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Highlights

What GAO Found

New U.S. COVID-19 cases and virus variants continue to challenge the nation. New daily reported cases increased sharply from December 21, 2021 to January 3, 2022 due primarily to the emergence of the Omicron variant. Cases during this time generally exceeded 380,000, surpassing the daily case rate reported during the emergence of the Delta variant in summer 2021, according to Centers for Disease Control and Prevention (CDC) data. Hospitalizations of individuals with confirmed COVID-19 also increased almost twofold at the end of 2021—from an average of 50,000 daily in late November 2021 to 93,000 daily.

According to CDC data, as of January 3, 2022, about 62 percent of the total U.S. population had been fully vaccinated. In late 2021, FDA expanded COVID-19 vaccine eligibility in multiple ways, including authorizing vaccines for children 5 through 11 years old, and authorizing booster shots for vaccinated individuals 12 years and older. In addition, the federal government and private businesses began requiring COVID-19 vaccination for certain employees.
Reported COVID-19 Vaccinations by Age Group in U.S., as of Jan. 3, 2022

Percentage of population

Percentage of fully vaccinated population

Fully vaccinated

Booster dose

5 years of age and older

66.1

Not applicable

12 years of age and older

71.2

Not available

18 years of age and older

72.9

37.2

65 years of age and older

87.7

58.8

Total

62.1

34.3
Source: Centers for Disease Control and Prevention (CDC). | GAO-22-105291

Note: CDC counts individuals as being fully vaccinated if they received two doses on different days of the two-dose vaccines or received one dose of the single-dose vaccine.

GAO’s COVID-19 reports have provided analyses of broad federal efforts to respond to the pandemic and support U.S. businesses and residents, resulting in 246 total recommendations for improving federal operations. Agencies have fully or partially addressed 38 percent as of December 31, 2021, fully addressing 16 percent (40 recommendations) and partially addressing another 22 percent (54 recommendations). Fully addressing GAO’s recommendations will enhance the quality and accountability of federal COVID-19 pandemic response and recovery efforts. GAO also raised four matters for congressional consideration, three of which remain open.

In this report, GAO makes five new recommendations in the areas of emergency rental assistance, nutrition assistance, and tax relief for businesses. GAO is also designating the Department of Health and Human Services’ (HHS) leadership and coordination of a range of public health emergencies as high risk. This designation is in keeping with long-standing efforts to identify federal programs needing transformation, and to help ensure sustained executive branch and congressional attention so the nation is prepared for future emergencies.

Emergency Rental Assistance

As of November 30, 2021, the Department of the Treasury had disbursed nearly $38 billion of the $46.55 billion it was appropriated for Emergency Rental Assistance (ERA) programs. These programs provide funds to grantees to administer programs to assist eligible renter households that are unable to pay rent, utilities, or other expenses due, directly or indirectly, to the COVID-19 pandemic. Treasury disburses ERA funds to grantees, such as states, local governments, and tribal governments, which make payments to landlords, households, and others eligible to receive the funds.

Treasury has not yet designed processes to identify and recover overpayments made by grantees, such as post-payment reviews or recovery audits. Such reviews could verify the eligibility for and accuracy of ERA payments. Without a process for conducting effective post-payment reviews or recovery audits for the ERA programs, Treasury’s ability to consistently identify and recover overpayments made by grantees may be delayed or impossible.

The Single Audit Act establishes requirements for audits of states, local governments, and other nonfederal entities that receive funding from federal awards (e.g., grants) when their expenditures meet a certain dollar threshold. The Office of Management and Budget (OMB) is responsible for developing government-wide guidance for performing audits to comply with the act. OMB guidance includes issuing an annual Compliance Supplement—a tool to help auditors identify compliance requirements that could have a direct and material effect on major programs. Auditors who conduct single audits follow guidance in the Compliance Supplement and agency guidance specific to their programs.

In its 2021 Compliance Supplement, OMB listed the ERA programs as “higher risk” programs, but did not include guidance for auditing grantee compliance with ERA. Without this guidance, auditors might not consistently and effectively identify deficiencies in grantees’ compliance with the requirements of the programs, limiting Treasury’s ability to identify and mitigate risks, including risks to payment integrity.

GAO recommends that Treasury design and implement processes, such as post-payment reviews or recovery audits, to help ensure timely identification and recovery of overpayments made by grantees to households, landlords, or utility providers in the ERA programs. Treasury agreed with this recommendation and stated that it is working to establish post-payment reviews and recovery audit activities.

GAO also recommends that OMB, in consultation with Treasury, issue guidance now or in the near future on the ERA programs in OMB’s Compliance Supplement for single audits to help ensure that auditors consistently and timely identify deficiencies in grantees’ compliance with the programs’ requirements. OMB neither agreed nor disagreed with this recommendation.

Nutrition Assistance

The Food and Nutrition Service (FNS), within the Department of Agriculture, administers multiple federal nutrition assistance programs, including the Pandemic Electronic Benefits Transfer (Pandemic EBT) program—which provides food assistance for children attending schools closed due to COVID-19—and the Supplemental Nutrition Assistance Program, among others.
COVID-19 Funding and Expenditures for Selected Federal Nutrition Assistance Programs as of Nov. 30, 2021

Program

Description

Total COVID-19 funding ($)

COVID-19 expenditures as of Nov. 30, 2021 ($)

SNAP

Provides low-income individuals and households with benefits to purchase allowed food items and achieve a more nutritious diet.

16.8 billion

15.6 billion

Indefinite appropriation

15.0 billion

Pandemic EBT

Provides households with children who would have received free or reduced-price school meals if not for school closures due to COVID-19, as well as eligible children in childcare, with benefits to purchase food.

Indefinite appropriation

42.4 billion

WIC

Provides eligible low-income women, infants, and children up to age 5 who are at nutrition risk with nutritious foods to supplement diets, information on healthy eating, and referrals to health care.

1.4 billion

710.5 million

TEFAP

Provides low-income individuals with groceries through food banks.

1.25 billion

1.1 billion
Legend: Pandemic EBT = Pandemic Electronic Benefits Transfer; SNAP = Supplemental Nutrition Assistance Program; TEFAP = the Emergency Food Assistance Program; WIC = Special Supplemental Nutrition Program for Women, Infants, and Children.
Source: GAO analysis of relevant provisions of the Families First Coronavirus Response Act; the CARES Act; the Consolidated Appropriations Act, 2021; and the American Rescue Plan Act of 2021 as well as information from the Food and Nutrition Service (FNS), within the Department of Agriculture. | GAO-22-105291

Note: Amounts shown reflect amounts appropriated specifically for COVID-19 response and relief and do not include annual appropriations. SNAP received both specific amounts of funding, as well as an indefinite appropriation—an appropriation that, at the time of enactment, is for an unspecified amount—for certain purposes, including a SNAP benefit increase of 15 percent through September 2021.

FNS does not have a comprehensive strategy for how its nutrition assistance programs should respond during emergencies. As part of this, FNS’s pandemic plans are outdated, and FNS efforts to identify and incorporate lessons learned from COVID-19 into its nutrition programs are incomplete. Developing a strategy for how its programs should respond to emergencies would benefit FNS’s response to both the current pandemic and future emergencies. Such a strategy could help FNS ensure that individuals and households maintain food security in times of heightened need and that FNS does not miss opportunities to coordinate with vendors across the country.

FNS has also not provided sufficient assistance to state and local agencies to facilitate their efforts to obtain reliable and comprehensive eligibility data for the Pandemic EBT program. According to FNS officials, state agencies reported various challenges collecting such data, including relying on manual tracking of thousands of participants. Reliable and comprehensive data can help state Supplemental Nutrition Assistance Program agencies ensure they have issued Pandemic EBT benefits to all eligible students in the correct benefit amounts.

GAO recommends that the Department of Agriculture ensure that FNS (1) develops a comprehensive strategy for the agency’s nutrition assistance programs to respond to emergencies that includes lessons learned during the COVID-19 pandemic and a mechanism to periodically review and update the strategy and (2) shares timely information with states and other stakeholders during development of the strategy to help inform their ongoing response to COVID-19.

GAO also recommends that the Department of Agriculture ensure that FNS further assists state and local agencies in their efforts to obtain reliable and comprehensive eligibility data for the Pandemic EBT program in order to determine eligibility and benefits amounts accurately. The Department of Agriculture agreed with both recommendations.

Tax Relief for Businesses

To provide liquidity to businesses during the COVID-19 pandemic, the CARES Act and other COVID-19 relief laws included tax measures to help businesses by reducing certain tax obligations, which, in some cases, led to cash refunds. These tax measures included expanded carrybacks for net operating losses—that is, when a taxpayer’s allowable deductions exceed the gross income for a tax year—and the acceleration of alternative minimum tax (AMT) credit refunds. According to officials from the Internal Revenue Service (IRS), the CARES Act changes contributed to the agency receiving 276 percent more filings for carryback refunds—which include applications for tentative refunds for net operating loss carrybacks and AMT credit refunds—in fiscal year 2021 than in fiscal year 2020.

IRS has been unable to process this backlog consistent with its statutory time frames for processing applications for tentative refunds, which businesses submit through IRS Forms 1045 and 1139. The Internal Revenue Code and the CARES Act generally require IRS to issue certain refunds within a 90-day period. IRS data show that the agency started to miss the 90-day statutory requirement for applications in September 2020 and missed it throughout 2021. As of November 2021, the average time for IRS to process all carryback refunds was 165 days (see figure).

Average Monthly Processing Times for Carryback Applications and Claims Filed with the Internal Revenue Service (IRS), Apr. 2020–Nov. 2021

Note: These data include all carryback cases, including those filed as “claims” on other IRS forms and those filed as “applications” on Forms 1045 and 1139. Forms 1045 are represented in the individual line and Forms 1139 are represented in the business line. Forms 1139 may also contain refund claims for the alternative minimum tax refund. IRS officials said the reported times do not include the additional time—up to 2 weeks—it may take for IRS to finalize production and distribute the refund to the taxpayer. The figure does not represent all of the work that IRS did throughout the year, but focuses on actions specific to the processing times for carryback cases. The Consolidated Appropriations Act, 2021 and American Rescue Plan Act of 2021 were also enacted in December 2020 and March 2021 respectively, and contained provisions that also required IRS action.

While IRS took some remedial actions, it did not have effective preventative control activities or mitigation plans in place to detect or address growing processing times for tentative refunds submitted on IRS Forms 1139 and 1045, such as an average processing time threshold to trigger activities to avoid missing refund deadlines. As such, IRS did not take actions to reduce the carryback backlog until April 2021—7 months after the agency began missing its statutory requirement.

Until effective preventative control activities and mitigation plans are put in place, IRS remains at risk of continuing to exceed its 90-day statutory requirement to issue tentative refunds for net operating loss carrybacks and AMT credit refunds. Failure to meet processing deadlines not only causes some taxpayers to face delays in receiving their refunds, but also increases the cost to the federal government in terms of interest paid on such refunds. According to IRS data for fiscal year 2021, these interest payments amounted to approximately $61 million on all carrybacks, of which applications for tentative refund made up roughly 80 percent of all carryback interest payments for the fiscal year.

GAO recommends that IRS establish mitigation plans—including indicators, such as a threshold to initiate mitigation activities—to timely address future challenges to processing times for applications for tentative refunds on Forms 1045 and 1139 within the 90-day statutory requirement. IRS neither agreed nor disagreed with this recommendation, but said that it will take the recommendation into consideration as it continues to make improvements to taxpayer services.

HHS COVID-19 Funding

HHS received approximately $484 billion in COVID-19 relief appropriations from the six COVID-19 relief laws. These 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. Of the $484 billion appropriated, HHS reported that it had obligated about $387 billion and expended about $226 billion—about 80 percent and 47 percent, respectively, as of November 30, 2021.

GAO previously recommended that HHS provide projected time frames for its spending of the remainder of its COVID-19 relief funds in the spend plans HHS submits to Congress. HHS partially agreed with the recommendation, but stated that the department would not be able to provide specific time frames for all relief funds as it needed to remain flexible in responding to incoming requests. Providing projected time frames would not affect HHS’s ability to be flexible in its spend plans, as these plans are not binding to the agency and can be revised. GAO will continue to examine HHS’s oversight of COVID-19 relief funds.

High-Risk Designation: HHS’s Leadership and Coordination of Public Health Emergencies

For more than a decade, GAO has reported on HHS’s execution of its lead role in preparing for, and responding to, a range of public health emergencies and has found persistent deficiencies in its ability to perform this role. These deficiencies have hindered the nation’s response to the current COVID-19 pandemic and a variety of past threats, including other infectious diseases—such as the H1N1 influenza pandemic, Zika, and Ebola—and extreme weather events, such as hurricanes.

As devastating as the COVID-19 pandemic has been, more frequent extreme weather events, new viruses, and bad actors who threaten to cause intentional harm loom, making the deficiencies GAO has identified particularly concerning. Not being sufficiently prepared for a range of public health emergencies can also negatively affect the time and resources needed to achieve full recovery.

While HHS has taken some actions to address the 115 recommendations GAO has made related to its leadership and coordination of public health emergencies since fiscal year 2007, 72 remain open. For example, HHS has not addressed our September 2020 recommendation to work with the Federal Emergency Management Agency to develop plans to mitigate supply chain shortages for the remainder of the pandemic, thus contributing to the shortage of such supplies as of January 2022. Also, while HHS began to procure additional tests in the latter part of 2021 and into 2022, and the White House recently appointed a new testing coordinator, HHS had not issued a comprehensive and publicly available testing strategy, which we recommend it do in January 2021. Such a strategy is needed to ensure more timely proactive action in the future and the efficient use of billions of dollars in unobligated funds.

GAO’s prior work has identified persistent deficiencies in HHS’s preparedness and response efforts in several areas, including (1) establishing clear roles and responsibilities for the wide range of key federal, state, local, tribal, territorial, and nongovernmental partners; (2) collecting and analyzing complete and consistent data to inform decision-making—including any necessary midcourse changes—as well as future preparedness; (3) providing clear and consistent communication to key partners and the public; (4) establishing transparency and accountability to help ensure program integrity and build public trust; and (5) understanding key partners’ capabilities and limitations.

GAO is adding this area to the high-risk list to help ensure the executive branch and Congress pay sustained attention in order to make additional progress in implementing GAO’s open recommendations and strengthen HHS’s leadership and coordination role for future public health emergencies.

Why GAO Did This Study

At the beginning of January 2022, the U.S. had about 56 million reported cases of COVID-19 and over 830,000 reported deaths, according to CDC. The country also experiences lingering economic repercussions related to the pandemic, including rising inflation and ongoing supply chain disruptions.

Six relief laws, including the CARES Act, have been enacted to address the public health and economic threats posed by COVID-19. As of November 30, 2021 (the most recent date for which data were available), the federal government had obligated a total of $4 trillion and expended $3.5 trillion, 88 and 77 percent, respectively, of the total COVID-19 relief funds provided by these six laws.

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, GAO’s ninth, examines the federal government’s continued efforts to respond to, and recover from, the COVID-19 pandemic.

GAO reviewed federal data and documents. GAO also interviewed federal and state officials and other stakeholders.

What GAO Recommends

GAO is making five 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 five recommendations to federal agencies:
NumberAgencyRecommendation
1Department of the Treasury

The Secretary of the Treasury should design and implement processes, such as post-payment reviews or recovery audits, to help ensure timely identification and recovery of overpayments made by grantees to households, landlords, or utility providers in the Emergency Rental Assistance programs. See the Emergency Rental Assistance enclosure. (Recommendation 1)
2Executive Office of the President : Office of Management and Budget

The Director of the Office of Management and Budget, in consultation with the Secretary of the Treasury, should issue guidance now or in the near future on the Emergency Rental Assistance programs in the Office of Management and Budget’s Compliance Supplement for single audits to help ensure that auditors consistently and timely identify deficiencies in grantees’ compliance with the programs’ requirements. See the Emergency Rental Assistance enclosure. (Recommendation 2)
3Department of Agriculture : Office of the Secretary : Food, Nutrition and Consumer Services : Food and Nutrition Service

The Secretary of Agriculture should ensure that the Administrator of the Food and Nutrition Service (1) develops a comprehensive strategy for the agency’s nutrition assistance programs to respond to emergencies that includes lessons learned during the COVID-19 pandemic and a mechanism to periodically review and update the strategy, and (2) shares timely information with states and other stakeholders during development of the strategy to help inform their ongoing response to COVID-19. See the Nutrition Assistance enclosure. (Recommendation 3)
4Department of Agriculture : Office of the Secretary : Food, Nutrition and Consumer Services : Food and Nutrition Service

The Secretary of Agriculture should ensure that the Administrator of the Food and Nutrition Service further assists state and local agencies in their efforts to obtain reliable and comprehensive eligibility data for the Pandemic Electronic Benefits Transfer program in order to determine eligibility and benefits amounts accurately. See the Nutrition Assistance enclosure. (Recommendation 4)
5Department of the Treasury : Internal Revenue Service

The Commissioner of Internal Revenue should establish mitigation plans—including indicators, such as a threshold to initiate mitigation activities—to timely address any future challenges to processing applications for tentative refund on Forms 1045 and 1139 within the 90-day statutory requirement. See the Tax Relief for Businesses enclosure. (Recommendation 5)
View recommendation(s) status

Introduction 


Congressional Committees

A sharp increase in the number of new Coronavirus Disease 2019 (COVID-19) cases continues to challenge the nation’s ongoing response and recovery efforts. Between December 21, 2021, and January 3, 2022, new reported U.S. COVID-19 cases generally exceeded 380,000 per day, according to the Centers for Disease Control and Prevention (CDC)—nearly four times the average number of cases in late November 2021. Hospitalizations of patients with confirmed COVID-19 have also increased. U.S. hospitals reported an average of more than 93,000 new patients admitted daily for the 7-day period from December 28, 2021, to January 3, 2022, an increase from the average of nearly 50,000 individuals admitted daily during a 7-day period in late November 2021, according to data from the Department of Health and Human Services (HHS).[1]

As of January 3, 2022, more than 56 million cases of COVID-19 have been reported in the U.S. since COVID-19 was first identified in January 2020. According to CDC estimates as of January 1, 2022, the virus’s Omicron variant was the dominant strain circulating in the U.S.[2] As of the week ending January 1, 2022, over 830,000 deaths attributed to COVID-19 have been reported in the U.S.

Much of the nation’s recent response efforts have focused on mitigating COVID-19’s health risks by making COVID-19 vaccines more widely available to the U.S. population, and expanding access to testing. The federal government has expanded vaccination eligibility by authorizing vaccines for children aged 5 and up. In addition, the CDC recently authorized COVID-19 booster shots for individuals aged 12 and up. As of January 3, 2022, about 62 percent of the total U.S. population—over 206 million individuals—had been fully vaccinated.[3] In addition, nearly seven million children aged 5 to 11 have received at least one COVID-19 vaccine dose since October 29, 2021, when the Food and Drug Administration (FDA) authorized the Pfizer vaccine for this age group.[4]

The pandemic has also had far reaching effects on the U.S. economy. The U.S. has continued to experience lower levels of employment relative to the prepandemic period and, more recently, rising U.S. consumer prices and widespread supply chain disruptions in multiple sectors.[5] These disruptions, which have occurred amid growing demand, have resulted in fluctuating shortages for some critical products, such as computer chips—which are key inputs into many consumer goods—and ongoing shortages of medical supplies, including testing material and personal protective equipment for the COVID-19 response.[6]

In response to supply chain disruptions, in June 2021, the White House issued a report that intends to provide a framework for closing supply chain vulnerabilities.[7] In addition, in September 2021, HHS—with the input of federal partners—released its National Strategy for a Resilient Public Health Supply Chain, as called for in Executive Order 14001.[8] This strategy makes recommendations to support designing, building, and sustaining a resilient public health supply chain, including investing in domestic manufacturing of personal protective equipment and other medical supplies, building a more capable and robust Strategic National Stockpile, and maintaining end-to-end public health supply chain visibility.[9]

Since March 2020, Congress has provided about $4.6 trillion through the CARES Act and other laws that were enacted to fund federal efforts to help the nation respond to and recover from the COVID-19 pandemic (COVID-19 relief laws).[10] Ongoing implementation of the provisions in the COVID-19 relief laws, as well as 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 additional potential challenges while it continues to respond to the evolving COVID-19 pandemic. For example, the current annual flu season could place further burdens on the already overtaxed health care, medical supply, and emergency management sectors.[11]

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.[12] This comprehensive report is our ninth recurring oversight report in response to this provision.[13]

This report includes 16 enclosures addressing a range of federal programs and activities across the government concerning public health and the economy (see appendix I). In these enclosures we are making five new recommendations to federal agencies in the areas of emergency rental assistance payments, nutrition assistance programs, and tax relief for businesses. Figure 1 lists these enclosures by topic area and highlights those with new recommendations. In addition, in this report, we are adding HHS’s leadership and coordination of a range of public health emergencies to GAO’s High-Risk List (see appendix II).

Figure 1: Report Enclosures by Topic Area

In addition to the eight previously issued recurring oversight reports, as of January 13, 2022, we have issued 130 targeted COVID-19-related reports, testimonies, and science and technology spotlights in areas such as behavioral health, veterans nursing homes, federal debt management, and vaccine development and distribution. We also have reviews ongoing in other areas. See appendix III for highlights pages from our recently issued work on COVID-19 and appendix IV for a list of our ongoing work related to COVID-19.

Across our body of COVID-19-related reports, we have made 246 recommendations to federal agencies and have raised four matters for congressional consideration to improve the federal government’s response efforts. As of December 31, 2021, agencies had fully or partially addressed 94 of our COVID-19-related recommendations (38 percent); of these, agencies had fully addressed 40 and partially addressed 54 of these recommendations.[14] For example, in response to one of our recommendations, in December 2021 FDA issued draft guidance for industry and FDA staff to plan for the transition of medical device emergency use authorizations issued during the COVID-19 pandemic. The guidance outlines both a timeline for advance notice of termination of emergency use authorization declarations and recommendations for manufacturers to prepare marketing submissions for clearance or approval of devices when they wish to continue distributing devices previously allowed under emergency use authorizations. FDA is seeking comment from stakeholders on the draft guidance through March 23, 2022.[15]

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.

Figure 2: Status of Prior GAO Recommendations from COVID-19-Related Work, by Federal Department or Agency, as of Dec. 31, 2021

Note: For this figure, recommendations made to the Internal Revenue Service are counted toward the total of recommendations made to the Department of the Treasury.

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 and obtaining information from federal and state officials and related stakeholders, such as servicers of federal student loans and organizations that have implemented nutrition assistance programs during the pandemic. We also examined federal laws, agency documents, and guidance, among other information. In each enclosure, we include a summary of the methodology specific to the work conducted.

We conducted this performance audit from June 2021 to January 2022 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 of the COVID-19 Pandemic

The COVID-19 pandemic continues to have devastating effects on public health and lingering effects on the economy. As of January 3, 2022, the U.S. had more than 56 million reported cases of COVID-19, according to CDC.[16] CDC and HHS data show that, at the end of December 2021 and into January 2022, the number of new reported COVID-19 cases and hospitalizations for confirmed COVID-19 were increasing. As of the week ending January 1, 2022, the U.S. had more than 830,000 reported deaths attributed to COVID-19.[17] The country also continues to experience lingering economic effects. While the labor market has shown signs of improvement in recent months, the employment-to-population ratio—which measures the share of the population employed—indicates that labor market conditions remain worse than in the prepandemic period, likely partially influenced by health concerns or family demands, among other factors.

The number of new reported daily COVID-19 cases in the U.S. began increasing at the end of November 2021, when the Delta variant of the virus was the dominant strain, following a decrease in the number of daily cases from a September 2021 peak. Between December 21, 2021 and January 3, 2022, new reported COVID-19 cases averaged about 380,000 per day—nearly double the average during the same period in 2020-2021.[18] See figure 3 for 7-day U.S. case averages since March 2020. Between December 18 and December 31, 2021, reported new COVID-19 cases per day, on average, for 52 jurisdictions, increased in 49 jurisdictions, held steady in 2 jurisdictions, and decreased in 1 jurisdiction.[19] The rise in cases in December 2021 coincides with the Omicron variant becoming the dominant strain, according to CDC estimates.

Figure 3: 7-Day Averages of Reported COVID-19 Cases in the U.S., Mar. 1, 2020–Jan. 3, 2022

Note: COVID-19 cases reported from states and territories include confirmed and probable cases. Beginning April 14, 2020, states could include probable as well as confirmed COVID-19 cases in their reports to CDC. Previously, counts included only confirmed cases. According to CDC, the actual number of cases is unknown for a variety of reasons, including that people who have been infected may not have been tested or may not have sought medical care. See CDC, “COVID Data Tracker: Trends in Number of COVID-19 Cases and Deaths in the U.S. Reported to CDC, by State/Territory,” accessed January 10, 2022, https://covid.cdc.gov/covid-data-tracker/#trends_dailycases

HHS data show that, at the end of December 2021 and into January 2022, COVID-19 hospitalizations were again increasing, after decreases in September and October 2021 (see figure 4).[20] During this same period, a record proportion of emergency department visits were related to COVID-19—nearly 12 percent of patient visits had an accompanying COVID-19 diagnosis, according to CDC data.[21] This increase in hospitalizations and emergency department utilization has strained health care systems, requiring multiple state governments to declare states of emergency.[22]

Figure 4: Reported Daily Hospitalizations and 7-Day Averages of Patients with Confirmed COVID-19 in the U.S., Aug. 1, 2020–Jan. 6, 2022

Note: We included only hospitalizations with confirmed COVID-19 cases (rather than confirmed and suspected COVID-19) to be consistent with CDC’s COVID data tracker page on hospitalizations. August 2020 was the first full month following HHS’s transition to its current hospital data collection process. We calculated the 7-day average as the average number of the adult and pediatric hospitalizations on a given date and each of the six previous days. See HHS, “COVID-19 Reported Patient Impact and Hospital Capacity by State Timeseries,” accessed January 6, 2022, https://healthdata.gov/Hospital/COVID-19-Reported-Patient-Impact-and-Hospital-Capa/g62h-syeh.

According to provisional 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. From early February 2020 through December 18, 2021, it was estimated that at least 748,000 more deaths occurred from COVID-19 and other causes than would normally be expected.[23]

As case numbers and hospitalizations have risen again, the federal government has put more resources into increasing the availability of COVID-19 tests. Since our last comprehensive report issued in October 2021, HHS, in partnership with the Department of Defense, has invested more than half a billion dollars from the American Rescue Plan Act of 2021 (ARPA) to boost manufacturing of key products needed to increase the domestic COVID-19 testing supply and make tests more widely available. These investments include the National Institutes of Health’s investment of $70 million to help bring more high-quality, at-home tests onto the U.S. market, in coordination with FDA.[24] In October 2021, the White House announced a plan to purchase $1 billion worth of rapid, at-home COVID-19 tests to address ongoing shortages and accelerate test production by the end of 2021. In December 2021 and January 2022, the White House announced plans to purchase and distribute 1 billion at-home, rapid tests for free to Americans as part of a larger effort to respond to the Omicron variant, with initial delivery starting in January 2022.[25] Increasing testing is a positive step, though, as we have previously reported, improved test result reporting is needed, especially for rapid tests, for effective surveillance.[26]

We previously reported on the inadequacy of federal efforts to ensure sufficient testing supplies and sound testing strategies dating back to September 2020, when we identified challenges with testing supply availability and recommended that HHS develop plans outlining specific actions the federal government could take to help mitigate remaining shortages of testing and other medical supplies for the remainder of the pandemic. In January 2021, we also recommended that HHS develop and make publicly available a comprehensive national COVID-19 testing strategy. HHS disagreed with the first recommendation, noting the work that had been done to manage the medical supply chain and increase supply availability. We maintain that taking the recommended actions could, among other things, help entities better plan for ongoing and future supply needs. Although HHS agreed with the second recommendation, it expressed concern about the potential burden of developing an efficient testing strategy. In May 2021, HHS told us that such a document was forthcoming and would speak to both the country’s short-term COVID-19 needs and the long-term needs associated with the country’s broader biopreparedness. However, to date, HHS has not provided this document. We maintain that developing an effective national testing strategy—and making it publicly available—remains warranted, especially given that, of the $58 billion HHS reported that it allocated for testing-related activities—such as procuring and distributing testing supplies, expanding community-based testing programs, and providing testing in high-risk and underserved populations—HHS had only spent about $16 billion, as of November 30, 2021 (the most recent date for which data was available), and $23 billion remains unobligated.

In addition to increasing testing to provide valuable information for individual and government decision-making, providing the public with safe and effective vaccines to protect people from becoming critically ill with COVID-19 is crucial to mitigating the public health and economic impacts of the virus and ending the pandemic. As of January 3, 2022, over 511 million doses of COVID-19 vaccine had been administered in the U.S., according to CDC.

As of January 7, 2022, three COVID-19 vaccines—manufactured by Pfizer, Janssen, and Moderna—were available in the U.S. The Pfizer vaccine is licensed by FDA for individuals aged 16 and older and is also available for individuals aged 5 through 15 years under an emergency use authorization.[27] The Janssen and Moderna vaccines are authorized for individuals aged 18 and older.[28] FDA has also authorized booster doses for all three available COVID-19 vaccines. Specifically, as of January 3, 2022, FDA had authorized a booster dose of the Pfizer vaccine for individuals aged 12 and older and booster doses of the Janssen and Moderna vaccines for individuals aged 18 and older.[29] See table 1 for U.S. COVID-19 vaccinations by age group. Additionally, FDA authorized two new COVID-19 antiviral drugs in December 2021.[30]
Table 1: Reported COVID-19 Vaccinations by Age Group in the U.S., as of Jan. 3, 2022

Percentage of population

Percentage of fully vaccinated population

Fully vaccinateda

Booster doseb

5 years of age and older

66.1

Not applicable

12 years of age and older

71.2

Not availablec

18 years of age and older

72.9

37.2

65 years of age and older

87.7

58.8

Total

62.1

34.3c
Source: Centers for Disease Control and Prevention (CDC). | GAO-22-105291

Note: See CDC, “COVID Data Tracker: COVID-19 Vaccinations in the United States,” accessed January 10, 2022, https://covid.cdc.gov/covid-data-tracker/#vaccinations_vacc-total-admin-rate-total.
aAs of January 8, 2022, CDC counts individuals as being fully vaccinated if they received two doses on different days (regardless of time interval) of the two-dose vaccines or received one dose of the single-dose vaccine. FDA authorized Pfizer’s two-dose COVID-19 vaccine for emergency use for individuals aged 16 and older on December 11, 2020. FDA amended the emergency use authorization to authorize use for individuals aged 12 to 15 on May 10, 2021, and to authorize a lower dose for individuals aged 5 to 11 on October 29, 2021.
bThe count of people who received a booster dose includes anyone who is fully vaccinated and has received a third dose of the two-dose COVID-19 vaccine or a second dose of the one-dose vaccine since August 13, 2021.
cOn December 9, 2021 and January 3, 2022, FDA amended the Pfizer emergency use authorization to allow booster doses for individuals 16 and 17 years of age, and for individuals aged 12 to 15, respectively. CDC recommended Pfizer booster doses for those aged 12 to 15 on January 5, 2022; data on the percentage of the population under 18 years of age who received a booster dose is therefore not available as this population was not eligible as of January 3, 2022.

The federal government has also issued requirements for vaccinating certain populations against COVID-19. For example, on September 9, 2021, the White House issued executive orders requiring COVID-19 vaccination for all federal government executive branch employees and federal contractors.[31] On November 5, 2021, the Department of Labor’s Occupational Safety and Health Administration published an emergency temporary standard that requires employers with 100 or more employees to develop, implement, and enforce a mandatory COVID-19 vaccination policy, with an exception for employers that instead create a system requiring covered employees who are not fully vaccinated to provide proof of regular testing for COVID-19 and, in certain circumstances, wear a face covering.[32] Since the emergency temporary standard was issued, it has faced a number of legal challenges, including, most recently, a stay issued by the U.S. Supreme Court.[33] State and local governments and individual businesses have independently implemented employee vaccine requirements. For example, certain school districts and airlines have required employee vaccination against COVID-19 as a condition of continued employment.

Although the percentage of the population vaccinated against COVID-19 has steadily increased, COVID-19 vaccination rates across the U.S. have varied. See figure 5 for the percentage of the population that is fully vaccinated by jurisdiction, according to CDC data.

Figure 5: Percent of People Fully Vaccinated by Jurisdiction, as Reported to the CDC, as of Jan. 3, 2022

Note: Data are for the number of fully vaccinated residents of a jurisdiction as a percent of the total population of the jurisdiction. CDC determines the number of people who are fully vaccinated based on vaccine dose information (e.g., dose number, dose manufacturer) that state, territorial, tribal, and local public health agencies and federal entities report to CDC. People are “fully vaccinated” if they received two doses on different days (regardless of time interval) of the two-dose vaccine or received one dose of a single-dose vaccine, according to CDC as of January 8, 2022. When the vaccine manufacturer is not reported, the recipient is considered fully vaccinated with two doses. See CDC, “COVID Data Tracker: COVID-19 Vaccinations in the United States,” accessed January 10, 2022, https://covid.cdc.gov/covid-data-tracker/#vaccinations_vacc-people-fully-percent-total.

HHS is the federal agency responsible for leading and coordinating all matters related to federal preparedness for, and response to, medical and public health emergencies. HHS and its component agencies, such as CDC, have coordinated with federal, state, local, tribal, and territorial governments, as well as public and private partners, to deliver services to the American people to aid in response and recovery. These COVID-19-related services include developing diagnostic tests; collecting and reporting of testing and other COVID-19 indicator data; developing, manufacturing, and distributing vaccines and therapeutics to prevent and treat COVID-19; and overseeing the deployment of the Strategic National Stockpile, among others.

However, HHS’s overall response to the COVID-19 pandemic has underscored longstanding concerns we have raised about its ability to execute its role leading federal public health and medical preparedness for, and response to, a range of public health emergencies, including extreme weather events, infectious disease outbreaks, pandemics, and intentional acts.[34] Throughout the COVID-19 pandemic, the Federal Emergency Management Agency—within the Department of Homeland Security—has provided significant support to HHS, including addressing medical supply shortages and assisting in vaccine distribution efforts.[35]

In addition to its devastating effects on public health, the pandemic presents lingering economic challenges. For example, indicators of inflation have generally increased in recent months, suggesting that inflation could be somewhat higher, and for somewhat longer, than previously expected. However, certain areas of the economy saw some improvement in recent months based on data available in January 2022. For example, the labor market has shown signs of improvement in recent months. Weekly initial claims for regular unemployment insurance benefits were generally similar to prepandemic levels in November and December 2021. Moreover, in December 2021 the employment-to-population ratio, which measures the share of the population employed, was 59.5 percent—an increase from the previous month. However, this ratio was 1.7 percentage points lower than in the prepandemic period, indicating that labor market conditions remain worse than in the prepandemic period (see fig. 6).[36] See the Economic Indicators enclosure in appendix I for more information.

Figure 6: Employment-to-Population Ratio, January 2019–December 2021

Although the effects on labor have been present since the start of the pandemic, the U.S. has faced more recent challenges to the economy, such as disruptions in global supply chains as demand for goods has increased rapidly during the economic recovery, which has contributed to higher inflation. The extent to which higher inflation will persist for a longer period of time will depend on many factors, which remain uncertain, such as how quickly capacity increases help alleviate global supply chain issues or whether changes in the severity of the pandemic influence consumer demand across the economy.

The federal government’s response to these evolving economic challenges continue. In addition to the supply chain plans released by the White House and HHS, the administration announced on October 13, 2021, that business, port, and union leaders committed to moving towards 24 hours a day, 7 days a week operations at the California Ports of Los Angeles and Long Beach—the points of entry for 40 percent of containers with goods coming into the U.S.—to help reduce existing bottlenecks.[37] More recently, the Infrastructure Investment and Jobs Act—enacted November 2021—includes funding to improve infrastructure at coastal ports, inland ports and waterways, and land ports of entry.[38]

Federal COVID-19 Funding and Spending

As of November 30, 2021, about $4.6 trillion in relief funds had been provided to fund response and recovery efforts for—as well as to mitigate the public health, economic, and homeland security effects of—the COVID-19 pandemic from the six COVID-19 relief laws.[39] As of November 30, 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 $4.0 trillion and expended $3.5 trillion of those funds, as reported by federal agencies to the Department of the Treasury’s Governmentwide Treasury Account Symbol Adjusted Trial Balance System.[40] Obligations and expenditures relative to the amounts provided through COVID-19 relief laws have varied over time, as new relief laws have provided additional relief funds and as the federal government has obligated and expended those funds (see fig. 7).

Figure 7: Percentage of COVID-19 Relief Funding Obligated and Expended, July 31, 2020–Nov. 30, 2021

Notes: Funding and spending amounts shown are based on trial balance information reported to the Department of the Treasury’s Governmentwide Treasury Account Symbol Adjusted Trial Balance System. The percentages shown represent the portions of funds available as of each date shown that had been obligated and expended. Data as of October 31, 2021 was not available because agencies are not required to report October trial balance information. Funding has generally increased over time and could increase in the future for programs with indefinite appropriations (i.e., appropriations that, at the time of enactment, are for an unspecified amount). In our prior reports, we reported appropriations based on appropriation warrant information provided by Treasury. The total amount we are reporting as of November 30, 2021 decreased from the amount we reported as of August 31, 2021 mostly due to the return of unused indefinite appropriations to the Treasury at the end of fiscal year 2021 by the Internal Revenue Service and the Department of Labor. To account for this and other actions affecting funding amounts for each activity, we used total budgetary resources reported to Treasury’s Governmentwide Treasury Account Symbol Adjusted Trial Balance System for this report. Total budgetary resources, as opposed to the previously reported appropriation warrant information provided by Treasury, reflect appropriations, as well as transfers, adjustments, recoveries, rescissions, and returns of unused indefinite appropriations at the end of fiscal year 2021.
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 reflected in the percentages shown include some estimates, such as estimated subsidy costs for direct loans and loan guarantees. Increased spending in Medicaid and Medicare is not accounted for in the funding provided by the COVID-19 relief laws. Under Office of Management and Budget guidance, federal agencies were not directed to report COVID-19 related obligations and expenditures until July 2020.

The nine major spending areas shown in table 2 represent $3.7 trillion, or 82 percent, of the total amounts provided. For these nine spending areas, agencies reported obligations totaling $3.4 trillion and expenditures totaling $3.1 trillion as of November 30, 2021. Table 2 provides additional details on budgetary resources, obligations, and expenditures of government-wide COVID-19 relief funds, including the nine major spending areas as of November 30, 2021.
Table 2: COVID-19 Relief Funding and Spending as of Nov. 30, 2021

Major spending area

Total budgetary resources
($ in billions)

Total obligations
($ in billions)

Total expenditures
($ in billions)

Economic Impact Payments
(Department of the Treasury)

871.5

848.5

848.5

Business Loan Programs
(Small Business Administration)

838.0

828.3

827.6a

Unemployment Insurance
(Department of Labor)

724.1

677.0

670.9

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

350.0

245.2

245.2

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

345.7

273.0

194.5

Education Stabilization Fund
(Department of Education)

278.1

272.4

73.4

Coronavirus Relief Fund
(Department of the Treasury)

150.0

150.0

149.9

Disaster Relief Fund
(Department of Homeland Security)b

97.0

72.1

19.8

Supplemental Nutrition Assistance Programs
(Department of Agriculture)

91.8

75.8

74.4

Other areasc

825.5

584.5

437.3

Totald

4,571.7

4,026.8

3,541.5
Source: GAO analysis of data from the Department of the Treasury and applicable agencies. | GAO-22-105291

Note: Total budgetary resources, obligations, and expenditure data shown for the major spending areas are based on data reported by applicable agencies to Treasury’s Governmentwide Treasury Account Symbol Adjusted Trial Balance System. Each spending area may include multiple programs. Total budgetary resources reflect the amount of funding made available for the COVID-19 response 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. In our October 2021 report, we reported that, as of August 31, 2021, $4.8 trillion in COVID-19 relief funds were provided by the six relief laws based on appropriation warrant information provided by Treasury. The total amount we are reporting as of November 30, 2021 decreased from the amount we reported as of August 31, 2021 mostly due to the return of unused indefinite appropriations to the Treasury at the end of fiscal year 2021 by the Internal Revenue Service and the Department of Labor. To account for this and other actions affecting funding amounts for each activity, we used total budgetary resources reported to Treasury’s Governmentwide Treasury Account Symbol Adjusted Trial Balance System for this report. Total budgetary resources, as opposed to the previously reported appropriation warrant information provided by Treasury, reflect appropriations, as well as transfers, adjustments, recoveries, rescissions, and returns of unused indefinite appropriations at the end of fiscal year 2021.
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.
aThe 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).
bFunding provided to the Disaster Relief Fund is 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 funding other than what was provided in the COVID-19 relief laws. Further, Treasury’s methodology includes all obligations and expenditures based on funding in the COVID-19 relief laws, including those for other disasters. In its Disaster Relief Fund Monthly Report dated December 7, 2021, the Department of Homeland Security reported COVID-19-related obligations totaling $84.0 billion and expenditures totaling $65.9 billion as of November 30, 2021.
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 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 funding provided by the COVID-19 relief laws and therefore not included in this table.
dBecause 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.[41] Table 3 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 November 30, 2021.
Table 3: COVID-19 Relief Funding for Federal Programs and Funds Receiving $10 Billion or More in Aid for States, the District of Columbia, Localities, U.S. Territories, and Tribes, as of Nov. 30, 2021

Program fund/description

Appropriations
($ in billions)

Obligations
($ in billions)

Expenditures
($ in billions)

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

350

245.2

245.2

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

190.3

186

26

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

150

150

149.9

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

95a

34b

22b

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

76.9c

60.4d

60.4d

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

69.5

40

27.3

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

52.5

52.4

10.3

Emergency Rental Assistance
Administered by Treasury, these programs provide grants to states, D.C., U.S. territories, localities, and tribes to provide assistance to eligible households for rent and utility payments.

46.6

37.7

37.7f

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

33.4

32.8

9.3

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

20

17.3h

9h

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

10

4.5h

2.1h

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

10

0

0

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

10

0

0
Source: GAO analysis of federal laws, data from the Congressional Budget Office, and obligations and expenditures data from the Department of the Treasury and applicable agencies. I GAO-22-105291

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, Pub. L. No. 116-123, 134 Stat. 146, 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.
aFunding provided to the Disaster Relief Fund is generally 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 the COVID-19 pandemic.
dMedicaid obligations and expenditures are as of September 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 ARPA 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 well as associated administrative costs and certain housing stability services.
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 November 29, 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 was (1) December 27, 2021, for states, D.C., and U.S. territories; and is (2) June 1, 2022, for tribal governments.
jStates, D.C., territories, and tribal governments were required to 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 

Overview

As we enter a new year, the COVID-19 pandemic continues to challenge the federal government’s ability to respond to and recover from the ongoing public health and economic problems facing the nation. This report provides key updates on the federal government’s pandemic response. We are making five new recommendations aimed at improving the integrity and effectiveness of the federal response. In addition, in this report, we are designating HHS’s leadership and coordination of a range of public health emergencies as high risk, in order for it to receive sustained attention from the executive branch and Congress.[42]

In our prior CARES Act reports and other targeted COVID-19-related reports, we have made a total of 246 recommendations to federal agencies, which have addressed or partially addressed 94 (38 percent).[43] As of December 31, 2021, agencies had addressed 40 of these recommendations, resulting in wide-ranging improvements such as the collection of data to assess the long-term outcomes of persons with COVID-19, by race and ethnicity, and improved communication with taxpayers. Agencies have also partially addressed an additional 54 recommendations. Fully addressing our previous recommendations as well as the new recommendations we are making in this report will enhance the quality, value, and accountability of the federal government’s investments in the response to and recovery from the COVID-19 pandemic.

Emergency Rental Assistance

Treasury was appropriated a total of $46.55 billion for Emergency Rental Assistance (ERA) programs to provide assistance, through grants to specified grantees, to eligible renter households that are unable to pay rent, utilities, or other expenses due, directly or indirectly, to the COVID-19 pandemic.[44] As of November 30, 2021, Treasury had disbursed $37.68 billion of these ERA funds to grantees, such as states, local governments, and tribal governments, who had expended about $17 billion in payments to landlords, renter households, and utility providers, including related administrative costs.[45]

Treasury has not yet designed processes to identify and recover ERA overpayments made by grantees, such as post-payment reviews or recovery audits. According to officials, the department is designing processes to gather data about recipients and overcome challenges in data access and data gathering and plans to implement a recovery audit process. However, Treasury has not yet designed a post-payment review process to validate ERA eligibility claims and payments made by grantees. Post-payment reviews can verify, for example, that households were eligible to receive ERA funds and that grantees made ERA payments in the correct amount. In addition, under the Payment Integrity Information Act of 2019, programs and activities that expend $1 million or more in a fiscal year are required to perform recovery audits—control processes designed to identify and recapture overpayments—if conducting such audits is cost-effective. Without a process for conducting effective post-payment reviews or recovery audits for the ERA programs, Treasury’s ability to consistently identify and recover overpayments made by grantees—including those resulting from potential fraud—may be delayed or impossible.

We are recommending that the Secretary of the Treasury design and implement processes, such as post-payment reviews or recovery audits, to help ensure timely identification and recovery of overpayments made by grantees to households, landlords, or utility providers in the ERA programs. Treasury agreed with this recommendation and stated that it is working to establish post-payment reviews and recovery audit activities, among other actions.

In addition, the Single Audit Act establishes requirements for audits of states, local governments, and other non-federal entities that receive funding from federal awards (e.g., grants) when their expenditure of such assistance meets a certain dollar threshold.[46] Single audits help federal agencies such as Treasury identify deficiencies in grantees’ compliance with applicable provisions of laws, regulations, contracts, or grant agreements and in grantees’ financial management and internal controls. Correcting such deficiencies can help ensure the appropriate use of federal funds and reduce the likelihood of federal improper payments.

The Office of Management and Budget (OMB) develops government-wide guidance on performing audits to comply with the act. OMB’s guidance includes issuing an annual Compliance Supplement that identifies the compliance requirements that could have a direct and material effect on major programs. Auditors who conduct single audits follow guidance in the annual Compliance Supplement and agency guidance specific to their programs. In its 2021 Compliance Supplement, OMB listed the ERA programs as “higher risk” programs; therefore, auditors are likely to consider them major programs that must be audited as part of the single audit process. However, the 2021 Compliance Supplement did not include guidance for auditing grantee compliance with ERA. Without this guidance, auditors may not consistently and effectively identify deficiencies in grantees’ compliance with the requirements of the ERA programs, limiting Treasury’s ability to identify and mitigate risks, including risks to payment integrity.

We are recommending that the Director of OMB, in consultation with the Secretary of the Treasury, issue guidance now or in the near future on the ERA programs in OMB’s Compliance Supplement for single audits to help ensure that auditors consistently and timely identify deficiencies in grantees’ compliance with programs’ requirements. OMB neither agreed nor disagreed with this recommendation.

See the Emergency Rental Assistance enclosure in appendix I for more information.

Nutrition Assistance

The Food and Nutrition Service (FNS), within the Department of Agriculture, administers nutrition assistance programs, which help individuals and households maintain food security in times of heightened need. FNS does not have a comprehensive strategy for how its programs should respond to emergencies, which would be beneficial to its response to the current pandemic and for future emergencies. As part of this, FNS’s pandemic plans are outdated, and its efforts to identify and incorporate lessons learned from the COVID-19 pandemic into its nutrition assistance programs are incomplete. Developing a comprehensive response strategy could better position FNS to help individuals and households maintain food security both in the current pandemic and during future emergencies, as well as help ensure FNS does not miss opportunities to coordinate with vendors across the country.

Further, FNS has not provided sufficient assistance to state and local agencies to ensure they collect reliable and comprehensive eligibility data for the Pandemic Electronic Benefits Transfer (Pandemic EBT) program, which provides benefits for purchasing food to households with children who would have received free or reduced-price school meals—if not for COVID-19-related school closures—as well as children in childcare. State agencies reported various challenges to obtaining these data, according to FNS officials. For example, our review found that state educational agencies’ capabilities in compiling students’ eligibility data for the Pandemic EBT plans varied, with some states relying on antiquated systems requiring manual tracking of thousands of participating students. Reliable and comprehensive data can help state Supplemental Nutrition Assistance Program agencies ensure they have issued Pandemic EBT benefits to all eligible students in the correct benefit amounts.

We are recommending that the Secretary of Agriculture ensure that the Administrator of FNS (1) develops a comprehensive strategy for the agency’s nutrition assistance programs to respond to emergencies that includes lessons learned during the COVID-19 pandemic and a mechanism to periodically review and update the strategy, and (2) shares timely information with states and other stakeholders during development of the strategy to help inform their ongoing response to COVID-19.

We are also recommending that the Secretary of Agriculture ensure that the Administrator of FNS further assists state and local agencies in their efforts to obtain reliable and comprehensive eligibility data for the Pandemic EBT program in order to determine eligibility and benefits amounts accurately.

The Department of Agriculture agreed with both recommendations.

See the Nutrition Assistance enclosure in appendix I for more information.

Tax Relief for Businesses

To provide liquidity to businesses during the COVID-19 pandemic, the CARES Act and other COVID-19 relief laws included tax measures to help businesses by reducing certain tax obligations, which, in some cases, led to cash refunds.[47] These tax measures included expanded net operating loss carrybacks and the acceleration of alternative minimum tax (AMT) credit refunds.[48] According to officials from the Internal Revenue Service (IRS), the CARES Act changes contributed to the agency receiving 276 percent more filings for carryback refunds—which include applications for tentative refunds for net operating loss carrybacks and AMT credit refunds—in fiscal year 2021 than in fiscal year 2020.

IRS has been unable to process this backlog consistent with its statutory time frames for processing applications for tentative refunds, which businesses submit through IRS Forms 1045 and 1139. The Internal Revenue Code and the CARES Act generally require IRS to issue certain refunds within a 90-day period.[49] IRS data show that the agency started to miss the 90-day statutory requirement for refund applications in September 2020 and missed it throughout 2021. As of November 2021, the average time for IRS to process all carryback refunds was 165 days.

While IRS took some remedial actions, it did not have effective preventative control activities or mitigation plans in place to detect or address growing processing times for tentative refunds submitted on IRS Forms 1139 and 1045, such as an average processing time threshold to trigger activities to avoid missing refund deadlines. As such, IRS did not take actions to reduce the carryback backlog until April 2021—7 months after the agency began missing its statutory requirement.

Large-scale staffing changes resulting from pandemic-related IRS facility shutdowns prevented the timely processing of paper returns, including those used to file for tentative refunds. Officials emphasized that the agency had to deal with many competing priorities as it worked through the backlog, such as managing the 2021 tax filing season and adapting to new legislation.

Until effective preventative control activities and mitigation plans are put in place, IRS remains at risk of continuing to exceed its 90-day statutory requirement to issue refunds for net operating loss carrybacks and AMT credit refunds. Failure to meets its processing deadline not only causes some taxpayers to face delays in receiving their refunds, but also increases the cost to the federal government in terms of interest paid on such refunds. According to IRS data for fiscal year 2021, these interest payments amounted to approximately $61 million on all carrybacks, of which applications for tentative refund made up roughly 80 percent of all carryback payments with interest for the fiscal year.[50]

We are recommending that the Commissioner of Internal Revenue establish mitigation plans—including indicators, such as a threshold to initiate mitigation activities—to timely address any future challenges to processing applications for tentative refunds on Forms 1045 and 1139 within the 90-day statutory requirement. IRS neither agreed nor disagreed with our recommendation, but said that it will take the recommendation into consideration as it continues to make improvements to taxpayer services.

See the Tax Relief for Businesses enclosure in appendix I for more information.

HHS COVID-19 Funding

HHS received approximately $484 billion in COVID-19 relief appropriations from the six COVID-19 relief laws enacted as of November 30, 2021. These 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. Of the $484 billion appropriated, HHS reported that it had obligated about $387 billion and expended about $226 billion—about 80 percent and 47 percent, respectively.

We previously recommended that HHS provide projected time frames for its spending of the remainder of its COVID-19 relief funds in the spend plans HHS submits to Congress. HHS partially agreed with the recommendation, but stated that the department would not be able to provide specific time frames for all relief funds as it needed to remain flexible in responding to incoming requests. Providing projected time frames would not affect HHS’s ability to be flexible in its spend plans, as these plans are not binding to the agency and can be revised. As of December 2021, HHS has not taken steps to implement this recommendation. We will continue to examine HHS’s oversight of COVID-19 relief funds.

See the HHS COVID-19 Funding enclosure in appendix I for more information.

Designation of New High-Risk Area: HHS’s Leadership and Coordination of Public Health Emergencies

For more than a decade, we have reported on HHS’s execution of its lead role in preparing for, and responding to, a range of public health emergencies and have found persistent deficiencies in its ability to perform this role. These deficiencies have hindered the nation’s response to the current COVID-19 pandemic and a variety of past threats, including other infectious diseases—such as the H1N1 influenza pandemic, Zika, and Ebola—and extreme weather events, such as hurricanes.

In this report, we are adding HHS’s leadership and coordination of a range of public health emergencies to our High-Risk List to help ensure sustained executive branch and Congressional attention so that our nation is adequately prepared for future threats.[51] Threats from extreme weather are predicted to increase, according to the U.S. Global Change Research Program. In 2020 alone, HHS responded to wildfires, hurricanes, and an earthquake, while also in the throes of the response to the COVID-19 pandemic, which itself has resulted in catastrophic loss of life and substantial damage to the national economy. As devastating as the COVID-19 pandemic has been, more frequent extreme weather events, new viruses, and bad actors who threaten to cause intentional harm loom, making the deficiencies we have identified particularly concerning. Not being sufficiently prepared for a public health emergency can also negatively affect the time and resources needed to achieve full recovery.

This new high-risk designation is based on our findings from a body of related work—including 115 recommendations issued since fiscal year 2007, when the Office of the Assistant Secretary for Preparedness and Response was created within HHS, and includes recommendations made in our recurring CARES Act reports and standalone COVID-19 reports.[52] The Office of the Assistant Secretary for Preparedness and Response serves as the principal advisor to the Secretary of Health and Human Services on all matters related to federal public health and medical preparedness and response to a range of public health emergencies.

While HHS has taken some actions to address the 115 recommendations we have made in this area, 72 remain open. Throughout our work over the years, we have identified broad principles of an effective national response. Based on these principles, we have found persistent deficiencies in HHS’s preparedness and response efforts in these areas:
  1. establishing clear roles and responsibilities for the wide range of key federal, state, local, tribal, territorial, and nongovernmental partners;
  2. collecting and analyzing complete and consistent data to inform decision-making—including any midcourse changes necessary—as well as future preparedness;
  3. providing clear and consistent communication to key partners and the public;
  4. establishing transparency and accountability to help ensure program integrity and build public trust; and
  5. understanding key partners’ capabilities and limitations.

See Appendix II for more on this new high-risk designation.

Conclusions 


The federal government’s efforts to respond to and recover from the COVID-19 pandemic continue. The ongoing cycle of decreases and increases in the number of cases as a result of new variants and lingering economic effects illustrate the challenges to the nation’s response and recovery efforts and the work that remains. We are pleased that agencies have addressed 40 and partially addressed 54 of our 246 recommendations as of December 31, 2021. Fully addressing our recommendations, including the new recommendations we are making in this report, can help improve the federal response and recovery efforts. Central to the federal government’s response is HHS’s leadership and coordination of a range of public health emergencies, which we are designating as high risk in this report, so that it receives sustained attention from the executive branch and Congress.

Closing 


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

If you or your staff have any questions about this report, please contact me at (202) 512-5500 or dodarog@gao.gov. Questions can also be directed to 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 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 



Appendix I: Enclosures

Economic Indicators

Based on data available in the beginning of January 2022, the national economy has continued to recover from the COVID-19 pandemic, while areas of the economy we are monitoring saw mixed performance in recent months. Indicators of inflation have generally increased in recent months, suggesting that inflation could be somewhat higher, and for somewhat longer, than previously expected. Indicators for labor markets, household finances, and small business credit conditions generally improved from September through December 2021, while indicator of state and local government employment weakened (see table).[53]

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

aThe employment-to-population ratio represents the number of employed people as a percentage of the civilian noninstitutional population 16 years and over. The ratio is subject to a misclassification error with respect to identifying workers as employed and absent from work who are likely unemployed on temporary layoff.
bState and local government and leisure and hospitality employment data from November and December 2021 are preliminary.
cHigher levels in the Consumer Credit Default Composite Index rate indicate more defaults on consumer loans, including auto loans, bank cards, and mortgages. The Consumer Credit Default Composite Index could be subject to seasonal variation but is not seasonally adjusted.
dSeriously delinquent loans are 3 months or more past due or in foreclosure, based on mortgages insured by the Federal Housing Administration (FHA). Decrease in serious delinquency rates on FHA loans may indicate improvement in the finances of the minority and low- to moderate-income households that disproportionately take out mortgages insured by FHA.
eLower levels of the small business credit card delinquency index indicate more delayed payments on credit. The small business credit card delinquency index is published under license and with permission from Dun & Bradstreet, and no commercial use can be made of these data.

Gross domestic product (GDP) grew at a 2.3 percent annual rate in the third quarter of 2021, slowing from its second quarter growth rate of 6.7 percent. Housing investment, consumer spending on automobiles, and federal government spending, among other components of GDP, were notably lower in the third quarter.

Slower growth to some extent reflects the waning fiscal effects of the federal pandemic response, which the Congressional Budget Office projected would contribute to higher GDP growth in 2020 and 2021.[54] Some subsequent research found that certain federal pandemic response programs supported, for example, consumer spending and corporate credit markets, and thereby likely contributed to economic growth.[55] Federal efforts to facilitate vaccinations also likely contributed to faster economic growth in the first half of 2021. 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. Based on monthly and weekly data from the Department of Labor, the labor market showed improvement in October, November, and December 2021 but generally remained worse relative to the prepandemic period. Weekly initial unemployment insurance declined and were similar to prepandemic levels in November and December 2021 (see the Unemployment Insurance Programs enclosure in app. I). The employment-to-population ratio in December 2021 was 59.5 percent, which was 0.2 percentage points higher than the previous month but 1.7 percentage points lower than the prepandemic period (see figure).

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

Changes in employment across sectors continue to reflect the differential impact of the pandemic on various sectors of the economy. For example, the leisure and hospitality sector experienced job growth in October, November, and December 2021, but employment in the leisure and hospitality sector was still 7.2 percent lower than it was in February 2020. State and local government employment declined for the fourth consecutive month in December 2021, and employment in these sectors remained 4.7 percent lower than in 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 November 2021, to 7.3 percent of loans, but still remained much higher than rates prior to the pandemic. 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, including fewer borrowers relying on mortgage forbearance provisions of the CARES Act.[56]

Key trends in inflation. Indicators of inflation have generally increased in recent months, suggesting that inflation could be somewhat higher, and for somewhat longer, than previously expected.[57] 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 low-income households.

If demand grows considerably faster than supply for an extended period of time, for example, then consumer price inflation could meaningfully increase. The extent to which higher inflation will persist for a longer period of time will depend on many factors which remain uncertain, for example, how quickly capacity increases help alleviate global supply chain issues or whether changes in the severity of the pandemic influence consumer demand across the economy. 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.[58]

In previous work, 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, including indicators of current consumer price inflation, as well as expectations of future inflation.[59] Based on data available in December 2021 covering price trends from February through November 2021, inflation has generally increased over the past several months (see table).

Indicators of Inflation, Feb.–Nov. 2021, and Average Inflation Rates, 2000–2019

Note: Underlined, red text indicates a higher rate of inflation than the previous month while black text indicates a lower rate of inflation than the previous month but with prices still rising overall. Deflation, or falling prices, would be indicated with a negative sign.
aPCE is based on the PCE price index, which reflects changes in the prices of goods and services purchased by or on behalf of consumers in the U.S. The Federal Open Market Committee states its longer-run inflation goal in terms of PCE inflation and typically aims for inflation of 2 percent on average over time, including by aiming to achieve inflation rates above 2 percent for some time after periods in which inflation is persistently below 2 percent.
bCPI is based on data from the Consumer Price Index for all urban consumers (CPI-U), in which year-over-year change is computed from the not-seasonally-adjusted series, and the month-over-month change is computed from the seasonally adjusted series.
cMedian CPI is based on the 1-month inflation rate of the component whose expenditure weight is in the 50th percentile of price changes. By omitting outliers (small and large price changes) and focusing on the interior of the distribution of price changes, the median CPI may provide a better signal of the underlying inflation trend than the all-items CPI.
dThe 16 percent trimmed-mean CPI is based on a weighted average of 1-month inflation rates of components whose expenditure weights fall below the 92nd percentile and above the 8th percentile of price changes. By omitting outliers (small and large price changes) and focusing on the interior of the distribution of price changes, the 16 percent trimmed-mean CPI may provide a better signal of the underlying inflation trend than the all-items CPI.
eThe 10-year expected inflation rate comes from a model that decomposes the TIPS to nominal Treasury spread into three components: inflation expectations, the inflation risk premium, and a third component that may capture the TIPS liquidity premium or other factors that influence the relative demand for TIPS. See S. D'Amico, D. H. Kim, and M. Wei, "Tips from TIPS: The Informational Content of Treasury Inflation-Protected Security Prices," Journal of Financial and Quantitative Analysis, vol. 53, no. 1 (2018): pp. 395–436.
fProfessional forecast of inflation is an average forecast of expected CPI inflation in 2022–2023 (annualized) from forecasts collected by Bloomberg. Absent data for January 2021, we have used black text for February 2021 data based on the data for 10-year expected CPI inflation from TIPS.

Inflation remains higher than averages in recent decades, but indicators of more recent price pressures (measured relative to the previous month) decreased in November 2021 after several months of increases (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, but the recent increase in these measures suggests that prices are rising across more goods and services in the economy and that inflation could remain elevated for a longer period of time. 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.

Percentage Change in Inflation Indicators from the Previous Month, Jan. 2019-Nov. 2021

Methodology

To identify indicators for monitoring areas of the economy supported by the federal response to the COVID-19 pandemic, in particular by the six COVID-19 relief laws, we reviewed 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 December 2021 and January 2022, 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 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 Labor, the Department of the Treasury, the Federal Reserve, and the Office of Management and Budget (OMB) with a draft of this enclosure. The Departments of Labor and Treasury provided technical comments, which we incorporated as appropriate. The Federal Reserve and OMB did not provide comments on this enclosure.

GAO’s Ongoing Work

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

Contact information: Michael Hoffman, (202) 512-6445, hoffmanme@gao.gov

HHS COVID-19 Funding

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 $387 billion and expended about $226 billion of this amount—about 80 percent and 47 percent, respectively—as of November 30, 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 November 30, 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 November 30, 2021, HHS reported that it had obligated about $387 billion (80 percent) and expended about $226 billion (47 percent) of the approximately $484 billion in COVID-19 relief funds appropriated (see figure below).

HHS-Reported COVID-19 Relief Appropriations, Obligations, and Expenditures from COVID-19 Relief Laws, as of Nov. 30, 2021

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

The table below shows HHS appropriations, obligations, and expenditures by COVID-19 relief law that HHS reported as of Nov. 30, 2021.
HHS-Reported COVID-19 Relief Appropriations, Obligations, and Expenditures, by Relief Law, as of Nov. 30, 2021

Legislation

Date of enactment

Appropriations
($ in millions)

Obligations
($ in millions
(% obligated))

Expenditures
($ in millions
(% expended))

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

March 6, 2020

6,497

5,820 (90)

3,983 (61)

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

March 18, 2020

1,314

1,308 (100)c

1,265 (96)

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

March 27, 2020

142,833

138,017 (97)

122,592 (86)

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

April 24, 2020

100,000

70,847 (71)

54,607 (55)

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

December 27, 2020

73,175

63,107 (86)

17,925 (24)

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

March 11, 2021

160,494

108,398 (68)

26,003 (16)

Total

484,313

387,497 (80)

226,374 (47)
Source: Department of Health and Human Services (HHS) data. | GAO-22-105291

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; 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. 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.
cThe percent obligated was 99.6 percent, which we show as 100 percent due to rounding.

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 key fund as of Nov. 30, 2021.
HHS-Reported Allocations, Obligations, and Expenditures of COVID-19 Relief Funding, by Agency or Key Fund, as of Nov. 30, 2021

Agency or key fund

Allocations
($ millions)

Obligations
($ millions)

Expenditures
($ millions)

Administration for Children and Families

65,257.5

65,072.8

14,930.2

Administration for Community Living

3,200.0

2,994.8

1,109.8

Agency for Toxic Substances and Disease Registry

12.5

12.5

10.4

Centers for Disease Control and Prevention

27,225.9

19,357.2

5,499.9

Centers for Medicare & Medicaid Servicesa

935.0

180.6

90.2

Enhanced Use of Defense Production Act

10,000.0

881.7

54.1

Food and Drug Administration

718.0

256.3

79.8

Health Resources and Services Administration

11,729.8

10,408.7

3,422.3

Indian Health Service

7,980.0

5,199.4

4,777.9

National Institutes of Health

3,001.3

2,560.2

1,443.4

Office of Inspector General

17.0

5.2

4.6

Public Health and Social Services Emergency Fund (PHSSEF)b

346,001.4

272,957.5

194,470.8

Office of the Assistant Secretary for Healthc

5,269.9

5,017.7

4,201.8

Office of the Assistant Secretary for Preparedness and Responsec

23,443.0

18,026.9

11,866.1

Biomedical Advanced Research and Development Authorityc

43,509.5

40,455.7

17,135.3

Provider Relief Fundc, d

178,000.0

144,546.1

135,570.2

Other PHSSEFc

95,779.0

64,911.1

25,697.4

Substance Abuse and Mental Health Services Administration

8,235.0

7,609.7

480.1

Grand Total

484,313.4

387,496.6

226,373.5
Source: Department of Health and Human Services (HHS) data. | GAO-22-105291

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 $1,063.5 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 transfers from the PHSSEF and this amount is included in the NIH allocation rather than 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.
HHS-Reported Allocations, Obligations, and Expenditures by Selected COVID-19 Response Activity, as of Nov. 30, 2021

COVID-19 response activity

Description

Allocations
($ in millions)

Obligations
($ in millions)

Expenditures
($ in millions)

Provider Relief Fund

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

178,000.0

144,546.1

135,570.2

Testing

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

58,326.2

34,912.2

15,502.0

Child Care and Development Funda

Includes funding for states and other governments for child care subsidies for eligible families and quality improvement activities, sub-grants to child care providers to stabilize the child care market, and payments for child care assistance.

52,450.0

52,432.9

10,302.6

Vaccines

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

40,681.7

34,954.7

13,395.4

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

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

40,116.6

39,541.3

11,841.9

Drugs and therapeutics

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

17,092.8

13,918.8

5,076.8

Strategic National Stockpile

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

13,919.9

10,583.9

7,845.2

Health centers

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

9,620.0

9,487.9

3,118.5

Rural provider payments

Includes assistance for rural providers and suppliers, administered using the same mechanism as the Provider Relief Fund.

8,500.0

6,627.5

6,627.5

Mental health and substance use–related services

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

8,315.0

7,624.7

480.3

Diagnostics research and development

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

2,333.0

1,930.2

1,115.6

Head Start

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

2,000.0

1,999.1

734.3

Testing for uninsuredb

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

2,000.0

1,998.4

1,973.4

Global disease detection and emergency response

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

1,550.0

707.4

264.3

Telehealth

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

284.2

175.0

145.5

Other response activitiesc

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

49,124.0

26,056.5

12,380.0

Total

484,313.4

387,496.6

226,373.5
Source: Department of Health and Human Services (HHS) data, written HHS responses, and GAO analysis of HHS spend plans. | GAO-22-105291

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.
aThe 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.
bAccording to HHS officials, HHS has allocated an additional $4.8 billion to the testing for the uninsured program from section 2401 of ARPA, which HHS included in the “testing” response activity category.
cAccording to HHS officials, the agency transferred $1,063.5 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 Nov. 30, 2021. We also reviewed appropriation warrant information provided by the Department of the Treasury as of Nov. 30, 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 with a draft of this enclosure. Neither agency provided 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 and HHS’s oversight of these funds.

GAO’s Prior Recommendation

The table below presents our recommendation related to HHS COVID-19 funding from a prior quarterly CARES Act report.
Prior GAO Recommendation Related to Department of Health and Human Services (HHS) COVID-19 Funding

Recommendation

Status

To communicate information about and facilitate oversight of the agency’s use of COVID-19 relief funds, the Secretary of Health and Human Services should provide projected time frames for the planned spending of COVID-19 relief funds in the Department of Health and Human Services’ spend plans submitted to Congress. (July 2021 report).

Open—not addressed. HHS partially concurred with the recommendation and as of December, 2021, stated that the department would aim to incorporate some time frames on planned spending where that information may be available such as time frames for select grants to states. However, HHS stated that the department would not be able to provide specific time frames for all relief funds since the evolving environment requires the department to remain flexible in responding to incoming requests for response activities. Providing projected time frames would not affect HHS’s ability to be flexible in its spend plans, as spend plans are not binding to the agency and can be revised.
Source: GAO. I GAO-22-105291

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

Enhanced Medicaid Funding

Selected states said that temporary increases in federal funds have helped support their Medicaid program operations during the COVID-19 public health emergency; however, (1) the 6.2 percentage point temporary funding increase will end while states work to resume normal enrollment operations, and (2) potential challenges exist for obtaining additional funds for home and community-based services.

Entities involved: Centers for Medicare & Medicaid Services, within the Department of Health and Human Services

Background

Medicaid is the nation’s largest source of funding for health care services for low-income and medically needy individuals, covering an estimated 77 million people at an estimated cost of $673 billion in total federal and state spending in fiscal year 2020.[60] Medicaid offers a wide range of benefits, including coverage for inpatient and outpatient hospital care, physician services, and laboratory testing. Medicaid also offers coverage for home and community-based services (HCBS), which provide individuals who are aged or have disabilities with various services, including assistance with daily activities, so that they may live in their homes and communities.

States administer their Medicaid programs within broad federal guidelines and according to state plans approved by the Centers for Medicare & Medicaid Services (CMS), the agency within the Department of Health and Human Services (HHS) that oversees Medicaid at the federal level.[61] Among other responsibilities, states must determine eligibility and enroll beneficiaries, verify eligibility periodically, and promptly terminate coverage for individuals who are no longer eligible.

The federal government matches states’ spending for Medicaid services according to a statutory formula known as the Federal Medical Assistance Percentage (FMAP). Each state has an FMAP that is calculated based on its per capita income relative to national per capita income. [62] In fiscal year 2021, states’ regular FMAPs ranged from 50 percent in 13 states to about 78 percent in Mississippi.

In response to previous economic downturns, legislation was enacted to provide states with an increased FMAP to provide fiscal relief and to maintain states’ Medicaid programs.[63] Most recently, the Families First Coronavirus Response Act (FFCRA) and the American Rescue Plan Act of 2021 (ARPA) provided states with temporary increases to their FMAP rates in response to the COVID-19 public health emergency (PHE), as shown in the table below.[64]
Overview of Selected Changes to the Federal Medical Assistance Percentage (FMAP) during the COVID-19 Public Health Emergency (PHE), as of Oct. 2021

6.2 percentage point FMAP increaseb

100% FMAP for optional COVID-19 groupc

10 percentage point FMAP increase for home and community-based services (HCBS)d

100% FMAP for COVID-19 vaccine administration

Authorizing legislationa

FFCRA § 6008

FFCRA § 6004(a)(3)

ARPA § 9811(a)

ARPA § 9817

ARPA § 9811(b)

Effective dates

January 1, 2020, through the end of the quarter in which the PHE ends

March 18, 2020, through the last day of the PHE

April 1, 2021 through March 31, 2022

April 1, 2021, through the end of the quarter that begins one year after the PHE ends

Number of participating statese

All

15 states, 3 territories

All states and D.C.

All

CBO estimated spendingf

$50 billion

$2 billion

$12.7 billion

$1.1 billion
Source: GAO analysis of Centers for Medicare & Medicaid Services (CMS) and Congressional Budget Office (CBO) documentation. | GAO-22-105291

aSee Families First Coronavirus Response Act, Pub. L. No. 116-127, div. F, §§ 6004(a)(3), 6008, 134 Stat. 178, 205, 208 (2020) (“FFCRA”); American Rescue Plan Act of 2021, Pub. L. No. 117-2, tit. IX, subtit. J, §§ 9811, 9817, 135 Stat 4, 208, 216 (“ARPA”).
bIn general, a state may not receive this FMAP increase if it 1) restricts eligibility standards, methodologies, or procedures, 2) increases premiums, 3) fails to provide continuous enrollment through the last day of the month in which the PHE ends, or 4) imposes cost sharing for certain COVID-19-related services.
cThis column refers to the optional COVID-19 group for otherwise uninsured individuals described at section 1902(a)(10)(A)(ii)(XXIII) of the Social Security Act. Coverage for this group is generally limited to COVID-19 vaccines, vaccine administration, testing, and treatment, as well as treatment of any condition that may seriously complicate the treatment of an individual with COVID-19, if otherwise covered by the state. See 42 U.S.C. § 1396a(a)(10)(XVIII) (in the matter following subsection (G)).
dNo state receiving the HCBS FMAP increase may receive a total FMAP greater than 95 percent for HCBS expenditures. In order to receive the FMAP increase for eligible HCBS expenditures, states must meet certain programmatic requirements, including submitting a spending plan to the Centers for Medicare & Medicaid Services (CMS) and obtaining CMS approval. As of December 15, 2021, CMS officials said they had given conditional approval to nine states, meaning the state is fully approved to claim the HCBS FMAP increase conditional upon its continued compliance with program requirements, and partial approval to 42 states, meaning the state is approved to claim the HCBS FMAP increase but CMS requested additional information about one or more of the states’ planned activities. No territories had submitted a spending plan as of that date.
eUnless otherwise noted, the term “state” refers to the 50 states, the District of Columbia, and the five U.S. territories that have Medicaid programs.
fThe CBO estimate does not account for additional Medicaid costs associated with evaluation and treatment of COVID-19, nor any increased Medicaid enrollment resulting from the economic disruption brought about by COVID-19. Thus, CBO notes that actual federal spending on Medicaid is likely to be greater.

Of the four COVID-19 related FMAP changes noted above, the Congressional Budget Office (CBO) projected that the 6.2 percentage point FMAP increase and the 10 percentage point FMAP increase for HCBS expenditures are expected to account for the majority of expenditures—over 95 percent. Both of these FMAP increases had qualifying requirements, as noted below.
  • The 6.2 percentage point FMAP increase. In general, this increase applies to allowable Medicaid expenditures for which a state receives its standard FMAP rate and that are made from January 1, 2020, through the end of the quarter in which the PHE ends. All states qualify for the increased FMAP provided they meet certain conditions, such as maintaining Medicaid enrollment for beneficiaries through the end of the month in which the PHE ends.[65]
  • The 10 percentage point FMAP increase for HCBS expenditures. This increase applies to certain expenditures for HCBS provided from April 1, 2021 to March 31, 2022.[66] To qualify for the increase, states must (1) use federal funds attributable to the increased FMAP to supplement, not supplant, existing state HCBS spending and (2) invest state funds equivalent to the amount of federal funding they receive from the increase into activities that will “enhance, expand, or strengthen” their HCBS programs. Each state was to submit an HCBS spending plan to CMS that estimated its expected amount of additional federal funding from the FMAP increase and described its planned activities in order to qualify.[67]

Overview of Key Issues

The 6.2 percentage point FMAP increase. As of September 30, 2021, federal expenditures attributed to the FFCRA 6.2 percentage point FMAP increase totaled approximately $60 billion.[68] For eight selected states in which we interviewed state Medicaid officials, this FMAP increase resulted in additional federal funds of approximately $8.5 billion, ranging from $208 million in New Hampshire to $2.3 billion in Ohio.[69]

Medicaid officials in all eight selected states said that the 6.2 percentage point FMAP increase was critical in enabling them to maintain program operations while they faced increased enrollment and decreased revenue. For example, New Hampshire officials noted their Medicaid enrollment increased 25 percent during COVID-19, and they said they would have faced serious financial challenges without the FMAP increase. Additionally,
  • officials from four selected states said the funding helped them respond to COVID-19, for example, by expanding telehealth and making supplemental payments to retain providers.
  • officials from six selected states said the increased FMAP provided general economic relief to their states in light of revenue declines and budget uncertainty, with officials from three states noting it freed up state funds to address other needs.

With respect to implementing the 6.2 percentage point FMAP increase, officials from seven selected states characterized their efforts as easy or straightforward, citing reasons such as the increase did not have to be applied to specific services and could be reported using existing processes.

Since the beginning of the PHE, Medicaid enrollment has increased 18.5 percent (11.9 million individuals) nationally, and CMS officials said states have postponed coverage terminations, as FFCRA requires states to maintain enrollment for nearly all Medicaid beneficiaries through the end of the month in which the PHE ends to receive the increased FMAP.[70] CMS is providing states up to 12 months after the PHE ends to complete any pending eligibility reviews and to reassess eligibility for beneficiaries who were determined ineligible during the PHE but who retained coverage due to FFCRA requirements.[71] FFCRA established that the increased FMAP will end on the last day of the quarter in which the PHE ends. Thus, the FMAP increase will end well before state officials said they can work through their backlog of eligibility reviews, as shown in the figure below.

Timeline of COVID-19 PHE, 6.2 Percentage Point FMAP Increase, and Medicaid Enrollment Requirements

aThe end date of the PHE is unknown.
bThe FMAP is the rate at which the federal government matches state spending for Medicaid services. Depending on the exact date on which the PHE ends, the FMAP increase could be discontinued the same date as the PHE (if the PHE ends on last day of the quarter), approximately 90 days later (if the PHE ends on first day of a quarter), or in between.
cTo receive the 6.2 percentage point FMAP increase provided under section 6008 of the Families First Coronavirus Response Act, states must meet certain requirements, such as maintaining enrollment for all Medicaid beneficiaries that were enrolled as of or after March 18, 2020, through the month in which the PHE ends, except for any beneficiary who requests to terminate their eligibility or no longer resides in the state. See Pub. L. No. 116-127, div. F, § 6008, 134 Stat. 178, 208 (2020). CMS is providing states up to 12 additional months to review eligibility and terminate coverage, as appropriate.

State officials we spoke with raised two primary concerns about the ultimate discontinuation of the FMAP increase:

Uncertainty surrounding end date of PHE. HHS has said it will notify states 60 days before the PHE ends, but officials from five selected states said the uncertainty surrounding when the PHE will end complicates their planning and budget efforts.[72] Officials from three selected states also said it will be helpful to receive as much advance notice of the official end date as possible.

Eligibility determination backlog. Officials from seven selected states were concerned about completing eligibility reviews after the PHE ends and the costs associated with maintaining eligibility for an increased number of Medicaid beneficiaries while they do so. Officials from six states said that a phase out of the FMAP increase would help them with the transition; officials in three of these states estimated it would take 6 to 12 months to return to normal enrollment levels.[73] For example,
  • New Hampshire officials estimated it will cost the state $3.8 million per 10,000 enrollees each month as they work to remove coverage for those who are no longer eligible.
  • New Jersey officials said that a phase out of the increased FMAP would help the state normalize operations as it returns to pre-PHE enrollment levels, because enrollment will not drop immediately when the PHE ends.

Because the FMAP increase will end before states complete their work on the backlog of eligibility reviews and terminations, there will be increased financial pressure to expedite reviews, which could exacerbate known weaknesses in states’ eligibility processes. CMS identified eligibility-related errors as a driving factor of the growing improper payment rate in Medicaid, a rate that exceeded 21 percent in 2021.[74] In addition, in January 2020, we reported that state and federal audits across 21 states identified weaknesses in states’ Medicaid eligibility determinations, including that states did not complete redeterminations (10 states) or terminate coverage for ineligible individuals (nine states) in a timely manner. These challenges underscore the importance of CMS and states continuing to work together to ensure that eligibility reviews are conducted accurately and timely and in a manner that ensures program integrity.[75]

The 10 percentage point FMAP Increase for HCBS. Actual expenditure data related to the increased FMAP for HCBS were not available at the time we conducted our work.[76] However, based on our review of selected states’ respective HCBS spending plans, their estimates of related federal funding ranged from $44 million in New Hampshire to $586 million in Georgia, as shown in the figure below.

Selected States’ Estimates of Additional Federal Funding Attributable to Increased HCBS Federal Medicaid Assistance Percentage, July 2021

Note: Selected states submitted plans to the Centers for Medicare & Medicaid Services (CMS) estimating the amount of additional federal funding they expect to receive for HCBS and describing how the state will reinvest funding into proposed HCBS activities. State estimates are subject to CMS approval and actual expenditures.

Officials from all selected states acknowledged that HCBS are an important area for targeted funding, with officials from five states noting HCBS beneficiaries and providers were particularly affected by COVID-19. Most selected states’ HCBS spending plans proposed workforce activities, such as payment increases or training for specified providers, and options to improve access to services, such as telehealth, as shown in the table below. Less commonly, states proposed other activities, such as IT infrastructure updates and expanding the number of beneficiaries eligible for HCBS.
Examples of Selected States’ Proposed Home and Community-Based Services (HCBS) Activities, July 2021

Proposed activitya

Number of selected statesb

Examples of proposed activities

Payments to providers

7

New Mexico to provide temporary economic recovery payments to HCBS providers.

New Jersey to increase payment rates for personal care assistants.

New Hampshire to enhance payments to HCBS providers to support retention and recruitment.

Education and training for providers

7

Iowa to provide crisis response training for providers that serve people with disabilities.

New Mexico to provide trainers and training resources for families providing In-Home Living Supports.

Louisiana to provide training for community practitioners to support persons with intellectual and developmental disabilities.

Improving access to HCBS

7

Georgia to incorporate telehealth into HCBS.

New Hampshire to deliver certain health care services in homeless shelters.

Washington to purchase technology and equipment for providers and beneficiaries to deliver services remotely.

Pilot new services or programs

6

Iowa to expand the number of providers that deliver services for children with complex behavioral needs.

New Hampshire to allow home modifications to allow for the elderly to receive care in their home.

Washington to implement homeless outreach provider teams that specialize in mental health and substance use disorder.
Source: GAO analysis of State Medicaid agency documentation. | GAO-22-105291

aSelected states submitted plans to the Centers for Medicare & Medicaid Services (CMS) estimating the amount of additional federal funding they expect to receive for HCBS and describing how the state will reinvest state funds equivalent to the amount of federal funds attributable to the increased FMAP into proposed HCBS activities. Proposed activities are subject to CMS approval, which was in process for all eight selected states as of October 21, 2021. As of this date, CMS had given partial approval to the plans submitted by six selected states, but had requested additional information on one or more of their proposed activities. For the other two selected states, CMS was awaiting on additional information from the states to complete its initial review. On October 21, 2021, CMS launched a webpage on Medicaid.gov that includes all states’ HCBS spending plans and a summary of related activities.
bWe did not include Ohio in the count of states because the state did not indicate specific proposed activities in its HCBS spending plan submitted to CMS in July 2021.

Selected states have faced challenges implementing HCBS activities and receiving increased federal funds. ARPA established the HCBS FMAP increase to begin 3 weeks after its enactment, and CMS officials said the abbreviated timeline created challenges for CMS to develop related guidance and system changes. Officials from six selected states noted that CMS guidance issued to date has generally been helpful, but seven selected states highlighted ongoing challenges related to their efforts to take advantage of these funds and the need for additional guidance or clarification on eligible services and expenditure reporting. For example,
  • Washington officials said they needed additional clarification from CMS on what types of behavioral health services are considered eligible HCBS activities.
  • Officials from three selected states also expressed uncertainty about how to apply the FMAP increase to managed care payments, which CMS had not issued guidance on as of November 9, 2021.[77]

In addition, at the time of our interviews, all eight selected states were still waiting for CMS’s conditional approval of their HCBS spending plans. As of October 21, 2021, CMS had given partial approval to the plans submitted by six selected states but had requested additional information on one or more of their proposed activities before granting conditional approval. For the other two selected states, CMS was awaiting additional information from the states to complete its initial review. Given that states can receive an additional 10 percentage point match if, among other things, they reinvest state funds equivalent to the amount of federal funds attributable to the increased FMAP on eligible HCBS while the FMAP increase is still in effect, there is an incentive for states to implement their proposed activities quickly to maximize the federal match.[78] Four selected states expressed concerns that the delay in CMS’s approval of their plans would affect their implementation of proposed activities and their ability to receive the maximum amount of funding available. For example, officials from New Mexico estimated they would receive approximately $100 million less from the FMAP increase if they adjusted their timeline and reinvested most of their state spending in fiscal years 2023 and 2024 instead of fiscal year 2022, as was included in the state’s original plan.

In addition to implementation concerns, officials from five of our selected states also raised concerns about the sustainability of HCBS enhancements they implement once the FMAP increase is no longer available.[79] For example:
  • New Mexico officials were concerned about increasing the number of individuals receiving HCBS, knowing that the state would be responsible for funding the increased costs associated with their coverage after the increase in funding ends.
  • Likewise, Iowa officials said their plan focused on infrastructure proposals that would support HCBS but require minimal state funding over time, while Ohio officials reported collaborating with their state legislature to develop proposed activities that would later be authorized.

Methodology

To conduct this work, we reviewed federal laws, prior GAO reports, and CBO estimated expenditures for the FMAP increases included in FFCRA and ARPA. We also reviewed related CMS guidance, including guidance regarding states’ eligibility for these funds and reporting of related expenditures, and interviewed CMS officials about steps they have taken to oversee states’ efforts to obtain the various FMAP increases. We also interviewed Medicaid officials from eight states on their experiences implementing the different FMAP increases and reviewed their HCBS spending plans.[80] These states were selected based on variation in their location, program size, and approved Medicaid flexibilities. Information from these states is not generalizable across all states. We also reviewed CMS data on COVID-19-related Medicaid expenditures, which we determined are sufficiently reliable for the purpose of this enclosure.

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 have ongoing work related to Medicaid and COVID-19, such as telehealth use during COVID-19, and will continue to review Medicaid program integrity.

GAO’s Prior Recommendations

The table below presents our past matter for consideration by Congress on Medicaid funding from the June 2020 CARES Act report:
Prior GAO Matter for Congressional Consideration Related to Medicaid Funding

Matter

Status

To help ensure that federal funding is targeted and timely, we urge Congress to use GAO's Federal Medical Assistance Percentage formula for any future changes to the Federal Medical Assistance Percentage during the current or any future economic downturn. (June 2020)

Open—Our past work has found that during economic downturns-when Medicaid enrollment can increase and state economies weaken-the formula, which is based on each state's per capita income, does not reflect current state economic conditions. No congressional action has been taken as of December 2021.
Source: GAO. | GAO-22-105291

Related GAO Product

Medicaid Eligibility: Accuracy of Determinations and Efforts to Recoup Federal Funds Due to Errors. GAO-20-157. Washington, D.C.: January 13, 2020.

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

Nutrition Assistance

The Food and Nutrition Service should develop a comprehensive strategy for its nutrition assistance programs during national emergencies and further assist states in their efforts to obtain eligibility data for the Pandemic Electronic Benefits Transfer program.

Entities involved: Food and Nutrition Service, within the Department of Agriculture

Recommendation for Executive Action

The Secretary of Agriculture should ensure that the Administrator of the Food and Nutrition Service (1) develops a comprehensive strategy for the agency’s nutrition assistance programs to respond to emergencies that includes lessons learned during the COVID-19 pandemic and a mechanism to periodically review and update the strategy, and (2) shares timely information with states and other stakeholders during development of the strategy to help inform their ongoing response to COVID-19.

The Secretary of Agriculture should ensure that the Administrator of the Food and Nutrition Service further assists state and local agencies in their efforts to obtain reliable and comprehensive eligibility data for the Pandemic Electronic Benefits Transfer program in order to determine eligibility and benefits amounts accurately.

The Department of Agriculture agreed with both recommendations.

Background

About 41.5 million individuals participated in the Supplemental Nutrition Assistance Program (SNAP) per month on average in fiscal year 2021, making it the largest federal nutrition assistance program. SNAP benefits totaled $107.9 billion that year, a new historic high for the program.[81] The Food and Nutrition Service (FNS), within the Department of Agriculture (USDA), administers SNAP and other programs, including the Pandemic Electronic Benefits Transfer program (Pandemic EBT); the Special Supplemental Nutrition Program for Women, Infants, and Children (WIC); and the Emergency Food Assistance Program (TEFAP).

Legislative and executive actions have resulted in increased funding for FNS’s nutrition assistance programs and provided flexibilities in how states administer some programs during the COVID-19 pandemic (see table for COVID-19 funding and expenditures for selected programs). For example, in March 2020, the Families First Coronavirus Response Act (FFCRA) authorized the issuance of SNAP emergency allotments—additional benefits on top of regular SNAP benefits—during the national COVID-19 public health emergency.[82] FFCRA also allowed FNS to adjust federal requirements for SNAP related to issuing benefits, reviewing applications, and reporting data. FNS approved 34 states’ requests to continue to take advantage of at least one adjustment, such as waiving certain interview requirements, through December 2021.

COVID-19 Funding and Expenditures for Selected Federal Nutrition Assistance Programs as of Nov. 2021
ProgramDescriptionTotal COVID-19 funding ($)aCOVID-19 expenditures as of Nov. 30 2021 ($)
SNAPProvides low-income individuals and households with benefits to purchase allowed food items and achieve a more nutritious diet. 16.8 billionb15.6 billion
Indefinite appropriationc15.0 billion
Pandemic EBTProvides households with children who would have received free or reduced-price school meals if not for school closures due to COVID-19, as well as eligible children in childcare, with benefits to purchase food.Indefinite appropriationd42.4 billion
WICProvides eligible low-income women, infants, and children up to age 5 who are at nutrition risk with nutritious foods to supplement diets, information on healthy eating, and referrals to health care.1.4 billion710.5 million
TEFAPProvides low-income individuals with groceries through food banks.1.25 billion1.1 billion
Legend: Pandemic EBT = Pandemic Electronic Benefits Transfer; SNAP = Supplemental Nutrition Assistance Program; TEFAP = the Emergency Food Assistance Program; WIC = Special Supplemental Nutrition Program for Women, Infants, and Children.
Source: GAO analysis of relevant provisions of the Families First Coronavirus Response Act; the CARES Act; the Consolidated Appropriations Act, 2021; and the American Rescue Plan Act of 2021 as well as information from the Food and Nutrition Service (FNS), within the Department of Agriculture. | GAO-22-105291

Note: This table provides information about selected programs and is not intended to provide comprehensive information about all federal nutrition assistance funding provided during the COVID-19 pandemic. For example, the Nutrition Assistance Program (not shown in the table above) provides block grants to Puerto Rico, American Samoa, and the Commonwealth of the Northern Mariana Islands to provide food assistance to low-income households and has expended $1.3 billion in COVID-19 funding through November 2021.
aAmounts shown from the Consolidated Appropriations Act, 2021 reflect amounts appropriated in Division N, pertaining to COVID-19 response and relief.
bThe $16.8 billion shown reflects total funding for SNAP provisions in COVID-19 relief laws that included a specific amount of funding. It does not include SNAP provisions from COVID-19 relief laws that included an indefinite appropriation. It also does not include SNAP emergency allotments, which are included in the regular annual SNAP appropriation, according to FNS.
cThe Consolidated Appropriations Act, 2021 provided an indefinite appropriation for certain provisions, including a SNAP benefit increase of 15 percent through June 2021. The American Rescue Plan Act of 2021 extended the increase through September 2021.
dThe Families First Coronavirus Response Act provided an indefinite appropriation for Pandemic EBT.

Overview of Key Issues

FNS lacks a comprehensive strategy for its nutrition assistance programs to respond to emergencies. As we have previously reported, FNS’s different nutrition assistance programs have varying eligibility requirements. In addition, programs vary in their capability to provide immediate aid in emergencies compared to their potential contributions to long-term recovery efforts. However, FNS does not have a documented strategy for how its different programs should respond to emergencies.

Several factors highlight the need for FNS to develop a comprehensive strategy for its response to the current pandemic and to future emergencies to help individuals and households maintain food security in times of heightened need. These factors include FNS’s (1) outdated pandemic plans; (2) new statutory authority to adjust program operations during the COVID-19 pandemic; (3) missed opportunities to coordinate with vendors across states; and (4) incomplete efforts to identify and incorporate lessons learned from the COVID-19 pandemic.

Outdated pandemic plans. At the onset of the COVID-19 pandemic, FNS had pandemic plans in place for several of its nutrition assistance programs, but the plans were outdated and did not always provide actionable guidance for FNS and state agencies.

FNS officials told us that the agency developed pandemic planning guidelines for SNAP in 2009 in response to the H1N1 influenza pandemic, but that it had not updated them until March 2020. When the COVID-19 pandemic emerged, the agency determined that some strategies included in the 2009 plan were not feasible. For example, officials said the 2009 plan directed states to operate Disaster SNAP in the event of a pandemic, but several factors impeded FNS’s ability to use this program in response to the COVID-19 pandemic. For instance, FNS officials said that during the COVID-19 pandemic, the Federal Emergency Management Agency did not issue any declarations for individual assistance under the Robert T. Stafford Disaster Relief and Emergency Assistance Act—a prerequisite for operating Disaster SNAP. FNS officials also said that Disaster SNAP is a short-term recovery program that typically issues only one month of benefits and that, during this pandemic, it would be more beneficial for eligible households to apply for SNAP—as opposed to Disaster SNAP—since they could receive multiple months of benefits.

FNS officials also confirmed that the agency developed pandemic planning guidelines for WIC and TEFAP in 2007 and 2009 respectively, and has not updated them. However, officials noted that the agency provided additional communications on WIC and TEFAP implementation to states and other stakeholders during the COVID-19 pandemic through its website, question and answer documents, and other technical assistance.

New statutory authority to adjust program operations. Provisions of COVID-19 relief laws provided FNS and states with new authority to adjust their administration of nutrition assistance during the pandemic. For example, throughout the COVID-19 pandemic, states were able to request from FNS various adjustments to federal requirements for SNAP and WIC, such as waiving certain requirements for in-person services.

COVID-19 relief laws did not provide additional authority for FNS or states to adjust TEFAP operations, which, according to officials from the American Commodity Distribution Association and Feeding America, caused challenges for some states. For example, states must monitor some TEFAP activities on site, such as food storage procedures in warehouses, according to FNS officials. State officials had to determine how to conduct on-site monitoring safely during the pandemic, including instances when there had been recent cases of COVID-19 among warehouse staff. American Commodity Distribution Association officials said FNS had communicated that guidance on this issue was forthcoming for several months in 2020, but ultimately FNS did not publish the guidance.

Given the lessons learned, FNS has the opportunity to examine how it was able to operate its programs in light of the statutory authority it received to adjust some program operations during the COVID-19 pandemic, including how such authority may have affected FNS’s and states’ emergency responses. By doing so, FNS could be positioned to request certain authority to help the agency respond efficiently to a future emergency.

Missed opportunities to coordinate with vendors across states. State agencies have relied on contracts with vendors to implement several aspects of the COVID-19 response for their nutrition assistance programs, according to officials from the American Public Human Services Association and Code for America. For example, all states needed to develop a process to implement the new Pandemic EBT program. FNS did not have a national contract with vendors that would have potentially allowed FNS to coordinate with states and vendors to procure goods or services that could apply across states, such as purchasing card stock for EBT cards that all states would need.

FNS officials acknowledged that, on occasion, states expressed concerns that competing with each other for limited resources required them to modify their timelines for SNAP and Pandemic EBT. This meant it took those states longer to implement the programs. However, FNS officials said that sharing resources or costs across states was not practical during COVID-19 because the agency had never done so in the past and speed was essential in FNS’s response to the pandemic. Officials also said that sharing resources or costs across states would have been logistically difficult and would have created challenges based on reporting and other requirements that could have further delayed implementation of nutrition assistance programs during COVID-19. Officials noted that FNS facilitated a decision between states and their EBT vendors about how they would add Pandemic EBT benefits to accounts as an example of how FNS’s national-level efforts attempted to create efficiencies for states and vendors implementing the program.

Incomplete efforts to identify lessons learned. FNS has identified and incorporated some lessons learned from earlier in the pandemic to adjust its current approach to responding to COVID-19, but has not yet done so extensively. For example, in November 2020, we reported that FNS initially required states to request extensions of certain SNAP adjustments each month, rather than offering them for multiple months—a process that created considerable uncertainty for states. In April 2021, FNS issued guidance on how states could request adjustments for multiple months through December 2021, or the month after the national COVID-19 public health emergency ends, whichever comes first. A SNAP official in one state noted that the multi-month approvals were a welcome change to FNS’s process and helped them operate SNAP effectively as the pandemic continued.

Similarly, we previously reported that the timing of FNS’s decisions about WIC waivers caused uncertainty among states, such as when local WIC offices would need to return to in-person services. In September 2020, FNS extended certain WIC waivers until 30 days after the COVID-19 public health emergency ends, which provided states greater clarity on waivers available for WIC. In September 2021, FNS further extended the expiration of certain WIC waivers until 90 days after the end of the public health emergency. FNS officials said the agency has also begun studying the use and effect of WIC waivers granted during the pandemic and plans to issue a report as early as 2022.

FNS officials described other key lessons learned from the COVID-19 pandemic that apply to its nutrition programs:
  • They said communication was essential and that, in the early months of the pandemic, the time it took USDA to finalize and communicate policies presented major challenges to those on the frontlines.
  • They also acknowledged that emergencies tend to exacerbate existing inequalities and made the response more difficult. They said that the pandemic disproportionately affected food insecurity for people of non-White races and ethnicities—disparities that are linked to long-standing, structural issues that they said FNS must be deliberate about addressing in the pandemic recovery and future reforms.

Though FNS has identified and incorporated some lessons learned from earlier in the pandemic to improve operations, the agency has not taken steps to do so comprehensively. Specifically:
  • Pandemic EBT: Officials from all five states we interviewed said FNS had not yet solicited feedback on Pandemic EBT lessons learned. FNS officials confirmed that the agency had not conducted formal data collection on lessons learned for the program, though officials noted they have collected some information on lessons learned through listening sessions, conference calls with regional groups of states, and working with states to develop their Pandemic EBT plans.
  • SNAP: Officials in four states said FNS had not yet solicited feedback on SNAP lessons learned, though FNS officials told us they have collected some anecdotal information from states on lessons learned and expect to learn more when states submit reports to FNS on the SNAP adjustments they used during the pandemic.
  • TEFAP: Feeding America and the American Commodity Distribution Association officials said they were not aware of FNS efforts to identify lessons learned for TEFAP during the pandemic, and FNS officials confirmed that the agency did not institute a formal process to gather information from TEFAP stakeholders.

Officials from the American Public Human Services Association also indicated that they were not aware of FNS efforts to engage stakeholders on lessons learned and said that FNS could be more proactive and strategic in this regard.[83]

According to FNS officials, the agency has not comprehensively identified lessons learned for its nutrition assistance programs because the COVID-19 pandemic is ongoing. Officials said the agency would likely conduct this effort after the COVID-19 pandemic has ended. However, as described above, in some instances FNS has been able to use lessons learned during COVID-19 to improve operations in real time. While the COVID-19 pandemic is ongoing, FNS has the opportunity to analyze how its programs have responded to the pandemic thus far and then take action to better support states in operating these programs and assist individuals and households in need of nutrition assistance.

USDA has strategic goals to ensure it delivers its programs efficiently and effectively and to provide all Americans access to a safe, nutritious, and secure food supply.[84] In addition, the Department of Homeland Security’s National Response Framework—a guide to how the nation responds to all types of disasters and emergencies—specifies that evaluation and continual process improvement are cornerstones of effective preparedness.[85]

With a comprehensive strategy for administering its nutrition assistance programs during crises, FNS would be better prepared to leverage the strengths of its programs and respond efficiently during future emergencies. A national strategy that includes lessons learned from the COVID-19 pandemic and a process to ensure FNS periodically reviews and updates the strategy could help FNS provide a quick and coordinated response to the ongoing pandemic and future emergencies. Implementing such a strategy could mitigate food insecurity and help ensure consistent access to safe and nutritious food for all Americans, including those disproportionately affected by the COVID-19 pandemic.

FNS has not provided sufficient assistance to state and local agencies to ensure they collect reliable and comprehensive eligibility data for Pandemic EBT. State SNAP agencies have encountered challenges obtaining reliable and comprehensive information regarding students’ eligibility to receive Pandemic EBT, according to FNS officials, but FNS has not provided sufficient assistance to help states overcome these challenges. Currently, state SNAP agencies issue Pandemic EBT benefits based on information obtained from states’ educational agencies on students’ eligibility to receive free or reduced-price meals through the National School Lunch Program (NSLP) and on school operating status.[86] Because state SNAP agencies are responsible for issuing benefits to eligible students, the SNAP agencies have collaborated with educational agencies to obtain data regarding Pandemic EBT eligibility. However, selected state SNAP agency officials have reported challenges to obtaining data through this process.[87] Specifically:
  • Challenges to data timeliness. SNAP officials we interviewed in selected states said that obtaining data from their state’s educational agency was a challenge that impeded their efforts to issue Pandemic EBT in a timely manner. For example, officials in one state said that, at the onset of the pandemic, a state law prohibited data sharing between the state educational agency and the state SNAP agency. FNS officials said challenges collecting eligibility data have led to delays in states issuing Pandemic EBT benefits to students—an issue that has led to students receiving Pandemic EBT benefits several months after they missed the school meals that those benefits were intended to replace. Code for America officials, who provided Pandemic EBT technical assistance to several states, said that delays in benefit issuance or challenges with incomplete data may disproportionately affect the most vulnerable, highest need families.
  • Challenges to data reliability. FNS officials said state SNAP agencies encountered challenges to obtaining reliable and comprehensive NSLP eligibility data and school operating status information from state educational agencies. Prior to the pandemic, state educational agencies did not track whether students were learning in-person, remotely, or via a hybrid model. State SNAP agencies needed this information to determine students’ eligibility and benefit amounts for Pandemic EBT accurately.[88]

Our review of 50 state Pandemic EBT plans found that state educational agencies’ capabilities in compiling students’ NSLP data and school operating status varied by schools, districts, and states. For example, a few states had existing systems—or created systems during the pandemic—that could centralize data on students’ NSLP participation and school operating status, whereas other states had antiquated systems that required manually tracking thousands of participating students. In one instance, a state SNAP official told us they contacted every school in their state directly to obtain individual spreadsheets of students eligible for Pandemic EBT. Code for America noted that issues with accuracy and reliability are pervasive in education data sets. Reliable and comprehensive NSLP data and school operating status information from state educational agencies can help state SNAP agencies confirm that (1) they have issued Pandemic EBT benefits to all eligible students, and (2) students received the correct amount of benefits.

Given these challenges, state SNAP officials we interviewed said they needed more assistance from FNS to help them obtain the data they need to accurately determine Pandemic EBT eligibility from state educational agencies. FNS officials said they posted approved Pandemic EBT plans online so states could see how other states were addressing data collection challenges. They also said FNS regional office staff convened states to share ideas. FNS officials acknowledged that states faced constraints identifying students who were eligible for Pandemic EBT, but said federal NSLP data cannot be used to determine Pandemic EBT eligibility because the data do not include student identifiers. FNS officials also said that FNS could do little to ensure states had correct data on Pandemic EBT-eligible students because ensuring the reliability of NSLP eligibility and school operating status data is a state and local responsibility.

FNS officials further noted that flexibilities allowing states to provide free school meals to all students for school years 2020-21 and 2021-22 may hinder states’ and school districts’ efforts to collect comprehensive data on NSLP eligibility. The officials said that parents or guardians may not realize that some students who do not receive SNAP but would otherwise meet Pandemic EBT eligibility requirements may not receive benefits if those students are not registered for NSLP. FNS allows school districts to use the most recent lists of children eligible for free or reduced-price school meals to determine Pandemic EBT eligibility. FNS guidance emphasizes that school districts must provide an opportunity for new students and those who have become newly income-eligible for free or reduced-price school meals to establish their eligibility. However, given that students can still receive free meals without submitting new applications, parents of many students eligible for Pandemic EBT may not have been actively encouraged to provide the information needed to access benefits.

As mentioned before, USDA has strategic goals to ensure it delivers its programs efficiently and effectively and to provide all Americans access to a safe, nutritious, and secure food supply. Furthermore, Standards for Internal Control in the Federal Government state that management should use quality information to achieve its objectives. According to these standards, quality information is appropriate, accurate, current, complete, and provided on a timely basis. While state educational agencies directly manage Pandemic EBT eligibility data, FNS should take steps to improve the reliability of the data to ensure program integrity and meet programmatic goals. For example, FNS could provide additional guidance or templates to state and local educational agencies to help them collect the specific data needed for Pandemic EBT.

By providing further assistance to states and local agencies to collect reliable and comprehensive data, FNS has the potential to improve students’ and their families’ access to Pandemic EBT as well as ensure program integrity through accurately determining eligibility and benefit amounts. For example, FNS may be able to alleviate significant delays in issuing Pandemic EBT benefits moving forward to help ensure the program is operating efficiently and effectively and that participants receive benefits in a timely manner. Also, FNS can have assurance that states have identified all eligible students for Pandemic EBT and that only eligible students are receiving benefits.

FNS has determined that Pandemic EBT is at high-risk for improper payments and is taking measures to mitigate risks. In summer 2021, FNS assessed Pandemic EBT for susceptibility to significant improper payments. Similar to what we reported in July 2021, FNS found that some factors indicated the potential for susceptibility to significant improper payments, including that eligibility decisions and payments are made by state or local government agencies, a risk factor noted in the Payment Integrity Information Act of 2019. According to FNS officials, provisions of FFCRA encouraged states to use the best feasible data to issue Pandemic EBT benefits in a timely manner, and FFCRA does not demand or expect precision in identifying eligible children or calculating benefit amounts.

FNS’s Office of the Chief Financial Officer has reviewed FNS’s improper payment risk assessment for Pandemic EBT and found the program to be at high-risk for improper payments. This designation triggered several improper payment reporting deliverables that will be due throughout fiscal year 2022, according to FNS. Additionally, FNS officials said an FNS workgroup has developed a protocol to provide oversight of state agencies for Pandemic EBT. The workgroup reviewed six states using the protocol in August and September 2021, and will use that information for an internal report on common strengths and weaknesses across the states. FNS officials said the report will also inform any additional mitigation and corrective action necessary for Pandemic EBT. FNS officials noted that the protocol may benefit the agency’s administration of other emergency programs or a future permanent program modeled on Pandemic EBT.

FNS continues to modernize WIC to help promote access to benefits. FNS officials provided updates on several ongoing WIC efforts during the pandemic.

WIC Task Force. The Task Force submitted a report to USDA on September 30, 2021, that recommended (1) use of online ordering and purchasing that follows commercial models and best practices, and (2) proposed regulatory changes that will enhance innovation and reduce barriers to online shopping.[89] USDA subsequently submitted a report to Congress that included a plan to carry out the recommendations received and an assessment of whether legislative changes are necessary to address such recommendations.[90] National WIC Association officials said WIC has consistently trailed behind SNAP in offering online purchasing because the statute and regulations governing WIC generally prohibit states from allowing transactions without the physical presence of a client and cashier.[91]

WIC benefit increase. USDA increased the cash-value voucher for fruits and vegetables in fiscal year 2021, with a cost of $114.7 million.[92] This increased benefit expired on September 30, 2021; however, the Extending Government Funding and Delivering Emergency Assistance Act temporarily increased the WIC cash-value voucher again.[93] National WIC Association officials said that maintaining this increased benefit is important because it has helped keep participants on WIC, and that consuming more fruits and vegetables is likely to provide health benefits.

WIC program modernization. FNS conducted more than 30 listening sessions with program stakeholders, such as state and local agencies and WIC recipients, and FNS shared an investment framework with state agencies to guide the use of $390 million in American Rescue Plan Act of 2021 (ARPA) funds.[94]

Return to in-person WIC operations. As of December 2021, 88 of the 89 WIC state agencies were still using the physical presence waiver, which allows agencies to deliver WIC services remotely, though some states were offering both in-person and remote appointments.[95] According to FNS officials, challenges state agencies face in reopening in-person services include participants’ concern about coming into WIC clinics, especially with children who are too young to be vaccinated against COVID-19, as well as clinic staff’s hesitancy to return to an office to provide services.

FNS continues to face challenges operating TEFAP, but added a fresh produce option and funds to increase access. FNS officials provided updates on several ongoing TEFAP efforts during the pandemic.

Canceled TEFAP orders. Canceled TEFAP orders due to pandemic-induced supply chain issues continue to be a challenge for FNS and states. FNS data for fiscal year 2021 show that 22 percent of TEFAP orders were canceled—totaling about 13,000 truckloads with a value of nearly $540 million.[96]

TEFAP fresh produce initiative. Forty-four state agencies ordered about 1.7 million TEFAP mixed fresh produce boxes for delivery to states and food banks from June to December 2021, with an estimated total value of $13 million. FNS expects to continue offering these boxes into fiscal year 2022. Feeding America and the American Commodity Distribution Association support FNS continuing the fresh produce initiative. Food banks prefer purchasing fresh produce in bulk because bulk purchases result in cost savings, streamlined distribution, efficient storage, and greater acceptance of produce from participating families.

Additional funds to support emergency feeding programs. As a result of ARPA, in June 2021, FNS announced its plan to provide $1 billion to support and expand the emergency food network, including $500 million for TEFAP food, $100 million for infrastructure needs, and $400 million for cooperative agreements for state agencies to support local and regional procurement.[97] FNS officials said these funds will support local organizations and rural, remote, and underserved communities. According to Feeding America and American Commodity Distribution Association officials, TEFAP is a critical part of how food banks provide emergency food assistance, and is particularly important in rural communities, where families may have limited access to resources, especially during the pandemic.

Methodology

We reviewed FNS data on program participation through September 2021 that were released in December 2021 and FNS data on expenditures as of November 30, 2021—the most recent data available at the time of our analysis. We determined these data were sufficiently reliable for our purposes by reviewing program documentation, discussing the data with knowledgeable FNS officials, and conducting manual testing for outliers or other errors.

We interviewed FNS officials, as well as SNAP officials in five states—California, Illinois, Louisiana, Montana, and Virginia—selected for a variety of factors, including states’ overall SNAP participation rates, requests for certain SNAP adjustments during the pandemic, and geographic diversity. In these interviews, we discussed experiences administering nutrition assistance programs during the pandemic and FNS’s guidance and assistance to states. We also interviewed officials from the American Commodity Distribution Association, the American Public Human Services Association, Code for America, Feeding America, and the National WIC Association. These organizations represent state and local stakeholders who have implemented nutrition assistance programs during the pandemic. Finally, we reviewed relevant federal laws, FNS guidance, and relevant documents.

Agency Comments

We provided a draft of this enclosure to USDA and the Office of Management and Budget (OMB) for review and comment. USDA agreed with both recommendations. With regard to the first recommendation, USDA emphasized that the department must balance developing a comprehensive strategy with the resources needed for responding to the ongoing COVID-19 pandemic. USDA noted that it would analyze lessons learned during the pandemic based on input from states and other stakeholders to implement short-term solutions, which will inform the department’s development of a long-term, comprehensive strategy. With regard to the second recommendation, USDA noted that it would focus its efforts on facilitating the transfer of eligibility data for child nutrition programs across state and local agencies to support the administration of future emergency programs and USDA’s permanent nutrition assistance programs. The department noted that it would work to develop tools or processes that states may adopt at their option, given USDA’s limited authority to impose data management solutions on state and local agencies.

USDA also provided technical comments, which we incorporated as appropriate. OMB did not provide comments.

GAO’s Ongoing Work

We will continue to monitor program integrity in FNS’s nutrition assistance programs, as well as the agency’s efforts to develop a comprehensive strategy for its nutrition assistance programs to respond to emergencies and the agency’s work to ensure states have sufficient, reliable data to implement Pandemic EBT accurately and equitably.

GAO’s Prior Recommendations

The table below presents our recommendation on nutrition assistance from a prior bimonthly CARES Act report.
Prior GAO Recommendation Related to COVID-19 Nutrition Assistance

Recommendation

Status

The Secretary of Agriculture should ensure that the Administrator of the Food and Nutrition Service (FNS) (1) provides sufficient context to help stakeholders and the public understand and interpret data on federal nutrition assistance programs during the pandemic and (2) discloses potential sources of error that may affect data quality during the pandemic, such as manual processing. For example, the agency could publish key information from its internal communications plan that it developed for the January 2021 data release and include additional table notes in subsequent data releases to help explain these issues. (March 2021 report)

Closed—addressed. FNS generally agreed with this recommendation and took action to address it. In March 2021, FNS reconfigured its data system so that manual processing would no longer be necessary. By doing so, FNS has removed potential sources of error that affected data quality earlier in the COVID-19 pandemic. The agency also added several table notes to data it released in April 2021 to help provide stakeholders and the public with sufficient context to understand and interpret key data.
Source: GAO. I GAO-22-105291

Related GAO Products

National Preparedness: Additional Actions Needed to Address Gaps in the Nation’s Emergency Management Capabilities. GAO-20-297. Washington, D.C., May 4, 2020.

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

Contact information: Kathryn A. Larin, (202) 512-7215, larink@gao.gov

Unemployment Insurance Programs

Weekly claims for CARES Act unemployment insurance benefits declined considerably after those programs expired in September 2021, and regular unemployment insurance claims were generally similar to prepandemic levels in November and December. States continued to address challenges resulting from historic numbers of claims during the COVID-19 pandemic—such as delayed benefit payments and increased amounts of overpayments—that have future implications.

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. 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, which have been provided by state UI programs since before the CARES Act was enacted, are funded primarily through state taxes levied on employers.[98] These benefits are intended to replace a portion of a claimant’s previous employment earnings, according to DOL.

The CARES Act created three federally funded temporary UI programs that expanded benefit eligibility and enhanced benefits during the COVID-19 pandemic. These programs, which were amended by the Consolidated Appropriations Act, 2021 and the American Rescue Plan Act of 2021, expired in September 2021. About half of the states, however, ended their participation in at least one of these programs in June or July, according to DOL. These temporary UI programs were:
  1. Pandemic Unemployment Assistance (PUA), which 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.[99]
  2. Federal Pandemic Unemployment Compensation (FPUC), which generally authorized an additional weekly benefit for individuals who were eligible for weekly benefits under the regular UI or CARES Act UI programs.[100]
  3. Pandemic Emergency Unemployment Compensation (PEUC), which generally authorized additional weeks of UI benefits for those who had exhausted their regular UI benefits.[101]

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 and expired in September 2021.[102] According to DOL, the MEUC program was intended to cover regular UI claimants whose benefits did 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.[103]

DOL required states to process and pay PUA, FPUC, PEUC, and MEUC benefits to eligible claimants for all weeks of unemployment before the programs ended due to early termination or expiration. In August 2021, the Secretary of the Treasury and the Secretary of Labor issued a joint letter to Congress affirming that states and territories also had the option to use Coronavirus State and Local Fiscal Recovery Funds from the American Rescue Plan Act of 2021 to provide additional weeks of income support to workers whose benefits had expired in September 2021 and to workers who were not covered by the regular UI program. However, DOL officials told us they were not aware of any states or territories that had used this funding for these purposes as of November 2021. Officials said one explanation may be that some states had already committed these funds for other purposes. They noted that states do not report to DOL on how they use these funds, because the funds are administered by the Department of the Treasury.

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.[104]

Because of high numbers of UI claims during the pandemic, some states have held substantial federal loans to pay UI benefits.[105] As of December 31, 2021, nine states and one territory held federal loans totaling about $39.9 billion, which is two states less and approximately $5.4 billion less than we reported in October 2021.[106] Following guidance from Treasury, some states used Coronavirus Relief Fund payments to reduce or prevent federal loan balances.[107] In addition, states may use Coronavirus State and Local Fiscal Recovery Funds from the American Rescue Plan Act of 2021 to restore their UI trust funds or to repay federal loan balances.[108] As of November 2021, interim reports for some states indicated that they planned to contribute some of these funds to their UI trust funds.[109]

Overview of Key Issues

Claims for CARES Act UI benefits declined considerably after those programs expired, and claims for regular UI benefits were generally similar to prepandemic levels in November and December 2021. After the CARES Act UI programs expired in early September 2021, initial PUA claims fell nationwide from 102,521 in late August to 17,267 in late September, and continued PUA and PEUC claims fell from about 9.3 million to 989,538 during that time, according to DOL.[110]

Initial claims for regular UI benefits in November and December 2021 were generally similar to prepandemic levels. During that time, the number of regular UI initial claims submitted each week ranged from about 8 percent higher to about 17 percent lower than the number submitted during the corresponding weeks in 2019. For example, during the week ending on December 18, 2021, DOL reported that 255,021 initial claims for regular UI benefits were submitted nationwide, which was about 11 percent lower than the number submitted during the corresponding week 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. Continued claims for regular UI benefits were similar to prepandemic levels from mid-November through mid-December 2021. During that time, the number of regular UI continued claims ranged from about 12 percent higher to about 8 percent lower than the number submitted during the corresponding weeks in 2019. For example, during the week ending on December 18, 2021, DOL reported that about 1.6 million continued claims for regular UI benefits were submitted nationwide, which was about 8 percent lower than the number submitted during the corresponding week in 2019.[111]

During the pandemic, the number of regular UI continued claims submitted each week declined overall after the peak in late April and early May 2020 through December 2021 (see figure). Although some of the decline in regular UI claims 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—prior to the program’s expiration in September 2021—or other benefits.

Weekly Continued Claims Submitted Nationwide for Regular UI, PEUC, and Extended Benefits, Mar. 1, 2020–Dec.18, 2021

Note: After exhausting regular UI benefits—generally available for up to 26 weeks in most states, according to the Department of Labor (DOL)—eligible individuals were generally able to apply for (1) PEUC; then (2) the Extended Benefits program, if activated in a state; and then (3) Pandemic Unemployment Assistance (PUA) benefits, in certain circumstances. PEUC and PUA expired on September 6, 2021. The weekly counts of continued claims shown are not seasonally adjusted. Counts are from DOL data that include any adjustments submitted by states as of January 6, 2022. All 53 states and territories reported regular UI claims in each week shown. The number of states and territories reporting PEUC claims varied by week; for example, fewer than half of the states and territories reported data before mid-May 2020 and at least 50 states and territories reported data each week from mid-July 2020 through mid-June 2021, when certain states began terminating their PEUC programs. The number of states reporting Extended Benefits claims each week varied, partly on the basis of the number of states with the program activated each week. The Extended Benefits program, which existed before the pandemic, is activated in states during periods of high unemployment, according to DOL.

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 throughout the pandemic cannot be drawn from data on continued claims.

In fall 2021, the timeliness of regular UI first payments remained lower than earlier in the year, and some claimants still face substantial delays in receiving benefits. As we have previously reported, the percentage of regular UI first payments made within 3 weeks has fluctuated during the pandemic.[112] First-payment timeliness nationwide improved from fall 2020 through January 2021, after a substantial decline in timeliness early in the pandemic due to the historically high numbers of claims and the resulting processing backlog. Subsequently, regular UI first-payment timeliness nationwide fluctuated from February through April 2021, then generally declined through October 2021, and then increased in November 2021.[113] First-payment timeliness was about 16 percentage points lower in November than in January 2021 (see figure).

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

Note: We analyzed UI first-payment timeliness data that states had reported to the Department of Labor (DOL) as of January 3, 2022. At that point, all 53 states and territories had reported data for November 2021 and prior months. One of DOL’s core performance measures is the percentage of all regular UI first payments made within either 14 or 21 days of the first week of benefits for which claimants are eligible, depending on whether the state requires that individuals who are otherwise eligible for benefits serve a waiting period—generally 1 week—before receiving benefits. We focus on payments made within 21 days because in guidance released at the start of the pandemic, DOL recommended that states consider temporarily waiving their waiting week requirements. According to DOL, states must pay at least 87 percent of regular UI claims within 14 or 21 days to reach an acceptable level of performance.

In some states, many regular UI claimants continue to face delays before receiving their first payments. For example, in 15 states, at least half of regular UI claimants who received their first benefits in November 2021 had been waiting longer than 3 weeks. In addition, nationwide, about 23 percent of regular UI claimants who received their first benefits in November 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 had been waiting longer than 10 weeks.

In November 2021, DOL officials said that the decrease in first-payment timeliness in August 2021 was likely caused by the same reasons as earlier declines in timeliness that we previously reported. Specifically, DOL officials previously said that 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 requiring adjudication and appeals, decreased numbers of staff, and enhanced fraud prevention efforts that have resulted in more adjudication issues for states to resolve.

States have continued to identify overpayments in the regular UI and CARES Act UI programs, and 36 states have reported data to DOL on recovered PUA overpayments. DOL reported that as of January 3, 2022, states and territories had identified approximately $27.1 billion in overpayments made in UI programs during the first 6 quarters of the pandemic combined (April 2020 through September 2021).[114] These reported overpayments are not necessarily a result of fraud, though some may be.[115] This $27.1 billion in reported overpayments includes
  • $10.4 billion in PUA overpayments,[116]
  • $8.5 billion in FPUC overpayments,[117]
  • $6.9 billion in regular UI and Extended Benefits overpayments, and
  • $1.3 billion in PEUC overpayments.[118]

States and territories reported recovering about $0.5 billion in the PEUC and FPUC programs combined from April 2020 through September 2021 (i.e., during the 6 quarters those programs existed).[119] 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 January 3, 2022, 36 states had reported some data on recovered PUA overpayments, reporting a combined total of about $1.3 billion recovered from April 2020 through September 2021.[120]

When overpayments are not due to fraud, states and territories may waive and not recover them in certain circumstances.[121] States and territories reported waiving about $0.2 billion of regular UI, Extended Benefits, PEUC, and FPUC overpayments during the first 6 quarters of the pandemic combined (April 2020 through September 2021).[122] 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.[123] As of January 3, 2022, 21 states had reported some data on waived PUA overpayments, reporting a combined total of about $103.6 million waived from April 2020 through September 2021.[124]

Because of the limited number of states and territories that had reported data on recovered and waived PUA overpayments to DOL as of January 3, 2022, our related recommendations remain 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 overpayments that are due to fraud—a subset of the total overpayment amounts.[125] During the first 6 quarters of the pandemic combined (April 2020 through September 2021), states and territories reported that about $2.3 billion in overpayments they had identified resulted from fraud across the UI programs, including about $1 billion from PUA, $791 million from FPUC, $426 million from the regular UI and Extended Benefits programs, and $63 million from PEUC.[126] However, according to DOL, states do not report such overpayments until investigations are complete and fraud has been confirmed, which may take a long time. As a result of these ongoing investigations, increasing amounts of overpayments due to fraud could be reported in the coming months.

In addition to reporting overpayments, 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.[127] According to OMB’s paymentacccuracy.gov, DOL reported an estimated improper payment amount of $78.1 billion with an estimated improper payment rate of about 19 percent for fiscal year 2021. According to DOL officials, the estimated improper payment amount includes the regular UI, Extended Benefits, PEUC, and FPUC programs.

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. Officials said they are exploring methods to estimate improper payments for PUA that will not be overly burdensome for states. DOL officials stated that they are required to submit the improper payment estimation methodology to OMB by June 2022, and they plan to include the estimates in DOL’s fiscal year 2022 agency financial report.[128]

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.

DOL continues to address potential fraud in the UI programs and is also taking steps to address equitable access to UI benefits and timely payment of those benefits. In fall 2021, DOL continued implementing its plan for using $2 billion in funding provided by the American Rescue Plan Act of 2021 to combat potential UI fraud, promote equitable access to UI benefits, and ensure timely payment of those benefits. As we reported in October 2021, DOL’s plan includes: 1) sending experts directly to states to help them address challenges related to fraud, benefit access, and benefit timeliness, 2) providing states with grants to combat potential fraud and address equity, 3) supporting states in modernizing their IT systems, and 4) awarding purchase agreements to vendors that can assist states in preventing identity fraud.[129] In fall 2021, agency officials said that DOL had taken the following actions in these areas:
  • Deployed expert teams to six states, and began deploying expert teams to six others. According to DOL officials, as of the end of October 2021, teams of experts in fraud, timeliness, technology, and equity had finished gathering information from the first six states that volunteered to participate—Colorado, Kansas, Nevada, Virginia, Washington, and Wisconsin—and were working with DOL and the states to finalize recommendations. Officials said that expert teams had also held initial meetings with four of six additional states that had volunteered to participate: Alabama, Connecticut, Iowa, Kentucky, Nebraska, and Pennsylvania. As this work continues, officials said they plan to use the expert teams’ findings to identify best practices and solutions for common challenges, and make them available as a resource for all states. In November 2021, DOL announced the availability of up to $200 million in grant funding to support states in improving UI systems and processes by implementing the expert teams’ recommendations following a consultative assessment.[130]
  • Awarded grants to states to strengthen their efforts to address potential fraud and recover overpayments, and solicited grant applications from states to address equity issues. As we previously reported, DOL announced grant opportunities for states to address potential fraud and recover overpayments in their UI programs.[131] According to DOL officials, DOL awarded a total of about $94 million in these grants in 2021, including grants to 55 states, territories, and the District of Columbia for PUA and to 50 states, territories, and the District of Columbia for PEUC.[132] In addition, DOL announced that it had awarded a total of nearly $134 million to 50 states, territories, and the District of Columbia to combat potential fraud in all UI programs. DOL also solicited grant applications from states 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, and eliminating administrative barriers to benefit applications.[133] States seeking these grants were required to identify the equity gaps they planned to address and the metrics they planned to use to measure improvement in equitable access. In October 2021, DOL officials said they planned to review states’ applications to ensure that states planned to use these funds for allowable purposes and had identified sufficient metrics before they awarded these grants.
  • Began developing modular technology solutions and a UI customer service blueprint. In November 2021, DOL officials said they had begun working with OMB’s U.S. Digital Service to develop modular technology solutions that can be integrated with state IT systems. Officials said they planned to begin pilot testing the first module, which is focused on the claimant experience, with states in February or March of 2022. In December 2021, DOL announced that Arkansas and New Jersey would be the first two states to participate in the pilot project.[134] Officials noted that they are also working with the U.S. Digital Service to develop a blueprint for the UI customer experience.
  • Addressed identity-related fraud by issuing instructions to states on accessing identity verification and fraud protection services and working with the Social Security Administration to establish a secure incarceration data exchange. As we previously reported, DOL officials told us that they had awarded purchase agreements to three vendors that states can use to combat identity-related fraud. In September 2021, DOL issued instructions to states on how to use DOL’s blanket purchase agreements to order the identity verification and fraud protection services provided by these vendors.[135] As a separate action, DOL officials said they signed a Memorandum of Understanding with the Social Security Administration in October 2021 to establish a secure incarceration data exchange that will allow states to cross-match UI claims data with incarceration records when determining the eligibility of UI claimants. That month, DOL announced the establishment and availability of this secure incarceration data exchange, and provided guidance for states on how to access it.[136]

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 January 6, 2022. We reviewed relevant federal laws and DOL guidance. We interviewed DOL officials about program data and agency actions, and we also interviewed DOL Office of Inspector General officials. 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

In our ongoing work, we continue to examine a variety of UI issues, including:
  • the implementation and administration of the 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;
  • selected claimants’ experiences during the pandemic, including their experiences with accessing the CARES Act UI programs;
  • selected states’ data on PUA benefit receipt, by race and ethnicity;
  • programmatic risks and challenges for the regular UI program as well as options for program transformation; and
  • UI IT systems modernization.

GAO’s Prior Recommendations

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

Recommendation

Status

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 (October 2021 report).

Open–not addressed. The Department of Labor (DOL) neither agreed nor disagreed with our recommendation. In December 2021, DOL reiterated that its Chief Financial Officer and the Employment and Training Administration’s Assistant Secretary are responsible for risk management in the UI program. We maintain that, consistent with our Fraud Risk Framework, it is important for DOL to clearly document this designation and these officials’ antifraud responsibilities.

The Secretary of Labor should identify inherent fraud risks facing the unemployment insurance program (October 2021 report).

Open–not addressed. DOL neither agreed nor disagreed with our recommendation. In December 2021, DOL reiterated that its current process allows it to identify, evaluate, and manage risks. However, DOL also said it will incorporate the recommended practices and approaches from the Fraud Risk Framework in its risk assessment activities moving forward. We will continue to monitor DOL’s fraud risk assessment activities.

The Secretary of Labor should assess the likelihood and impact of inherent fraud risks facing the unemployment insurance program (October 2021 report).

Open–not addressed. DOL neither agreed nor disagreed with our recommendation. In December 2021, DOL reiterated that its current process allows it to identify, evaluate, and manage risks. However, DOL also said it will incorporate the recommended practices and approaches from the Fraud Risk Framework in its risk assessment activities moving forward. We will continue to monitor DOL’s fraud risk assessment activities.

The Secretary of Labor should determine fraud risk tolerance for the unemployment insurance program (October 2021 report).

Open–not addressed. DOL neither agreed nor disagreed with our recommendation. In December 2021, DOL reiterated that its current process allows it to identify, evaluate, and manage risks. However, DOL also said it will incorporate the recommended practices and approaches from the Fraud Risk Framework in its risk assessment activities moving forward. We will continue to monitor DOL’s fraud risk assessment activities.

The Secretary of Labor should examine the suitability of existing fraud controls in the unemployment insurance program and prioritize residual fraud risks (October 2021 report).

Open–not addressed. DOL neither agreed nor disagreed with our recommendation. In December 2021, DOL reiterated that its current process allows it to identify, evaluate, and manage risks. However, DOL also said it will incorporate the recommended practices and approaches from the Fraud Risk Framework in its risk assessment activities moving forward. We will continue to monitor DOL’s fraud risk assessment activities.

The Secretary of Labor should document the fraud risk profile for the unemployment insurance program (October 2021 report).

Open–not addressed. DOL neither agreed nor disagreed with our recommendation. In December 2021, DOL reiterated that its current process allows it to identify, evaluate, and manage risks. However, DOL also said it will incorporate the recommended practices and approaches from the Fraud Risk Framework in its risk assessment activities moving forward. We will continue to monitor DOL’s fraud risk assessment activities.

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

Open—partially addressed. DOL agreed with our recommendation and on September 3, 2021, issued PUA program guidance and updated instructions for states to report PUA overpayments waived. As of January 3, 2022, 21 states had reported some data on PUA overpayments waived. We will continue to monitor state reporting of PUA overpayments waived.

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

Open—partially addressed. DOL agreed with our recommendation and on January 8, 2021, issued PUA program guidance and updated instructions for states to report PUA overpayments recovered. As of January 3, 2022, 36 states had begun reporting some data on the amount of PUA overpayments recovered. Sustained reporting by more states is needed to help inform DOL, policymakers, and the public about the amount of PUA overpayments states have recovered. We will continue to monitor state reporting of PUA overpayment recovery data.

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

Open—partially addressed. DOL partially agreed with our recommendation. Specifically, DOL agreed to pursue options to report the actual number of distinct individuals claiming UI benefits. However, DOL did not agree with the recommended retroactive effective date of the reporting. In a letter dated March 30, 2021, DOL stated that it had begun developing a new state report that would capture data related to distinct individuals claiming regular UI benefits; DOL estimated that this data collection might begin in early 2022.

In November 2021, DOL officials said their work on the new state report that would capture data related to distinct individuals claiming regular UI benefits had not yet been completed, due to other competing priorities. In January 2022, officials said they plan to have the new data collection ready for submission for public notice and comment early in 2022.

DOL also reiterated its concerns about the feasibility of states’ reporting this information retroactively, including for the pandemic UI programs, without detracting from their primary obligation for timely and accurate claims processing.

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

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

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

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

Closed—addressed. DOL issued guidance on August 12, 2020, clarifying that individuals working full time and being paid through PPP are not eligible for UI. The guidance also clarified that individuals working part time and being paid through PPP would be subject to certain state policies, including state policies on partial unemployment, to determine their eligibility for UI benefits. Further, the guidance clarified that individuals being paid through PPP but not performing any services would similarly be subject to certain provisions of state law. Finally, the guidance noted that an individual receiving full compensation would be ineligible for UI.
Source: GAO. I GAO-22-105291

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) 512-4769, costat@gao.gov and Seto J. Bagdoyan, (202) 512-6722, bagdoyans@gao.gov

Emergency Rental Assistance

The Department of the Treasury has not yet designed processes, such as post-payment reviews or recovery audits, for identifying and recovering overpayments made by grantees to households, landlords, or utility providers to help reasonably assure payment integrity for the Emergency Rental Assistance programs, and the Office of Management and Budget has not yet issued guidance on the programs in the Compliance Supplement for single audits.

Entities involved: Department of the Treasury and Office of Management and Budget

Recommendations for Executive Action

The Secretary of the Treasury should design and implement processes, such as post-payment reviews or recovery audits, to help ensure timely identification and recovery of overpayments made by grantees to households, landlords, or utility providers in the Emergency Rental Assistance programs. Treasury agreed with this recommendation.

The Director of the Office of Management and Budget, in consultation with the Secretary of the Treasury, should issue guidance now or in the near future on the Emergency Rental Assistance programs in the Office of Management and Budget’s Compliance Supplement for single audits to help ensure that auditors consistently and timely identify deficiencies in grantees’ compliance with the programs’ requirements. The Office of Management and Budget neither agreed nor disagreed with this recommendation.

Background

In response to concerns about the economic effects of the COVID-19 pandemic on renters and their landlords, the Department of the Treasury was appropriated a total of $46.55 billion for two Emergency Rental Assistance (ERA) programs—referred to by Treasury as ERA1 and ERA2—which Treasury disburses through grants to specified grantees to make payments as appropriate to landlords, utility providers, and eligible renter households. Specifically, in December 2020, the Consolidated Appropriations Act, 2021 appropriated about $25 billion for Treasury to make payments to states (including the District of Columbia), local governments with more than 200,000 residents, U.S. territories, Indian tribes or their tribally designated housing entities, as applicable, and the Department of Hawaiian Home Lands. The act, as amended, provides for the funds in ERA1 to remain available to grantees until September 30, 2022.[137] In March 2021, the American Rescue Plan Act of 2021 appropriated about $21.55 billion in additional funding for Treasury to disburse through ERA2 to grantees, to remain available until September 30, 2025.[138]

ERA provides funds to grantees to administer programs to assist eligible renter households that are unable to pay rent, utilities, or other expenses due, directly or indirectly, to the COVID-19 pandemic.[139] The table below summarizes the amount of Treasury’s ERA appropriations, disbursals, and spending as of November 30, 2021.
Summary of Funding for Emergency Rental Assistance (ERA) Appropriated, Disbursed, and Spent as of November 30, 2021 (dollars in billions)

Law

Amount appropriated to Treasury

Amount disbursed to grantees

Amount spent by grantees

Consolidated Appropriations Act, 2021 (ERA1)

$25.00

$24.99

$14.58

American Rescue Plan Act of 2021 (ERA2)

$21.55

$12.69

$2.81

Total

$46.55

$37.68

$17.39
Source: GAO analysis of the Consolidated Appropriations Act, 2021; the American Rescue Plan Act of 2021; and Department of the Treasury (Treasury) data. | GAO-22-105291

Note: The amounts disbursed are through November 30, 2021. For ERA1, the funding remains available until September 30, 2022, and the amount spent includes expenditures for financial assistance to households through November 30, 2021, as well as payments for administrative costs, housing stability services, Indian tribes or their tribally designated housing entities, and the Department of Hawaiian Home Lands through September 30, 2021. For ERA2, the funding remains available until September 30, 2025, and the amount spent includes total expenditures through November 30, 2021. 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 both substantially expended their ERA1 allocation and obligated at least 75 percent of their initial ERA2 allocation.

Treasury awards ERA funds to states, local governments, and U.S. territories based primarily on their population, as required by law.[140] Landlords, renter households, and utility providers can then apply to grantees for financial assistance.[141] In general, eligible households must (1) have qualified for unemployment insurance benefits or experienced a financial hardship due to the COVID-19 pandemic, (2) demonstrate a risk of housing instability or homelessness, and (3) meet certain household income requirements.

Payment integrity is the process of ensuring that a payment is proper, including the legality, propriety, validity, and accuracy of payments. Payment integrity controls are designed to help the government manage risks, including the risk that grantees (1) make payments to ineligible recipients, (2) make payments in incorrect amounts, and (3) make payments as a result of potential fraud.

Preventive control activities generally offer the most cost-efficient use of resources to help ensure payment integrity, since they enable managers to avoid a costly and inefficient “pay-and-chase” post-payment process.[142] However, on occasion, factors beyond the direct control of agencies, such as the emergency nature of the ERA programs and the challenges that it created for Treasury and grantees, may limit the extent to which certain control activities are appropriate and feasible for a program. As we reported in October 2021, some grantees have experienced overwhelming demand for ERA1 funds and lacked sufficient staff capacity to address all applications in a timely manner. Challenges for grantees also include developing new policies and procedures, hiring additional staff, and developing electronic application and data collection systems. When agencies do not establish strong preventive controls, especially in eligibility-based programs such as ERA, strong post-payment controls can help ensure timely identification and recovery of overpayments.

The Single Audit Act establishes requirements for audits of states, local governments, and other non-federal entities that receive funding from federal financial assistance programs (e.g., grants). Single audits help federal agencies identify deficiencies in the grantee’s compliance with applicable provisions of laws, regulations, contracts, or grant agreements and in the grantee’s financial management and internal controls.

Overview of Key Issues

Identification and recovery of overpayments. Treasury has not yet designed processes to identify and recover overpayments made by grantees, such as post-payment reviews or recovery audits, to help ensure payment integrity for the ERA programs. A post-payment review occurs after a payment has been made and is designed to determine whether the payment was correct or whether there was an over or underpayment. According to guidance from the Office of Management and Budget (OMB), a recovery audit is a control process designed to identify and recapture overpayments, and, as such, is a management function and responsibility.

According to Treasury officials, the department is designing processes to gather data about recipients and overcome challenges in data access and data gathering. However, Treasury has not yet designed a post-payment review process to validate ERA eligibility claims and payments made by grantees. Additionally, according to officials, Treasury plans to implement a recovery audit process; however, the department has not yet established such a recovery audit process to help ensure timely identification and recovery of overpayments made by grantees to households, landlords, or utility providers in the ERA programs. Also, Treasury officials indicated that these payments may be tested as part of future single audits.

Under the Payment Integrity Information Act of 2019 (PIIA), programs and activities that expend $1 million or more in a fiscal year are required to perform recovery audits, if conducting such audits is cost-effective. OMB guidance states that when determining the cost-effectiveness of a recovery audit, an agency should assess the likelihood that the expected recoveries will be greater than the costs incurred to identify and recover the overpayments. The agency should consider whether its existing business practices for recovery activities provide an efficient and effective means for the identification of overpayments.[143] Common activities used to identify overpayments outside of recovery audits include statistical sampling, agency post-payment reviews, and the agency audit resolution and follow-up process.

According to Treasury officials, they have not yet conducted a cost-benefit analysis to determine the cost-effectiveness of payment recovery audits but plan to do so as part of the agency’s PIIA compliance activities for fiscal year 2022.

In addition, Treasury officials noted that the Consolidated Appropriations Act, 2021 requires Treasury’s Office of Inspector General (OIG) to carry out recoupment activities, among other oversight responsibilities.[144] Treasury officials explained that they have ongoing meetings with the OIG to determine how they plan to coordinate payment recovery activities and establish communication mechanisms, but have yet to finalize a process. While Treasury’s OIG is required to conduct oversight and recoupment activities, per OMB guidance, Treasury has responsibility for conducting recovery audits that are determined to be cost-effective to identify and recover overpayments, including ineligible payments.

Federal internal control standards state that management should design control activities to achieve objectives and respond to risks and implement control activities through policies. Without a process for conducting effective post-payment reviews or recovery audits for ERA, such as reviews to verify eligibility of households and accuracy of payments to households, landlords, and utility providers, Treasury’s ability to consistently identify and recover overpayments made by grantees—including those resulting from potential fraud—will be limited. As a result, the opportunities to identify and recover any overpayments may be delayed or impossible.

Single audit guidance. The Single Audit Act establishes requirements for states, local governments, and other non-federal entities that receive federal awards (e.g., grants) 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.[145] These audits help identify deficiencies in the grantee’s compliance with applicable provisions of laws, regulations, contracts, or grant agreements and in the grantee’s financial management and internal controls. Correcting such deficiencies can help ensure the appropriate use of federal funds and reduce the likelihood of federal improper payments.

The Single Audit Act directs OMB to develop government-wide guidance on performing audits to comply with the act. As part of this role, each year OMB, after consultation with federal agencies, issues a Compliance Supplement—a tool designed to help consolidate applicable legal requirements for numerous programs into one central place. The Compliance Supplement identifies the compliance requirements that could have a direct and material effect on major programs. Auditors who conduct single audits must determine whether the grantee has complied with laws, regulations, and the provisions of contracts or grant agreements that may have a direct or material effect on each of its major programs. Federal agencies are responsible for ensuring that program objectives, procedures, and compliance requirements that are subject to the audit are submitted to OMB for inclusion in the Compliance Supplement.

In its 2021 Compliance Supplement, OMB listed the ERA programs as “higher risk” programs; therefore, auditors are likely to consider them major programs that must be audited as part of the single audit process. However, the 2021 Compliance Supplement, issued in August 2021, did not include guidance for auditing grantee compliance with ERA. Treasury officials stated that they could not meet OMB’s deadline because they are still determining Treasury’s policies with regard to how ERA will be reviewed and what requirements to include in a future Compliance Supplement. Treasury officials also said that they plan to have guidance for ERA included in a forthcoming addendum to the 2021 Compliance Supplement or the 2022 Compliance Supplement but did not provide any specific timeframes.[146]

According to Treasury officials, for fiscal year 2021 single audits, auditors can also use the supplement’s general compliance guidance applicable to all federal programs not included in the supplement.[147] However, auditors who conduct single audits generally follow guidance in the Compliance Supplement and agency guidance specific to their programs. Auditors utilize the Compliance Supplement to help understand a federal program’s objectives, procedures, and compliance requirements. Without program-specific guidance, auditors would need to research many statutes and regulations for each program to determine which compliance requirements to test.

Federal internal control standards state that management should use quality information and externally communicate the necessary quality information to achieve the entity’s objectives. These standards emphasize the need for providing timely information, which would include such information as guidance to auditors that conduct single audits, so it can be used for effective monitoring. The Compliance Supplement identifies important compliance requirements that the federal government expects to be considered as part of a single audit. Without this guidance, auditors might not consistently and effectively identify deficiencies in grantees’ compliance with the requirements of ERA, limiting Treasury’s ability to identify and mitigate risks, including risks to payment integrity.

Methodology

We interviewed officials from Treasury and reviewed policies and procedures related to payment integrity risks in the ERA programs. Based on Treasury-provided documentation, we assessed the design of Treasury’s policies and procedures against relevant statutory requirements, OMB guidance, and federal internal control standards. For any key control activities that were not properly designed and documented, we inquired with Treasury officials to determine the reasons. For our review, we focused on Treasury’s efforts related to payment integrity risks. We did not evaluate Treasury OIG’s oversight and recoupment activities for ERA.

Agency Comments

We provided Treasury and OMB with a draft of this enclosure. Treasury provided written comments, which are reproduced in appendix VI, and technical comments, which we incorporated as appropriate. OMB did not provide comments.

Treasury agreed with our recommendation, and stated that it is working to establish post-payment reviews and recovery audit activities within the schedule prescribed in Treasury’s Implementation Guide for OMB Circular A-123 Appendix C: Requirements for Payment Integrity. Treasury also stated that it will be approving and initiating an ERA desk review plan that uses risk-based analytics to identify the highest-risk ERA recipients. Treasury stated that it is also actively working with OMB to publish guidance on the programs in the Compliance Supplement in early 2022.

GAO’s Ongoing Work

We will monitor the status of our payment integrity recommendations for Treasury and OMB and continue our oversight of government-wide payment integrity efforts and OMB’s guidance for single audits.

Related GAO Products

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

A Framework for Managing Fraud Risks in Federal Programs, GAO-15-593SP. Washington, D.C.: July 28, 2015.

COVID-19 Housing Protections: Moratoriums Have Helped Limit Evictions, but Further Outreach Is Needed. GAO-21-370. Washington, D.C.: March 15, 2021.

Additional Actions Needed to Improve Accountability and Program Effectiveness of Federal Response. GAO-22-105051. Washington, D.C.: October 27, 2021.

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

Daniel Garcia-Diaz, (202) 512-4529, GarciaDiazD@gao.gov

Student Loan Repayment

The Department of Education has begun implementing plans to address anticipated challenges with helping borrowers resume student loan repayment in May 2022.

Entities involved: Department of Education, including the Office of Federal Student Aid

Background

Federal student loans are an important resource to help individuals access higher education. As of November 2021, 45.8 million borrowers had a combined $1.61 trillion in outstanding federal student loan debt, according to data from the Department of Education. The majority of these loans are part of the William D. Ford Federal Direct Loan program and are owned by Education.[148] Loan servicers under contract with Education are responsible for maintaining federal student loan records, communicating with borrowers about the status of their loans, and processing payments.

Several types of relief were provided through the CARES Act and actions taken by Education for all borrowers with student loans owned by Education. This relief included, among other things, suspending (1) all payments due, (2) interest accrual, and (3) involuntary collections for loans in default.[149] Private student loans and commercially-owned or school-owned federal loans were not eligible for the suspensions. Education implemented these suspensions retroactively to March 13, 2020, the date COVID-19 was declared a national emergency. On August 6, 2021, Education announced these suspensions would expire on January 31, 2022, and planned to resume repayment in February 2022. Then on December 22, 2021, Education announced that the period of relief would be extended and these suspensions would now expire on May 1, 2022.[150] According to Education, the extension will allow the administration to assess the impacts of the Omicron variant of the virus on student borrowers and provide additional time for borrowers to plan for the resumption of payments and reduce the risk of delinquency and defaults after payments resume.

Beginning May 2, 2022, Education and seven of its loan servicers will resume collection of payments, interest accrual, and involuntary collection of defaulted loans for 42.3 million borrowers with federal student loans. About 26.6 million of these borrowers will transition to repayment and be required to make monthly payments once the relief ends, according to data as of November 2021 (see figure below).[151] In addition to those borrowers in repayment, another 7.2 million borrowers have loans that are in default and 9 million borrowers have loans that do not yet require monthly payments (because the borrower is enrolled in school or in a grace period).[152]

Number and Type of Borrowers Affected by the Expiration of COVID-19 Emergency Relief for Federal Student Loans, as of November 2021

Note: When calculating the number of borrowers in each of the three categories, some borrowers may be double-counted if they have multiple loans in different payment statuses (e.g., one loan in repayment and one loan in default). This, along with rounding, explains why the sum of the borrowers in the three categories does not exactly equal the total number of borrowers covered by COVID-19 emergency relief for federal student loans.

Education has a four-part plan for helping borrowers adjust to the end of COVID-19 emergency relief for federal student loans that focuses on communicating with borrowers, reducing delinquency, meeting customer service expectations, and monitoring and oversight.

Overview of Key Issues

Outreach to borrowers. Education officials said that the department has been communicating regularly with borrowers since loan repayment was suspended in March 2020, but they expect it will still be a challenge to motivate borrowers to resume repaying their loans after over two years of payment inactivity. In addition, after months of informing borrowers that payments would resume in February 2022, Education’s outreach efforts must now shift towards preparing borrowers for the new May 2, 2022, start date after the most recent extension of loan relief.

Education created a communication plan to prepare borrowers for the transition back to loan repayment, which includes multiple campaign phases with key outreach messages to borrowers that increase in urgency over time.[153] For example, in early communication starting in August 2021, Education provided information to borrowers about when payments would resume and about repayment resources, such as Income-Driven Repayment plans and loan consolidation.[154] Once payments resume, Education plans to encourage borrowers to repay their loans and validate that all borrowers have made an initial payment or have been contacted by a servicer. In the months following the resumption of payments, Education plans to continue to provide borrowers with information that will keep them on track with their payments.

Education officials also provided loan servicers with guidance that outlines Education’s borrower outreach plans so the servicers can coordinate their outreach with the department’s planned messages. In addition, Education officials said they reviewed sample communications from four servicers who chose to conduct additional borrower outreach beyond Education’s planned communications. Education officials said they provided these servicers with feedback and suggested changes to ensure the messages were accurate and aligned with current policy.

According to Education officials, the department will communicate directly with all borrowers about resuming repayment. This is a change from previous years, when Education primarily relied on its loan servicers to contact borrowers. Education is planning to communicate with borrowers every month and through a variety of outreach methods.

Emails. Education selected email as its primary communication method with borrowers.[155] Education’s communication plan involves emailing borrowers once a month with a key message that will change based on the current phase. For example, in September 2021, Education sent borrowers an email announcing the February 2022 date for resuming repayment (subsequently extended to May) and reminding borrowers to update their contact information with their servicers. As the date to resume repayment approaches, the email content will include warnings of interest rates being reinstated and potential consequences for missing payments. Each monthly email will also include standard information like the date for resuming repayment and a checklist of borrower actions to take, such as considering enrollment in an Income-Driven Repayment plan or setting up auto-debit payments.

Education will also require loan servicers to develop messages that meet Education’s requirements for its outreach timeframes and content, and will periodically provide servicers with specific content to use in their emails. For example, as the end of the payment suspension nears, Education will require servicers to develop and send a payment reminder to all borrowers with a bill due.

From August through November 2021, Education emailed 125.6 million monthly messages to approximately 34.9 million borrowers. Education officials reported that as of December 2021 they had valid email addresses for 87 percent of all borrowers covered by COVID-19 emergency relief for federal student loans. Education officials said they have other processes in place to help reach borrowers they are unable to contact via email—including directing loan servicers to contact these borrowers via postal mail—and providing key information through other online channels.

Website. Education updated StudentAid.gov to improve usability and reflect key messages for borrowers on resuming repayment. For example, Education posted messages on its website that link to resources such as a loan simulator that can help borrowers calculate payments under various Income-Driven Repayment plan options. Education also updated its Coronavirus Frequently Asked Questions on StudentAid.gov with information on how borrowers can determine their interest rate after the zero percent interest rate ends, and provided options for how borrowers can lower their monthly student loan payment if it will be too high when repayment resumes. Education reported that from March 2020 to March 2021 there were more than 10 million visits to the Coronavirus Frequently Asked Questions on StudentAid.gov.

In addition, Education officials reported that they have seen an increase in traffic to StudentAid.gov since August 2021 when they began communications about resuming repayment, with the website receiving 14 million visits during the last week of October 2021 alone. In addition, Education plans to use its website to provide partners, such as schools and student advisors, with information and communication resources to help borrowers with resuming repayment. For example, in October 2021 Education updated its financial aid toolkit for partners with sample email content, sample social media posts, video content, and guidance on how to help prepare borrowers for resuming repayment, among other things. Education is planning to update the toolkit with resources that will reflect the new May 2022 repayment start date.

Other outreach channels. Education is conducting additional borrower outreach through channels such as social media, search engine marketing, text messages, and alerts from its myStudentAid mobile phone application.[156] For example, Education sent 2.4 million text messages in October 2021. According to Education’s communication plan, the use of social media and search engine marketing began in August 2021. Education officials said that all communications link back to StudentAid.gov as the main source of information for resuming repayment.

Targeted outreach to certain borrowers. Education is providing targeted communications and assistance for specific groups of borrowers, including borrowers 1) at increased risk of delinquency, 2) in default on their loans, and 3) automatically paying their student loan bills prior to the payment freeze.

Borrowers at increased risk of delinquency. Education determined that some borrowers will require additional engagement before and after payments resume to reduce their risk of becoming delinquent. These borrowers include those who did not complete their program of study, borrowers that were delinquent before the payment suspension, and borrowers who entered repayment within the past three years.[157] Education officials noted that borrowers who recently entered repayment are not traditionally considered a high risk for delinquency; however, these borrowers may need extra support to develop healthy repayment behaviors and find a repayment plan that fits their needs because they have not been required to make payments for the majority of their time in repayment status.

Education has required loan servicers to conduct phone outreach campaigns to these at-risk borrowers to inform them of their payment due date and the various programs and flexibilities available to help them resume repayment. About 50 percent of all federal student loan borrowers were identified as at-risk for this purpose, according to data we obtained from loan servicers in October 2021. In addition, Education has been sending monthly emails directly to at-risk borrowers beginning in September 2021. Once repayment resumes, Education plans to also send daily emails to at-risk borrowers, including those who have missed payments. These emails will include information on the risk of delinquency and available options for borrowers who are struggling to make payments.

Borrowers in default. Education determined that borrowers who have defaulted on their loans require additional communication and assistance. According to Education, many of these borrowers did not respond to early outreach attempts regarding the payment suspension. In addition, the contractor managing borrowers’ defaulted loans initially did not have valid email addresses for about half of the borrowers in default. Education recently began providing the contractor with additional email addresses drawn from various data sources; however, email addresses are still missing for about 25 percent of defaulted borrowers. Education is planning to reach these borrowers by using other outreach channels to share messages about rehabilitation options.[158] For example, Education is planning to post social media content with options for defaulted loan rehabilitation, resources borrowers should be aware of, and consequences of not taking action to enroll in a rehabilitation plan.

Borrowers with auto-debit. Education required loan servicers to contact 5.1 million borrowers who were making loan payments via auto-debit prior to the payment suspension because these borrowers will have to confirm that they want to continue automatically paying their student loans when repayment resumes.[159] Education officials said borrowers’ circumstances may have changed since the repayment freeze began. Therefore, Education chose to require borrowers who want to resume auto-debit after the payment suspension to opt back in to automatically making payments, to ensure that borrowers are aware that a withdrawal will be occurring so they can budget accordingly. Education officials said that restarting auto-debits without a confirmation from borrowers could result in unnecessary harm, such as borrowers not having enough money in their account and being subject to bank overdraft fees. Borrowers who do not opt in to resuming auto-debit will have to manually submit each loan payment.[160] Borrowers were allowed to make their selection by clicking on a link in emails from their loan servicer without logging into their account and through other means, such as over the phone or by logging into their account online.

Borrowers enrolled in auto-debit are traditionally the least risky customers, according to one loan servicer. If borrowers do not proactively reconfirm their enrollment in auto-debit it will result in higher rates of delinquency, according to another loan servicer. These borrowers are not used to manually submitting loan payments and may not realize they have been removed from auto-debit. The loan servicer outreach is intended to ensure that borrowers who want to continue making automatic payments will have the ability to do so, according to Education documentation. As of December 2021, 3.3 million of the 5.1 million borrowers who were previously making loan payments via auto-debit had reinstated their automatic payments.[161]

Flexibilities for borrowers once repayment resumes. As borrowers face student loan bills for the first time in over two years, getting borrowers to resume payments and avoid delinquency or default will be a significant challenge, according to Education officials. Education has planned to ease this transition by temporarily not reporting missed payments to credit rating agencies. In addition, Education is providing borrowers with additional flexibilities during the early stages of resuming repayment.

Simplifying Income-Driven Repayment. The 8.7 million borrowers with loans in an Income-Driven Repayment plan will not be required to recertify their current income and family size for six months after repayment resumes, although borrowers can voluntarily recertify at any time.[162] Borrowers who apply for a new Income-Driven Repayment plan or those already in a plan who volunteer to provide this information can self-certify their current income amount and family size over the phone or through other means offered by their loan servicer instead of submitting an application and documentation of their income, which is typically required.[163] Education officials said that these documentation requirements are a common friction point that can keep some borrowers from enrolling in Income-Driven Repayment plans. Officials said temporarily removing these requirements will make signing-up for Income-Driven Repayment plans easier. As of December 2021, 160,000 borrowers had self-certified to either start or continue their enrollment in an Income-Driven Repayment plan.[164]

Expanding customer service. Education will require loan servicers to add evening and weekend call center hours to increase the availability of customer service representatives who can respond to borrower questions about resuming repayment. Education plans to validate whether call centers meet their performance standards, and will monitor call center communication metrics like call volumes, wait times, and abandon rates. Education also plans to conduct oversight of servicers with call center secret shoppers.

Servicers leaving federal student loan portfolio. Additional communication and assistance is needed for some borrowers as a result of changes in loan servicers. Three loan servicers— Navient, Granite State Management and Resources, and FedLoan Servicing—announced in 2021 that they plan to end student loan servicing activities by the end of 2022.[165] As of December 2021, approximately 12.2 million borrowers held student loans with these three servicers. This includes all loans certified for Public Service Loan Forgiveness and all borrowers with Teacher Education Assistance for College and Higher Education loans and grants that are currently serviced by FedLoan Servicing. Education plans to transfer borrowers’ loan accounts held by these servicers to other federal student loan servicers. Education officials said that these transfers will be challenging because some borrowers will have to adjust to new servicers at the same time they will be adjusting to resuming loan repayment.

Education plans to send targeted outreach to borrowers affected by the servicer transfers. Education officials said that for each servicer transfer they will communicate via email with borrowers both before and after the transfer occurs, letting them know which servicer they are transferring to and immediate steps to take before and after the transfer, such as updating their contact information and setting up their online accounts with their new servicer.

Education completed the transfer of all student loan accounts from Granite State Management and Resources in November 2021 and from Navient in December 2021. As of January 2022, Education had transferred 37 percent of student loan accounts from FedLoan Servicing, and expected to complete all transfers by the summer of 2022.[166]

Loan servicer capacity to help borrowers resume repayment. Adequate loan servicer staffing and training are important aspects of meeting the increased demands related to helping borrowers resume repayment. For example, loan servicers need to ensure they have trained staff available to accommodate extended call center hours and to prepare for higher call volumes as borrowers seek information about their loans and apply for different repayment plans in preparation for resuming payments.

In October 2021, all seven of the loan servicers told us that they expected higher than normal call volumes.[167] Two loan servicers also said they anticipated that borrowers will require longer and more frequent phone calls as they get used to repaying their loans and seek to determine how changes to their financial and family circumstances since the payment freeze may impact their loan payments.

All seven servicers reported that they needed to increase hiring to prepare for and administer borrower loan repayment. All seven servicers reported in October 2021 that they have already increased hiring to prepare for resuming repayment, but indicated that they still needed to hire over 4,500 employees to meet their hiring targets. Two of the seven servicers said that the substantial increase in new hires may contribute to negative customer service experiences, as these staff may not have the experience to answer all the unique questions that may arise from resumption of payments.

These new hires will have to obtain federal clearance and complete training, a process that can collectively take up to eight weeks, according to one servicer.[168] Despite these challenges, all seven servicers reported that they will have adequate time to hire and train the staff needed before the payment suspension ends. Education officials said they do not have any immediate concerns about their loan servicers’ current capacity or their ability to hire staff, and that they are closely monitoring servicer hiring, workload estimates, and performance.

Methodology

To conduct this work we reviewed data reported by Education, relevant federal laws, agency plans, and guidance. We also interviewed Education officials and sent questions to seven student loan servicers about their preparations for resuming borrower loan repayment.[169] We assessed the reliability of Education’s reported data by reviewing documents and responses from officials. We found the data sufficiently reliable for our purposes.

Agency Comments

We provided a draft of this enclosure to Education and the Office of Management and Budget for review and comment. 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 examine Education’s oversight of the student loan program and servicers.

Contact information: Melissa Emrey-Arras, (617) 788-0534, emreyarrasm@gao.gov

Economic Injury Disaster Loan Program

The Small Business Administration has taken steps to improve its implementation of the Economic Injury Disaster Loan program—including moving the operation of COVID-19 loans and advances to the Office of Capital Access, implementing program changes, communicating key information, and increasing its application processing capacity— but needs to continue to work to improve its controls over the program.

Entities involved: Small Business Administration

Background

Since March 2020, the Small Business Administration (SBA) has provided millions of dollars in loans and grants (called advances) through the Economic Injury Disaster Loan (EIDL) program to assist small businesses and nonprofits experiencing economic injury caused by COVID-19.[170] In the Paycheck Protection Program and Health Care Enhancement (PPPHCE) Act, enacted on April 24, 2020, Congress appropriated $50 billion in loan credit subsidies for SBA to cover the cost of making EIDL loans.[171] Additionally, in the CARES Act and the PPPHCE Act, Congress appropriated $20 billion for EIDL advances, a new component of the program that provided direct payments of up to $10,000 to qualifying small businesses that did not have to be repaid.[172] On July 11, 2020, SBA announced that it had fully allocated the $20 billion in funding for EIDL advances.

On December 27, 2020, under the Consolidated Appropriations Act, 2021, Congress appropriated an additional $20 billion for targeted EIDL advances to eligible entities with 300 or fewer employees that are located in low-income communities and experienced an economic loss of greater than 30 percent.[173] Qualifying entities may receive up to $10,000 in targeted advances.[174] Advances do not have to be repaid.

On March 11, 2021, under the American Rescue Plan Act of 2021, Congress appropriated additional funding for entities that qualified for targeted EIDL advances under the Consolidated Appropriations Act, 2021. Congress appropriated an additional $10 billion for eligible entities that have not received the full amount of $10,000 in targeted EIDL advances. Congress also appropriated $5 billion to provide an additional $5,000 for eligible entities in low-income communities that suffered an economic loss greater than 50 percent and employed not more than 10 employees. The $5,000 is available in addition to advances obtained under the CARES Act or targeted advances under the Consolidated Appropriations Act, 2021. The act also appropriated $70 million for EIDL loans and additional funding for SBA administrative expenses for several programs, including the targeted advance programs and the EIDL loan program. The Infrastructure Investment and Jobs Act, signed into law on November 15, 2021, rescinded $13.5 billion of the COVID EIDL loan appropriations and approximately $17.6 billion from the targeted EIDL advance appropriations.

Overview of Key Issues

Transition of COVID-19 EIDL loans and advances to the Office of Capital Access facilitated program improvements. In July 2021, SBA moved the operation of EIDL program responsibilities related to COVID-19 from the Office of Disaster Assistance to the Office of Capital Access. SBA officials explained that SBA made this transition to allow the Office of Disaster Assistance to focus on natural disaster response—in particular the upcoming hurricane season—and to implement additional risk management approaches for the EIDL program that SBA had used for the Paycheck Protection Program and the Restaurant Revitalization Fund program.[175] The officials emphasized that collaboration continues between the two offices. For example, while the Office of Capital Access is now responsible for overseeing the program, the Office of Disaster Assistance staff dedicated to COVID-19 EIDL processing remain the same.

Following the transition, SBA officials told us that the agency had made changes intended to improve the processing of COVID-19 EIDL loans and advances. For example, they noted the inclusion of steps to better identify potential fraud, such as making the login process more secure. In March 2021, we found that the EIDL program was susceptible to fraudulent payment risks. We recommended that SBA conduct and document a fraud risk assessment for the program. SBA stated in October 2021 that it was finalizing a fraud risk assessment and that its Compliance, Oversight, and Reporting Team was reviewing the results of the assessment. These represent positive steps toward implementing the recommendation.

Some improvements made to communication with applicants. To improve the borrower experience, SBA officials told us that they allowed field office staff to view the status of an application and provide the status to applicants. In addition, SBA officials noted that they revised the template used for letters sent to applicants not approved for EIDL loans to provide additional information to applicants on how they can request that their application be reconsidered.

We reported in July 2021 that while SBA had moved quickly under challenging circumstances to provide EIDL funding to applicants, benefiting many small businesses, SBA did not communicate key information (such as processing times and loan limits) and loan status to potential and actual applicants in an effective, consistent, or timely manner. Consequently, we recommended that SBA develop a comprehensive strategy for communicating with potential and actual program applicants in the event of a disaster. While SBA has not as of December 2021 completed this strategy, the changes represent positive steps to help improve the communication of key information with program applicants. In December 2021, SBA stated that the agency was evaluating plans for a major change to its disaster loan processing platform that must be resolved before further action could be taken on this recommendation.

Changes to better support small businesses. In September 2021, SBA announced that it had implemented the following changes to the COVID EIDL program:
  • increased the amount of funding that can be borrowed from $500,000 to $2 million;
  • created a 1-month exclusivity window for businesses requesting loans of $500,000 or less;
  • authorized funds to be used to prepay commercial debt and make payments on federal business debt;
  • deferred repayments for 2 years after loan origination date;
  • created additional ways to meet program size standards for businesses in industries uniquely affected by COVID-19;
  • established more simplified requirements for affiliated businesses to model those of the Restaurant Revitalization Fund; and
  • added a $10 million limit on maximum aggregate loans to a single corporate group.

These changes affected some eligibility requirements and overall processing time frames. For example, SBA requires that loans over $500,000 be secured with real estate owned by the business; consequently, these larger loans require additional underwriting.[176] SBA officials estimated that these loans take approximately 3 additional weeks to close, but described this time frame as similar to loans of a similar size made through the 7(a) Loan Program, SBA’s largest lending program, or through traditional lending.

As another example of SBA’s improved communication efforts, SBA issued a press release in September 2021 and updated its frequently asked questions document, which is available on its website, to communicate the programmatic changes discussed above to potential applicants.

Increased application processing capacity. Beginning in September 2021, SBA reported a number of improvements in loan processing. For example, SBA stated that the EIDL program had increased application processing capacity from an average of 2,000 to more than 37,000 applications per day. SBA attributed the increased productivity primarily to its recent ability to obtain tax transcripts directly from, and streamlining the data transmittal process with, the Internal Revenue Service, which has helped SBA to validate information on borrowers’ applications more efficiently.[177] SBA also temporarily increased staff to eliminate the application backlog.

The officials said that the number of new applications is increasing, but significantly less than applications for loan increases. The officials stated that the overall trend in requests for targeted advances and supplemental targeted advances has remained flat. They noted that implementing the legislative criteria for qualifying for targeted and supplemental targeted advances has created unanticipated challenges for borrowers. Specifically, they said that demonstrating the requisite revenue decline required a lot of effort for borrowers. They also noted that while some potential borrowers could demonstrate that they needed financial assistance, they were not located in designated low-income communities that would make them eligible for such assistance.

As of December 15, 2021, SBA had approved more than 3.8 million COVID-19 EIDL loans totaling about $312.4 billion, and funded 532,124 targeted advances totaling about $4.6 billion and 429,554 supplemental targeted advances totaling about $2.1 billion.

Inability to support EIDL accounting and related controls. In November 2021, SBA’s independent auditor issued a disclaimer of opinion on SBA’s fiscal year 2021 consolidated financial statements, meaning the auditor was unable to express an opinion due to insufficient evidence. This was SBA’s second consecutive disclaimer on its financial statements. As the basis for the disclaimer, the auditor reported that SBA was unable to provide adequate evidence to support a significant number of transactions and account balances due to inadequate processes and controls related to its implementation of its programs authorized under the CARES Act and related legislation, including EIDL and the Paycheck Protection Program.[178] For more information on the auditor’s findings related to the Paycheck Protection Program, see the Paycheck Protection Program enclosure in appendix I.

The auditor also identified several material weaknesses in internal controls related to EIDL.[179] Specifically, the auditor reported weaknesses concerning (1) controls over EIDL loans and advances; (2) subsidy reestimates, including the EIDL subsidy reestimate; and (3) SBA’s evaluation of service organizations (contractors), including those relevant to EIDL.[180] In addition, the auditor identified a material weakness in SBA’s entity-level controls, citing challenges due to the implementation of new and expanded programs, including EIDL.

In its discussion of the material weakness related to controls over EIDL loans and advances, the auditor stated that SBA did not adequately design and implement controls to ensure that approved loans and advances were provided to eligible borrowers and accurately reported. The auditor noted instances where more than one loan or advance was approved and disbursed to the same recipient, as well as instances where, according to law enforcement agencies, loans and advances were awarded to recipients with fraudulent tax identification numbers. The auditor reported that as of September 30, 2021, SBA had flagged over 500,000 approved and disbursed EIDL loans and advances (with an approximate total value of over $30 billion) in its loan repository system as issued to potentially ineligible borrowers.

For the material weakness related to subsidy reestimates, the auditor stated that SBA did not adequately design and implement controls to ensure the assumptions used in the subsidy reestimate for EIDL loans appropriately reflect risks in the portfolio. SBA is in the process of reviewing the EIDL portfolio to address eligibility concerns related to disbursed loans. The auditor reported that because this review was not completed at the time of the year-end subsidy reestimate, SBA did not have a reasonable basis to determine whether the assumptions it applied to loans in the EIDL portfolio were appropriate. In addition, the auditor reported that SBA did not design and implement sufficient review controls over the development and application of the assumptions it used in the subsidy reestimate for the EIDL portfolio, and therefore, SBA was unable to sufficiently support the appropriateness of the assumptions it applied to the subsidy reestimate.

For the material weakness related to service organizations, the auditor reported that SBA did not obtain reasonable assurance of the operating effectiveness of internal controls within service organizations’ control environments, including a service organization relevant to the processing of EIDL transactions. Additionally, SBA did not provide evidence of adequate monitoring activities performed over the relevant control environments at service organizations, such as obtaining and reviewing attestation reports on the design, implementation, and operating effectiveness of controls.

In total, the auditor made nine recommendations to SBA to address the issues related to EIDL in the three areas of material weaknesses described above. Among other things, the auditor recommended that SBA
  • develop and execute a review plan for the EIDL loans and advances portfolios and determine which transactions were made to ineligible recipients;
  • implement controls to prevent or detect loans and advances that are not in conformance with related legislation and program eligibility terms;
  • design and implement controls to continue accumulating relevant, complete, and accurate data on which to base the subsidy reestimate model for the EIDL portfolio; and
  • enhance its review and evaluation of service organization controls.

SBA’s auditor also reported a material weakness in SBA’s entity-level controls, citing challenges due to the implementation of new and expanded programs. Related to EIDL, the auditor stated SBA lacked a clear organizational structure that designated responsibilities for management and oversight of EIDL, including timely development of corrective actions to remediate recommendations related to review of the EIDL portfolio. The auditor issued five recommendations to improve entity-level controls, including recommending, among other things, that SBA document its internal control system and processes related to the implementation of new or expanded programs from new legislation; develop and implement monitoring controls to ensure implementation of an effective internal control environment; and develop and implement a sufficient plan to test and monitor the design, implementation, and operating effectiveness of key controls that affect financial reporting and compliance with relevant laws and regulations.

The auditor noted that the deficiencies were primarily caused by SBA prioritizing the implementation of CARES Act provisions and related legislation as quickly and efficiently as possible over implementing internal control processes. In addition, the auditor cited the inherent challenges of implementing new and expanded programs without historical precedence.

SBA disagreed with the severity of the weaknesses related to controls over EIDL loans and advances, subsidy reestimates, and entity-level controls. SBA partially agreed with the material weakness related to service organization oversight. While SBA did not agree or disagree with the auditor’s recommendations, in commenting on the auditor’s report, SBA stated that it is continuing its efforts to address material weaknesses, strengthen processes, develop fraud risk assessments, and support requirements for the auditability of its financial statements.

We support the recommendations the auditor provided to address control weaknesses related to EIDL, and we encourage SBA to continue to work to improve its controls over the program, as well as to improve its documentation to support future financial statement audits.

Methodology

To conduct this work, we reviewed SBA documentation of policy and programmatic changes the agency has made to the EIDL program since July 2021. We also analyzed SBA’s data on the processing of loans, targeted advances, and supplemental targeted advances through October 2021 and interviewed SBA officials. We monitored SBA’s fiscal year 2021 financial statement audit and reviewed its fiscal year 2021 agency financial report and the accompanying independent auditor’s report. We assessed the reliability of SBA data by interviewing SBA officials. We determined that the data were sufficiently reliable for reporting the status of EIDL COVID-19 loans and targeted advances.

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 on the EIDL program is ongoing. We continue to examine SBA’s processing of EIDL COVID-19 loans and advances and the fraud risks in the program. We will also continue to monitor SBA’s progress toward developing and implementing corrective actions to address the material weaknesses identified in December 2020 and November 2021 by its independent financial statement auditor.

GAO’s Prior Recommendations

The table below presents our recommendations on the EIDL program from prior bimonthly and quarterly CARES Act reports.
Prior GAO Recommendations Related to the Economic Injury Disaster Loan Program

Recommendation

Status

The Administrator of the Small Business Administration (SBA) should conduct and document a fraud risk assessment for the Economic Injury Disaster Loan (EIDL) program. (March 2021 report)

Open—partially addressed. SBA agreed with the recommendation, stating that it would work to ensure that a fraud risk assessment for the EIDL program is completed. In December 2021, SBA provided a fraud risk assessment that had been prepared by its contractor. Based on our initial review of the assessment, it adhered to many fraud risk management leading practices, but for example, SBA did not determine its fraud risk tolerance. We intend to follow up with SBA to discuss the fraud risk assessment and agency actions in response to the assessment.

The Administrator of SBA should develop a strategy that outlines specific actions to address assessed fraud risks in the EIDL program on a continuous basis. (March 2021 report)

Open—partially addressed. SBA agreed with the recommendation, stating that it would work to ensure that fraud risks are monitored on a continuous basis. In December 2021, SBA provided a fraud risk assessment, which would inform an antifraud strategy. We intend to follow up with SBA to discuss agency actions in response to the fraud risk assessment and plans for developing an antifraud strategy.

The Administrator of SBA should implement a comprehensive oversight plan to identify and respond to risks in the EIDL program to help ensure program integrity, achieve program effectiveness, and address potential fraud. (March 2021 report)

Open—partially addressed. SBA agreed with the recommendation, stating that it will implement a comprehensive oversight plan. In December 2021, SBA provided a fraud risk assessment, which would inform the oversight plan. We will continue to monitor the agency's actions to address this recommendation.

The Administrator of SBA should develop and implement portfolio-level data analytics across EIDL program loans and advances made in response to COVID-19 as a means to detect potentially ineligible and fraudulent applications. (January 2021 report)

Open—partially addressed. At the time of our report, SBA neither agreed nor disagreed with this recommendation. In December 2021, SBA stated that the agency had implemented fraud indicators for EIDL application data. SBA also stated that the agency shared these indicators with the Pandemic Response Accountability Committee for review. Further, SBA stated that the agency would provide additional details to GAO in 2022. We will continue to monitor the agency's actions to address this recommendation.
Source: GAO. I GAO-22-105291

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.

Contact information: William B. Shear, (202) 512-8678, shearw@gao.gov

Tax Relief for Businesses

Internal Revenue Service’s controls were not sufficient to timely address challenges to meeting the 90-day statutory requirements for issuing tentative net operating loss and alternative minimum tax refund claims. This contributed to the delay of the issuance of tentative refunds to some taxpayers beyond the 90-day requirement, and cost the government around $61 million in interest from all carrybacks in fiscal year 2021.

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

Recommendation for Executive Action

The Commissioner of Internal Revenue should establish mitigation plans—including indicators, such as a threshold to initiate mitigation activities—to timely address any future challenges to processing applications for tentative refund on Forms 1045 and 1139 within the 90-day statutory requirement.

The Internal Revenue Service neither agreed nor disagreed with our recommendation, but stated that it will take the recommendation into careful consideration as it continues to make improvements to ensure that it can serve the future needs of the nation’s taxpayers.

Background

To provide liquidity to businesses during the COVID-19 pandemic, the CARES Act and other COVID-19 relief laws included tax measures to help businesses—including sole proprietors—by reducing certain tax obligations.[181] In some cases, those measures led to cash refunds. The Internal Revenue Service’s (IRS) capacity to implement new initiatives, such as the many COVID-19 related tax provisions, is an ongoing challenge we cited in our 2021 High-Risk Report.

The CARES Act, the Consolidated Appropriations Act, 2021, and the American Rescue Plan Act of 2021 modified, among other provisions of the tax law, provisions previously enacted or amended by Public Law 115-97, commonly known as the Tax Cuts and Jobs Act (TCJA).[182] The Joint Committee on Taxation estimates the following tax provisions will result in about $26 billion in foregone revenue for the federal government in fiscal years 2020 through 2030.[183]

Net Operating Loss (NOL) carrybacks. An NOL is a loss which may result from a trade or business loss or a casualty or theft loss, and may occur when a taxpayer's allowable deductions exceed its gross income for a tax year, essentially resulting in negative income. During an NOL year, a taxpayer generally does not owe any income taxes and may be able to use the NOL to offset income in other tax years, via a carryback or carryforward.[184] The CARES Act generally requires, unless waived by the taxpayer, carrybacks for 5 years for NOLs arising in tax years beginning in 2018, 2019, and 2020, which may provide a cash refund for certain taxpayers.[185] Tax years prior to 2018 generally had a higher tax rate, so the ability of businesses to carryback 2018, 2019, and 2020 NOLs to earlier tax years with a higher tax rate tends to increase the relative value of the carryback amounts.

In general, for NOLs arising in tax years beginning after 2017, TCJA limited the deduction of NOL carrybacks and carryforwards to 80 percent of taxable income.[186] The CARES Act temporarily suspended the 80 percent limitation, and those NOLs can reduce 100 percent of a taxpayer’s taxable income for tax years beginning before 2021.[187]

For corporations (other than S corporations), refunds resulting from NOL carrybacks are typically claimed on either Form 1120-X, Amended U.S. Corporation Income Tax Return; or Form 1139, Corporation Application for Tentative Refund. For individuals, estates, and trusts, refunds resulting from NOL carrybacks are typically claimed on Form 1045, Application for Tentative Refund.[188] This enclosure focuses on the Applications for Tentative Refunds on Forms 1139 and 1045. From April 17 to December 31, 2020, IRS implemented temporary procedures to allow taxpayers to submit via fax Forms 1139 and 1045 for a quick tentative refund during the period that IRS closed its processing centers and was unable to process mail due to COVID-19.[189] After December 31, 2020, all Forms 1045 and 1139 must be filed on paper.

Acceleration of Alternative Minimum Tax (AMT) credit refunds. In general, AMT was an alternative tax regime, which applied a lower tax rate to a broader tax base by limiting the use of tax preferences and disallowing credits and deductions. TCJA repealed the corporate AMT, but most corporations could claim their remaining unused minimum tax credits as a refundable credit for tax years 2018 through 2021.[190] Under the CARES Act, corporations with AMT credits may claim a refund for tax years beginning in 2018 and 2019 and may either file Form 1139 or Form 1120-X to receive a refund for some or all of these credits.[191]

Overview of Key Issues

IRS processing times well exceed its 90-day statutory time limit. The CARES Act amended tax provisions affecting NOL and corporate AMT, which could potentially help increase business liquidity during the COVID-19 pandemic. The Internal Revenue Code and the CARES Act generally require IRS to issue certain refunds within a period of 90 days from the date on which a complete application for a tentative carryback adjustment is filed, or from the last day of the month in which the return is due, whichever is later.[192] This requirement includes applications for tentative refund on Forms 1139 and 1045 filed via fax before December 31, 2020 and via paper since that date.

According to IRS data, the agency’s average monthly processing time has been consistently longer than the statutory 90-days to process applications for tentative refund on Forms 1139 and 1045 since September 2020 and January 2021 for corporate and individual filings, respectively (see figure).[193] As we reported in July 2021, before late 2020, IRS had not taken longer than 90 days to process these refunds in the 3 prior years of data we analyzed for that report. Our review of IRS data for this report shows that as of November 2021, average monthly processing times peaked in March and June 2021 for corporate and individual filings, respectively, and have decreased since then, but remain well above 90-days. Since the CARES Act allows corporations to use Form 1139 to claim AMT credit refunds, these refunds are also represented in the carryback processing data, which includes applications for tentative refund on Forms 1139 and 1045.

Average Monthly Processing Times for Taxpayer Carryback Applications and Claims Filed with the Internal Revenue Service (IRS), Apr. 2020–Nov. 2021

Note: These data include all carryback cases, including those filed as “claims” on Forms 1120-X and 1040-X and those filed as “applications” on Forms 1045 and 1139. Forms 1045 are represented in the individual line and Forms 1139 are represented in the business line. Forms 1139 may also contain refund claims for the alternative minimum tax (AMT) refund. IRS officials said the reported times do not include the additional time—up to 2 weeks—it may take for IRS to finalize production and distribute the refund to the taxpayer. The figure does not represent all of the work that IRS did throughout the year, but focuses on actions specific to the processing times for carryback cases. The Consolidated Appropriations Act, 2021 and American Rescue Plan Act of 2021 were also enacted in December 2020 and March 2021 respectively, and contained provisions that also required IRS action.

As of November 2021, the average time to process all carryback refunds for individual filers in 2021 was 165 days and 166 days for corporate filers. IRS officials said these numbers do not include unprocessable applications or the additional time—up to 2 weeks—for IRS to finalize production and distribute the refund to the taxpayer.[194] This means that taxpayers are not receiving their NOL and AMT credit refunds in a timely manner, and are subsequently owed interest after 45 days.[195] According to IRS data, IRS has paid around $61 million in interest on all carrybacks, including applications for tentative refund, for fiscal year 2021.[196] According to IRS data, applications for tentative refund made up roughly 80 percent of all carryback payments with interest for the fiscal year.

IRS facility closures and associated staffing challenges contributed to processing backlogs. COVID-19 caused IRS facilities to shut down, and the subsequent large-scale staffing changes prevented the timely processing of paper returns, including paper filed Forms 1045 and 1139.[197] IRS processing centers re-opened in June 2020, and IRS officials said they have been processing mail in the order of receipt while operating at partial capacity to accommodate social distancing. More information about IRS’s backlog is included in our March and July 2021 CARES Act reports.

The COVID-19 facility closures and staffing changes created a large filing backlog, which the IRS was still working through for much of 2021. At the end of the 2021 filing season, IRS had about 25.5 million unprocessed individual and business returns, including about 1.2 million returns from its 2020 backlog. IRS reported that as of May 28, 2021, it had entered all 2020 individual returns into its processing systems. As of November 19, 2021, IRS reported that it still had roughly 460 business filings from 2020 that had not been entered into its processing systems.[198] Officials emphasized that the agency had to deal with many competing priorities as it worked through the backlog, such as managing the 2021 tax filing season and adapting to new legislation.[199]

While IRS had some controls in place to help manage applications for tentative refunds, the controls did not trigger sufficient responsive or preventative action in fiscal year 2021. IRS officials said the agency had standard processes and procedures in place to address changes in its inventory of taxpayer filings and to monitor processing times for carryback cases.[200] However, these processes and procedures did not result in immediate action when processing times for corporate filings approached and then surpassed the statutory 90-day limit in late 2020.
  • Weekly reports. IRS headquarters staff produce weekly carryback reports that they share with IRS processing sites to alert them of older cases and to help ensure that processing timeframes are met, particularly for higher dollar value cases. [201] They also generate reports that track the weekly processing times for applications for tentative refund. In late 2020 through early 2021, neither of these efforts resulted in immediate action to reduce the overall processing times for these applications, but rather focused on specific aged cases that IRS prioritized based on refund amount.
  • Inventory projections. IRS’s Accounts Management team also develops fiscal year inventory projections for both the corporate and individual filer programs, which include but are not limited to Forms 1139 and 1045 filings. According to IRS officials, the projections are typically completed by the beginning of the fiscal year and are updated as needed to identify changes in the receipt patterns to help ensure adequate staffing. According to IRS officials, if data in their projections show a specific program is not on track to meet the program target, a more comprehensive look at staffing, inventory levels, and any known changes to receipts or efficiency is completed.

    For fiscal year 2021, this process was not able to effectively predict the influx of tentative carryback applications from the 2020 tax year because the projections, according to IRS officials, are largely based on historical data on filing volumes. Specifically, according to IRS officials, those projections did not take into account the CARES Act changes that affected the number of filers submitting refund claims at the end of the year. Officials explained that projections for fiscal year 2021 were updated twice, with one of those updates occurring in April 2021 when large receipt patterns were identified. However, by fiscal year end, IRS had received 276 percent more carryback filings in fiscal year 2021 than in fiscal year 2020, according to IRS officials.

Since IRS’s policies and procedures did not focus on mitigating overall processing times, particularly when the agency was at risk of not meeting its statutory requirement, IRS did not take action to reduce the carryback backlog until April 2021. At that time, IRS had already been missing its statutory 90-day requirement for approximately 7 months. According to IRS officials, in response to the April 2021 inventory projections update, IRS began training additional staff the following month to address the backlog. From June through September 2021, IRS officials said that the agency continued to train additional staff to work on the carryback inventory to help further reduce the backlog and processing times, as shown in the figure above. Therefore, training of staff was completed a year after IRS was consistently missing the deadline for corporate filings. As of October 2021, there had been an overall decrease in processing times since IRS began training new staff to work these cases, but numbers increased again in November 2021.

While IRS took some remedial actions, it did not have effective preventative control activities or mitigation plans in place to detect or address growing processing times for Forms 1139 and 1045. Standards for Internal Control in the Federal Government highlight the design of control activities to achieve an agency’s objectives and respond to risks. Control activities can be preventative, meaning they are designed to prevent an entity from failing to achieve an objective or address a risk, in this case, the 90-day statutory requirement to issue refunds.

IRS initiated action after observing the volume of applications it had received, and not when its average processing time consistently surpassed the statutory requirement. A common control activity identified in the Standards for Internal Control is the establishment and review of performance measures and indicators by assessing data so that appropriate actions can be taken. We recognize that 2020 and 2021 were unprecedented times, but developing a threshold at which planned preventative mitigation activities would start could help IRS better manage unexpected backlogs and reduce the volume of refunds issued after the 90-day deadline in the future. For example, actions could include an analysis of average processing times with a specified number of days at which preventative actions would occur. These improved controls could help IRS better adapt to circumstances in the future that could create a risk of not meeting its statutory requirement.

IRS is pursuing other efforts that may result in improvements for the carryback process. In addition to increased staff to process these refund claims, IRS is taking steps to address objectives and activities outlined in an April 2021 Lean Six Sigma Organization (LSSO) opportunity assessment and the National Taxpayer Advocate Service’s (TAS) 2022 Objectives Report to Congress, according to IRS officials.[202] LSSO reviewed the carryback program for improvement opportunities and efficiency gains, with the COVID-19 backlog in mind.[203] IRS said it is working on responding to the recommended opportunities in the report. While this effort presents opportunities to improve processes, it did not focus on monitoring and indicators to help the agency meet its statutory requirement.

In its June 2021 report, TAS stated that due to the CARES Act, it anticipates many taxpayers will file applications for refunds for the 2020 taxable year and that it will work with IRS to identify delays and propose further recommendations to improve the timely payment of tentative refunds. If implemented by IRS, some of the activities that TAS proposed could be integrated into control activities to mitigate the risk of IRS failing to meet the 90-day statutory requirement in the future.[204] For example, TAS suggested that IRS open a dedicated fax line to expedite the processing of paper forms, which could include the tentative carryback applications. They also suggested that IRS assign a specific employee unit dedicated to processing Forms 1139 and 1045. Such activities could be components of a mitigation plan that is triggered when processing times cross a certain threshold.

Methodology

To conduct this work, we reviewed IRS data as of November 27, 2021, federal laws, and agency guidance; and interviewed IRS officials. To analyze IRS data, we reviewed processing times for carryback cases from fiscal years 2019 through 2021 and calculated the average days it took to process these forms per month. We determined that the data were sufficiently reliable for our purposes.

Agency Comments

We provided IRS, Treasury, and the Office of Management and Budget with a draft of this enclosure. IRS’s written comments are reproduced in appendix V. IRS and Treasury provided technical comments, which we incorporated as appropriate. The Office of Management and Budget did not provide any comments on this enclosure.

In its comments, IRS neither agreed nor disagreed with our recommendation to establish mitigation plans—including indicators, such as a threshold to initiate mitigation activities—to timely address any future challenges to processing applications for tentative refund on Forms 1045 and 1139 within the 90-day statutory requirement. IRS stated that prior to COVID-19, it met the 90-day timeframe for the majority of carryback cases. IRS also said that it would not have been adequately resourced to prevent the overage even with an indicator due to impacts from the pandemic, the high volume of cases, and limited staffing. However, IRS stated that it will take the recommendation into careful consideration as it continues to make improvements to ensure the IRS can serve the needs of the nation’s taxpayers well into the future. We continue to believe that taking the recommended action would improve IRS’s ability to meet their statutory requirement and enhance accountability in the federal government’s response to, and recovery from, the COVID-19 pandemic.

GAO’s Ongoing Work

As IRS works to reduce processing times, it will continue to be important that IRS design control activities to mitigate processing backlogs like this in the future. We will continue to monitor IRS efforts.

GAO’s Prior Recommendations

The table below presents our recommendations on tax relief for businesses from prior bimonthly and quarterly CARES Act reports.
Prior GAO Recommendations Related to Tax Relief for Business

Recommendation

Status

The Commissioner of Internal Revenue should update the Form 1040-X instructions to include information on the electronic filing capability for tax year 2019 (November 2020 report)

Closed—addressed. On November 10, 2021, IRS posted an update of the Form 1040-X instructions on its website. This revision contains the reminder that taxpayers can file Form 1040-X electronically with tax filing software to amend 2019 or later Forms 1040 or 1040-SR. As a result, taxpayers are more likely to be aware of the electronic filing capability, which enables them to file their amended returns effectively and helps reduce government administrative costs associated with paper submissions.

The Commissioner of Internal Revenue should clearly communicate on the Internal Revenue Service’s website that there are delays beyond the statutory 90-day timeline in processing net operating loss and alternative minimum tax tentative refunds. (July 2021 report)

Closed—addressed. IRS neither agreed nor disagreed with our recommendation. In September 2021, IRS updated its website to address our recommendation. Specifically, the update states, “due to the lingering effects of COVID-19, we continue to experience inventory backlogs and processing times longer than the normal 90-day statutory period.” This will provide taxpayers with more accurate information and expectations for receiving a refund and helps IRS meet its obligation to provide taxpayers with clear explanations of the laws and IRS procedures, as stated in the IRS Taxpayer Bill of Rights.
Source: GAO. I GAO-22-105291

Related GAO Products

High-Risk Series: Dedicated Leadership Needed to Address Limited Progress in Most High-Risk Areas. GAO-21-119SP. Washington, D.C.: March 2, 2021.

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

Contact information: Jessica Lucas-Judy, (202) 512-6806, lucasjudyj@gao.gov

Paycheck Protection Program

In November 2021, the Small Business Administration’s independent auditor issued a disclaimer of opinion on the agency’s 2021 consolidated financial statements, in part because of weaknesses in the Paycheck Protection Program, including its controls over the ongoing loan forgiveness process.

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.[205] PPP loans, made by lenders but guaranteed 100 percent by SBA, are low interest (1 percent) and fully forgivable if certain conditions are met.[206]

Lenders made about 11.5 million PPP loans, totaling about $792 billion.[207] 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.[208] In Round 2, lenders made about 6.3 million loans totaling about $271 billion. As of November 30, 2021, SBA had obligated about $815.2 billion across the two rounds of PPP, including lender fees, and expended about $815.1 billion, according to SBA.

SBA implemented the program rapidly, and millions of small businesses have benefited from PPP.[209] 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 eight recommendations since June 2020 to help ensure program integrity, achieve program effectiveness, and address potential fraud. As discussed in the table below, SBA has partially addressed the four recommendations from our prior bimonthly and quarterly CARES Act reports. In addition, as noted below, SBA has fully addressed one of the four recommendations from our July 2021 PPP report and shared its plans to address the other three.

Overview of Key Issues

Inability to support PPP accounting and related controls. In November 2021, SBA’s independent auditor issued a disclaimer of opinion on SBA’s fiscal year 2021 consolidated financial statements, meaning the auditor was unable to express an opinion due to insufficient evidence. This was SBA’s second consecutive disclaimer on its financial statements. As the basis for the disclaimer, the auditor reported that SBA was unable to provide adequate evidence to support a significant number of transactions and account balances due to inadequate processes and controls related to its implementation of its programs authorized under the CARES Act and related legislation, including PPP and the Economic Injury Disaster Loan program.[210]

The auditor identified several material weaknesses in internal control related to PPP.[211] Specifically, the auditor reported weaknesses concerning (1) SBA’s controls over PPP loan guarantee approval, reporting, review, and forgiveness; (2) subsidy reestimates, including the PPP subsidy reestimate; and (3) SBA’s evaluation of service organizations (contractors), including those relevant to PPP.[212] In addition, the auditor identified a material weakness in SBA’s entity-level controls, citing challenges due to the implementation of new and expanded programs, including PPP.

In its discussion of the material weakness related to controls over PPP loan guarantee approval, reporting, review, and forgiveness, the auditor noted that SBA did not adequately design and implement controls to ensure PPP loan guarantees approved in fiscal year 2021 were in existence, accurate, and in conformance with the CARES Act and related legislation. The auditor also stated that SBA lacked adequate controls to review the status of PPP loan guarantees where lender loan status reports had not been submitted, had been submitted incorrectly, or were not processed, hindering SBA’s ability to determine that the status of PPP loan guarantees was complete and accurate. In addition, the auditor noted that SBA lacked controls to ensure the PPP loan guarantees approved in fiscal year 2020 were completely and accurately reviewed to address eligibility flags and determine eligibility for forgiveness. Finally, the auditor stated that SBA did not adequately design and implement controls to ensure that forgiveness payments were accurate and proper in accordance with the CARES Act and related legislation.

The auditor’s report included several examples to highlight the control deficiencies contributing to the material weakness described above, such as the following:
  • The auditor could not verify existence and accuracy for 32 of 383 sampled items from the PPP loan guarantees approved in fiscal year 2021 because lenders did not respond to confirmation requests.
  • As of September 30, 2021, SBA had flagged over 27,000 approved PPP loan guarantees (with an approximate value of $488 million) in its loan repository system as potentially not in conformance with the CARES Act and related legislation.
  • As of September 30, 2021, SBA had reported approximately $2 billion of PPP loans that were approved but not disbursed due to unsubmitted or unprocessed loan status reports from lenders.
  • An analysis of the results of the PPP loan review process and forgiveness payments showed $49 billion was paid to lenders for forgiveness of PPP loans that were still being reviewed by SBA to address alerts and flags indicative of eligibility concerns.

For the material weakness related to subsidy reestimates, the auditor stated that SBA did not adequately design and implement controls over the review of the data inputs used in the PPP subsidy reestimate. Specifically, SBA did not consider and document the effects of errors from lender reporting on the reestimate. As a result, SBA did not have sufficient controls to ensure that the unpaid principal balance of loan guarantees that is the basis for the reestimate was complete and accurate. SBA also lacked controls to ensure completeness and accuracy of data sourced from the loan review process and forgiveness transactions that underlie key assumptions in the PPP reestimate calculation.

For the material weakness related to service organizations, the auditor reported that SBA did not obtain reasonable assurance of the operating effectiveness of internal controls within service organizations’ control environments. These service organizations included financial service providers involved in the PPP loan approval and forgiveness processes. Additionally, SBA did not provide evidence of adequate monitoring activities performed over the relevant control environments at service organizations, such as obtaining and reviewing attestation reports on the design, implementation, and operating effectiveness of controls at the service organizations.

In total, the auditor made 14 recommendations to SBA to address the issues related to PPP in the three areas of material weakness described above. Among other things, the auditor recommended that SBA
  • perform a thorough review of PPP loan guarantees approved in fiscal year 2021;
  • develop and enforce a policy and controls that require the adequate training and monitoring of lenders to execute their responsibilities in the PPP loan servicing process;
  • develop and enforce a policy and controls to monitor the results of its contractor’s loan review processes;
  • design adequate controls and processes to ensure forgiveness payments are not processed for loan guarantees that have not been sufficiently reviewed;
  • design and implement controls to continue accumulating relevant, complete, and accurate data on which to base the subsidy reestimate models for the PPP portfolio; and
  • assess the risk posed by service organizations’ control environments, and obtain sufficient assurance of the operating effectiveness of relevant and significant service organization controls.

SBA’s auditor also reported a material weakness in SBA’s entity-level controls, citing challenges due to the implementation of new and expanded programs. Related to PPP, the auditor stated that the PPP loan guarantee review and forgiveness review processes were not designed to ensure the reviews performed were to a sufficient level of precision to ensure the related balances were free of material misstatement. In addition, the auditor stated that SBA did not develop and implement an adequate monitoring plan for lenders participating in PPP. The auditor issued five recommendations to improve entity-level controls, including recommending, among other things, that SBA:
  • document its internal control system and processes related to the implementation of new or expanded programs from new legislation;
  • develop and implement monitoring controls to ensure implementation of an effective internal control environment; and
  • develop and implement a sufficient plan to test and monitor the design, implementation, and operating effectiveness of key, relevant controls that affect financial reporting and compliance with relevant laws and regulations.

The auditor noted that the deficiencies were primarily caused by SBA prioritizing the implementation of CARES Act provisions and related legislation as quickly and efficiently as possible over implementing internal control processes. In addition, the auditor cited the inherent challenges of implementing new and expanded programs without historical precedence.

SBA disagreed with the severity of the weaknesses related to PPP loan guarantees, subsidy reestimates, and entity-level controls. SBA partially agreed with the material weakness related to service organization oversight. While SBA did not agree or disagree with the auditor’s recommendations, in commenting on the auditor’s report, SBA stated that it is continuing its efforts to address material weaknesses, strengthen processes, develop fraud risk assessments, and support requirements for the auditability of its financial statements.

We support the recommendations the auditor provided to address control weaknesses related to PPP, and we encourage SBA to continue to work to improve its controls over the program, as well as to improve its documentation to support future financial statement audits.

Status of SBA’s loan forgiveness determinations. Based on our analysis of loan-level SBA data as of September 30, 2021, of the approximately 11.5 million PPP loans, SBA had received forgiveness decisions from lenders for about 7.4 million loans (64 percent).[213] SBA had made forgiveness determinations on 7.3 million of these loans, resulting in about 97 percent (7.1 million loans totaling more than $548 billion) receiving full forgiveness, about 141,000 loans receiving partial forgiveness, and 177 loans not receiving any forgiveness (see figure). About 115,000 loans were still being reviewed by SBA and had not received a forgiveness determination.[214]

Status of SBA Loan Forgiveness Determinations on Paycheck Protection Program Loans, as of Sept. 30, 2021

Note: Percentages do not add to 100 because of rounding.

The rate at which lenders are submitting loan forgiveness decisions to SBA has generally increased each month since August 2020 (see figure).[215] Whereas SBA received fewer than 100,000 loan forgiveness decisions in August and September 2020, SBA received more than 1 million each month in August and September 2021.

Number of Paycheck Protection Program Loan Forgiveness Decisions Submitted by Lenders to SBA, Aug. 2020–Sept. 2021

Status of loan reviews. As we previously reported, an SBA contractor conducted an initial automated review of all Round 1 loans to identify anomalies or attributes that may indicate noncompliance with eligibility requirements, fraud, or abuse.[216] Loans with any identified issues were subject to manual review by contractor and SBA staff. 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, contractor staff had completed about 78,000 manual reviews and referred about 8,900 loans to SBA for further review, as of November 15, 2021.[217]

Of the approximately 7.3 million loans for which SBA had made a forgiveness determination as of September 30, 2021, about 98,000 loans (totaling around $37.5 billion) required further review by SBA based on contractor concerns or perceived risk. The reviewed loans fell into one of three loan amount categories: (1) loans of less than $150,000 (65,600), (2) loans between $150,000 and $2,000,000 (15,239), and (3) loans of more than $2 million and loans with flags that required an escalated review (17,387).

SBA progress in addressing previous recommendations. Of the four recommendations we made in July 2021 to improve its loan review and forgiveness processes, SBA has fully addressed one. Specifically, we previously found that 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 therefore 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.

On July 15, 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 lender’s 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. Based on these actions, we determined that SBA has addressed our recommendation.

SBA has taken some steps or plans to take steps to address our three other July 2021 recommendations.
  • In our July 2021 report, 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. SBA agreed with the recommendation, and the agency issued a Federal Register notice on November 16, 2021, that delegated certain authorities related to SBA's review of PPP loans and final SBA loan review decisions to two entities within SBA—a Higher Authority Review Team and the Office of Capital Access Committee.[218] We are reviewing the notice to determine whether it fully addresses our recommendation.
  • We also found in July 2021 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 help ensure it responds in a timely manner to PPP lender inquiries on loan reviews. SBA agreed with the recommendation, and SBA officials told us in October 2021 that they had taken steps to improve communication with lenders, such as having a customer service team handle all the lender inquiries from the lender platform and communicate to lenders reasons for delays or issues with loan reviews. In late December 2021, SBA provided us with documentation on procedures its customer service staff are to follow. We are reviewing the documentation to determine whether it fully addresses our recommendation.
  • Lastly, we found in July 2021 that SBA had not yet implemented the CARES Act requirement that SBA purchase loans prior to loan forgiveness upon submission of reports by lenders concerning the amount expected to be forgiven. Consequently, we recommended that SBA implement this statutory provision or report to Congress why it has not complied, including seeking statutory flexibilities or exceptions that the agency believes appropriate. In response, SBA stated that it would notify Congress of its request to seek statutory flexibility on this matter or would request that Congress repeal the advance purchase requirement. In December 2021, SBA officials said they planned to send a letter to Congress in the second quarter of fiscal year 2022.

Methodology

To conduct this work, we analyzed SBA loan-level forgiveness data as of September 30, 2021, reviewed data on PPP obligations and expenditures, and interviewed SBA officials. We reviewed SBA’s fiscal year 2021 agency financial report and the accompanying independent auditor’s report. 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 determinations and PPP expenditures.

Agency Comments

We provided SBA, Treasury, and the Office of Management and Budget (OMB) with a draft of this enclosure. SBA and Treasury provided technical comments, which we incorporated as appropriate. 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 in December 2020 and November 2021 by its independent financial statement auditor.

GAO’s Prior Recommendations

The table below presents our PPP recommendations from prior bimonthly and quarterly CARES Act reports.
Prior GAO Recommendations Related to the Paycheck Protection Program

Recommendation

Status

The Administrator of the Small Business Administration (SBA) should conduct and document a fraud risk assessment for the Paycheck Protection Program (PPP). (March 2021 report)

Open—partially addressed. SBA agreed with the recommendation. In December 2021, SBA provided a fraud risk assessment that had been prepared by its contractor. Based on our initial review of the assessment, it adhered to many but not all fraud risk management leading practices. For example, SBA did not determine its fraud risk tolerance as called for by leading practices. We intend to follow up with SBA to discuss the fraud risk assessment and agency actions in response to the fraud risk assessment.

The Administrator of SBA should develop a strategy that outlines specific actions to monitor and manage fraud risks in the Paycheck Protection Program on a continuous basis. (March 2021 report)

Open—partially addressed. SBA agreed with the recommendation, stating that it would work to ensure that fraud risks are monitored on a continuous basis. In December 2021, SBA provided a fraud risk assessment, which would inform an antifraud strategy. We intend to follow up with SBA to discuss agency actions in response to the fraud risk assessment and plans for developing an antifraud strategy.

The Administrator of SBA should expeditiously estimate improper payments and report estimates and error rates for PPP due to concerns about the possibility that improper payments, including those resulting from fraudulent activity, could be widespread. (November 2020 report)

Open—partially addressed. SBA neither agreed nor disagreed with our recommendation at the time of our report. In response to our recommendation, SBA stated that it was planning to conduct improper payment testing for PPP and that it takes improper payments seriously. SBA officials stated that SBA had submitted a sampling plan to the Office of Management and Budget in February 2021. In July 2021, they said that SBA would use this sampling plan to estimate both improper payments and error rates for PPP in the fourth quarter of fiscal year 2021. They noted in August 2021 that SBA would officially report the improper payment rate in its Fiscal Year 2022 Agency Financial Report, not in the same report for fiscal year 2021, because of timing.

The Administrator of SBA should develop and implement plans to identify and respond to risks in PPP to ensure program integrity, achieve program effectiveness, and address potential fraud, including in loans of $2 million or less. (June 2020 report)

Open—partially addressed. At the time of our report, SBA neither agreed nor disagreed with our recommendation. As we reported in September 2020, SBA had said that it planned to review all PPP loans of $2 million or more and further stated that it may review any PPP loan it deems appropriate, including loans of less than $2 million. In late December 2020, SBA provided a Loan Review Plan outlining steps it planned to take to review PPP loans. The document describes three steps in the process: automated screenings of all loans, manual reviews of selected loans, and quality control reviews to ensure the quality, completeness, and consistency of the review process. In July 2021, SBA officials told us that the agency had begun updating its review plan to incorporate programmatic changes, including its oversight of loans of $2 million or more. As of December 2021, SBA was still finalizing the updated plan.
Source: GAO. I GAO-22-105291

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

State Small Business Credit Initiative

Treasury is in the process of implementing the reauthorized State Small Business Credit Initiative to help support small business financing programs and expects to begin disbursing funds to states, territories, and tribal governments in the first quarter of 2022.

Entities involved: Office of Recovery Programs and Office of Domestic Finance, within the Department of the Treasury

Background

Under the State Small Business Credit Initiative (SSBCI), reauthorized in March 2021 by the American Rescue Plan Act of 2021 (ARPA), $10 billion was appropriated for small business capital access programs and other credit support programs of state, territory, District of Columbia, and tribal governments.[219] ARPA requires Treasury to complete all disbursements and remaining obligations before September 30, 2030. Any amount that remains unexpended by Treasury on that date is to be rescinded and deposited into Treasury’s general fund.

Congress first authorized SSBCI in the Small Business Jobs Act of 2010, appropriating $1.5 billion in funding following the 2007-2009 financial crisis. This original SSBCI program ended in September 2017. As with the original program, the current program may fund (1) capital access programs that provide insurance for business loans (in the form of loan loss reserve funds) for participating financial institutions;[220] and (2) other credit support programs that include collateral support, loan participation, loan guarantee, venture capital, and other similar programs.[221] Through different mechanisms, each program type shares a portion of the risk of loan repayment or equity financing with lenders, thereby facilitating transactions that might not otherwise have occurred.

The current program also retains the original formula for allocating a portion of the funds ($6 billion) to states (and municipalities, if their states do not submit a complete application to Treasury), territories, and the District of Columbia; disbursement structure (three installments over the life of the program); and the requirement for participants to use at least 80 percent of the previous disbursement before receiving the next installment. In addition, each participating jurisdiction (state, territory, District of Columbia, tribal government, or any participating municipality) is required to demonstrate a “reasonable expectation” that its other credit support programs, taken together, would generate an amount of small business lending and investment at least 10 times its SSBCI funding (a 10:1 leverage ratio).

In contrast to the original program, the current program received a much larger appropriation and includes an allocation for tribal governments and additional funding for very small businesses and business enterprises owned and controlled by socially and economically disadvantaged individuals (see figure).[222] It also includes technical assistance funds that can be used to provide legal, accounting, and financial advisory services to support very small businesses and businesses owned by socially and economically disadvantaged individuals that apply to participate in an SSBCI program or another government small business program.

State Small Business Credit Initiative Funding Allocations, 2010 and 2021

Note: Only municipalities located in states that do not submit complete applications are eligible to receive funding. In addition to the allocations of $6.0 billion for states, territories, the District of Columbia, and any participating municipalities, and $0.5 billion for tribal governments, these jurisdictions may receive portions of the funding for very small businesses, technical assistance, and businesses owned and controlled by socially and economically disadvantaged individuals.

Overview of Key Issues

Preliminary funding allocations and program time frames. In November 2021, Treasury updated the preliminary allocation amounts it had previously published for states, territories, and the District of Columbia (see map).[223] The updated preliminary amounts include the main allocation and allocations for very small businesses, businesses owned and controlled by socially and economically disadvantaged individuals, and jurisdictions that demonstrate “robust support” for such businesses. Treasury also published the aggregate preliminary allocation to all tribal governments and communicated individual amounts to each tribal government directly.

For states and territories, preliminary main allocations and allocations for very small businesses were based on each state’s or territory’s decline in employment from 2019 through 2020 as a proportion of national employment decline.[224] Preliminary allocations related to businesses owned and controlled by socially and economically disadvantaged individuals were based on the percentage of each jurisdiction’s total population residing in Community Development Financial Institution Investment Areas.[225] All preliminary allocations for tribal governments were based on the total number of enrolled tribal members for each tribe using available enrollment data.[226]

Total potential funding amounts varied among states and territories. California received the highest allocation (approximately $1.2 billion), followed by New York (approximately $502 million) and Florida (approximately $488 million). The Northern Mariana Islands and American Samoa received the lowest allocations (approximately $57 million each). Tribal governments in aggregate received a total of approximately $709 million. Treasury officials told us they have not published data on individual tribal government preliminary allocations because of concerns from tribal governments about disclosing sensitive tribal data on which the allocations are partially based.

State Small Business Credit Initiative 2021 Preliminary Allocations to States and Territories

According to Treasury officials, all states and territories and 395 tribal governments submitted a notice of intent to apply for the program.[227] States, territories, and the District of Columbia must have initiated their SSBCI applications for capital access and other credit support programs by the statutory deadline of December 11, 2021, and fully complete their applications by February 11, 2022. The deadline for tribal governments to initiate and submit their complete SSBCI applications for this funding was extended to May 11, 2022. Officials said applications will be accepted and reviewed by Treasury on a rolling basis. As of November 1, 2021, Treasury officials told us they anticipate the first round of completed application reviews and disbursements will likely occur during the first quarter of 2022. Applications for technical assistance funding are due by March 31, 2022 for states, territories, and the District of Columbia, and July 11, 2022 for tribal governments.

Staffing of program office continues. Treasury has determined preliminary staffing needs for the SSBCI program office (part of Treasury’s Office of Recovery Programs) and has been hiring staff. According to Treasury officials, as of October 20, 2021, 11 positions were staffed, out of 23 total authorized positions in the program office. Treasury officials said the office will include (1) a compliance group that trains participating jurisdictions on compliance rules and answers their questions about eligible transactions; (2) an outreach group that assists jurisdictions with applications and other Treasury processes and facilitates knowledge sharing through white papers, webinars, and subject matter experts; (3) a policy group that releases guidance and frequently asked questions (FAQs) and responds to new policy issues; and (4) a technical assistance group that will assist states through contractors. The structure of the compliance, outreach, and policy groups will be similar to the original program. While some staff will be assigned to a specific group, program analysts will work across the four groups.

Original program guidance was updated to reflect some of the new components. Treasury released updated guidance for the current SSBCI program on November 10, 2021. The guidance covers (1) requirements for borrowers, lenders, and investors participating in capital access and other credit support programs, (2) the funding methodology and requirements for using the additional funds to assist very small businesses and businesses owned and controlled by socially and economically disadvantaged individuals, and (3) eligibility and reporting requirements for jurisdictions applying to the program. Treasury published application instructions and launched an online application portal on November 22, 2021. Treasury plans to announce the availability of technical assistance funding and issue separate guidelines for this component of the program in early 2022, according to officials.

Treasury has conducted initial outreach to eligible jurisdictions. According to officials, prior to releasing the November 2021 guidance, Treasury had held over 50 listening sessions with state and territory officials and other organizations, and approximately 15 webinars and seven regional leadership meetings to provide support to tribal governments, which did not participate in the original program. Treasury officials said that outreach to eligible jurisdictions occurred through the December 11 initial application deadline, with daily office hour sessions supplemented by webinars. Officials said Treasury plans to host webinars on program design and separate office hours for eligible jurisdictions on an ongoing basis, and provide direct assistance related to the specific types of programs applicants propose implementing.

Lessons learned from the original SSBCI program may inform implementation of the current program. Our reviews of the original SSBCI program from 2011 through 2014, as well as audits by Treasury’s Office of Inspector General, included recommendations to improve Treasury’s implementation. For example, we made three recommendations related to measuring program performance that Treasury implemented, including a recommendation that Treasury establish targets for selected performance measures such as the amount of SSBCI funds used over time. In addition, a 2016 program evaluation commissioned by Treasury identified lessons learned and effective practices from Treasury’s experience with the original program.

Treasury officials provided examples on how Treasury plans to apply lessons learned to the current program. For example, Treasury officials noted that in developing updated guidance, they were aware of the need to provide appropriate flexibility to participants so that they can adapt programs to their jurisdiction’s needs and adjust their programs over time. In addition, Treasury officials recognized the importance of information sharing across participants and said they plan to facilitate ongoing discussions among participants so they can learn about implementing specific programs from their counterparts. Treasury officials also said they identified the top 11 risks states faced during the original program and best practices for managing those risks, which are publicly available on Treasury’s website.

Increased size and new program features present potential challenges. As Treasury operationalizes a larger and more complex SSBCI program, potential challenges for Treasury and program participants include:
  • Meeting the overall program leverage ratio. ARPA increased total funding for states and territories by over $5 billion, creating a larger pool of money for lending and investing. Many states were unable to meet the 10:1 leverage ratio requirement for the original program, and state officials expressed some concerns about meeting the same leverage ratio for the current program. For example, one state official said meeting the leverage ratio requirement will be a challenge given the amount of money the state will receive for the current program. Representatives from a financial organization we interviewed noted that participants have a better understanding of opportunities to leverage funds and which types of programs result in higher leverage ratios for the current program.
  • Managing allocations related to very small businesses and businesses owned and controlled by socially and economically disadvantaged individuals. ARPA included $1.5 billion to be expended for businesses owned and controlled by socially and economically disadvantaged individuals (as well as $1 billion to be provided to jurisdictions that demonstrate robust support for these businesses), and $500 million to be expended for very small businesses. State officials we interviewed said assisting these businesses can be difficult. For example, officials from one state said it may be difficult to incentivize banks to take on the level of risk necessary to serve these businesses and that they plan to address this by working closely with community development financial institutions.
  • Managing funds for tribal governments. ARPA included a $500 million set-aside for tribal governments, who as first-time participants will likely require additional guidance and technical assistance from Treasury, according to representatives from a financial organization that helped states set up their programs during the original SSBCI round. Tribal governments may also receive additional SSBCI funding from the allocations related to very small businesses and businesses owned and controlled by socially and economically disadvantaged individuals. We reported in October 2021 that Treasury faced various challenges that slowed distribution of funds from the Coronavirus Relief Fund to tribes.
  • Managing technical assistance funds. ARPA included a $500 million set-aside for technical assistance to very small businesses and businesses owned by socially and economically disadvantaged individuals. Treasury may provide these funds to participating jurisdictions, transfer them to the Minority Business Development Agency, or use them to directly contract with technical assistance providers. State officials we interviewed said the technical assistance component would be an important component of the current program and receiving additional guidance from Treasury in this area will help them plan how to use the SSBCI funds. One official noted that allowing participating jurisdictions to administer these funds may improve access for underserved businesses. As previously noted, Treasury officials plan to release guidance for this component in early 2022.

Methodology

To conduct this work, we reviewed relevant federal laws, agency guidance, notices, and reports, and interviewed Treasury officials. We also interviewed officials from three states that implemented the 2010 program, and representatives from four organizations familiar with the program. We also analyzed data from Treasury on preliminary funding allocations for states and territories. We obtained information from Treasury on how they determined and verified these allocations, and determined the data were sufficiently reliable for the purposes of our reporting objective.

Agency Comments

We provided the Department of the Treasury and the Office of Management and Budget with a draft of this enclosure. Treasury 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 Treasury’s efforts to make the 2021 SSBCI program operational. We plan to review how states, territories, and tribal governments plan to use SSBCI funds to support small businesses. We also plan to examine Treasury’s efforts to ensure compliance with program requirements, manage program risk, and monitor and assess the effectiveness of the program.

Related GAO Products

COVID-19: Lessons Learned from Interior and Treasury’s Administration of CARES Act Funds Could Improve Federal Emergency Relief to Tribes. GAO-22-104349. Washington, D.C.: October 29, 2021.

Small Business Credit Programs: Treasury Continues to Enhance Performance Measurement and Evaluation but Could Better Communicate and Update Results. GAO-15-105. Washington, D.C.: December 11, 2014.

State Small Business Credit Initiative: Opportunities Exist to Enhance Performance Measurement and Evaluation. GAO-14-97. Washington, D.C.: December 18, 2013.

Small Business Lending: Opportunities Exist to Improve Performance Reporting of Treasury’s Programs. GAO-13-76. Washington, D.C.: December 5, 2012.

State Small Business Credit Initiative: Opportunities Exist to Improve Program Oversight. GAO-12-173. Washington, D.C.: December 7, 2011.

Contact Information: Michael Clements, (202) 512-8678, clementsm@gao.gov

Federal Office Space

Bottom line statement: Most agencies we surveyed expect to reduce office space leases or square footage in the next 3 to 5 years, in part due to the pandemic. Some told us they anticipate making potentially costly office design changes to meet hybrid workforce needs and evolving federal requirements.

Entities involved: The 24 agencies that fall under the Chief Financial Officers Act of 1990, as amended.[228] These agencies collectively occupied approximately 98 percent of all federal office space in fiscal year 2020, according to General Services Administration data.

Background

The COVID-19 pandemic, which resulted in nearly 60 percent of the federal workforce teleworking, has raised questions about the office space needs of the federal government and ways agencies will plan for federal workspace in the future.[229] Furthermore, it is not clear whether previous workspace standards and designs, such as for building ventilation, occupancy rates, and open office configurations, are appropriate in light of COVID-19.

Federal properties include thousands of leased and owned office buildings that cost billions of dollars annually to rent, operate, and maintain, one reason that managing federal real property has been on GAO’s High-Risk List since 2003. The General Services Administration (GSA) provides real property guidance to federal agencies, including the 24 Chief Financial Officers (CFO) Act agencies, and assists them in acquiring and leasing properties, including ensuring properties meet federal safety protocols such as those related to ventilation.

Overview of Key Issues

Recent and future decreases in leased office space. In response to a GAO survey of all CFO Act agencies, several agencies reported terminating leases or allowing leases to expire in response to the pandemic and pandemic-related policies allowing more telework. Five of the 24 agencies we surveyed reported terminating leases due to the pandemic and two reported extending current leases to avoid pandemic-related challenges associated with moving offices to a new location. For example:
  • The Department of Veterans Affairs reduced its leased office space by approximately 237,000 square feet across 18 leases nationwide—through lease terminations and allowing leases to expire—because of teleworking personnel.
  • The Environmental Protection Agency delayed its office relocation to a federal building in Washington, D.C. due to the challenges of moving almost 1,000 employees and equipment while the federal government was operating under a maximum telework status. As a result, the agency had to extend its lease in Arlington, Virginia (326,057 square feet) until March 2022 at an annual cost of approximately $14 million.

Prior to the pandemic, the federal government’s leased and owned real property assets were already decreasing, in part in response to executive branch policies aimed at reducing the federal footprint—for example, Freeze the Footprint (2012) and Reduce the Footprint (2015).[230] However, since the pandemic began in March 2020, federal agencies have reduced leasing at a higher rate (see figure below).

Number of Leases in the Federal Leasing Inventory, July 2011–July 2021

aIn 2012, the Office of Management and Budget (OMB) directed the 24 Chief Financial Officers (CFO) Act agencies to “freeze” their footprint and maintain their civilian real estate inventory at or below their then-current levels.
bIn 2015, OMB issued its Reduce the Footprint policy requiring the CFO Act agencies to set annual targets for reducing their portfolio of domestic office and warehouse space.

While there are likely several reasons other than the pandemic for the recent and substantial reduction in leases, according to agencies this downward trend is likely to continue. Most agencies we surveyed told us they plan to reduce the number of leases or reduce square footage in their real estate portfolio starting in the next 3 to 5 years, in part because of the pandemic. For example:
  • Department of Education officials said they are canceling plans for several new leases because of the pandemic and will reduce square footage between 27 and 50 percent for future leases.
  • Department of Defense officials reported plans to reduce their reliance on leased workspace because, in some offices, almost 90 percent of personnel were able to telework.

Additionally, in the next 5 years more than half of federal leases will expire, giving agencies the opportunity to significantly change their leased portfolio.

Needed office design changes and related costs. Multiple agencies reported that they expect potentially costly office design changes will be needed for post-pandemic workforce reentry. Specifically, agencies expect a need to transform traditional offices to hybrid offices, which allow regular and occasional in-office work, and for additional technology investments to enable agency personnel to perform their jobs at home. Several agencies reported that one-time costs to make design changes may offset some savings from reducing the federal footprint.

Additionally, the majority of agencies told us they expect increased costs from construction, driven by increased building supply costs and labor shortages. For example, Department of Defense officials said that data collected from June 2020 to June 2021 show costs for non-residential construction materials rose 26 percent.

Guidance and assistance for agencies on workforce reentry and space planning. Some guidance has been provided to federal agencies regarding workforce reentry issues, including telework and remote work, and updated or additional guidance may be issued.
  • On June 10, 2021, the Office of Personnel Management (OPM), GSA, and the Office of Management and Budget (OMB) jointly issued a memorandum providing guidance to agencies for reentry and post-reentry work environment and personnel policies. This memorandum included high-level guidance to agencies on telework, remote work, hours of work, labor relations, and performance management.
  • On July 23, 2021, OPM issued further guidance for agencies on workforce reentry issues. It covered many topics addressed in the previous guidance but also included information on pay administration, evacuation pay, labor, and employee relations.
  • On November 12, 2021, OPM released additional guidance which provides resources and information to help agencies conceptualize the continued evolution of telework, including a new section providing agencies with policy guidance on remote work.

GSA officials said they will consider future guidance updates on space configuration and ventilation. Officials from other federal agencies told us they thought that OMB may provide additional guidance involving space reduction goals in the future. However, OMB officials we interviewed said it was too early to tell whether they would publish new guidance.

GSA officials said the agency has shifted preexisting efforts to assist agencies in the real property planning process to respond more directly to the pandemic, and has added additional services (see figure below). For example, GSA’s efforts to assist agencies in planning workspace now and after the pandemic include facility capacity analysis and occupancy planning.

Examples of General Services Administration’s (GSA) Return to Workplace Planning Services for Federal Agencies

Methodology

We sent a survey to all 24 CFO Act agencies and received a 100 percent response rate. The survey asked specifically about the effects of COVID-19 on current changes to and future plans for office space leases, owned buildings, and new construction projects. We also reviewed relevant OPM, OMB, and GSA guidance; interviewed officials from federal agencies; and analyzed GSA leasing inventory data from July 2011 to July 2021. We interviewed cognizant agency officials about the data and reviewed the data for omissions and completeness and concluded the data was reliable for our purposes.

Agency Comments

We provided a draft of this enclosure to the 24 CFO Act agencies and to the Office of Management and Budget. GSA provided technical comments, which we incorporated as appropriate.

GAO’s Ongoing Work

The COVID-19 pandemic continues to have effects on federal office space needs and requirements. We have ongoing work related to the office space of the 24 CFO Act agencies and expect to issue a report in the summer of 2022. GAO is also currently conducting work to examine telework use at the 24 CFO Act agencies during the COVID-19 pandemic.

Related GAO Products

Federal Leasing: Quality Information and Metrics Would Allow GSA to Better Assess the Value of Its Broker Program. GAO-20-361. Washington, D.C.: March 31, 2020.

Contact information: Jill Naamane, Acting Director, (202) 512-2834, naamanej@gao.gov

Coronavirus State and Local Fiscal Recovery Funds

States continue to distribute Coronavirus State and Local Fiscal Recovery Funds awards to smaller local governments, and the Department of the Treasury has extended deadlines for meeting reporting requirements for all recipients.

Entities involved: Department of the Treasury

Background

The Coronavirus State and Local Fiscal Recovery Funds (CSLFRF), established under the American Rescue Plan Act of 2021 (ARPA) and administered by the Department of the Treasury, allocated $350 billion to the states, the District of Columbia, local governments, tribal governments, and U.S. territories to help cover a broad range of costs stemming from the fiscal effects of the COVID-19 pandemic.[231] Local governments consist of metropolitan cities, counties, and smaller local governments (typically serving populations of less than 50,000) referred to as non-entitlement units of local government (NEU).[232]

Treasury had distributed more than $245 billion in CSLFRF allocations to recipients as of November 30, 2021, according to Treasury data. The figure below shows the amounts of funding the CSLFRF allocates to various recipient types as well as the amount of funding Treasury distributed to each recipient type as of November 30, 2021.

CSLFRF recipients have until December 31, 2024, to incur obligations with their CSLFRF awards and, according to Treasury, until December 31, 2026, to liquidate those obligations, in accordance with allowable uses established in ARPA.

Coronavirus State and Local Fiscal Recovery Funds Allocations and Treasury Distributions as of Nov. 30, 2021, by Recipient Type

aNon-entitlement units of local government (NEU), are local governments typically serving populations of less than 50,000. 42 U.S.C. §§ 803(g)(5), 5302(a)(5). NEUs include cities, villages, towns, townships, or other types of local governments.
bA metropolitan city is defined as the central city within a metropolitan area (i.e., a standard metropolitan statistical area as established by the Office of Management and Budget) or any other city within a metropolitan area that has a population of 50,000 or more. 42 U.S.C. §§ 803(g)(4), 5302(a)(3)-(4).
cARPA provides that to receive their Coronavirus State and Local Fiscal Recovery Funds award, states, the District of Columbia, and U.S. territories must first provide Treasury with a signed certification stating that they require their award to carry out allowable activities and will comply with relevant requirements when they use their award. According to Treasury, states that have experienced a net increase of more than 2 percentage points in their unemployment rate from February 2020 to the date of the latest available data will receive their full award in a single payment; other states will receive award funds in two equal tranches, with the second tranche provided within 12 months after certification. Governments of U.S. territories will receive an award in a single payment. Treasury is required to distribute awards to metropolitan cities, states (for distribution to NEUs), and counties in two equal tranches, providing the first payment within 60 days after ARPA’s enactment, or May 10, 2021, to the extent practicable, and providing the second payment no earlier than 12 months after the first. After receiving award funds for distribution to NEUs, states have 30 days to make those distributions, unless Treasury grants an extension. According to Treasury, tribal governments will receive their award funds in two distributions: the first distribution in May 2021 and the second distribution, based on employment data, in June 2021.

Under ARPA, eligible state, territorial, metropolitan city, county, and tribal governments receive funding directly from Treasury. According to Treasury, over 20,000 NEUs are receiving CSLFRF awards through their state governments.[233] Specifically, Treasury will make payments to states for distribution to NEUs in two tranches (approximately 12 months apart), and states are required to allocate and distribute the payments to each NEU within their state.[234]

Treasury has issued guidance that includes steps states should follow for allocating and distributing funds to NEUs.[235] Among other things, these steps include identifying eligible NEUs, calculating initial allocation amounts, and establishing a process for NEUs to submit requests for their award.[236] Consistent with ARPA, states must also ensure an NEU’s total CSLFRF award (i.e., the sum of both tranches) does not exceed 75 percent of the NEU’s most recent budget.[237] According to Treasury guidance, states have some discretion in calculating the initial allocation of funds. For example, the guidance explains that states may divide any overlapping population between NEUs in a number of ways for the purpose of allocating funds.[238]

As CSLFRF recipients, NEUs may be subject to single audits, as required by the Single Audit Act. The act establishes requirements for nonfederal entities 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 they spend at least $750,000 in federal awards in their fiscal year.[239]

On May 10, 2021, Treasury released an interim final rule for implementing the CSLFRF that identified reporting requirements for all recipients.[240]
  • All recipients—except NEUs—were required to submit an interim report that provided an initial overview of the status and use of their funding.
  • All recipients, including NEUs, are required to submit project and expenditure reports on a quarterly or annual basis—depending on the type of recipient—that provide information on their use of the funding and projects undertaken with the funding, among other things.
  • States, U.S. territories, and metropolitan cities and counties with a population that exceeds 250,000 residents are also required to submit to Treasury annually, and post on their public websites, a recovery plan performance report (recovery plan). These recovery plans are to discuss planned uses of spending and include, among other things, descriptions of the projects funded.

Treasury released subsequent guidance that provides additional detail and clarification on the compliance and reporting responsibilities for each recipient type, including reporting deadlines as shown in the figure below.[241] Recipients must submit all required CSLFRF reports through Treasury’s online reporting portal.

Treasury’s Reporting Requirements for the Coronavirus State and Local Fiscal Recovery Funds, by Recipient Type, as of Nov. 15, 2021

Overview of Key Issues

States’ progress in distributing CSLFRF payments to NEUs. Under ARPA, states have 30 days to distribute funds to NEUs, once they receive the payments from Treasury.[242] We asked Treasury officials about data they could provide us on the amount of funds states distributed to NEUs for the first tranche of payment of award funds. Treasury officials told us that states had submitted data on distributions to NEUs, as well as NEUs’ contact information (e.g., personal contact and other related information), but that Treasury had concerns with the quality and completeness of the data and was not prepared to share the data at the time of our review.[243]

Treasury officials told us that they are in the process of working to ensure the completeness and quality of the data, which includes, among other things, working with states to address missing data and ensuring that the allocation amounts to NEUs met the allowable statutory limits under ARPA. The officials also said they plan to engage directly with NEUs to create accounts in Treasury’s online portal, which recipients use to submit required reports.[244] We will continue to follow up with Treasury on its efforts to address these data concerns.

ARPA also allows states to request from Treasury one or more extensions of up to 30 days, with the initial extension granted if states encounter an “excessive administrative burden” that affects their ability to distribute all CSLFRF payments to their NEUs.[245] According to Treasury data, as of January 3, 2022, most states had received multiple 30-day extensions from Treasury for distributing CSLFRF payments to NEUs within their state, as shown in the table below.

Number of States Receiving One or More 30-Day Extensions from Treasury for Distributing Coronavirus State and Local Fiscal Recovery Funds Payments to Non-Entitlement Units of Local Government, as of Jan. 3, 2022

First 30-day extension

Second 30-day extension

Third 30-day extension

Fourth 30-day extension

Fifth 30-day extension

Sixth 30-day extension

Seventh 30-day extension
States (50)4435252112104
Source: Department of the Treasury. I GAO-22-105291

According to Treasury officials, some states faced challenges that affected their ability to distribute all CSLFRF payments to NEUs. Treasury officials said some states have thousands of NEUs and need more time to manage efforts such as reaching out to NEUs and processing NEU requests for funds. For example, they said some states requested an extension so they could have additional time to establish a process for distributing CSLFRF payments. These officials also told us that some states had difficulty contacting NEUs—particularly smaller NEUs—that have limited administrative capacity, such as a lack of full-time staff and limited broadband access and office hours.

Representatives from some state and local government associations described similar challenges. For example, some states encountered difficulties communicating with NEUs that did not have staff readily available to respond to state inquiries, while other states were not able to identify an appropriate NEU contact.

In addition, representatives from one association told us that obtaining the necessary documentation to verify NEUs’ budgets can be challenging for states, particularly because some NEUs do not have a documented budget. For example, an association representative told us that one NEU had provided the state its written budget on a napkin. According to Treasury guidance, states may rely on an NEU’s budget total, rather than actual budget documents, to ensure an NEU’s total CSLFRF award does not exceed 75 percent of its annual budget.[246] However, NEUs must provide actual budget documents that validate their budget total when they submit their first project and expenditure report to Treasury due on April 30, 2022.

Status of NEU single audits. Representatives from both the audit community and state and local government associations told us that NEUs may face challenges in conducting the single audits required by the Single Audit Act, given that thousands of NEUs may be subject to single audits for the first time. The act requires auditors to conduct single audits in accordance with generally accepted government auditing standards (GAGAS).[247] The representatives expressed concern that there may not be enough qualified state auditors available with the expertise to address the increased COVID-19 workload and the number of entities that may be subject to a single audit. For example, representatives from one association said they estimate that CSLFRF spending may trigger up to 10,000 new single audits.[248]

Representatives also expressed concern that resources to perform these audits might be stretched beyond auditors’ capacity, especially auditors with GAGAS certification. One association’s representatives told us that state auditors are using resources to conduct audits of CSLFRF funding at the state level, limiting the staff they can devote to local government audits. Specifically, they said that while state auditors usually conduct audits for local governments, many have been constrained due to an increase in demand and insufficient staffing.[249] As a result, local accounting firms may be called on to conduct many single audits.

In addition, association representatives said that the cost of performing single audits may be a challenge for some jurisdictions. For example, representatives from one state and local government association said that some smaller NEUs have to consider the cost of the single audit when determining whether to accept a CSLFRF award and that some have declined their award as a result.[250] Representatives at another association said that state auditors often get a set appropriation from the state legislature each fiscal year, making it difficult to obtain additional funding to conduct audits that occur after the state appropriations were originally enacted.

Treasury officials said they are aware of the concerns raised by the associations as well as others in the audit community, including the American Institute of Certified Public Accountants. They told us that they worked with the Office of Management and Budget (OMB) on the Compliance Supplement for single audits to clarify the CSLFRF requirements for auditors.[251] We will continue to monitor Treasury’s progress along with our prior July 2021 recommendation that OMB, in consultation with Treasury, issue timely and sufficient single audit guidance for auditing recipients’ uses of CSLFRF payments.

States’ planned uses of funds. As discussed above, Treasury required state recipients to submit their recovery plans by August 31, 2021, or 60 days after receiving their CSLFRF award. These plans were to describe planned (i.e., intended and actual) uses of spending that cover the date of the award through July 31, 2021. We analyzed 47 state recovery plans that were publicly available as of December 3, 2021.[252] Ten of these recovery plans did not include specified dollar amounts related to their planned uses of funds. The remaining 37 plans specified dollar amounts for their planned uses of funds that totaled $80.8 billion across seven spending categories as defined by Treasury:[253]
  1. Public Health. Recipients may address the effects of the COVID-19 public health emergency. Examples include funds for COVID-19 testing and vaccination efforts, procuring personal protective equipment, and providing mental health services.
  2. Negative Economic Impacts. Recipients may address the negative economic impacts that the COVID-19 pandemic had on individuals, households, and businesses, among other groups. Examples include funds for food programs, job training assistance, and aid to tourism, travel, and hospitality industries.
  3. Services to Disproportionately Impacted Communities. Recipients may provide services to communities disproportionately impacted by the COVID-19 pandemic. Examples include funds for education assistance to high-poverty school districts, affordable housing, and services for unhoused persons.
  4. Premium Pay. Recipients may use funds to provide premium pay to eligible public and private sector workers performing essential work during the COVID–19 pandemic.
  5. Infrastructure. Recipients may use funds for necessary investments in water, sewer, and broadband infrastructure. Examples include funds for wastewater treatment services, managing and treating stormwater, and providing broadband to unserved or underserved users.
  6. Revenue Replacement. Recipients may use funds for the provision of government services to the extent of the reduction in revenue experienced due to the COVID–19 pandemic.
  7. Administrative and Other. Recipients may use funds to cover the administrative expenses of managing their CSLFRF award. Examples include costs of consultants to ensure compliance with program requirements and costs of facilities or administrative functions (e.g., a director’s office).[254]

Across the 37 state recovery plans that specified dollar amounts for planned uses of CSLFRF award funds, revenue replacement represented the largest share (about 33 percent of planned specified dollar amounts), as shown in the figure below. Twenty of these 37 states reported plans to use at least some of their award funds for revenue replacement. For example, Washington state reported plans to use $600 million to replace lost transportation revenue and fund transportation operating expenses due to decreases in travel-related revenue during the pandemic. Pennsylvania planned to use $4.6 billion to replace lost revenue in a number of areas related to the state’s government operations, including higher education, housing finance programs, and emergency medical services.

Percentage of States’ Planned Uses of Coronavirus State and Local Fiscal Recovery Funds (CSLFRF) by Spending Category, Based on States’ Recovery Plan Performance Reports that Were Publicly Available as of Dec. 3, 2021

Note: Our analysis is based on 47 states’ recovery plan performance reports (recovery plan), including the District of Columbia, that were publicly available as of December 3, 2021. Based on our analysis, 37 states’ recovery plans specified dollar amounts for planned uses of CSLFRF award funds in at least one of the seven spending categories defined by the Department of the Treasury. Our analysis does not include U.S. territories’, metropolitan cities’, and counties’ recovery plans or their planned uses of CSLFRF award funds.

Addressing the negative economic impacts of COVID-19 represented the second largest share (about 28 percent) of specified dollars for states’ planned uses of CSLFRF award funds. Twenty-nine states reported plans to spend some of their CSLFRF award funds in this spending category. Some states reported planned uses for contributing to unemployment insurance trust funds. For example, Arizona provided nearly $759 million to replenish its unemployment insurance trust fund to pre-pandemic levels. Other states reported planned uses of CSLFRF award funds in support of their tourism industries. For example, Alaska reported that it planned to spend $90 million to help more than 2,000 businesses remain viable during the 2022 tourism season, due to economic losses the state experienced in 2020 and 2021.

For the 10 state recovery plans that did not specify a dollar amount for their planned use of funds, some included general descriptions of planned uses in one or more spending categories. For example, Arkansas reported plans to use some funds to increase staffing in the state’s health care systems and cover expenses related to skilled nursing facilities. Other states reported that they had not made decisions as of July 31, 2021, and were in the process of determining how to spend their award at the time the reports were due. For example, Missouri reported that it was evaluating potential uses for its CSLFRF award and that most funds would be appropriated when the state legislature reconvenes in 2022.

CSLFRF reporting requirement extensions. Treasury extended the deadlines to all CSLFRF recipients for submitting the first project and expenditure reports. While prior Treasury guidance specified that such reports were originally due on October 31, 2021, states, territories, certain metropolitan cities and counties, and tribal governments receiving more than $30 million must now meet a January 31, 2022 deadline, with reports covering the period between March 3, 2021, and December 31, 2021.[255] For NEUs, other metropolitan cities and counties, and tribal governments receiving less than $30 million, the first reports are now due on April 30, 2022, and will cover the period between March 3, 2021 and March 31, 2022.[256]

Treasury officials told us that the deadline extensions were due, in part, to technological issues with the online reporting portal. For example, they said recipients attempting to submit their interim reports (due August 31, 2021) were not able to upload large amounts of data for certain required information due to an issue with the portal’s bulk upload feature. Officials told us that, in these cases, Treasury provided recipients with emergency technical assistance or uploaded the data on the recipients' behalf. In addition, Treasury officials told us that the extended timeframes would allow them to improve the portal’s capabilities, including the bulk data upload feature, and to make reporting more user-friendly.

In addition, Treasury officials said that reporting deadlines were extended due to challenges some recipients faced using ID.me—a commercial identity verification service—to access Treasury’s portal. Specifically, they said some recipients—particularly those from smaller jurisdictions—were not familiar with ID.me and faced challenges uploading the required evidence to verify their identity, such as copies of government identification or physical address listings. However, in December 2021, Treasury implemented Login.gov—which does not require the same level of personal identification and verification as ID.me—as an alternative way for recipients to access the portal.[257]

Association representatives told us that recipients are unclear about what information to include in the project and expenditure reports because Treasury had not released a user guide for these reports. In early January 2022, Treasury released a user guide that contained detailed instructions to help recipients navigate the portal and adhere to reporting requirements.[258] Treasury officials also told us they were testing the portal's functionality for the project and expenditure reports, based on feedback from selected CSLFRF recipients, and planned to make improvements to the portal before the first reports are due in January 2022.

Representatives from state and local government associations told us that some recipients also face challenges in meeting CSLFRF reporting requirements due to limited broadband access and outdated technology. Treasury officials told us that they are aware that some smaller NEUs and rural communities, among other recipients, have limited technological capacity, which could affect their ability to meet reporting requirements. Officials added that, for those recipients with limited technological capacity, the extended reporting timeframes will provide them with additional time to obtain technical assistance from Treasury. Treasury officials also told us that Treasury is planning to engage directly with NEUs and other recipients with limited technological capacity to help them comply with reporting requirements.

Methodology

We reviewed federal laws and Treasury guidance and documentation regarding the CSLFRF, interviewed Treasury officials, and collected Treasury’s written responses to questions that we posed. To gather perspectives about CSLFRF recipients’ experiences with reporting and auditing requirements, we interviewed representatives from 11 organizations that collectively represent state and local governments and the audit community: the American Institute of Certified Public Accountants; the Council of State Governments; the Government Finance Officers Association; the International City/County Management Association; the National Association of Counties; the National Association of State Auditors, Comptrollers and Treasurers; the National Association of State Budget Officers (NASBO); the National Conference of State Legislatures; the National Governors Association; the National League of Cities; and the United States Conference of Mayors. We also analyzed 47 states’ recovery plan performance reports that were publicly available based on our search of state government websites, and that were collectively available on the NASBO and the Pandemic Response Accountability Committee websites as of December 3, 2021. We determined that the state recovery plans, and the data they contained, were reliable for the purpose of reporting aggregate spending regarding states’ planned uses of funds as of the date of their reports.

Agency Comments

We provided Treasury and OMB with a draft of this enclosure. Treasury provided technical comments, which we incorporated as appropriate. OMB did not provide comments on this enclosure.

GAO’s Ongoing Work

Our work on the CSLFRF is ongoing. We will continue to review how CSLFRF recipients use their awards, address challenges they face in managing the funds, and evaluate outcomes of their funded projects. We will continue to monitor OMB’s and Treasury’s efforts to provide CSLFRF guidance, monitor funds, and ensure adequate audit coverage. We will also continue to follow up on open recommendations.

GAO’s Prior Recommendations

The table below presents our recommendations on single audits and CSLFRF from prior bimonthly and quarterly CARES Act reports.
Prior GAO Recommendations Related to Single Audits and Coronavirus State and Local Fiscal Recovery Funds (CSLFRF)

Recommendation

Status

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. (October 2021 report)

Open—partially addressed. Treasury agreed with the recommendation. In December 2021, Treasury officials stated the agency expects to have drafts of internal control policies and procedures for CSLFRF finalized in the coming weeks. We will continue to monitor the actions Treasury takes in response to our recommendation.

The Director of the Office of Management and Budget (OMB), in consultation with the Secretary of the Treasury, should issue timely and sufficient single audit guidance for auditing recipients' uses of payments from the Coronavirus State and Local Fiscal Recovery Funds. (July 2021 report)

Open—partially addressed. OMB neither agreed nor disagreed with our recommendation. In December 2021, OMB issued single audit guidance for the Coronavirus State and Local Fiscal Recovery Funds in Addendum 1 of the 2021 Compliance Supplement. We will review Addendum 1 and obtain feedback from members of the audit community (e.g., agency Offices of Inspector General; National Association of State Auditors, Comptrollers, and Treasurers; and American Institute of Certified Public Accountants) to determine if the guidance is sufficient.

The Director of the Office of Management and Budget (OMB) should work in consultation with federal agencies and the audit community (e.g., agency Offices of Inspector General; National Association of State Auditors, Comptrollers, and Treasurers; and American Institute of Certified Public Accountants), to the extent practicable, to incorporate appropriate measures in OMB’s process for preparing single audit guidance, including the annual Single Audit Compliance Supplement, to better ensure that such guidance is issued in a timely manner and is responsive to users’ input and needs. (March 2021 report)

Open—partially addressed. OMB neither agreed nor disagreed with our recommendation. In response to this report, OMB stated that it is actively working, to the extent practicable, to update processes to better ensure that the single audit guidance is issued in a timely manner and is responsive to users' input and needs. OMB also stated that it continues to work with federal agencies and the audit communities to develop and publish audit guidance for major programs in the Compliance Supplement.

As we previously reported, auditors who conduct single audits for entities with June 30 year-ends have expressed a need to obtain the Compliance Supplement by no later than April of each year in order to effectively plan their audits and conduct interim testing. The 2021 Compliance Supplement was not issued until August 2021 and lacked guidance for several American Rescue Plan Act of 2021 (ARPA) programs.

In December 2021, OMB issued single audit guidance for two ARPA programs in Addendum 1 of the 2021 Compliance Supplement and stated that Addendum 2 is projected for publication in early 2022. OMB also issued a Controller Alert in December 2021, which included a timeline for preparing the 2022 Compliance Supplement (in collaboration with federal agencies and the audit community) and such timeline estimated publication by April 30, 2022. We continue to meet periodically with OMB and the audit community to discuss the audit community’s concerns and the additional single audit guidance needed. We will continue to monitor the actions OMB takes in response to our recommendation.
Source: GAO. I GAO-22-105291

Related GAO Products

Government Auditing Standards: 2018 Revision Technical Update April 2021 (Supersedes GAO-18-568G). GAO-21-368G. Washington, D.C.: April 14, 2021.

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

As of December 15, 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: Department of Defense and Department of Health and Human Services, 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.[259] 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.[260] 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.[261] 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.[262]

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 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).[263] 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.[264]

Overview of Key Issues

Agencies obligated more than $100 billion on federal contracts, with DOD and HHS accounting for over three-quarters of obligations as of December 15, 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 exceeded 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 December 15, 2021, DOD accounted for about 56 percent and HHS for about 22 percent of the total obligations made by federal agencies in response to the COVID-19 pandemic. See figure for obligation amounts by federal agency.

Contract Obligations in Response to COVID-19 by Federal Agency, as of Dec. 15, 2021

In our October 2021 report, we reported that government-wide contract obligations related to COVID-19 totaled $86.9 billion through September 30, 2021; by December 15, 2021, those obligations had increased by about $14.7 billion—to $101.6 billion. DOD accounted for about $12.5 billion, or about 85 percent of the increase in total contract obligations since September 30, 2021. Significant increases in obligations early in the pandemic were due to large purchases of medical equipment and supplies—such as ventilators and personal protective equipment. Large vaccine and therapeutic purchases explain more recent spikes in obligations. For example, following purchases of about $4 billion in Pfizer and Moderna vaccines in December 2020, multi-billion dollar vaccine purchases by DOD in February, June, and July 2021 contributed to monthly increases in reported contract obligations. Additionally, multi-billion dollar purchases of therapeutics from Pfizer and Regeneron contributed to monthly increases in September and November 2021. See figure for government-wide obligations and confirmed COVID-19 cases by month.

Government-wide COVID-19-Related Contract Obligations and Confirmed COVID-19 Cases by Month, Feb. 2020–Dec. 15, 2021

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. Drugs and treatments have become the largest area of government-wide obligations, accounting for 42 percent of total obligations over the course of the pandemic, and 63 percent of the total obligations in response to COVID-19 in calendar year 2021. These obligations increased over 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 $42.6 billion as of December 15, 2021.[265] In calendar year 2021, increases in obligations for drugs and treatments have included $19 billion in obligations for COVID-19 vaccines to Pfizer and Moderna, with the most recent increases in obligations since June 2021 due to purchases to support booster shots, pediatric vaccinations, international vaccine donations, and therapeutics to treat COVID-19.

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–Dec. 15, 2021

Note: In addition to what is reflected in the figure, agencies canceled, or deobligated, $176.5 million and $335.1 million for drugs and treatments in July 2020 and April 2021, respectively. Obligations for fruits and vegetables were made primarily in support of the U.S. Department of Agriculture’s Farmers to Families Food Box Program.

As of December 15, 2021, COVID-19-related contracts for goods continued to be competed less frequently than contracts for services. About 64 percent of the obligations for goods were on contracts that were not awarded competitively, compared with about 41 percent of the obligations for services. For example, about $32 billion, or 75 percent, of the $42.6 billion in obligations for drugs and treatments and about $8.2 billion, or 81 percent, of the $10.1 billion in obligations for medical and surgical equipment were on contracts awarded noncompetitively.

Since our October 2021 report, the proportion of COVID-19 related contracts identified as having been awarded noncompetitively decreased from about 62 percent as of September 30, 2021 to 57 percent, or $58 billion as of December 15, 2021.[266] Throughout the course of the pandemic, the percentage of obligations on these noncompetitive contracts has fluctuated from a low of 21 percent of obligations in November 2021 to a high of 94 percent of obligations in July 2021. The higher rate of obligations on noncompetitively awarded contracts in July 2021 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 85 percent, or about $49.1 billion, of the contract obligations associated with noncompetitive awards.[267]

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.[268] Undefinitized contract obligations for COVID-19 increased from about $5.5 billion as of September 30, 2021 to $6.2 billion as of December 15, 2021, continuing to total about 6 percent of government-wide obligations on contracts awarded in response to COVID-19. A majority of the increase was driven by undefinitized contracts awarded by HHS for the purposes of increasing community access to COVID-19 testing at pharmacy and retail locations. DOD continued to report the highest amount of undefinitized contract obligations, identifying about $4.3 billion, or about 8 percent of its overall COVID-19-related contract obligations, as being on undefinitized contracts.

Our prior work reviewed DOD’s, HHS’s, and the Department of Homeland Security’s use of undefinitized contracts in response to COVID-19, including the use of CARES Act flexibilities for such contracts. We found that the timing of definitization and amount obligated prior to definitization varied across our selected contracts, and that officials at DOD—which accounted for the majority of undefinitized contract obligations—cited the ability to quickly award undefinitized contracts as a major benefit during the pandemic.

Use of other transaction agreements by DOD remained the same. 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 at $12.5 billion as of December 15, 2021. In July 2021, we reported almost all of the obligations on other transaction agreements were 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.

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 December 15, 2021.[269] 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.[270] 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 in 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 DOD, HHS, and the Office of Management and Budget with a draft of this enclosure. The agencies did not provide comments on this enclosure.

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.
Prior GAO Recommendations Related to Federal Contracts and Agreements for COVID-19

Recommendation

Status

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

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

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

Open-Partially Addressed. USDA neither agreed nor disagreed with our recommendation, and as of December 2021 had not fully assessed the contracting personnel needed to execute and administer contracts in support of the Farmers to Families Food Box Program or successor food distribution program. According to Agricultural Marketing Service officials, they have discontinued the program, and are using other methods of hunger relief, so they do not anticipate needing additional permanent staff. Agricultural Marketing Service officials are planning to use an existing contract vehicle to obtain additional staff support for contract documentation needs for the awards that have been made under the Farmers to Families Food Box Program and other food purchasing efforts. Agricultural Marketing Service officials have prepared a statement of work for the contract support services needed, which includes information on the number of Farmers to Families Food Box program contracts needing support services and other tasks. Agricultural Marketing Service officials expect interested vendors to submit staffing plans identifying the number of staff needed to accomplish the work under the contract. Agricultural Marketing Service officials said they planned to award the contract by the end of calendar year 2021, but as of December 2021, had not provided an update on the status of doing so.

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

Open-Partially Addressed. ASPR agreed with our recommendation, and as of April 2021, ASPR officials stated that they have discussed within ASPR the need to consistently identify other transaction agreements in the Federal Procurement Data System (FPDS) and explored how their contract writing system may interface with the FPDS other transaction agreement module in the future. In December 2021, ASPR officials added that in the meantime, they have issued guidance to their contracting teams to manually track other transaction agreements in their contract writing system. We will continue to monitor ASPR’s efforts to implement our recommendation.

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

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

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

Closed-Implemented. DOD did not agree with our recommendation. However, in March 2021 DOD, in coordination with DHS, issued a revised memorandum of agreement. The revised agreement establishes a process and timelines for communicating and evaluating NIA code extensions by requiring the General Services Administration to notify other federal agencies no less than seven days before a NIA code is set to expire so that agencies can request an extension as needed. The revised agreement also more clearly defines what constitutes a consistent decrease in contract actions to ensure criteria for extending or closing a NIA code is consistently applied.
Source: GAO. I GAO-22-105291

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.

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

International Trade

Shipping costs for importing goods into the U.S. have significantly increased since the beginning of the pandemic; U.S. import values of COVID-19-related products, such as face masks, ventilators, gloves, and hand sanitizer, have continued to fluctuate; and U.S. exports of COVID-19 vaccines have increased in recent months.

Background

Global trade has rebounded from the initial steep decline at the beginning of the COVID-19 pandemic, but international supply chains continue to experience disruptions. According to United Nations trade statistics, trade in world merchandise grew by 22 percent from the second quarter of 2020 through the second quarter of 2021, after declining by 15 percent from the second quarter of 2019 through the second quarter of 2020. According to the United Nations, imbalances between global demand and supply of merchandise have created congestion at U.S. and European ports and a shortage of vessels and equipment needed to export products from China, Malaysia, India and parts of Europe. According to the same reporting, port congestion and export bans imposed by other countries have challenged the delivery of life-saving products such as medicine, water, and hygiene-related products.

The overall U.S. trade deficit of goods and services increased by 75 percent, from $42 billion in February 2020 to $73 billion in August 2021.[271] The U.S. goods trade deficit increased by 40 percent from $64 billion in February 2020, the month before the World Health Organization (WHO) declared the start of a pandemic, to roughly $89 billion in August 2021. U.S. exports of goods and services increased by between 4 and 5 percent from February 2020 through August 2021 and U.S. imports of goods and services increased by 16 percent from February 2020 through August 2021.

Overview of Key Issues

Increasing shipping costs and port congestion. The cost of shipping goods across country borders has significantly increased in 2021 (see figure). Throughout 2019 and before the pandemic started in 2020, U.S. importers paid an average of about $283 in import charges, which includes freight cost, per $10,000 of merchandise imported. After March 2020, the cost relative to dollar imported has increased. In August 2021, U.S. importers paid close to $400 per $10,000 of merchandise imported.[272] According to an executive briefing by the United States International Trade Commission (USITC), there are a number of factors that contributed to the increase in shipping prices, including a shortage of shipping containers in East Asian countries. A shortage of port workers has created delays in unloading shipping containers, which further contributes to the shortage of available shipping containers.

The number of shipping containers flowing through the ports of Los Angeles and Long Beach, the two major U.S. ports on the west coast, has increased to record levels. According to press releases issued by the port of Los Angeles, the port of Los Angeles saw its busiest September on record after processing over 900,000 twenty-foot equivalent units (TEU) in September 2021, which was a 26 percent increase from the previous year.[273] According to a press release issued by the port of Long Beach, the port of Long Beach experienced its second busiest October on record after processing almost 800,000 TEUs. On October 13, 2021, after a meeting between port leadership and the President, the U.S. administration announced that the port of Los Angeles agreed to operate 24/7 in order to clear the backlog of ships waiting to unload their containers in the U.S. Approximately 40 percent of containerized freight flowing through the United States arrives or departs the ports of Los Angeles and Long Beach.

Monthly Trends in U.S. Import Charges Relative to Value Imported from Jan. 2018–Aug. 2021

Note: U.S. Census import data contains information on total monthly import charges paid on all imported shipments into the United States. Census cannot reliabily account for shipments valued below $2,000. As such, Census implements statistical methodologies to account for imported shipments below $2,000 to improve coverage, timeliness and relevance of the international merchandise trade statistics. Import charges include cost of freight; insurance; and other charges, excluding duties. August 2021 was the latest month of trade data available at the time of our analysis.

Fluctuations in U.S. trade of COVID-19-related products. U.S. import values of COVID-19-related products (e.g., face masks, ventilators, gloves, and hand sanitizer) have continued to fluctuate. U.S. import values of products in categories related to the COVID-19 response decreased by 14 percent from March through May 2021 before rebounding by 13 percent from May through August 2021.[274] Import values of these products in August 2021 were 34 percent higher than in February 2020, the last month before the declaration of the COVID-19 pandemic by the World Health Organization (see figure).[275]

Monthly U.S. Imports of COVID-19-Related Products, by Product Type, Jan. 2019–Aug. 2021

Note: U.S. Census Bureau trade statistics—a widely used source analyzing U.S. international trade—do not contain precise data on imports of COVID-19-related products. As a result, we estimated the import value of all product types and categories within those types using Harmonized Tariff Schedule of the United States (HTS) statistical reporting numbers and associated product groupings listed by the U.S. International Trade Commission (USITC). Examples of products included in the “Other” category of product type include hospital beds and wheelchairs. See U.S. International Trade Commission, COVID-19 Related Goods: U.S. Imports and Tariffs, Investigation No. 332-576, USITC Publication 5073 (Washington, D.C.: June 2020). Revisions to the HTS on July 1, 2020, January 1, 2021, and July 1, 2021, provided several new HTS-10 statistical reporting numbers for previously identified COVID-19-related product categories. We identified these product categories and included them in our analysis. Some HTS categories represent more than one product, and some categories contain products that are not directly relevant to COVID-19 response. Product categories that USITC identified as COVID-19 related refer only to the subset of goods considered to be COVID-19 related in each HTS-10 statistical reporting number. Therefore, the values shown may overestimate the imports of products directly relevant to COVID-19 response. Nevertheless, the values shown are useful indicators for tracking import trends for such products. For more information about factors influencing import trends in various types of COVID-19-related products, see U.S. International Trade Commission, COVID-19 Related Goods: The U.S. Industry, Market, Trade and Supply Chain Challenges, Investigation No. 332-580 (December 2020). August 2021 was the latest month of trade data available at the time of our analysis.

A rise in import values of personal protective equipment (PPE) and testing equipment has been driving the increase in import value of COVID-19-related products. Import values of PPE increased more than 500 percent from February 2020 through June 2020. Import values of PPE in August 2021 remained nearly 150 percent greater than in February 2020, before the pandemic. Import values of testing equipment also doubled from February 2020 through August 2021. Meanwhile, import values of pharmaceutical products; non-PPE-related hospital equipment (e.g., surgical towels); and other medical products (e.g., hospital beds and wheel chairs) increased by 6 percent, 35 percent, and 17 percent, respectively, from February 2020 through August 2021.

There are many factors that could contribute to fluctuations in import values of COVID-19-related products. First, changes in import values are related to changes in both the quantity and price of the imported products. For instance, import values for a specific product can decrease despite an increase in the number of units imported if the decrease in price is large enough.[276] In addition, changes in the number of COVID-19 cases may shift the demand for some COVID-19-related products, such as pharmaceuticals and diagnostic equipment, over time.

According to the United Nations Conference on Trade and Development, more than 80 countries banned exports of medical and personal protective equipment 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 import values of these products since early 2020 despite increased constraints on the global supply chain mentioned above.

Increased U.S. exports of COVID-19 vaccines. The U.S. has increased exports of COVID-19 vaccines in recent months. As of September 2, 2021, the U.S had exported over 130 million doses to over 90 countries and as of November 7, the U.S. State Department reported over 230 million vaccines had been delivered to foreign countries. In October 2021, we reported that the U.S. government had taken several actions to increase the availability of COVID-19 vaccines to other countries, and, in July 2021, we reported that the U.S. government had taken several steps to increase domestic production of COVID-19 vaccines. In February 2021, the U.S. announced it would provide an initial $2 billion to COVID-19 Vaccines Global Access (COVAX) to support access to COVID-19 vaccines for 92 low- and middle-income countries. [277] The U.S. Agency for International Development obligated $2 billion for COVAX in March 2021 and an additional $2 billion in July 2021. We also reported that the U.S. government has taken steps through COVAX and other means to provide COVID-19 vaccines to other countries. In addition, we reported in July that the administration has taken several actions to increase domestic production of COVID-19 vaccines. In September 2021, the administration announced plans to expand domestic production of vaccine inputs by investing an additional $3 billion in the vaccine supply chain.

U.S. exports of vaccines significantly increased after the first COVID-19 vaccine was approved for emergency use authorization (EUA). According to U.S. Census Bureau trade statistics, the value of exports of vaccines for human use, which include COVID-19 vaccines, increased over 16-fold from $91 million in December 2020, when the first COVID-19 vaccine was granted EUA, to over $1.4 billion in August 2021 (see figure).[278]

The value of U.S. export of vaccines for human use averaged $128 million per month in 2020, but averaged over $1.2 billion from May 2021 through August 2021 (see figure). Generally, the majority of U.S. vaccine exports—by value—prior to December 2020 went to EU member countries and the United Kingdom (UK), averaging 52 percent in 2020. However, the share of vaccine exports going to EU member countries and the UK dropped to under 20 percent by August 2021, from roughly 70 percent in January 2021. This suggests that, as of August 2021, more U.S. vaccine exports were going to other countries outside the EU and the UK.

Value of U.S. Exports of Vaccines for Human Use, Overall and to EU Member Countries and the United Kingdom, January 2019 through August 2021

Note: Domestic export data for products described in Schedule B code 3002.20.0000 reported in the figure above contain exports on all vaccines for human use (See Schedule B code 3002.20.0000—Vaccines for Human Medicine), including authorized COVID-19 vaccines, to every country. Schedule B product categories are a systematic grouping of commodities used by the U.S. Census Bureau to track exports of different products, which is based on the headings and subheadings in the International Harmonized System used by WTO members. As of October 2021, Schedule B product categories do not contain sufficiently granular information required to identify exports of COVID-19 vaccines specifically. August 2021 was the latest month of trade data available at the time of our analysis.

Methodology

To conduct this work, we reviewed the most recent publicly available U.S. trade statistics from the U.S. Census Bureau as well as U.S. International Trade Commission data on product categories that contain COVID-19-related products.[279] We also analyzed trends in U.S. export data of vaccines for human use to provide context behind U.S. efforts to supply the COVID-19 vaccine to other countries. We determined that the trade data were sufficiently reliable to provide an overview of U.S. trade of COVID-19-related products and the costs related to importing goods into the U.S.

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, as well as international supply chain issues and Customs and Border Protection’s trade facilitation during COVID-19.

Related GAO Products

COVID-19: Additional Actions Needed to Improve Accountability and Program Effectiveness of Federal Response. GAO-22-105051. Washington, D.C.: October 27, 2021.

Contact information: Kimberly Gianopoulos, (202) 512-8612, gianopoulosk@gao.gov

Federal Fraud-Related Cases

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.[280] By proactively managing fraud risks, federal officials can help safeguard taxpayer dollars to ensure they serve their intended purposes, particularly given that about $4.6 trillion had been provided as of November 30, 2021, to fund COVID-19 response and recovery efforts.

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.[281] Also, two individuals have 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.[282] In addition, numerous others faced related federal charges as of October 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 October 2021, our hotline—known as FraudNet—received over 3,200 complaints related to the CARES Act, about half of which involve SBA’s PPP and EIDL program, DOL’s UI program, and EIPs (see text box).[283]

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-22-105291

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 nearly 280,000 reports about fraud and over 192,000 reports about identity theft as of December 2, 2021.[284] Also according to FTC reporting, nearly half of the reports about fraud indicated a financial loss and cost Americans over an estimated $627 million.

In prior quarterly reports, we made recommendations to SBA and DOL to better manage fraud risks to COVID-19 relief programs, in accordance with the Fraud Risk Framework. For example, in our March 2021 quarterly report, we recommended, among other things, that SBA conduct and document fraud risk assessments for the PPP and EIDL programs. In our October 2021 quarterly report, we made several recommendations to DOL, including to designate a dedicated entity for managing the process of assessing fraud risks to the UI programs and identify and assess fraud risks facing the UI programs. We are reviewing agency efforts to address these recommendations.

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.[285] 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.[286] 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.[287]

Fraud against federal programs. From March 2020 through October 2021, 303 individuals pleaded guilty to federal charges of defrauding COVID-19 relief programs, including SBA’s PPP and EIDL program and DOL’s UI programs, among others. See the figure below for the number of individuals who have pleaded guilty to federal fraud-related charges against COVID-19 relief programs as of October 31, 2021.

Number of Individuals or Entities That Have Pleaded Guilty to Federal Fraud-Related Charges by COVID-19 Relief Program, as of Oct. 31, 2021

Of the 303 individuals who pleaded guilty, 101 had been sentenced as of October 31, 2021. See the figure below for additional sentencing details.

Number of Individuals Who Have Pleaded Guilty to Federal Fraud-Related Charges and Have Been Sentenced, as of Oct. 31, 2021

Note: Some of these individuals were sentenced for additional charges not related to COVID-19 relief programs. Also, sentences can include things in addition to prison time such as restitution or other fees.

For example:
  • The first person in the country charged with fraudulently seeking SBA loans was sentenced to 56 months in prison followed by 3 years supervised release in connection with a PPP loan scheme. This individual and a co-conspirator pleaded guilty to conspiracy to commit bank fraud after filing four fraudulent PPP loan applications in the names of businesses they falsely claimed to own. In total, these individuals sought over $500,000. In fact, this individual had no ownership interest in three of the businesses and the fourth business had no employees and did not pay any wages.[288] See the enclosure on the Paycheck Protection Program in appendix I for more information on the program.
  • In another case, an individual pleaded guilty to wire fraud and aggravated identity theft associated with a scheme to defraud SBA’s EIDL program. This individual created multiple fictitious businesses and submitted three fraudulent EIDL applications for the businesses, providing false statements on the loan applications using the stolen identification of another person. As a result of these applications, this individual received over $110,000 and spent the funds on unauthorized personal expenses and to make money transfers to individuals in another country. As of October 31, 2021, this individual had not yet been sentenced. See the enclosure on the Economic Injury Disaster Loan Program in appendix I for more information on the program.
  • One individual pleaded guilty to wire fraud, conspiracy to commit wire fraud, and identity theft associated with a scheme to defraud UI. This individual was hired by the state unemployment agency shortly after being released from prison following a conviction for aggravated identity theft. Using this position with the agency, this individual submitted fraudulent UI claims for personal benefit and for the benefit of a co-conspirator. The co-conspirator—who was also the individual’s spouse and was incarcerated at the time of the application and therefore ineligible for UI—also pleaded guilty to wire fraud. As of October 31, 2021, neither individual had yet been sentenced. For more information on the UI programs, including information on state and territory reporting of overpayments that are due to fraud and DOL’s efforts to address potential fraud in the UI programs, see the enclosure on Unemployment Insurance Programs in appendix I.
  • One individual was sentenced to 70 months in prison followed by 5 years supervised release and ordered to pay over $50,000 in restitution after pleading guilty to bank fraud and aggravated identity theft in connection with a mail theft and EIP fraud scheme. This individual admitted, among other things, to stealing mail, including bank statements, credit cards, credit card statements, W-2 forms, and more than $700,000 in checks, including an EIP check. This individual used the stolen EIP check to create six counterfeit EIP checks, ranging from $1,200 to $2,400. Further, this individual admitted to attempting to deposit his own EIP check through an online banking platform after having already cashed it the prior day.
  • As part of another case, one individual pleaded guilty to theft of government money associated with a scheme to defraud the Coronavirus Food Assistance Program. This individual submitted an application to the program, falsely claiming that this individual’s livestock business sustained significant losses because of the COVID-19 pandemic, and received over $70,000 in benefits as a result. As of October 31, 2021, this individual had not yet been sentenced.

As of October 31, 2021, six individuals had been convicted at trial for COVID-19 relief fraud.[289] For example, a federal jury convicted an individual of bank fraud, making false statements to a federally insured financial institution, aggravated identity theft, and making false statements to a federal agency. This individual submitted fraudulent applications seeking more than $1.5 million in PPP and EIDL loans for fictitious businesses. Specifically, this individual used the identities of elderly residents of senior living facilities and falsified official documents about these fictitious business to support the PPP and EIDL applications.

Federal charges were pending against 499 individuals for attempting to defraud COVID-19 relief programs as of October 31, 2021.[290]

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 October 2021, 18 individuals or entities pleaded guilty to federal charges related to consumer fraud and one individual was convicted of a consumer fraud-related charge.[291] For example, one individual pleaded guilty to wire fraud related to a personal protective equipment (PPE) fraud scheme. For instance, this individual agreed to provide approximately 1.5 million medical gowns to multiple individuals, but instead used the funds for personal expenses, including online gaming. As part of the guilty plea, this individual admitted to defrauding eight individuals of close to $1 million. In another case, an individual pleaded guilty to importation contrary to law associated with a scheme to smuggle hydroxychloroquine sulfate into the U.S. to sell in COVID-19 “treatment kits.”[292] This individual sold one of the treatment kits, which the individual claimed would cure COVID-19, to an undercover agent for $4,000.

There were also federal charges pending against 53 individuals or entities related to consumer fraud as of October 31, 2021.

As of October 31, 2021, the majority of individuals and entities that had pleaded guilty, faced federal charges for, or were convicted of COVID-19-related consumer fraud schemes were allegedly involved in schemes related to prevention or treatment of COVID-19 or PPE sales (see figure).

Number of Individuals or Entities That Have Pleaded Guilty to, Faced Federal Charges for, or Were Convicted for Consumer Fraud, as of Oct. 31, 2021

aThe “other” category can include individuals or entities that engaged in deceptive business practices, making COVID-19-related claims that caused consumers to suffer or potentially suffer financial or other losses unrelated to prevention or treatment, personal protective equipment, or testing. For example, one individual pleaded guilty and was sentenced to 63 months in prison for, among other things, creating a website to sell other goods that were sought after during the pandemic and not delivering those goods.

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 and fraud against the federal programs discussed earlier. From March 2020 through October 2021, 24 individuals pleaded guilty to these types of federal charges.[293] For example, one individual pleaded guilty to hoarding and price gouging after purchasing 100,000 KN95 facemasks that he offered for resale at markups of as high as 500 percent. This individual was sentenced to 3 years of probation and ordered to pay a $2,500 fine. In another case, two individuals pleaded guilty to conspiracy to commit health care fraud and were sentenced to 3 years of probation and ordered to pay restitution of about $14,000. These individuals admitted to approaching residents of senior complexes to offer “COVID-19 screening tests”—which were actually general respiratory pathogen screening panels—and submitting inaccurate and medically unnecessary claims to Medicare for the tests.[294]

There were also other federal charges pending against 32 individuals as of October 31, 2021. For example, one individual was charged with 16 counts of health care fraud and one count of money laundering associated with a Medicare fraud scheme. This individual allegedly submitted $100 million in false Medicare claims, at least $42 million of which was billed after the onset of the COVID-19 public health emergency, including claims for fraudulent respiratory test billings submitted alongside COVID-19 tests. This individual allegedly spent the funds on luxury cars, real estate, and jewelry, among other things.

In prior quarterly reports, we have reported that, 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. As COVID-19 vaccines have become increasingly available, and government and private entities have begun implementing vaccination requirements, other types of fraud involving COVID-19 vaccines have emerged. For example:
  • In one case, an individual pleaded guilty to participating in a felony conspiracy associated with a vaccine-related Medicaid fraud scheme. Specifically, this individual illegally vaccinated minors who were ineligible to receive a COVID-19 vaccine and submitted corresponding claims to Medicaid.
  • In another case, DOJ announced charges against two individuals in two separate cases for allegedly selling or attempting to sell COVID-19 vaccination record cards via social media. In one of the cases, the individual is alleged to have stolen authentic COVID-19 vaccination record cards from a Department of Veterans Affairs hospital, while the second individual is alleged to have imported fraudulent cards.

Federal agency warnings to help prevent future fraud-related cases. 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 October 2021, the FTC warned the public about scams related to the Federal Communications Commission’s Emergency Broadband Benefit Program—a program designed to help qualified households afford internet service during the COVID-19 pandemic by providing a one-time discount on an internet-connected device and monthly discounts for internet service. Specifically, the FTC warned the public about impersonators offering to help individuals sign up for a “free” device and internet service in exchange for money or personal information and offered tips to avoid such scams.
  • In August 2021, the FTC warned the public about schemes in which identity thieves use text messages to gather personal information necessary to steal UI benefits or file fraudulent UI benefits claims.
  • Also in August 2021, the Department of Health and Human Services Office of Inspector General alerted the public about COVID-19-related scams in which fraudsters offer unapproved and illegitimate COVID-19 tests, federal grants, and Medicare prescription cards in exchange for personal information.
  • In addition, federal officials have continued to warn the public against making or buying fake COVID-19 vaccination cards.

We previously reported on examples of agency warnings to the public about emerging fraud schemes in our quarterly July and October 2021 reports. In addition, in our October 2021 report, we reported on other federal efforts to address and prevent future fraud-related cases, such as taking administrative and other enforcement actions and establishing task forces and working groups.

Methodology

To conduct this work, we reviewed information from DOJ to identify federal fraud-related charges related to COVID-19 relief funding as of October 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 FTC, describing COVID-19 fraud-related efforts.

Agency Comments

We provided a draft of this enclosure to the Office of Management and Budget, which provided no comments.

GAO’s Ongoing Work

In our ongoing work, we are reviewing fraud risk management and potential fraud in the PPP, EIDL, and UI programs, among others.

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

Appendix II: New High-Risk Designation: HHS and Public Health Emergencies

We are adding the Department of Health and Human Services’ (HHS) leadership and coordination of public health emergencies—including extreme weather events, infectious disease outbreaks, pandemics, and intentional acts—to GAO’s High-Risk List. The department’s response to the COVID-19 pandemic has highlighted longstanding concerns we have raised about its ability to execute its role leading federal public health and medical preparedness for, and response to, such public health emergencies. We reported in March 2021 that our ongoing and planned work may lead us to designate HHS’s leadership and coordination of public health emergencies as a high-risk issue. We are adding this high-risk designation now to help ensure sustained leadership and attention from the executive branch and Congress so that our nation is adequately prepared for future emergencies.

Why the Area Is High Risk

For more than a decade, we have reported on HHS’s execution of its lead role in preparing for, and responding to, public health emergencies and have found persistent deficiencies in its ability to perform this role. These deficiencies have hindered the nation’s response to the current COVID-19 pandemic and a variety of past threats, including other infectious diseases—such as the H1N1 influenza pandemic, Zika, and Ebola—and extreme weather events, such as hurricanes.

If left unaddressed, these deficiencies will continue to hamper the nation’s ability to be prepared for, and effectively respond to, future threats. Threats from extreme weather are predicted to increase, according to the U.S. Global Change Research Program. In 2020 alone, we saw HHS responding to wildfires, hurricanes, and an earthquake, while also in the throes of the response to the COVID-19 pandemic, which has resulted in catastrophic loss of life and substantial damage to the national economy. As devastating as the COVID-19 pandemic has been, more frequent extreme weather events, new viruses, and bad actors who threaten to cause intentional harm loom, making the deficiencies we have identified particularly concerning. Not being sufficiently prepared for a public health emergency can also negatively affect the time and resources needed to achieve full recovery.

In our March 2021 High-Risk report, we named HHS’s leadership and coordination of public health emergencies as an emerging issue requiring close attention. Based on our findings from a body of work related to HHS’s preparedness for, and response to, public health emergencies—including 10 new GAO products with recommendations issued since our 2021 High-Risk report—we have now determined that this issue should be on our High-Risk List.

GAO’s High-Risk Designation

GAO designates programs and operations as ‘high risk’ due to their vulnerabilities to fraud, waste, abuse, and mismanagement, or because they need transformation. To determine which federal government programs and functions should be designated high risk, we consider qualitative factors, such as whether the risk
  • involves public health or safety, service delivery, national security, national defense, economic growth, or privacy or citizens’ rights, or
  • could result in significantly impaired service; program failure; injury or loss of life; or significantly reduced economy, efficiency, or effectiveness.
We also consider the exposure to loss in monetary or other quantitative terms. Before making a high-risk designation, we consider corrective measures planned or under way to resolve a material control weakness and the status and effectiveness of these actions.
Source: GAO. | GAO-22-105291

HHS is responsible for leading and coordinating all matters related to federal public health and medical preparedness for, and response to, emergencies, whether naturally occurring or intentional.[295] Preparing for and responding to nationally significant public health emergencies requires a whole-of-nation, multidisciplinary approach involving multiple federal agencies and coordination with nonfederal entities, including state, tribal, and territorial governments, and the private sector.

Within HHS, a variety of agencies and offices are involved, including the following:
  • The Office of the Assistant Secretary for Preparedness and Response (ASPR) serves as the principal advisor to the Secretary of Health and Human Services on all matters related to federal public health and medical preparedness and response to public health emergencies.
  • The Centers for Disease Control and Prevention (CDC) supports public health preparedness efforts to prevent, detect, and respond to new and emerging disease threats. For example, during infectious disease outbreaks, CDC conducts studies to learn about the link between infection and health outcomes, monitors and reports cases of infection, and provides guidance to travelers and health care providers, among other activities. Additionally, CDC typically develops a diagnostic test for an emerging pathogen when no diagnostic test has been approved, cleared, or authorized by the Food and Drug Administration (FDA) and no adequate alternative is available, such as during H1N1 and Zika.
  • FDA plays a critical role in protecting the U.S. from biological threats, including intentional acts and naturally occurring infectious diseases. For example, FDA is responsible for ensuring that medical countermeasures—including drugs, vaccines, diagnostic tests, and personal protective equipment—against these threats are safe and effective.[296] FDA may also issue emergency use authorizations to allow the temporary use of unapproved medical products to diagnose, prevent, or treat disease.[297]

Key GAO Findings

Through our work on public health emergencies from fiscal year 2007—when ASPR was created and designated the principal advisor to the Secretary of Health and Human Services on public health emergencies—to present day (January 2022), we have made 115 recommendations to HHS related to its leadership and coordination of public health emergencies. Of these,
  • 72 recommendations have not been fully implemented—49 stemming from the COVID-19 pandemic (HHS generally concurred with 62 of these 72 recommendations);
  • 10 recommendations—all made prior to the COVID-19 pandemic, in fiscal year 2012 or earlier—have been closed as unimplemented as the department does not plan to address them, though we believe these recommendations are still relevant;[298] and
  • 33 recommendations—nine made during, and the rest prior to the COVID-19 pandemic—have been implemented.

Through our work, we have identified broad principles of an effective national response and found persistent deficiencies in HHS’s preparedness and response efforts in these areas:
  1. establishing clear roles and responsibilities for the wide range of key federal, state, local, tribal, territorial, and nongovernmental partners;
  2. collecting and analyzing complete and consistent data to inform decision-making—including any midcourse changes necessary—as well as future preparedness;
  3. providing clear, consistent communication to key partners and the public;
  4. establishing transparency and accountability to help ensure program integrity and build public trust; and
  5. understanding key partners’ capabilities and limitations.

Establishing clear roles and responsibilities within HHS and between it and its key partners. The unprecedented scale of the COVID-19 pandemic, and the whole-of-nation response required to address it, highlight the critical importance of clearly defining the roles and responsibilities for the wide range of federal departments and other key partners involved when preparing for pandemics and addressing unforeseen emergencies. Our work has found numerous deficiencies in this critical principle for an effective response, and concerns remain, including the following:

Decision-making roles for national biodefense resources. HHS leads the Biodefense Steering Committee and Coordination Team, which are in charge of facilitating joint decision-making for the National Biodefense Strategy—the national strategy outlining actions needed to protect the nation from potentially catastrophic biological threats.[299] In February 2020, we reported that there were no clear, detailed processes, roles, and responsibilities for joint decision-making, and that agency officials reported being unsure how decisions related to prioritizing and allocating national biodefense resources would be made. The lack of clear decision-making roles can especially impede the ability of agencies to address gaps or leverage resources that span department and agency boundaries, which is frequently the situation for biodefense, leading us to recommend that HHS document such roles. As of January 2022, this recommendation has not been fully addressed.

HHS agencies’ roles and responsibilities in repatriating U.S. citizens during the COVID-19 pandemic. At the beginning of the COVID-19 pandemic, the U.S. returned, or repatriated, about 1,100 U.S. citizens from abroad and quarantined them domestically to prevent the spread of COVID-19. In April 2021, we reported that HHS put these repatriates, its own personnel, and nearby communities at risk due to a lack of clarity as to which HHS agency was in charge, including which HHS agency was responsible for managing infection prevention. This led to fundamental problems including a delay in issuing a federal quarantine order, during which time a repatriate tried to leave the quarantine facility; inconsistent use of personal protective equipment to protect HHS responders from the virus; and ASPR allowing asymptomatic COVID-19 positive repatriates to return on flights with citizens who had not tested positive, contradicting CDC guidance. As of January 2022, HHS has not fully addressed our recommendations to revise or develop new plans that clarify agency roles and responsibilities during a pandemic, and regularly exercise these plans with key partners.

HHS’s role in medical countermeasure management. Safe and effective medical countermeasures—including vaccines, drugs, diagnostics, and related supplies, such as personal protective equipment—are critical for responding to large-scale public health emergencies as demonstrated by the COVID-19 pandemic. As of January 2022, shortages of such supplies continue to plague the nation’s pandemic response. HHS has not addressed our recommendation from September 2020 that the department work with the Federal Emergency Management Agency to develop plans outlining specific actions the federal government will take to help mitigate supply chain shortages for the remainder of the pandemic.

The pandemic has highlighted gaps in clearly defined roles and responsibilities for management of these critical supplies, including the following:
  • In September 2020, we reported that many responsibilities for medical supply chain management—the process for obtaining and delivering goods and services—that had been shared between multiple agencies for the COVID-19 response were transitioning to HHS. We recommended that HHS document roles and responsibilities for supply chain management functions transitioning to HHS, including continued support from other federal partners, to ensure sufficient resources exist to sustain and make the necessary progress in stabilizing the supply chain. As of January 2022, HHS has not addressed this recommendation, which we reiterate as important, especially during a time of ongoing shortages of medical supplies, including testing material and personal protective equipment for the COVID-19 response.
  • In January 2021, we reported on challenges facing HHS’s Strategic National Stockpile (SNS), among them, its appropriate role and responsibilities during future pandemics. We cited confusion among stakeholders and experts regarding the role of the SNS in the COVID-19 response. The SNS is part of the federal medical infrastructure that can supplement state and other jurisdictional medical countermeasure needs during public health emergencies.[300] However, as of January 2022, HHS has not developed a formal process for engaging with key stakeholders on a supply strategy for pandemic preparedness. These stakeholders, including state, local, tribal, and territorial partners and the private sector, have a shared role for providing supplies during a pandemic.

Cross-department roles in pandemic responses. Clear roles and responsibilities during a pandemic have been a longstanding concern. For example, in August 2007, we reported that federal leadership roles and responsibilities, including HHS’s, needed to be rigorously and robustly tested as they evolve to ensure clarity in how relationships should work during emergencies. We also reported that because initial actions may help limit the spread of a virus, such as influenza, the effective exercise of shared leadership roles and responsibilities could substantially shape the outcome of a pandemic. The unclear roles and responsibilities observed in aspects of the COVID-19 response, some described above, have emphasized the importance of this key principle further.

Collecting and analyzing complete and consistent data to inform decision-making and future preparedness. Data are critical to inform the response to a public health emergency. For example, during the COVID-19 pandemic, data have been needed to understand who has been infected and their location to enable informed decision-making about resource allocation and steps to limit disease spread. However, the data HHS has relied on during the COVID-19 pandemic have been, and remain, incomplete and inconsistent, highlighting longstanding concerns we have had with the data HHS relies on to respond to public health emergencies.

Data on the spread of COVID-19 at the outset of the pandemic. We reported in July 2021 that the first COVID-19 test developed by CDC was faulty, undermining data collection on the spread of the virus in the U.S. during the early weeks of the pandemic. CDC developed the nation’s first diagnostic test for COVID-19 and distributed it to public health and Department of Defense (DOD) laboratories between February 6 and 10, 2020; however, the test was faulty and a new test was not distributed to laboratories until February 28, 2020. Since no other testing options were available in the U.S. outside of CDC headquarters until February 29, 2020, the failure of CDC’s test limited the nation’s understanding of the spread of the virus, even as other countries were able to scale up their own testing faster.

Data collection during the COVID-19 response. Throughout the response to the COVID-19 pandemic, we have reported on numerous ongoing data collection concerns, which have plagued our nation’s ability to effectively, efficiently, and equitably respond, including the following:
  • COVID-19 testing, case counts, and hospital capacity data. We reported in January 2021 that interpreting these data has proven challenging because the data HHS collects are often incomplete and inconsistent. Test positivity rates may be incomplete and inconsistent due, in part, to whether and how states report on certain types of COVID-19 tests. Case counts may be incomplete and inconsistent due, in part, to differences in how states count cases. Available hospital capacity may be inconsistent due, in part, to how hospital staff interpret which data must be reported.
  • Race and ethnicity data for COVID-19 cases, hospitalizations, and deaths. We reported in September 2020 that persistent gaps in these data limited the nation’s ability to effectively target pandemic response efforts for various racial and ethnic groups that available data suggest may be disproportionately affected.
  • Nursing home data for COVID-19 cases and deaths. We reported in September 2020 that HHS’s Centers for Medicare & Medicaid Services began requiring nursing homes to report COVID-19 data to CDC starting with information as of May 8, 2020, but made reporting prior to May 8, 2020, optional. By not requiring nursing homes to submit data from the first 4 months of 2020, HHS limited the usefulness of the data in helping to understand the effects of COVID-19 in nursing homes during the initial stage of the response.

Data on the locations of critical care and dialysis patients evacuated in response to 2017 hurricanes. We reported in September 2019 that ASPR officials indicated that poor patient tracking resulted in HHS personnel having to later search for patients who were evacuated in response to Hurricanes Irma and Maria in 2017. Further, because case workers are not required to report the final status of evacuated patients to ASPR, the office was unable to readily determine if approximately one-fourth of the evacuated patients were appropriately discharged, left against medical advice, or were otherwise unaccounted for.

Long-standing mandate for an HHS-led nationwide public health situational awareness capability. We reported in 2010 that, although required by statute, HHS had made little progress on implementing a nationwide public health situational awareness capability through an interoperable network of systems to help ensure timely and complete collection of public health data to aid a response.[301] Under the existing process—which HHS has had to rely on during the COVID-19 pandemic—public health data are collected by thousands of different health departments and laboratories, as well as multiple federal agencies.[302] Technological capabilities vary widely among these entities, which may use systems and software that are not interoperable and unable to exchange and share data.

HHS was originally required to establish the nationwide public health situational awareness network capability by December 2008. The network was to share data and information in near real time from state, local, tribal, and territorial public health entities to enhance early detection of, rapid response to, and management of potentially catastrophic infectious disease outbreaks and other public health emergencies. Subsequent legislation required HHS to establish the network by March 2015, but we found in September 2017 that HHS had only submitted an incomplete implementation plan.[303] Consequently, public health reporting has continued to rely on disparate systems that struggle to share information on a nationwide basis, as has been evident during the COVID-19 pandemic.

Providing clear, consistent communication to key partners and the public. In the midst of a public health emergency, clear and consistent communication—among all levels of government, with health care providers, and to the public—is paramount. Our work over the years has found that HHS has, during critical incidents, provided unclear and inconsistent communications; this was also an identified concern in an HHS exercise to test preparedness.

COVID-19 pandemic response. We have reported on communication concerns throughout the pandemic:
  • In April 2021, we reported that some stakeholders said states often did not have information critical to COVID-19 vaccine distribution at the local level, such as how many doses they would receive and when. We reemphasized findings from a prior September 2020 report that a clearly communicated plan for coordination with key federal and non-federal partners remains imperative for effective distribution and administration planning, as well as for effective management of the public’s expectations, including to help ensure public acceptance and uptake of the vaccine.
  • In March 2021, we reported that there was inconsistent communication to health care providers about the use of certain personal protective equipment, according to association officials. Specifically, there was inconsistent information on the recommended use of decontamination systems for respirators between FDA and CDC, which led to confusion and hesitancy among providers about using such devices, according to some associations we interviewed.
  • In January 2021, we reported that HHS had not issued a publicly available and comprehensive national COVID-19 testing strategy, creating the risk of key partners and the public lacking crucial information to support an informed and coordinated testing response. An effective national strategy not only aids coordination, but is also an important tool to help determine resources required to meet future needs and measure progress on national goals. As of January 2022, HHS has not made public a comprehensive national strategy on COVID-19 testing.

ASPR Crimson Contagion exercise. In August 2019, ASPR conducted a pandemic planning exercise, known as Crimson Contagion, in conjunction with multiple federal agencies, states, and stakeholders.[304] ASPR’s after-action report from this exercise found that HHS’s regional staff lacked clear guidance on the distribution of information to state and local partners, and that states lacked clarity on which channels they should use to request information from, and report information to, federal partners throughout the response.[305] As we reported in June 2020, HHS officials told us they had not been able to address the Crimson Contagion findings, because they were busy responding to the COVID-19 pandemic.

Zika surveillance and research. In May 2017, we reported that at the beginning of the outbreak when relatively little was known about the disease, there were several challenges for Zika virus disease surveillance and research efforts. This included challenges related to communicating changes to the national Zika virus case definition, which is essential to ensure consistent reporting of cases across entities. For example, officials from a state that had one of the largest number of reported cases said they sometimes received inconsistent guidance because entities within CDC did not talk with each other, and CDC could not come to a quick decision about the Zika virus case definition.

H1N1 response. In June 2011, we reported that selected state officials reported being overwhelmed from the large volume of, and sometimes inconsistent, information received from HHS and the Department of Homeland Security during the H1N1 response. We found that the departments did not effectively coordinate their release of information to state contacts, according to four of the five states we interviewed.

Establishing transparency and accountability to help ensure program integrity and build public trust. When agencies need to quickly disseminate funding and information during public health emergencies, transparency and accountability are especially critical to help ensure program integrity and build public trust. However, we have found deficiencies in these areas both during and prior to the COVID-19 pandemic.

Payment integrity risks for directly shipping SNS materials from vendors during the COVID-19 pandemic. In July 2021, we reported that ASPR did not have documented policies and procedures in place to ensure accountability of funds the office provided to vendors of supplies. Specifically, it could not ensure that state, local, territorial, and tribal governments actually received the correct and undamaged SNS materials that were to be shipped directly from ASPR’s vendors. Because of a lack of accountability mechanisms, such as clear policies and procedures, we found that there is an increased risk that ASPR may make improper payments to vendors for incorrect supplies or quantities, or supplies the intended recipients did not receive.

Transparency of changes to testing guidelines for the COVID-19 pandemic. In November 2020, we reported that COVID-19 testing guidelines had changed several times over the course of the pandemic with little scientific explanation of the rationale behind the changes, thereby confusing providers and public health stakeholder groups implementing the guidelines, and risking the erosion of trust in the federal government.

Transparency related to procurement of materials for the SNS prior to the COVID-19 pandemic. In July 2021, we reported concerns related to the transparency of decisions made by the interagency body that recommends procurement of vaccines, supplies, and other materials for the SNS in the years prior to the COVID-19 pandemic. Specifically, some interagency body members reported that ASPR’s efforts to restructure this body in the years prior to the COVID-19 pandemic led to a reduced ability to provide input and reduced transparency of the rationale behind decisions made, including for the SNS inventory. Additionally, the restructuring led to a lapse in statutorily required annual reviews that provide transparency to Congress about the priorities and procurements for the SNS.[306] Further, ASPR was unable to provide documentation of the interagency body’s deliberations during the 2018 to 2020 period, leaving it unclear who was involved in the meetings or what they considered when making decisions.

Transparency and accuracy regarding vaccine availability during H1N1. In June 2011, we reported that the credibility of all levels of government was diminished when the initial supply of the H1N1 vaccine available during the 2009 H1N1 pandemic did not meet expectations HHS conveyed to the public. HHS conveyed to state and local jurisdictions, and to the public, that a robust H1N1 vaccine supply, about 120 million to 160 million doses, was expected to be available in October 2009, but ultimately only 23 million doses were available at that time. Consequently, the public had an unfavorable view of the federal government’s ability to provide the country with the H1N1 vaccine.

Understanding key partners’ capabilities and limitations. We reported in September 2019 that, in general, ASPR’s resource response capacity—personnel and supplies—can support a response to two simultaneous events that occur in different areas in the continental U.S. for 30 days, according to officials. Beyond that, ASPR relies on other response partners. However, ASPR does not have a complete understanding of key partners’ capabilities and limitations, which creates a vulnerability. Furthermore, we have concerns that ASPR lacks the capability to fully execute its own responsibilities.

Key partners’ capabilities during 2017 hurricane response. In September 2019, we reported that ASPR did not have a full understanding of the capabilities and limitations of its key federal partners during the response to Hurricanes Irma and Maria in the U.S. Virgin Islands and Puerto Rico in 2017—including DOD and the Department of Veterans Affairs. This resulted in some deployed resources not being properly and efficiently utilized, according to ASPR documentation and DOD officials.

Response capabilities if DOD is unavailable. DOD has been an integral response partner for HHS, carrying out key medical response activities, such as patient care and evacuation, during public health emergencies. However, we reported in 2018 and 2019 that ASPR does not have a contingency plan for a response in which DOD’s assistance is unavailable—for example, if DOD is deployed to defend the nation from outside threats at the same time its support is needed for a domestic public health emergency response. DOD’s 2017 hurricane after-action report also included reliance on DOD as a concern and recommended that HHS establish contracts with the commercial sector to ensure the federal government has other options available for larger responses.

Understanding capabilities of nonfederal governments. HHS is responsible for providing assistance to state, local, territorial, and tribal governments during public health emergencies when needed. It is important for ASPR to understand these governments’ capabilities and their limitations. In our May 2018 report we found that routine federal public health funding to these entities had generally decreased over the years. Such decreases had limited state and local preparedness capacity, according to CDC officials—such as being able to maintain preparedness staff—and increased the importance of supplemental appropriations to respond to infectious disease threats. In March 2021, we found similar concerns. We reported that while COVID-19 supplemental funding available for testing was helpful in the near term, most selected jurisdictions were concerned about the ability to maintain testing capacity and preparedness in the longer term once supplemental funding was no longer available.

Capacity to execute new and ongoing preparedness and response duties. We have identified concerns with ASPR’s capabilities to fully execute its preparedness and response activities, especially as ASPR’s responsibilities have increased. These additional responsibilities include leading the Biodefense Coordination Team, which coordinates implementation of the National Biodefense Strategy; oversight of the SNS, including inventory management and supply distribution; and leadership in establishing a resilient medical products supply chain for the nation, including related supply chain data management and tracking, and acquisitions and contracting activities, all of which have been areas of concern during the COVID-19 pandemic. We have reported on the following examples as areas of concern:
  • Vaccine responsibilities. In January 2022, we reported that federal efforts to accelerate the development, manufacturing, and distribution of COVID-19 vaccines transitioned to a new office within ASPR, when they previously had been led by a partnership between HHS and DOD—known as the HHS-DOD Countermeasures Acceleration Group (and formerly known as Operation Warp Speed). We reported that the partnership and HHS had not completed all tasks necessary to ensure that ASPR could fully assume all of its new responsibilities by the transition date of January 1, 2022. For example, documentation that we reviewed did not indicate that HHS had developed and implemented strategies to resolve identified workforce gaps—such as communication and logistic expertise—resulting from DOD’s departure.
  • Domestic manufacturing of medical products. In December 2021, we reported that HHS created an office in September 2020 in response to ASPR’s new responsibility to manage the expansion of domestic manufacturing of critical medical supplies, according to officials. One year later as the pandemic continues and ASPR has already assumed new responsibilities, ASPR has yet to reveal how it will staff this office.
  • Medical supply acquisition. In September 2020, we reported that ASPR was expected to take over medical supply acquisition responsibilities from DOD, which would require knowledge of certain legal authorities, according to officials. However, only three of ASPR’s 20 contracting officers had experience using these authorities prior to the COVID-19 pandemic and hiring was expected to be a challenge, according to ASPR officials.[307]
  • Emergency responder workforce. In June 2020, we reported that when determining the size of its emergency responder workforce, ASPR did not consider the number of responders projected to be needed to respond to multiple or concurrent events, and officials could not tell us why their planning did not take such scenarios into account. This lack of planning was notable given that we had previously reported that during the 2017 hurricane season, ASPR experienced a shortage of these responders, which contributed to a reliance on DOD to provide essential public health and medical service functions.

What Remains to Be Done

The Secretary of Health and Human Services has an imperative, complex, and far-reaching role as the lead for the federal public health and medical response to public health emergencies. Numerous public health emergencies converging and occurring simultaneously can present significant challenges and tax already strained resources. As devastating as the COVID-19 pandemic and the concurrent fires, hurricanes, and earthquake have been, HHS, its partners, and Congress must be prepared for more frequent disasters and new viruses, whether naturally or intentionally introduced.

Sustaining attention on preparing for, and responding to, future public health emergencies will be challenging as the nation continues to address the COVID-19 pandemic. However, waiting to address the deficiencies we have identified in HHS’s leadership and coordination of public health emergencies is not an option as it is not possible to know precisely when the next threat will occur; only that it will come. Addressing these deficiencies will require sustained leadership commitment; the necessary capacity to prepare, respond, and recover; and the systems to measure, evaluate, and demonstrate progress. The 72 related GAO recommendations that HHS has yet to implement are a starting place, including the following:
  • Cleary defined roles and responsibilities. HHS should direct the Biodefense Coordination Team to document agreed upon processes, roles, and responsibilities for making and enforcing joint decisions across federal agencies and their partners involved in protecting the nation against catastrophic biological threats.
  • Complete and consistent data. HHS should establish the nationwide public health situational awareness network capability, as required by statute, to help ensure timely and complete collection of public health data to aid a response, and use an expert committee to systematically review, and help standardize, the ongoing collection and reporting of public health data.
  • Clear, consistent communication. FDA and CDC should develop a process to ensure consistent guidance for health care providers on the appropriate use of personal protective equipment during future public health emergencies.
  • Transparency and accountability. ASPR should develop plans to ensure a transparent and deliberative process for making recommendations on the procurement of vaccines, supplies, and other materials for the SNS and maintain related documentation, including the rationale and outcomes for decisions made.
  • Understanding key partners’ capabilities and limitations. ASPR should work with key federal response partners to develop and finalize memorandums of agreement that include information on the capabilities and limitations of these agencies to meet public health and medical services core capabilities during public health emergencies.

In 2021, the administration released high-level plans that help provide HHS and its partners a road map to be better prepared for the next pandemic or biological threat.[308] These plans will require a whole-of-nation approach to implementation, including from states, territories, tribes, and localities where public health funding has declined over the years. Health departments at all levels need to be prepared to help HHS respond to ongoing and future public health emergencies.

Through our ongoing and planned work, we will continue to monitor HHS’s efforts to address public health emergencies. This includes evaluating HHS’s efforts to implement the administration’s plans, which will be essential to addressing this High-Risk area overall. We will evaluate HHS’s efforts against our five High-Risk criteria: (1) leadership commitment to addressing our concerns; (2) capacity to resolve the risks; (3) development of a corrective action plan that defines the root cause, solutions, and corrective measures needed; (4) monitoring to validate the effectiveness and sustainability of corrective measures; and (5) demonstrated progress in the implementation of those measures. By taking actions to enhance its leadership and coordination of public health emergencies, HHS will be better positioned to help the nation more effectively prepare for, and respond to, future public health emergencies in a timely and effective manner.

Selected Related GAO Products

COVID-19: HHS and DOD Transitioned Vaccine Responsibilities to HHS, but Need to Address Outstanding Issues. GAO-22-104453. Washington, D.C.: January 19, 2022.

COVID-19: Agencies Are Taking Steps to Improve Future Use of Defense Production Act Authorities. GAO-22-105380. Washington, D.C.: December 16, 2021.

Biodefense: After-Action Findings and COVID-19 Response Revealed Opportunities to Strengthen Preparedness. GAO-21-513. Washington, D.C.: August 4, 2021.

COVID-19: HHS Should Clarify Agency Roles for Emergency Return of U.S. Citizens during a Pandemic. GAO-21-334. Washington, D.C.: April 19, 2021.

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

Public Health Preparedness: HHS Should Take Actions to Ensure It Has an Adequate Number of Effectively Trained Emergency Responders. GAO-20-525. Washington, D.C.: June 18, 2020.

National Biodefense Strategy: Additional Efforts Would Enhance Likelihood of Effective Implementation. GAO-20-273. Washington, D.C.: February 19, 2020.

Disaster Response: HHS Should Address Deficiencies Highlighted by Recent Hurricanes in the U.S. Virgin Islands and Puerto Rico. GAO-19-592. Washington, D.C.: September 20, 2019.

2017 Hurricanes and Wildfires: Initial Observations on the Federal Response and Key Recovery Challenges. GAO-18-472. Washington, D.C.: September 4, 2018.

Infectious Disease Threats: Funding and Performance of Key Preparedness and Capacity-Building Programs. GAO-18-362. Washington, D.C.: May 24, 2018.

Public Health Information Technology: HHS Has Made Little Progress toward Implementing Enhanced Situational Awareness Network Capabilities. GAO-17-377. Washington, D.C.: September 6, 2017.

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

Influenza Pandemic: Lessons from the H1N1 Pandemic Should Be Incorporated into Future Planning. GAO-11-632. Washington, D.C.: June 27, 2011.

Public Health Information Technology: Additional Strategic Planning Needed to Guide HHS’s Efforts to Establish Electronic Situational Awareness Capabilities. GAO-11-99. Washington, D.C.: December 17, 2010.

Influenza Pandemic: Further Efforts Are Needed to Ensure Clearer Federal Leadership Roles and an Effective National Strategy. GAO-07-781. Washington, D.C.: August 14, 2007.

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

Appendix III: Highlights Pages from Recently Issued GAO COVID-19 Products

Aviation Industry Recovery

We issued COVID-19 Pandemic: Observations on the Ongoing Recovery of the Aviation Industry, GAO-22-104429, on October 21, 2021.

Federal Workplace Reentry

We issued COVID-19: Federal Agencies’ Initial Reentry and Workplace Safety Planning, GAO-22-104295, on October 25, 2021.

Hiring Authorities

We issued Federal Hiring: OPM Should Collect and Share COVID-19 Lessons Learned to Inform Hiring during Future Emergencies, GAO-22-104297, on October 25, 2021.

Emergency Relief to Tribes

We issued COVID-19: Lessons Learned from Interior and Treasury’s Administration of CARES Act Funds Could Improve Federal Emergency Relief to Tribes, GAO-22-104349, on October 29, 2021.

State Department Repatriation Effort

We issued COVID-19: State Carried Out Historic Repatriation Effort but Should Strengthen Its Preparedness for Future Crises, GAO-22-104354, on November 2, 2021.

Vaccine Distribution and Communication

We issued COVID-19: HHS Agencies’ Planned Reviews of Vaccine Distribution and Communication Efforts Should Include Stakeholder Perspectives, GAO-22-104457, on November 4, 2021.

Election Assistance Commission Grants

We issued Election Assistance Commission: Assessment of Lessons Learned Could Improve Grants Administration, GAO-22-104313, on November 8, 2021.

Vaccine Development

We issued Vaccine Development: Capabilities and Challenges for Addressing Infectious Diseases, GAO-22-104371, on November 16, 2021.

Defense Production Act Loans

We issued U.S. International Development Finance Corporation: Actions Needed to Improve Management of Defense Production Act Loan Program, GAO-22-104511, on November 17, 2021.

VA Supply Chain

We issued VA Acquisition Management: Fundamental Challenges Could Hinder Supply Chain Modernization Efforts If Not Addressed, GAO-22-105483, on November 18, 2021.

Behavioral Health and COVID-19

We issued Behavioral Health and COVID-19: Higher-Risk Populations and Related Federal Relief Funding, GAO-22-104437, on December 10, 2021.

Services for Older Adults

We issued COVID-19: Selected States Modified Meal Provision and Other Older Americans Act Services to Prioritize Safety, GAO-22-104425, on December 15, 2021.

Improving USAspending.gov

We issued Federal Spending Transparency: Opportunities Exist for Treasury to Further Improve USAspending.gov’s Use and Usefulness, GAO-22-104127, on December 16, 2021.

Defense Production Act Authorities

We issued COVID-19: Agencies Are Taking Steps to Improve Future Use of Defense Production Act Authorities, GAO-22-105380, on December 16, 2021.

Housing Finance Vulnerabilities

We issued Housing Finance System: Future Reforms Should Consider Past Plans and Vulnerabilities Highlighted by Pandemic, GAO-22-104284, on January 13, 2022.

HHS-DOD COVID-19 Countermeasures Acceleration Group

We issued COVID-19: HHS and DOD Transitioned Vaccine Responsibilities to HHS, but Need to Address Outstanding Issues, GAO-22-104453, on January 19, 2022.

International Humanitarian Assistance

We issued COVID-19: Better USAID Documentation and More-Frequent Reporting Could Enhance Monitoring of Humanitarian Efforts, GAO-22-104431, on January 26, 2022.

Appendix IV: List of Ongoing GAO Work Related to COVID-19 as of December 28, 2021

Agencies' Readiness and Use of Telework for COVID-19 Response

Aviation Contact Tracing

CARES Act Assistance to Farmers

U.S. Customs and Border Protection Trade Facilitation during COVID-19

COVID-19 Diagnostic Testing

COVID-19 Disparities

COVID-19 in Nursing Homes: Data and Challenges

COVID-19 in Nursing Homes: Federal Policies

COVID-19 Meat and Poultry Worker Safety

COVID-19 Unemployment Assistance for Contingent Workers

COVID-19 Vaccine Allocation Methodology

COVID-19: Employer Tax Provisions

COVID-19: State Department Overseas Operations

Department of Defense Advance and Progress Payments during the COVID-19 National Emergency

Election Administration during the COVID-19 Pandemic

Emergency Rental Assistance Program

Financial Regulatory Oversight during COVID-19

Fraud Risks in Small Business Administration (SBA) Pandemic Relief Programs

Health Insurance Loss

Department of Health and Human Services (HHS) High-Risk Research Oversight

HHS Medicare Telehealth Waivers for COVID-19

HHS Public Relations Campaign

HHS's Public Health Situational Awareness Capability

Indian Health Service Response to COVID-19

K-12 Disconnected Students during the COVID-19 Pandemic

Medicaid Telehealth during COVID-19

Medical Surge Readiness

Oversight of Emergency Rental Assistance Program

Oversight of Unemployment Insurance during COVID-19

Pandemic Learning Loss

Political Interference at Selected HHS Agencies

Post-COVID-19 Federal Space Planning

Regulatory Flexibilities for COVID-19 Response

SBA Assistance to Venues

SBA Restaurant Revitalization Fund

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, and Ethnicity

Tribal Epidemiological Data Access

Transportation Security Administration COVID-19-related Directives for Transportation Systems

Unemployment Insurance Risks and Transformation

Appendix V: Comments from the Internal Revenue Service

Appendix VI: Comments from the Department of the Treasury

References

Figures

  1. Average Monthly Processing Times for Carryback Applications and Claims Filed with the Internal Revenue Service (IRS), Apr. 2020–Nov. 2021
  2. Figure 1: Report Enclosures by Topic Area
  3. Figure 2: Status of Prior GAO Recommendations from COVID-19-Related Work, by Federal Department or Agency, as of Dec. 31, 2021
  4. Figure 3: 7-Day Averages of Reported COVID-19 Cases in the U.S., Mar. 1, 2020–Jan. 3, 2022
  5. Figure 4: Reported Daily Hospitalizations and 7-Day Averages of Patients with Confirmed COVID-19 in the U.S., Aug. 1, 2020–Jan. 6, 2022
  6. Figure 5: Percent of People Fully Vaccinated by Jurisdiction, as Reported to the CDC, as of Jan. 3, 2022
  7. Figure 6: Employment-to-Population Ratio, January 2019–December 2021
  8. Figure 7: Percentage of COVID-19 Relief Funding Obligated and Expended, July 31, 2020–Nov. 30, 2021
  9. Indicators for Areas of the Economy Supported by the Federal COVID-19 Pandemic Response, Sept.–Dec. 2021, Cumulative Changes since Feb. 2020
  10. Employment-to-Population Ratio, Jan. 2019–Dec. 2021
  11. Indicators of Inflation, Feb.–Nov. 2021, and Average Inflation Rates, 2000–2019
  12. Percentage Change in Inflation Indicators from the Previous Month, Jan. 2019-Nov. 2021
  13. HHS-Reported COVID-19 Relief Appropriations, Obligations, and Expenditures from COVID-19 Relief Laws, as of Nov. 30, 2021
  14. Timeline of COVID-19 PHE, 6.2 Percentage Point FMAP Increase, and Medicaid Enrollment Requirements
  15. Selected States’ Estimates of Additional Federal Funding Attributable to Increased HCBS Federal Medicaid Assistance Percentage, July 2021
  16. Weekly Continued Claims Submitted Nationwide for Regular UI, PEUC, and Extended Benefits, Mar. 1, 2020–Dec.18, 2021
  17. Timeliness of First Payments of Regular Unemployment Insurance (UI) Benefits, Jan. 2020–Nov. 2021
  18. Number and Type of Borrowers Affected by the Expiration of COVID-19 Emergency Relief for Federal Student Loans, as of November 2021
  19. Average Monthly Processing Times for Taxpayer Carryback Applications and Claims Filed with the Internal Revenue Service (IRS), Apr. 2020–Nov. 2021
  20. Status of SBA Loan Forgiveness Determinations on Paycheck Protection Program Loans, as of Sept. 30, 2021
  21. Number of Paycheck Protection Program Loan Forgiveness Decisions Submitted by Lenders to SBA, Aug. 2020–Sept. 2021
  22. State Small Business Credit Initiative Funding Allocations, 2010 and 2021
  23. State Small Business Credit Initiative 2021 Preliminary Allocations to States and Territories
  24. Number of Leases in the Federal Leasing Inventory, July 2011–July 2021
  25. Examples of General Services Administration’s (GSA) Return to Workplace Planning Services for Federal Agencies
  26. Coronavirus State and Local Fiscal Recovery Funds Allocations and Treasury Distributions as of Nov. 30, 2021, by Recipient Type
  27. Treasury’s Reporting Requirements for the Coronavirus State and Local Fiscal Recovery Funds, by Recipient Type, as of Nov. 15, 2021
  28. Percentage of States’ Planned Uses of Coronavirus State and Local Fiscal Recovery Funds (CSLFRF) by Spending Category, Based on States’ Recovery Plan Performance Reports that Were Publicly Available as of Dec. 3, 2021
  29. Contract Obligations in Response to COVID-19 by Federal Agency, as of Dec. 15, 2021
  30. Government-wide COVID-19-Related Contract Obligations and Confirmed COVID-19 Cases by Month, Feb. 2020–Dec. 15, 2021
  31. Contract Obligation Amounts for Top Five Goods and Services Procured in Response to COVID-19 by month, Feb. 2020–Dec. 15, 2021
  32. Monthly Trends in U.S. Import Charges Relative to Value Imported from Jan. 2018–Aug. 2021
  33. Monthly U.S. Imports of COVID-19-Related Products, by Product Type, Jan. 2019–Aug. 2021
  34. Value of U.S. Exports of Vaccines for Human Use, Overall and to EU Member Countries and the United Kingdom, January 2019 through August 2021
  35. Number of Individuals or Entities That Have Pleaded Guilty to Federal Fraud-Related Charges by COVID-19 Relief Program, as of Oct. 31, 2021
  36. Number of Individuals Who Have Pleaded Guilty to Federal Fraud-Related Charges and Have Been Sentenced, as of Oct. 31, 2021
  37. Number of Individuals or Entities That Have Pleaded Guilty to, Faced Federal Charges for, or Were Convicted for Consumer Fraud, as of Oct. 31, 2021
  38.  

Tables

  1. Reported COVID-19 Vaccinations by Age Group in U.S., as of Jan. 3, 2022
  2. COVID-19 Funding and Expenditures for Selected Federal Nutrition Assistance Programs as of Nov. 30, 2021
  3. Table 1: Reported COVID-19 Vaccinations by Age Group in the U.S., as of Jan. 3, 2022
  4. Table 2: COVID-19 Relief Funding and Spending as of Nov. 30, 2021
  5. Table 3: COVID-19 Relief Funding for Federal Programs and Funds Receiving $10 Billion or More in Aid for States, the District of Columbia, Localities, U.S. Territories, and Tribes, as of Nov. 30, 2021
  6. HHS-Reported COVID-19 Relief Appropriations, Obligations, and Expenditures, by Relief Law, as of Nov. 30, 2021
  7. HHS-Reported Allocations, Obligations, and Expenditures of COVID-19 Relief Funding, by Agency or Key Fund, as of Nov. 30, 2021
  8. HHS-Reported Allocations, Obligations, and Expenditures by Selected COVID-19 Response Activity, as of Nov. 30, 2021
  9. Prior GAO Recommendation Related to Department of Health and Human Services (HHS) COVID-19 Funding
  10. Overview of Selected Changes to the Federal Medical Assistance Percentage (FMAP) during the COVID-19 Public Health Emergency (PHE), as of Oct. 2021
  11. Examples of Selected States’ Proposed Home and Community-Based Services (HCBS) Activities, July 2021
  12. Prior GAO Matter for Congressional Consideration Related to Medicaid Funding
  13. COVID-19 Funding and Expenditures for Selected Federal Nutrition Assistance Programs as of Nov. 2021
  14. Prior GAO Recommendation Related to COVID-19 Nutrition Assistance
  15. Prior GAO Recommendations Related to Unemployment Insurance (UI) Programs
  16. Summary of Funding for Emergency Rental Assistance (ERA) Appropriated, Disbursed, and Spent as of November 30, 2021 (dollars in billions)
  17. Prior GAO Recommendations Related to the Economic Injury Disaster Loan Program
  18. Prior GAO Recommendations Related to Tax Relief for Business
  19. Prior GAO Recommendations Related to the Paycheck Protection Program
  20. Number of States Receiving One or More 30-Day Extensions from Treasury for Distributing Coronavirus State and Local Fiscal Recovery Funds Payments to Non-Entitlement Units of Local Government, as of Jan. 3, 2022
  21. Prior GAO Recommendations Related to Single Audits and Coronavirus State and Local Fiscal Recovery Funds (CSLFRF)
  22. Prior GAO Recommendations Related to Federal Contracts and Agreements for COVID-19
  23.  

Abbreviations

AbbreviationDescription
AMTalternative minimum tax
ARPAAmerican Rescue Plan Act of 2021
CDCCenters for Disease Control and Prevention
COVID-19Coronavirus Disease 2019
EBTElectronic Benefits Transfer
ERAEmergency Rental Assistance
FDAFood and Drug Administration
FNSFood and Nutrition Service
HHSDepartment of Health and Human Services
IRSInternal Revenue Service
OMBOffice of Management and Budget

End Notes

Contacts

Jessica Farb

Managing Director, Health Care, farbj@gao.gov, (202) 512-7114

Congressional Relations

A. Nicole Clowers, Managing Director, clowersa@gao.gov, (202) 512-4400
U.S. Government Accountability Office
441 G Street NW, Room 7125, Washington, DC 20548

Public Affairs

Chuck Young, Managing Director, youngc1@gao.gov, (202) 512-4800
U.S. Government Accountability Office
441 G Street NW, Room 7149, Washington, DC 20548

Strategic Planning and External Liaison

Stephen J. Sanford, Managing Director, spel@gao.gov, (202) 512-4707
U.S. Government Accountability Office
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