payments. FAA officials stated that, in accordance with Single Audit Act requirements, the agency notifies airport sponsors if the amount of their expenditures triggers the $750,000 threshold. The airport sponsor must then confirm annually that the audit was completed and uploaded to the Federal Audit Clearinghouse. FAA officials explained that airport sponsors’ independent auditors conduct the Single Audits, but FAA often provides technical assistance about CARES Act grant expenditures. If the audits identify a finding, FAA then follows up with the airport to ensure they have taken corrective action. Additionally, the DOT Office of Inspector General may check compliance and review single audit reports for DOT fund recipients, and is currently reviewing DOT’s processes for verifying that these audits have been completed, among other things.
Airport grant funding uses. Airport association representatives told us that the federal funding provided has been critical. FAA has begun to collect and consolidate data from airports on general spending categories for CARES Act funding through grant close-out reports, which are completed once all allocated airport funds have been expended. As of September 27, 2021, FAA officials said that 765 CARES Act airport grants, totaling $2.47 billion, have been closed out. For these grants, the majority of airport grant funds have been used for payroll and debt servicing. As for Consolidated Appropriations Act, 2021 and American Rescue Plan Act of 2021 funding, FAA officials reported that they have not yet begun to close out these grants as of September 2021. However, airport associations said that airport sponsors are generally using these grants to pay down debt and pay for operating expenses such as payroll.
Workforce retention requirements and monitoring. Certain airport sponsors accepting CARES Act grant funds were required to continue to directly employ at least 90 percent of the number of employees onboard as of March 27, 2020, through the end of the calendar year 2020.[431] The Consolidated Appropriations Act, 2021 extended these same workforce retention requirements through February 15, 2021. Airports that accept American Rescue Plan Act of 2021 grants were subject to the same workforce retention requirements through September 30, 2021.[432] According to FAA, the 131 largest U.S. airports were subject to this requirement under the Consolidated Appropriations Act, 2021.
FAA officials said at the time that airport sponsors execute a COVID-19 relief grant, sponsors certify that they will meet the workforce retention requirements and report their employee numbers. Since we last reported in July 2021, FAA has continued to monitor compliance with workforce retention requirements for the 131 affected airports. More specifically, FAA officials stated that they receive workforce retention information from airports through a dedicated CARES Act email and track these employee numbers, comparing them to the March 27, 2020 baseline data, to ensure airports are meeting the 90-percent threshold. Airport associations told us that airports have not faced challenges meeting these workforce retention requirements.
Airport tenant relief. As part of the Consolidated Appropriations Act, 2021 requirements, airport sponsors that accept tenant relief funds will waive rent and minimum annual guarantee obligations for eligible airport tenants beginning December 27, 2020, until the relief equals the total tenant relief allocation amount and to the extent permissible under state and local laws.[433] Eligible airport tenants include on-airport car rental and parking as well as in-terminal concession tenants.
To administer the tenant relief portion of the Consolidated Appropriations Act, 2021 funding, FAA officials have calculated airport allocations and informed airport sponsors of the amount of eligible concessions relief, including funds they can use for administration costs.[434] FAA is requesting that airport sponsors provide tenant relief plans with their payment requests when they are ready to accept their concessions-relief funding. FAA officials said they are reviewing these plans to ensure that airport sponsors are providing relief according to the law and FAA guidance prior to approving payment. According to FAA guidance, FAA requires airport tenants to provide certifications of eligibility directly to airport sponsors, who then keep the documentation on file for possible audits. As previously mentioned, FAA officials said that monitoring concessions relief funding and understanding the contractual structures between an airport and its concessionaires are new scopes of work for FAA’s Office of Airports and thus, FAA has detailed personnel from its Office of Civil Rights to review concessions relief plans and train other FAA staff on how to conduct these reviews.
Airport representatives noted that determining tenant eligibility and how to provide concessionaire relief on a proportional basis under the Consolidated Appropriations Act, 2021 can be complex due to varying tenant agreements. Airport association representatives stated, however, that FAA has mostly addressed these challenges related to airports’ roles in determining tenant eligibility and providing relief. For example, FAA has provided guidance on how to administer concession relief through the FAQs posted to FAA’s website, which the agency updated with additional clarifications in April 2021. FAA has also held videoconferences to answer airports’ tenant relief questions, and has established a dedicated email for airports to direct questions to FAA headquarters. Airport association representatives reported that airports have been able to get their questions answered through FAA’s dedicated email.
As previously mentioned, the American Rescue Plan Act of 2021 also provides in-terminal concession tenant relief funding for eligible airport sponsors. FAA officials reported that they would not begin processing these tenant relief applications until after October 1, 2021, however, because of their need to manage fiscal year-end operations. Representatives from an airport association and an airport concessionaires association noted, however, that airports continue to have questions about the tenant relief portion of the American Rescue Plan Act of 2021. Specifically, the concessionaires association noted that some airports are unclear about the eligibility requirements for concessions that operate through various business models, such as joint ventures, and whether they would qualify as large or small concessions. To help address some of these questions, FAA officials stated that they are considering updating guidance to airports on this tenant relief funding based on feedback from airports and lessons learned from administering the Consolidated Appropriations Act, 2021 tenant relief funds.
An airport concessionaires association told us although airport traffic has begun to recover, the dedicated tenant relief continues to be important to help airport businesses respond to the impacts of COVID-19. They noted that although many concessionaires have started to re-open and rehire, these businesses are far from returning to full-service and staffing. In particular, these concessionaires face increasing challenges due to the uncertainty around COVID-19’s effect on passenger traffic in the fall and winter of 2021, and difficulty recruiting and hiring staff during the pandemic.
Methodology
To conduct this work, we analyzed FAA data on airport funding as of September 27, 2021. We determined the data were sufficiently reliable for the purposes of our reporting by performing interviews with agency officials and reviewing relevant documentation. We also reviewed the CARES Act, the Consolidated Appropriations Act, 2021, and American Rescue Plan Act of 2021 and related agency guidance, and conducted interviews with agency officials and representatives from airport associations, and an airport concessions association, selected to represent a wide variety of industry and airport types.
Agency Comments
We provided FAA and the Office of Management and Budget (OMB) with a draft of this enclosure. FAA provided technical comments that we incorporated as appropriate. OMB did not have any comments on this enclosure.
GAO’s Ongoing Work
Our work on aviation industry COVID-19 financial assistance is ongoing. We will continue to monitor FAA’s administration of grants under the CARES Act, the Consolidated Appropriations Act, 2021, and the American Rescue Plan Act of 2021. We will also continue to monitor aviation operations, impacts, and lessons from the COVID-19 pandemic through other ongoing work.
Contact information: Heather Krause, (202) 512-2834 or krauseh@gao.gov
Payroll Support Assistance to Aviation Businesses
Bookmark:The Department of the Treasury has nearly completed making payroll assistance payments to the aviation industry; however, it has not developed policies and procedures to ensure that warrants, which give the federal government the ability to purchase stock in the companies of certain program recipients, are acted upon in a manner that will provide appropriate compensation to the federal government.
Entity Involved: Department of the Treasury
Recommendations for Executive Action
The Secretary of the Treasury should develop policies and procedures to determine when to act on warrants obtained as part of the Payroll Support Program to provide appropriate compensation to the federal government.
Treasury agreed with our recommendation and said the agency is in the process of creating a policy to dispose of the warrants obtained as part of the Payroll Support Program.
Background
The CARES Act established the Payroll Support Program (PSP1) in March 2020, and the Consolidated Appropriations Act, 2021 established a Payroll Support Program Extension (PSP2) in December 2020.[435] In March 2021, the American Rescue Plan Act of 2021 created a new round of the program (PSP3).[436] PSP1 included up to $32 billion in financial assistance for passenger air carriers, cargo air carriers, and aviation contractors. PSP2 provided up to $16 billion, and PSP3 provided up to $15 billion in financial assistance for passenger air carriers and aviation contractors.
Payments from PSP1, PSP2, and PSP3 were to be used exclusively for the continuation of wages, salaries, and benefits. To help ensure recipients’ compliance with the Payroll Support Program agreement terms, Treasury developed a program agreement that includes various compliance requirements, and Treasury also developed a compliance monitoring approach with two levels of testing. Treasury also requires that some recipients provide taxpayer protections through notes and/or warrants.[437] Specifically, for PSP1, PSP2, and PSP3 recipients, Treasury requires passenger air carriers that received payments of more than $100 million and contractors that received more than $37.5 million to provide warrants and/or notes as taxpayer protection.[438] Further, Treasury required cargo carriers that received payments through PSP1 to provide notes equal to 56 percent of the payroll support over $50 million. The notes have a 10-year term, and the warrants must be exercised by Treasury within 5 years.
Passenger air carriers are experiencing rising demand for domestic leisure travel; however, it remains uncertain how passenger demand will respond as the pandemic continues. However, bookings for domestic business travel will likely return at a slower pace, and between 10 to 30 percent of this business travel may not return after the pandemic, according to a ratings agency. International travel is also expected to return at a slower pace than domestic leisure travel, according to a consulting firm’s projections, with international travel not expected to return to prepandemic levels until 2023 or 2024. Further, the aviation industry is expected to incur operating losses through the end of 2021, although these losses are likely to be less than the losses the industry experienced in 2020, according to a ratings agency.
Overview of Key Issues
Treasury made $59 billion in payments out of $63 billion provided for PSP1, PSP2, and PSP3. As of September 2021, across PSP1, PSP2, and PSP3, Treasury had made payments of $50.1 billion to the 10 largest passenger air carriers—the remaining passenger air carriers received $3.4 billion. Aviation contractors received $4.6 billion across PSP1, PSP2, and PSP3. Cargo carriers received $827.7 million through PSP1.[439] Through PSP1, PSP2, and PSP3, Treasury provided payments to 402 companies—254 passenger air carriers and 148 contractors—as of September 2021. See figure below for additional information on the pace and amount of PSP1, PSP2, and PSP3 payments.
Treasury has nearly completed making payments for PSP3, and as of September 2021, has administered 98 percent of PSP3 funds. As of September 2021, Treasury has administered $14.7 billion out of $15 billion available under PSP3. As directed by statute, only recipients that received PSP2 payments were eligible for PSP3 payments.[440] Treasury has made PSP3 payments to 462 recipients—287 passenger air carriers and 175 contractors. According to Treasury officials, the remaining PSP3 agreements will be signed and funds released once PSP2 applicants have resolved outstanding issues. For passenger air carriers, the 10 largest payments averaged $1.3 billion, and the remaining passenger air carrier payments averaged $3.1 million. For contractors, the 10 largest payments averaged $50.4 million, and the remaining contractor payments averaged $2.3 million.
As we reported in July 2021, according to Treasury officials, passenger air carriers received PSP3 payments equal to 93 percent of their PSP2 payment and contractors received PSP3 payments equal to their PSP2 payment.[441] Three selected industry associations and two companies we interviewed said that not having to complete an application for PSP3 streamlined the process compared to previous iterations of the program.
Across PSP1, PSP2 and PSP3, Treasury required warrants from 14 recipients and notes from 36 recipients; however, Treasury does not have policies and procedures for when to act upon these warrants. By statute, Treasury may receive warrants, notes, or other financial instruments which the Secretary determines provide appropriate compensation to the federal government for provision of financial assistance.[442] As detailed in Treasury guidance and on Treasury’s website, Treasury requires that recipients of Payroll Support Program payments over a certain dollar amount provide notes and/or warrants to Treasury.[443] Specifically, passenger air carriers receiving over $100 million of payroll support are required to provide notes equal to 30 percent of the payroll support provided over $100 million with a 10-year term. Contractors receiving over $37.5 million of payroll support must provide notes equal to 44 percent of the payroll support provided over $37.5 million with a 10-year term.[444] Payroll Support Program recipients that received payroll support over the dollar amounts listed above must also provide warrants, if they are publicly traded companies. The number of warrants a recipient is required to provide is equal to 10 percent of the principal amount of the note issued by the participant, divided by an exercise price.[445] In total, across PSP1, PSP2, and PSP3, the note principal amount that must be paid by 36 recipients is $15.1 billion, and 14 recipients provided a total of 58 million warrants. See table below for additional details.
Source: GAO analysis of Department of the Treasury data. | GAO-22-105051
According to Office of Management and Budget Circular A-129, which provides guidance on managing federal loan programs and other financial assets, agencies are required to establish appropriate controls over programmatic functions and operations. This guidance also requires management to employ a reporting framework to inform proactive portfolio management.
Treasury has not exercised any of the warrants for common stock it holds in the 14 businesses mentioned above. As Treasury continues to hold these warrants for stock purchases, the warrants may increase in value as the airline industry recovers. For example, based on the current stock price at market close on October 1, 2021, its warrants from one recipient would be valued at 159 percent above the predetermined price Treasury would have to pay to act on them.
However, Treasury has not documented policies and procedures to guide when to act on the warrants to fulfill the statutory purpose to provide appropriate compensation to the federal government. As we reported in 2010, acquiring an ownership interest in private companies can help protect taxpayers by enabling the government to earn returns when it sells its shares and the institutions repurchase their shares or redeem their warrants. According to Treasury officials, it is likely that—if the airline industry continues to recover—the Payroll Support Program, through the exercising of these warrants, could end up with a profit. According to Treasury officials, as these warrants do not mature until the 2024-2026 timeframe, Treasury is taking a measured approach to disposing of the warrants. By establishing policies and procedures over warrant processes, Treasury will help ensure that management has the information needed for informed decision making on when to act on the warrants it holds, thereby maximizing the benefit to the federal government.
Treasury’s compliance monitoring approach is in progress, and some recipients may undergo compliance monitoring for up to 10 years. Treasury developed a compliance monitoring approach for PSP1 that involved two levels of compliance testing. All recipients undergo the first level of compliance testing, which is a set of automated testing rules applied to each submitted compliance report. Specifically, at the end of each quarter, recipients must submit a quarterly compliance report to Treasury via an online portal that Treasury has developed. This report includes information about the amount of payroll support funds expended during the quarter, financial statements, a copy of the recipient’s IRS Form 941, and information about changes in the number of employees and the amount spent on wages, salary, and benefits, among other things.
If an issue is identified during the first level of compliance testing, the recipient is elevated to the second level of compliance testing, which involves a more detailed review by a Treasury analyst. Treasury officials said that they are using the same compliance monitoring approach for PSP2 and PSP3, with some updates. As we previously reported, for PSP2 compliance monitoring, Treasury developed a portal to assess recipients’ compliance with the employee recall requirements included in the PSP2 agreement.[446]
As of July 2021, PSP1 compliance monitoring is underway, and according to Treasury officials, PSP1 compliance monitoring will end with the second quarter of 2022. For PSP2 recipients, Treasury began conducting compliance monitoring in the first quarter of 2021, and PSP2 compliance monitoring will end with the first quarter of 2023. Treasury officials said that they expect that PSP3 compliance monitoring will begin with the third quarter of 2021, and PSP3 compliance monitoring will end with the second quarter of 2023. However, if a recipient received a PSP1, PSP2, or PSP3 payment that required a note or warrant, then the recipient can remain in the program for up to 10 years, and will continue to undergo compliance testing. According to the Payroll Support Program agreement, the recipient must submit quarterly compliance reports until no notes or warrants are outstanding or held by Treasury.
According to Treasury documents, Treasury requires that when recipients submit a quarterly compliance report, they certify their compliance with the terms and agreements of the Payroll Support Program agreement and maintenance of effective internal controls, as well as certify the veracity and accuracy of any data, documents, or information submitted to Treasury. According to Treasury officials, while Treasury is not required to validate that the information in the financial statements is accurate, Treasury monitors publicly reported financial information for recipients whose payment requires notes and warrants. Treasury officials said that monitoring publicly reported financial information is intended to help Treasury confirm that financial information recipients submit as part of Treasury’s compliance monitoring approach is accurate.
The Payroll Support Program agreement requires recipients to establish and maintain effective internal controls, among other things. Treasury officials said that recipients can develop a wide range of internal controls, and that internal control systems differ across recipients. Therefore, Treasury relies on recipients’ certification that their internal control systems are adequate and appropriate. However, Treasury officials said that if they find evidence that recipients do not have effective internal controls in place, they could do additional compliance testing and ask the recipient to provide additional information. For example, Treasury officials said that if a recipient reported that they used more funds than they had received from Treasury, indicating an accounting or reporting weakness, Treasury would conduct additional compliance testing.
Industry associations said that Payroll Support Program payments provided critical assistance to the industry. Five selected industry associations and three selected companies we interviewed said that while challenges existed with the program, it provided critical financial assistance for the industry. For example, a member from one industry association said Payroll Support Program payments helped create lasting jobs in three of its locations, and due to the payments it received, the company did not have to lay off employees. Another member from the same industry association said Payroll Support Program payments helped keep this companies’ employees on payroll and ensured that employees were up-to-date on training requirements. This helped ensure that the industry could quickly restart, because the company did not have to hire new employees.
However, in certain cases, increased demand for air travel has exceeded airlines’ ability to return capacity to service, resulting in rescheduled and canceled flights. Airlines have experienced workforce shortages because they reduced their employment levels through voluntary measures, such as early retirement, and involuntary measures, such as furloughs, and retraining and recertifying some staff can, in some cases, be a lengthy process.
Lessons learned from the implementation of the Payroll Support Program could inform similar programs in the future. Our reviews of PSP1, PSP2, and PSP3 offer some lessons learned that Treasury and Congress could consider when establishing and implementing future federal government relief programs.
Clear communication. Treasury’s communication with applicants about the Payroll Support Program was not always clear. For example, as we reported in March 2021, recipients raised concerns about the need for additional guidance. Further, four selected industry associations and one company we interviewed said that Treasury did not provide status updates or timeframes about the application process. Five selected industry associations and one company told us that communication between Treasury and applicants—for example, the ability to get in touch with Treasury staff and get answers to time-sensitive questions—did not improve throughout Treasury’s implementation of PSP1, PSP2, and PSP3. Clear communication from Treasury could help ensure program transparency and keep applicants informed about program requirements and timeframes.
Identifying which type of assistance would best help achieve a defined goal. Treasury officials told us that they implemented the Payroll Support Program by following the requirements laid out in statute; however, oversight bodies and members of Congress continue to raise concerns that certain actions taken by recipients may not serve the interests of taxpayers and aviation workers. For example, specific concerns have been raised about businesses obtaining funds from more than one federal financial assistance program. However, the laws that authorized the three rounds of the Payroll Support Program did not prohibit businesses from accessing other federal financial assistance. In contrast, new programs authorized in December 2020 and March 2021, however, including the Coronavirus Economic Relief for Transportation Services program and Aviation Manufacturing Jobs Protection program, do provide funding limitations in relation to other COVID-19 relief funding received by eligible recipients. Additionally, as we have stated in prior work, as Congress contemplates future assistance to aid the aviation industry’s recovery, Congress may wish to consider how to best define goals and objectives for future assistance, which may help determine which tools are needed and most appropriate to support an aviation industry recovery following the pandemic.
Methodology
To conduct this work, we reviewed the CARES Act, the Consolidated Appropriations Act, 2021, and the American Rescue Plan Act of 2021. We also reviewed Treasury guidance and documents, and interviewed Treasury officials. We reviewed PSP1 data as of September 1, 2021, PSP2 data as of September 8, 2021, and PSP3 data as of September 22, 2021. We reviewed these data for outliers and missing information, and we determined that Treasury’s data were sufficiently reliable for the purposes of summarizing the number, value, and timing of Payroll Support Program payments, as well as the number of warrants and the total note principal amount. In addition, we conducted interviews with a selection of five companies and six industry associations representing businesses eligible to apply for Payroll Support Program payments.
Agency Comments
We provided Treasury and the Office of Management and Budget (OMB) with a draft of this enclosure. Treasury provided technical comments, which we incorporated as appropriate. Treasury’s general comments are reproduced in appendix IX. In its management response, Treasury agreed with our recommendation and said the agency is in the process of creating a policy that will allow Treasury to evaluate when and how to act to dispose of the warrants obtained as part of the Payroll Support Program. OMB did not provide comments on this enclosure.
GAO’s Ongoing Work
We will continue to monitor Treasury’s implementation of federal financial assistance programs for the transportation sector authorized by COVID-19 relief laws in December 2020 and March 2021.
GAO’s Prior Recommendations
The table below presents our recommendation on payroll support assistance for aviation businesses from a prior bimonthly CARES Act report.
Source: GAO. | GAO-22-105051
Related GAO Products
Financial Assistance: Ongoing Challenges and Guiding Principles Related to Government Assistance for Private Sector Companies. GAO-10-719. Washington, D.C.: August 3, 2010.
Troubled Asset Relief Program: June 2009 Status of Efforts to Address Transparency and Accountability Issues. GAO-09-658. Washington, D.C.: June 17, 2009.
Contact Information: Heather Krause, (202) 512-2834, krauseh@gao.gov
Loans for Aviation and Other Eligible Businesses
Bookmark:As directed by the CARES Act, the Department of the Treasury required certain loan recipients to provide financial assets, such as warrants that give the federal government the ability to purchase stock, to protect taxpayer interests; however, it has not developed policies and procedures to ensure these warrants are acted upon in a manner that will benefit taxpayers.
Entity involved: Department of the Treasury
Recommendation for Executive Action
The Secretary of the Treasury should develop policies and procedures to determine when to act on warrants obtained as part of the loan program for aviation and other eligible businesses to benefit the taxpayers. Treasury agreed with our recommendation and said the agency is in the process of creating a policy to dispose of the warrants obtained as part of the loan program.
Background
The CARES Act authorized the Department of the Treasury to provide up to $46 billion in loans and loan guarantees to certain aviation businesses and other businesses deemed critical to maintaining national security (national security businesses).[447] This loan program was intended to provide liquidity to these sectors. Treasury executed 35 loan agreements with businesses in these targeted sectors, totaling about $22 billion. Consistent with the CARES Act, the executed loans have a duration of 5 years or less. Of these 35 loans, as of October 1, 2021, 10 loans have been fully repaid and the total value of outstanding loans is about $1.1 billion, as shown in the table below.[448]
Source: GAO analysis of Department of the Treasury data. | GAO-22-105051
Note: Section 4003 of the CARES Act authorized maximum assistance available through loans in three categories: passenger air carrier, repair station operator, and ticket agent ($25 billion); cargo air carrier ($4 billion); and businesses critical to maintaining national security ($17 billion). CARES Act, Pub. L. No. 116-136, § 4003, 134 Stat. 281, 470 (2020). To match the Department of the Treasury’s reporting on these loans, and because air carriers that received loans could provide both passenger and cargo air services, we combined all air carriers into a single category.
aIncludes all loan disbursements and increases in loan principal amount arising from payment-in-kind interest, less any repayments of principal.
In nearly all cases, borrowers with loans over $300 million had to draw down 10 percent of the loan amount when the loan was executed, while borrowers with loans less than $300 million had to draw down the entire loan amount. Eight companies—seven passenger air carriers and one national security business—had loans over $300 million, and all drew down at least the 10 percent required by Treasury near the time the loan was executed.[449] Under the loan agreements, seven of these borrowers had until May 28, 2021, to draw down additional loan funds. With the passage of this deadline, Treasury will not make any additional loan disbursements.
The CARES Act set out conditions for this loan program including that borrowers, among other things, (1) not reduce employment levels by more than 10 percent from levels as of March 24, 2020, through September 30, 2020, (2) refrain from share buybacks and dividend payments, and (3) limit compensation to employees with salaries over certain amounts until 1 year after the date the loan or loan guarantee is no longer outstanding. Additionally, the CARES Act permitted Treasury to make loans to publicly traded companies only if those businesses provided a warrant—an option to buy shares of stock at a predetermined price before a specified date—or equity interest—ownership in a company—to Treasury.[450]
Overview of Key Issues
Treasury has developed and is applying a four-pronged approach to compliance monitoring and relies on loan recipients to certify the accuracy of submitted information. According to Treasury officials, the agency is using a four-pronged approach to monitor loan recipients’ compliance with the terms and conditions of loan agreements, including restrictions on compensation to employees with salaries over certain amounts and dividend payments.
- On a quarterly basis, recipients answer questions, through an online portal, to determine compliance with loan agreement terms. These questions focus on employee headcount, internal controls, and other loan agreement requirements. Treasury conducts two levels of review on recipients’ answers to these questions. In the first level of review, Treasury uses an automated process to verify that the answers submitted by the recipient indicate compliance with loan agreement terms and conditions. If the first level of review identifies a potential compliance issue, then a Treasury analyst conducts a second, more detailed review of the answers submitted by the recipient and the documents submitted. In this second review, a Treasury analyst will also contact the recipient to discuss the issue, if needed. During this review, potential compliance issues are cleared or determined to be an actual compliance issue that requires remediation.
- On a quarterly basis, recipients must submit reports and certifications on a variety of financial topics. Staff with the Bank of New York Mellon, which serves as Treasury’s financial agent, and Treasury’s recipient monitoring group review these reports and certifications to ensure all recipients are complying with the terms and conditions of loan agreements.
- On an ongoing basis, Treasury’s asset management group reviews recipients’ financial statements and relevant media reports, and meets with recipients’ management to discuss the business environment and any identified concerns.
- On an ongoing basis, Bank of New York Mellon staff monitor the principal and interest payments from borrowers. As the financial agent for Treasury, the Bank of New York Mellon collects payments from borrowers and relays to Treasury any issues or problems with payments.
According to Treasury officials, recipients certify that the information submitted through the agency’s online portal is correct. The officials stated that the reliance on recipient self-certification is an acceptable level of risk since about 90 percent of the outstanding loan funds are to publicly traded companies. As publicly traded companies, these businesses are subject to financial reporting requirements established by the Securities and Exchange Commission, such as preparing and making public annual and quarterly reports on financial condition that contain audited financial statements.
Certain terms and conditions of the loan agreements, including restrictions on paying dividends to shareholders and compensation for employees with salaries over certain thresholds, are in effect for 1 year after loans have been repaid in full. Therefore, Treasury expects to continue monitoring all loan recipients’ compliance with loan agreement terms and conditions through at least the second quarter of 2022. Since the loans can have a duration of up to 5 years, depending on the repayment status, Treasury may keep this compliance monitoring process in place through 2026.
Treasury’s approach to address noncompliance with loan agreement terms and conditions varies depending on the situation. Most of the penalties for noncompliance are laid out in the terms and conditions of each loan agreement; however, according to Treasury officials, they have the authority to negotiate amendments to agreements and address compliance violations as appropriate. In cases of noncompliance with any terms and conditions, Treasury’s practice is to contact the borrower and instruct it to remedy the violation as soon as possible. For example, if a recipient does not provide compliance information on time, Treasury would contact the recipient immediately after the deadline and notify it of the noncompliance and that it will face penalties if the requested information is not provided within 30 days.
If Treasury determines that a loan recipient has intentionally submitted inaccurate information as part of its compliance reporting, Treasury may refer the case to the Treasury Office of Inspector General for investigation. Under the terms of the loan agreements, in certain circumstances Treasury has the ability to accelerate the loan—require payment of the loan before the terms of the loan agreement specify—in whole or in part. According to Treasury officials, as of September 2021, Treasury found one borrower to be materially noncompliant with loan agreement terms and conditions; however, the borrower remedied the noncompliance, and Treasury does not plan to take further action.[451]
Treasury monitors the performance of outstanding loans using real-time information. According to Treasury officials, they use real-time information—such as filings with the Securities and Exchange Commission and phone calls with the management teams of loan recipients—to monitor the operations and overall financial health of borrowers. Treasury officials also use this information to assess the need for corrective action to avoid defaults or noncompliance. For example, if a borrower did not meet the required collateral to loan value ratio, Treasury would work with the borrower to fix the issue. This could include the borrower providing additional collateral or paying down the loan. According to Treasury officials, as of September 2021, no borrowers have missed any loan payments.
Treasury anticipates the loan program may make money for taxpayers, but has not developed policies and procedures to guide when it will act on the warrants. The CARES Act required Treasury to receive warrants or equity interest as a condition of making loans to publicly traded businesses.[452] The terms and conditions for these must be designed to provide for Treasury’s reasonable participation in equity appreciation for the benefit of taxpayers.[453] The law further provided that for the primary benefit of taxpayers, Treasury may sell, exercise, or surrender financial instruments it obtained. Also, according to Office of Management and Budget Circular A-129, which provides guidance on managing federal loan programs and other financial assets, agencies are required to establish appropriate controls over programmatic functions and operations. This guidance also requires management to employ a reporting framework to inform proactive portfolio management.
As taxpayer protection for the loan program, Treasury received warrants, which allow the purchasing of common stock, from nine businesses equal to 10 percent of the total loan amount drawn.[454] According to Treasury officials, these warrants have a 5-year term and expire in 2025. Before these warrants expire, Treasury may use these warrants to buy stock in these nine businesses at the agreed upon price. Treasury also received shares equal to 29.6 percent of Yellow Corporation common stock as taxpayer compensation. Treasury has not acted upon any of the warrants for stock it holds in these nine businesses. While seven of these nine businesses have already repaid the loan, Treasury still holds the warrants for stock purchases and—as the airline industry recovers—these warrants may increase in value.
As stated above, Treasury must use these warrants or any senior debt instruments received as part of granting these loans for the primary benefit of the taxpayer. However, Treasury has not developed policies and procedures for determining when to act on the warrants to benefit the taxpayer. According to Treasury officials, the agency has not finalized a policy on when to act upon or exercise the warrants held through this program because it does not plan to dispose of these warrants in 2021. The reasons for this include (1) uncertainty due to the ongoing pandemic, (2) some of the warrants are not profitable at this time, and (3) Treasury has until 2025 to exercise these warrants, which according to Treasury officials removes any urgency for having a policy on disposing of these warrants in 2021.
According to Treasury officials, it is likely that—if the airline industry continues to recover and borrowers do not default—the loan program, through the exercising of these warrants, could end up with a profit. For example, based on the stock price at market close on October 1, 2021, the warrants from one borrower would be valued at 159 percent above the predetermined price Treasury would have to pay to act on them. By establishing policies and procedures over warrant processes, Treasury will help ensure that management has the information needed for informed decision-making on when to act on the warrants it holds, in order to benefit the taxpayers.
Methodology
To conduct this work, we reviewed the most recent Treasury data on the status of executed loans as of October 1, 2021; reviewed the CARES Act; and interviewed Treasury officials. We are continuing to use the data on loans that we have found reliable through interviews with agency officials on the data’s consistency and completeness during prior reviews. We determined the data were sufficiently reliable for the purposes of our enclosure. We also reviewed the loan transaction summaries prepared by Treasury to confirm the nine businesses that provided warrants to Treasury through the loan program—Alaska Airlines, American Airlines, Frontier Airlines, Hawaiian Airlines, JetBlue Airways, Mesa Airlines, Republic Airways, SkyWest Airlines, and United Airlines—and these businesses’ quarterly financial reports (10-Q), if available, to understand the number of warrants and predetermined price to use them.
Agency Comments
We provided Treasury and the Office of Management and Budget (OMB) with a draft of this enclosure. Treasury provided technical comments, which we incorporated as appropriate. OMB did not provide comments on this enclosure. Treasury’s general comments are reproduced in appendix IX. In its management response, Treasury agreed with our recommendation and said the agency is in the process of creating a policy that will allow Treasury to evaluate when and how to act to dispose of the warrants obtained as part of the loan program.
GAO’s Ongoing Work
We will continue to monitor Treasury’s implementation of federal financial assistance programs for the transportation sector authorized by COVID-19 relief laws in December 2020 and March 2021.
Related GAO Products
Financial Assistance: Lessons Learned from CARES Act Loan Program for Aviation and Other Eligible Businesses. GAO-21-198. Washington, D.C.: December 10, 2020.
Contact information: Heather Krause, (202) 512-2834, krauseh@gao.gov
Aviation Manufacturing Jobs Protection Program
Bookmark:The Department of Transportation set up a cross-organizational team to distribute payroll support assistance to aviation manufacturing businesses and announced it will offer $482.3 million in funding to 313 businesses that applied in the first application period.
Entity involved: Department of Transportation
Background
In March 2021, the American Rescue Plan Act of 2021 was enacted, establishing the Aviation Manufacturing Jobs Protection (AMJP) Program.[455] Through this program, the Department of Transportation (DOT) is to provide up to $3 billion in funding to eligible aviation manufacturing companies to pay up to half of their compensation costs for certain categories of employees, for up to 6 months.[456] While some aviation manufacturing companies were eligible for other federal COVID-19 relief programs such as the three rounds of the Payroll Support Program (PSP), and the Paycheck Protection Program (PPP), others were not eligible due to their size, among other reasons.[457] In response to reduced commercial passenger demand during the COVID-19 pandemic, airlines parked or retired a substantial portion of their aircraft fleet, which in turn reduced demand for new commercial airplanes, engines, and spare parts, and also affected companies that provide aircraft maintenance services.
DOT will provide AMJP program funds to eligible applicants to help cover payroll and facilitate the retention or rehiring of employees.[458] For a company to be eligible, among other criteria, it must have involuntarily furloughed or laid off at least 10 percent of its workforce in 2020 as compared to 2019 or experienced a 15 percent decline in 2020 revenues compared to 2019.[459] Companies that received financial assistance from the first round of PSP (PSP1) or that are still expending PPP assistance as of the date of application to the AMJP program are ineligible for the program.[460]
When applying to the AMJP program, a company must identify the group of employees that are eligible for payroll support through the program.[461] Employees in the eligible employee group must meet certain criteria, including: (1) cannot exceed 25 percent of a company’s U.S. workforce as of April 1, 2020, (2) cannot have a compensation level greater than $200,000 per year, and (3) must be engaged in aviation manufacturing or maintenance, repair, and overhaul activities or services. In order to receive AMJP funding, companies also have to make several commitments, including—but not limited to—a commitment that they will not involuntarily furlough or lay off employees for whom they are receiving AMJP funding for the duration of the agreement.[462] Once an AMJP agreement is in place with a company, DOT may require continuing disclosure and reporting in support of requests for disbursement of funds.[463] If DOT receives eligible AMJP applications that exceed the $3 billion appropriated for the AMJP program, it must reduce the funds provided to companies on a pro-rated basis.
Overview of Key Issues
DOT officials set up a cross-organizational team to manage the AMJP program and develop and communicate eligibility and application requirements. The AMJP program is managed out of DOT’s Office of the Secretary (OST); however, many offices have been involved with the set-up of the program. These include the Federal Highway Administration, Federal Motor Carrier Safety Administration, Pipeline and Hazardous Materials Safety Administration, Federal Rail Administration, and several offices within OST. The Federal Aviation Administration has provided technical support as needed.
DOT officials told us they met with officials at the Department of the Treasury and the Small Business Administration (SBA) to discuss how to administer the AMJP program based on experiences administering other federal COVID-19 relief programs. According to DOT officials, they also discussed ways to verify the eligibility of applicants that received funds under Treasury or SBA COVID-19 relief programs, such as PSP1 and PPP respectively, during the period that would disqualify applicants from the AMJP program.
In April 2021, DOT published a request for emergency approval of information collection for the AMJP program in the Federal Register and released its public AMJP website with information about the program.[464] A second notice, published in the Federal Register in June 2021, outlined the process for eligible companies to apply for the AMJP program.[465] DOT hosted three webinars about the program, its eligibility requirements, and the application process, and published audio and video recordings and presentation slides to the AMJP website. It also created and published a Frequently Asked Questions document that DOT officials told us was routinely monitored and considered for potential updates as additional questions were submitted. DOT officials also told us they directly addressed questions via telephone and email.
According to DOT officials, DOT has hired a financial support contractor to, among other duties, manage AMJP application validation, conduct work related to financial controls and stratification of risk, and coordinate review of applications for completeness. According to DOT officials, DOT officials will review and validate the process the contractor uses for application review and then make an independent determination of an applicant’s eligibility and payroll support payment size. DOT officials told us that they can request additional information from applicants when they find inconsistencies, deficiencies, or defects in the application, and have asked applicants to provide corrected information when needed.[466]
While DOT is able to verify some eligibility requirements against government data, for other requirements, officials told us they must rely on the self-certification of applicants. For example, DOT officials stated that disclosure rules on Treasury and Internal Revenue Service’s ability to share taxpayer information constrains DOT from being able to verify the timing of Employee Retention Credit use—instead DOT must rely on applicants to self-certify if and when they accrued, requested, or planned to request the Employee Retention Credit.[467] DOT officials told us that post-award audits may be considered to verify self-certified information for some recipients.
In addition, DOT officials told us that all AMJP recipients are subject to post-award reporting requirements, performance assessment, and compliance reviews. Standard reporting will occur at three points—within 10 days of a business entering into an AMJP agreement, when businesses request an interim disbursement of award funds (if applicable), and a final report when the final payment request is made. DOT officials also stated that selected recipients designated as higher-risk will be required to submit a payroll report within 10 business days after the businesses’ regular payroll is made to employees.
DOT re-opened the application process due to confusion about one of the AMJP program limitations. On July 26, 2021, DOT announced that it would re-open the AMJP application for an additional 4 weeks, starting August 4, 2021, through September 1, 2021, due to confusion about eligibility requirements for the program. In particular, DOT officials told us that they had heard from some companies that thought they had to make a choice between applying for the AMJP program or claiming the Employee Retention Credit, which is not accurate.[468] By statute, DOT cannot enter into an AMJP agreement with companies that were allowed the Employee Retention Credit under the CARES Act for the quarter immediately prior to the one in which they enter into an AMJP agreement.[469] DOT initially opened applications to the program for four weeks, from June 15, 2021, through July 13, 2021. DOT officials told us they received over 350 applications during this period, far lower than the approximately 4,900 companies DOT officials estimated were eligible to apply. DOT officials stated that they received 196 applications during the second application period, which they are in the process of reviewing for eligibility as of late September 2021.
DOT announced it will offer $482.3 million in funding to 313 businesses that applied in the first application period. Officials told us they entered into the first AMJP agreements and disbursed $196.8 million to 264 businesses as of late September 2021.[470] DOT officials expect to announce in November 2021 initial offers of funding for businesses that applied in the second application period. As required by statute, DOT must enter into all AMJP agreements within 6 months of the effective date of the first AMJP agreement.
Selected industry associations were generally complimentary of DOT’s transparency and communication about the AMJP program and its application requirements, although some expressed challenges with the clarity of DOT guidance. Representatives from four selected industry associations we interviewed told us that DOT officials were responsive and made an effort to provide answers when the program’s eligibility requirements or application process were unclear. Representatives told us that DOT’s webinars, Frequently Asked Questions document, and responsiveness to direct questions from individual companies were all helpful. For example, representatives from three industry associations told us that their members had submitted direct questions to DOT and received responses, sometimes within days.
However, representatives also told us that some program requirements were not always clear, such as how to calculate the eligible employee group for the program. For example, one industry association told us they received questions from members about whether they could round up when calculating the number of employees in the eligible group. Industry association representatives also told us that while the aviation manufacturing industry was starting to see an increase in demand in summer 2021, there was still a need for the AMJP program. In particular, representatives said that the assistance would help some companies rehire workers and start making parts that have longer lead times, allowing the industry to prepare for a rebound in demand and potentially minimize future disruptions to the supply chain.
Methodology
To conduct this work, we reviewed the American Rescue Plan Act of 2021 and DOT’s Federal Register notices related to the AMJP program. We also reviewed DOT guidance, documents, and webinars, and interviewed DOT officials. In addition, we conducted interviews with a selection of four industry associations representing companies eligible to apply for the AMJP program.
Agency Comments
We provided DOT and the Office of Management and Budget (OMB) with a draft of this enclosure. DOT provided technical comments, which we incorporated as appropriate. OMB did not provide comments on this enclosure.
GAO’s Ongoing Work
We will continue to monitor DOT’s administration and oversight of the AMJP program, including the steps it is taking to provide appropriated funds consistent with statutory and program requirements and to monitor program recipients’ compliance with these requirements.
Contact Information: Heather Krause, (202) 512-2834, krauseh@gao.gov
Transit Industry
Bookmark:Transit agencies will continue to use COVID-19 relief funds to cover operating expenses, including revenue losses, and are taking steps to strengthen rider confidence.
Entity involved: Federal Transit Administration, within the Department of Transportation
Background
Millions of Americans rely on public transportation systems for mobility and access to jobs, education, and essential services, such as medical care and grocery shopping. Within the Department of Transportation (DOT), the Federal Transit Administration (FTA) provides grants to state departments of transportation, local public transit systems, and tribes to support and expand services. These services may include buses, subways, light rail, commuter rail, trolleys, and ferries in urban, rural, and tribal areas.
The CARES Act appropriated about $25 billion to FTA to support the transit industry through two formula programs—the Urbanized Area Formula program ($22.7 billion) and the Formula Grants for Rural Areas program ($2.2 billion).[471] CARES Act grant funds were made available to transit agencies for COVID-19-related expenses incurred on or after January 20, 2020; FTA allocated the $25 billion to urbanized areas, states, and tribes on April 2, 2020.[472] These funds must now be directed, to the maximum extent possible, to payroll and operating expenses.[473] There is no limit on the amount of funds that recipients may use for operating expenses, and the funds are available until expended.[474]
On December 27, 2020, the Consolidated Appropriations Act, 2021 appropriated an additional $14 billion to FTA for the transit industry to prevent, prepare for, and respond to COVID-19.[475] Further, on March 11, 2021, the American Rescue Plan Act of 2021 (ARPA) appropriated approximately $30.5 billion to FTA for the same purpose.[476] Both of these acts provide funding to urbanized areas and states differently than the CARES Act, using a formula based on operating expenses reported to FTA in 2018.[477] FTA is allocating the majority of the funds appropriated by the two acts through its Urbanized Area and Rural Area formula programs, similar to its allocation of funds appropriated by the CARES Act.[478] Consolidated Appropriations Act, 2021 funds are available for obligation until expended, but ARPA funds are available for obligation until the end of fiscal year 2024.
Overview of Key Issues
Transit agencies have expended the majority of CARES Act funds and are beginning to obligate and expend funding from the Consolidated Appropriations Act, 2021 and ARPA. According to FTA data, as of August 31, 2021, transit agencies had obligated about 98 percent of allocated CARES Act funds and had expended 81 percent of the funds (see table). In addition, transit agencies had obligated about 49 percent of allocated funds from the Consolidated Appropriations Act, 2021 and about 22 percent of allocated formula funds from ARPA. FTA officials reported that as of August 31, 2021, 102 applications for new grants had been submitted for Consolidated Appropriations Act, 2021 funds and 149 applications had been submitted for ARPA funds.[479]
Source: GAO analysis of Federal Transit Administration (FTA) data. | GAO-22-105051
Note: FTA Formula programs include the Urbanized Area Formula program, the Formula Grants for Rural Areas program, the Tribal Transit program, the Intercity Bus program, and the Enhanced Mobility of Seniors & Individuals with Disabilities program.
aThe CARES Act appropriated $25 billion for transit industry grants.
bThe Consolidated Appropriations Act, 2021 appropriated $14 billion.
cThe American Rescue Plan Act of 2021 appropriated about $30.5 billion, including approximately $26.5 billion to FTA formula funding programs.
dNumbers in columns may not sum to totals because of rounding.
eAllocations do not include funding set aside for FTA administration and oversight.
Transit agency officials reported using COVID-19 relief funds to cover operating expenses and mitigate the virus’s spread and also reported steps to strengthen rider confidence.
Use of COVID-19 relief funds for operating expenses. Officials from each of the 20 transit agencies where we conducted interviews said they used COVID-19 relief funds to cover operating expenses. According to the officials, such expenses included purchasing equipment to mitigate the spread of COVID-19 (five agencies) and labor costs (four agencies). Additionally, officials said they used COVID-19 relief funds to offset lost revenue, such as revenue from fares (10 agencies). Officials from all 20 agencies reported receiving COVID-19 relief funds through the CARES Act. Officials from 10 agencies reported also receiving COVID-19 relief funds through the Consolidated Appropriations Act, 2021, in addition to the CARES Act, and officials from nine agencies reported receiving COVID-19 relief funds through ARPA. Officials from four agencies said they had received COVID-19 relief funds through all three acts.
Steps to mitigate COVID-19 spread. Officials from the 20 transit agencies told us they had taken one or more steps to mitigate the spread of COVID-19 that were generally similar to those we identified in November 2020. For example, officials said they had practiced enhanced cleaning (18 agencies) and social distancing (17 agencies) and provided personal protective equipment (15 agencies) and barriers for drivers (eight agencies). Additionally, officials from all of the 20 agencies said they had followed federal requirements such as mask mandates. Further, officials said they generally relied on some combination of tools, guidance, and resources from state and local health departments (12 agencies), the Centers for Disease Control and Prevention (10 agencies), FTA (seven agencies), and the Transportation Security Administration (five agencies) to develop COVID-19 mitigation measures.
Ongoing negative effects of the COVID-19 pandemic. Officials from the 20 transit agencies reported ongoing negative effects of the COVID-19 pandemic—including reduced ridership (16 agencies), lost fare revenue (12 agencies), and service reductions (10 agencies). In addition, officials expressed concern about the possibility of continued reduced ridership (12 agencies) and lost fare revenue (seven agencies). Officials from five of the 20 agencies said they planned to delay the use of COVID-19 relief funds to mitigate future uncertainty such as continued fare revenue shortfalls. Moreover, officials from seven agencies said they were concerned there would be an ongoing shortage of drivers and staff.
Steps to strengthen rider confidence. Transit agency officials told us they were taking steps to strengthen rider confidence and increase ridership. Officials from 13 of the 20 agencies said they had worked to strengthen rider confidence via public outreach efforts. For example, officials from one transit agency said they had undertaken a publicity campaign to increase rider confidence, highlighting their enhanced sanitation efforts via internet and television advertisements and providing information resources on the agency website. Additionally, officials from 14 transit agencies said they were relying on COVID-19 mitigation measures, such as increased sanitation and mask requirements, to strengthen rider confidence.
Tribal transit agencies reported similar uses of COVID-19 relief funds as nontribal transit agencies, but said their service had been severely affected by the pandemic. Four of the five tribal transit agencies where we conducted interviews had either suspended or reduced service at some point during the pandemic. According to a transit association official, tribal transit agencies were more likely than nontribal transit agencies to suspend operations for some period during the pandemic. Officials from two of the five agencies said their agencies had shut down completely for 6 to 15 months, between March 2020 and June 2021. Officials from one tribal transit agency told us that as of July 2021, transit service remained suspended because of the difficulty of hiring new staff.
Similar to nontribal transit agencies, officials from the five tribal transit agencies we interviewed reported using COVID-19 relief funds to cover operating expenses, such as salaries (four agencies) and equipment purchases to mitigate the spread of COVID-19 (two agencies). For example, officials from all five tribal transit agencies reported implementing COVID-19 mitigation measures on their transit systems that were generally similar to the measures implemented by nontribal transit agencies. Officials reported using sanitation measures, physical distancing, and mask requirements.
Some transit agencies are reserving COVID-19 relief funds because of continued uncertainty, while some urbanized areas are still determining allocations at a local level. The CARES Act and the Consolidated Appropriations Act, 2021 provide funding that is available until expended and transit agencies may reserve funds to cover COVID-19 related expenses for the next few years. FTA officials told us that recipients are carefully weighing the short- and long-term effects of the pandemic when determining how to reserve or spend COVID-19 relief funds. Officials from five transit agencies said that they are planning to reserve the use of COVID-19 relief funds to mitigate future uncertainty.
However, some urbanized areas are still determining how to distribute funding allocated under the COVID-19 relief laws among local transit agencies. For example, the funding recipient for the Chicago, Illinois, urbanized area, which encompasses areas in three states, is the Regional Transportation Authority (RTA). Officials from the Chicago Transit Authority (CTA), a transit agency within that urbanized area, told us that dividing allocations requires significant discussion between RTA and transit agencies in the area. CTA officials told us RTA has had to decide how to split its funds–which were allocated to it based on the urbanized area’s 2018 operating expenses under the Consolidated Appropriations Act, 2021–among three large transit agencies.[480] Officials said RTA is also undergoing the same process to decide how to distribute ARPA funds. According to FTA officials, the agency had not identified any grant administration challenges other than waiting for recipients to decide how to split allocated funds at the local level.
FTA has integrated COVID-19 relief programs into its existing review processes and announced that the agency will begin supplemental oversight of these funds. FTA officials told us that the agency is including oversight of COVID-19 relief funds in its regular oversight program for Urbanized Area and Rural Area program funding recipients. Under FTA’s Triennial and State Management review programs, the agency evaluates how Urbanized Area and Rural Area funding recipients are meeting statutory and administrative requirements every 3 years. According to FTA officials, these reviews will now incorporate supplemental guidance and instructions for the oversight of COVID-19 relief funds. In March 2021, we reported that FTA had reinitiated Triennial and State Management oversight activities in October 2020.
In addition, FTA announced on April 20, 2021, that the agency would begin new supplemental oversight activities for recipients of COVID-19 funds, which will include spot reviews of expenses charged to FTA grants and the documentation of these expenses. In some cases, FTA will also look at the grant recipient’s financial systems during the spot reviews. FTA officials told us that they expect to complete 119 spot reviews this year and said that these reviews will help ensure proper documentation and the eligibility of expenses charged to COVID-19 relief grants.
Further, according to the officials, FTA continues to provide webinar series to address areas of risk in grant management and to educate recipients. FTA officials said that as of August 31, 2021, they had awarded grants to six recipients that had not previously received any FTA formula funding. Moreover, the DOT Office of Inspector General announced a new audit of FTA’s COVID-19 Relief Funding oversight in July 2021. This initial audit will focus on the design of FTA’s controls addressing relief funding requirements and on oversight risks throughout the grant life cycle.
Methodology
To conduct this work, we analyzed COVID-19 relief laws, applicable regulations, and FTA data on transit industry grant funding, including tribal transit funding, as of August 31, 2021. We found these data to be reliable for the purposes of describing federal allocations and transit agency obligations and expenditures.
We reviewed written responses from FTA officials about how they were implementing provisions of the CARES Act; the Consolidated Appropriations Act, 2021; and ARPA. In addition, we interviewed officials from 20 selected nontribal transit agencies and five of 10 selected tribal transit agencies. We interviewed officials, either by phone or through written questions and responses, regarding challenges they had experienced related to the pandemic and the provision of COVID-19 relief funds. We selected the 30 transit agencies on the basis of the amounts of CARES Act funds they had obligated. We selected agencies that had obligated varying amounts of COVID-19 relief funds, which we categorized as high, medium, or low amounts of relief funding. Finally, we interviewed representatives of the Community Transportation Association of America and the American Public Transportation Association to discuss the impact of COVID-19 relief funds on their members.
Agency Comments
We provided DOT and the Office of Management and Budget (OMB) with a draft of this enclosure. DOT provided technical comments, which we incorporated as appropriate. OMB did not provide comments on this enclosure.
GAO’s Ongoing Work
Our work on transit industry COVID-19 relief funds is ongoing. We will continue to work with our audit partners to monitor these programs.
Contact information: Andrew Von Ah, (213) 830-1011, vonaha@gao.gov
Coronavirus Economic Relief for Transportation Services (CERTS)
Bookmark:The Department of the Treasury worked with federal agencies and industry groups to develop eligibility guidance and has obligated all of $2 billion available.
Entities involved: Department of Transportation, Department of the Treasury, and United States Coast Guard
Background
In December 2020, the Consolidated Appropriations Act, 2021 was enacted, establishing the Coronavirus Economic Relief for Transportation Services (CERTS) Program.[481] Through this program, the Department of the Treasury must provide $2 billion in grant funding to eligible providers of transportation services that have experienced certain revenue losses because of COVID-19.[482]
According to industry associations, revenue losses can be attributed to declines in travel that affected multiple forms of transportation, including some of these transportation service providers. For the purposes of the CERTS Program, transportation service providers generally include private-sector operators of motor coaches (e.g., intercity buses), school buses, and passenger vessels (e.g., small cruise ships and river boats). They also include pilot organizations that provide vessels with pilots who navigate trade and cruise ships into and out of the port.[483] While some of these companies may have received federal financial assistance from other COVID-19 relief programs, such as the Payroll Protection Program, the CERTS Program provides funding exclusively to transportation service providers in these industries.
Treasury is awarding CERTS Program grants to eligible applicants to, for example, help cover payroll, rehire employees who have been laid off, and cover certain overhead and operational expenses.[484] In addition to meeting other requirements, applicants must certify that they have experienced revenue losses of 25 percent or more annually as a result of COVID-19. Applicants must also certify that the amount of assistance sought, when combined with any other pandemic-related federal financial assistance they have received, does not exceed the total revenue they earned during calendar year 2019.[485]
According to program guidance, all CERTS grant applicants eligible for financial assistance that submit a complete application and are approved by Treasury will receive an award, based primarily on their annual lost revenue and the aggregate annual lost revenues of all eligible applicants in that industry.
Overview of Key Issues
As of October 6, 2021, Treasury had obligated all of the $2 billion appropriated for CERTS Program grants to eligible providers of transportation services. Treasury accepted CERTS applications through July 19, 2021. Treasury received 2,091 completed applications, including 1,646 from motor coach companies, 224 from school bus companies, 204 from passenger vessel companies, and 17 from pilot organizations. As of October 6, 2021, Treasury had awarded CERTS Program grants to 1,447 applicants.
Treasury officials said they are providing grant funding to approved applicants in one or two payments. Treasury guidance states that this approach will ensure that grantees receive the bulk of their funds on a rolling basis instead of waiting until Treasury has finished reviewing all applications. For grantees that will receive two payments, the first payment averaged approximately $1.3 million per grantee, representing an estimated 80 percent of the total funding the grantee will receive, according to Treasury officials. After reviewing all applications, Treasury made a second payment to some grantees. .
Treasury officials said they began making grant payments to eligible companies in mid-August and finished reviewing applications and making final payments in October 2021.
Treasury developed a process to determine grant eligibility in consultation with the Department of Transportation (DOT) and U.S. Coast Guard (USCG). Before accepting applications, Treasury officials met with DOT and USCG officials to identify the information Treasury would need to verify the eligibility of applicants in the motor coach, school bus, and passenger vessel industries, which DOT and USCG regulate. For example, officials from DOT’s Federal Motor Carrier Safety Administration (FMCSA) provided information about the motor coach industry to Treasury officials and worked with them to develop a process for verifying that applicants were authorized operators of motor coaches. To become an authorized motor coach operator, FMCSA requires companies to obtain a unique USDOT number and comply with applicable federal and state statutes and regulations.[486]
After the application period ended, Treasury sent FMCSA applications that did not provide Treasury with sufficient information to verify that the motor coach applicant was an authorized operator (e.g., the USDOT number was missing or was not an authorized operator’s USDOT number). FMCSA officials said they reviewed more than 700 such applications.
Treasury also required school bus companies, passenger vessel companies, and pilot organizations to submit information in their applications that existing federal and state sources could validate. For example:
- School bus companies. Treasury required applicants to submit, among other information, the name of a school, school district, or state department of education for which the company provided school bus services to transport students in 2019. Treasury was able to compare this information with some information from state departments responsible for student transportation. Treasury also used applicants’ tax returns to verify that transporting students was their principal business.
- Passenger vessel companies. Treasury required applicants to submit vessel names and official numbers as documented on a certification of inspection issued by USCG. Treasury was able to compare the applicants’ information with information from USCG.
- Pilot organizations. Treasury required applicants to submit a copy of the operating license or other document issued by a state pilot commission, board, or oversight body. Treasury was able to compare these documents with information obtained from those entities.
In addition, Treasury required applicants to submit tax returns to show that they met revenue loss and other eligibility requirements, such as having a certain number of employees. According to Treasury officials, they also coordinated with the Department of Labor (DOL) to draft CERTS Program guidance related to unemployment insurance, and they compared the applicant list for the CERTS Program with Small Business Administration information to determine whether an applicant had received other federal financial assistance related to the COVID-19 pandemic.
Treasury plans to monitor awardees’ use of grant funds by requiring them to update Treasury on their anticipated expenditures of these funds at least once every 90 days from the date of receipt. Treasury will review these reports to verify that applicants are using grant funds for eligible activities. In addition, Treasury officials told us they are conducting a risk assessment on the design of the CERTS Program and will conduct a similar assessment of the grant award process in 2022.
Most selected industry associations expressed satisfaction with Treasury’s communication about the CERTS Program but also reported some challenges related to the application time frames and requirements. Officials of six of the seven industry associations where we conducted interviews were generally complimentary of Treasury’s outreach and communication on the CERTS Program. For example:
- Officials from one association said that Treasury officials solicited early and frequent input from multiple industry groups, which Treasury incorporated into the program guidance and application requirements.
- Officials from another industry association said that within weeks after the enactment of the Consolidated Appropriations Act, 2021, Treasury officials contacted them to learn about their industry. Specifically, officials of one school bus association we interviewed said that Treasury met with them regularly from January 2021 through July 2021 to learn about the school bus industry, including characteristics of private contractors and drivers, and the impact of the pandemic on these groups.
Officials from one association were more critical of Treasury’s outreach and communication, saying that they would have liked Treasury to communicate with industry members directly in addition to communicating through their industry association.
Moreover, officials from six of the industry associations reported some challenges related to the application time frames and Treasury’s requirements.[487] For example:
- Officials from three of the industry associations said they would have preferred that Treasury had begun accepting applications for the CERTS Program sooner.
- Officials from six of the industry associations we interviewed reported challenges in using “ID.me,” a company that provides secure identity proofing, authentication, and group affiliation verification for government and businesses across industries. Treasury required applicants to verify their identity through ID.me before they could complete a CERTS Program application.
- Officials from six of the industry associations said that some of their members were confused by certain information requirements in the application. Examples included a requirement to provide a tax form that did not apply to the applicant and a requirement to provide calendar-year tax information, although the applicant had filed its taxes for a fiscal year.[488]
Nevertheless, industry associations we interviewed said that Treasury officials had generally addressed these issues—either by providing instructions or, in some cases, making changes to the application—and that many of their members had successfully completed the CERTS Program application.
Methodology
To conduct this work, we reviewed the Consolidated Appropriations Act, 2021; applicable statutes and regulations; and Treasury guidance and documentation. We conducted interviews with USCG, DOT, and Treasury officials to understand Treasury’s approach to implementing, monitoring, and overseeing the CERTS Program. We also reviewed Treasury data on the number and value of CERTS Program grants and total obligations as of October 6, 2021, and asked Treasury about these data’s source and reliability. On the basis of our review and Treasury’s response, we determined that the data were sufficiently reliable for the purposes of summarizing the number of grants awarded and their amounts.
In addition, we interviewed USCG and DOT officials, asking them to describe how they worked with Treasury officials to develop and implement the CERTS Program. Finally, we interviewed officials from seven associations representing the motor coach, school bus, passenger vessel, and pilotage industries to obtain their perspectives on the CERTS Program and application process. We selected these associations from each of the four industries on the basis of their role in the coalition that advocated for the program, their inclusion in our prior reports, and Treasury and stakeholder recommendations.
Agency Comments
We provided Treasury, DOT, and the Office of Management and Budget with a draft of this enclosure. DOT provided technical comments, which we incorporated as appropriate. Treasury and the Office of Management and Budget did not provide comments.
GAO’s Ongoing Work
We will continue to monitor Treasury’s oversight of the CERTS Program, including steps it takes to ensure that the obligation and expenditure of appropriated funding meet statutory and program requirements.
Contact Information: Biza Repko, Director, (202) 512-2834, repkoe@gao.gov
Paycheck Protection Program
Bookmark:The Small Business Administration has simplified its processes as it continues to review and forgive Paycheck Protection Program loans.
Entities involved: Small Business Administration, Department of the Treasury
Background
Since March 2020, Congress has provided commitment authority of about $814 billion for the Paycheck Protection Program (PPP) under the Small Business Administration’s (SBA) largest guaranteed loan program, its 7(a) small business lending program.[489] PPP loans, made by lenders but guaranteed 100 percent by SBA, are low interest (1 percent) and fully forgivable if certain conditions are met.[490]
As of July 30, 2021, lenders had made about 11.5 million PPP loans, totaling about $791 billion.[491] Of those, lenders made about 5.1 million loans (totaling about $521 billion) during Round 1 (April through August 2020). SBA relaunched the program (Round 2) on January 11, 2021, following enactment of the Consolidated Appropriations Act, 2021, which authorized additional PPP loans and made changes to the program. Among other things, the act expanded the categories of forgivable nonpayroll costs and allowed PPP borrowers to receive a second PPP loan (second draw loans) of up to $2 million provided that they meet certain criteria.[492] In 2021 (Round 2 of PPP), lenders made about 6.3 million loans totaling about $271 billion.
As of September 26, 2021, SBA had received about 7.3 million loan forgiveness decisions from lenders and made payments on about 7 million of those (about $553 billion).[493]
SBA implemented the program rapidly and millions of small businesses have benefited from PPP. However, the speed with which SBA implemented the program left it with limited safeguards to identify and respond to program risks, including susceptibility to improper payments and fraud. Consequently, we have made four recommendations since June 2020 to ensure program integrity, achieve program effectiveness, and address potential fraud. As discussed in more detail below, SBA has partially addressed each of these recommendations.
As of August 31, 2021, SBA had obligated about $810.3 billion across the two rounds of PPP, including lender fees, and expended about $809.7 billion, according to SBA.
Overview of Key Issues
Status of loan reviews. For Round 1 loans, SBA conducted an initial automated review of all loans to identify anomalies or attributes that may indicate noncompliance with eligibility requirements, fraud, or abuse.[494] Loans with any identified issues were subject to manual review. Any issue identified would need to be resolved before borrowers could receive a second draw PPP loan or have their loan forgiven. According to SBA officials, SBA had completed about 114,000 manual reviews and 20,500 reviews were pending, including 6,200 loans pending higher authority reviews by more experienced analysts for partial or full denial of forgiveness, as of July 26, 2021.
In April 2020, SBA and the Department of the Treasury (Treasury) announced that SBA would review borrower eligibility for all loans of more than $2 million. In October 2020, SBA released questionnaires to be filled out by for-profit and nonprofit businesses that, together with their affiliates, received PPP loans with an original principal amount of $2 million or greater. According to SBA, the agency would use the information collected through these questionnaires to inform its assessment of whether a business’s certification that economic uncertainty made the loan request necessary to support the business’s ongoing operations was made in good faith.[495]
As we reported in July 2021, SBA was processing loan forgiveness decisions for these large loans slowly. Almost all loan forgiveness decisions for loans of $2 million or more submitted as of May 17, 2021, were processed in more than 90 days. In contrast, SBA processed about 79 percent of loans of less than $500,000 in 10 days or less.
In part to review loans more quickly, SBA has discontinued the use of the loan necessity questionnaires, which were designed to help SBA evaluate the good faith certification made by PPP borrowers on their loan application that economic uncertainty made the loan request necessary to support ongoing operations.[496] In a July 29, 2021, response to a frequently asked question posted on its website, SBA explained that the results of the loan reviews that it had completed to date showed that audit resources would be more efficiently deployed across all loans if the loan necessity questionnaires were discontinued. The agency also noted that the loan necessity reviews, including the review of borrowers’ completed questionnaires, were lengthy and had caused delays beyond the 90-day statutory timeline for forgiveness.
In July 2021, we made two recommendations to SBA to improve its loan review process.
- We found that SBA had not documented policies and procedures for some elevated reviews conducted when SBA determines that the borrower is ineligible for a PPP loan or for the loan amount or loan forgiveness amount claimed by the borrower. Consequently, we recommended that SBA establish time frames for finalizing and issuing these procedures. In response, SBA agreed with the recommendation and told us it was working to finalize its procedures for these reviews, but had not yet done so as of September 2021.
- We also found that although SBA developed tools such as a web portal and lender hotline, its system for responding to lender inquiries was ad hoc. Some lenders, lender associations, and state banking associations also noted that SBA was not responsive to lender inquiries, including on loan reviews and the status of loan forgiveness determinations. Consequently, we recommended that SBA develop and implement a process to ensure it responds in a timely manner to PPP lender inquiries on loan reviews. In response, SBA agreed with the recommendation and said it would provide procedures to us, but had not yet done so as of September 2021.
Changes to loan forgiveness process. On July 30, 2021, SBA published an interim final rule with changes meant to simplify the loan forgiveness process for borrowers with the smallest loans.[497]
- Changes to loan forgiveness application process. Some borrowers now have the option to apply for forgiveness directly to SBA instead of their lender. This option is available to borrowers with loans of $150,000 or less whose lenders have opted into using SBA’s direct borrower forgiveness platform.[498] Similar to loan forgiveness applications submitted directly to the lender, the lender would approve (or deny) the loan forgiveness request. Once the lender submits its decision to SBA, SBA reviews the decision and sends any loan forgiveness proceeds to the lender. SBA believes that (1) lenders that opt in will have reduced costs, increased efficiency, and more timely remittance of forgiveness payments from SBA and (2) borrowers who submit loan forgiveness applications directly through SBA’s direct borrower forgiveness process will experience less wait time and uncertainty than submitting through their lender.[499] The new platform began accepting loan forgiveness applications on August 4, 2021.
- Changes to documentation requirements. Borrowers who received a second draw PPP loan of $150,000 or less in 2021 and did not submit documentation of revenue reduction at the time of loan application may use an alternative method of documenting the required revenue reduction.[500] An independent third-party contractor has developed a COVID Revenue Reduction Score (COVID score) that will be assigned for each second draw PPP loan of $150,000 or less and that will be visible to the lender and certain borrowers in the platform.[501] The lender may review the borrower’s score in the platform. When the COVID score meets or exceeds the value required for validation of the borrower’s revenue reduction, use of the COVID score will satisfy the requirement for the borrower to document revenue reduction. If the COVID score does not validate the required revenue reduction for the borrower, the borrower must either provide documentation directly to the lender or upload it through the platform for its lender to review.
In July 2021, we reported that SBA had not issued guidance for key aspects of the forgiveness process and made two recommendations in this area.
- The CARES Act requires SBA to make an advance purchase for the expected forgiveness amount of a PPP loan within 15 days of receiving a report on the expected forgiveness amount from a lender, and outlines a process for lenders to initiate the advance purchase. As of July 2021, SBA had not implemented this provision. Consequently, we recommended that SBA implement the advance purchase provision in the CARES Act or report to Congress why it has not complied, including seeking statutory flexibilities or exceptions believed appropriate. In response, SBA said it would notify Congress of its request to seek statutory flexibility on this matter or would request that Congress repeal the advance purchase requirement, but had not yet done so as of September 2021.
- As of early July 2021, SBA had not yet finalized a process for PPP lenders to claim the loan guarantee if a borrower ceases operations or defaults on a loan. We recommended that SBA establish time frames for finalizing and issuing a PPP-specific loan guarantee purchase process, including allowing lenders to claim the SBA guarantee when they have evidence the business ceased operations or declared bankruptcy. In July 2021, SBA issued a procedural notice on lenders’ servicing responsibilities for PPP loans and SBA’s guarantee purchase process. According to the notice, SBA will honor its guarantee and purchase 100 percent of the outstanding balance of the loan in applicable circumstances provided that the lender has complied with all the PPP requirements, including the lenders’ underwriting requirements and the document collection and retention requirements. The process outlined in the procedural notice would also apply to requests for guarantee purchase and charge-off for loans to businesses that have permanently closed and do not plan to submit a forgiveness application or have filed for Chapter 7 bankruptcy protection, among other circumstances.
Methodology
To conduct this work, we reviewed SBA guidance and data on PPP loan forgiveness applications and obligations and expenditures, and interviewed officials from SBA. We assessed the reliability of the SBA data by reviewing documentation and interviewing SBA officials. We determined that the data were sufficiently reliable for reporting the status of loan forgiveness applications and PPP expenditures.
Agency Comments
We provided SBA, Treasury, and the Office of Management and Budget (OMB) with a draft of this enclosure. Treasury provided technical comments, which we incorporated as appropriate. SBA and OMB did not provide comments on this enclosure.
GAO’s Ongoing Work
Our work on PPP is ongoing. We continue to examine SBA’s loan review and forgiveness processes and the fraud risks in the program. We also continue to monitor SBA’s progress toward developing and implementing corrective actions to address the material weaknesses identified by its financial statement auditor.
GAO’s Prior Recommendations
The table below presents our recommendations on the Paycheck Protection Program from prior bimonthly and quarterly CARES Act reports.
Source: GAO. I GAO-22-105051
Related GAO Product
Paycheck Protection Program: SBA Added Program Safeguards, but Additional Actions Are Needed. GAO-21-577. Washington, D.C.: July 29, 2021.
Contact information: William B. Shear, (202) 512-8678, shearw@gao.gov
Coronavirus State and Local Fiscal Recovery Funds
Bookmark:To provide assurance that funds are expended in accordance with program requirements, the Department of the Treasury should comply with federal internal control standards by establishing policies and procedures for administering the Coronavirus State and Local Fiscal Recovery Funds as states and localities plan for using and managing their allocations.
Entities involved: Department of the Treasury and Office of Management and Budget
Recommendation for Executive Action
The Secretary of the Treasury should design and document timely and sufficient policies and procedures for monitoring recipients of Coronavirus State and Local Fiscal Recovery Funds to provide assurance that recipients are managing their allocations in compliance with laws, regulations, agency guidance, and award terms and conditions, including ensuring that expenditures are made for allowable purposes.
Treasury agreed with the recommendation.
Background
COVID-19 relief laws have appropriated $500 billion to the Department of the Treasury to provide direct funding to states, the District of Columbia, localities, tribal governments, and U.S. territories to help them respond to, and recover from, the COVID-19 pandemic.[502] This amount includes $350 billion appropriated to Treasury through the American Rescue Plan Act of 2021 (ARPA) for the Coronavirus State and Local Fiscal Recovery Funds (CSLFRF) in March 2021.[503]
The CSLFRF allocates funds to states, the District of Columbia, localities, tribal governments, and U.S. territories to cover a broad range of costs stemming from the fiscal effects of the COVID-19 pandemic.[504] Localities consist of metropolitan cities, counties, and smaller local governments, referred to as non-entitlement units of local government.[505] According to Treasury data, it had distributed approximately $240 billion in CSLFRF funds to recipients as of August 31, 2021. The figure below shows the amounts of funding the CSLFRF allocates to various recipient types as well as the amount of funding Treasury had distributed to each recipient type as of August 31, 2021.
Coronavirus State and Local Fiscal Recovery Funds Allocations and Treasury Distributions as of Aug. 31, 2021, by Recipient Type
ARPA established four key eligible-use categories for which recipients can use the CSLFRF payments:[506]
- Respond to the COVID-19 pandemic or its negative economic impacts, including assistance to households, small businesses, and nonprofits or aid to impacted industries, such as tourism, travel, and hospitality
- Respond to workers performing essential work during the COVID-19 pandemic, by providing premium pay to the recipients’ eligible workers or grants to eligible employers that have eligible workers who perform essential work
- Provide government services to the extent of any revenue reduction resulting from the COVID-19 pandemic relative to revenues collected in the recipient government’s most recent prepandemic full fiscal year
- Make necessary investments in water, sewer, or broadband infrastructure
Recipients must incur obligations with their CSLFRF payments by December 31, 2024, and must liquidate those obligations by December 31, 2026.[507]
On May 10, 2021, Treasury released an interim final rule implementing the CSLFRF, which includes guidance for recipients on the eligible uses of CSLFRF payments.[508] The interim final rule states that CSLFRF recipients have flexibility, within the four key eligible-use categories identified in ARPA, to determine how best to use the payments to meet the needs of their communities and populations. The interim final rule also urges all recipients to develop plans, in consultation with their constituents and communities, for spending their allocations across the four categories. Further, the interim final rule establishes a framework for determining the types of programs and services that are eligible under ARPA and provides examples of uses that recipients may consider.
Treasury requested public comments on the interim final rule by July 16, 2021. Before issuing the interim final rule, Treasury published a document containing answers to frequently asked questions (FAQs) about the program. Treasury updates this document periodically in response to questions received from stakeholders.
Treasury’s interim final rule also identifies reporting requirements for recipients. For example, specified recipients are required to submit reports that provide information on their use of the funding and projects undertaken with the funding, among other things. On June 24, 2021, Treasury released the Compliance and Reporting Guidance for the CSLFRF program, which provides additional detail and clarification for each recipient’s compliance and reporting responsibilities. The figure below shows reporting requirements for the five types of recipients.
Overview of Key Issues
States’ and selected localities’ plans for CSLFRF allocations. We surveyed states and localities (cities and counties) to, among other things, determine the status of their plans for spending CSLFRF allocations across the ARPA eligible use categories.[509] Of the 48 states and 45 localities that responded to our survey, 24 states and four localities (two cities and two counties) reported having a proposed or adopted spending plan as of July 2021 for using their CSLFRF allocations (see figure). The remaining 24 states and 41 localities reported that they did not have a proposed or adopted plan. Officials from two associations representing state and local governments told us that many states and localities were still in the process of developing plans for their CSLFRF allocations because they have until the end of 2024 to obligate them.
Number of States and Localities That Reported Having a Proposed or Adopted Plan for Spending Their CSLFRF Allocations, as of July 2021
The 24 states and four localities that reported having a proposed or adopted CSLFRF plan provided documentation for our review. Our review of the documentation provided by the 24 states found the following:
- Documentation or written survey responses for 19 states showed that their legislatures had appropriated at least some of the funds from their CSLFRF allocations. However, some of these states’ documentation and written responses also showed that they will need to take additional steps to appropriate their full allocations or determine specific uses for funds already appropriated. One state appropriated funds from its CSLFRF allocation to various state programs and initiatives—including transportation, water protection and sustainability, and reemployment assistance—in appropriations for fiscal year 2021–2022. In response to an open-ended survey question, a budget official stated that the state is still determining which activities the appropriations for these programs and initiatives will support.
- Documentation or written survey responses for five states identified proposals or recommendations for using allocations that their states’ executives had made but their legislatures had not yet acted on. For example, one state’s governor had developed an ARPA budget that recommended a range of uses for the state’s CSLFRF allocation, including assisting those most affected by the pandemic and upgrading the state’s broadband and water infrastructure. As of July 2021, the state legislature had not yet adopted the governor’s budget proposal.
The four localities that reported having a proposed or adopted spending plan provided documentation that varied in the level of detail and in the breadth of projects covered. For example, one city provided the mayor’s spending proposal, which included appropriations for various projects, such as increasing affordable housing units, revitalizing tourism, and incentivizing grocery stores to locate within food desert areas. Further, one county provided meeting minutes as its plan, which documented county officials agreeing to use some of its CSLFRF allocation to improve broadband service to unserved and underserved households and businesses. The county also reported that it was unsure how it would use all of its allocation at this time.
States and localities that reported having a proposed or adopted CSLFRF spending plan also reported intending to spend their allocations across multiple eligible use categories. Specifically, 22 of the 24 states and three of the four localities reported that they planned to spend some portion of their CSLFRF allocation on public health, on responding to the pandemic’s economic impact, or on both. States also frequently reported investments in infrastructure, offsets to state revenue losses, and administrative costs as areas in which they planned to use their CSLFRF allocations. Two of the four localities that reported having a proposed or adopted plan reported that they did not have spending plans in place for three-quarters of their allocations.
The 24 states and 41 localities that reported not having a proposed or adopted CSLFRF spending plan also reported needing to take additional steps before proposing or adopting a plan. Those steps included collecting public or stakeholder input (e.g., other levels of government or businesses) or waiting for approval from a legislative body. For example, in response to an open-ended survey question, one state official reported that the governor’s emergency relief and recovery office was working with state agencies and other stakeholders (e.g., local governments and businesses) to finalize a plan before consulting with the state’s executive leaders and its legislature to revise and approve it. Similarly, officials from two cities stated in response to open-ended survey questions that they needed to develop other plans for their respective cities, such as infrastructure and expenditure plans, before proposing or adopting a plan for using their CSLFRF allocations.
States’ and localities’ self-reported capacity for managing allocations. Most states and localities that responded to our survey reported that they had sufficient or more than sufficient capacity to manage their CSLFRF allocations in accordance with federal requirements.[510] For example, 35 of 48 states and 38 of 45 localities reported they had either sufficient or more than sufficient capacity to allocate and disburse CSLFRF funds. However, some of the states and localities that responded to our survey reported that they had insufficient capacity to manage their CSLFRF allocations in accordance with federal requirements. For example, 17 of 48 states and eight of 45 localities reported that they had somewhat less than or much less than sufficient capacity to report on the use of their CSLFRF allocations consistent with federal requirements (see figure).
States’ and Localities’ Reported Capacity for Managing Their CSLFRF Allocations, as of July 2021
Forty-four of 48 states and 30 of 45 localities also reported that they had taken or planned to take one or more additional steps to help them manage their CSLFRF allocations. These states and localities most often reported that they had hired or planned to hire new staff (39 states and 13 localities)—including contractors or consultants—or had reassigned existing staff (38 states and 18 localities) to support the management of their CSLFRF allocations. For example, in response to an open-ended survey question, one state official commented that the state was adding five staff to a central office to manage CSLFRF allocations to agencies, respond to statewide inquiries, and meet the program’s reporting requirements. In addition, this official stated that the state’s agencies would need to add staff resources to manage their own CSLFRF responsibilities.
Additional steps that states and localities reported having taken or planning to take included implementing new internal controls or amending existing ones (28 states and nine localities); procuring new financial management or information technology systems (16 states and four localities); expanding fraud detection efforts (21 states and 10 localities); and creating a new entity (e.g., office or task force) to oversee CSLFRF spending (19 states and four localities). Likewise, one county official stated, in response to an open-ended survey question, that the county had created a financial recovery team and would use contracted auditors to ensure fiscal and contractual CSLFRF compliance.
Six states reported that they may face challenges in expanding staff capacity. For example, one state, responding to an open-ended survey question, stated that onboarding contract staff is a long process and is unlikely to help the state meet its staffing needs. The state is therefore relying on existing staff, who have been strained by the demands of responding to the pandemic, to manage its allocation.
Similarly, some localities expressed concern about their ability to ensure they had sufficient staff capacity for managing their CSLFRF allocations. For example, in response to open-ended survey questions, officials from three counties stated that they were concerned about their ability to maintain routine operations during periods of increased workload when fulfilling CSLFRF reporting requirements. Officials from three associations representing state and local governments told us that because of the extensive compliance and reporting requirements, smaller localities that do not regularly receive federal funding assistance may face capacity challenges when managing their CSLFRF allocations. Some of the officials said these jurisdictions generally have fewer staff and less institutional knowledge and awareness of federal processes than larger localities have, which could limit the smaller localities’ ability to fully understand and comply with CSLFRF requirements.
States’ and localities’ perspectives on clarity of Treasury’s CSLFRF guidance. Few states and localities responding to our survey indicated that Treasury’s guidance on the allowable uses of CSLFRF funds and the program reporting requirements was very clear (see figure).
States’ and Localities’ Views on Clarity of Treasury’s CSLFRF Guidance on Allowable Uses of Funds and Reporting Requirements, as of July 2021
In addition, most of the states and localities that responded to our survey reported needing additional information about the allowable uses of CSLFRF funds. Most of the states and nearly half of the localities also reported needing additional information about the program’s reporting requirements.
Allowable uses of CSLFRF funds. The majority of states (29 of 48) and localities (29 of 45) that responded to our survey reported needing additional information about allowable uses of CSLFRF funds. For states, examples of such information included guidance on whether incarcerated persons are considered underserved populations; guidance on the taxability of funds provided to small businesses; and guidance on water projects, such as those for irrigation, dams, and levees. Similarly, examples of information that localities reported needing included whether CSLFRF funds could be used to purchase laptops and software for remote work and emergency communication radios for emergency and safety employees.
In addition, 12 states and six localities reported that they needed additional information related to calculating revenue losses. For example, one state reported that it needed additional information about what could be considered a revenue loss. In a response to an open-ended survey question, one city official stated that the city needed clarity on how local tax increases from previous years affect the revenue replacement calculation.
Representatives of three associations representing state and local governments told us that, in response to feedback from their members, the associations had asked Treasury for additional information on the allowable uses of funds. For example, representatives of two associations said that their members were uncertain whether they could pool their CSLFRF funds with other jurisdictions to pursue regional efforts, such as behavioral health and broadband projects. In addition, in a comment submitted to Treasury about its interim final rule for implementing the CSLFRF, an association representing local governments noted that a lack of clarity on the allowable uses of the funds might hamper its members’ ability to achieve an equitable economic recovery, a key goal of the program.
Treasury officials told us they intend the final rule to address recipients’ questions and concerns and to provide additional information recipients need to effectively manage their allocations. They said that as of September 2021, Treasury was reviewing comments on the interim final rule. Before finalizing the rule, Treasury has taken steps to respond to recipients’ questions, including those related to allowable uses, in updates to its FAQ document. For example, Treasury’s FAQ document includes a six-page section devoted to questions about revenue loss. Treasury also specified in a July 2021 update that jurisdictions could pool their funds to pursue regional projects. One state reported that it had fewer questions about potential allowable uses with each FAQ update Treasury published.
CSLFRF reporting requirements. Thirty-two states and 17 localities that responded to our survey reported needing additional information about CSLFRF reporting requirements. For example, states reported that they needed to know, among other things, details about the system through which they would have to report. States cited specific information that would be helpful for meeting reporting requirements, such as a CSLFRF reporting system user guide and data dictionary, information about the data requirements (e.g., system data fields and business rules), and reporting templates for the system.
Of the 17 localities that reported needing additional information about the reporting requirements, five reported that they wanted Treasury to provide relevant training or webinars. Since mid-June 2021, Treasury has provided seven webinars on CSLFRF reporting requirements, including overviews of the relevant guidance and specific technical assistance topics (e.g., evidence-based interventions and program evaluations). Of the six localities that requested information about the reporting system, one county wanted the reporting templates, to help it set up its own reporting systems, and another county asked whether the portal would allow prime recipients to upload data files in addition to entering data manually.
Two localities responding to the survey reported that they had obtained support from associations representing state and local governments to supplement their understanding of Treasury’s guidance. One association developed webinars and told us they hosted weekly calls, and another association created on-line forums where members could share ideas and concerns with other government officials.
In August 2021, after we administered our survey, Treasury issued additional guidance on CSLFRF reporting requirements.[511] This guidance includes a user guide for the reporting system, with detailed instructions for navigating the system and entering required information. Treasury also issued a template for recipients’ Recovery Plan Performance Reports, which identifies information that recipients will be required to include in the reports. Treasury also plans to issue a user guide for submitting Project and Expenditure Reports.
States’ and localities’ concerns about single audits of CSLFRF recipients. CSLFRF recipients may be subject to single audits as required by the Single Audit Act. The act establishes requirements for states, the District of Columbia, localities, Indian tribes, U.S. territories, and nonprofit organizations that receive federal awards to undergo single audits (or, in limited circumstances, program-specific audits) of those awards annually (unless a specific exception applies) when their expenditures meet a certain dollar threshold.[512]
The Single Audit Act’s Compliance Supplement provides guidance and policy for performing single audits. Specifically, the supplement includes information about the programs’ objectives, procedures, and compliance requirements. Without such information, auditors would need to research compliance requirements for each program in numerous statues and regulations. Each year, the Office of Management and Budget (OMB) works with agencies over multiple months to compile this information and issues the information in the supplement. According to OMB, CSLFRF and other programs included as part of ARPA, enacted in March 2021, were not included in the 2021 Compliance Supplement, because agencies did not have sufficient time to provide OMB with the inputs required for those programs to be included in the August 2021 publication of the Compliance Supplement.
In July 2021, we asked states and localities whether their single audits would include CSLFRF and if they needed additional guidance to complete them. Among survey respondents that expected their single audits to include CSLFRF, some expressed concern about the timeliness of the 2021 Compliance Supplement. One respondent reported that auditors are not able to adequately plan their audit procedures for CSLFRF until the Compliance Supplement is available. Respondents also expressed the need for additional guidance, such as clarification of requirements to report CSLFRF data on the Schedule of Expenditures of Federal Awards and to report non-entitlement unit distributions, revenue loss, and subrecipient monitoring.
These concerns expressed by states and localities are similar to those we previously reported. Specifically, in March 2021, we reported that auditors who conduct single audits for entities whose fiscal year ends on June 30 have expressed a need to receive the Compliance Supplement by no later than April each year to effectively plan their audits and conduct interim testing.[513] In our March 2021 report, we recommended that OMB work with federal agencies and the audit community (e.g., agencies’ inspectors general; the National Association of State Auditors, Comptrollers, and Treasurers; and the American Institute of Certified Public Accountants) to incorporate measures into OMB’s process for preparing single audit guidance to better ensure that such guidance is issued in a timely manner and is responsive to users’ input and needs.
OMB neither agreed nor disagreed with our recommendation. Although OMB stated that it shares the draft Compliance Supplement with the grant and audit communities as part of the Compliance Supplement preparation process, OMB has not taken additional steps to ensure that the Compliance Supplement and other single audit guidance are issued in a timely manner and are responsive to users' input and needs. OMB officials stated that they believe there is currently an appropriate balance between the timeliness of issuing the annual Compliance Supplement and the consideration given to inputs and comments from federal agencies and the audit and grantee community. However, the survey respondents expressed concerns similar to the audit community’s concerns that we previously reported.
In July 2021, we further recommended that OMB, in consultation with Treasury, issue timely and sufficient single audit guidance for auditing recipients’ uses of CSLFRF payments. OMB neither agreed nor disagreed with our recommendation. In August 2021, OMB issued the 2021 Compliance Supplement and stated that issuance of an addendum containing CSLFRF guidance was forthcoming.
Standards for internal control in the federal government require that management identify, analyze, and respond to change—such as by providing timely guidance— as part of a risk assessment process. The lack of timely single audit guidance could prevent auditors from completing and issuing timely audit reports, which could in turn limit federal agencies’ ability to ensure their awardees’ appropriate use of the CSLFRF and reduce the likelihood of improper payments.
Treasury’s monitoring of recipients’ internal controls. In April 2021, Treasury established the Office of Recovery Programs to oversee programs authorized through the COVID-19 relief laws (primarily the CARES Act, the Consolidated Appropriations Act, 2021, and ARPA). Given Treasury’s role in administering the CSLFRF, Treasury’s newly established Office of Recovery Programs has an opportunity to create a robust system of CSLFRF recipient monitoring that provides assurance that funds are expended for allowable purposes and recipients are managing their allocations in compliance with laws, regulations, agency guidance, and the awards’ terms and conditions.
Treasury’s current efforts to administer the CSLFRF program include developing recipient reporting guidance and, according to officials, planning the department’s approach to recipient monitoring.
Developing recipient reporting guidance. Treasury’s Compliance and Reporting Guidance for the CSLFRF program includes a table listing internal control best practices for recipients. These best practices relate to written policies and procedures, written standards of conduct, risk-based due diligence, risk-based compliance monitoring, and record maintenance and retention. In addition, the guidance includes requirements for recipients to report on their CSLFRF expenditures at various intervals, beginning with an interim period and followed by quarterly and annual periods. Further, the guidance notes that recipients and subrecipients will be subject to an audit under the Single Audit Act when their annual expenditures in federal awards meet a certain dollar threshold.
Planning recipient monitoring. In our interview with CSLFRF program officials in Treasury’s Office of Recovery Programs, the officials stated that Treasury’s procedures for monitoring of CSLFRF recipients will include recipient risk assessment, systematic review of relevant single audit reports, data collection and monitoring, risk-based and event-based compliance reviews, remediation, escalation, and recoupment. Treasury officials also indicated that single audit report findings related to eligibility will serve as a fundamental compliance control. In addition, according to the officials, Treasury plans to conduct reviews of recipients’ interim, quarterly, and annual reporting data. Further, the officials said Treasury plans to assess the risk of recipient noncompliance, using information from sources such as whistleblower reports or media reports and following up as needed with reviews of selected recipients.
However, as of August 2021, Treasury’s key internal processes and control activities for the timely monitoring of recipients’ use of their CSLFRF allocations for allowable purposes and for responding, as appropriate, to CSLFRF internal control and compliance findings were in the development phase. According to Treasury officials, the key internal processes and control activities had not been finalized or documented. The officials noted that program development had occurred within a short timeframe since the enactment of ARPA in March 2021 and that finalizing and documenting internal processes and control activities for the new program required time and resources. Further, vacancies in top-level leadership positions in the Office of Recovery Programs have contributed to uncertainty about how the final program policies and procedures will be implemented.
Federal internal control standards state that management should design control activities to achieve objectives and respond to risks and should implement control activities through policies. As part of this process, management designs control activities in response to the entity’s objectives and risks to achieve an effective internal control system. Management then documents the internal control responsibilities in policies at an appropriate level of detail to allow management to effectively monitor the control activity.
Until Treasury properly designs and documents policies and procedures to guide CSLFRF program officials and other responsible oversight parties in the Office of Recovery Programs, there is a risk that key control activities needed to help ensure program management fulfills its recipient monitoring and oversight responsibilities may not be established or applied effectively and consistently. This risk may be particularly acute with respect to monitoring state and local recipients with insufficient capacity to manage their CSLFRF allocations in accordance with federal requirements, as some survey recipients noted. Given that Treasury had distributed approximately $240 billion of the CSLFRF as of August 31, 2021, it is important that sufficient policies and procedures be developed and implemented expeditiously to prevent potentially unallowable uses of CSLFRF by recipients from going undetected and uncorrected.
Methodology
To conduct this work, we surveyed budget officials in the 50 states and the District of Columbia.[514] We also sent surveys to city and county officials in a randomly selected nongeneralizable sample of 48 localities (24 metropolitan cities and 24 counties).[515] We generated our sample of cities and counties by using Treasury data on localities that had received at least some of their CSLFRF allocations as of June 17, 2021. We then grouped the data on the basis of small, medium, and high allocation amounts. We also used the U.S. Census Bureau’s division of regions to achieve geographic diversity across four regions. The sampled localities included entities within each of the 24 strata formed by the combination of allocation amounts, region, and type of locality (city or county).
The results of the three surveys cannot be generalized to the larger population of states and localities receiving funding, including to non-entitlement units of local government or to other recipients of CSLFRF allocations (i.e., territories and tribal governments). However, the survey results provide useful information about respondents’ planned use and management of state and local CSLFRF allocations, self-reported capacity to manage allocations, and perceptions of the clarity of Treasury’s CSLFRF guidance on allowable uses of funds and reporting requirements.
We asked state, city, and county officials to respond to each question from the perspective of their state, city, or county as a whole. We did not independently verify whether officials sought input from other state, city, or county offices when completing the survey. The survey questions were designed to obtain state, city, and county officials’ perspectives on their state’s, city’s, or county’s planned use and management of its CSLFRF allocations at the time the officials were completing the survey. Each of the three surveys also included questions to obtain officials’ perspectives regarding the clarity of Treasury’s CSLFRF guidance on allowable uses and reporting requirements at the time they completed the survey.
We administered the surveys from July 1, 2021, through August 6, 2021. We pretested a draft of the surveys with officials in two states, one city, and one county to help ensure that the questions were understandable and answerable. We received responses from 48 states, including the District of Columbia; 22 cities; and 23 counties. We assessed data reliability by checking for missing values and survey response errors and followed up with officials on survey responses as appropriate. After completing these checks, we determined that the final survey data were sufficiently reliable for the purpose of obtaining states’ and selected counties’ and cities’ perspectives on their planned use and management of their CSLFRF allocations and the clarity of Treasury’s CSLFRF guidance on allowable uses and reporting requirements.
In addition, we interviewed a nongeneralizable sample of officials from five associations representing state and local governments to obtain their perspectives on the CSLFRF program. Furthermore, we reviewed federal laws and Treasury guidance, interviewed Treasury officials, and collected Treasury’s written responses to questions that we posed.
Agency Comments
We provided a draft of this report to Treasury and OMB for review and comment.
Treasury provided written comments, which are reproduced in appendix IX. Treasury agreed with our recommendation in this enclosure and stated that it is in the process of designing, documenting, and implementing a risk-based compliance program to monitor recipient use of CSLFRF program funds. Treasury also provided technical comments, which we integrated as appropriate.
OMB did not provide comments on this enclosure.
GAO’s Ongoing Work
We currently have multiple ongoing or planned reviews of the funding that federal COVID-19 relief laws appropriated for agencies across the federal government to provide payments to states, the District of Columbia, localities, territories, and tribal governments for responding to, and recovering from, the COVID-19 pandemic. Our work on the CSLFRF, in particular, is ongoing. We will continue to review the extent to which federal agencies provide effective guidance to help recipients achieve accountability and transparency for their use of payments. We also plan to examine how CSLFRF recipients spend their payments, address challenges they face in managing the funds, and evaluate outcomes of their funded projects.
We will continue to monitor OMB and Treasury’s efforts to provide CSLFRF guidance, and we will work with the audit community to determine whether concerns previously expressed have been addressed by the 2021 Compliance Supplement. We will also continue to monitor the status of our open recommendations.
GAO’s Prior Recommendations
The table below presents our recommendations on single audits from prior bimonthly and quarterly CARES Act reports.
Source: GAO. I GAO-22-105051
Related GAO Products
COVID-19: Continued Attention Needed to Enhance Federal Preparedness, Response, Service Delivery, and Program Integrity. GAO-21-551. Washington, D.C.: July 19, 2021.
State and Local Governments: Fiscal Conditions During the COVID-19 Pandemic in Selected States. GAO-21-562. Washington, D.C.: July 15, 2021.
COVID-19: Sustained Federal Action Is Crucial as Pandemic Enters Its Second Year. GAO-21-387. Washington, D.C.: March 31, 2021.
COVID-19: Federal Efforts Could Be Strengthened by Timely and Concerted Actions. GAO-20-701. Washington, D.C.: September 21, 2020.
COVID-19: Opportunities to Improve Federal Response and Recovery Efforts. GAO-20-625. Washington, D.C.: June 25, 2020.
Standards for Internal Control in the Federal Government. GAO-14-704G. Washington, D.C.: September 2014.
Contact Information: Jeff Arkin, (202) 512-6806, arkinj@gao.gov, and Beryl Davis, (202) 512-2623, davisbh@gao.gov
Federal Contracts and Agreements for COVID-19
Bookmark:As of September 30, 2021, federal agencies continued to obligate billions of dollars monthly in support of COVID-19 response efforts through contracts and other transaction agreements, with drugs and treatments continuing to be the predominant type of good and service procured.
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.[516] 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.[517] 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.[518] 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 requirements on the use of other transaction agreements in response to COVID-19 for HHS and DOD—for example, related to congressional reporting and who can approve certain transactions.[519]
As federal contracting activity through contracts and agreements continues to play a critical role in response to the pandemic, it is important to ensure that the use of these contracts and agreements 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 (FPDS).[520] The COVID-19 NIA code was established on March 13, 2020, to track contract actions and associated obligations in response to the pandemic in FPDS. The Department of Homeland Security (DHS) and DOD have subsequently extended the code four times—generally in 6-month increments, and most recently until March 30, 2022.[521]
Overview of Key Issues
Agencies obligated $86.9 billion on federal contracts, with DOD and HHS accounting for three-quarters of obligations as of September 30, 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. The increase in DOD’s contract obligations is due, in part, 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 September 30, 2021, DOD accounted for about 51 percent and HHS for about 24 percent of the total obligations made by federal agencies in response to the COVID-19 pandemic. U.S. Department of Agriculture (USDA) obligations, almost all of which were in support of the Farmers to Families Food Box Program, accounted for $6.2 billion, or 7 percent of total obligations made in response to COVID-19 (see figure).[522]
In our July 2021 report, we reported that government-wide contract obligations related to COVID-19 totaled $61.4 billion through May 31, 2021; by September 30, 2021, those obligations had increased by about $25.5 billion—to $86.9 billion. DOD accounted for about $19.6 billion, or about 77 percent of the increase in total contract obligations since May 31, 2021. See figure for government-wide obligations and confirmed COVID-19 cases by month.
Types of goods and services purchased and competition rate 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 primarily medical equipment and supplies—such as ventilators and personal protective equipment—to drugs and treatments, such as COVID-19 vaccines and therapeutics.
- We reported in July 2021 that drugs and treatments were the largest area of government-wide obligations and that remains the case. This area accounted for 37 percent of total obligations. These obligations increased about tenfold 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 $31.9 billion as of September 30, 2021.[523] Obligations for drugs and treatments increased by $17.6 billion from May 31, 2021, to September 30, 2021, with over 50 percent, or $9.3 billion, of the increase due to the purchase of additional COVID-19 vaccines from Pfizer to support booster shots, pediatric vaccinations, and international vaccine donations. An additional $4.1 billion of the increase was for the purchase of therapeutics to treat COVID-19 from Regeneron and Merck, and $3.3 billion of the increase was for additional doses of COVID-19 vaccines from Moderna.
- Medical equipment and supplies—including personal protective equipment like nitrile gloves—increased by about $708.1 million since May 31, 2021, and accounted for about $10.1 billion, or 12 percent of government-wide contract obligations as of September 30, 2021.
- Obligations for laboratory equipment and supplies—including COVID-19 test kits—increased by an additional $965.7 million since May 31, 2021, to $3.6 billion as of September 30, 2021.
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–Sept. 2021
As of September 30, 2021, COVID-19-related contracts for goods continued to be competed less frequently than contracts for services. About 74 percent of the obligations for goods were on contracts that were not awarded competitively, compared with about 40 percent of the obligations for services. For example, about $29.6 billion, or 93 percent, of the $31.9 billion in obligations for drugs and treatments and about $8.2 billion, or 82 percent, of the $10.1 billion in obligations for medical and surgical equipment were on contracts awarded noncompetitively.
Since our July 2021 report, the proportion of COVID-19 related contracts identified as having been awarded noncompetitively increased from 58 percent as of May 31, 2021, to 62 percent as of September 30, 2021—about $54.3 billion.[524] Throughout the course of the pandemic, the percentage of obligations on these noncompetitive contracts has fluctuated from a low of 25 percent of obligations in February 2020 to a high of 94 percent of obligations in July 2021. 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 84 percent, or about $45.8 billion, of the contract obligations associated with noncompetitive awards.[525]
Federal agencies’ use of undefinitized contracts increased. 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.[526] Since May 31, 2021, undefinitized contract obligations for COVID-19 have increased from about $5 billion to about $5.5 billion as of September 30, 2021, totaling about 8 percent of government-wide obligations on contracts awarded in response to COVID-19. This increase was driven in part by undefinitized contracts made by HHS for vaccine kit services to support booster shots and pediatric vaccinations.
DOD continued to report the highest amount of undefinitized contract obligations, identifying about $4.2 billion, or about 10 percent of its overall COVID-19-related contract obligations as being on undefinitized contracts. DOD’s use of undefinitized contracts included the procurement of 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.[527]
Use of other transaction agreements has stabilized, but transparency of certain awards could be improved. In addition to contract obligations, DOD, HHS, and DHS have reported using other transaction agreements in response to COVID-19, with obligations on these agreements remaining about the same as we reported in July 2021, at $12.5 billion.[528] In July 2021, we found that about $12 billion of the $12.5 billion, or about 96 percent, was used for vaccine development and manufacturing; medical research and development, such as COVID-19 rapid test kits; and applied defense research and development, such as COVID-19 therapeutics.
In July 2021, we also found that agencies did not use a systematic approach to consistently and accurately track other transaction agreements awarded in response to COVID-19 and the associated dollars obligated. Specifically, HHS, DOD, and DHS reported obligating $10.9 billion on COVID-19 other transaction agreements in FPDS. However, our analysis of FPDS data, agency data, and agreement documents found these agencies obligated at least $12.5 billion—a $1.6 billion difference.[529] In addition to this $1.6 billion, HHS’s National Institutes of Health officials told us that as of August 2021, they had obligated about $560 million on COVID-19 agreements, which were not reported in FPDS.[530] Officials told us that while they do not report their use of agreements to FPDS (as they are not required to do so by statute or policy), they began reporting these agreements in a database used by HHS to track grant awards in May 2021.[531]
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 through September 30, 2021.[532] 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.[533] 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 and the data it collects—specifically, the data dictionary and data validation rules—and by performing electronic testing. For the 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 supplemented our FPDS analysis with analysis of agency-provided data and interviews with agency officials. 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, the U.S. Department of Agriculture (USDA), and the Office of Management and Budget with a draft of this enclosure. HHS, DOD, USDA, and the Office of Management and Budget did not provide comments. DHS provided technical comments, which we incorporated as appropriate.
GAO’s Ongoing Work
We have work underway related to DOD’s use of advance and progress payments during the response to COVID-19.
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.
Source: GAO. I GAO-22-105051
Related GAO Products
COVID-19 Contracting: Actions Needed to Enhance Transparency and Oversight of Selected Awards. GAO-21-501. Washington, D.C.: July 26, 2021.
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.
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
Vaccines Provided Abroad
Bookmark:COVID-19 Vaccines Global Access, known as COVAX—a key U.S.-supported initiative to provide vaccines abroad—has exceeded its fundraising target but, because of supply limitations and other challenges, is not projected to reach its goal of delivering 2 billion doses in 2021. COVAX now expects to achieve this goal in early 2022.
Entities involved: Coalition for Epidemic Preparedness Innovations; Gavi, the Vaccine Alliance; World Health Organization; United Nations Children’s Fund; Department of Health and Human Services; Department of State; and U.S. Agency for International Development
Background
Providing safe and effective vaccines to protect people from COVID-19 is crucial to mitigating the public health and economic impacts of the virus and to ending the pandemic.[534] In addition to limiting cases and deaths, slowing transmission of COVID-19 through vaccination is critical to deterring the emergence of new virus variants. By contrast, uncontrolled transmission anywhere in the world increases the risk of variants that can evade current vaccines, diagnostics, and therapeutics, thereby prolonging the pandemic globally and endangering the fragile U.S. recovery. The World Health Organization’s (WHO) reporting indicates that about 6.1 billion vaccine doses had been administered worldwide as of September 29, 2021. However, according to WHO estimates, a total of 11 billion to 12 billion doses will be needed to vaccinate at least 70 percent of the world’s population in order to end the pandemic.[535]
In April 2020, WHO and seven other global health organizations created the Access to COVID-19 Tools Accelerator (ACT-Accelerator), an effort to rapidly develop and provide equitable access to vaccines, diagnostics, and therapeutics.[536] The vaccine-related component of the ACT-Accelerator is known as COVID-19 Vaccines Global Access (COVAX). Several global health organizations—the Coalition for Epidemic Preparedness Innovations (CEPI);[537] Gavi, the Vaccine Alliance (Gavi);[538] and WHO—colead COVAX, with the United Nations Children’s Fund (UNICEF) as a key implementing partner.[539] COVAX is the only global initiative working with governments and manufacturers to ensure COVID-19 vaccines are available worldwide to both higher-income and lower-income countries, according to WHO.[540] As of September 2021, 193 countries had signed up as members of COVAX.[541] This included 101 higher- and middle-income countries paying for vaccines themselves (i.e., self-financing) and 92 eligible low- and middle-income countries relying on donor funding.[542]
The U.S. has provided funding in support of COVAX. Through the Consolidated Appropriations Act, 2021, Congress appropriated $4 billion for the Global Health Programs account and directed that the funds be administered by the U.S. Agency for International Development (USAID) and made available as a contribution to Gavi.[543] In February 2021, the U.S. announced that it would provide an initial $2 billion contribution to COVAX through Gavi to support access to safe and effective vaccines for the 92 low- and middle-income countries participating in COVAX. USAID obligated the initial $2 billion for COVAX to Gavi in March 2021 and the remaining $2 billion in July 2021.
The U.S. has also provided dose donations in support of COVAX. In May 2021, the U.S. announced plans to donate 80 million vaccine doses abroad from its own surplus supply, providing the majority of the doses through COVAX. The U.S. later announced that it had donated more than 110 million doses from its own supply. In June 2021, the U.S. announced it would facilitate the purchase of 500 million vaccine doses to be provided through COVAX—including 200 million to be delivered by the end of 2021—to the 92 low- and middle-income countries as well as eight additional self-financing countries in the African Union.[544] According to the White House, this represented “the world’s largest-ever purchase and donation of vaccines by a single country.” In September 2021, the U.S. committed to donating an additional 500 million vaccine doses. These additional doses will be provided through COVAX to the same countries referenced in the June announcement, according to administration officials.[545]
The U.S. government has also taken steps apart from COVAX to increase the availability of COVID-19 vaccines abroad. These include the following actions:
- Bilateral vaccine donations. In addition to providing doses through COVAX, the U.S. has donated millions of vaccines on a bilateral basis, beginning with doses it provided to Canada, Mexico, South Korea, and Taiwan in June 2021. According to the Department of State, the U.S. will continue to make donations as it receives more surplus supply.
- Support for local vaccine production. The U.S. has taken a number of steps to bolster vaccine production overseas. For example, in March 2021, the President announced a vaccine partnership with India, Japan, and Australia to support increased production of COVID-19 vaccines for the Indo-Pacific region. Additionally, in June 2021, the U.S. International Development Finance Corporation announced that it would provide €600 million (approximately $720 million) in joint financing with other G7 development finance institutions to support vaccine manufacturing in South Africa. According to the announcement, the vaccines will be distributed primarily to the African Union, South Africa, and COVAX.[546]
Overview of Key Issues
COVAX has four primary lines of effort, each led by one of the co-leading organizations—CEPI, Gavi, and WHO—in collaboration and coordination with UNICEF, other organizations, governments, civil society, and industry, according to COVAX (see table below).
Source: GAO analysis of COVID-19 Vaccines Global Access (COVAX); Coalition for Epidemic Preparedness Innovations (CEPI); Gavi, the Vaccine Alliance (Gavi); World Health Organization (WHO); United Nations Children’s Fund (UNICEF); and Pan American Health Organization (PAHO) documents. | GAO-22-105051
Note: “Countries” refers to COVAX participant economies, not all 193 of which are independent states. “COVAX partners” refers to CEPI, Gavi, WHO, and UNICEF.
aBecause normal liability insurance is not available to manufacturers, each country receiving COVID-19 vaccines through the COVAX Facility is required to indemnify manufacturers, donors, distributors, and other stakeholders against any losses they incur from the deployment and use of the vaccines, according to COVAX documents.
bThe COVAX AMC includes a no-fault compensation mechanism, a key benefit for lower-income countries, administered by WHO. According to COVAX partners, this mechanism provides fair, no-fault, lump-sum compensation to any individual in the 92 low- and middle-income countries covered by the COVAX AMC who suffers a serious adverse event from any vaccine procured or distributed through the COVAX Facility.
cAs of August 31, 2021, the Moderna, University of Oxford–AstraZeneca, Novavax, and Curevac COVID-19 vaccines had shown clinical efficacy in preventing severe disease, according to CEPI. Of these, the Moderna and University of Oxford–AstraZeneca vaccines had received WHO’s emergency use listing.
dAn adjuvant is a component of a vaccine that helps the immune system response.
COVAX’s key goal for 2021 is to deliver 2 billion vaccine doses to COVAX participating countries. To help end the acute phase of the pandemic, COVAX set a goal of delivering 2 billion vaccine doses to COVAX participating countries—including at least 1.3 billion doses for low- and middle-income countries—by the end of 2021. According to COVAX, these 2 billion doses would cover at least 20 percent of populations in all participating COVAX countries and would be sufficient to vaccinate the most at-risk population groups, including health care workers, elderly adults, and people with underlying health conditions.
As late as June 2021, COVAX partners (i.e., CEPI, Gavi, WHO, and UNICEF) projected that this goal could be met—and potentially exceeded—if COVAX raised at least $9.3 billion in total funding commitments by June 2021.[547] As of July 2021, COVAX partners said that they were in the process of updating COVAX’s strategy and goals for 2022.
COVAX exceeded its fundraising target but was no longer projected as of September to deliver 2 billion doses in 2021, primarily because of supply challenges. By June 2021, COVAX had raised more than $9.6 billion in funding commitments, surpassing the June fundraising target amount needed to purchase sufficient vaccine doses to achieve COVAX’s 2021 goal. According to Gavi, as of September 2021 at least $6.7 billion of COVAX’s funding commitment pledges had been fulfilled and as of August 2021 its total funding commitments had increased to about $9.8 billion.
However, our analysis of UNICEF data found that COVAX will likely not meet its goal of delivering 2 billion doses by the end of 2021.[548] COVAX anticipated in April 2021 that nearly half a billion doses would be shipped by the middle of 2021. Yet data that UNICEF reported on September 15, 2021, indicated that only about 279 million doses had been delivered through COVAX to 141 participating countries and that relatively few additional doses—about 4.1 million—were in transit.[549] Therefore, as of that date, COVAX was still 1.7 billion doses, or about 86 percent, short of its goal of delivering 2 billion doses in 2021 (see figure). As of September 8, 2021, COVAX partners expected to achieve this goal in the first quarter of 2022.
COVAX and UNICEF data demonstrate that limited vaccine supply is the primary challenge preventing COVAX from achieving its key goal. According to the September 8, 2021, COVAX Global Supply Forecast (the most recent forecast), COVAX had agreements with 11 different vaccine developers to purchase up to 4.974 billion doses.[550] However, UNICEF-reported data show that as of September 15, manufacturers had made available fewer than 286 million doses for delivery through COVAX and that COVAX had delivered 98 percent of these doses. Further, the September 8, 2021, COVAX Global Supply Forecast estimated that under the most likely scenario, only about 1.4 billion doses will be available to COVAX by the end of 2021, including doses it purchased from manufacturers and donated doses (estimated on the basis of commitments from donor countries).[551] This represents a 26 percent decrease from the COVAX Global Supply Forecast on July 27, 2021 (the previous forecast), which projected that 1.9 billion doses would be available to COVAX by the end of 2021.
COVAX partners attributed the initiative’s limited vaccine supply to, among other factors, high-income countries’ bilateral deals with manufacturers to purchase a significant portion of the available vaccine supply early in the pandemic. Although COVAX received funding pledges early in the pandemic, it lacked adequate cash resources to purchase sufficient doses of the limited vaccine supply, according to COVAX partners. In addition, COVAX partners said that bilateral dose donations outside COVAX, manufacturing scale-up challenges, and export restrictions have contributed to the limited supply of vaccine doses available to COVAX. For example, according to COVAX and USAID documents as of September 2021, vaccine supply from a major COVAX manufacturer, the Serum Institute of India, had been constrained since the spring of 2021, when the Indian government instituted export restrictions in response to a spike of COVID-19 cases in India.[552]
COVAX partners said that they had taken steps to try to increase vaccine production. For example, COVAX developed a manufacturing task force to address delays caused by supply shortages and manufacturing disruptions. According to COVAX partners, the task force brokers agreements between stakeholders, supports technology transfers, and examines new manufacturing opportunities. For example, in July 2021, the task force launched a marketplace to match critical raw material suppliers with vaccine manufacturers in an effort to accelerate the global production of vaccine doses for COVAX. COVAX has also solicited donations of excess vaccine doses from higher-income countries to increase the supply of vaccines available to lower- and middle-income countries. WHO reported that as of September 17, 2021, COVAX had received pledges for about 722 million dose donations, of which about 114 million had been delivered.[553]
COVAX partners expect that vaccine supply will increase dramatically later this year. The COVAX Global Supply Forecast on September 8, 2021, projected that of the 1.4 billion vaccine doses expected to be available to COVAX by the end of 2021, approximately 1.1 billion doses would become available from September through December. However, as of September 2021, the extent to which factors such as Delta and other variants and the increasing demand for booster shots would affect the limited supply remained unclear. Further, partners predict that once the supply constraints are alleviated, other factors, such as countries’ abilities to absorb and administer the vaccines, may significantly affect COVAX’s progress in meeting its goal.
COVAX partners have taken some steps to address other key challenges that may affect progress. COVAX documents and partners identified other key challenges, in addition to the limited supply of vaccine doses, that may affect progress in ending the pandemic, including progress toward COVAX’s goal of delivering 2 billion doses in 2021. Some of these challenges, as well as steps taken to respond to these challenges, are shown in the table below.
Source: GAO analysis of Coalition for Epidemic Preparedness Innovations (CEPI); Gavi, the Vaccine Alliance (Gavi); World Health Organization (WHO); United Nations Children’s Fund (UNICEF); and World Bank documents and interviews. | GAO-22-105051
Notes: “COVAX partners” refers to CEPI, Gavi, WHO, and UNICEF.
“Advance Market Commitment (AMC) countries” refers to 92 low- and middle-income economies that receive donor-funded doses through COVID-19 Vaccines Global Access (COVAX). “Countries” refers to AMC economies, not all of which are independent states.
COVAX is part of the Access to COVID-19 Tools (ACT) Accelerator, a larger multilateral effort to combat the COVID-19 pandemic. The ACT-Accelerator includes the Health Systems Connector, a crosscutting work area aimed at addressing in-country health systems bottlenecks to facilitate country readiness.
Methodology
To conduct this work, we reviewed documents and data from CEPI, Gavi, WHO, and UNICEF regarding COVAX’s structure and operations, the goals and status of COVAX efforts, and steps that COVAX partners have taken to address identified challenges. We also interviewed CEPI, Gavi, WHO, and UNICEF officials knowledgeable about COVAX. We reviewed UNICEF data on the status of COVAX vaccine supply and deliveries as of September 15, 2021. To assess the reliability of these data, we performed logic tests and interviewed UNICEF about the reliability and limitations of the data. We determined that the data were sufficiently reliable for the purposes of this work.
In addition, we reviewed White House documents and interviewed, or obtained written responses from, officials at the Department of Health and Human Services, the Department of State, and USAID regarding COVAX, the bilateral provision of COVID-19 vaccine doses to other countries, and other U.S. efforts to increase the availability of the vaccine abroad. We also reviewed relevant laws, including the Consolidated Appropriations Act, 2021.[554]
Agency Comments and Third-Party Views
We provided the Department of Health and Human Services, the Department of State, USAID, the Office of Management and Budget (OMB), CEPI, Gavi, UNICEF, and WHO with a draft of this enclosure. All except OMB and CEPI provided technical comments, which we incorporated as appropriate.
GAO’s Ongoing Work
We plan to conduct additional work to examine in-country readiness and delivery of COVID-19 vaccines abroad.
Contact information: Jason Bair, (202) 512-6881, bairj@gao.gov
International Trade
Bookmark:U.S. imports of COVID-19-related products, such as face masks, ventilators, gloves, and hand sanitizers, have fluctuated, while U.S. exports of COVID-19 vaccines to the European Union and the United Kingdom have increased in recent months.
Background
The COVID-19 pandemic has disrupted businesses around the world as well as international supply chains. According to the United Nations Conference on Trade and Development, world merchandise trade grew by 11.6 percent from the first quarter through the second quarter of 2021—a significant improvement over the 21 percent quarterly decline from the first through the second quarter of 2020.[555]
U.S. trade of COVID-19-related products. U.S. imports of COVID-19-related products (e.g., face masks, ventilators, gloves, and hand sanitizers) have fluctuated. U.S. imports of products in categories related to the COVID-19 response decreased slightly from March through June 2021. However, imports of such products in June 2021 were 32 percent higher than in February 2020, the last month before the transmission of COVID-19 started to become widespread in the U.S., according to the Centers for Disease Control and Prevention (CDC) (see figure).[556]
Monthly U.S. Imports of COVID-19-Related Products, by Product Type, Jan. 2018–June 2021
Total trends in import value are related to changes in both the quantity and price of the imported goods. For example, the unit value of nasal swabs decreased by 30 percent from May 2020 through May 2021, while the quantity imported increased by 69 percent during the same period. Overall, the import value of nasal swabs increased from $23 million in May 2020 to $28 million in May 2021.
Many factors affecting product availability, such as supply chain constraints, export restrictions, and product demand, may drive trends in imports of COVID-19-related products. For example, according to the Bureau of Labor Statistics (BLS), drastically reduced shipping capacity and urgent demand for personal protective equipment pushed the costs of air freight transportation services for shipments of goods from foreign countries to the U.S. to unprecedented heights in spring 2020. In addition, according to the United Nations Conference on Trade and Development, more than 80 countries banned exports of medical and personal protective goods in the early phases of the pandemic, and 60 percent of those restrictions remained in place as of June 11, 2021. Overall, the need for medical supplies in response to the pandemic explains the increase in imports of these products since early 2020. Fluctuations in the number of COVID-19 cases may shift the demand for some COVID-19 products, such as pharmaceuticals and diagnostic equipment, over time.
From March through June 2021, imports of COVID-19-related products from China—which accounted for 11 percent of such imports overall in May—and from the rest of the world fluctuated. Specifically, imports of COVID-19-related products from China decreased by 26 percent (from $2.75 billion to $2.05 billion) and total imports of such products from other countries decreased by 12 percent (from $16.2 billion to $14.1 billion) from March through May 2021 before increasing by 7 percent from May through June 2021.[557] Previously, from December 2020 through March 2021, imports of COVID-19-related products from China had risen by 12 percent (from $2.44 billion to $2.75 billion) and imports of such products from other countries had risen by 7 percent (from $15.1 billion to $16.2 billion).[558]
Total U.S. trade of COVID-19 vaccines with European Union (EU) member countries and the United Kingdom (UK) increased in recent months.[559] From January through May 2021, the value of U.S. COVID-19 vaccine exports more than doubled (from roughly $62.3 million to $125.3 million) and the value of U.S. COVID-19 vaccine imports rose almost 11-fold (from $1.3 million to $15.3 million) (see figure). After a decline in the value of exports from January through April 2021, U.S. export and import value of COVID-19 vaccines to EU countries and UK more than tripled from April through May 2021. From April through May 2021, U.S. exports of these vaccines to EU countries and the UK increased from $38.6 million to $125.3 million, and U.S. import values of these vaccines increased from $3.6 million to $15.3 million. U.S. Census Bureau trade statistics indicate that EU member countries and the UK exported the majority of vaccines most similar to the COVID-19 vaccines imported by the U.S. from January through May 2021.[560]
U.S. Trade of COVID-19 Vaccines with the European Union and United Kingdom, Jan.–May 2021
U.S. exports of all vaccines for human use, including COVID-19 vaccines, averaged $128 million per month in 2020 but totaled $820 million in May 2021 and $1.5 billion in June 2021. The price per dose of the COVID-19 vaccines varied. We estimate that the per-dose cost to the federal government for U.S. and EU-approved vaccines ranged from $4 (AstraZeneca) to $20 (Pfizer), on the basis of reporting from the Congressional Research Service.[561]
The EU and UK governments have taken steps to regulate COVID-19 vaccine trade.
- In 2020, the EU and UK governments each allowed exemptions from value-added taxes on certain imports of COVID-19 vaccines to reduce supply chain constraints on acquiring COVID-19 vaccines.
- On January 29, 2021, the European Commission of the EU issued a regulation imposing an export authorization requirement on certain COVID-19 vaccines. On March 11, 2021, the commission extended this requirement.[562]
- On March 24, 2021, the European Commission of the EU issued a regulation allowing authorities to consider whether an export authorization would threaten the security of the supply of specified vaccines and active substances used for their manufacture to EU member countries.
- On June 29, 2021, the European Commission of the EU extended these regulations through September 2021. According to the commission, these regulations are intended to ensure timely access to COVID-19 vaccines for all EU citizens and to increase transparency regarding vaccine exports to countries outside the EU.
EU member countries and the UK increased their global exports of COVID-19 vaccines from January through April 2021. Exports of COVID-19 vaccines from EU member countries increased from $180 million in January to $1.44 billion in April, while exports of COVID-19 vaccines from the UK increased from around $1 million in January to almost $9 million in April. Overall, EU member countries and the UK exported more than $2.8 billion worth of COVID-19 vaccines from January through April 2021.
Meanwhile, the U.S. government has taken actions to increase the availability of COVID-19 vaccines to other countries.
- In July 2021, we reported that the federal government had taken several steps to increase domestic production of COVID-19 vaccines. An increase in domestic supply, along with a leveling off in domestic demand for vaccines, could create more opportunities for COVID-19 vaccine exports.
- The Office of the U.S. Trade Representative stated in May 2021 that it would begin negotiations at the World Trade Organization to facilitate waiving intellectual property rights on COVID-19 vaccines, which may allow other countries to produce them domestically.[563]
- The FDA has allowed AstraZeneca COVID-19 vaccines—which is produced, but not authorized for use, in the U.S.—to be exported to other countries.
- The U.S. has provided funding, donated surplus doses, and taken other steps in support of efforts to provide vaccines to other countries, including those that cannot afford to buy vaccines themselves. (For more information, see the Vaccines Provided Abroad enclosure in app. I.)
Methodology
To conduct this work, we reviewed the most recent publicly available U.S. trade statistics from the Census Bureau as well as U.S. International Trade Commission data on product categories that contain COVID-19-related products.[564] We analyzed EU and UK trade data from the European Commission and Her Majesty’s Revenue and Customs that were available as of July 19, 2021, to study trends in exports and imports of vaccines against SARS-related coronaviruses (i.e., COVID-19) from and to EU member countries and the UK.[565] We converted euros and pounds sterling into U.S. dollars, using monthly exchange rate data from Federal Reserve Economic Data.[566]
We determined that the trade data were sufficiently reliable for our reporting purposes. According to an EU Commission report on the quality of EU trade statistics, data on imports from, and exports to, countries outside the EU from 2016 through 2019 were likely fully accounted for because they rely on customs declarations.[567] Her Majesty’s Revenue and Customs also conducts several validation and credibility checks of its trade data to ensure their accuracy before publication.
Agency Comments
We provided a draft of this enclosure to the Office of Management and Budget, which had no comments on this enclosure.
GAO’s Ongoing Work
We will continue to monitor U.S. trade of COVID-19-related products and COVID-19 vaccines.
Related GAO Products
COVID-19: Efforts to Increase Vaccine Availability and Perspectives on Initial Implementation. GAO-21-443. Washington, D.C.: April 14, 2021.
Contact information: Kimberly Gianopoulos, (202) 512-8612, gianopoulosk@gao.gov
Federal Fraud-Related Cases
Bookmark:Federal agencies’ enforcement actions on fraud-related charges help protect consumers and ensure that taxpayer dollars and government services related to COVID-19 serve their intended purposes.
Entities involved: Government-wide
Background
The public health crisis, economic instability, and increased flow of federal funds associated with the COVID-19 pandemic present increased pressures and opportunities for fraud.[568] By proactively managing fraud risks, federal officials can help safeguard taxpayer dollars to ensure they serve their intended purpose, particularly given that Congress had appropriated about $4.8 trillion as of August 31, 2021, to fund COVID-19 response and recovery efforts.[569]
According to GAO’s A Framework for Managing Fraud Risks in Federal Programs, among other things, effective managers of fraud risks refer instances of potential fraud to Offices of Inspector General (OIG) or other appropriate parties, such as law enforcement entities or the Department of Justice (DOJ), for further investigation.
The extent of fraud associated with the COVID-19 relief funds appropriated to date has not yet been determined. One of the many challenges is that because of fraud’s deceptive nature, programs can incur financial losses related to fraud that are never identified, and such losses are difficult to reliably estimate. However, many individuals have already pleaded guilty to federal charges of defrauding COVID-19 relief programs—including the Small Business Administration’s (SBA) Paycheck Protection Program (PPP) and Economic Injury Disaster Loan (EIDL) program, the Department of Labor’s (DOL) unemployment insurance (UI) programs, and economic impact payments (EIP) issued by the Department of the Treasury and Internal Revenue Service.[570] Also, one individual has been convicted at trial of PPP-related fraud, and four individuals have been convicted at trial of fraud related to both the PPP and EIDL program.[571] In addition, numerous others faced related federal charges as of July 31, 2021.
Further, federal hotlines have received numerous complaints from the public, many of them alleging potential fraud involving COVID-19 relief funds. For example, from March 2020 through July 2021, our hotline—known as FraudNet—received over 2,700 complaints related to the CARES Act, many of which involve SBA’s PPP and EIDL program, DOL’s UI program, and EIPs (see text box).[572]
Report Fraud, Waste, and Abuse GAO’s FraudNet supports accountability across the federal government. Allegations of fraud, waste, or abuse can be submitted via the FraudNet portal or by calling the hotline at 1-800-424-5454. |
Source: GAO | GAO-22-105051
In addition to fraud against federal programs, scammers are also targeting consumers, which can result in financial losses and undermine health and safety. For example, the Federal Trade Commission (FTC) is tracking complaints related to COVID-19 fraud against consumers. According to FTC reporting, the agency had received over 347,000 reports about fraud and over 69,000 reports about identity theft as of August 4, 2021.[573] Also according to FTC reporting, over a third of the reports about fraud indicated a financial loss and cost Americans over an estimated $518 million.
Overview of Key Issues
Since March 2020, DOJ has publicly announced charges in numerous fraud-related cases involving COVID-19 relief programs, COVID-19-related consumer fraud schemes, or other types of fraud related to COVID-19.[574] The charges—filed across the U.S. and investigated by a range of law enforcement agencies—include making false statements and engaging in identity theft, wire and bank fraud, and money laundering.[575] The number of individuals facing fraud-related charges has continued to grow in the past year and will likely increase, as these cases take time to develop.[576]
Fraud against federal programs. From March 2020 through July 2021, 198 individuals pleaded guilty to federal charges of defrauding COVID-19 relief programs, including SBA’s PPP and EIDL program, DOL’s UI programs, and EIPs.[577] For example:
- In one case, an individual was sentenced to more than 11 years in prison after fraudulently seeking over $24 million in PPP loans. This individual pleaded guilty to wire fraud and money laundering and admitted that he had fraudulently sought PPP loans on behalf of nearly a dozen different companies. Specifically, this individual admitted to making several false and misleading statements about the companies’ respective payroll expenses and submitting fraudulent documentation in support of his applications when, in fact, none of the businesses had employees or paid wages consistent with the amounts claimed in the applications. Based on this individual’s false statements and documentation, lenders paid out over $17 million. The individual used the proceeds for personal expenses including purchasing multiple homes, paying off mortgages, and purchasing multiple luxury cars. In addition to the prison sentence, this individual was ordered to pay over $17 million in restitution. See the enclosure on the Paycheck Protection Program in appendix I for more information on the program.
- As part of another case, an individual pleaded guilty to wire fraud associated with a scheme to defraud the EIDL program. The individual submitted an EIDL application on behalf of a business he owned, certifying that he would use the loan proceeds solely as working capital to alleviate economic injury caused by disaster. After obtaining a loan for $150,000, the individual fraudulently misapplied the loan proceeds by purchasing a boat for his personal use and by paying for other expenditures that were in violation of EIDL rules and regulations.
- Three individuals pleaded guilty to wire fraud associated with a scheme to defraud UI by using information belonging to other people, including prison inmates, to file for pandemic-related unemployment benefits, falsely stating that these other people had lost their jobs because of the COVID-19 pandemic. In exchange for cash payments, one of these individuals provided third parties with the debit cards loaded with UI benefits. Each of these individuals caused the state unemployment agency to disburse approximately $353,000 to $477,000 in fraudulently obtained UI benefits. For more information on potential fraud in the UI programs, see the enclosure on Unemployment Insurance Fraud Risk Management, and for more information on the UI programs, see the enclosure on Unemployment Insurance Programs in appendix I.
- One individual pleaded guilty to a charge of conspiracy to commit bank fraud in connection with EIPs. This case involved the individual and his conspirators creating counterfeit checks, including counterfeit pandemic relief checks; depositing the checks online and at various bank ATMs; and withdrawing the funds before the victim institutions identified the checks as fraudulent.
As of July 31, 2021, five individuals had been convicted at trial for COVID-19 relief fraud.[578] For example, a federal jury found four individuals guilty of conspiracy to commit bank fraud and wire fraud, 11 counts of wire fraud, eight counts of bank fraud, and conspiracy to commit money laundering for obtaining more than $18 million in PPP and EIDL COVID-19 relief funds. These individuals used fake, stolen, and synthetic identities to submit fraudulent applications for PPP and EIDL loans, submitted false and fictitious documents to lenders and SBA, and then used the fraudulently obtained funds as down payments on luxury homes and to purchase other luxury items.[579]
Federal charges were pending against 465 individuals for attempting to defraud COVID-19 relief programs as of July 31, 2021.[580]
Consumer fraud. In addition to fraud against federal programs, fraud can result in financial losses to consumers and undermine health and safety. From March 2020 through July 2021, 15 individuals or entities pleaded guilty to federal charges related to consumer fraud.[581] For example, in one case, a company and its owner pleaded guilty to charges related to the unlawful importation, sale, and mailing of an unregistered pesticide product marketed as a killer of airborne viruses such as COVID-19. In another case, an individual devised a scheme to defraud an investor and obtain money under fraudulent pretenses related to the purchase and resale of personal protective equipment (PPE) to hospitals and retailers in response to the COVID-19 pandemic. This individual pleaded guilty to wire fraud and money laundering.
There were also federal charges pending against 55 individuals or entities related to consumer fraud as of July 31, 2021. For example, an individual was indicted for allegedly defrauding a company that developed and manufactured COVID-19 test kits by falsely representing that his own company was certified to perform testing, was an “end user” of the tests, and would not attempt to resell them. This individual advertised online that he was selling “Food and Drug Administration-approved COVID-19 test kits” and attempted to sell the tests at a substantial markup.[582]
As of July 31, 2021, the majority of individuals and entities that had pleaded guilty or faced federal charges for COVID-19-related consumer fraud schemes were allegedly involved in schemes related to prevention or treatment or PPE sales (see figure).
Number of Individuals or Entities Who Have Pleaded Guilty to or Faced Federal Charges for Consumer Fraud, as of July 31, 2021
Further, as COVID-19 vaccines have become available, potential consumer fraud related to vaccines has emerged. While the extent of vaccine-related fraud is unknown, DOJ has publicly announced charges or other actions in consumer fraud cases involving individuals or entities that claimed to offer vaccines to prevent COVID-19. For example, DOJ announced charges against three individuals for allegedly creating a fraudulent replication of a vaccine company’s website and stating that consumers could buy COVID-19 vaccines. Further, DOJ announced charges against another individual for selling immunization pellets that this individual allegedly falsely claimed would provide lifelong immunity to COVID-19. This individual allegedly created and provided counterfeit COVID-19 vaccination cards to make it appear that customers received an authorized COVID-19 vaccine.
Other federal cases. The federal government is also pursuing charges including conspiracy, wire fraud, and theft that are related to COVID-19 but separate from consumer fraud—including vaccine-related fraud—and fraud against the federal programs discussed earlier. From March 2020 through July 2021, 14 individuals pleaded guilty to these types of federal charges.[583] For example, one individual was sentenced to 46 months in prison and 3 years of supervised release, ordered to pay over $530,000 in restitution, and ordered to forfeit $527,000 and a vehicle after pleading guilty to embezzling more than $500,000 from AmeriCorps and to agreeing to accept a bribe for the administration of grants under the CARES Act. Another individual pleaded guilty to hoarding and price gouging, admitting that she began accumulating nearly 20,000 N95 respirator masks starting in February 2020 in anticipation of a shortage that would be caused by the COVID-19 pandemic, and that she sold the masks for up to $15 each.
There were also other federal charges pending against 29 individuals as of July 31, 2021. For example, one individual was indicted on charges for his role in a $9.3 million health care kickback scheme. Among other things, this individual was charged with conspiracy to commit health care fraud and wire fraud for allegedly conspiring with others to pay and receive kickbacks in exchange for referring Medicare beneficiaries to his clinical laboratory for testing that they did not need. Specifically, among other things, this individual submitted at least $260,000 in claims related to medically unnecessary testing that was improperly bundled with COVID-19 testing.[584]
Other federal efforts to address and prevent future fraud-related cases. In addition to DOJ filing fraud-related charges against individuals and entities for actions related to COVID-19, other federal agencies have undertaken efforts to address fraud-related cases and prevent such cases in the future.
Taking administrative and other enforcement actions. FTC and the Food and Drug Administration have issued warning letters to companies for allegedly selling fraudulent COVID-19-related products, including those making deceptive or scientifically unsupported claims about their ability to prevent or treat COVID-19. In addition, FTC has sought civil penalties against individuals and entities for allegedly engaging in deceptive practices related to the COVID-19 pandemic.[585] In one case, FTC brought action against two companies and two officers of those companies in connection with the labeling, advertising, marketing, distribution, and sale of products they claimed would treat, prevent, or cure COVID-19. One of the officers agreed to settle the charges and is barred from making similar unsupported health claims in the future and was ordered to provide refunds to defrauded consumers. In another case, the Environmental Protection Agency ordered a website to stop selling pesticides, such as a “disinfection card” that claims to protect the wearer from coronavirus.
Establishing task forces and working groups. On May 17, 2021, the Attorney General established the COVID-19 Fraud Enforcement Task Force to marshal the resources of DOJ in partnership with agencies across the government.[586] The task force held its first meeting on May 27, 2021, where task force members discussed priority goals, including increased efforts to combat fraud related to COVID-19 relief programs. Also on May 17, 2021, the President established the Initiative on Identity Theft Prevention and Public Benefits to develop recommendations on prevention measures to respond to the threat of identity theft in public benefits programs. Through the initiative, the White House’s American Rescue Plan Implementation Coordinator and the Office of Management and Budget (OMB) are working with relevant stakeholders to develop recommendations and proposals.
Further, on July 15, 2021, the Chair of the Pandemic Response Accountability Committee announced the formation of a new working group focused on preventing and addressing identity fraud in pandemic response programs. The working group is a joint effort of multiple agency Inspectors General. In addition, the Federal Bureau of Investigation Springfield Field Office organized a PPP and EIDL fraud working group consisting of its federal partners—the Internal Revenue Service Criminal Investigations and the SBA OIG.
Providing information to the public about emerging fraud schemes. As a result of complaints from the public alleging potential fraud involving COVID-19 relief funds received through hotlines and other fraud detection efforts, federal agencies have warned the public about emerging fraud schemes, which can help prevent future cases of fraud against federal programs and consumers. For example, in March 2021, DOL launched a website to help the public better understand UI identity theft. The website also provides resources for those who may have been victims of identity theft, including a list of contact information for each state to report UI identity theft.[587] We previously reported on examples of agency warnings to the public about emerging fraud schemes in our quarterly July 2021 report.
Methodology
To conduct this work, we reviewed information from DOJ to identify federal fraud-related charges related to COVID-19 relief funding as of July 31, 2021. We also analyzed related federal court documents. In addition, we reviewed FTC reports on complaints related to fraud and identity theft and press releases from other federal entities, including the Pandemic Response Accountability Committee, FTC, DOL, and the Environmental Protection Agency, describing COVID-19 fraud-related efforts.
Agency Comments
We provided OMB with a draft of this enclosure. OMB provided technical comments, which we incorporated as appropriate.
GAO’s Ongoing Work
We will continue our oversight of government-wide fraud risk management efforts.
Related GAO Products
Economic Injury Disaster Loan Program: Additional Actions Needed to Improve Communication with Applicants and Address Fraud Risks. GAO-21-589. Washington, D.C.: July 30, 2021.
Paycheck Protection Program: SBA Added Program Safeguards, but Additional Actions Are Needed. GAO-21-577. Washington, D.C.: July 29, 2021.
A Framework for Managing Fraud Risks in Federal Programs. GAO-15-593SP. Washington, D.C.: July 28, 2015.
Contact information: Rebecca Shea, (202) 512-6722, shear@gao.gov
FEMA’s Disaster Relief Fund and Assistance to State, Local, Tribal, and Territorial Governments
Bookmark:The Federal Emergency Management Agency does not consistently interpret and apply COVID-19 Public Assistance guidance and provide timely approval of COVID-19 applications for Public Assistance, causing undue burdens and stress for communities.
Entity involved: Federal Emergency Management Agency, within the Department of Homeland Security
Recommendations for Executive Action
The Federal Emergency Management Agency Administrator should improve the consistency of the agency’s interpretation and application of the COVID-19 Public Assistance policy within and across regions by further clarifying and communicating eligibility requirements nationwide.
The Federal Emergency Management Agency Administrator should require the agency’s Public Assistance program employees in the regions and at its Consolidated Resource Centers to attend training on changes to COVID-19 Public Assistance policy to help ensure it is interpreted and applied consistently nationwide.
The Department of Homeland Security concurred with both recommendations and outlined actions it has taken to improve the consistency of the agency’s interpretation and application of the COVID-19 Public Assistance Policy and train employees in the regions and at its Consolidated Resource Centers.
Background
Before the COVID-19 pandemic, the Federal Emergency Management Agency’s (FEMA) Disaster Relief Fund—the primary source of federal disaster assistance for state, local, tribal, and territorial governments—had never been used during a nationwide public health emergency.[588] As of August 31, 2021, FEMA had obligated more than $80 billion from the Disaster Relief Fund to respond to COVID-19. As of the same date, the Disaster Relief Fund’s balance was more than $40 billion.
FEMA has used the Disaster Relief Fund to respond to the COVID-19 pandemic by providing three primary types of disaster assistance.
- Individual Assistance. FEMA provides Individual Assistance to disaster survivors to cover necessary expenses and serious needs—such as housing assistance, counseling, or funeral assistance—which cannot be met through insurance or low-interest loans. For the COVID-19 response, FEMA has provided lost wages assistance, funeral assistance, and crisis counseling.
- Public Assistance. FEMA provides Public Assistance to state, local, tribal, and territorial governments, and certain types of private nonprofit organizations so that communities can quickly respond to, and recover from, major disasters or emergencies. After natural disasters, Public Assistance tends to be used for emergency cleanup and for permanent reconstruction projects—for example, to rebuild damaged public infrastructure. For all 59 major disaster declarations for COVID-19, FEMA has authorized Public Assistance for emergency protective measures only. This may include eligible medical care, purchase and distribution of food, noncongregate medical sheltering, operation of Emergency Operations Centers, and the purchase and distribution of personal protective equipment. On February 2, 2021, the President issued a memorandum that directed FEMA to fully reimburse state, territorial, and tribal governments for all work eligible for emergency protective measures assistance through September 30, 2021.[589] On August 17, 2021, the President extended this full reimbursement through December 31, 2021.[590] According to FEMA officials, FEMA’s Public Assistance Workforce, which manages FEMA’s Public Assistance workload, consists of approximately 1,800 employees, of which more than 1,000 have supported the COVID-19 effort in some capacity from their primary duty station.
- Mission assignments. FEMA also issues mission assignments—work orders directing other federal agencies to provide direct assistance to state, local, tribal, and territorial governments—to support disaster response and recovery. For the COVID-19 response, for example, FEMA issued a mission assignment to the Department of Defense to fund National Guard deployments to support state and territorial response efforts.
Overview of Key Issues
FEMA’s use of the Disaster Relief Fund to support COVID-19 activities. As of August 31, 2021, FEMA had obligated more than $80 billion from the Disaster Relief Fund to respond to COVID-19.
Individual Assistance. On August 8, 2020, a presidential memorandum directed that up to $44 billion be made available from the Disaster Relief Fund to provide lost wages assistance to supplement unemployment insurance compensation.[591] According to FEMA officials, as of August 31, 2021, FEMA had obligated approximately $39 billion for the Lost Wages Assistance program. Further, in December 2020, the Consolidated Appropriations Act, 2021, appropriated $2 billion to the Disaster Relief Fund for eligible funeral expenses for individuals or households with COVID-19-related funeral expenses.[592] On April 12, 2021, FEMA began accepting and processing applications for COVID-19 funeral assistance via a dedicated call center number.
Public Assistance. FEMA officials stated that as of August 31, 2021, FEMA had received 25,274 applications for Public Assistance and awarded $30.7 billion. From September 28, 2021 through December 31, 2021, FEMA anticipates it will receive 5,600 additional public assistance projects for an estimated additional $8.8 billion. With the emergence of the Delta variant of COVID-19, there could be an increase in COVID-19-related Public Assistance projects. From September 1, 2020 to August 31, 2021, FEMA obligated a total of approximately $26.8 billion for Public Assistance for almost 8,200 projects. The figure below shows the number of projects and award amount for each of FEMA’s 10 regions from September 1, 2020, through August 31, 2021.
According to FEMA officials, for COVID-19 declarations, FEMA can only provide Public Assistance funding for emergency measures to protect public health and safety. A January 21, 2021, presidential memorandum expanded the definition of eligible activities under FEMA’s Public Assistance Program to include measures implemented to facilitate the safe opening and operation of all eligible facilities, including schools, domestic violence shelters, and transit systems, among others. Such assistance may include funding for the provision of personal protective equipment and disinfecting services and supplies.[593] According to FEMA officials, the memorandum will likely have a significant impact on their resources and operations. Specifically, FEMA officials stated that the eligibility of reopening and operating expenses for schools and other facilities is likely to significantly increase the number of applicants and cost of eligible claims under Public Assistance.
Mission assignments. FEMA has issued mission assignments to multiple federal agencies—the Department of Agriculture, Department of Labor, Environmental Protection Agency, and Department of Defense, among others—to assist in the COVID-19 response. For example, FEMA issued a mission assignment to the Department of Defense to fund National Guard deployments to assist in recovery efforts. The presidential memorandum issued on January 21, 2021, provided that FEMA would fully reimburse expenses for National Guard activities to respond to COVID-19, which may include vaccination distribution.[594] According to FEMA, the estimated cost for National Guard assistance totaled more $5.6 billion as of August 31, 2021.
The figure below shows FEMA’s obligations for COVID-19, by program and activity.
FEMA’s Disaster Relief Fund supports a variety of activities.
Mass vaccination sites. The President directed FEMA to establish Pilot Community Vaccination Centers (CVC) as part of a national effort to speed the pace of COVID-19 vaccination campaigns and ensure equitable access to vaccinations. Pilot CVCs were established through a partnership between FEMA; the Centers for Disease Control and Prevention; other federal agencies; and states. After an initial 8-week operational period, CVC pilot sites are closed or transitioned to the state entity to fully operate. According to FEMA officials, the last CVC pilot site closed on June 20, 2021. FEMA told us that as of June 20, 2021, the pilot CVCs had given more than 5.6 million doses of vaccines across 39 locations, including sites that had extended their participation in the pilot program.[595] FEMA officials stated that, as of September 8, 2021, there are no plans to re-establish pilot CVC sites in response to the COVID-19 Delta variant, as state and local jurisdictions currently have the capacity to continue providing vaccinations as needed.
Work and associated costs to support the distribution and administration of COVID-19 vaccines may be eligible for Public Assistance. As such, FEMA is coordinating with other federal agencies to meet state, local, tribal, and territorial needs. Specifically, FEMA officials stated that as of August 31, 2021, the agency had obligated more than $5.83 billion to states, tribes, and territories for vaccine distribution through the Public Assistance Program. In addition, FEMA is deploying additional personnel to vaccination sites where they will assist people seeking access to the vaccine. According to FEMA officials, eligible work and costs under Public Assistance for vaccine distribution may include, but is not limited to,
- leasing facilities or equipment to administer and store the vaccine,
- providing staffing and training support,
- providing personal protective equipment and other administrative supplies, and
- using technology to register and track vaccine administration.
FEMA funeral assistance for COVID-19-related deaths. In December 2020, the Consolidated Appropriations Act, 2021, appropriated $2 billion to the Disaster Relief Fund for eligible funeral expenses for individuals or households with COVID-19-related funeral expenses.[596] FEMA began accepting applications on April 12, 2021. According to FEMA data, as of August 30, 2021, the call center had received and was processing 264,544 applications, had approved 165,154 applications, and had awarded more than $1 billion.
COVID-19 Funeral Assistance provides up to $9,000 per deceased individual to applicants who incurred COVID-19-related funeral expenses on or after January 20, 2020, and meet eligibility requirements. The maximum assistance provided to an applicant who incurred expenses for multiple deaths per state or territory is $35,500. FEMA provides financial assistance for eligible funeral expenses including remains transfer, caskets and urns, burial plots and cremation niches, and markers and headstones.[597] According to FEMA’s interim policy, the death certificate must directly or indirectly attribute the death to COVID-19 and the death must have occurred in the U.S., including the U.S. territories and the District of Columbia. However, in June 2021, FEMA amended its policy to allow applicants more flexibility in attributing a death to COVID-19 without amending the death certificate. Specifically, for deaths that occurred between January 20, 2020, and May 16, 2020, applicants can submit a signed statement or letter from the certifying official on the death certificate, or from the medical examiner or coroner in the jurisdiction in which the death occurred, that attributes the death to COVID-19. The signed statement must be accompanied by a death certificate. For deaths occurring after May 16, 2020, applicants must include a copy of the death certificate that attributes the death to COVID-19.
FEMA does not accept online applications for COVID-19 Funeral Assistance. According to FEMA officials, the agency established a dedicated, toll free call center number and hired a contractor to accept and support the processing of applications for COVID-19 Funeral Assistance. As of July 22, 2021, the call center is staffed by approximately 1,900 operators across the U.S. Further, according to FEMA officials, as of August 31, 2021, the average time needed to complete an application was about 20 minutes. FEMA has not established a deadline to apply at this time.
After completing an application with a call center representative, applicants receive an application number they can use to provide supporting documentation to FEMA online, by fax, or mail. In addition, FEMA sends applicants a letter requesting additional documents to support their application for COVID-19 funeral assistance. Applicants approved for COVID-19 Funeral Assistance will receive a check by mail or direct deposit, depending on the option chosen when applying for assistance. Applicants who are not approved for COVID-19 Funeral Assistance will receive a decision letter explaining why they are not approved, their rights to appeal the decision, and information on how to appeal it. Applicants have 60 days from the date of the decision letter to appeal FEMA’s decision.
According to FEMA officials, in June 2021, FEMA identified a malfunction in its financial system that resulted in duplicate COVID-19 Funeral Assistance payments to 65 applicants in Georgia. As of September 30, 2021, 49 of the 65 duplicate payments, totaling almost $295,000, had been successfully recalled by the Department of the Treasury or voluntarily refunded by applicants. FEMA officials told us that they were continuing to reach out to applicants to ask them to voluntarily return the duplicate payments. If applicants do not voluntarily return these payments, FEMA will consider other means, such as garnishing wages, to retrieve the money. According to FEMA officials, as of September 10, 2021, FEMA made technical enhancements to the system to increase memory and database size to accommodate increased funeral assistance payments. However, FEMA was still working on other enhancements to the system to repair the underlying issue that caused duplicate payments to be paid. FEMA officials stated that they were not aware of any other duplicate payments going out to applicants.
The scope of FEMA’s COVID-19 Funeral Assistance is unprecedented. In the decade before the COVID-19 pandemic, FEMA had processed approximately 6,000 applications for funeral assistance after other natural disasters, according to FEMA officials. The officials told us that FEMA has internal controls to mitigate fraudulent activity and described these internal controls as effective for preventing and identifying fraud. According to the officials, to develop the internal controls, FEMA relied on numerous sources and lessons learned from previous disasters. The officials said that as of August 31, 2021, FEMA had flagged 22,275 of the 264,321 applications it had received for additional review based on its fraud controls. Of the flagged applications, 11,497 were cleared for continued processing; 1,239 applications remained under review; 9,499 applications were pending additional documentation from the applicant; and 40 applications were pending adjudication for potential fraud.
Delays in FEMA’s processing of Public Assistance applications. FEMA is experiencing delays in processing applications for COVID-19 Public Assistance. Applicants and state emergency management personnel have raised concerns to FEMA about the time it takes to complete and approve applications for COVID-19 Public Assistance.
Senior state emergency managers we spoke with in one state said that long processing times have created financial challenges for communities that are awaiting reimbursement from FEMA for expenses they incurred. For example, these officials told us that they submitted 823 projects to FEMA for Public Assistance. Of these, as of August 26, 2021, 195 applications were determined to have ineligible expenses, 92 were pending, 86 were withdrawn, 248 were going through formulation[598], and 202 had been approved and obligated funding. According to these state officials, on average, it took FEMA 236 days to make ineligibility determinations for the 195 applications with ineligible expenses and about 135 days to approve and make obligations for the 202 approved applications once they were submitted. The long processing time led some applicants to seek other funding sources for their projects and also created additional stress and financial burden for applicants already dealing with a disaster; it also created additional strain on state, territorial, and federal personnel who were assisting applicants.
FEMA officials stated that FEMA currently has a backlog of 3,002 applications that are pending a determination memorandum for potentially ineligible expenses.[599] As of September 2021, FEMA’s median time to process an application is 51 days if there is not an issue with expense eligibility. However, if there is an eligibility issue, the median number of days to process the application is 138 days. [600]
FEMA officials acknowledged concerns that they had heard regarding the application process for COVID-19 Public Assistance and took actions to address them. In an effort to make the application process easier and to improve timeliness in making an eligibility determination, FEMA took steps that included clarifying information collection and documentation requirements and simplifying and streamlining the application process. In addition, to reduce the backlog of ineligibility determinations, in February 2021, FEMA established the Determination Memorandum task force consisting of 27 personnel, including analysts and attorneys, who were experienced determination memorandum writers. To improve the application process, the task force created a review process to ensure that the memorandums were written clearly and stated the appropriate determinations based on the specifics of the projects.
According to FEMA officials, as a result of these steps, there has been a reduction in FEMA’s backlog of ineligibility determinations and number of requests for additional information from applicants. However, with the emergence of the Delta variant for COVID-19, the number of COVID-19-related Public Assistance applications could increase, which could affect the backlog of ineligibility determinations. We will continue to monitor FEMA’s processing of COVID-19-related public assistance claims.
FEMA inconsistently applied COVID-19 Public Assistance policies. FEMA issued several COVID-19 related policies for Public Assistance.[601] FEMA inconsistently interpreted and applied its policies for COVID-19 Public Assistance within and across its regions.[602] State emergency managers we spoke with from four of the 10 regions provided multiple examples of FEMA’s inconsistency in interpreting and applying its policy regarding the eligibility of expenses for reimbursement from its Public Assistance Program.
Overtime. Officials we spoke with in two states said that FEMA inconsistently interpreted and applied its policies for reimbursement of overtime expenses for Emergency Medical Services workers. For example, according to the officials, in some cases FEMA said that these expenses were eligible for reimbursement only if the Emergency Medical Service worker was responding to a patient who had already tested positive for COVID-19; however, FEMA did not interpret this policy consistently across communities in the state and across other regions. In addition, based on ongoing issues that applicants faced, one of these states requested that FEMA clarify its policy on overtime pay for Emergency Medical Service workers. However, as of August 2021, according to officials in one state, FEMA had not provided clarity on its policy, while officials in the other state said that the issue had been resolved.[603]
Personal protective equipment. Officials in one state said that at one point FEMA had deemed the provision of personal protective equipment at correctional facilities as ineligible for reimbursement in their region but that states in other regions had received reimbursement for the same expense. Furthermore, officials we spoke with in two states said that FEMA imposed requirements for reimbursement for personal protective equipment and disinfectant for schools that they believed were inconsistent with its policy at the time and doing so created challenges for schools reopening. FEMA officials we spoke with in August 2021 acknowledged that the agency’s interpretation and application of its policy related to reimbursement for personal protective equipment varied across regions.
Based on our conversation with state emergency managers, we found that inconsistent interpretation and application continues in one state. For example, state officials told us that reimbursement for PPE has been inconsistent across counties within the state. That state reported that although the expenses for PPE were incurred around mid-2020, after which FEMA issued a clarifying policy, current interpretation of the prior policy as it applies to PPE continues to be inconsistent.
Noncongregate sheltering. Officials we spoke with in one state said that FEMA had inconsistently interpreted and applied its policy across FEMA regions for reimbursement of expenses for noncongregate sheltering.[604] According to FEMA policy, noncongregate sheltering can be approved for up to 30 days or longer if justified.[605] However, officials in this state said that FEMA had not approved reimbursement for noncongregate sheltering costs beyond 14 days but had approved it for longer periods in states in other regions.
FEMA officials in headquarters acknowledged these challenges and have taken initial steps to address them. For example, in December 2020, FEMA established the Request For Information task force that included subject matter experts from its four Consolidated Resource Centers and local hires who were experienced determination memorandum writers.[606] The intent of this task force was to improve the consistency of FEMA’s interpretation and application of policy. As part of the Request For Information task force, FEMA personnel reviewed every instance where FEMA was planning to request additional supporting documentation from applicants. As a result of the task force’s efforts, FEMA identified common scenarios that FEMA could use to train staff and improve consistency across regions. FEMA officials said that they communicated the task force’s findings in writing and in meetings with FEMA regional personnel and associations of state emergency managers.
Based on our discussions with FEMA headquarters officials and state emergency managers, we identified four key areas that contributed to the inconsistent interpretation and application of COVID-19 policy for Public Assistance.
- Changes in policy. Although FEMA’s Public Assistance Program and Policy Guide defines policies and procedures for the Public Assistance Program, it does not specifically address COVID-19 Public Assistance. FEMA had not previously used the Public Assistance Program to respond to a nationwide emergency such as the COVID-19 pandemic. As a result, FEMA officials said that they quickly developed and issued a series of policy documents clarifying the use of Public Assistance to respond to COVID-19, which FEMA personnel interpreted and applied differently.[607] FEMA officials stated that they work hard to retain consistency in policies that are issued, but it is difficult with every state and region not experiencing the same thing at the same time. State emergency managers we interviewed stated that changes in policy were interpreted and applied inconsistently within and across regions. Similarly, the National Governors Association letter to FEMA on May 12, 2021, stated that prior to FEMA issuing clarifying policy, states and territories received inconsistent messaging across FEMA regions about the eligibility of items for reimbursement, such as masks and disinfectant for schools and increased operating costs for 24/7 emergency operations center. According to the letter, subsequent changes to FEMA’s policy guidance resulted in three different eligibility requirements based on arbitrary dates, which led to challenges in verifying duplication of benefits and untangling obligated funds and caused strain on personnel at the state, territorial, and federal levels. In the letter, the National Governors Association stated that they continue to be challenged by FEMA’s COVID-19 Public Assistance guidance and recommended that the FEMA Administrator implement better communication of policy changes and decisions that are disseminated by the FEMA regions to ensure consistency of messaging across the country.[608] FEMA officials stated that as of October 1, 2021, they had not issued a response to this recommendation. In addition, in September 2021, the National Emergency Management Association made recommendations to streamline Public Assistance to FEMA and specifically stated that FEMA’s changing policies made it challenging for states to determine which policies applied to specific projects at any given time, and prolonged the application and review process.[609] On September 8, 2021, FEMA issued a policy that provides retroactive reimbursement at 100 percent federal cost share for Public Assistance expenses incurred from January 20, 2020 through December 31, 2021.[610]
- Delegation of authority to FEMA regions. According to FEMA officials, FEMA’s 10 regions have the authority and responsibility to make final eligibility determinations, while FEMA’s Consolidated Resource Centers handle all processing of applications, including cost estimates and compliance reviews. FEMA officials said that although they strive to achieve consistency in interpretation and application of policy, differences arise because of the delegated authority. According to FEMA officials, COVID-19 is unusual because it affects every state and every region at the same time, unlike the disasters that FEMA policies typically address. FEMA officials stated that because of delegated authority, the 10 regions’ interpretation and application of COVID-19 policies may not be the same in every circumstance, and they continue to discuss methods to improve in this area. According to FEMA officials, some of the different outcomes exist because there are different circumstances behind projects in different places.
- Training of staff. FEMA officials stated that training on COVID-19 policy is available to but not required for individuals handling Public Assistance applications. As part of its task force to reduce inconsistent application of policy, FEMA identified training gaps among its staff at Consolidated Resource Centers and among state, local, tribes, and territorial partners and began to address these gaps through training and mentoring staff. According to FEMA officials, FEMA works closely with the regions and state, local, tribal, and territorial partners in an effort to apply policy consistently across all COVID-19 declarations. Specifically, FEMA officials stated that for each policy developed for COVID-19 Public Assistance, FEMA provided training on an as needed basis. FEMA also developed frequently asked questions and fact sheets and placed them on their website for employees to access as needed. Additionally, FEMA hosted a series of webinars that were available to staff and state, local, tribal, and territorial governments that addressed eligibility requirements for reimbursable Public Assistance expenses for COVID-19. However, staff at Consolidated Resource Centers, among others, were not required to take this training.[611]
- Experience and knowledge of staff. Emergency management officials from two states attributed inconsistent interpretation and application of COVID-19 Public Assistance policies to the experience level of the person making the eligibility determination for applications. In September 2021, the National Emergency Management Association stated that "the movement of Public Assistance projects through the entire process successfully and efficiently is heavily reliant on the knowledge of the FEMA representatives to ensure proper policy intent compliance and to avoid future audits. The lack of experience of FEMA representatives presents constant challenges as they do not have a full understanding of the project scope nor the policy that would back the project eligibility." In addition, according to National Emergency Management Association officials, the rotation of personnel reviewing COVID-19 Public Assistance applications could affect eligibility determinations for that project. For example, if an application is in process and has to be transferred to a different person to review, that individual may not have a full understanding of the project scope including prior determinations made by their predecessor. This could result in expenses that were initially determined to be eligible for Public Assistance to ultimately be deemed ineligible.
According to FEMA’s National Disaster Recovery Framework, the federal government is responsible for ensuring that information is distributed in an accessible manner and is well understood, so that all stakeholders are informed and aware of the process.[612] FEMA has acknowledged that in spite of its efforts, inconsistent interpretation and application of Public Assistance policy for COVID-19 continues to occur within and across regions. Given the current rise in the COVID-19 Delta variant across the nation, FEMA is likely to receive applications for reimbursement for a larger number of projects than it estimated earlier in 2021. By improving the consistency of its interpretation and application of COVID-19 Public Assistance policy, FEMA can help ensure that applicants for Public Assistance receive timely and consistent reimbursement for eligible expenses.
Methodology
To conduct this work, we reviewed FEMA’s monthly Disaster Relief Fund reports to obtain FEMA obligations data for Individual Assistance, Public Assistance, and mission assignments for February 2020 through August 2021 and projected obligations data through September 2021. We reviewed federal laws and FEMA policies and guidance on how states, local, tribal, and territorial governments may apply for, and receive, assistance to respond to the COVID-19 pandemic. We also reviewed data from FEMA’s advisories on mass vaccination sites, Public Assistance, and funeral assistance related to COVID-19. Although we present FEMA data on Public Assistance and COVID-19 Funeral Assistance, we did not independently determine the reliability of the data.
In addition, we reviewed presidential memorandums issued on August 8, 2020, January 21, February 2, and August 17, 2021; FEMA’s Frequently Asked Questions; and previous GAO reports on FEMA’s response to the COVID-19 pandemic and other natural disasters. Further, we reviewed letters to FEMA from the National Governors Association and National Emergency Management Association on FEMA’s Public Assistance Program. We also interviewed state emergency officials from Illinois, North Carolina, Pennsylvania, and Washington as well as representatives from the National Governors Association and the National Emergency Management Association. Finally, we interviewed FEMA officials regarding their efforts to implement COVID-19 Funeral Assistance and the COVID-19 Public Assistance Program.
Agency Comments
We provided a draft of this enclosure to the Department of Homeland Security (DHS), FEMA, and the Office of Management and Budget (OMB). In its comments, which are reproduced in appendix V, DHS concurred with both recommendations and outlined actions it has taken to improve the consistency of the agency’s interpretation and application of the COVID-19 Public Assistance Policy and train employees in the regions and at its Consolidated Resource Centers. Specifically, FEMA stated that on September 8, 2021, it issued the Safe Opening and Operation Interim Policy which amends the applicable time period of eligibility retroactively to the beginning of the incident period for activities related to the safe opening and operation of facilities. This policy also specifies that work conducted from the beginning of the incident period to December 31, 2021, will be reimbursed at a federal cost share of 100 percent. According to FEMA’s management response letter, FEMA believes this policy will improve the consistent interpretation and application of COVID-19 Public Assistance Policy nationwide. We agree that the newly issued policy and the period of time it covers should assist FEMA in improving the consistency of its decision-making on this issue; however, it does not necessarily address the variance in interpretation on other issues, such as overtime for Emergency Medical Services employees or non-congregate sheltering. Further, given this is a recently issued policy, we will continue to monitor its implementation to see if it fully addresses our recommendation. Additionally, FEMA stated that it has taken a number of actions to educate staff on changes to COVID-19 Public Assistance policy to ensure that interpretation and application are consistent nationwide. For example, FEMA conducted a Public Assistance Training on September 9, 2021, which included a section on COVID-19 related policies and guidance, including helping applicants navigate COVID-19 project development. It is too early to measure the impact of FEMA’s efforts to educate staff on changes to COVID-19 Public Assistance policy.
GAO’s Ongoing Work
We will continue to monitor issues related to FEMA’s Disaster Relief Fund, workforce, and funeral assistance for COVID-19 related deaths. Specifically, we will monitor obligations for Individual Assistance, Public Assistance, and mission assignments, as well as the balance in the fund. In addition, we will continue to monitor and assess the controls FEMA is using to prevent fraud, waste, and abuse in its delivery of COVID-19 funeral assistance. We will continue to report on this program in our CARES Act reporting through April 2022.
GAO’s Prior Recommendations
The table below presents our recommendations on FEMA’s response to COVID-19 from prior bimonthly and quarterly CARES Act reports.
| Recommendation | Status |
|---|---|
| The Federal Emergency Management Agency Administrator should adhere to the agency’s protocols listed in the updated 2019 Tribal Consultation Policy by obtaining tribal input via the four phases of the tribal consultation process when developing new policies and procedures related to COVID-19 assistance. (March 2021 report). | Open—partially addressed. In March 2021, DHS concurred with our recommendation. DHS stated that FEMA’s National Tribal Affairs Adviser, based in the Office of External Affairs, will coordinate with other FEMA offices and directorates, as appropriate, to review the agency’s adherence to protocols listed in the Tribal Consultation policy. According to FEMA officials, in March 2021, FEMA conducted formal consultation with Tribal Leaders on COVID-19 Funeral Assistance before finalizing the interim policy. In April 2021, FEMA sent letters to tribal leaders discussing (1) FEMA policy and procedure for financial assistance to individuals and households for COVID-19 related funeral expenses incurred after January 20, 2020; and (2) framework, policy details and requirements for determining the eligibility of safe opening and operation work and costs under the Public Assistance Program. |
| The Federal Emergency Management Agency Administrator should provide timely and consistent technical assistance to support tribal governments’ efforts to request and receive Public Assistance as direct recipients, including providing additional personnel, if necessary, to ensure that tribal nations are able to effectively respond to COVID-19. (March 2021 report). | Open—partially addressed. In March 2021, DHS concurred with our recommendation. DHS stated that FEMA’s Recovery Directorate will publish a memorandum that will contain direction to FEMA regions regarding the assignment of Public Assistance Program delivery managers to promote equitable delivery of Public Assistance to tribal governments. According to FEMA officials, on August 6, 2021, FEMA sent a memorandum that provided updates on how FEMA would deliver assistance. This guidance provides FEMA’s regional staff the ability to work with all tribal applicants to understand their capacity to address issues through their assigned Public Assistance program delivery manager. As of October 1, 2021, FEMA did not have data on the outcome of this assistance. |
| 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. (GAO-20-701) | Open—partially addressed. In September 2020, DHS disagreed with this recommendation, noting, among other things, work that FEMA had already done to manage the medical supply chain and increase supply availability. Although DHS disagreed with our recommendation, it began taking some actions in March 2021. As of May 2021, DHS has not demonstrated action to devise interim solutions that would systematically help states, tribes, and territories effectively track, manage, and plan for supplies to carry out the COVID-19 pandemic response in the absence of state-level end-to-end logistics capabilities that would track critical supplies required for a response of this scale. We note that we made this recommendation to both DHS and HHS with the intent that they would work together under the Unified Coordination Group to address challenges reported by state officials with both public health and emergency management responsibilities. Moreover, we recommended they take actions that were consistent with the roles and responsibilities that were to be more clearly defined as HHS took a more central role in leading supply distribution. The recommendation to define those roles and responsibilities remains open. Moreover, although both DHS and HHS have reported separate actions, taken as part of other efforts within each separate purview, neither has articulated how they worked with the other nor how they assessed whether the actions changed the experiences of state officials who reported issues during our prior work. Without systematic and deliberate action to help states ensure they have the support they need to track, manage, and plan for supplies, states, tribes, and territories on the front lines of the whole-of-nation COVID-19 response may continue to face challenges that hamper their effectiveness. |
Source: GAO. | GAO-22-105051
Related GAO Products
FEMA Disaster Workforce: Actions Needed to Address Deployment and Staff Development Challenges. GAO-20-360. (Washington, D.C.: May 4, 2020).
Disaster Response: Federal Assistance and Selected States and Territory Efforts to Identify Deaths from 2017. GAO-19-486. (Washington, D.C.: Sept. 13, 2019.
Disaster Assistance: Opportunities to Enhance Implementation of the Redesigned Public Assistance Grant Program. GAO-18-30. (Washington, D.C.: Nov. 8, 2018)
2017 Hurricanes and Wildfires: Initial Observations on the Federal Response and Key Recovery Challenges. GAO-18-472 (Washington, D.C.: Sept. 4, 2017).
Disaster Recovery: FEMA’s Public Assistance Grant Program Experienced Challenges with Gulf Coast Rebuilding. GAO-09-129. (Washington, D.C.: Dec. 18, 2008).
Contact information: Chris Currie, (404) 679-1875, curriec@gao.gov
COVID-19 Impact on IRS Enforcement
Bookmark:In response to the pandemic’s onset in March 2020, the Internal Revenue Service significantly reduced its efforts to enforce taxpayer compliance. In July 2020, IRS started increasing these enforcement efforts by making changes to address the challenges of operating in a pandemic environment.
Entity involved: Internal Revenue Service, within the Department of the Treasury.
Background
The Internal Revenue Service’s (IRS) tax enforcement efforts help collect tax revenue from noncompliant taxpayers and promote voluntary tax compliance. We have included enforcement of tax laws on our High-Risk List due to the need for IRS to improve tax compliance and address the gross tax gap, or the difference between taxes owed by individuals and businesses and the taxes they paid voluntarily and on time.[613]
IRS’s efforts to enforce tax compliance include examination programs to help ensure that taxpayers file accurate tax returns. IRS’s Wage and Investment (W&I), Small Business and Self-Employed (SB/SE), and Large Business and International (LB&I) divisions conduct examinations based on the type of taxpayer. Examinations can be conducted by mail and telephone or in person, such as at an IRS office or a taxpayer’s location. IRS also uses automated compliance checks, such as the Automated Underreporter (AUR) program, to verify taxpayer compliance by comparing information reported by taxpayers to information reported to IRS by third parties, such as employers and banks. IRS collection efforts seek to enforce taxpayers’ compliance with tax filing requirements and payment of taxes.[614]
Overview of Key Issues
Beginning in March 2020, IRS closed its on-site operations and generally suspended its key tax enforcement programs to protect staff and taxpayers from transmitting COVID-19 and because it had limited ability to perform work remotely. In addition, IRS provided tax compliance relief to taxpayers experiencing COVID-19 hardships. This relief included postponing certain collection activities and limiting examinations in the field.
IRS began to resume some enforcement activities in July 2020 by transitioning staff to telework, revising the types of work they were to do, and increasing the use of technology. However, IRS faced significant work backlogs along with process challenges and reduced staff availability. IRS continued to slowly resume enforcement activities in the fall and winter of 2020. As of June 2021, IRS had made major improvements but had not achieved prepandemic levels in caseload and tax revenue for all enforcement activities. IRS is considering ways to identify lessons learned and make permanent changes as appropriate to improve enforcement and prepare for future disruptions to operations.
Use of Weather and Safety Leave over time. At the beginning of the pandemic, few IRS staff were working in the office, while many others began teleworking. Under IRS policy, staff who were unable to work in either of these settings were placed in Weather and Safety Leave, a type of paid leave typically used when it is unsafe for staff to come into the office due to inclement weather or some other reason (see figure).
As of June 2021, almost no staff were on full-week Weather and Safety Leave, while more than 60,000 IRS staff performed at least some of their work remotely and approximately 30,000 performed at least some work from the office.[615]
The pandemic’s effects on enforcement caseloads and revenue. We found that nearly all IRS enforcement caseloads dropped substantially from June 2019 to June 2020. Caseloads increased from June 2020 to June 2021, but not all activities have returned to their prepandemic levels (see table). Although not all changes can be attributed to the pandemic, it was a key factor during the period.
Legend: AUR = Automated Underreporter; FY = fiscal year; LB&I = Large Business and International; SB/SE = Small Business and Self-Employed; W&I = Wage and Investment
Source: GAO analysis of Internal Revenue Service (IRS) data. | GAO-22-105051
aExamination and AUR caseloads are tracked by the number of cases started and cases closed.
bCollection inventory is measured by the number of taxpayer modules being pursued for unpaid taxes or unfiled returns. A module is a record for a specific taxpayer covering one return for one tax period.
The table shows that the pandemic’s effect on caseload varied by the type of enforcement activity. By June 2021, caseloads for AUR and W&I correspondence examinations, which are highly automated, had recovered from the 2020 decline and exceeded the 2019 levels. In LB&I, field examiners generally were ready to telework, which enabled them to start even more examinations, but closures declined because they rely on other parts of IRS that were shut down or at reduced staffing.
By June 2021, workloads in collection for both unpaid taxes and unfiled returns had mostly returned to or were trending toward the 2019 levels. One exception is field collection, where the June 2021 unpaid tax inventory was below the June 2019 and June 2020 levels. SB/SE collection officials said that collecting unpaid taxes in the field generally involves face-to-face contact with taxpayers, unlike the other two activities, which involve collecting unpaid taxes by mail and telephone.
The pandemic also affected the revenue collected through enforcement actions.[616] The table below shows that enforcement revenue declined across all the major enforcement activities during the height of the pandemic in June 2020, although the decline was smaller for collection from unfiled tax returns. Collection officials explained that they shifted staff to work more unfiled tax return cases and fewer unpaid tax cases in the early part of the pandemic because that work could be done remotely without face-to-face contact. Collection officials said they shifted staff back to more unpaid tax cases as safety procedures were implemented.
Source: GAO analysis of Internal Revenue Service (IRS) data. | GAO-22-105051
aInvolves examinations done by IRS revenue agents in IRS field offices.
bInvolves examinations done by IRS examiners through mail from IRS campus locations.
cInvolves matching information returns filed by third parties to report income such as wages to tax returns filed by taxpayers.
Operational challenges and IRS’s actions. According to IRS management, enforcement activities across IRS generally were not telework ready because the case work largely relied on paper processes.[617] Office closures limited access to physical case files; when staff were able to come to the office, IRS faced logistical challenges of keeping staff socially distanced. Staff did not have computers, scanners, and printers to telework from home, and it took IRS time to procure and distribute this equipment. Enforcement staff were limited in their ability to safely meet taxpayers face to face. Meanwhile, interruptions to mail, phone, and print operations caused delays and backlogs in casework. The table below shows these common operational challenges and the actions IRS took across its divisions.
Because staff were not telework ready, IRS enforcement managers stated that many staff experienced downtime during the summer of 2020 while IRS acquired equipment so they could work from home. Downtime was also an issue for staff who had been doing much of their work remotely using IRS equipment before the pandemic, such as highly graded examination and collection staff who meet with taxpayers in the field and do the most complex work. Although these staff were telework ready, some of them could not do as much work as before the pandemic. If they did meet with taxpayers, they faced challenges in keeping the interactions safe.
Interruptions in support services, such as mail, phone, and print operations, also hampered resumption of enforcement activities. Many of these operations were not restarted until mid- or late summer 2020. As a result, IRS staff and taxpayers could not communicate with each other, leading to delays and increases in backlogged enforcement casework.
IRS managers and documents indicated that safety concerns among IRS staff and taxpayers were a major challenge related to the pandemic. When staff did go into the office to pick up or drop off paper case files, IRS faced logistical challenges in ensuring that staff stayed socially distant. IRS also had to ensure that taxpayers were kept safe during interactions with staff.
To understand and address enforcement staff concerns, IRS collected feedback in both formal and informal settings. For example, one division held virtual town hall meetings, while others sought feedback through an electronic mailbox. IRS managers said that staff feedback helped them address staff questions and concerns about resuming enforcement activities from safety and practical standpoints.
In addition to these agency-wide changes, individual IRS divisions made changes to address specific pandemic-related challenges. We discuss some division-specific changes below, based on interviews with enforcement managers and a review of related documents.
LB&I examinations. LB&I managers stated that most of their examiners were already telework ready, but that LB&I relied heavily on paper processes for case files located in its offices. LB&I arranged for staff to go into the office as needed to retrieve, print, and scan files and also provided staff with printers and scanners to work remotely. Additionally, LB&I changed its Information Document Request process. Normally, when taxpayers do not comply with a request to provide IRS with documents in a timely manner, IRS is authorized to obtain taxpayer documents through a summons. LB&I approved changes to make time frames more flexible and reduce the use of summonses since many corporate taxpayers’ employees were not working in an office. The division also established a process by which examiners could virtually close an examination case without having to go into an office.
SB/SE field and office examinations. Given challenges with starting new examinations, SB/SE directed office examiners to work taxpayer claims and ongoing examinations that could be worked virtually. SB/SE used more virtual technology to allow field examiner staff to safely interact with taxpayers. Video conferencing proved to be popular with staff, and IRS is obtaining more licenses to allow its use. If examiners needed to retrieve documents from taxpayers, they arranged to meet outdoors. Further, SB/SE developed procedures to exchange information virtually through secure communication channels and set up a virtual Taxpayer Digital Communications pilot project at the Philadelphia campus.
W&I correspondence examinations. Because W&I examiners had not previously teleworked, IRS issued a memorandum in May 2020 that allowed work to be done outside of the office. To make the work portable, W&I managers scanned examination case files until safety protocols were established, and then clerks did the scanning. W&I also arranged for examiners to visit the campus to pick up paper files as needed. With the shutdown of mail operations, W&I initiated e-fax to allow taxpayers to send IRS documents. When phone and mail operations became more available during fall 2020, W&I changed telephone scripts and call routing to shorten call times and take more calls, according to IRS officials. IRS also initiated a call-back function in January 2021 that allows a taxpayer to receive a call from IRS rather than remain on hold.
AUR. Although AUR document matching is automated, interactions with taxpayers rely on a paper process. During the early stages of the pandemic, AUR management brought program managers onto the campuses to assess work to be done based on critical needs and staff availability. Managers determined what work was portable and which staff should work at the campuses. Because AUR’s systems did not allow for document scanning, management had to decide how many clerks to bring in to a campus to prepare paper case files for AUR staff to pick up and work remotely.
SB/SE field collection. Field collection management said its staff were telework ready but were generally assigned more unfiled return work during the early part of the pandemic because this work is more automated and can be done without field visits, unlike unpaid tax cases. Field collection management provided guidance to carve out exceptions for certain unpaid tax work to continue, such as egregious employment tax returns, pyramid schemes, high-income taxpayers, and high-risk cases where the government might lose the opportunity to collect money. Since September 2020, SB/SE has been changing the case mix to get back to a normal distribution of unfiled return and unpaid tax cases.
SB/SE campus collection.[618] Given that staff generally were not telework ready, management used the shutdown period to train staff to use new equipment to access phones and online systems. Automated Collection System (ACS) management said they opened some phone lines by mid-April of 2020. SB/SE suspended collection actions, but taxpayers could respond to collection notices and ask for hardship exceptions or to pay in installments. ACS and Compliance Services Collection Operations (CSCO) managers said that when the print sites reopened at the end of June 2020, IRS prioritized which notices involving unpaid taxes to send based on factors such as operational status and staff’s ability to help taxpayers settle their accounts and to respond to taxpayer inquiries. IRS remained behind on notices until September 2020 after deciding to freeze sending new notices so that it could catch up on processing older notices. As a result, IRS delayed issuing some notices until November 2020.
CSCO set up dedicated e-fax lines so that taxpayers could submit documents electronically. SB/SE also scanned documents received by mail as much as possible to get work to remote staff. Further, ACS has been piloting an online text chat service with taxpayers, allowing taxpayers to authenticate their identities, send documents, and settle specific account issues. Another new feature allows taxpayers to request a telephone call-back from IRS at a specific time rather than remaining on hold. Also, IRS is attempting to reduce the number of people calling by redirecting taxpayers to online resources. Managers said that expanding self-help options has been a successful change to operations during the pandemic.
Lessons learned. Our review also looked at how IRS is tracking lessons learned from changes made to resume enforcement activities. Although IRS has not yet finalized its plans, enforcement managers across IRS said they were considering how to track the lessons learned. Similarly, these IRS managers stated that they are considering ways to assess changes that have been working well during the pandemic and that should be kept or revised. Recognizing a hesitancy to abandon processes and procedures that worked prior to the pandemic, IRS officials said they are asking staff to consider whether the pandemic-induced changes would help them work enforcement cases outside of a pandemic environment.
IRS managers stated that the agency recognizes the need to move from paper-based to more digital processes. Agency officials said that responding to challenges posed by the pandemic has encouraged this transition and has demonstrated that it can be done. Virtual tools that allow for video communication and sharing information electronically have shown signs of being useful. As a result, the enforcement managers we interviewed said these tools will be made available for staff if they find them useful and if taxpayers are willing to participate. Similarly, IRS is looking for ways to expand acceptance of digital signatures on electronic documents.
Methodology
To describe the effect of the pandemic on IRS tax enforcement caseloads and revenue, we reviewed data in IRS systems for reporting on key enforcement programs using data points as of the end of June in fiscal years 2019 (prior to the pandemic), 2020 (during the height of the IRS shutdown due to the pandemic), and 2021 (the most recent available month). We identified the key programs by reviewing data on all of the enforcement activities of the three IRS divisions responsible for individual and business taxpayers—SB/SE, W&I, and LB&I—and, in consultation with IRS officials, we selected those areas generally recognized as having the greatest effects on the use of IRS resources to enforce tax laws. To describe the effect of the pandemic on staffing, we reviewed data on IRS staff use of Weather and Safety Leave and time working remotely or in the office. We assessed the reliability of the data by reviewing existing information about data IRS collects—specifically, the data dictionary and data validation methods—and by interviewing officials responsible for data reporting. We determined that the data were sufficiently reliable for the purpose of describing changes to IRS enforcement activities during the pandemic.
To identify the challenges faced by IRS during the pandemic and changes made to address those challenges, including any lessons learned, we interviewed division officials responsible for managing the programs and reviewed supporting data and documentation. We summarized the challenges and IRS’s changes and interviewed IRS officials to corroborate the summary.
Agency Comments
We provided IRS, the Department of the Treasury, and the Office of Management and Budget with a draft of this enclosure. They did not have any comments on this enclosure.
GAO’s Ongoing Work
We will continue to monitor IRS’s administration of tax enforcement programs.
Related GAO Product
High Risk Series: Dedicated Leadership Needed to Address Limited Progress in Most High-Risk Areas. GAO-21-119SP. Washington, D.C.: March 2, 2021.
Contact information: James R. McTigue Jr., (202) 512-6806, mctiguej@gao.gov
Postal Service
Bookmark:The U.S. Postal Service’s mail volume increased, its on-time performance declined, and its finances declined in the third quarter of fiscal year 2021 as compared to the same period in 2020, which was just after the onset of the COVID-19 pandemic.
Entity involved: U.S. Postal Service
Background
The U.S. Postal Service (USPS) plays a critical role in the nation’s communication and commerce, a role highlighted in 2020 as USPS delivered billions of pieces of mail throughout the COVID-19 pandemic including ballots, Census forms, and recovery rebate checks, in addition to an unprecedented surge of packages. As an independent establishment of the executive branch, USPS is expected to provide affordable, quality, and universal postal service. USPS is also expected to be financially self-sufficient by covering its expenses through revenues generated from the sale of its products and services. However, USPS has not been able to cover its expenses since fiscal year 2007 due to (1) long-term declines in its most profitable mail products and (2) rising expenses, such as for compensation and benefits. As a result, USPS’s financial viability has been on our High-Risk List since 2009.
USPS’s mail volume, on-time delivery performance, revenue, and expenses changed significantly since the onset of the COVID-19 pandemic. In addition, we reported in April 2021 that USPS took actions to reduce its costs that may have also reduced its on-time performance, such as reducing late and extra mail transportation trips. We reported that some of these actions were suspended by USPS prior to the general election on November 3, 2020. We also reported in April 2021 that when comparing 2020 to 2019, USPS’s
- overall mail volume declined even with increases in the volume of packages;
- on-time performance fell with a steep decline nationwide in December 2020; and
- net loss grew even though revenue increased by $4.3 billion.[619]
To help USPS respond to the COVID-19 emergency, the CARES Act, as amended in late 2020, provided USPS up to $10 billion in additional funding for COVID-19-related operating expenses.[620]
Overview of Key Issues
Mail volume. In the third quarter of fiscal year 2021, overall mail volume increased by about 4.0 billion pieces (about 15.1 percent) when compared to the same period in fiscal year 2020 (see figure). This change is almost entirely attributable to Marketing Mail volumes rebounding from significant declines that occurred in the beginning of the COVID-19 pandemic. Marketing Mail volume increased 4.3 billion pieces (39 percent) year over year. Mail volume trended toward prepandemic levels, which meant increases for market-dominant products such as First Class Mail (e.g., letters, cards, billing statements) and Marketing Mail (e.g., advertisements, flyers, newsletters), and decreases for competitive products (primarily packages), which spiked during the early parts of the pandemic. For example, in the third quarter of fiscal year 2021, competitive package volume was about 14 percent lower than it was in the same period in fiscal year 2020.
On-time performance. Nationally, while on-time performance for market-dominant products was slightly lower during the third quarter of fiscal year 2021 as compared to the same period in fiscal year 2020, performance continued to rebound from USPS’s December 2020 lows. On-time performance for First Class Mail averaged 87.6 percent nationally from April through June 2021, as compared to 90.8 percent for the same period in fiscal year 2020. Moreover, since the first quarter of fiscal year 2021 ended with a December on-time performance for First Class Mail of 69 percent, the third quarter showed continued improvement as on-time performance for First Class Mail increased from 87.27 percent in April 2021, to 87.59 percent in May 2021, to 87.95 percent in June 2021, but remained well below 2020 levels.
Revenue and expenses. USPS reported a net loss of $3 billion for the third quarter of fiscal year 2021, as compared to a net loss of $2.2 billion for the same period in fiscal year 2020.[621] USPS earned about $845 million more in operational revenue in the third quarter of fiscal year 2021 when compared to the third quarter of fiscal year 2020. Revenue from USPS’s market-dominant products increased by about $1.3 billion, mainly due to increased volume of marketing mail, while revenue for USPS’s competitive products declined by about $466 million as package volume decreased.
USPS’s expenses increased by approximately $1.6 billion for the third quarter in fiscal year 2021 when compared to the same period in fiscal year 2020. USPS attributed the increase to several factors, such as
- a $900 million increase in worker’s compensation expenses due to changes in interest rates;
- a retiree health benefits increase of $387 million, also due to changes in interest rates; and
- an increase in transportation expenses of $182 million, reflecting higher package volumes on trucks, changes in transportation modes, and higher fuel prices.
COVID-19 funding. As of July 2021, USPS had received all $10 billion of its CARES Act funding. USPS requested this funding for operating expenses incurred due to the COVID-19 emergency from March 2020 to May 2021.[622] These expenses included categories such as overtime, hiring and training costs of new employees, absenteeism, and costs of sanitizing work areas (see table).
Source: GAO analysis of U.S. Postal Service (USPS) data. | GAO-22-105051
Note: These funds are made available by the CARES Act, Pub. L. No. 116-136, div. A, tit. VI, § 6001, 134 Stat. 281, 504-05 (2020), as amended by the Consolidated Appropriations Act, 2021, Pub. L. No. 116-260, div. N, tit. VIII, § 801, 134 Stat. 1182, 2119 (2020). USPS requests these funds pursuant to a memorandum of understanding with the Department of the Treasury.
aAccording to USPS’s memorandum of understanding with the Department of the Treasury, these additional expenses are due to changes in product volumes attributable to the COVID-19 emergency versus pre-COVID forecasts in USPS’s financial plans, taking into account (1) the costs captured above for Supplies and Services, (2) the revenue and expenses of all products and services, and (3) the actions USPS was unable to undertake to account for the reduction in volumes because of its statutory mandates, such as the requirement to provide 6-days-a-week delivery. See, e.g., Pub. L. No. 116-260, div. E, tit. V, 134 Stat. 1182, 1423 (2020).
As stated above, USPS has not been able to cover its expenses with its revenues since fiscal year 2007 due to long-term declines in its most profitable mail products and rising expenses, such as for compensation and benefits. USPS has maintained its operations since then through a combination of actions, such as taking on debt and not making required payments for pensions and retiree health care benefits. USPS stated that it took those actions to preserve cash to continue to provide universal postal service.
USPS’s cash balance has decreased from $25.5 billion at the end of March 2021 to $22.8 billion at the end of June 2021. USPS officials stated that the main reason for this decrease was a $3 billion repayment of short-term debt to the federal government and the expenditure of USPS’s CARES Act funds. As of the end of June 2021, USPS had expended $9.6 billion of its CARES Act funds to cover its operating expenses such as payroll and transportation costs. As of the end of July 2021, USPS had received all $10 billion of its CARES Act funding. As we reported in April 2021 and July 2021, USPS continued to preserve cash in 2021 by forgoing making required retiree health care and pension payments. However, USPS reported that its current cash balance is insufficient to support USPS’s $82 billion in annual operating expenses, its capital investments, and to prepare for unexpected contingencies.
USPS’s cash balance could be reduced in the coming years. As stated above, USPS has received all of its CARES Act funds. USPS’s volume of packages is now decreasing, which has reduced its revenue growth. USPS also deferred payments of about $1.8 billion for the employer’s share of the Social Security payroll tax on wages from March 27, 2020, through December 31, 2020, as allowed under the CARES Act. Payment of half of this deferred amount is due on December 31, 2021, and payment of the other half is due on December 31, 2022. [623]
Methodology
To conduct this work, we analyzed USPS data on volume, on-time performance, and revenue and expenses, as of June 2021, which were the latest data available. We used USPS’s 10-Q financial statement for the third quarter of fiscal year 2021. To determine the reliability of the data we used, we interviewed relevant USPS officials about volume, on-time performance, and financial data that they either provided us directly or that we obtained from publicly available reports. They described where the data came from, how they were collected, and controls in place to provide assurance the data were complete and accurate. Based on this interview and relevant USPS documents we reviewed, we determined all data used were sufficiently reliable for the purposes of reporting on USPS mail volumes, on-time performance levels, revenues, and expenses.
We also reviewed applicable federal laws and interviewed USPS officials.
Agency Comments
We provided USPS and the Office of Management and Budget (OMB) with a draft of this enclosure for review and comment. USPS provided technical comments that we incorporated as appropriate. USPS also provided general comments, which are reproduced in appendix X. In its comments, USPS provided additional context about its financial condition, recent service performance, and anticipated plans to address these issues. OMB did not provide any comments.
Related GAO Products
U.S Postal Service: Better Use of Climate Data Could Enhance the Resilience of Postal Facilities to Climate Change Effects. GAO-21-104152. Washington, D.C.: September 30, 2021.
U.S. Postal Service: Further Analysis Could Help Identify Opportunities to Reduce Injuries among Non-Career Employees. GAO-21-556. Washington, D.C.: August 17, 2021.
U.S. Postal Service: Volume, Performance, and Financial Changes since the Onset of the COVID-19 Pandemic. GAO-21-261. Washington, D.C.: April 29, 2021.
High Risk Series: Dedicated Leadership Needed to Address Limited Progress in Most High-Risk Areas. GAO-21-119SP. Washington, D.C.: March 2, 2021.
High Risk Series: Restructuring the U.S. Postal Service to Achieve Sustainable Financial Viability. GAO-09-937SP. Washington, D.C.: July 28, 2009.
Contact information: Jill Naamane, Acting Director, (202) 512-2834, naamanej@gao.gov
Appendix II: Highlights Pages from Recently Issued GAO COVID-19 Products
Bookmark:Contracting Flexibilities
Bookmark:We issued COVID-19 Contracting: Actions Needed to Enhance Transparency and Oversight of Selected Awards, GAO-21-501, on July 26, 2021.
VA CLC Infection Prevention
Bookmark:We issued COVID-19: VA Should Assess Its Oversight of Infection Prevention and Control in Community Living Centers, GAO-21-559, on July 28, 2021.
Contractor Paid Leave Reimbursements
Bookmark:We issued COVID-19 Contracting: Contractor Paid Leave Reimbursements Could Provide Lessons Learned for Future Emergency Responses, GAO-21-475, on July 28, 2021.
Child Welfare
Bookmark:We issued Child Welfare: Pandemic Posed Challenges, but also Created Opportunities for Agencies to Enhance Future Operations, GAO-21-483, on July 29, 2021.
Implementation of Paycheck Protection Program
Bookmark:We issued Paycheck Protection Program: SBA Added Program Safeguards, but Additional Actions Are Needed, GAO-21-577, on July 29, 2021.
BOP Response to COVID-19
Bookmark:We issued Bureau of Prisons: BOP Could Further Enhance its COVID-19 Response by Capturing and Incorporating Lessons Learned, GAO-21-502, on July 29, 2021.
Assessing Vendors and Contracting Lessons Learned
Bookmark:We issued COVID-19 Contracting: Opportunities to Improve Practices to Assess Prospective Vendors and Capture Lessons Learned, GAO-21-528, on July 29, 2021.
Oversight of COVID-19 Assistance
Bookmark:We issued COVID-19 Pandemic: Actions Needed to Improve Federal Oversight of Assistance to Individuals, Communities, and the Transportation Industry, GAO-21-105202, on July 29, 2021.
Economic Injury Disaster Loans
Bookmark:We issued Economic Injury Disaster Loan Program: Additional Actions Needed to Improve Communication with Applicants and Address Fraud Risks, GAO-21-589, on July 30, 2021.
Biodefense Preparedness
Bookmark:We issued Biodefense: After-Action Findings and COVID-19 Response Revealed Opportunities to Strengthen Preparedness, GAO-21-513, on August 4, 2021.
Hospital Capacity Data Collection
Bookmark:We issued COVID-19: HHS’s Collection of Hospital Capacity Data, GAO-21-600, on August 5, 2021.
Federal Debt Management
Bookmark:We issued Federal Debt Management: Treasury Quickly Financed Historic Government Response to the Pandemic and Is Assessing Risks to Market Functioning, GAO-21-606, on August 17, 2021.
Immigration Courts
Bookmark:We issued COVID-19: Improvements Needed in Guidance and Stakeholder Engagement for Immigration Courts, GAO-21-104404, on August 31, 2021.
Medicaid HCBS Waivers
Bookmark:We issued Medicaid Home and Community-Based Services: Evaluating COVID-19 Response Could Help CMS Prepare for Future Emergencies, GAO-21-104401, on September 8, 2021.
Food Box Program
Bookmark:We issued USDA Food Box Program: Key Information and Opportunities to Better Assess Performance, GAO-21-353, on September 8, 2021.
Exposure Notification
Bookmark:We issued Exposure Notification: Benefits and Challenges of Smartphone Applications to Augment Contact Tracing, GAO-21-104622, on September 9, 2021.
Characteristics of Paycheck Protection Program Borrowers
Bookmark:We issued Paycheck Protection Program: Program Changes Increased Lending to the Smallest Businesses and in Underserved Locations, GAO-21-601, on September 21, 2021.
DOD Pandemic Response
Bookmark:We issued COVID-19: Defense-Wide Working Capital Fund Cash Management and Defense Logistics Agency Pandemic Response, GAO-21-104590, on September 22, 2021.
Dedicated User Fees
Bookmark:We issued COVID-19: Reviewing Existing Policies Could Help Selected Agencies Better Prepare for Dedicated User Fee Revenue Fluctuations, GAO-21-104325, on September 29, 2021.
Telework Cybersecurity
Bookmark:We issued COVID-19: Selected Agencies Overcame Technology Challenges to Support Telework but Need to Fully Assess Security Controls, GAO-21-583, on September 30, 2021.
HUD Oversight
Bookmark:We issued COVID-19: Additional Risk Assessment Actions Could Improve HUD Oversight of CARES Act Funds, GAO-21-104542, on September 30, 2021.
IHS COVID-19 Contracting
Bookmark:We issued COVID-19 Contracting: Indian Health Service Used Flexibilities to Meet Increased Medical Supply Needs, GAO-22-104745, on October 14, 2021.
Federal Reserve Lending Programs
Bookmark:We issued Federal Reserve Lending Programs: Credit Markets Served by the Programs Have Stabilized, but Vulnerabilities Remain, GAO-22-104640, on October 19, 2021.
IRS IT Investments
Bookmark:We issued Information Technology: Cost and Schedule Performance of Selected IRS Investments, GAO-22-104387, on October 19, 2021.
Appendix III: List of Ongoing GAO Work Related to COVID-19 as of September 30, 2021
Bookmark:Accountability for Bureau of Indian Education Spending of COVID-19 Funds
Agencies' Human Capital Flexibilities in Response to Coronavirus Pandemic
Agencies' Readiness and Use of Telework for COVID-19 Response
Air Travel Disease Research and Development
Aviation Contact Tracing
Aviation Operations in a Pandemic Environment
CARES Act Assistance to Farmers
CARES Act International Humanitarian Assistance
CARES Act Title IV Federal Reserve Facilities II
U.S. Customs and Border Protection Trade Facilitation
Contact Tracing App Technology Assessment
Behavioral Health Impacts
Defense Production Act Capstone
COVID-19 Diagnostic Testing
COVID-19 Disparities
COVID-19 in Nursing Homes: Data and Challenges
COVID-19 in Nursing Homes: Federal Policies
Meat and Poultry Worker Safety
COVID-19 Services for Older Adults
COVID-19 Testing Lessons Learned
Unemployment Assistance for Contingent Workers
Vaccine Allocation Methodology
Vaccine Distribution and Communication
Employer Tax Provisions
Critical Manufacturing Supply Chain
Department of State Overseas Operations
COVID-19: State Repatriation
Department of Defense Advance and Progress Payments during COVID-19 National Emergency
Election Administration during the COVID-19 Pandemic
Election Assistance Commission Guidance and Grants Oversight during the COVID-19 Pandemic
Federal Agencies' Reentry
Financial Regulatory Oversight during COVID-19
Freedom of Information Act Processing during COVID-19
Fraud Risks in Small Business Administration (SBA) Pandemic Relief Programs
Health Insurance Loss
Department of Health and Human Services (HHS) Medicare Telehealth Waivers for COVID-19
HHS Public Relations Campaign
HHS's Public Health Situational Awareness Capability
Housing Finance System in the Pandemic
IHS Response to COVID-19
Department of the Interior and Department of the Treasury's COVID-19 Response to Tribes
K-12 Disconnected Students during the COVID-19 Pandemic
Medicaid Telehealth during COVID-19
Operation Warp Speed
Oversight of Unemployment Insurance
Pandemic Learning Loss
Political Interference at Selected HHS Agencies
Post-COVID-19 Federal Space Planning
Regulatory Flexibilities for COVID-19 Response
Regulatory Flexibilities Timeline
SBA Assistance to Venues and Restaurants
Scientific Integrity at Selected HHS Agencies
Social Security Administration Service Delivery during COVID-19
State Small Business Credit Initiative Funds for COVID-19 Response
Strategic National Stockpile Contents and Management Review
Tax Policy Effects on Businesses by Sex, Race, and Ethnicity
Tax Policy Effects on Households by Sex, Race, Ethnicity
Tribal Epidemiological Data Access
Transportation Security Administration COVID-19-Related Directives for Transportation Systems
Unemployment Insurance Risks and Transformation
U.S. Department of Agriculture Human Pandemic Preparedness Plan for Food Safety Inspections
Vaccine Development
Appendix VII: Comments from the Department of Labor, Employment and Training Administration
Bookmark:
Appendix VIII: Comments from the Department of Labor, Occupational Safety and Health Administration
Bookmark:
_OCT_21_CARES_Page_1-1634666186282.png)
_OCT_21_CARES_Page_2-1634666213622.png)
_OCT_21_CARES_Page_3-1634666249257.png)
References
Figures
- Reported COVID-19 Cases per Day in the U.S., Mar. 1, 2020–Sept. 23, 2021
- Coronavirus State and Local Fiscal Recovery Funds Allocations and Treasury Distributions as of Aug. 31, 2021, by Recipient Type
- Dollar Amount and Count of Advance Child Tax Credit Payments, by Month, as of Sept. 25, 2021
- Figure 1: Report Enclosures by Topic Area
- Figure 2: Status of Prior GAO Recommendations from COVID-19-Related Work, by Federal Department or Agency, as of Sept. 30, 2021
- Figure 3: Reported COVID-19 Cases per Day in the U.S., Mar. 1, 2020–Sept. 23, 2021
- Figure 4: Higher-Than-Expected Weekly Mortality in the U.S., Jan. 2020 to Sept. 2021
- Figure 5: Daily Count of COVID-19 Vaccine Doses Administered in the U.S. and Reported to CDC, Dec. 14, 2020–Sept. 23, 2021
- Figure 6: Employment-to-Population Ratio, Jan. 2019–Sept. 2021
- Figure 7: Percentage of COVID-19 Relief Appropriations Obligated and Expended, July 31, 2020–Aug. 31, 2021
- Indicators for Areas of the Economy Supported by the Federal COVID-19 Pandemic Response, June–Sept. 2021, Cumulative Changes since Feb. 2020
- Employment-to-Population Ratio, Jan. 2019–Sept. 2021
- Serious Delinquency Rates on Single-Family Residential Mortgages, Jan. 2019–Aug. 2021
- Indicators of Inflation, Feb.–Aug. 2021, and Average Inflation Rates, 2000–2019
- Percentage Change in Inflation Indicators over the Previous Month, Jan. 2019-Aug. 2021
- Public Health Reporting Requirements or Guidance by Antigen Test Authorized Settings
- Establishments Manufacturing the COVID-19 Vaccines, by the Date of the Most Recent Historical FDA Inspection Prior to Initial Emergency Use Authorization (EUA) Request and Manufacturing Type
- Establishments Manufacturing the COVID-19 Vaccines Not Authorized or Licensed, by Date of Their Most Recent FDA Inspections and Manufacturing Type, as of May 2021
- FDA Biologic Inspections by Year and Type of Inspection, Fiscal Years 2012–2021
- Number of FDA Biologic Inspections by Month, Fiscal Years 2019–2021
- Number of FDA Inspections and Percentage of Foreign and Domestic Inspections by Biologic Product Type, Fiscal Year 2019
- Plan Selections during Open Enrollment Periods in Federal and State-Based Exchanges, 2017-2021
- Federal Exchange Special Enrollment by Qualifying Event, 2017-2020
- Medicaid Enrollment from January to December 2020
- HHS-Reported COVID-19 Relief Appropriations, Obligations, and Expenditures from COVID-19 Relief Laws, as of August 31, 2021
- Timeline of OSHA’s Key Actions to Respond to the COVID-19 Pandemic, from January 2020 through September 2021
- COVID-19-Related Reports to OSHA among Industries Targeted by OSHA’s National Emphasis Program, February 2020 through August 2021
- OSHA Enforcement Activities Based on Report Type, for Selected Periods from March 2019 through August 2021
- Percentage of Open Child Care Providers Increased during 2020
- Financial Problems for Child Care Providers Topped States’ List of Greatest Child Care Challenges in 2020
- Federal Child Care Flexibilities States Most Commonly Used During COVID-19
- Small Child Care Providers Received More Paycheck Protection Program Loans than Larger Providers
- Total Meals Served in Key Child Nutrition Programs in 2019, 2020, and 2021, by Month, as of Sept. 10, 2021
- Weekly Continued Claims Submitted Nationwide for Regular Unemployment Insurance, Pandemic Emergency Unemployment Compensation, and Extended Benefits, Mar. 1, 2020–Sept. 4, 2021
- Timeliness of First Payments of Regular Unemployment Insurance (UI) Benefits, Jan. 2020–Aug. 2021
- First-Round Emergency Rental Assistance (ERA1) Spending and Unique Renter Households Served, by Reporting Period (Jan.–Aug. 2021)
- Percentage of First-Round Emergency Rental Assistance (ERA1) Allocations Spent by Grantees in U.S. States and Territories through Aug. 2021
- Income Qualifications for the Expanded Child Tax Credit, Based on Tax Year 2021
- Advance Child Tax Credit Disbursals, by Month, as of Sept. 25, 2021
- Shuttered Venue Operators Grant (SVOG) Initial Grant Recipients, by Grant Amount, as of Sept. 20, 2021
- Timeline for the Shuttered Venue Operators Grant Program, as of Sept. 20, 2021
- Timeline for the Restaurant Revitalization Fund Program, as of July 2021
- Restaurant Revitalization Fund Recipients, as a Percentage of the Total Number of Restaurants with 500 or Fewer Employees in Each State, as of June 30, 2021
- Restaurant Revitalization Fund (RRF) Recipients, by Assistance Amount, as of June 30, 2021
- Payment Amount and Number of Agreements Signed for the Payroll Support Program (PSP1), Payroll Support Program Extension (PSP2), and Second Payroll Support Program Extension (PSP3), as of September 2021
- Coronavirus State and Local Fiscal Recovery Funds Allocations and Treasury Distributions as of Aug. 31, 2021, by Recipient Type
- Treasury’s Reporting Requirements for the Coronavirus State and Local Fiscal Recovery Funds, by Recipient Type, as of October 7, 2021
- Number of States and Localities That Reported Having a Proposed or Adopted Plan for Spending Their CSLFRF Allocations, as of July 2021
- States’ and Localities’ Reported Capacity for Managing Their CSLFRF Allocations, as of July 2021
- States’ and Localities’ Views on Clarity of Treasury’s CSLFRF Guidance on Allowable Uses of Funds and Reporting Requirements, as of July 2021
- Contract Obligations in Response to COVID-19 by Federal Agency, as of September 30, 2021
- Government-wide COVID-19-Related Contract Obligations and Confirmed COVID-19 Cases by Month, Feb. 2020–Sept. 2021
- Contract Obligation Amounts for Top Five Goods and Services Procured in Response to COVID-19 by month, Feb. 2020–Sept. 2021
- COVAX Progress toward Goal of Delivering 2 Billion Vaccine Doses to Participating Countries in 2021, as of Sept. 15, 2021
- Monthly U.S. Imports of COVID-19-Related Products, by Product Type, Jan. 2018–June 2021
- U.S. Trade of COVID-19 Vaccines with the European Union and United Kingdom, Jan.–May 2021
- Number of Individuals or Entities Who Have Pleaded Guilty to or Faced Federal Charges for Consumer Fraud, as of July 31, 2021
- FEMA’s Disaster Relief Fund Balance, by Month, Feb. 2020– Aug. 2021
- Number of Projects and Amounts Obligated for Public Assistance for COVID-19, by FEMA Region, Sept. 1, 2020–Aug. 31, 2021
- FEMA’s Disaster Relief Fund Obligations for COVID-19 by Program and Activity through August 2021
- Internal Revenue Service (IRS) Staff Work Status, Mar. 2020–June 2021
- IRS Pandemic-Related Enforcement Challenges and Actions through June 2021
- Change in Mail Volume for Selected Mail Types between Third Quarters in Fiscal Year 2020 and 2021 (in thousands of piece of mail)
Tables
- Table 1: COVID-19 Relief Appropriations, Obligations, and Expenditures, as of Aug. 31, 2021
- Table 2: Appropriations, Obligations, and Expenditures for Federal Programs and Funds Receiving $10 Billion or More in COVID-19-Related Aid for States, the District of Columbia, Localities, U.S. Territories, and Tribes, as of Aug. 31, 2021
- Number of FDA Emergency Use Authorizations for COVID-19 Antigen Tests by Setting, as of October 14, 2021
- Prior GAO Recommendations Related to COVID-19 Testing
- Selected Studies of Employer-Sponsored Insurance (ESI) Loss during the COVID-19-Associated Economic Downturn
- HHS-Reported COVID-19 Relief Appropriations, Obligations, and Expenditures, by Relief Law, as of August 31, 2021
- HHS-Reported Allocations, Obligations, and Expenditures of COVID-19 Relief Funding, by Agency or Key Fund, as of August 31, 2021
- HHS-Reported Allocations, Obligations, and Expenditures by Selected COVID-19 Response Activity, as of August 31, 2021
- Prior GAO Recommendation Related to Department of Health and Human Services (HHS) COVID-19 Funding
- Provider Relief Fund: Summary of Allocations and Disbursements, as of August 31, 2021
- Prior GAO Recommendation Related to Department of Health and Human Services (HHS) Relief to Providers
- Number of GAO-Identified Information Security Program and System Control Deficiencies at the U.S. National Institutes of Health and Associated Recommendations by Core Security Function
- Prior GAO Recommendation Related to Cybersecurity
- COVID-19-Related Reports to OSHA and OSHA Enforcement Actions, March 2020 through August 2021
- COVID-19-Related Violations and Penalties, for Most Frequently Cited Standards and the General Duty Clause, from February 2020 through August 2021
- Prior GAO Recommendations Related to Worker Safety and Health
- Coronavirus Supplemental Appropriations to the Child Care and Development Fund (CCDF)
- State Uses or Planned Uses of CARES Act and Consolidated Appropriations Act, 2021, Division M (CAA) Funds
- Examples of Vulnerable Student Groups and Barriers to Staying Engaged in School During the COVID-19 Pandemic, According to Officials from Selected States, School Year 2020-2021
- Examples of Reported Efforts to Engage K-12 Students Disconnected by COVID-19 Pandemic during the 2020-2021 School Year, in Selected States
- Prior GAO Recommendations Related to Unemployment Insurance (UI) Programs
- Summary of Emergency Rental Assistance (ERA) Laws and Amounts Appropriated, Disbursed, and Spent (dollars in billions) through Aug. 2021
- GAO’s Prior Recommendations Related to Economic Impact Payments
- SBA’s Implementation of Suggested Actions in the OIG Shuttered Venue Operators Grant Management Alert, as of Aug. 2021
- Disbursement of CARES Act Funding, as of September 15 , 2021
- Prior GAO Recommendation Related to Assistance for Fisheries Participants
- FAA Obligations and Expenditures for CARES Act Airport Grants, as of September 27, 2021
- FAA Obligations and Expenditures for the Consolidated Appropriations Act, 2021 Airport Grants, as of September 27, 2021
- FAA Obligations and Expenditures for the American Rescue Plan Act of 2021 Airport Grants, as of September 27, 2021
- Information about Notes and Warrants Provided to the Department of the Treasury for the Payroll Support Program (PSP1), Payroll Support Program Extension (PSP2), and Second Payroll Support Program Extension (PSP3), as of September 2021
- Prior GAO Recommendation Related to Payroll Support Assistance for Aviation Businesses
- Executed and Outstanding Loans for the CARES Act Loan Program for Aviation and Other Eligible Businesses as of October 1, 2021
- FTA Allocations and Transit Agency Obligations and Expenditures of COVID-19 Relief Funds for Formula Programs, as of Aug. 31, 2021
- Prior GAO Recommendations Related to the Paycheck Protection Program
- Prior GAO Recommendations Related to Single Audits
- Prior GAO Recommendations Related to Federal Contracts and Agreements for COVID-19
- COVAX Key Lines of Effort and Leadership
- Other Key Challenges Affecting COVAX Efforts to Deliver Vaccines and Steps Taken to Address These Challenges, as Reported by COVAX Partners
- Prior GAO Recommendations Related to COVID-19
- Enforcement Caseload Trends for IRS Examination, Automated Underreporter, and Collection Activities for June 2019, 2020, and 2021
- Enforcement Revenue in June 2019, 2020, and 2021 for Selected Major Enforcement Activities
- Amounts Requested by USPS under the CARES Act, as Amended, for COVID-19-Related Operating Expenses Incurred Mar. 2020–May 2021
Abbreviations
| Abbreviation | Description |
|---|---|
| ARPA | American Rescue Plan Act of 2021 |
| CDC | Centers for Disease Control and Prevention |
| COVID-19 | Coronavirus Disease 2019 |
| CSLFRF | Coronavirus State and Local Fiscal Recovery Funds |
| CTC | child tax credit |
| DOL | Department of Labor |
| FDA | Food and Drug Administration |
| FEMA | Federal Emergency Management Agency |
| FNS | Food and Nutrition Service |
| HHS | Department of Health and Human Services |
| HRSA | Health Resources and Services Administration |
| IRS | Internal Revenue Service |
| OSHA | Occupational Safety and Health Administration |
| PRF | Provider Relief Fund |
| UI | unemployment insurance |
| USDA | Department of Agriculture |
End Notes
Contacts
Jessica Farb
Managing Director, Health Care, farbj@gao.gov, (202) 512-7114Congressional Relations
A. Nicole Clowers, Managing Director, clowersa@gao.gov, (202) 512-4400
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Strategic Planning and External Liaison
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U.S. Government Accountability Office
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