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CRS_R44932
{ "title": [ "", "Introduction", "Data Information and Caveats", "BLM Livestock Grazing Data", "FS Livestock Grazing Data", "Discussion" ], "paragraphs": [ "", "Livestock grazing on federal lands primarily occurs on public lands managed by the Bureau of Land Management (BLM, in the Department of the Interior) and on National Forest System lands managed by the Forest Service (FS, in the Department of Agriculture). Both agencies operate under statutory principles of multiple use and sustained yield, with livestock grazing among generally authorized uses. Both agencies also charge fees for grazing on agency lands under a fee formula established in the Public Rangelands Improvement Act of 1978 and continued administratively. However, the agencies administer livestock grazing on their lands through somewhat different processes. The other two major federal land management agencies, the National Park Service and the Fish and Wildlife Service, have limited authorities allowing livestock grazing on their lands. Accordingly, this report provides information for BLM and FS only.\nThe extent to which BLM and FS lands are protected and available for various land uses and activities is of perennial interest to Congress. Current congressional issues related to livestock grazing pertain to the fee level, terms and conditions of permits, and amount of grazing authorized, among other topics. This report provides data on the extent of livestock grazing in recent years to assist with congressional deliberations on uses of federal lands generally and availability of lands for livestock grazing in particular. It identifies factors that may have contributed to changes in the amount of livestock grazing over the past 15 years. However, it does not discuss the relative likelihood of any one of these factors to affect grazing trends at national, regional, or local levels.", "This report generally provides data on livestock grazing for BLM and FS from FY2002 to FY2016. It reflects four livestock data categories that can indicate the amount of grazing on federal land. However, for two of the four categories, data for FS are provided only for FY2006-FY2016 because the accuracy of available data for FY2002-FY2005 for those two categories could not be confirmed. The four categories roughly correspond with\nthe number of livestock operators, the number of grazing permits and leases held by these operators, how much grazing could have been authorized for use, and how much grazing was actually used.\nThe four categories are somewhat similar between the agencies, but the categories and terminology are not identical. For instance, whereas FS administers grazing through permits only, BLM authorizes grazing through both permits and leases. Also, both agencies authorize and bill for grazing in terms of livestock use and occupancy of the range for one month, under similar though not identical processes. The BLM measurement is referred to as animal unit months (AUMs), whereas FS uses the term head months (HD-MOs). As another example, those authorized to conduct grazing on BLM land—including individuals, groups, associations, or corporations—are referred to as livestock operators ; on FS lands, they are referred to as permittees . Such differences are reflected in the titles of the data categories presented.\nThe four categories presented here do not reflect all potential indicators of livestock grazing that might be helpful in assessing changes over the specified time range, such as annual acreage of land available and used for livestock grazing. Although acreage statistics over time are not readily available, in recent years BLM has had more land available and used for livestock grazing than FS. For instance, in FY2015, BLM managed a total of 248.3 million acres, of which 154.8 million (62.3%) were available for livestock grazing and 138.8 million (55.9%) were used for grazing. By comparison, in FY2015, FS managed a total of 192.9 million acres, of which more than 95.0 million (49.2%) were available for grazing and 77.3 million (40.1%) were used for grazing.\nTable 1 , Figure 1 , and Figure 2 provide data for BLM. In Table 1 , the first column essentially reflects the number of individuals or entities authorized to graze livestock on BLM lands. However, operators with multiple permits or leases for the same kind of livestock may be counted multiple times, thus overrepresenting the number of operators. The second column shows the number of grazing permits and leases held by these operators; some operators hold more than one permit or lease. The third column, on AUMs in force, reflects the number of AUMs that could have been authorized for use. The fourth column, AUMs authorized, reflects the number of AUMs actually used and billed for.\nTable 2 , Figure 3 , and Figure 4 provide data for FS. In Table 2 , the first column reflects the number of individuals or entities that had active grazing permits and could have been authorized to graze. The second column reflects the number of permits held by these permittees. The third column shows the permitted HD-MOs of grazing that could have been authorized for use. The fourth column reflects the number of HD-MOs authorized to graze and billed for.\nFor both agencies, the tables and figures show increases in grazing used over the period examined, as measured by the amount of time livestock spent on the range. For the other three categories of data, livestock grazing on BLM land was the same or somewhat less in FY2016 than in FY2002. FS had relatively larger declines over the years examined for the other three categories of livestock grazing.", "BLM livestock grazing data across all four categories examined remained relatively constant between FY2002 and FY2016. As shown in Table 1 , column 1, the number of operators authorized to graze livestock on BLM land was nearly identical in FY2002 and FY2016, the first and last years of the period examined. The average number of operators annually was 15,755. During the 15-year period, the highest number of operators was 16,416 in FY2006, the only year in which the figure exceeded 16,000. There was a difference of 954 between this high year and the lowest level of 15,462 in FY2005.\nAs shown in Table 1 , column 2, the number of permits and leases held by livestock operators was 1.7% lower in FY2016 than in FY2002. During the 15-year period, the greatest number of permits and leases was 18,142 in FY2002. There was a difference of 448 between that high year and the lowest year during the period—FY2011—when there were 17,694 permits and leases. The average number of permits and leases was 17,852 annually.\nFigure 1 illustrates the changes in the numbers of BLM livestock operators and grazing permits and leases from FY2002 to FY2016. During the first 10 years (FY2002-FY2011), permits and leases declined fairly steadily and by 2.5% overall, as noted. They rose by 0.6% during the last five years (FY2012-FY2016).\nBLM authorizes grazing permits and leases in terms of AUMs, as noted above. Columns 3 and 4 of Table 1 provide data on AUMs. Figure 2 illustrates the changes in the numbers of AUMs in force and AUMs authorized for BLM lands. As shown in column 3 of the table, AUMs of grazing in force—reflecting AUMs that could have been authorized for use—have gradually decreased and were 2.6% less in FY2016 than in FY2002. The highest level of AUMs in force was 12.7 million in FY2005, for a difference of 337,475 between this year and the low of 12.4 million in FY2016. The average AUMS in force over the 15 years was 12.5 million. In each of the first seven years (FY2002-FY2008), AUMs in force ranged between approximately 12.5 million and 12.7 million annually. Since then, the annual totals have dropped to between 12.3 million and 12.5 million.\nAs shown in column 4 of Table 1 , the number of AUMs that were actually authorized and billed for has varied over time and was 5.2% higher in FY2016 than in FY2002. This was the largest percentage difference of all four BLM data categories examined. AUMs authorized reached a high of nearly 9.0 million in FY2011. There was a difference of 1.5 million between this high and the period low of 7.5 million in FY2003. Over the 15 years, the average AUMs authorized each year was 8.4 million. As shown in Figure 2 , authorized AUMs were lowest during the first four years (FY2002-FY2006), when they were below 8.3 million each year. Since then, the figures have fluctuated between 8.3 million and 9.0 million annually.", "As noted above, FS data are provided for 15 years for two categories of livestock data but for 11 years for two other categories due to uncertainty about the reliability of earlier data. As shown in Table 2 , column 1, the number of livestock permit holders allowed to graze commercial livestock on FS land was 12.4% lower in FY2016 than in FY2006. In fact, in FY2006, the most permittees were allowed to graze—6,598—whereas in FY2016 the fewest were allowed to graze—5,779. There was a difference of 819 between these high and low years. The average number of permittees throughout the 11 years was 6,146 annually.\nFigure 3 illustrates the changes in the numbers of FS livestock permittees and active permits from FY2006 to FY2016. As shown in Figure 3 , the number of permittees declined steadily throughout the 11-year period.\nFrom FY2006 to FY2016, the number of active permits showed trends similar to those for the number of permit holders (see Table 2 , column 2). For instance, the number of active permits was 12.5% lower in FY2016 than in FY2006. In addition, the highest level was reached in FY2006, when there were 7,095 active permits, and the lowest level occurred in FY2016, when there were 6,211. There was a difference of 884 between these high and low years. The number of active permits averaged 6,601. As with the number of permittees, the number of active permits decreased steadily over the 11-year period, as shown in Figure 3 .\nAs noted above, FS administers grazing in terms of HD-MOs, defined as the time in months that livestock spend on FS land. Columns 3 and 4 of Table 2 provide data on HD-MOs. Figure 4 illustrates the changes in the numbers of HD-MOs under permit and HD-MOs authorized from FY2002 to FY2016. As shown in column 3 of Table 2 , the number of HD-MOs under permit—the maximum number that could have been authorized for use—was 18.4% less in FY2016 than in FY2002. This was the largest change in the FS data categories examined. There was a high of 10.1 million HD-MOs under permit in FY2002 and a low of 8.2 million in FY2006, a difference of nearly 1.9 million. The average number of HD-MOs under permit was 8.7 million annually. There was significant annual variation in the data, particularly during the first four years of the 15-year period, as shown in Figure 4 .\nThe number of HD-MOs that were actually authorized and billed for was 1.1% higher in FY2016 than in FY2002 (see column 4 of Table 2 ). Over the 15 years, HD-MOs ranged from a high of 7.3 million in FY2010 to a low of 5.1 million in FY2009, a difference of 2.2 million. Although the average was 6.5 million per year, the number of HD-MOs authorized varied widely over the period, as shown in Figure 4 . During the first several years (FY2002-FY2009), the figures averaged 6.1 million annually. Since FY2010, the average has increased to 6.9 million annually.", "There are similarities in the BLM and FS livestock data over the 15-year period examined. For instance, both agencies had more grazing permits than livestock operators or permittees, because some operators and permittees held more than one permit. Also, both agencies had considerably higher levels of grazing that could have been authorized for use than were actually used. The AUMs and HD-MOs actually used for grazing were likely less than the potential maximum due to voluntary nonuse for economic and other reasons, resource-protection needs, and forage depletion caused by drought and fire, among other reasons.\nIn other ways, BLM and FS livestock grazing differed. As an example, BLM had higher levels of livestock grazing than FS in all four data categories. This difference is in part because BLM manages more acres of land generally and more acres of land for livestock grazing specifically than FS, as noted above.\nDuring the period of analysis, the agencies also experienced different patterns and amounts of change in the four categories of data. The amount of grazing used increased for both agencies from FY2002 to FY2016, but the increase was higher for BLM (5.2%) than for FS (1.1%). Grazing use was based on the amount of time livestock spent on the range, as measured in AUMs or HD-MOs.\nFor the other three categories of data, there were either no changes or relatively small declines for BLM, whereas FS saw relatively larger decreases. With regard to the number of livestock operators, BLM started and ended the FY2002-FY2016 period with nearly the same level, with some fluctuation in between; by contrast, FS livestock permittees decreased steadily from FY2006 to FY2016 and ended the period down 12.4%. With regard to BLM permits and leases, there was a decrease over several years followed by a slight increase, with a 1.7% overall decline over the 15-year period. By contrast, FS active permits decreased steadily from FY2006 to FY2016 and by a larger amount—12.5% overall. With regard to the amount of grazing that could have been used, the BLM's AUMs declined between FY2002 and FY2016 by 2.6%, whereas FS's HD-MOs ended the same period down by 18.4%.\nThe size of the change in livestock grazing on BLM and FS lands depends in part on the length of the period examined. For example, although AUMs used on BLM lands increased by 5.2% over the last 15 years, over the past several decades they declined significantly—about 52.2% from the 1954 level of 18.2 million AUMs. The size of the change also depends on the particular start and end years chosen. For instance, since FY2002, the HD-MOs that could have been authorized on FS lands have declined by 18.4%. However, since FY2006, they have increased by 0.5%.\nChanges in grazing on BLM and FS land nationally reflect a variety of different conditions on rangelands in diverse locations. No analysis was made for this report as to the extent of variation on particular rangelands in specific states or regions. Similarly, no examination was made of the effect of change in particular areas on the national levels reflected in this report.\nThe specific factors that influenced each annual change in grazing nationally were not analyzed for this report. However, national grazing changes identified herein can be attributed to a variety of factors, including amendments to agency land use plans to accommodate other land uses, such as increased recreation. Resource protection needs, typically for water and wildlife resources, also can affect the timing and the amount of grazing. Forage depletion caused by drought or fire can reduce the amount of grazing, and significant rainfall can augment the availability of forage. More generally, matching forage production with livestock production for the long-term health of the rangeland is a factor affecting grazing in some areas. Another factor is voluntary nonuse by ranchers for a variety of reasons, including market, lifestyle, conservation, and others, as in the case of ranchers who use or sell their land for other purposes. Development of nearby private land also can influence grazing on federal land, for example, by impacting the free flow of livestock between ownerships." ], "depth": [ 0, 1, 1, 1, 1, 1 ], "alignment": [ "h0_title h2_title h4_title h3_title h1_title", "h0_full h4_full", "h3_full h2_full h1_full", "", "", "h3_full h2_full h4_full" ] }
{ "question": [ "What agencies oversee livestock grazing on federal lands?", "How these agencies manage lands?", "What is Congress's stance on this issue?", "What information does this report provide?", "What data does this report provide?", "How are these four categories related?", "What do these categories correspond to?", "What changes in grazing did the agencies observe?", "How is this time measured?", "How did the data compare across the two agencies?", "What did the other three catagoeis of data determine?", "How did FS compare to BLM?", "What happened across the two agencies with regard to livestock operators?", "How did BLM fare in terms of permits and leases?", "How does this compare to FS?", "What was the trajectory of grazable land?", "What do changes in grazing reflect?", "What can these changes be attributed to?", "What are the limitations of this report?" ], "summary": [ "Livestock grazing on federal lands primarily occurs on lands of the Bureau of Land Management (BLM, in the Department of the Interior) and the Forest Service (FS, in the Department of Agriculture).", "Both agencies manage lands under sustained-yield and multiple-use principles, with livestock grazing among generally authorized uses.", "Congress continues to be interested in the extent to which BLM and FS lands are protected and used for a variety of activities, including livestock grazing.", "This report provides data on the extent of livestock grazing in recent years to assist with congressional deliberations on uses of federal lands generally and decisionmaking on the availability of lands for livestock grazing in particular.", "This report generally provides data for 15 years, from FY2002 to FY2016, for four categories of livestock data.", "The four categories of data are similar but not identical between the agencies.", "The categories roughly correspond with the number of livestock operators, the number of grazing permits and leases held by these operators, how much grazing could have been authorized for use, and how much grazing was actually used.", "Both agencies saw increases over the period in the amount of grazing used, based on the time livestock spent on the range.", "This time is measured in animal unit months (AUMs) for BLM and head months (HD-MOs) for FS.", "The increase in the amount of grazing was higher for BLM (5.2%) than for FS (1.1%).", "For the other three categories of data, livestock grazing on BLM land was the same or somewhat less in FY2016 than in FY2002.", "FS saw relatively larger declines than BLM for these other three categories of livestock grazing.", "With regard to livestock operators, BLM started and ended the FY2002-FY2016 period with nearly the same number, with some fluctuation in between, whereas the number of FS livestock permittees decreased steadily from FY2006 to FY2016 and ended the period down 12.4%.", "Regarding the number of BLM permits and leases, there was a relatively small overall decline of 1.7% from FY2002 to FY2016.", "By contrast, the number of FS active permits decreased steadily from FY2006 to FY2016 and by a larger amount—12.5% overall.", "As for the amount of grazing that could have been used, BLM's AUMs declined by 2.6% between FY2002 and FY2016, whereas FS's HD-MOs declined by 18.4% over the same period.", "Changes in grazing on BLM and FS lands nationally reflect a variety of different conditions on rangelands in diverse locations.", "The national changes can be attributed to various factors, including amendments to agency land use plans, resource protection needs and the long-term health of rangelands, the effect of weather (e.g., rain/drought) and fire on forage, voluntary nonuse by permit holders for a variety of reasons, and development on nearby private lands.", "The relative extent to which any one of these factors contributed to any national, regional, or local changes in grazing on federal lands is beyond the scope of this report." ], "parent_pair_index": [ -1, 0, 0, -1, -1, 0, 0, -1, 0, 0, -1, 0, -1, -1, 3, -1, -1, 0, -1 ], "summary_paragraph_index": [ 0, 0, 0, 0, 1, 1, 1, 2, 2, 2, 3, 3, 3, 3, 3, 3, 5, 5, 5 ] }
CRS_R42061
{ "title": [ "", "Introduction", "Intelligence Spending: An Overview and Trends", "Trends in Recent Years", "Trends Since 1980", "Comparison with National Defense Spending", "Developing and Enforcing Intelligence Spending Priorities", "The National Intelligence Priorities Framework", "The Intelligence Planning, Programming, Budgeting, and Evaluation", "Potential Oversight Issues for Congress", "The Intelligence Appropriations Process", "Reprogramming After Enactment", "Proposed Changes to Intelligence Appropriations", "An Intelligence Title Within Defense Appropriations Acts?", "A Separate Intelligence Appropriations Act?", "Separate Intelligence Appropriations Subcommittees?", "Caution in the House", "Conclusion", "Appendix. Actions Taken in Response to the Recommendations of the 9/11 Commission" ], "paragraphs": [ "", "Appropriations for intelligence activities represent a significant part of both the federal and defense budget at a time of growing fiscal austerity. In the past, spending levels for intelligence activities were shrouded in secrecy. Today, overall totals of intelligence spending are made public, but the process for appropriating funds for intelligence activities remains complicated and not well understood.\nSteady, yearly increases in intelligence funding in the past decade helped create an intelligence apparatus that, many experts agree, has been effective at accomplishing its ultimate goal of preventing another terrorist attack on the scale of 9/11. But in the new era of fiscal limits, intelligence officials and Members of Congress are addressing ways to reduce intelligence spending while ensuring continued effectiveness against al-Qaeda and while adapting to new priorities other than counterterrorism. Director of National Intelligence (DNI) James R. Clapper Jr. recently stated that sequestration would require a 7% cut, or roughly $4 billion, to the National Intelligence Program (NIP) budget and warned of reduced global coverage and decreased human and technical intelligence collection. Mr. Clapper also warned of repercussions similar to those that occurred in the 1990s when, in concert with a one-third decrease in active duty military personnel, the intelligence community saw a 23% cut in its budget, resulting in what he characterized as a \"damaging downward spiral.\"\nThe Washington Post on August 29, 2013, published details about the Administration's FY2013 NIP budget request, based on a document provided by former NSA contractor Edward Snowden. Because the document leaked to the news media is classified, CRS is unable to provide a discussion of the specific detail of that budget submission. Nonetheless, the disclosure may drive further public debate about the size of the intelligence budget and about the effectiveness of intelligence spending. This report discusses the historic trend in intelligence spending, as well as broader issues concerning the intelligence budgeting process, and may help Members of Congress contextualize information concerning the FY2013 budget.", "Total intelligence spending can be understood as the combination of (1) the NIP, which covers the programs, projects, and activities of the intelligence community oriented towards the strategic needs of decision makers, and (2) the Military Intelligence Program (MIP), which funds defense intelligence activity intended to support tactical military operations and priorities. Later sections of this report describe these programs in more detail. It is important to recognize that public comments about intelligence spending do not always distinguish between the NIP, the MIP, and the total of the two, complicating discussions on a subject about which there are already few details.\nThe 9/11 Commission recommended that the amount of money spent on national intelligence be released to the public. In accordance with the Implementing the Recommendations of the 9/11 Commission Act, the Director of National Intelligence (DNI) in 2007 began to announce each year the amount of money appropriated for the NIP. The Intelligence Authorization Act of 2010 also required the President to publicly disclose the amount requested for the NIP in his budget. The Secretary of Defense began to release annual MIP appropriations figures in 2010 and specified those figures back to 2007. These actions have provided public access to previously classified budget numbers for national and military intelligence efforts. Table 1 provides these recently released figures in both nominal and constant 2014 dollars. Unless otherwise noted, values in this report are in constant dollars.", "Appropriations for intelligence activities amounted to over $78 billion in FY2012, the last year for which there is complete data. The President's budget requested $73 billion for FY2013. This does not take into account sequestration, and actual appropriated amounts are not yet available for 2013. Since peaking in 2010, total intelligence spending has fallen by at least 15%, which largely reflects a decrease in military intelligence spending.\nThe NIP and MIP figures above include funding for Overseas Contingency Operations (OCO)—roughly $10 billion annually for intelligence activities. It can be useful to distinguish OCO funding, including OCO funding for military intelligence, from other defense spending because that funding pays for wartime-related activities that differ from activities funded by the DOD base budget. For broader intelligence spending in the NIP, however, it is not clear what activity is supported by NIP OCO funds or to what extent that activity is qualitatively different than other intelligence operations taking place across the globe. Figure 1 breaks out OCO funds from other MIP and NIP funding. Base budget intelligence spending grew by more than $10 billion, peaking in FY2010, while OCO intelligence spending grew by about $3 billion, peaking in FY2011.\nPolicy makers have remarked that intelligence spending has doubled since September 11, 2001. CRS analysis suggests that the NIP slightly more than doubled in real terms from 2001 to 2012 while the MIP grew at a slower pace. The NIP budget in 2001 (then referred to as the National Foreign Intelligence Program—NFIP) was roughly $24 billion in constant 2014 dollars, or less than half of the NIP budget for FY2012. After sequestration, the NIP budget from 2001 to 2013 will have roughly doubled. Publicly available data suggest the total intelligence budget in FY2001 was roughly $37 billion, or almost half of the $78 billion intelligence budget for FY2012.", "Total intelligence spending previously peaked in 1989, at 125% above spending in 1980, before declining in the mid-1990s to 80% above spending in 1980. It is possible to estimate that total intelligence spending in 1980 was slightly less than $21 billion, in current dollars. Spending appears to have quadrupled between 1980 and 2010 before declining over the past three years. These estimates are based on information provided by the 1996 Commission on the Roles and Capabilities of the U.S. Intelligence Community, which described the trend in intelligence spending from 1980 to the mid-1990s and the projected spending trend from the mid-1990s to 2001. The commission specified the percentage change at key points in time but not actual spending levels. The Director of Central Intelligence (DCI) also publicly disclosed the amount appropriated for intelligence for FY1997 and FY1998. Using the trends described by the commission and the figure for FY1997, CRS estimated spending in 1980 and 1989. The methodology for the estimates is further explained in the \"notes\" below Figure 2 . Both the DCI disclosures and the commission appear to combine national and military intelligence spending. Data are not available specifically for national intelligence over this extended timeframe.", "The vast majority of intelligence spending falls within the national defense function—the budget category that includes the military activities of DOD as well as other national security activities. Using the estimates above, it is possible to separate total intelligence spending from the national defense function and to compare the growth in intelligence spending to the growth in national defense spending without intelligence. Total intelligence spending grew more sharply than other national defense spending in both the 1980s and after 2001. As noted, total intelligence spending previously peaked in 1989, at 125% above spending in 1980, before declining in the mid-1990s to 80% above spending in 1980. In comparison, national defense excluding intelligence grew by 55% from 1980 to its peak in 1985 before declining in the mid-1990s to roughly equal that in 1980. As shown in Figure 2 , total intelligence spending grew from $34.4 billion to $78.4 billion or by about 110% in real terms from 2001 to 2012. National defense excluding intelligence grew by 55% over that time period.\nAs a result of these trends, when measured from 1980, total intelligence spending by 2012 had grown 274%, while national defense spending without intelligence had grown 82% over that time period (see Figure 3 ).\nPerhaps one of the most critical questions facing Congress is whether intelligence spending will fall in concert with other defense spending. Some argue that as defense spending decreases, intelligence spending should remain flat or rise because a robust intelligence apparatus would be necessary to compensate and provide forewarning to a smaller, more nimble DOD. While plausible, this argument belies the fact that, as demonstrated by Figure 3 , intelligence spending has already been decoupled from defense spending—the two in recent decades have tended to move in the same direction but have changed by different degrees.\nAnother argument about the relationship between defense and intelligence spending concerns the diversity and magnitude of the threats to U.S. interests. Intelligence spending might appropriately be correlated to the diversity of threats. The intelligence community has argued that, especially after September 11, 2001, the range and complexity of threats to the United States has expanded to include not only state actors, but also non-state actors involved in activities such as terrorism, cyber-attacks, and drug trafficking. To fulfill the strategic needs of decision makers, the community must to some degree dedicate resources towards those threats. In comparison, while DOD must do contingency planning to address a diversity of threats, it does not necessarily need to dedicate resources towards each of them. Further, the cost to DOD of addressing new threats may not be as large as the cost associated with challenges from traditional state actors like the Soviet Union. Defense spending might thus be understood to correlate to the total size of the threat to U.S. interests.\nHence, this would explain and to some extent justify the divergence of intelligence spending from other national defense spending since the end of the Cold War, when many experts agree the number of threats to U.S. interests multiplied even while the sheer magnitude of the threat may have decreased. The question remains whether, after a decade of sharp growth and after the most critical improvements to intelligence capabilities have by some accounts already been made, intelligence spending can now be pared back while preserving necessary tools and capabilities.", "DNI James R. Clapper, in March 2013 testimony before the Senate Select Committee on Intelligence, stated that \"in my almost 50 years in intelligence, I do not recall a period in which we've confronted a more diverse array of threats, crises and challenges around the world.... Threats are more interconnected and viral.\" The challenge for Congress and the intelligence community in light of this assessment may be to better establish priorities and to align relevant budgets accordingly. Absent such a process, resources may not be focused on the most critical issues, making it difficult to respond effectively to the myriad threats that the intelligence community argues are in need of attention.\nDuring a previous round of budget cuts in the 1990s and prior to the establishment of the DNI, some critics argued that the intelligence community lacked a rigorous system to establish priorities and to shape the intelligence budgets to meet those priorities. The intelligence community at the time was overseen by the Director of Central Intelligence, who also served as the head of the Central Intelligence Agency (CIA) and who many argue was too focused on the CIA, to the detriment of his broader duties. This by some accounts made it difficult to adapt to the new fiscal realities of the 1990s when spending fell in response to the dissolution of the Soviet Union.\nA 1996 report from the Council on Foreign Relations questioned the role of intelligence community management in priority setting, stating that, \"Intelligence requirements are most often set by intelligence producers or by relatively junior officials in the policymaking departments.\" The 1996 Commission on the Roles and Capabilities of the United States Intelligence Community found that not only were requirements often set by lower level staff, but any guidance from the DCI may often have come too late in the process to affect program priorities:\nThe [Director of Central intelligence] is charged by law to \"provide guidance to elements of the Intelligence Community for the preparation of their annual budgets.\" Usually, this guidance is issued by the DCI's staff or jointly with the Office of the Secretary of Defense after an overall level of funding has been decided by the Secretary of Defense and the DCI, and takes into account presidentially directed needs and priorities, statements of national security strategy, analyses of intelligence \"gaps\" and future needs, and other pertinent direction. Often, however, this guidance comes after the program and budget process has begun, and the program managers have already incorporated their own assumptions about intelligence requirements into budget estimates.\nSimilarly, a House Permanent Select Committee on Intelligence (HPSCI) report from 1996 referred to a problem of the \"tail trying to wag the dog,\" with respect to the intelligence budget process, meaning that community-level staff would compile the budget proposals of different agencies but exercised little oversight or control over those budgets. Thus, individual intelligence community components were able to establish their intelligence priorities and to shape their budgets to meet those priorities without effective overall rationalization of effort. Some observers believed the community-level staff under the DCI lacked sufficient authority and insight into the budget of individual agencies while others believed the DCI had significant budgetary authority that he never used effectively.\nIn part because of the concerns above, the Intelligence Reform and Terrorism Prevention Act of 2004 created the DNI and arguably expanded its budgetary authorities beyond those previously possessed by the DCI. While the act stated that the DNI would \"develop and determine an annual consolidated National Intelligence Budget,\" that language almost matched the budget formulation authorities granted to the DCI. However, the 2004 law also granted the DNI additional reprogramming authority and the means to monitor and execute the NIP, authorities the DCI lacked. Since 2004, the DNI has adopted two primary administrative mechanisms to establish intelligence priorities and then allocate resources towards those priorities, the National Intelligence Priorities Framework (NIPF) and the Intelligence Planning, Programming, Budgeting, and Evaluation (IPPBE) process.", "The NIPF, which was developed under the DCI and adopted by the DNI in 2005, is the process by which the DNI identifies intelligence topics relevant to policy makers and assigns priorities to intelligence targets based on those topics. The NIPF is designated as \"the DNI's sole mechanism for establishing national intelligence priorities.\" Members of the intelligence community are directed to allocate collection and analytic resources in accordance with the NIPF. The DNI Chief Financial Officer is responsible for ensuring that NIP resources are allocated towards priorities identified in the NIPF. However, some have questioned the effectiveness of this process. Ambassador Robert Hutchings, the chairman of the DNI's National Intelligence Council from 2003 to 2005, stated in a 2007 hearing before the House Permanent Select Committee on Intelligence that the NIPF was \"little more than diplomatic or bureaucratic busywork.\" A point to stress is that there is little publicly available information that would help corroborate or refute the Ambassador's claim.", "Intended to parallel DOD's programming and budgeting process, the IPPBE system is the budgetary mechanism used to develop the NIP. Of note, the intelligence community directive that describes the IPPBE does not mention the NIPF, suggesting the DNI's key mechanism for developing intelligence priorities might have a limited role in the budget formulation process. The planning phase of the IPPBE does involve an analysis of intelligence community priorities and gaps, although how and to what extent the NIPF informs that analysis us unknown. After IPPBE analysis is completed by the DNI's staff, it is then used to provide programmatic guidance to members of the intelligence community, and such guidance should be reflected in responses provided to the DNI that are used to actually formulate the NIP.", "Before the creation of the DNI, the reports discussed in the previous section suggested that administrative mechanisms intended to establish intelligence priorities were perfunctory exercises. Priorities and corresponding budget allocations reflected the priorities in individual agencies. Such was the situation prior to intelligence reform in 2004 and the establishment of a DNI with expanded budgetary authorities over the different components of the intelligence community.\nRecently, observers have raised concerns that the intelligence community has become too focused on counterterrorism and support to the military, to the detriment of other, more strategic intelligence priorities. A press account published in early 2013 alleged that a classified report prepared by the President's Intelligence Advisory Board (PIAB) in 2012 found that, after a decade of counterterrorism and intelligence support to the wars in Iraq and Afghanistan, the CIA and other members of the intelligence community had become too focused on tactical operations.\nIn light of these considerations and growing budgetary pressures, Congress may act to examine the NIPF and IPPBE processes to determine their effectiveness at shaping the NIP. Possible oversight questions include:\nHow and to what extent does the NIPF affect the collection and analytic priorities of individual agencies? Does the DNI's staff exercise its full authority over the budgets of individual intelligence agencies? To what extent do individual agencies incorporate the planning guidance from the DNI when formulating their budgets? After intelligence community components provide their budget proposals, to what extent does the DNI adjust budget submissions in accordance with intelligence community priorities?", "Intelligence appropriations are inherently complicated because of the nature of both the intelligence community and the budgeting and execution processes that have developed over time. Funds for the large national-level intelligence agencies—CIA, the National Security Agency (NSA), National Reconnaissance Office (NRO), National Geospatial-Intelligence Agency (NGA), and Defense Intelligence Agency (DIA)—are included in the NIP and are generally believed to consume a large portion of annual intelligence funding. The NIP also includes funding for the State Department's Bureau of Intelligence and Research (INR) and intelligence efforts in other civilian agencies, including the Federal Bureau of Investigation (FBI) and the Departments of Justice, Commerce, and the Treasury. Funds for the intelligence components of the military departments are included in the MIP. In addition, the MIP includes some funds for the tactical intelligence activities of the NSA, NRO, NGA, and DIA.\nThe DNI develops and determines the NIP budget and presents it to the President for his approval \"together with any comments from the heads of departments containing agencies or organizations.\" The President's annual budget is then submitted to Congress, normally in early February of each year.\nCongress reviews the President's budgets and appropriates funds for intelligence mostly in defense appropriations legislation, which has always included the vast bulk of intelligence spending—probably well over 90% of the NIP. Appropriations for the CIA are included in defense appropriations acts, but are transferred directly to the Director of the CIA, and the Defense Department has no role in the apportionment or allocation of CIA funds. Funding for intelligence activities of some departments, namely State, Justice, Homeland Security, Energy, and the Treasury, is provided in other appropriations measures.\nOnce appropriations legislation (or a continuing resolution) is enacted prior to the beginning of the new fiscal year, the Office of Management and Budget (OMB) apportions funds to the various agencies with national intelligence programs based on the Administration request and congressional adjustments.", "Reprogrammings and transfers are others tools that the DNI can use to manage intelligence resources by transferring funds to meet unanticipated, higher priority needs. The Intelligence Reform and Terrorism Prevention Act of 2004 provided the DNI with the authority to reprogram or transfer NIP funds to a higher priority intelligence activity, with the approval of the Director of the Office of Management and Budget and after consultation with the heads of affected agencies or organizations. Cumulative reprogrammings or transfers out of any department or agency must be less than $150 million and less than 5% of the NIP budget for that department or agency. The DNI may exceed these limits with the concurrence of the relevant department head. In addition, the Consolidated Appropriations Act of 2012, ( P.L. 112-74 ) and the Consolidated and Further Continuing Appropriation Act of 2013 ( P.L. 113-6 ) stated that the DNI could transfer at most $2 billion of NIP funds appropriated for FY2012 and FY2013.", "The complexities of the intelligence appropriations process have led to a number of proposals for different approaches that seek in various ways to disentangle national intelligence funding from the defense budget. Although the DNI has a statutory responsibility to manage NIP funds, the Office of the Secretary of Defense also has a major role in budget execution, to some extent sharing responsibility with the DNI. The Intelligence Reform Act provides that the DNI \"shall be responsible for managing appropriations for the National Intelligence Program by directing the allotment or allocation of such appropriations,\" but also provides that this be done in a manner \"that respects and does not abrogate the statutory responsibilities\" of heads of departments.\nA key issue here is the potential for competing goals and different priorities that may derive from the respective roles of the DNI and the Secretary of Defense in preparing the annual budgets for intelligence agencies and for allocating appropriated funds for intelligence activities within national-level DOD agencies. The \"does not abrogate\" language creates a level of ambiguity regarding the respective budgetary authorities of the DNI and Secretary of Defense. While the DNI effectively has authority over the NIP today, in the event of major changes to the budgets of the DOD component of the intelligence community, this ambiguity in the statute could result in challenges to the DNI's stewardship of the intelligence community. Even absent such changes, the fact that much of the NIP is buried within the defense budget might complicate budget formulation and execution.\nSome observers have suggested that intelligence appropriations should be separated from defense appropriations and that Congress should consider a separate appropriations act (or a separate title in a larger appropriations act) for intelligence. Others have suggested establishing separate intelligence appropriations subcommittees. Such approaches, proponents maintain, would provide a better opportunity for Congress to consider the national intelligence effort as a collective whole and give the DNI a greater role in ensuring that government-wide requirements are not sacrificed to meet the immediate needs of DOD programs. On the other hand, skeptics argue that these changes would provide the DNI no new insights that he cannot currently obtain, and that they would complicate ties between intelligence programs and closely related non-intelligence DOD programs such as satellite launch programs. Sections below discuss these proposals in more detail.", "One option for policy makers would be for defense appropriations subcommittees, as presently constituted, to report a defense appropriation bill that would include a separate title for the NIP. Current defense appropriations bills include a Title VII, Related Agencies, that provides funding for the CIA Retirement and Disability System Fund and for the Intelligence Community Management Account (which includes the Office of the DNI and the National Counterterrorism Center (NCTC)). A new title could be established, or Title VII could be expanded, to include all NIP funding, with corresponding reductions in other defense accounts. This approach would give greater visibility to NIP funding and would not necessarily require separate 302(b) allocations, which set limits for each appropriations subcommittee as part of the congressional budget process. A major advantage of this approach is that it would require fewer changes to the intelligence appropriations process compared to the two proposals discussed below.", "The 9/11 Commission, in addition to recommending that amounts appropriated for national intelligence be disclosed, urged that \"Congress should pass a separate appropriations act for intelligence, defending the broad allocation of how these tens of billions of dollars have been assigned among the varieties of intelligence work.\" Overall amounts requested and appropriated are now made public. This development arguably facilitates the preparation of a separate intelligence appropriations act.\nThe option of a stand-alone intelligence appropriations act would entail the separation of appropriations for the NIP from the DOD budget. Although not calling for a separate appropriations bill, DNI Clapper spoke favorably of separating the NIP from the DOD budget during his confirmation hearing as DNI in July 2010. Responding to a question from Senator Russ Feingold, DNI Clapper stated:\nI would support and I've also been working and have had dialogue with actually taking the National Intelligence Program out of the DOD budget since the reason, the original reason for having it embedded in the department's budget was for classification purposes. Well, if it's going to be publicly revealed, that purpose goes away. And it also serves the added advantage of reducing the topline of DOD department budget, which is quite large, as you know and that's a large amount of money that the department really has no real jurisdiction over.\nFour months later, in November 2010, Mr. Clapper suggested that this would be the Administration's approach beginning with the budget submission for FY2013 that will be forwarded to Congress in February 2012. However, DNI Clapper indicated in an address to the Geospatial Intelligence Foundation in October 2011 that the NIP would not be placed in a separate budgetary category under the DNI. Although he provided no details regarding the decision, it is possible that concerns reflected in House-passed legislation may have affected the decision.\nTo improve tracking of the NIP, Section 433 of the FY2012 Intelligence Authorization Bill, H.R. 1892 ( P.L. 112-87 ), which was signed by the President on January 3, 2012, permits the establishment of separate accounts in the Treasury to which intelligence funds could be transferred and separately accounted for. This capability was advocated by DNI Clapper as a means to improve the management of the NIP in his September 2011 testimony. \"Specifically, managing this program as a coherent whole would improve efficiency, transparency and accountability.\" He added at another point in the hearing that \"it is a challenge to watch execution. And a lot of it is because we simply don't have the auditable tools in order to watch how the money's actually being spent.\"", "Some suggest that a separate intelligence appropriations bill would call for a separate appropriations subcommittee for national intelligence. Both the House and Senate took steps in this direction, but ultimately neither established separate subcommittees for intelligence. A separate intelligence appropriations subcommittee would be given a separate budget allocation in accordance with Section 302(b) of the Congressional Budget Act that would limit spending levels in bills. Furthermore, with a separate intelligence appropriations subcommittee, it would be difficult to shift intelligence funds to defense activities. This option would probably encounter opposition in Congress because it would require changes to the appropriations committee structure.", "Proposals for separating intelligence appropriations from defense appropriations or even initiatives to provide procedures for identifying intelligence programs have encountered significant congressional resistance in the past. In particular, language in the FY2012 defense appropriations bill, H.R. 2219 , passed by the House in July 2011, appeared to prohibit efforts to separate the NIP from DOD funding. Section 8116 of H.R. 2219 provides that:\nNone of the funds appropriated in this or any other Act may be used to plan, prepare for, or otherwise take any action to undertake or implement the separation of the National Intelligence Program budget from the Department of Defense budget.\nA similar provision was not included in the version of the FY2012 defense appropriations bill that was reported in the Senate on September 15, 2011. However, this provision survived the conference committee and was included in H.R. 3671 , the Consolidated Appropriations Act, 2012, which became law in January 2012 ( P.L. 112-74 ). The same language was included in H.R. 933 , the Consolidated and Further Continuing Appropriations Act, 2013, which became law in March 2013 ( P.L. 113-6 ). The House version of the FY2014 National Defense Authorization Act ( H.R. 1960 ) went further. The act precluded the use of DOD funds to move NIP out of the DOD budget, to consolidate the NIP budget within DOD, or to establish a new appropriations account for the NIP. The Senate has not yet passed its authorization act.", "Specific proposals to change the intelligence appropriations process have been controversial. There is strong resistance to separate intelligence appropriations bills, and little attention has as yet been given to a separate title for the NIP within defense appropriations legislation. DNI Clapper has apparently dropped plans to separate the NIP from DOD's budget. Moreover, the intelligence oversight structure, which the 9/11 Commission characterized as \"dysfunctional,\" has remained largely unchanged. Efforts to establish new congressional committees with both authorization and appropriations responsibilities appear to have generated little interest. A separate appropriations subcommittee for intelligence was approved by the Senate but never established, nor has the House created an entirely separate subcommittee. Thus, for the moment, Members of Congress have to work with existing intelligence appropriations and oversight mechanisms to help shepherd the intelligence community into a new fiscal era.\nThese issues also raise broader questions about the extent and sufficiency of DNI authorities, a topic of much debate in the years immediately following intelligence reform, especially as it related to the personnel and funding of the Department of Defense elements of the intelligence community. Regarding the proposal to move the intelligence community out of DOD's budget, DNI Clapper stated that it would give \"ODNI a lot more authority and insight and transparency over [the NIP],\" suggesting he currently lacks sufficient authority and insight.\nThere currently appears to be little appetite for a debate about an expansion of DNI authorities, probably in part because of unanswered questions about the current remit and effectiveness of the Office of the DNI. Nonetheless, DNI authorities may be more critical now, when declining budgets force choices between different intelligence platforms and agencies, as opposed to when the DNI faced the relatively easy process of managing a decade of budgetary growth.", "The 9/11 Commission recommendations included a variety of changes intended to strengthen congressional oversight of intelligence and streamline the intelligence budgeting process. Responding to those recommendations about intelligence appropriations, Congress undertook a number of initiatives, but some measures have not been implemented and others have been reversed. None appears to have fundamentally altered the process.\nHouse Initiatives\nBoth the House and Senate responded to the 9/11 Commission's recommendations to set up separate appropriations subcommittees for intelligence. H.Res. 35 of the 110 th Congress established a Select Intelligence Oversight Panel within the House Appropriations Committee. The panel was to consist of not more than 13 Members of whom no more than 8 came from the same political party, including the chairman and ranking Member of the Appropriations Committee, the chairman and ranking Members of the defense appropriations subcommittee, six additional Members of the Appropriations Committee, and three Members of the intelligence committee. The select panel was established to:\nReview and study on a continuing basis budget requests for and execution of intelligence activities; make recommendations to relevant subcommittees of the Committee on Appropriations; and, on an annual basis, prepare a report to the Defense Subcommittee of the Committee on Appropriations containing budgetary and oversight observations and recommendation for use by such subcommittee in preparation of the classified annex to the bill making appropriations for the Department of Defense.\nProponents of H.Res. 35 indicated their determination to support the intent of the recommendations of the 9/11 Commission and pointed to three principal concerns:\nThe first was that the intelligence authorizing committee was routinely ignored by the administration and the intelligence community because they didn't provide the money. In this town, people follow the money.\nSecondly, the Appropriations Committee, frankly, was negligent in its responsibilities for oversight....\nThe third problem that we faced is that there was grossly insufficient staff on the part of the Appropriations Committee to have decent congressional oversight.. . . The other problem was that there was not sufficient emphasis on intelligence matters by the Defense Appropriations Subcommittee because they had a lot of other things to do.\nOpponents argued that the proposal did not significantly change the previously existing structure: \"Rather than consolidating oversight authority into a single committee that has both authorizing and appropriating authority, it just creates a new committee that has neither, doesn't have either of those powers.\"\nIn July 2008, the chairman of the panel, Representative Rush Holt, described the panel's recommendations to the Defense Appropriations Subcommittee, claiming that \"in the course of a year and [a] half since the creation of this Panel we have directly influenced the intelligence fund for five bills. Three of these bills were supplemental appropriations and this is the second annual appropriations bill that we have acted upon.\" He indicated that the panel forwarded recommendations higher than the previous year's levels but lower than the Administration's request. The panel's recommendations sought, he maintained, to require the ODNI to better manage the budget and enhance the role of Congress in reviewing the budget request and overseeing the DNI's performance. Rush argued: \"One of the problems of past Congressional oversight has been that the Intelligence Community was forced to cut or add programs based on the changing whims of Congress. The creation of this Panel and stronger budgetary oversight over intelligence programs will hopefully provide stability for our nation's intelligence professionals.\" Representative Holt also noted that the panel recommended changes to space programs and encouraged a robust investment in foreign language training.\nIn January 2011, the 112 th Congress eliminated the Select Intelligence Oversight Panel in H.Res. 5 . In March 2011, the chairman of the House Permanent Select Committee on Intelligence, Representative Mike Rogers, announced a plan to permit three members of the Appropriations Committee to participate in House Permanent Select Committee on Intelligence hearings and briefings. The goal of the initiative, according to Representative Rogers, was to \"knit together the Intelligence Committee with the Appropriators and ... allow key appropriators important insights into the intelligence committee which they fund.\" The proposal did not, however, change the responsibilities of the two committees.\nSenate Initiatives\nThe Senate also recognized the need to respond to the 9/11 Commission's recommendations. In January 2004, the Senate adopted S.Res. 445 to improve the effectiveness of the Senate Select Committee on Intelligence and for other purposes. Section 402 of the resolution, which passed by a vote of 79-6-15, established a Subcommittee on Intelligence within the Senate Appropriations Committee \"as soon as possible after the convening of the 109 th Congress.\" S.Res. 445 did not, however, actually constitute a change to the Senate Rules, and the 109 th Congress reshuffled appropriations subcommittees and jurisdictions without creating a subcommittee on intelligence.\nIn considering intelligence authorization in 2009, however, the Senate returned to the issue. The Intelligence Committee reported its version of FY2010 authorization legislation, S. 1494 , which included a provision (Section 341) to express the sense of the Senate that a Subcommittee on Intelligence should be established within the Committee on Appropriations with the responsibility for approving an annual appropriations bill for the National Intelligence Program that would be considered by the full Appropriations Committee \"without intervening review by any other subcommittee.\" The intelligence subcommittee would, however, automatically include the chairman and ranking Member of the Subcommittee on Defense. This provision was the subject of conversations between the chair of the Intelligence Committee and the ranking Member of the Appropriations Committee, and Section 341 was dropped from the bill before it passed the Senate by unanimous consent on September 16, 2009. (The provision was not included in the final version of the FY2010 Intelligence Authorization Act, P.L. 111-259 , that was eventually enacted in October 2010.)\nDuring consideration of S.Res. 445 and on other occasions, it was argued that it would be difficult to create a subcommittee with a classified budget. The actions taken by the Senate reflect the fact that classification has always been a key consideration in the congressional approach to intelligence appropriations. There has been little public discussion of the extent to which other factors relating to subcommittees' jurisdiction may have been important." ], "depth": [ 0, 1, 1, 2, 2, 2, 2, 3, 3, 2, 1, 2, 1, 2, 2, 2, 2, 1, 2 ], "alignment": [ "h0_title h2_title h1_title h3_title", "h0_full h1_full", "h0_title h2_full h1_title", "h0_full", "", "h0_full h1_full", "h1_full", "", "", "", "h3_full h2_full", "", "h3_full h2_full", "h2_full", "", "", "", "h3_title", "h3_full" ] }
{ "question": [ "How significant are intelligence appropriations with regards to the federal budget?", "How has intelligence spending changed since 2001?", "What recent development may spark further debate about intelligence spending?", "What will Congress do with regards to intelligence programs?", "How can Members determine which intelligence programs are effective and affordable?", "What will be the effect of fiscal pressures today?", "How are these choices different from choices made during the past decade?", "What was the justification for cutting the budget of the intelligence committee in the 1990s?", "To what extent did reforms post 2001 address this issue sufficiently?", "How is intelligence spending spread?", "What organization is responsible for most of the funding for the NIP?", "What are some other sources of funding for DOD members?", "From what does the remaining 10% of NIP funding come?", "What is the problem with the appropriations process for intelligence activities?", "What can be done to separate the NIP from the Department of Defense budget?", "What was the issue with the proposal from the 9/11 Commission?", "What has been the response to other proposals to separate intelligence appropriations from defense appropriations?" ], "summary": [ "It is now publicly acknowledged that intelligence appropriations are a significant component of the federal budget, over $78 billion in FY2012 for both the national and military intelligence programs.", "Limited publicly available data suggest intelligence spending, measured in constant 2014 dollars, has roughly doubled since the September 11, 2001, terrorist attacks and, before declines over the last three years, was almost double spending at its peak at the end of the Cold War.", "The recent disclosure by the Washington Post of details from the Administration's FY2013 National Intelligence Program (NIP) budget request may spark further debate about intelligence spending.", "It is likely that Members of Congress will more closely examine intelligence programs to ensure they are both effective and affordable.", "Perhaps the most important questions for Members are how and to what extent intelligence spending, after a decade of sharp growth, should fall in comparison to declines in other defense spending.", "Fiscal pressures today will require intelligence officials to more clearly establish priorities and to make difficult choices between different intelligence collection platforms and agencies.", "Such choices may not have been required during the past decade, during which additional funding could be found to address new threats and to fix organizational weaknesses.", "In the 1990s, during a previous round of budget cuts and prior to the establishment of the Director of National Intelligence (DNI), it was argued that the intelligence community lacked a rigorous system to establish priorities and to tailor the intelligence budgets to meet those priorities.", "It remains unclear whether intelligence reforms after September 11, 2001, sufficiently addressed this issue.", "Intelligence spending is spread across the 17 organizations comprising the intelligence community.", "Over 90% of NIP funding, which focuses on strategic needs of decision makers and is notionally under DNI control, falls within the Department of Defense (DOD) budget.", "DOD members of the intelligence community also receive funding for tactical intelligence from the Military Intelligence Program (MIP), which is under the authority of the Secretary of Defense but which may fund intelligence collection platforms that could be used for both tactical and strategic purposes.", "The remaining portions of the NIP fall within several other Cabinet departments and two independent agencies. These overlaps complicate both budget formulation and the congressional appropriation process.", "The appropriations process for intelligence activities is complex and not widely understood.", "A number of changes have been proposed that would streamline the process or disentangle the NIP from the Department of Defense budget.", "Some, such as the proposal by a 9/11 Commission to combine authorization and appropriation responsibilities in a single committee, would be inconsistent with congressional practices during the past century.", "Other proposals to separate intelligence appropriations from defense appropriations, or to establish a separate intelligence title within defense appropriations acts, are less radical, but have met with opposition." ], "parent_pair_index": [ -1, -1, -1, -1, 3, -1, 0, -1, 2, -1, -1, 1, -1, -1, -1, 1, -1 ], "summary_paragraph_index": [ 0, 0, 0, 0, 0, 1, 1, 1, 1, 2, 2, 2, 2, 3, 3, 3, 3 ] }
GAO_GAO-19-297
{ "title": [ "Background", "Student Visa and School Certification Process", "Fraud Risk-Management Leading Practices and Requirements", "ICE Has Strengthened Fraud Risk Management for SEVP but Has Not Fully Developed a Fraud Risk Profile or Employed Certain Data Tools That Can Help Guide Its Efforts", "ICE Has Taken Steps to Enhance Fraud Risk Management", "ICE Does Not Have Some Components of a Fraud Risk Profile Needed to Fully Assess and Manage Fraud Risks", "ICE Is Exploring the Use of Data Analytics to Aid Fraud Detection in SEVP", "ICE Has Processes for School Certification and Ongoing Compliance Monitoring, but Long- Standing Delays in Recertifying Schools Pose Fraud Risks", "ICE Assesses Schools’ Initial and Continued Eligibility to Enroll Foreign Students through the Certification and Recertification Processes and Ongoing Compliance Monitoring", "ICE Followed Its Procedures during Three GAO Covert Tests of ICE’s School Certification Controls", "Long-Standing Delays in Recertifying Schools Create Additional Fraud Risks in SEVP", "ICE Does Not Assess Residual Risk Posed by Schools in Its Recertification Queue", "ICE Has Implemented Controls That Mitigate Fraud Risks Related to the Eligibility, Suitability, and Training of DSOs, but Weaknesses Exist", "ICE Does Not Routinely Verify DSO-Submitted Eligibility Information in Support of Their Immigration or Citizenship Status", "ICE Plans for More- Comprehensive Vetting of Prospective DSOs’ Suitability for the Position Remain Incomplete", "ICE Has Mechanisms to Monitor and Support DSOs but Does Not Have Mandatory Training for Them", "Most DSOs Do Not Receive Fraud Training", "Conclusions", "Recommendations for Executive Action", "Agency Comments and Our Evaluation", "Appendix I: GAO’s 2012 Recommendations on the Student and Exchange Visitor Program, and the Agency’s Response", "Appendix II: Objectives, Scope, and Methodology", "Appendix III: Key Elements of the Fraud Risk-Assessment Process", "Appendix IV: Withdrawal or Denial of Certification or Recertification", "Appendix V: Comments from the Department of Homeland Security", "Appendix VI: GAO Contacts and Staff Acknowledgments", "GAO Contacts", "Staff Acknowledgments" ], "paragraphs": [ "", "Foreign students interested in studying in the United States must first be admitted to an SEVP-certified school or university before applying for a nonimmigrant visa at a U.S. embassy or consulate overseas to authorize travel to the United States. A visa holder must present himself or herself for inspection at a U.S. port of entry by an officer with DHS’s U.S. Customs and Border Protection to determine admissibility. Nonimmigrants, including foreign students, are permitted to enter the United States for an authorized period of stay.\nSchools seeking to enroll foreign students on F and M visas must pay an application fee and petition for SEVP certification by submitting an electronic certification petition and supporting documentation to ICE through SEVIS. Among other things, SEVIS assists ICE in tracking and providing oversight of foreign students—while they are approved to study in SEVP-certified U.S. educational institutions—and their accompanying dependents. Figure 1 outlines the steps required for schools seeking to obtain and maintain SEVP certification and the process for foreign nationals to pursue a course of study in the United States.\nMore specifically, during the initial certification process, a school must provide ICE, specifically SEVP’s School Certification Unit (Certification Unit), with evidence of the school’s legitimacy (or bona fides) and eligibility. Such evidence includes the following: proof of any requisite licensure or approval by an appropriate state- level licensing or approving agency; proof of accreditation by an accrediting agency recognized by the Department of Education, if accreditation is required or otherwise claimed;\nDSO’s attestation statement that he or she is familiar, and intends to comply, with program rules and regulations for admission under, and maintenance and change of, nonimmigrant student status; and confirmation by the school that it is eligible for certification, among other things (willful misstatements in a school certification petition may constitute perjury); and\nDSOs’ proof of U.S. citizenship or lawful permanent residency.\nIn addition, petitioning schools must generally submit a school catalog or written statement including certain information with respect to the qualifications of teaching staff, and attendance and grading policies, among other things. However, the requirement for a school catalog or written statement is not applicable to a public school or school system, a school accredited by a Department of Education–recognized accrediting agency, or a secondary school operated by or as part of such an accredited school. Moreover, an institution of higher education that is not a public educational institution or system, or not accredited by a recognized accrediting body, must provide evidence “in lieu of” meeting those criteria. Such evidence must show either that the school of higher learning confers recognized degrees upon its graduates or its credits have been and are unconditionally accepted by at least three public or accredited institutions of higher education.\nSchools nominate individuals to serve as DSOs, who act as liaisons between foreign students, the DSOs’ employing school, and federal government agencies. DSOs support school compliance with record- keeping, reporting, and other requirements, and provide recommendations to foreign students regarding the maintenance of their immigration status. In addition to entering and maintaining complete information on students in SEVIS in a timely manner, DSOs are responsible for using SEVIS to submit their school’s certification petition and update the information, as necessary. To demonstrate eligibility, DSOs must, among other things, provide to ICE statements certifying their familiarity and intent to comply with the program rules and regulations relating to the requirements for nonimmigrant students’ admission, maintenance of status, and change of status, and requirements for school approval. ICE’s regulations provide that willful misstatements in certification and recertification submissions may constitute perjury.\nOnce ICE has received a complete petition from a school seeking SEVP certification, staff from SEVP’s Field Representative Unit are to conduct a site visit to the school, including each instructional site foreign students will attend, to interview school officials and review the facilities. After receiving all necessary evidence and a site-visit report from the field representatives, ICE staff in the Certification Unit analyze the documentation, determine the school’s eligibility, and certify those schools that they determine meet all of the program’s requirements.\nFurther, DHS is required to conduct a review, every 2 years, of certified schools’ continued eligibility and compliance with the program’s requirements. To be eligible for recertification, an SEVP-certified school must demonstrate at the time of filing that it remains eligible for certification and has complied during its previous period of certification or recertification with record-keeping, retention, reporting, and other program requirements. During the recertification process, the Certification Unit requires schools to submit the same type of evidence that was required for certification, including, among other things, proof of state licensing and accreditation and DSO attestation statements and citizenship documentation. The Certification Unit also evaluates how the school has ensured that its foreign-student records are accurate and in compliance with statutory record-keeping requirements. However, site visits are not required for recertification.\nThe Enhanced Border Security and Visa Entry Reform Act of 2002 states that a material failure of an SEVP-certified school to comply with the record-keeping and reporting requirements to receive foreign students shall result in the suspension for at least 1 year, or termination, of the school’s approval to receive such students. SEVP’s Analysis and Operations Center (Compliance Unit) conducts ongoing monitoring of SEVP-certified schools for compliance with these regulatory record- keeping and reporting requirements, as well as schools’ continued eligibility for certification. Under federal regulation, SEVP can deny an SEVP-certified school’s recertification petition or, subsequent to out-of- cycle review, withdraw certification if the school or its programs are no longer eligible for certification. Denial of recertification or withdrawal on notice as a result of out-of-cycle review may be for any valid and substantive reason, including failure to comply with record-keeping and reporting requirements, willful issuance by a DSO of a false statement, or not operating as a bona fide institution of learning, among other bases.", "According to federal standards and guidance, executive-branch agency managers are responsible for managing fraud risks and implementing practices for combating those risks. Federal internal control standards call for agency management officials to assess the internal and external risks their entities face as they seek to achieve their objectives. The standards state that, as part of this overall assessment, management should consider the potential for fraud when identifying, analyzing, and responding to risks. Risk management is a formal and disciplined practice for addressing risk and reducing it to an acceptable level. In July 2015, we issued the Fraud Risk Framework, which provides a comprehensive set of key components and leading practices that serve as a guide for agency managers to use when developing efforts to combat fraud in a strategic, risk-based way. The Fraud Risk Framework describes leading practices in four components: commit, assess, design and implement, and evaluate and adapt, as depicted in figure 2.\nThe Fraud Reduction and Data Analytics Act of 2015, enacted in June 2016, requires the Office of Management and Budget (OMB), in consultation with the Comptroller General of the United States, to establish guidelines for federal agencies to create controls to identify and assess fraud risks and design and implement antifraud control activities. The act further requires OMB to incorporate the leading practices from the Fraud Risk Framework in the guidelines. In July 2016, OMB published guidance about enterprise risk management and internal controls in federal executive departments and agencies. Among other things, this guidance affirms that managers should adhere to the leading practices identified in the Fraud Risk Framework. Further, the act requires federal agencies to submit to Congress a progress report each year for 3 consecutive years on the implementation of the controls established under OMB guidelines, among other things.", "", "ICE developed a risk-assessment framework and other tools to assist in its efforts to manage fraud risks to SEVP. For example, in 2014, ICE began developing an SEVP Risk Assessment Model and Framework, which provides an overview of how SEVP identifies, assesses, responds to, and reports on identified internal and external risks to the program. Specifically, SEVP’s Risk Assessment Model and Framework—which was updated several times between 2014 and 2017—discusses categories of fraud risks to the program, including fraud associated with schools, DSOs, and students. Moreover, in 2014, ICE developed a Risk Assessment Tool for SEVP that uses data from SEVIS records to identify potential fraud and other noncompliance issues among certified schools. The tool prioritizes different risk indicators—such as the proportion of the school that consists of foreign students—and ranks schools by risk level. SEVP officials stated that schools identified as high risk receive additional administrative review by the Compliance Unit. According to SEVP officials and documentation we reviewed, ICE has continued to update and refine the tool since 2014 to improve its effectiveness in helping to identify program risks, including fraud risks.\nThrough these and its oversight efforts, ICE has identified various fraud risks in SEVP; such risks may take various forms, including immigration benefit fraud, which involves the willful or knowing misrepresentation of material facts for the purpose of obtaining an immigration benefit, such as a nonimmigrant student status, without lawful entitlement. According to ICE documentation we reviewed and officials we spoke to, the fraud risks to the program generally fall into four broad categories: schools, students, DSOs, and third-party brokers, who are individuals engaged in the fee- or commission-based recruitment of foreign students, among other activities. Figure 3 illustrates the types of fraud that may occur in these four categories during different stages of a certified school’s involvement in the program, as we identified in ICE documentation and through our interviews with ICE officials.\nFor specific examples of fraud risks that ICE has identified in SEVP, see figure 4.\nICE has also taken steps since 2012 to strengthen its fraud risk- management efforts in response to our prior recommendations. For example, in our 2012 report on SEVP risks, we found that, among other things, ICE did not have a process to assess risks in SEVP and did not consistently implement existing internal controls for determining school eligibility. To address this and other findings, we made eight recommendations to enhance ICE’s ability to assess program risks, prevent and detect school certification fraud, and improve the controls over SEVP. ICE took action that addressed these eight recommendations and has developed various tools designed to strengthen its fraud risk- management efforts (see app. I).\nFurther, ICE has taken steps to improve collaboration and coordination to enhance fraud risk management between SEVP and CTCEU, the unit within ICE responsible for managing criminal investigations. More specifically, ICE has embedded agents within SEVP’s Compliance Unit, and these agents help provide law-enforcement expertise within the unit and act as liaisons with ICE agents located in the field to provide information and support ongoing criminal investigations. According to a senior ICE official with CTCEU, the embedded agents have helped streamline processes and provide expertise to aid administrative and investigative efforts. Figure 5 shows the process for coordination between CTCEU and SEVP.\nFurther, ICE officials with CTCEU stated they have acquired specialized software tools to manage fraud tips and to conduct open-source and related research on certified schools suspected of acting fraudulently. To help identify and prioritize leads, ICE officials stated that they use a software tool to efficiently help review and prioritize tips received through ICE’s tip line, which gathers tips from the general public on suspicious or potential criminal activity. To aid investigations of schools, ICE explored the use of another specialized software to aid the review of online social media associated with schools or individuals, among other things.\nIn addition, changes to SEVIS have aided ICE’s efforts to manage fraud risks in the program. In 2008, ICE initiated an effort to modernize SEVIS to address identified system vulnerabilities, such as the inability to capture detailed school data that would allow the detection of patterns and anomalies that could indicate fraud. Although SEVIS modernization is not yet complete, changes made in the system have helped to improve system usability and the ability to identify suspected fraud in the program, according to program officials. For example, system edit checks implemented in 2015 and 2016 to verify user-entered names and addresses have enhanced data quality by helping to identify and prevent likely data-entry errors. SEVP officials also stated that improved data quality can help make it easier to distinguish potential fraud from unintentional data-entry errors. ICE officials we spoke to and related documentation we reviewed stated that SEVIS modernization efforts may include additional functionality, such as the ability to create person-centric records for each student.", "Although ICE has developed a Risk Assessment Model and Framework and taken other action to improve fraud risk management in SEVP, ICE has not fully developed and implemented a “fraud risk profile” that would help guide its efforts. According to our Fraud Risk Framework, an effective antifraud entity tailors the approach for carrying out fraud risk assessments to its programs. This approach allows an agency to, among other things, develop a fraud risk profile that identifies the inherent fraud risks affecting the program, assesses the likelihood and effect of each type of fraud risk that the determines the agency’s tolerance for certain types or levels of fraud risks in the program, examines the suitability of existing controls for each fraud risk, and documents the program’s fraud risk profile.\nEffective managers of fraud risks use this profile to help decide how to allocate resources to respond to fraud risks. Further, Federal Internal Control Standards require managers to respond to identified risks. Appendix III provides additional information on the key elements in the fraud risk-assessment process including the development of a fraud risk profile.\nOur assessment of SEVP’s Risk Assessment Model and Framework found that while it describes the program’s approach for managing fraud risks, it does not include all of the key elements of a fraud risk profile:\nFirst, SEVP’s Risk Assessment Model and Framework identifies three broad categories of inherent fraud risks that affect the program (those posed by schools, DSOs, and students), but does not include all risks that the program or its stakeholders have identified, such as the risk of third-party brokers. As noted previously, ICE agents and program officials identified brokers as a risk to the program because brokers have helped facilitate school and student fraud and misused or stolen student funds in the past. However, according to ICE officials with SEVP, SEVP’s Risk Assessment Model and Framework was not designed to define all of the risks posed to SEVP.\nSecond, while SEVP’s Risk Assessment Model and Framework assesses the potential effect of its risk posed by students, schools, and DSOs, it does not discuss the likelihood of the risk’s occurrence. For example, the Risk Assessment Model and Framework contains a narrative outlining the potential negative consequences of each of the three broad risk categories but does not address the likelihood of those risks occurring. According to SEVP officials, SEVP’s Risk Register helps identify and determine the likelihood of identified program risks. However, our review of the Risk Register found that it is used to track program-wide risks and does not identify or discuss specific fraud risks. Further, these officials stated that many of the components in a fraud risk profile are included in SEVP’s Risk Assessment Tool, but this tool was developed to prioritize the review of SEVP-certified schools that have potential compliance issues and was not designed to address all SEVP fraud risks such as the risks posed by students or brokers. Using information on the likelihood of risk occurrence can help managers decide how to allocate resources. For example, managers can use this information to make decisions to allocate resources to addressing fraud risks that are most likely to occur or have relatively high impact.\nThird, SEVP’s Risk Assessment Model and Framework does not assess the agency’s tolerance for all fraud risks to the program. For example, while SEVP officials stated that students represent a significant risk to the program, they have not fully assessed the extent of risks associated with student fraud or the agencies’ tolerance for it. In October 2017, the SEVP Director stated that SEVP was just beginning to get a better understanding of student risks, but had not done an assessment of their likelihood and tolerance. However, SEVP officials acknowledged the importance of fully assessing student risks because of the challenges that can be associated with detecting, preventing, and responding to student fraud.\nFourth, SEVP’s Risk Assessment Model and Framework does not examine the suitability of existing fraud controls or prioritize all residual risks that remain after inherent risks have been mitigated by existing control activities. We found that, while the Risk Assessment Model and Framework discusses different internal controls and tools used to prioritize and address risks in the school certification and recertification process, such as the Risk Assessment Tool, it does not explicitly identify any internal controls or tools used to prioritize or address student risks. In addition, the Risk Assessment Model and Framework does not identify and prioritize residual fraud risks that ICE has flagged as being vulnerabilities to the program. According to ICE agents in four field offices and officials in the Compliance Unit, limitations to SEVP’s ability to prevent some schools that present fraud risks from obtaining certification or continuing to participate in the program after fraud risks have been identified represent residual risks to the program. For example, officials in the Compliance Unit stated that certified schools that have been accredited through an accrediting body recognized by the Department of Education generally represent a lower fraud risk, but ICE has still experienced noncompliance and cases of fraud with these schools. At one point several fraud cases were tied to the same accrediting body. In another example of a potential residual risk to the program, ICE field agents stated that potentially fraudulent schools may continue to operate during criminal investigations, which can take several years to investigate and prosecute. During the investigation, schools may remain in operation and continue to enroll foreign students, provided their certification is not withdrawn through other administrative actions. As one example, ICE’s investigation into Prodee University—a case that involved hundreds of students—began in 2011, but warrants were not issued until 2015. The school continued to operate and accept foreign students during the 4-year investigation, creating residual risk to the program during these years.\nAccording to SEVP’s Director, the program has not developed a fraud risk profile that fully addresses all identified risks because the program has not yet developed the maturity needed to manage its risks in this way, but she noted that doing so could be a good next step in the process. Without a fraud risk profile consistent with leading practices—which identifies all fraud risks, discusses the likelihood of those risks, assesses the agency’s risk tolerance, and determines the suitability of related controls—ICE cannot ensure it has taken all necessary actions to address SEVP risks.", "ICE is exploring the use of better data analytics to help detect fraud in SEVP but has not yet employed techniques, like network analysis, to help detect and prevent fraud prior to certification. ICE officials with SEVP stated that they are exploring the use of additional data-analytics tools to help mitigate fraud in the program, including tools that can perform network analysis. However, these efforts are in their early stages and have been limited to conversations between program staff. While previously noted efforts to improve SEVIS may also include additional data analytics to mitigate fraud, these efforts have remained underway since 2008. Agency officials told us they recognize that better analytic tools can help them detect and prevent fraud in the certification process and are seeking additional resources to support this effort. According to agency documentation, SEVP awarded a contract in September 2018 to help establish a data-governance framework within SEVP. Among other things, the contract will examine the tools, skill sets, and number of people needed to support the data-related needs for SEVP, to include operational data and analytics. According to agency officials, SEVP plans to award a contract in the first quarter of fiscal year 2019 to provide better data-analytics support.\nData-analytics approaches, such as network analysis, have the potential to enable ICE to identify high-risk schools prior to initial certification, thus allowing SEVP to apply increased oversight, as needed, during the adjudication process. Network analysis involves a quantitative approach for analyzing, summarizing, and graphically representing complex patterns of relationships among individuals or organizations. Such a technique is useful for identifying associations, such as between schools with current or past administrative and criminal concerns and those schools seeking certification. Information about the connections and relationships among schools—developed through network analysis—may then provide leads in reviews and investigations in the certification and recertification processes, which are important controls for preventing fraudulent schools from entering and remaining in the SEVP program. ICE field agents with two of five field offices we visited stated that it can be challenging to identify fraudulent schools as compared to legitimate ones during the initial certification of schools. For example, agents familiar with one investigation stated that after ICE began investigating a school for suspected fraud, the owner tried to establish another school, which was only identified because of a lead provided through interviews conducted during the investigation. Further, because tools such as the Risk Assessment Tool use data analytics, but rely on information collected from current SEVP-certified schools, it can be difficult to identify schools with fraud concerns before they are certified to participate in the program.\nUsing a network approach in our analysis of 2,439 SEVP-certified schools, we identified 11 connections that could raise fraud concerns. Specifically, we conducted a network analysis utilizing both public and proprietary information associated with certified schools as of September 2017. We obtained basic information on these schools from ICE, such as school names and addresses. We also used public records associated with these schools related to businesses and people, such as past and current executives. Using this information and freely available public software, we identified relationships among certified schools that ICE had previously identified as having potential compliance or fraud concerns and other certified schools that did not have such concerns. For example, in 11 connections, we identified instances in which an executive appeared to have been employed by a school under active criminal investigation or administrative review who was either previously or later employed by a different school not under investigation or review. Moreover, for 2 of the 11 connections, we found additional derogatory information associated with executives tied to SEVP-certified schools that could raise fraud concerns. For instance, one executive had employment terminated from a previous school and was under investigation for misappropriating school funds for personal use. While these connections do not prove fraud or noncompliance, they do provide information about potential risks, which can inform the prioritization of administrative and investigative resources during certification.\nICE currently has limited ability to identify associations among schools with potential fraud concerns before they are certified to participate in the program. According to our Fraud Risk Framework, federal managers should design and implement specific control activities to prevent and detect fraud. These control activities can include data analytics, among other things, and should emphasize fraud prevention to the extent possible. A network approach provides the capability to better prevent and detect fraud by identifying potentially fraudulent schools before they are certified by SEVP and by detecting associations that pose a fraud risk among those already certified.", "ICE has processes in place for school certification, recertification, and ongoing compliance monitoring, and has taken steps to improve school certification controls since our 2012 report. We also found that ICE followed its established procedures and specifically identified GAO’s fraudulent petitions or otherwise took appropriate steps to prevent the petitions from moving forward in the process during our three independent covert tests of SEVP internal controls over the school certification process. However, the agency continues to face long- standing delays in conducting recertification reviews every 2 years to ensure that SEVP-certified schools continue to meet program requirements—one of its important fraud risk controls. As a result of these delays, ICE has a queue of recertification petitions awaiting adjudication, which creates additional fraud risks to the program if higher-risk schools continue to operate pending recertification. However, the agency has not assessed the magnitude of these risks.", "ICE’s certification and recertification processes are designed to assess schools’ initial and continued eligibility to enroll foreign students and, as previously discussed, once a school is certified, ICE is to monitor its continued program eligibility. SEVP-certified schools are to undergo recertification reviews every 2 years (see fig. 6).\nInitial certification: As previously discussed, to be eligible for SEVP certification, a petitioning school must establish at the time of filing that it is a bona fide institution of learning or other recognized place of study that possesses the necessary facilities, personnel, and finances to conduct, and is in fact engaged in, instruction in recognized courses. SEVP officials stated that they address potential fraud risks during the initial certification process by verifying the schools’ information and documentation through web-based research and a site visit to interview the school’s DSO and observe the school’s facilities. According to SEVP officials and guidance, as of October 2016, field representatives are responsible for conducting and documenting site visits for certifications. When conducting the visits, field representatives are to gather evidence on school eligibility for certification, review the facilities, and interview personnel nominated on the petition to become DSOs. They may also report back any anomalies or areas of concerns they may notice for further vetting by the compliance unit. SEVP received approximately 2,000 certification petitions from fiscal years 2013 through 2017. See figure 7 for details on the number of approved and denied petitions during this period.\nICE has implemented several controls to address fraud risks in the school certification process since our 2012 report on SEVP program risks, but long-standing delays in the recertification process create additional fraud risks. In particular, ICE strengthened its processes for verifying and monitoring schools’ accreditation and states’ licensing statuses. For example, since December 2012, SEVP adjudicators are to verify all “in lieu of” letters during the school’s initial-certification and recertification processes. In May 2015, SEVP developed a continuous process for verifying schools’ state licensing and accreditation status and updated its Adjudicator’s Manual with specific actions adjudicators must take to consistently verify evidence provided by schools, including “in lieu of” letters and states’ licensing documentation. In addition, SEVP took steps to ensure that all flight schools had the appropriate Federal Aviation Administration certification.\nRecertification: To be eligible for recertification, an SEVP-certified school must demonstrate at the time of filing that it remains eligible for certification and has complied during its previous period of certification or recertification with record-keeping, retention, reporting, and other program requirements. SEVP received approximately 14,000 recertification petitions from fiscal years 2013 through 2017. See figure 8 for details on the number of approved and denied petitions during this period.\nThe recertification process is an important fraud risk control, according to ICE officials, since they may determine that some certified schools are potentially noncompliant during the recertification process. For example, SEVP denied 105 recertification petitions from fiscal year 2013 through fiscal year 2017. On the basis of our review of recertification denial data, the majority of denials were due to the school’s abandoning its petition for recertification by not responding to SEVP’s request for further information. Appendix IV provides additional details on the withdrawal and denial of certification and recertification petitions as outlined in federal statute and regulation. For the remaining schools, SEVP issued a formal recertification denial notice for a variety of reasons, including those that highlight fraud risks in the program, such as improper issuance of Forms I-20, including the issuance of forms to foreign students who will not be enrolled in or carry a full course of study;\nDSO conduct did not comply with program regulations; willful issuance by a DSO of a false statement; failure to timely report school or course of study information, including material changes; and failure to maintain the accreditation or licensing necessary to qualify graduates as represented in the school’s Form I-17.\nOngoing compliance monitoring: The Enhanced Border Security and Visa Entry Reform Act of 2002 provides that SEVP-certified schools are to comply with record-keeping and reporting requirements to enroll nonimmigrant students. Between schools’ initial certifications and their subsequent recertification reviews, ICE uses a variety of mechanisms to monitor ongoing compliance with program requirements and mitigate fraud risks. For example:\nSEVP deployed its first group of field representatives in 2014. As of June 2018, ICE had 57 field representatives across 60 different geographic areas of responsibility nationwide. According to SEVP guidance, field representatives are to act as direct liaisons between SEVP and certified schools and are to try to meet with all certified schools in their territory at least once per year if the school has foreign students enrolled, or once every 2 years if no foreign students are enrolled. According to SEVP officials, the field representatives are to have a customer-service focus and assist DSOs in adhering to program requirements and, as a result, do not have law-enforcement or investigative responsibilities. However, if field representatives learn of potential fraud while visiting a school, they are to document and send this information to SEVP headquarters. All of the eight field representatives we interviewed reported that they primarily have a customer-service role but have also identified and reported suspected fraud to SEVP headquarters. For instance, one representative stated that she reported a language school because its stated level of student enrollment did not appear to correspond with the number of students in class during her visits to the school.\nSEVP adjudicators are to verify and adjudicate changes that occur at an SEVP-certified school that require an update to the school’s Form I-17 petition information in SEVIS. These changes include the school’s name, location, or new areas of study offered, among others. According to Certification Unit officials, adjudicators review information from both SEVP’s risk tools and field-representative school-visit reports when adjudicating updates to identify any indications of noncompliance or fraud that need to be further reviewed and researched by the Compliance Unit.\nCompliance Unit staff are to vet tips provided by external parties (such as DSOs from other schools) or internal stakeholders (such as field representatives or Certification Unit adjudicators) to determine whether they indicate the need to open an administrative or criminal investigation on the school. Compliance Unit staff may also identify schools for additional monitoring. The Compliance Unit is also responsible for extracting and analyzing data from SEVIS on an ongoing basis, including data related to certified schools and foreign students suspected of noncompliance and fraud, among other things. According to ICE officials, staff are responsible for researching schools with high-risk scores provided by the Risk Assessment Tool.\nICE may conduct an out-of-cycle review of a school at any time to help determine whether the school is complying with its reporting and record-keeping requirements and to ensure the school’s continued eligibility for SEVP certification. ICE may initiate an out-of-cycle review as a result of receiving information regarding potential noncompliance or fraud. The out-of-cycle review process may include a review of student records, a request for the submission of documentation to verify accreditation, a request for proof of state licensure, or a request for any other required evidence that establishes a school’s continued eligibility for SEVP certification. ICE officials stated that they may, pending the result of this review, issue a remedial action plan to the school describing the areas of noncompliance, such as correcting student records, that the school is required to address to maintain its program eligibility. If, upon completion of an out-of-cycle review, SEVP determines that a certified school has failed to sustain eligibility or has failed to comply with the record-keeping, retention, reporting, and other requirements, SEVP will institute withdrawal proceedings by serving the school a notice of intent to withdraw SEVP certification. At the conclusion of withdrawal proceedings, a school found to be ineligible for continued SEVP certification as a result of an out-of-cycle review will receive a notice of withdrawal (see app. IV for additional information on the withdrawal process).", "ICE followed established procedures during our three covert tests of the internal controls over the SEVP school certification process by either successfully identifying GAO’s fraudulent petitions or by taking appropriate steps to prevent the petitions from moving forward in the process. Therefore, we did not identify any significant deficiencies during our testing of these controls. We submitted certification petitions and conducted other covert investigative work for three fictitious schools, all of which have differing certification requirements. Using these schools, GAO agents applied for SEVP certification.\nFor one of the fictitious schools, we tested SEVP certification controls that require schools to submit complete documentation by submitting an application for the school that was missing several of the required documents. Consistent with its procedures, ICE flagged our petition as incomplete and sent us a notification stating that our petition was canceled because we failed to submit all supporting evidence as outlined in the regulations.\nFor our second school, we tested SEVP controls requiring schools to schedule and complete a site visit conducted by an SEVP field representative, by submitting a completed petition, but avoiding the site visit and requesting that our paperwork move forward without it. SEVP’s field representative subsequently notified us that our petition would not move forward until a site visit was performed.\nFor our third fictitious school, we submitted an application, and participated in a site visit with SEVP officials. We tested SEVP controls related to verifying application documentation, and whether SEVP site- visit officials followed established procedures for the site visit. The field representative toured the facilities and interviewed GAO agents posing as school officials. During its review of our petition, ICE took steps to verify our school’s information and discovered that documentation we submitted was fictitious. As a result, SEVP officials subsequently referred our school to ICE agents for further investigation, consistent with ICE policies and procedures. Upon learning that ICE followed its documented internal control processes, we concluded our covert testing.", "ICE faces long-standing challenges in conducting school recertification on a 2-year basis consistent with statute and regulation, which may allow potentially fraudulent schools to operate for a longer period without detection. The Enhanced Border Security and Visa Entry Reform Act of 2002 states that DHS must conduct compliance reviews every 2 years, during which ICE reviews a school’s records to verify that it continues to comply with program-eligibility requirements. ICE began the first recertification cycle in May 2010—8 years after the enactment of the statutory requirement for periodic review of SEVP-certified schools. As of March 2012—nearly 10 years after statutory enactment—ICE reported that it had recertified approximately 19 percent of certified schools. In October 2016, ICE reported that it had completed its first round of recertification (in other words, all existing certified schools had been recertified at least one time) and had used recertification to address a number of issues, including gathering missing data for some school records.\nICE has continued to recertify schools. However, Certification Unit officials told us that, while recertification should be conducted every 2 years, ICE has been unable to meet a 2-year time frame for all certified schools. ICE has been extending schools’ certification expiration dates since officials began recertifying schools in 2010, according to Certification Unit officials, to provide additional time for adjudicating recertification petitions. According to ICE regulations, schools should be notified 180 days before their certification expiration date and must file a completed petition for recertification by such date, which is 2 years from the date of their previous SEVP certification or the recertification expiration date. However, as described in figure 9, SEVP has been extending schools’ certification expiration dates by 180 days beyond the 2-year mark as defined in ICE’s regulation. Under this process, schools must submit their complete petition and supporting documentation to SEVP within 180 days after the 2-year mark.\nExtending certification expiration dates increases the period between each recertification review, resulting in a decrease in the number of recertification reviews conducted in a given time frame, as shown in the hypothetical example of two schools in figure 10.\nFor instance, if SEVP initially certified a school in January 2016, by providing an extension SEVP is setting the school’s certification expiration date to July 2018—2 years and 180 days after the initial certification—as opposed to 2 years after the initial certification, which would be consistent with ICE regulations. After receiving the school’s documentation, Certification Unit staff need time to review and adjudicate the petition. If this school submits a complete petition to SEVP in June 2018—1 month before its revised expiration date—SEVP staff may and do take additional time, depending on the facts and circumstances of the specific petition, beyond the revised expiration date to adjudicate the petition. SEVP officials stated that, if necessary, they can further extend the certification expiration date to accommodate the time needed for their review. For instance, SEVP may not adjudicate this school’s petition until December 2018. Once SEVP completes its adjudication in December 2018, the school’s new certification expiration date would be June 2021 (2 years and 180 days after December 2018). Thus, rather than potentially being able to complete two rounds of recertification during this 5-year period consistent with ICE regulation, SEVP would recertify the school only once.\nAs we reported in 2012, according to SEVP officials, ICE delayed the recertification process until after SEVIS was deployed in 2003 and the program fee was increased in 2008 to support hiring additional staff. Further, with regard to resources, ICE officials stated that they are cross- training adjudicative staff across all of their program areas to help address the recertification workload, and creating regional adjudication teams with assigned territories similar to the field representatives’ territories to allow the adjudicators to work with the same schools throughout the school’s participation in the program. In addition, in February 2018, SEVP’s Director stated that ICE was expecting to hire additional adjudicators for a total of 10. In July 2018, ICE identified the need to increase initial certification fees and add a new recertification fee to, among other things, hire additional adjudicators to address longer recertification processing times. Specifically, ICE stated that, at present staffing levels, SEVP is able to process 1,939, or 44 percent, of the required annual projected 4,400 recertification cases.\nICE’s actions to allocate additional resources to the recertification process are a step in the right direction toward addressing its recertification delays. However, it is unclear whether these actions alone will be adequate to address the delays. As of June 2018, ICE officials told us that there were 3,281 recertification petitions that needed to be adjudicated. As previously discussed, recertification reviews are an important fraud risk control because they are one of ICE’s primary means of reviewing each school’s data and identifying potential school noncompliance and fraud, especially since an out-of-cycle review may not be conducted for each school. As Federal Internal Control Standards state, management should: (1) establish and operate activities to monitor the internal control system and evaluate the results, and (2) identify, analyze, and respond to risks related to achieving the defined objectives. By not requiring schools to submit their petitions within the 180-day period prior to the 2-year expiration date, as required by regulation, ICE has limited assurance it is leveraging the recertification process effectively to identify and respond to potential fraud risks to the program, including those risks associated with allowing a fraudulent school to operate for a longer period. ICE’s plan to increase the number of SEVP adjudicators may help it meet the 2-year recertification requirement, but without monitoring and evaluating the efficacy of these actions, ICE will not have reasonable assurance it can effectively manage the recertification process and associated fraud risks.", "As previously discussed, ICE’s queue of recertification petitions awaiting adjudication creates additional fraud risks to the program if higher-risk schools continue to operate pending recertification. However, ICE has not assessed the magnitude of such risks.\nAs of June 26, 2018, ICE had 3,281 recertification petitions in a queue for review, according to SEVP officials, petitions that ICE adjudicates in the order in which they were filed. As discussed, ICE uses a variety of mechanisms to monitor schools’ ongoing compliance with program requirements and mitigate fraud risks. In addition, ICE assesses and considers schools’ risks during the adjudication process for recertification. Specifically, according to SEVP’s recertification standard operating procedures, case analysts in the Certification Unit are to review the recertification packages once submitted to determine whether they are complete and prepare them for adjudication. Further, SEVP officials stated that the Certification Unit staff use an assessment of the school’s risk to help prioritize further analysis and review efforts. When adjudicating recertification petitions, adjudicators are to confirm that they have assessed the school’s risk and whether any identified risks have previously led to any further action, according to Certification Unit officials. If case analysts determine that compliance issues are present (e.g., the school has closed or the school has made updates to the Form I-17 that are awaiting adjudication), they are to notify their supervisors. For higher-risk schools, Certification Unit officials stated that adjudicators may request more detailed evidence from schools as part of recertification, consistent with their standard operating procedures, than they would for lower-risk schools to help make more efficient use of the resources in this unit.\nThese processes have helped SEVP consider and address potential risks during the recertification process. However, SEVP has not determined risks posed by schools in its recertification queue and, according to Certification Unit officials, does not prioritize the review of schools’ recertification petitions in its queue based on risk. As previously noted, ICE is required to conduct periodic reviews every 2 years to determine SEVP-certified schools’ continued program eligibility and compliance. The statute governing recertification does not, by its terms, preclude ICE from considering a school’s relative risk as part of the compliance review process. However, SEVP’s Director and Certification Unit officials stated that a recertification process that prioritizes reviews based on school risk would not be particularly helpful or add value in addressing school compliance concerns because the officials already have a number of mechanisms they can use, as previously discussed, to address potential noncompliance, including conducting out-of-cycle reviews of high-risk schools.\nAlthough ICE considers schools’ risk-related information during the adjudication process and may identify noncompliant or potentially fraudulent schools through ongoing monitoring activities, ICE has not determined the extent to which there are residual fraud risks posed by schools in the recertification queue that ICE has identified as higher-risk than other schools awaiting recertification. According to GAO’s Fraud Risk Framework, managers should rank residual fraud risks in order of priority, using the likelihood and impact analysis, as well as risk tolerance, to help decide how to allocate resources to respond to residual fraud risks, all of which is documented in a fraud risk profile. As previously discussed, a fraud risk profile (1) identifies the inherent fraud risks affecting the program, (2) assesses the likelihood and effect of each type of fraud risk that it has identified, (3) determines the agency’s tolerance for certain types or levels of fraud risks in the program, and (4) examines the suitability of existing controls for each fraud risk. Given SEVP’s long- standing delays in recertifying schools, without an assessment of residual risks posed by the recertification queue—as part of its fraud risk profile, as previously noted—ICE cannot ensure that it is effectively addressing the risks posed by higher-risk schools awaiting recertification, a situation that does not help further strengthen ICE’s fraud risk-management efforts in SEVP.", "ICE has identified fraud risks related to DSOs and implemented controls to mitigate these risks, but weaknesses exist in four key areas: (1) verification of information provided by DSOs in support of their eligibility, (2) background checks, (3) mandatory compliance training, and (4) fraud- risk training. Prior to approval of schools’ nomination of individuals to serve as DSOs, these nominees must meet eligibility requirements and pass a criminal-background check, but weaknesses exist in both of these controls. In addition, once ICE approves prospective DSOs, it has controls for oversight and training; however, this training is not mandatory and does not address fraud risks.", "ICE has eligibility requirements for school employees seeking to serve as DSOs at SEVP-certified schools, as discussed earlier, but does not routinely verify DSO-submitted eligibility information in support of their immigration or citizenship status. According to ICE regulations, to be eligible to participate as a DSO, an individual must be a regularly employed member of the school administration whose office is located at the school and must meet two primary eligibility criteria. First, a DSO’s compensation may not include commissions for recruitment of foreign students. To verify that requirement, a field representative is to interview a school’s principal DSO during an initial certification site visit, and ask whether any prospective DSOs receive compensation from commissions for recruitment of foreign students. In addition, a field representative is to review the school’s website for recruitment-related activities and evaluate the DSO’s job title and position description, according to ICE officials.\nSecond, DSOs must be U.S. citizens or lawful permanent residents, but the Certification Unit does not routinely verify the evidence provided to meet this eligibility requirement. Specifically, DSOs are to submit documentation during the school’s certification or recertification process— such as a passport, birth certificate, Permanent Resident Card or Alien Registration Receipt Card, or copy of naturalization/citizenship certificate—as evidence of their U.S. citizenship or lawful permanent resident status. The Certification Unit is to review this documentation to verify that the biographic details match the information provided on the school’s Form I-17. According to ICE officials, if the Certification Unit suspects that a prospective DSO’s documentation may not be valid, it will send the information to the Compliance Unit for additional review.\nHowever, neither the Certification Unit nor the Compliance Unit routinely verify the information reported by DSOs in support of their immigration or citizenship status because they do not have access to the type of information needed to independently verify this information for all prospective DSOs, according to ICE officials. Certification Unit officials told us that verifying information on naturalized U.S. citizens and lawful permanent residents would be beneficial. They said that they have previously asked for access to information, such as other DHS databases that contain information on naturalized U.S. citizens or lawful permanent residents, to strengthen their process for determining the eligibility of prospective DSOs. However, they have yet to receive access to this information. In addition, verifying eligibility information for U.S.-born citizens would also be valuable, but is more difficult than for naturalized U.S. citizens or lawful permanent residents, according to ICE officials. This is because ICE does not collect DSOs’ Social Security numbers— key information necessary to verify U.S. citizenship—in part because SEVIS does not have the necessary security features needed to collect and house those data, and adding those features would be costly. In June 2018, ICE management officials stated that they were reviewing databases that may be useful to verify DSOs’ self-reported eligibility information but did not provide any additional support or documentation of those plans or a time frame for completing this review.\nAs outlined in our Fraud Risk Framework, as part of an effective antifraud strategy, managers should take steps to verify reported information, particularly self-reported data. Specifically, managers can benefit from conducting data matching to verify key information, including self-reported data and information necessary to determine eligibility, using government or third-party sources to verify data electronically. Until ICE routinely verifies the eligibility information submitted by prospective DSOs in support of their immigration or citizenship status, particularly for naturalized U.S. citizens and lawful permanent residents, ICE will not be able to ensure that it is preventing ineligible individuals, including those who represent a fraud risk, from becoming DSOs and providing them with access to SEVIS to maintain student records.", "ICE has taken some initial steps to strengthen the process for vetting prospective DSOs but has not implemented comprehensive background checks on DSO nominees prior to approving them to carry out the DSOs’ reporting, record-keeping, and other functions. ICE officials told us that they have been working since December 2016 to develop a plan to conduct comprehensive background checks on prospective DSOs to address past concerns about DSO vetting. Specifically, in 2011, ICE expressed concerns that DSOs, who were not required to undergo background checks, were responsible for maintaining updated information of foreign students in SEVIS.\nAccording to ICE officials, they have taken initial steps to address these concerns by implementing criminal-background checks on prospective DSOs. Specifically, in May 2017, ICE started conducting background checks on all school employees nominated to be DSOs at the time of petitioning for initial SEVP certification or whenever a school requests to add a new DSO. For these types of checks, ICE officials within CTCEU are to review the prospective DSO’s biographic information from both the Form I-17 and the proof of U.S. citizenship or immigration status documentation received by the school. After ICE officials in CTCEU complete this check, they are to forward the findings to SEVP for review. If SEVP determines that a prospective DSO is unsuitable for participation in the program, ICE officials in SEVP are to send a notice of rejection to the nominating school. From April 2017 to March 2018, ICE screened approximately 4,750 prospective DSOs and identified 68 individuals with a criminal history. ICE rejected the nomination of 15 of these prospective DSOs, because, for example, they had criminal histories that included instances of identity theft, fraud in obtaining U.S. citizenship, and conspiracy, among other crimes. ICE officials stated that certain crimes will not necessarily disqualify a candidate, such as misdemeanors, traffic- related infractions, or other lesser crimes.\nAs of June 2018, ICE officials told us that they are developing a more- comprehensive background-check process to screen prospective DSOs against additional government data sources. Specifically, ICE officials told us that they are seeking to partner with DHS’s Transportation Security Administration (TSA) to collect biometric information (e.g., fingerprints) on prospective DSOs at TSA’s enrollment provider locations nationwide during the school certification process. ICE officials stated that they intend to provide the biometric information they collect through TSA’s enrollment provider to ICE’s Office of Professional Responsibility (OPR), and OPR officials will review such information to determine DSOs’ suitability. According to agency documentation, ICE’s OPR would vet such information against data sources to screen these individuals for prior criminal histories such as sexual misconduct, terrorist activities, and immigration violations. According to ICE officials, they also intend to use this process to periodically review the suitability of incumbent DSOs.\nWhile ICE officials have told us they intend to expand the screening of prospective DSOs, ICE does not have a documented implementation plan that outlines how the project will be executed. The Project Management Institute’s A Guide to the Project Management Body of Knowledge (PMBOK® Guide) identifies standards related to project-management processes, including the need to have documented implementation plans describing how the project will be executed, monitored, and controlled, as well as requirements and techniques for communication and establishing agreements among stakeholders. In addition, GAO’s Schedule Assessment Guide identifies best practices associated with developing and maintaining a reliable, high-quality schedule. ICE provided us with a draft of its revised background-check policy, talking points on its plans for these checks, and draft requirements it shared with TSA in December 2016. However, these documents do not provide a detailed project- implementation plan to guide ICE’s effort. As of June 2018, ICE and TSA officials have met twice in the last 2 years, and ICE officials do not have any documents or other written details on their planned coordination with TSA. SEVP’s Director acknowledged that SEVP will need to develop a project plan to help guide its coordination with TSA and ICE’s OPR. Without a documented implementation plan for this effort that outlines how the project will be executed, monitored, and controlled, ICE does not have reasonable assurance that it will be able to implement a more- comprehensive DSO background-check process.", "ICE has established mechanisms for monitoring SEVIS usage by approved DSOs and providing support to DSOs to help them ensure their schools comply with SEVP requirements but does not mandate training for DSOs. Once DSOs are approved by SEVP, they are authorized to make changes to student records in SEVIS and to create Forms I-20, which enable students to apply for nonimmigrant student status. To detect noncompliance and fraud that may be committed by DSOs during this process, ICE has established mechanisms to monitor information entered and identify data for computers used by DSOs through SEVIS compliance checks, among other things. For example, according to agency officials, ICE monitors DSO actions in SEVIS to help prevent noncompliance and fraud.\nIn addition to monitoring DSOs’ use of SEVIS, ICE provides support and training to DSOs to help ensure they can effectively update and maintain student records in SEVIS and provide recommendations to students regarding the maintenance of their status, according to our review of ICE documentation and interviews with ICE and school officials. According to program rules, DSOs are responsible for understanding SEVP regulations related to the requirements for foreign students’ admission, maintenance of status, and change of status and requirements for school approval. To assist them, ICE officials and DSOs that we interviewed told us that SEVP uses its field representatives to provide DSOs with a point of contact for questions related to the program. According to SEVP’s internal guidance, field representatives are expected to visit the schools within their areas of responsibility at least once a year to provide in-person guidance and training to DSOs. DSOs at 15 of the 17 schools we visited stated that the field representatives were helpful, including with providing guidance on how to comply with SEVP rules and regulations.\nIn addition, SEVP internal guidance encourages DSOs to take its web- based training course on the responsibilities and obligations for both DSOs and foreign students in SEVIS. However, this course is voluntary. According to ICE officials and field representatives, the extent to which DSOs take the voluntary training varies—some DSOs receive additional training beyond the voluntary SEVP training, but other DSOs do not complete any training. ICE officials noted that the voluntary online training may be perceived as cumbersome and that, since it is not required, many DSOs instead reach out to field representatives or call the SEVP Response Center to get answers to questions that are covered by existing training materials. ICE officials also stated that they do not know the extent to which DSOs have completed the online training because they do not track this information. Further, the officials acknowledged that since training is voluntary, some DSOs may not complete it before assuming their responsibilities and gaining access to SEVIS.\nICE officials we interviewed told us they encounter problems with DSOs complying with record-keeping requirements; however, they believe most of these issues are a result of DSOs not understanding program rules or their own responsibilities within the program. According to agency documentation, in 2014 SEVP found that some DSOs were inconsistently reporting school information in several SEVIS data fields. In addition, SEVP’s Risk Assessment Tool includes a number of high-risk indicators that may stem from DSO record-keeping errors within SEVIS, including students listed as enrolled in an academic program not available at that school (e.g., doctoral students at schools without doctorate degrees available) and students listed as active who have long exceeded their program’s end date or authorized employment’s end date. Errors such as these make it difficult for ICE officials to know whether the information in SEVIS is inaccurate due to unintentional mistakes by the DSO or whether the school or its employees may be engaged in potential fraud. For additional examples of potential noncompliance or fraud, see the box below.\nPotential Designated School Official Noncompliance or Fraud Student and Exchange Visitor Program officials cited the following examples of potential noncompliance or fraud that they have encountered, among others: the reported foreign-student enrollment listed in the Student and Exchange Visitor Information System (SEVIS) does not seem to correspond with the number of students attending class or the size of the school’s physical space, all enrolled foreign students listed in SEVIS are living at the same address, and students repeatedly transfer to several different schools.\nField representatives at one location we visited noted that DSOs with multiple job responsibilities may not have time to keep up with SEVP rules and policy updates. Similarly, DSOs at 7 of the 17 schools we spoke with mentioned that they have multiple job responsibilities beyond their DSO duties. In addition, SEVP officials indicated that DSOs have a high rate of turnover, especially at small schools, and may lack the expertise to effectively follow program requirements.\nSEVP officials acknowledged that mandatory training could help reduce the number of unintentional violations by DSOs who may not adequately understand the program’s regulations, thus allowing SEVP staff to focus their monitoring efforts on schools and individuals who may be engaged in intentional noncompliance and fraud. In June 2018, ICE officials told us that they recently received internal agreement to require all new DSOs to complete training prior to gaining full access to SEVIS once the officials release a new version of their DSO training program. However, SEVP officials could not provide documentation on their plans, including time frames for completing the revised DSO-training program, whether to require DSO training, or how they will track DSO compliance. Federal Internal Control Standards calls for agencies to demonstrate a commitment to competence, including recruiting, developing, and retaining competent individuals. Further, it recommends that agencies establish expectations of competence for key roles, including possessing the necessary knowledge, skills, and abilities, and training individuals appropriately. Without mandatory training and a process to verify that training is completed, SEVP does not have reasonable assurance that DSOs are familiar with, and understand, their roles and responsibilities as outlined in program regulation.", "SEVP’s voluntary DSO training emphasizes student and school compliance with program rules and the DSOs’ responsibilities to enter and maintain complete and accurate information in SEVIS in a timely manner but does not address fraud risks to the program, including previously identified fraud schemes or trends. According to ICE officials, some DSOs may receive fraud-specific training from ICE agents through the Project Campus Sentinel initiative; however, these visits are limited to a small portion of certified schools each year. During a Project Campus Sentinel visit, ICE guidance states that an ICE agent will meet with DSOs and provide information on how to detect potential fraud, including student visa exploitation and national security vulnerabilities. In addition, ICE guidance encourages ICE agents to remind DSOs to contact them when they encounter these instances. In fiscal year 2017, ICE officials reported that ICE agents visited 400 of the more than 18,000 SEVP- certified school campuses in existence at that time. According to ICE officials, the agency can only conduct a limited number of Project Campus Sentinel visits to schools each year due to competing investigative priorities.\nThe DSOs we spoke with varied in their understanding of the role they should play in identifying and reporting fraud to SEVP. Specifically, DSOs at 8 of 17 schools told us they did not receive training on SEVP-related fraud risks or could not identify SEVP-provided, fraud-specific training. For example, DSOs at one school told us that there is confusion among DSOs about their role to prevent and report fraud and that this issue has been discussed at past training events and conferences. Specifically, they stated that there is some confusion over the difference between fraud and noncompliance. According to these DSOs, they are responsible for addressing issues of noncompliance, but they do not actively look for SEVP-related fraud. A DSO from another school told us she interprets the DSO role as providing program oversight, including oversight related to fraud, and that she previously reported an instance of potential student fraud to ICE when she encountered suspicious immigration paperwork. In addition, DSOs at another school told us that they were not aware of any training related to fraud risks within SEVP but noted that guidance about fraud trends or potential red-flag indicators could be useful.\nThe Fraud Risk Framework identifies training as one way of demonstrating an agency’s commitment to combating fraud. Training and education intended to increase fraud awareness among stakeholders, managers, and employees serves as a preventive measure to help create a culture of integrity and compliance within the agency. Specifically, the Fraud Risk Framework discusses leading practices for training and education, including communicating responsibilities for implementing fraud controls and details on how and where to report fraud. In addition, increasing awareness of fraud schemes, including red flags and risk indicators, through training and education can serve a preventive purpose by helping create a culture of integrity and compliance within the program and can enable managers, employees, and stakeholders with responsibility for implementing aspects of the program to better detect potential fraud. According to ICE officials, DSOs can serve as the front line against SEVP-related fraud, and they provide a significant portion, if not the majority, of fraud-related tips.\nIn June 2018, ICE officials told us that, in response to discussions that we had during our review, they plan to incorporate fraud training into the revised DSO training. However, because ICE officials just recently made that decision, they had not yet developed documented plans for this training or timelines for when it would be completed. While agreeing to incorporate fraud training into the revised DSO training is a good first step, the development and execution of those plans will be needed to strengthen fraud controls. Until ICE develops and implements a plan for fraud-specific DSO training, ICE will not have reasonable assurance that this training will be delivered and DSOs will have the information they need to address fraud within the program.", "Through SEVP, ICE oversees over 1.2 million foreign students at nearly 9,000 SEVP-certified schools across more than 18,000 campuses. Past instances of fraud and noncompliance in the program have resulted in ICE taking some steps to address fraud risks in the program, such as developing a Risk Assessment Model and Framework. However, ICE does not have a fraud risk profile that identifies all of SEVP’s fraud risks, discusses the likelihood of those risks, assesses related controls, and identifies the agency’s tolerance for risk. Such a fraud risk profile would help ICE more effectively assess whether additional internal controls or changes to policies or regulations are needed. Moreover, ICE has not yet fully employed the use of data analytics, such as network analysis, to help it identify potentially fraudulent schools before they become certified to enroll foreign students and help it better use its administrative and investigative resources.\nICE has also made improvements to its processes for certifying and recertifying SEVP schools and monitoring DSOs—all of which can help reduce the risk of fraud in the program. However, ICE continues to delay the recertification process by initiating the school recertification reviews after the 2-year certification expiration date, which is not consistent with ICE regulations. Further, ICE has not included an assessment of residual risks posed by the current recertification queue—as a part of the fraud risk profile previously noted—and as a result does not have a full understanding of the risks associated with schools awaiting recertification. Although DSOs play an important role in helping ICE oversee students in the program, ICE has recognized they can pose fraud risks to the program. However, ICE does not routinely verify DSO-submitted eligibility information and DSO suitability for participation in SEVP, and therefore does not have reasonable assurance that only eligible and suitable DSOs are participating in the program. Finally, ICE has not developed or implemented mandatory and fraud-specific training to improve DSOs’ compliance with program requirements and aid its efforts to detect fraud in the program.", "We are making the following seven recommendations to ICE:\nThe Director of ICE should develop a fraud risk profile that aligns with identifies inherent fraud risks affecting the program, assesses the likelihood and impact of inherent fraud risks, determines fraud risk tolerance, and examines the suitability of existing fraud controls and prioritizes residual fraud risks, including residual risks posed by the recertification queue. (Recommendation 1)\nThe Director of ICE should build on existing efforts to use data analytics by employing techniques, such as network analysis, to identify potential fraud indicators in schools petitioning for certification. (Recommendation 2)\nAs ICE works to complete its efforts to hire additional SEVP adjudicators, the Director of ICE should begin notifying certified schools 180 days prior to, and requiring submission of complete recertification petitions by, the 2-year certification expiration date, consistent with regulation, and evaluate whether additional resources are needed. (Recommendation 3)\nThe Director of ICE should, as practicable, verify the eligibility information provided to establish the immigration or citizenship status of lawful permanent residents and naturalized U.S. citizens, as well as U.S.-born citizens, who have been nominated or renominated to serve as DSOs. (Recommendation 4)\nThe Director of ICE should develop an implementation plan for the project aimed at strengthening background checks for DSOs; that plan should outline how the project will be executed, monitored, and controlled. (Recommendation 5)\nThe Director of ICE should implement mandatory DSO training and verify that the training is completed. (Recommendation 6)\nThe Director of ICE should complete the development and implementation of its plans for mandatory fraud-specific training for DSOs. (Recommendation 7)", "We provided a draft of this report to DHS for its review and comment. In its written comments, reproduced in appendix V, DHS concurred with our recommendations and described specific steps it plans to take in response to all seven of our recommendations. DHS also provided technical comments, which we incorporated as appropriate.\nWe are sending copies of this report to the appropriate congressional committees and the Secretary of Homeland Security. In addition, the report is available at no charge on the GAO website at http://www.gao.gov.\nIf you or your staff have any questions about this report, please contact Rebecca Shea at (202) 512-6722 or [email protected] or Rebecca Gambler at (202) 512-8777 or [email protected]. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix VI.", "Table 1 contains information on the eight recommendations that we made to U.S. Immigration and Customs Enforcement (ICE) in our 2012 report, and ICE’s actions to address them. We closed each of these recommendations as implemented.", "This report is a public version of a sensitive report that we issued on November 20, 2018, which examined the efforts that U.S. Immigration and Customs Enforcement (ICE) has taken since our 2012 report to address fraud risks, including the extent to which ICE has (1) taken steps to strengthen its management of fraud risks in the Student and Exchange Visitor Program (SEVP), (2) implemented controls to address fraud risks in the school certification and recertification processes, and (3) implemented fraud risk controls related to the eligibility, suitability, and training of Designated School Officials (DSO).The sensitive report included information related to SEVP internal controls used to help prevent and identify noncompliance or fraud in the program. The sensitive report also discussed some planned actions to improve these internal controls, some of which the Department of Homeland Security (DHS) deemed to be sensitive and must be protected from public disclosure. This public report omits the information that DHS deemed to be sensitive including details associated with (1) the oversight of schools during the certification and recertification process, (2) our covert testing of SEVP certification internal controls, and (3) current and planned actions to oversee DSOs. Although the information provided in this report is more limited, it addresses the same objectives and uses the same methodology as the sensitive report.\nFor our first objective, to evaluate the extent to which ICE has taken steps to strengthen its management of fraud risks in SEVP, we assessed actions ICE, particularly SEVP and the Counterterrorism and Criminal Exploitation Unit (CTCEU), have taken since 2012 to design and implement controls to address fraud in the postsecondary, vocational, and English language school certification and recertification process. We reviewed documents including regulations, processes and procedures, and guidance related to fraud risk management, school certification, and recertification processes, and the role of DSOs. We evaluated the extent to which ICE’s practices were consistent with Standards for Internal Control in the Federal Government and GAO’s A Framework for Managing Fraud Risks in Federal Programs. In particular, we analyzed ICE documentation, such as standard operating procedures, policy statements, and guidance for adjudicators to determine how ICE’s processes and systems identify and assess risk in SEVP, including the SEVP Risk Assessment Model and Framework, Risk Assessment Tool, Risk Register, and other internal guidance. In addition, we reviewed information from ICE’s current SEVP administrative, watch, and criminal investigative cases and analyzed information on past cases of SEVP fraud, including indictments.\nAlso, we interviewed ICE officials within SEVP to evaluate the extent to which the program has taken steps to strengthen its management of fraud risks since 2012. We met with senior officials from SEVP, including SEVP’s Director and management of the Risk Management Support Team, School Certification Unit (Certification Unit), Analysis and Operations Center (Compliance Unit), Policy Team, and Field Representative Unit. We interviewed officials from ICE’s Office of the Principal Legal Advisor to discuss regulatory priorities and legal authorities related to fraud prevention and detection. We also interviewed officials from ICE’s Identity Benefit Fraud Unit and Domestic Operations to discuss their roles in SEVP-related fraud prevention. In addition, we met with officials from CTCEU headquarters, including the Student and Exchange Visitor Information System Exploitation Section and criminal investigators from 5 of the 26 ICE field offices to discuss past cases of SEVP-related fraud and steps taken to identify and prioritize fraud risk. We visited ICE field offices in Washington, D.C.; Los Angeles and San Francisco, California; Newark, New Jersey; and New York, New York. We selected these locations based on a mix of criteria, including the following characteristics: (1) number of ongoing investigations of certified schools; (2) reported previous and current experience investigating SEVP-related fraud; (3) number of field representatives assigned to or located near the field office; and (4) number of schools that were located proximate to the field office and that were either pending recertification, as of July 2017, or have been recertified since August 2016. As we did not select a probability sample of ICE field offices to interview, the results of these interviews cannot be generalized to all of ICE’s 26 field offices. However, the interviews provided us with perspectives of ICE officials responsible for conducting school fraud investigations, including their views on the process SEVP has established for certifying and monitoring schools, fraud, and national security vulnerabilities related to foreign students, and any challenges field offices have faced in their investigations.\nWe conducted a network analysis utilizing both public and proprietary information associated with currently certified schools to determine the potential to utilize additional data analytics to aid fraud risk-management efforts in SEVP. To develop this analysis, we identified a list of schools that, as of July 2017, had been identified by ICE as either being under active criminal investigation or subject to additional oversight or administrative action due to compliance concerns. We also selected a list of SEVP-certified postsecondary schools without such identified concerns as of September 2017. We restricted our set of schools to those with at least 20 foreign students as of September 2017. In total, 2,439 schools comprising 170 with concerns and 2,269 without such concerns were analyzed. We then used an outside vendor to provide public and proprietary information such as descriptive information associated with these schools including addresses, businesses, and past executives. Using these data, we used network-analysis techniques to identify connections between both those schools with criminal or compliance concerns and schools without such identified concerns. We determined whether each of the postsecondary schools without compliance concerns were linked to any of those with compliance concerns via executive employment. Specifically, we identified instances in which an official associated with a school with criminal or compliance concerns was associated with another school not identified as having those concerns. The underlying logic behind this focus was that schools associated with an official linked to a school of concern may potentially indicate the need for further review of possible criminal or compliance concerns. To further validate this information, we conducted additional research using investigative databases and the Internet to try to verify the instances identified in our analysis such as by ensuring the time frames of the connection appeared relevant or to verify the identity of individuals and schools involved. While such connections are not proof of criminal or compliance problems, they may potentially be indicative of them. This is a diagnostic that has been used in other fraud-related network research.\nFor our second objective, to evaluate the extent to which ICE has implemented controls to address fraud risks in the school certification and recertification processes, we assessed documentation describing SEVP’s school certification and recertification controls, interviewed headquarters and selected field-office ICE officials, and analyzed agency-provided recertification data. Specifically, we assessed SEVP’s standard operating procedures, including its Adjudicator’s Manual, training materials, and other guidance to determine whether the certification and recertification controls described in these documents addressed the high-risk indicators ICE identified in its Risk Assessment Tool. We used this analysis to determine any potential noncompliance and fraud vulnerabilities in these controls. We also assessed SEVP’s controls in these areas against Standards for Internal Control in the Federal Government related to risk management, as well as principles of the Framework for Managing Fraud Risks in the Federal Government. Additionally, we interviewed ICE officials in SEVP’s Certification Unit, which is responsible for adjudicating certification and recertification petitions, and the Compliance Unit, which is charged with monitoring schools for ongoing compliance with regulatory record-keeping and reporting requirements. To understand how ICE Homeland Security Investigations agents in the field offices work with officials in SEVP and the CTCEU to investigate school fraud, we conducted semistructured interviews with ICE agents in five field offices. We also interviewed ICE officials from SEVP’s Field Representative Unit as well as eight field representatives assigned to or located near the selected field offices to gather information on the representatives’ roles and activities in identifying and reporting potential school fraud.\nFurther, we conducted covert testing of SEVP’s internal control activities related to the school certification process. Specifically, we submitted certification petitions and conducted other covert investigative work for three fictitious schools, each of which are subject to particular petition requirements.\nFor one of the fictitious schools, we tested SEVP certification controls that require schools to submit complete documentation by submitting a petition for the school that was missing several of the required documents. For our second school, we tested SEVP controls requiring schools to schedule and complete a site visit conducted by an SEVP field representative, by submitting a completed petition for the accredited business school, but avoiding the site visit and requesting that our paperwork move forward without it.\nFor our third fictitious school, we submitted a petition and participated in a site visit with SEVP officials, using a rented space as a fictitious school location. We tested SEVP controls related to verifying petition documentation, and whether SEVP site-visit officials followed established procedures for the site visit.\nFor all three petitions, we used publicly available information to construct our scenarios. We then documented any actions taken by SEVP on the submitted petitions, such as completeness checks, investigative steps, adjudication decisions or requests to provide additional supporting documentation, among other things. Results for all three covert tests, while illustrative, cannot be generalized to the full population of petitions.\nFor our third objective, to determine the extent to which ICE implemented fraud risk controls related to the eligibility and suitability of DSOs, we assessed guidance, training, and policies related to DSOs. Specifically, we reviewed regulations for DSO eligibility and SEVP guidance and standard operating procedures to determine whether supporting evidence provided to meet these requirements is being verified, including the Field Representative Unit’s Site Visit Standard Operation Procedure and the Certification Unit’s Adjudicator’s Manual. We evaluated the extent to which ICE’s practices for verifying eligibility were consistent with the Framework for Managing Fraud Risks in the Federal Government. In addition, we reviewed the current and planned documentation and procedures on ICE’s existing and planned background checks, including the existing documentation for DSO vetting against relevant databases, initial requirements for planned biometric screening, and a draft policy document for the planned checks. To gather additional perspectives, we interviewed ICE officials in headquarters and selected field offices. We also interviewed selected DSOs in the field. We identified leading practices for project planning in the Project Management Institute’s A Guide to the Project Management Body of Knowledge. In addition, we reviewed the best practices associated with developing and maintaining a reliable, high-quality schedule in the GAO Schedule Assessment Guide.\nIn assessing current training and oversight for DSOs, we examined guidance, policies, and procedures for the SEVP Field Representative Unit and CTCEU’s Project Campus Sentinel. We assessed the implementation of these controls against criteria in Standards for Internal Control in the Federal Government and A Framework for Managing Fraud Risks in Federal Programs. We reviewed DSO training materials, including the Online Training for DSOs and the Study in the States website. To determine how ICE identifies fraud risk associated with DSOs, the controls in place for addressing and mitigating these risks, and its efforts to identify potential vulnerabilities in its controls, we met with ICE officials at headquarters and five selected field offices, as discussed above. To identify the extent to which they have DSO training and antifraud responsibilities and requirements, we interviewed selected field representatives. Furthermore, we interviewed DSOs at 17 selected certified postsecondary schools on their roles and responsibilities and training resources. We selected these officials because, as of September 2017, they constituted a group of representatives from certified schools of various types and sizes and were located in proximity to our previously selected ICE field-office locations. As we did not select a probability sample of DSOs to interview, the information we obtained from these school officials cannot be generalized. These interviews provided us with the perspectives of DSOs on their roles and responsibilities, training, and fraud risks within the program. Further, we interviewed officials from NAFSA, an association of international educators, to discuss the organization’s views on fraud risks within SEVP, and we reviewed an extract from the NAFSA Advisor’s Manual of federal regulations affecting foreign students and scholars.", "GAO’s A Framework for Managing Fraud Risks in Federal Programs states that, in planning the fraud risk assessment, effective managers tailor the assessment to the program by, among other things, identifying appropriate tools, methods, and sources for gathering information about fraud risks and involving relevant stakeholders in the assessment process (see fig. 11).", "On the basis of our analysis of U.S. Immigration and Customs Enforcement (ICE) data, the Student and Exchange Visitor Program (SEVP) withdrew certification for approximately 2,600 schools during the period of fiscal years 2013 through 2017 (see fig. 12). The Enhanced Border Security and Visa Entry Reform Act of 2002 states that a material failure of an SEVP-certified school to comply with the record-keeping and reporting requirements to receive nonimmigrant students shall result in the suspension for at least 1 year, or termination, of the school’s approval to receive such students. Under federal regulation, SEVP can deny an SEVP-certified school’s recertification petition or, as a result of a subsequent out-of-cycle review, can withdraw certification, if the school or its programs are no longer eligible for certification.\nDenial of recertification or withdrawal on notice as a result of out-of-cycle review may be for any valid and substantive reason, including failure to comply with record-keeping and reporting requirements, willful issuance by a DSO of a false statement, or not operating as a legitimate institution, among other bases. According to SEVP officials, denials resulting from recertification reviews are often based on historical discrepancies in the DSO’s data entry, record-maintenance and Form I-20 issuance issues, or a negative change in the school’s operating status, such as a loss of state licensure. By regulation, an appeal of a notice of denial or withdrawal must be made within 15 days after service of the decision. Schools denied recertification must, according to regulations, wait at least 1 calendar year from the date of denial of recertification or withdrawal notice before being eligible to petition again for certification.\nIf, upon the completion of an out-of-cycle review, SEVP determines that a school has failed to sustain eligibility or has failed to comply with the record-keeping, retention, reporting, or other requirements, SEVP will institute withdrawal proceedings by serving the school a notice of intent to withdraw SEVP certification. Failure of a school to respond to a notice of intent to withdraw within 30 days will result in an unappealable withdrawal of the school’s certification. At the conclusion of withdrawal proceedings, a school found to be ineligible for continued SEVP certification as a result of an out-of-cycle review will receive a notice of withdrawal. SEVP withdrew on notice approximately 211 certifications from fiscal years 2013 through 2017 (see fig. 12). If SEVP staff identify an issue during an out- of-cycle review that seems to be an error not warranting withdrawal, SEVP could issue a Remedial Action Plan to the school describing the issues it needs to address to retain its program eligibility. According to SEVP officials, once they have gathered enough evidence and made the decision to withdraw the school’s certification, SEVP can temporarily terminate the school’s ability to issue Forms I-20 to students. For example, SEVP officials explained that if a school that is otherwise in compliance lets its accreditation lapse, SEVP may revoke its authority to issue Forms I-20 until it renews its accreditation.\nRegarding automatic withdrawals, SEVP will serve a notice of intent to withdraw SEVP certification to the school 30 days prior to its certification expiration date if, up until that point the school has failed to file a complete petition for recertification. From fiscal year 2013 through fiscal year 2017, SEVP automatically withdrew 1,763 certifications (see fig. 12). SEVP will not accept a petition for recertification and the school will be automatically withdrawn immediately if such school has effectively relinquished its SEVP certification by not petitioning for recertification, abandoning its petition, or not submitting a complete recertification package by the certification expiration date. Certified schools can also voluntarily withdraw their certification at any time.", "", "", "", "In addition to the contacts named above, Latesha Love (Assistant Director), Kathryn Bernet (Assistant Director), Nick Weeks (Analyst-in- Charge), David Aja, David Dornisch, Gabrielle Fagan, April Gamble, Gina Hoover, Lauren Kirkpatrick, Kirsten Lauber, Barbara Lewis, Sasan J. “Jon” Najmi, Robin Nye, George Ogilvie, Ramon Rodriguez, Constance Satchell, Sabrina Streagle, Shana Wallace, and Helina Wong made key contributions to this report." ], "depth": [ 1, 2, 2, 1, 2, 2, 2, 1, 2, 2, 2, 2, 1, 2, 2, 2, 2, 1, 1, 1, 1, 1, 1, 1, 1, 1, 2, 2 ], "alignment": [ "h3_title", "h3_full", "", "h0_title h3_title", "h0_full h3_full", "", "h3_full", "h0_title h2_title h3_title h1_full", "h0_full h3_full h1_full", "", "h1_full", "h2_full", "h0_title h2_title", "", "", "h0_full h2_full", "h2_full", "", "h2_full", "", "", "h3_full h4_full", "", "", "", "", "", "" ] }
{ "question": [ "What has the Department of Homeland Security identified with regards to the Student and Exchange Visitor Program?", "What types of risks are included?", "How can these fraud risks occur?", "To what extent has ICE managed fraud risks so far?", "What is one fraud risk control that ICE has implemented?", "How has the ICE met difficulties with recertifying schools?", "How has the ICE attempted to fix the recertification problem?", "Will ICE's steps taken ensure that recertification is conducted consistently with regulations?", "For what does ICE rely on DSOs?", "What does the ICE not provide DSOs with?", "How does the ICE plan to address this deficit?", "How would training DSOs improve the program?", "What does the SEVP do?", "What is the relationship between ICE and SEVP?", "How does the ICE combat fraud in the SEVP?", "What was GAO tasked with doing?", "How did GAO review potential vulnerabilities?", "What actions has GAO taken?", "What was the criteria for schools selected to be interviewed by the GAO?", "What is this report?", "What information is omitted from this report?" ], "summary": [ "The Department of Homeland Security's (DHS) U.S. Immigration and Customs Enforcement (ICE) has identified several fraud risks to the Student and Exchange Visitor Program (SEVP).", "As shown in the figure below, these include risks associated with school owners and designated school officials (DSO) who help ICE oversee students in the program.", "These fraud risks may occur as schools apply to become SEVP-certified, accept foreign students, and apply for recertification every 2 years.", "ICE has implemented controls to address fraud risks related to school certification, but long-standing delays in recertifying these schools exacerbate fraud risks.", "By statute and regulation, ICE must conduct recertification reviews every 2 years to ensure that schools continue to meet program requirements—an important fraud risk control.", "Between 2013 and 2017, ICE recertified about 12,900 schools. However, according to ICE officials, they have been unable to meet the 2-year time frame and, as of June 2018, had 3,281 recertification petitions waiting for review.", "To help manage its queue, ICE has lengthened the period between recertification reviews by extending schools' certification expiration dates by 180 days, which is inconsistent with its regulation and may allow fraudulent schools to operate longer without detection.", "Although ICE is taking steps to increase resources for recertification, it is unclear whether these steps will ensure recertification is conducted consistently with ICE regulations.", "ICE relies on DSOs to, among other things, update and maintain foreign-student data in ICE's foreign-student information system and report suspected fraud to ICE.", "However, ICE does not provide DSOs with training that addresses fraud risks to the program.", "In June 2018, ICE officials stated that they plan to develop this fraud training for DSOs, but do not have documented plans or timelines for when it would be completed.", "By developing these plans, the agency would be better positioned to ensure that DSOs receive the training needed to address potential fraud in the program.", "As of March 2018, more than 1.2 million foreign students in the United States were enrolled in 8,774 schools certified by SEVP.", "ICE is responsible for managing SEVP, which certifies schools to enroll foreign students.", "Various ICE offices have a role in preventing, detecting, and responding to potential fraud in the program.", "GAO was asked to review potential vulnerabilities to fraud in SEVP.", "GAO examined, among other things, the extent to which ICE (1) implemented controls to address fraud risks in the school certification and recertification processes and (2) implemented fraud risk controls related to DSO training.", "GAO analyzed ICE policies and documentation, including fraud risk guidance and procedures for school certification and recertification; analyzed 2013 through 2017 recertification data; and interviewed officials from five ICE field offices that GAO selected based on their experience investigating program fraud.", "GAO also interviewed officials from 17 selected schools located near these ICE field offices.", "This is a public version of a sensitive report that GAO issued in November 2018.", "Information that DHS deemed sensitive has been omitted." ], "parent_pair_index": [ -1, 0, 0, -1, 0, 0, 2, 0, -1, 0, 1, 1, -1, 0, 0, -1, 3, -1, -1, -1, 2 ], "summary_paragraph_index": [ 2, 2, 2, 3, 3, 3, 3, 3, 4, 4, 4, 4, 0, 0, 0, 0, 0, 1, 1, 1, 1 ] }
GAO_GAO-18-338
{ "title": [ "Background", "BEP’s Proposal for a New Production Facility Considered Project Costs and Feasibility, Security, Efficiency, Safety, and Future Flexibility BEP Studies from 2010 to 2017 Determined the Cost and Feasibility of Multiple Alternatives", "BEP Considered Other Factors in Deciding to Propose a New Production Facility", "Security", "Efficiency", "Safety", "Flexibility", "BEP Generally Followed Leading Capital-Planning Practices, and Its 2017 Cost Estimate Partially Met the Characteristics of a Reliable Cost Estimate", "BEP Generally Followed Applicable Leading Capital-Planning Practices", "BEP’s 2017 Cost Estimate Partially Met the Four Characteristics of a High- Quality, Reliable Estimate", "Ability to Sell or Repurpose Potentially Vacant Space Could Affect the Total Cost to the Federal Government", "Agency Comments", "Appendix I: Comments from the Department of the Treasury", "Appendix II: GAO Contact and Staff Acknowledgments", "GAO Contact", "Staff Acknowledgments" ], "paragraphs": [ "BEP produces notes at the request of the Federal Reserve. Each year, the Federal Reserve determines how many currency notes are needed to meet the demand for currency. Federal Reserve and BEP officials then agree on a payment amount for note production, including costs associated with maintaining BEP’s facilities. The Federal Reserve’s payments are deposited into BEP’s revolving fund; the revolving fund is used for BEP’s operational expenses, including note production. According to Treasury officials, the revolving fund can pay for renovations and retrofitting of a production facility, but not for land purchase or new building construction. In 2016, the Federal Reserve paid around $660 million for note production.\nIn order to cover all expenses associated with the Federal Reserve’s needs, including currency production, the Federal Reserve generates income primarily from the interest on their holdings of U.S. government securities, agency mortgage-backed securities, and agency debt acquired through open market operations. The Federal Reserve is required to transfer any surplus funds over $7.5 billion to the General Fund of the U.S. Treasury. Increases or decreases in operating costs or BEP’s currency production could affect these surpluses and subsequent transfers to the General Fund. Historically, the Federal Reserve has had significant surpluses. In 2016, the Federal Reserve transferred $92 billion to the General Fund.\nBEP’s Washington, D.C., facility consists of a 104-year old, multi-story, multi-wing Main Building and an 80-year old multi-story, multi-wing Annex Building (see fig. 1). The Main Building is the primary production building, and the Annex Building is used primarily for administrative functions. Both buildings qualify for historic designation and thus any alterations would be subject to certain requirements under the National Historic Preservation Act of 1966, as amended. In addition to these buildings, BEP leases a warehouse in Landover, Maryland, to store production supplies in part because the two Washington, D.C., buildings do not have the necessary infrastructure to accommodate shipments carried by large commercial trucks.\nBEP’s Fort Worth facility was built in order to ensure reliable currency production in the event of any disruption of operations at the D.C. facility. BEP was able to obtain donated land and a building in Fort Worth and therefore did not need to purchase land or construct a new facility. Specifically, in 1986, BEP accepted a proposal from the City of Fort Worth that included 100 acres of donated land and a donated building shell to be built to BEP’s specifications. BEP then used its revolving fund to pay for the building’s interior retrofitting, including a central energy plant and installation of currency presses. The Fort Worth facility began producing notes in December 1990 and was intended to produce around 25 percent of U.S. notes. According to BEP officials, as a result of increased demand for U.S. notes and production limitations associated with the D.C. facility, the Fort Worth facility has produced an increasingly large share of notes. In fiscal year 2016 the Fort Worth facility produced nearly 60 percent of notes, while the D.C. facility produced the remaining 40 percent.", "From 2010 through 2017, BEP contracted for various studies to investigate alternatives, costs, potential sites, and program requirements to ensure future currency production in the D.C. area (see table 1 for details of the studies). In BEP’s 2013 study and since then, the agency has focused on three alternatives: “Renovation”—a major renovation of the current facility “New build”—a new building in a different location that would house currency production and all administrative functions “Hybrid”—a new building in a different location that would house currency production, but having administrative functions in one of its current buildings According to BEP officials, the cost estimates in the 2013 study were an important factor in their preference for a new facility instead of a renovation.\nThe 2013 study concluded that BEP should pursue the new build alternative because it was estimated to be the least costly option, could be completed in the shortest time frame, and promised the greatest efficiencies. The study found that the renovation alternative would be the most costly option and take the longest time to complete because it would require BEP to produce currency at its current location while it was being renovated. BEP officials told us this would require moving production equipment from the Main Building to the Annex during the renovation and back to the Main Building once it was renovated. According to GSA officials, renovations are often more costly than new construction. According to Federal Reserve officials, moving large, complex printing presses and machines from one building to another and then back again significantly expands the renovation’s timeframe, as time would be needed to test the machines to get them back into specification. The Federal Reserve further noted that some modern presses will not fit into the Main Building without significant structural alterations, which would add cost and time to a renovation.\nFollowing the release of the 2013 study, BEP proposed to the Secretary of Treasury, with the support of Treasury officials, that Treasury and BEP pursue the hybrid alternative as their first choice (see table 2 for details on BEP’s proposal). BEP officials told us that they, along with Treasury, selected the hybrid alternative even though the hybrid was more expensive than the new build alternative. According to BEP officials, the cost difference between the hybrid and new build was outweighed by the value of maintaining administrative functions in Washington, D.C., to facilitate the day-to-day decision-making process among BEP, Treasury, and Federal Reserve officials. According to Treasury officials, the ability for other Treasury employees to co-locate in the Main Building after the repurposing is completed would also provide long-term cost benefits to Treasury because Treasury could save on expensive lease agreements in downtown Washington, D.C. Further, Treasury officials noted that it is important that the Treasury Department maintain the Main Building as an asset because of its location and history, and Treasury officials prefer that BEP maintain some functions in the building. The 2017 study provided cost estimates of BEP’s and Treasury’s preferred hybrid option, as well as the renovation option that BEP officials said they would pursue if BEP does not receive the necessary legal authority to construct a new facility. The study estimated that the hybrid option would cost approximately $1.389 billion and that the renovation option would cost approximately $1.957 billion.\nFederal Reserve officials told us they concur with the 2013 study that a new facility is warranted, that a renovation of the existing facility would be more costly than a new facility, and a renovation would not provide the same degree of efficiency. Federal Reserve officials said that they prefer the new build alternative because the 2013 study identified this alternative as the least expensive option, and would provide a modern, efficient manufacturing process. These officials also told us that, whatever alternative BEP pursues, the Federal Reserve will be financially responsible —whether it is for a new building, a renovated building, or the continuation of the currency production process in the D.C. facility.\nBEP officials stated that they support a new building over a renovation because the new build would both be less expensive and have greater benefits than a renovation. Furthermore, BEP officials told us that while they prefer to remain in the D.C. area, they would approve of the construction of a new facility in a different location if necessary. However, BEP officials also told us that if BEP does not get the legal authority necessary to use its revolving fund to purchase land and build a new facility in 2018, BEP will pursue a renovation of the existing D.C. facility beginning at the end of 2018.", "", "As a federal facility, BEP must meet physical security standards established by the Interagency Security Committee (ISC). According to an assessment conducted by BEP’s Office of Security, the D.C. facility does not meet many of the necessary requirements for a facility of its security level. While certain security improvements, such as blast resistant windows or vehicle barriers, could be installed if the facility is renovated, other standards could only be addressed with a new facility. Specifically, the current buildings are located in an urban center surrounded by buildings (see fig. 1 above). As a result, according to the assessment, the facility does not have a secure perimeter because it lacks the required setback between the building and any point where an unscreened vehicle can travel or park. BEP officials said that even after a renovation, the facility would continue to have inadequate setback distance. According to the assessment, the facility’s designation as a historic building also limits BEP’s ability to make changes to the current facility to meet the necessary level of protection. For example, the facility’s placement on the historic registry limits BEP’s ability to make certain structural changes that could mitigate the building’s chances of progressively collapsing in the event of certain types of destructive attacks or actions. BEP’s Office of Security attributed certain security deficiencies to the facility’s limited setback distance and the buildings’ structure, and determined that the D.C. facility is at relatively high risk to threats such as an externally-placed portable explosive device.", "BEP aims to provide quality banknotes in an efficient, cost effective manner. However, BEP officials concluded that the layout of the D.C. facility makes production less efficient than the Fort Worth facility. According to BEP production data, from 2013 to 2016, manufacturing costs were higher at the D.C. facility for all comparable denominations. For example, in 2016, production costs of $1 and $20 notes were 23 percent and 7 percent higher, respectively, at the D.C. facility compared to the Fort Worth facility. Additionally, the D.C. facility employs more manufacturing personnel than Fort Worth, even though it produces fewer notes (see table 3). BEP officials attributed the difference in the costs to the D.C. facility’s multi-floor, multi-wing production layout. Specifically, in D.C., after notes are printed on one side, they are moved to another floor to dry for at least 72 hours, brought back to the original floor to be printed on the opposite side, and again moved to the other floor to dry. In Fort Worth, because the production occurs in one large room on one floor, these processes occur in adjacent spaces on the same floor. As a result, according to BEP, notes travel more than twice as far during production in the D.C. facility.\nAccording to BEP, Treasury, and Federal Reserve officials, a new production facility would offer greater efficiency gains than a renovated facility. According to BEP officials, maintaining production on one floor in an open space improves production efficiency. They added that a renovation of the D.C. facility could include tearing down some walls and raising ceilings, steps that could improve some production processes. However, they also noted that because the D.C. facility qualifies for a historic designation, according to BEP officials, a renovation could not alter the building’s shape. As a result, production would still occur on multiple levels and in separate wings if the facility were renovated. We have reported in the past that agencies faced challenges in rehabilitating and modernizing historic buildings for contemporary use because of their age, specific design characteristics, and their particular historical features.", "According to its Strategic Plan, BEP is committed to providing a safe and positive work environment for its employees. However, BEP officials said that manufacturing employees at the D.C. facility face greater injury risk than at the Fort Worth facility. According to BEP workers’ compensation claim data, approved workers’ compensation claims at the D.C. facility accounted for approximately 67 percent of BEP’s approved claims from fiscal year 2013 through fiscal year 2016, or 200 of 297 approved claims. BEP officials attributed the higher number of workers’ compensation claims in the D.C. facility to the relatively high number of employees needed to produce fewer notes (see table 3) and the increased opportunity for employee injury because production material must be transported farther and between floors. BEP officials estimated that approximately 65 to 70 percent of all worker injuries are related to materials handling.\nBEP officials noted that there is an estimated $196-million deferred- maintenance backlog at the D.C. facility. This backlog includes maintenance to the facility’s electrical and architectural systems. Even if BEP had taken care of these maintenance issues in the past, it would not negate the need for a renovation or a new facility. BEP officials noted that a renovation would reduce some safety concerns, such as upgrading the facility’s electrical systems and adding more fire-rated exits as required by Occupational Safety and Health Administration regulations; however, a renovation would not be able to address the multi-floor production process that BEP officials attributed to employee injuries.", "According to BEP officials, it is important for BEP to maintain flexible currency production to respond to production needs that may change over time. Specifically, BEP officials said that a production facility should have the ability to adapt to changes in production equipment. Both BEP and Federal Reserve officials told us that the new equipment likely will be larger than current machinery. According to a representative from a leading currency printing equipment manufacturer from which BEP buys its printing equipment, future equipment is unlikely to decrease in size. BEP officials said that, while the D.C. facility could be renovated to accommodate larger equipment, it would not be possible to replicate the large, open production floor of the Fort Worth facility, which allows for simple installation of equipment. BEP officials told us that, unlike the current D.C. facility, a new production facility would be able to easily accommodate the printing equipment necessary for security features that BEP is currently developing for the next currency redesign.\nFlexibility is also an important factor when considering the future demand for currency. The demand for currency fluctuates, and recent changes in how the public makes purchases could affect the demand for currency. Some observers have noted that the increased use of new payment technologies—such as online banking and phone applications—as well as the rise in online purchases may lead to a substantially reduced demand for currency. In a few countries, such as Sweden, noncash transactions have become common and the demand for currency has fallen substantially.\nIn the United States, there are several indications that currency demand will not substantially decline within the next decade. For example, the yearly number of U.S. currency notes in circulation increased by 43 percent from 2008 to 2016. In addition, the number of ATMs in the United States continues to grow, and a 2016 Federal Reserve study of consumer payment choice found that cash still accounted for 32 percent of all transactions, and more than 50 percent of transactions under $25. This continued strength in the demand of cash has several sources. Cash can be seen as a hedge against uncertainties, such as natural disasters or political or economic turmoil, and also has advantages related to privacy, anonymity, and personal data security. Moreover, according to the Federal Deposit Insurance Corporation, approximately 25 percent of U.S. households have limited access to the products and services of the banking industry, and therefore, these “unbanked” and “underbanked” populations, who may not have many alternative means of payment, rely largely on cash.\nFederal Reserve and Treasury officials we spoke with do not believe that the use of cash in the U.S. will decline in any significant way over the next decade. In particular, the Federal Reserve predicts a continued rise in demand for cash over the next 10 years, despite the increased availability of noncash payment options, indicating that a new or renovated facility will still be required for currency production. According to BEP officials, a new production facility would better manage the ebbs and flows in the future demand for currency than a renovation of the current facility. Specifically, should production demand increase, a new production facility could be designed to easily scale to meet new production requirements. Conversely, should the demand for currency decline in the coming years or substantially decline in the future, unused space in a new facility could be partitioned off and be used for other purposes or by another Treasury agency.", "", "Capital investments in infrastructure can require significant resources to construct, operate, and maintain over the course of their life-cycle. Leading capital-planning practices can help agencies determine the resources needed to meet their mission, goals, and objectives and how to efficiently and effectively satisfy those needs throughout the capital decision-making process. As shown in table 4, we found that BEP’s capital investment decision-making process that resulted in its decision to pursue a new currency-production facility (as part of the previously described hybrid option) followed three applicable capital-planning leading practices and substantially followed the fourth.\nNeeds assessment: BEP followed this leading practice, which calls for comprehensively assessing the resources needed as a basis for investment decisions. BEP conducted a facility condition assessment in 2004 that contributed to BEP’s effort to seek a new production facility, resulting in the studies from 2010-2017 discussed above. The assessment identified the current condition of the facility and the facility’s capabilities, including production inefficiencies that led BEP to begin a multi-year effort to determine its immediate and future infrastructure needs. BEP also determined in 2004 that the agency had almost $200 million in deferred maintenance needs. BEP officials told us that they consulted with Federal Reserve officials and concluded that it would not be prudent to spend substantial funds to address this deferred maintenance. For example, officials determined that it would not be prudent to replace the heating and plumbing systems while pursuing a new production facility. As a result, BEP deferred some maintenance items, such as replacing heating systems, which would not compromise safety and production. However, BEP officials said that they prioritized and maintained critical items, such as its cleaning and recycling systems, and implemented energy conservation initiatives to help reduce costs. As of October 2017, BEP’s deferred maintenance backlog was about $196 million.\nAlternatives evaluation: BEP substantially followed this leading practice, which calls for a determination of how best to bridge performance gaps by identifying and evaluating alternative approaches. As noted above, BEP first considered multiple alternatives on how to achieve its mission to efficiently produce banknotes. Further, BEP considered different methods to fund and obtain land and a shell for a new production facility (see table 5). To evaluate alternatives for the location of a new facility, a contractor identified, in 2015, potential construction sites in the D.C. area and compared each site to a set of criteria. However, BEP officials told us that they discounted locations outside the metropolitan D.C. area because they believed it would be costly to relocate employees or hire and train new manufacturing personnel to replace employees who do not relocate. BEP officials said that the few employees who relocated from the D.C. facility to the Fort Worth facility when it first opened were paid $50,000 each for their move. Based on these factors, BEP focused on a D.C-area location and did not conduct an analysis of the financial implications of building a new facility outside the D.C. area, where construction or other costs could be less expensive.\nStrategic linkage: BEP followed this leading practice, which stresses the importance of linking plans for capital asset investments both to an organization’s overall mission and to its strategic goals. In the 2014-2018 Strategic Plan, BEP noted that it would seek approval to proceed with the 2013 study’s recommendation to construct a new production facility. According to the strategic plan, a new production facility would help achieve BEP’s long-articulated strategic goal of being a printer of world- class currency notes, providing its customers and the public with superior products through excellence in manufacturing and technological innovation. Furthermore, Treasury concurred with BEP’s assessment and added its request for legal authority to purchase land and build a new facility in the fiscal year 2018 President’s Budget proposal.\nLong-term capital plan: BEP followed this leading practice, which calls for a capital plan that documents an agency’s decisions and describes its mission, planning process, and risk management, among other things. BEP completed all of the key activities associated with this practice. For example, in its fiscal year 2018 capital investment plan, BEP lays out the purpose, goals, and benefits of a new currency production facility. It also notes the implications of exposing currency production to vulnerabilities relating to potential facility systems failures and inefficiencies.", "A reliable cost estimate—a summation of individual cost elements—is critical to support the capital planning process by providing the basis for informed investment decision-making, realistic budget formulation and program resourcing, and accountability for results. BEP’s 2017 cost estimate includes a contractor-developed estimate of the cost for the construction of a new production plant and the repurposing of the Main Building for BEP’s administrative offices (the hybrid alternative) and a BEP-developed estimate of additional project costs, such as additional production equipment and real estate acquisition. We found this estimate partially met the four characteristics of a high-quality, reliable cost estimate (see table 6). In developing this estimate, BEP relied on GSA guidance that was available at the time. That guidance did not refer to leading practices for cost estimates that are identified in GAO’s Cost Guide. GSA has recently updated its guidance to refer to the leading practices in GAO’s Cost Guide, and BEP officials told us that they will follow this updated GSA guidance when developing any future cost estimates.\nComprehensive: BEP’s 2017 cost estimate substantially met the comprehensive characteristic. For example, the estimate included most life-cycle cost components, defined the program and its current schedule and included a consistent work breakdown structure. However, the estimate did not include operating and sustainment costs or information regarding the ground rules and assumptions used to develop the costs.\nWell documented: BEP’s 2017 cost estimate partially met the well- documented characteristic. For example, the estimate documented the source data and the technical assumptions used for the construction costs, which were reviewed by GSA and BEP personnel. However, documentation for the contractor’s estimate and its sources for the factors used in the estimate did not include details to enable an outside cost analyst to replicate the work. According to BEP officials, the cost data are the contractor’s proprietary data. BEP officials also told us that sources for the factors used were based on subject matter expert opinion.\nAccurate: BEP’s cost estimate partially met the accurate characteristic. While we found minor rounding errors and no errors in the model build-up calculations and did not find any calculation or adjustment errors in the estimate, the estimate nonetheless did not provide information regarding the bias of the costs and the appropriateness of the estimating technique used. However, BEP did follow industry standards to develop contingency costs for a pre-design estimate for a program that has not yet been authorized. We also found that $515 million of the internal estimate (37 percent of the program’s total cost estimate) was based on undocumented subject matter opinion or escalated incorrectly from the 2013 study estimate. Further, BEP’s estimate did not use the same construction year mid-point as its contractor for the inflation assumptions. According to BEP officials, that lack is because BEP’s costs were projected based upon the contractor’s estimate of fiscal year 2022, while the production equipment was escalated to fiscal year 2021 because this is the projected year for purchasing equipment. The officials also acknowledged that this rationale, however, was not documented in the cost estimate. BEP clarified that the estimates did not explicitly state a confidence level because the estimate is in the pre-planning stage. They added that it is common in the design and construction industry that contingencies are applied to the estimate based on the completeness of design, and as the design progresses, these contingencies are reduced as more becomes known about the project. As there have not been actual costs yet, variances between planned and actual costs have not been documented, explained, and reviewed.\nCredible: BEP’s 2017 cost estimate partially met the credible characteristic. For example, BEP provided documentation showing that both BEP and GSA reviewed the contractor’s construction estimate and its technical assumptions. However, the estimate did not include a sensitivity analysis for the construction costs, a risk and uncertainty analysis, or cross-checks to see whether similar results could be obtained. A cross-check could include an independent cost estimate conducted by an outside group to determine whether other estimating methods would produce similar results, but BEP officials told us that no independent cost estimate was developed because this was too early in the project to do such a comparison and that the construction estimate was developed in response to a government contract statement of work to prepare a preliminary budget forecast for BEP. Rather, BEP relied on what it characterized as an extensive review by BEP management and GSA officials.", "The alternative that BEP pursues could have a financial effect on the federal government and ultimately taxpayers. Below, we discuss potential costs and potential savings associated with the disposition of the three buildings under the different scenarios based on our review of BEP documents and interviews with Treasury and GSA officials (see fig. 2). For example, Treasury, which has custody and control over the Main Building and the Annex, could experience costs if it needs to spend money to upgrade these buildings, but could also experience savings if it can repurpose the buildings or consolidate its employees into fewer buildings. GSA, which serves as the federal government’s primary real property and disposal agent, could incur costs for the marketing and disposal process, but could create savings for the government if it could repurpose or sell any vacated buildings. Proceeds from sales of Treasury- controlled facilities would benefit the federal government.\nWhile it is possible to identify some potential costs and benefits, it is too early to determine which costs or benefits may be realized or to attempt to quantify them. GSA and Treasury officials told us that the actions of other agencies or interested third parties (e.g., those potentially interested in purchasing the Annex) would affect the costs and cost-savings of any alternative. In addition, there are factors outside of the government’s control, such as timing and market conditions, that could affect costs and cost-savings. For example, changes in the Washington, D.C., real estate market could affect the opportunity to sell the Annex. Based on interviews with officials at GSA, Treasury, the Federal Reserve, and BEP, we have identified the following potential costs and savings for each building.\nPotential costs and savings associated with the Main Building: Both BEP and Treasury officials told us that the Main Building will remain under Treasury’s custody and control, regardless of which alternative BEP undertakes.\nRenovation: BEP would use its revolving fund to replace existing heating/cooling systems and windows in the Main Building with higher efficiency ones. Ideally, there would be some long-term cost savings because the new systems would be less costly to operate. However, BEP officials told us that a renovation may be more expensive than currently estimated because the Main Building is over 100 years old and there could be unforeseen expenses depending on what is found once walls and ceilings are removed.\nNew build: Treasury would likely pay to renovate the Main Building once BEP vacates it because the Main building would remain under Treasury’s custody and control. The cost of this renovation could be partially offset by savings associated with co-locating other Treasury offices in the Main Building after the renovation is complete. For example, Treasury bureaus currently have 15 leased facilities with about 1.9-million square feet in the downtown D.C. area. The annual cost of these facilities is $91.7 million. While, not all of the employees currently in leased space could move into a renovated Main Building, the Main Building’s 530,000 square feet could provide opportunities to reduce leasing costs. However, because these potential renovations and staff moves are not likely to occur for several years, Treasury officials told us that they are not able to determine either the costs or benefits of moving Treasury staff to the Main Building.\nHybrid: BEP’s revolving fund would pay for the renovation of one- third of the Main Building that would serve as BEP’s administrative office and a future visitors’ center. This step would leave the remaining two-thirds to be renovated to a “warm lit shell” to allow others to occupy the building. At this time, Treasury does not know what entity or account would pay for the renovation of the remaining two-thirds because, according to Treasury officials, they have not determined what the use of the balance of the Main Building would be, including what entity would fund any modifications needed for new occupants. If Treasury decided to use the Main Building for its own staff, then Treasury could fund the cost to convert to offices for other Treasury agencies. Under this scenario, there is both a cost to Treasury to renovate the space it plans to use as well as a savings in having Treasury staff vacate other leased space and move to a Treasury-controlled building.\nPotential costs and savings associated with Treasury’s Annex: The Annex could either remain for BEP’s administrative offices or could be declared excess and transferred to GSA for disposal.\nRenovation: BEP’s revolving fund would cover the cost of renovating the entire Annex as a “warm lit shell” and a more extensive renovation of the portion of the Annex that BEP would use first as temporary space for its currency printing equipment and then permanently for its administrative office. According to BEP officials, the Annex would be renovated to accommodate currency-printing lines that would be relocated from the Main Building in order for the Main Building to be renovated. Once the Main Building is renovated, the Annex would then be renovated to become administrative space for BEP. This process could be quite costly and take more time as the Annex would be renovated twice for different purposes. However, if the unused part of the Annex could be used by Treasury for other Treasury offices, there could be some cost savings to Treasury. According to BEP officials, while BEP would use its revolving fund to renovate the Annex to a “warm lit shell,” the agency that ultimately occupies the unused space would be responsible for the costs associated with repurposing that space for its own purposes.\nNew build and Hybrid: BEP’s revolving fund would pay for any necessary environmental clean-up needed in order for the Annex to be declared as excess and transferred to GSA for disposal. GSA, as part of its mission, would incur costs such as marketing, conducting the disposition process, and concluding the property transfer. GSA’s disposal process can result in the building being transferred for use by another Federal agency, being sold to a local or state government via a negotiated sale, being conveyed to a public entity or eligible non- profit for public uses (e.g. homeless use), or being sold to a private party via a public sale. As the Annex is centrally located in Washington, D.C., the building could be attractive to potential developers. GSA recently sold another federal building near the Annex for over $30 million. GSA officials believe that there would be significant market interest in the Annex due to the Annex’s location and recent private development in the area. Treasury and GSA officials stated that proceeds from the sale of the Annex would be deposited into the Land and Water Conservation Fund to benefit the federal government.\nOn the other hand, there is no guarantee that GSA would be able to sell the Annex: our previous work found that the most frequent method of disposal for federal buildings from fiscal years 2011 through 2015 was demolition (57 percent) rather than sale (14 percent). Federal buildings identified for disposal may not be suitable for sale for reasons such as their age, location, and condition, factors that often make demolition the preferred disposal method. The unique configuration of the Annex with its five wings, its age and condition, and historic-designation eligibility could deter some potential buyers. The future demand for the building, interest from private-sector buyers, and the general economic and real estate market are uncertain and can change quickly. If the Annex is not sold and remains on the government’s real property inventory, generally BEP or Treasury would be responsible for any annual maintenance costs for the building. Alternatively, the unsold Annex could be donated to a state or local government that would then be responsible for maintenance costs.\nPotential costs and savings associated with the leased warehouse: The warehouse is a GSA-leased property.\nRenovation: BEP would continue its annual leasing of the warehouse, which would still be needed to accommodate large trucks that cannot access the D.C. facility. The current lease costs approximately $3.4 million each year, and BEP recovers about $500,000 per year of these costs by permitting other Treasury components to use the building through interagency agreements.\nNew build and Hybrid: If BEP discontinued its lease after a new facility is completed, it would save approximately $2.9 million per year. If BEP ended its lease prior to the end of the lease term, GSA would need to find another entity to occupy the warehouse for the remainder of the lease term.", "We provided copies of the draft report to the BEP, GSA, the Federal Reserve, and Treasury for review and comment. BEP coordinated with Treasury in providing comments. In these comments, reproduced in Appendix I, BEP emphasized the factors that led BEP to determine that a new facility is the preferred alternative for its currency production process and acknowledged our findings on those factors. BEP and the Federal Reserve also provided technical comments, which we incorporated as appropriate. GSA did not provide comments.\nAs agreed with your office, unless you publicly announce the contents of this report earlier, we plan no further distribution until 30 days from the report date. At that time, we will send copies to the Director of the Bureau of Engraving and Printing, the Secretary of the Treasury, the Chair of the Federal Reserve Board, and the Administrator of the General Services Administration. In addition, the report will be available at no charge on the GAO website at http://www.gao.gov.\nIf you or your staff have any questions about this report, please contact me at (202) 512-2834 or [email protected]. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made major contributions to this report are listed in appendix II.", "", "", "", "In addition to the individual named above, John W. Shumann (Assistant Director); Martha Chow (Analyst in Charge); Amy Abramowitz; Lacey Coppage; Delwen Jones; Jennifer Leotta; Josh Ormond; and Tomas Wind made key contributions to this report." ], "depth": [ 1, 1, 2, 3, 3, 3, 3, 1, 2, 2, 1, 1, 1, 1, 2, 2 ], "alignment": [ "h3_full", "h0_full h3_full", "h0_title", "h0_full", "h0_full", "", "h0_full", "h1_title", "h1_full", "h1_full", "h2_full h1_full", "h4_full", "", "", "", "" ] }
{ "question": [ "What did the Bureau of Engraving and Printing's studies determine?", "How much would these renovations cost?", "How would a new facility be better than the current facility?", "What would the effect on production be if a new facility was constructed?", "To what extent has BEP followed leading capital-planning practices?", "How has the BEP's capital planning followed leading practices?", "To what extent has the BEP's cost estimate partially followed leading practices?", "How do BEP officials plan to provide sufficient sensitivity analyses?", "What could affect the total federal costs of BEP's actions?", "What other potential sources of savings might benefit BEP?", "What costs would there be?", "What have agency officials noted about determining costs and savings?", "What is the role of BEP?", "How does the Federal Reserve assist BEP?", "For what is BEP requesting legal authority?", "What will BEP do if it does not receive the necessary legal authority?", "What did GAO do with the draft report?", "What did BEP emphasize in its comments?", "What contributions did the Federal Reserve make?", "What contributions did the GSA provide?" ], "summary": [ "The Bureau of Engraving and Printing's (BEP) studies and research determined that a new production facility would be less expensive and better address BEP's need for secure, efficient, and flexible currency production than a renovation of its Washington, D.C. facility.", "According to 2017 cost estimates, BEP's preferred option—a new production facility in the Washington, D.C., area and some renovated administrative space in its current D.C. facility—would cost approximately $1.4 billion, while a renovation of its current facility for both production and administrative functions would cost approximately $2.0 billion.", "A new facility similar to BEP's Texas facility could have a secure perimeter that meets federal building security standards. Such a perimeter is not possible with the current facility.", "A new facility could also house production on a single production floor to allow for a more efficient production process.", "BEP generally followed leading capital-planning practices, and its 2017 cost estimate of a new production facility partially met the characteristics of a reliable cost estimate.", "BEP's capital planning followed leading practices, for example, by including a needs assessment, a link to BEP's strategic plan, and a long-term capital plan.", "BEP's cost estimate partially followed leading practices, for example, by including most life-cycle cost components and documentation of the data used for the estimate. However, it did not include sufficient sensitivity analyses, which identify a range of costs-based on varying assumptions.", "BEP officials stated that they plan to follow the updated GSA guidance that includes GAO's cost-estimating leading practices when updating this early stage estimate.", "The ability to sell or repurpose any part of the current D.C. facility could affect the total federal costs of BEP's actions.", "According to officials from the Department of the Treasury (Treasury) and the General Services Administration (GSA), there could be savings if Treasury could consolidate staff or operations into the vacated facility. There could also be savings if the unneeded facility could be sold to a private buyer.", "However there would be costs to prepare the facility for use by other entities or if the unneeded facility does not sell.", "Agency officials said that it is too early to determine specific costs and savings.", "BEP, within Treasury, designs and produces U.S. currency notes at BEP's facilities in Washington, D.C., and Fort Worth, Texas.", "The Federal Reserve pays for BEP's operational expenses, including currency production.", "BEP is requesting legal authority to purchase land and construct a new production facility in the D.C. area.", "BEP officials told GAO that, if it does not receive the necessary legal authority for a new production facility, it will renovate the D.C. facility.", "GAO provided the draft report to BEP, GSA, the Federal Reserve, and Treasury for review.", "In the comments, reproduced in Appendix I, BEP emphasized the factors that led BEP to determine that a new facility is the preferred alternative.", "BEP and the Federal Reserve also provided technical comments, which we incorporated as appropriate.", "GSA did not provide comments." ], "parent_pair_index": [ -1, 0, 0, 0, -1, 0, 0, -1, -1, -1, 1, -1, -1, -1, -1, 2, -1, 0, 0, 0 ], "summary_paragraph_index": [ 4, 4, 4, 4, 5, 5, 5, 5, 6, 6, 6, 6, 0, 0, 0, 0, 3, 3, 3, 3 ] }
GAO_GAO-12-837
{ "title": [ "Background", "Definition of R&D in the Federal Government", "DHS R&D Investment", "R&D Roles and Responsibilities at DHS", "Our Work on Fragmentation, Overlap, and Duplication", "DHS Does Not Know Its Total Investment in R&D, and Policies and Guidance Could Help Define and Oversee R&D Efforts", "DHS Does Not Know Its Total Investment in R&D", "Policies and Guidance for Defining and Reporting R&D Could Improve Oversight", "S&T Coordinates Some R&D at DHS, but DHS R&D Is Fragmented and Overlapping, Increasing the Risk of Unnecessary Duplication", "S&T Has Taken Some Actions to Coordinate R&D across DHS", "DHS R&D Is Fragmented and Overlapping, Increasing the Risk of Unnecessary Duplication", "Policy and Tracking Mechanism Could Improve Coordination and Reduce Risk of Unnecessary Duplication", "Conclusions", "Recommendations for Executive Action", "Agency Comments and Our Evaluation", "Appendix I: Objectives, Scope, and Methodology", "Appendix II: Federal Government Definitions of Research and Development", "Appendix III: Department of Homeland Security Research and Development Obligations, Fiscal Year 2011", "Appendix IV: Role of Research and Development in Supporting the Department of Homeland Security Acquisition Life Cycle", "Appendix V: Comments from the Department of Homeland Security", "Appendix VI: GAO Contact and Staff Acknowledgments", "GAO Contact", "Staff Acknowledgments" ], "paragraphs": [ "", "OMB requires agencies to submit data on R&D programs as part of their annual budget submissions. Specifically, agencies are to provide data on investments for basic research, applied research, development, R&D facilities construction, and major equipment for R&D. OMB provides one definition of R&D that all federal agencies are to use to prepare budget estimates (see app. II for a list of federal R&D definitions). According to OMB, R&D activities comprise creative work undertaken on a systematic basis in order to increase the stock of knowledge, including knowledge of man, culture, and society, and the use of this stock of knowledge to devise new applications. R&D is further broken down into the following three stages, as defined by OMB.\nBasic research is a systematic study directed toward a fuller knowledge or understanding of the fundamental aspects of phenomena and of observable facts without specific applications towards processes or products in mind.\nApplied research is a systematic study to gain knowledge or understanding to determine the means by which a recognized and specific need may be met.\nDevelopment is a systematic application of knowledge or understanding, directed toward the production of useful materials, devices, and systems or methods, including design, development, and improvement of prototypes and new processes to meet specific requirements.", "There are several mechanisms by which agencies such as DHS are required to report their investments in R&D, and investments can be described in the following ways:\nBudget authority is the legal authorization to obligate funds.\nObligations are binding agreements for the government to make a payment (outlay) for goods and services ordered or received.\nOutlays are payments to liquidate obligations and represent the amount actually expended.\nFor R&D activities, OMB directs agencies to submit information on budget authority and outlays for each year. Because the executive branch and Congress generally make budget decisions in terms of budget authority, budget authority can provide insight into relative priorities within the annual budget process and changes in budget policies. Agencies report obligation data to OMB by object classification. Object classes are categories that present obligations for items or services purchased according to their initial purpose. For R&D-related obligations, OMB has a separate category for R&D contracts (object class 25.5). OMB also includes some advisory and assistance services for R&D in a separate object class category (object class 25.1).\nThe other agencies conducting homeland security R&D included the Departments of Agriculture, Commerce, Defense, Energy, and Health and Human Services; the National Aeronautical and Space Administration; the Environmental Protection Agency; and the National Science Foundation. being the largest R&D entity. DHS reported $512 million in budget authority and $752 million in outlays for R&D in fiscal year 2011.", "The Homeland Security Act of 2002 established S&T within DHS and provided it with responsibility for, among other things: conducting basic and applied research, development, demonstration, and testing and evaluation activities relevant to any or all elements of DHS; establishing and administering the primary R&D activities of the department, including the long-term research and development needs and capabilities for all elements of the department; and coordinating and integrating all research, development, demonstration, testing, and evaluation activities of the department.\nS&T has six technical divisions responsible for managing S&T’s R&D portfolio and coordinating with other DHS components to identify R&D priorities and needs. As of September 2012, S&T had approximately 79 active R&D projects. Most of S&T’s R&D portfolio consists of applied and development R&D projects for its DHS customers. It also conducts other projects for additional customers, including other federal agencies, first responders, and industry, among others.\nThese divisions are the Borders and Maritime Division, Chemical/Biological Defense Division, Cyber Security Division, Explosives Division, Human Factors/ Behavioral Sciences Division, and the Infrastructure Protection and Disaster Management Division. In addition, S&T’s First Responder Group (FRG) identifies, validates, and facilitates the fulfillment of first responder requirements through the use of existing and emerging technologies, knowledge products, and the development of technical standards, according to S&T FRG officials.\nIn addition to S&T, DNDO and the Coast Guard conduct R&D activities. After its establishment in 2005, DNDO assumed responsibility from S&T for certain nuclear and radiological R&D activities. DNDO is the primary federal organization responsible for developing, acquiring, and supporting the deployment of an enhanced domestic system to detect and report on attempts to import, possess, store, transport, develop, or use an unauthorized nuclear explosive device, fissile material, or radiological material in the United States.estimated that they have 30 R&D projects and plan to obligate $75.9 million for R&D in fiscal year 2012. According to Coast Guard officials, the Coast Guard R&D Center conducts R&D projects to support the Coast Guard’s priorities, primarily focusing on maritime safety-related projects. As of August 2012, Coast Guard officials estimated that they have 60-70 applied research projects and have spent about $30 million on R&D in fiscal year 2012 so far.", "In 2010, Congress directed us to identify programs, agencies, offices, and initiatives with duplicative goals and activities within departments and government-wide and report annually to Congress. In March 2011 and February 2012, we issued our first two annual reports to Congress in response to this requirement. The annual reports describe areas in which we found evidence of fragmentation, overlap, or duplication among federal programs. Using the framework established in our prior work on addressing fragmentation, overlap, and duplication, we use the following definitions for the purpose of assessing DHS’s R&D efforts:\nFragmentation occurs when more than one federal agency (or more than one organization within an agency) is involved in the same broad area of national interest.\nOverlap occurs when multiple programs have similar goals, engage in similar activities or strategies to achieve those goals, or target similar beneficiaries. Overlap may result from statutory or other limitations beyond the agency’s control.\nDuplication occurs when two or more agencies or programs are engaging in the same activities or providing the same services to the same beneficiaries.", "", "DHS does not know how much all of its components invest in R&D, making it difficult to oversee R&D efforts across the department. According to DHS budget officials, S&T, DNDO, and the Coast Guard are the only components that conduct R&D and, according to our analysis, they are the only components that report budget authority, obligations, or outlays for R&D activities to OMB as part of the budget process. However, we identified an additional $255 million in R&D obligations by other DHS components. Further, we found that DNDO did not report certain R&D budget data to OMB, and R&D budget accounts include a mix of R&D and non-R&D spending, further complicating DHS’s ability to identify its total investment in R&D.\nOur analysis of the data that DHS submitted to OMB found that DHS’s R&D obligations were underreported because other DHS components obligated money for R&D contracts that were not reported to OMB as R&D. Specifically, for fiscal year 2011, our analysis identified $255 million in obligations for R&D that DHS did not report as R&D contracts in the object classification tables. These obligations included DHS components providing S&T with funding to conduct R&D on their behalf and components obligating funds through contracts directly to industry, universities, or with DOE’s national laboratories for R&D. Specifically:\nS&T reported receiving $50 million in reimbursements from other DHS components, such as U.S. Citizenship and Immigration Services, the Secret Service, the Office of Health Affairs, Customs and Border Protection (CBP), and the Transportation Security Administration (TSA) to conduct R&D projects. These obligations were not identified as R&D in these components’ budgets.\nOur analysis identified 10 components, including CBP, TSA, U.S.\nImmigration and Customs Enforcement (ICE), and the Federal Emergency Management Agency (FEMA), that obligated approximately $55 million for R&D contracts that were not reported as R&D.\nOur analysis identified that DHS components, outside of S&T, DNDO, and the Coast Guard, obligated $151 million to DOE national laboratories for R&D-related projects (44 percent of total DHS spending at the national laboratories in fiscal year 2011). For example, the National Protection and Programs Directorate (NPPD) obligated $83 million to DOE national laboratories in fiscal year 2011 (see app. III for R&D obligations by component).\nOur analysis of the data that DHS submitted to OMB also showed that DHS’s R&D budget authority and outlays were underreported because DNDO did not properly report its R&D budget authority and outlays to OMB for fiscal years 2010 through 2013. Specifically, for fiscal years 2010 through 2013, DHS underreported its total R&D budget authority by at least $293 million and outlays for R&D by at least $282 million because DNDO did not accurately report the data. In fiscal year 2011, S&T and the Coast Guard reported $512 million in R&D budget authority and $752 million in outlays, but DNDO did not report $56 million in R&D budget authority or $80 million in outlays. DNDO officials gave us the data for the missing years as depicted in figure 1 along with S&T and Coast Guard data.\nDNDO budget officials told us that they are aware of the omission and confirmed that the OMB submission will be corrected in fiscal year 2013. DHS budget officials agreed that DHS underreported its R&D spending and when asked, could not provide a reason why the omission was not flagged by DHS review.\nIn addition, within S&T, the Coast Guard, and DNDO, it is difficult to identify all R&D funding because their R&D budget accounts fund both R&D and non-R&D investments. For fiscal year 2011, we estimated that 78 percent of S&T’s Research, Development, Acquisition, & Operations account, 51 percent of DNDO’s “Research, Development, & Operations” account, and 43 percent of the Coast Guard’s R&D budget account fund R&D activities. Figure 2 provides the various S&T, DNDO, and Coast Guard budget accounts and budget activities and what percentage of each account was obligated for R&D in fiscal year 2011.\nDHS’s budget director recognized that spending in areas that cut across the department, like R&D, are difficult to manage and told us that DHS does not have oversight of R&D across the department. DHS is taking some steps to address this, including identifying R&D as a budget line in DHS’s proposed unified account structure, which was submitted to Congress in the fiscal year 2013 budget for approval.\nIn 2007, we reported that appropriators rely on budget exhibits to inform the decision to authorize and appropriate funds for many programs; thus, accurate classifications of program and projects by budget activity are needed for decision makers to readily understand how projects are progressing and how money is being spent. Specifically regarding R&D, we reported that decision makers use the Department of Defense’s (DOD) budget reports, which detail a project’s stage of development, to assess how much is being invested in fundamental science and technology and to determine the future capabilities of U.S. military forces.", "DHS does not have a departmentwide policy defining R&D or guidance directing components how to report R&D activities. As a result, it is difficult to identify the department’s total investment in R&D, which limits DHS’s ability to oversee components’ R&D efforts and align them with agencywide R&D goals and priorities. DHS officials told us that DHS uses OMB’s definition of R&D, but the definition is broad and its application may not be uniform across components, and thus, R&D investments may not always be identified as R&D. For example, DHS officials told us that test and evaluation is generally not considered R&D because the purpose is to test how an existing technology fits into an operational environment. However, S&T’s Chief Financial Officer (CFO) told us that S&T reports test and evaluation activities as part of its R&D budget authority.\nFurther, DHS officials told us that there is no distinct line between capital investments and the R&D for technology development. For example, NPPD officials told us they consider its cybersecurity system to be a capital investment, and not R&D, but they consider R&D of new technologies as an important aspect of this system. The variation in R&D definitions may contribute to the unreliability of the reporting mechanisms for R&D investments in budget development and execution, as discussed above. Standards for Internal Control in the Federal Government state that policies and mechanisms are needed to enforce management’s directives, such as the process of adhering to requirements for budget development and execution and to ensure the reliability of those and other reports for internal and external use. Additionally, we previously reported that agencies can enhance and sustain their collaborative efforts by defining and articulating a common outcome and establishing compatible policies, procedures, and other means to operate across agency boundaries. Such definitions could help DHS better identify its R&D investment.\nDOD FMR, DoD 7000.14-R, Volume 2B, Chapter 5. appropriation accounts for R&D activities. However, those reports include R&D that is reported as R&D obligations in the budget process and do not provide financial details for the R&D investments made by components other than S&T, DNDO, and the Coast Guard, as described earlier in this report.\nThe challenges DHS faces in managing its R&D efforts are similar to the challenges the department has faced in managing its acquisitions. In September 2008, we reported that DHS had not integrated the acquisition function across the department and did not have adequate oversight of all of its acquisition programs. DHS officials agreed with our findings and the agency has taken steps to implement policies and guidance to ensure that components follow consistent acquisition practices and that a process exists to oversee acquisition programs, as outlined in Acquisition Management Directive 102-01 (AMD 102-01). Officials at DHS’s Program Accountability and Risk Management office (PARM) agreed the department has not developed policies or guidance on how components should define and oversee R&D investments and efforts. They stated that they are in the process of updating AMD 102-01 to include additional sections pertaining to nonacquisition investments and that such R&D policy and guidance could be incorporated into such updates in the future. (See App. IV for an illustration of how R&D supports all four phases of DHS’s Acquisition Life Cycle as defined by AMD 102-01). Such an update could establish policy and guidance for defining R&D consistently across the department and outline the processes and procedures for overseeing R&D, which would provide more oversight into the R&D investments across the department.", "S&T has coordinated R&D efforts across DHS to some extent, but the department’s R&D efforts are fragmented and overlapping, which increases the risk of unnecessary duplication. We identified 35 instances of overlap among contracts that DHS components awarded for R&D projects, but did not identify instances of duplication among these contracts. Additionally, DHS has not developed a policy defining who is responsible for coordinating R&D and what processes should be used to coordinate it, and S&T does not have mechanisms to track all R&D activities at DHS. Developing a policy defining the roles and responsibilities for coordinating R&D, and establishing coordination processes and a mechanism to track all R&D projects could help DHS mitigate existing fragmentation and overlap, and reduce the risk of unnecessary duplication.", "The Homeland Security Act of 2002, among other things, requires that S&T coordinate and integrate all research, development, demonstration, testing, and evaluation activities within DHS and establish and administer the primary R&D activities of the department. To carry out these responsibilities, S&T developed coordination practices that fall into four general categories: (1) S&T component liaisons, (2) R&D agreements between component heads and S&T, (3) joint R&D strategies between S&T and components, and (4) various R&D coordination teams made up of S&T and component project managers.\nS&T officials stated that one of the primary ways that S&T mitigates the risk of overlap and duplication is through component liaisons staffed at S&T and S&T officials staffed at component agencies. Component liaisons became a primary coordination mechanism under the former Under Secretary who requested a Coast Guard official to work at S&T as a deputy division director. According to S&T officials, these component liaisons have been integral to S&T’s coordination efforts. As of July 2012, S&T had eight liaisons from TSA, CBP, ICE, NPPD, the Secret Service, and the Coast Guard. In addition, S&T had seven employees detailed to other components, including CBP, the Secret Service, DHS’s Office of Policy, DHS’s Tactical Communications Program Office, DNDO, and TSA, as well as two liaisons at FEMA and DHS’s Office of the Chief Financial Officer. According to S&T, liaisons help S&T maintain communication with components on R&D needs and related activities. For example, CBP requested an S&T liaison to provide technical expertise to its acquisition division. However, S&T does not have liaisons with every component.\nS&T signed agreements with two components—CBP and the Secret Service—to help coordinate R&D activities. Under those agreements, S&T is working with the components on high-level “Apex projects” that are intended to solve components’ strategic operational problems within 2 years. For example, S&T and the Secret Service have an Apex project called the Science and Technology Operational Research and Enhancement project that was initiated in June 2010 to provide technology solutions for the Secret Service to define, establish, and document the near- and long-term R&D strategy for the protection of national leaders, visiting heads of state and government, designated sites, and national special security events. S&T officials stated that the Apex project required development and testing of about seven technologies which the Secret Service plans to incorporate into its operations. As of July 2012, S&T officials reported that all seven technologies were in the developmental stage and will undergo testing in late 2012. For the CBP Apex project, S&T is overseeing the development and evaluation of new technology and infrastructure to help CBP create Secure Transit Corridors. S&T officials stated that, as of July 2012, the project was on track to be completed in 1 year. S&T officials stated that it can accommodate only three or four Apex projects at any given time because of the time and resources required, but that it anticipates starting future Apex projects with FEMA and ICE. As a result, these high-level partnerships are not intended to address all customer needs at DHS.\nFurther, S&T provided us with three memorandums of agreement it entered into with DHS components as a means to coordinate R&D efforts. Specifically, S&T has agreements with CBP to develop a rapid response prototype, the Coast Guard to develop a test bed, and TSA to coordinate the transition of the Transportation Security Laboratory from TSA to S&T which, was completed in 2006. S&T is also currently working with TSA on an Aviation Security agreement that is to result in S&T supporting TSA in various areas (as outlined in the agreement) and providing technology to address capability gaps. S&T plans to initiate similar partnerships first with CBP, then with ICE and FEMA.\nS&T also works with DHS components to ensure that it meets their R&D needs by signing technology transition agreements (TTA) to ensure that components use the technologies S&T develops. S&T has 42 TTAs with DHS components. For example, TSA agreed to integrate automated intent detection technologies to better detect unknown threats before they enter the country into its behavior detection-screening program once S&T successfully demonstrated that the technologies met performance requirements. Additionally, the U.S. Citizenship and Immigration Service (USCIS) agreed to deploy rapid DNA-based screening technologies to determine kinship to use in the refugee and asylum eligibility determination process upon S&T demonstrating that the technology meets certain performance criteria. According to S&T officials, none of these TTAs has yet resulted in a technology being transitioned from S&T to a component.\nIn March 2011, S&T and TSA issued a joint R&D strategy for aviation security that identifies TSA’s R&D priorities. That plan was a result of an internal planning process that prioritized capability gaps and focused on the work between TSA and S&T’s Explosives and Human Factors/Behavioral Sciences Divisions. According to TSA officials, the joint R&D strategic plan does not represent a TSA-wide R&D strategy because it does not include surface transportation security capability gaps. Rather, the officials said that TSA uses the National Infrastructure Protection Plan and an R&D working group with S&T to identify those capability gaps. S&T officials stated that it is currently updating its R&D Strategy with TSA. S&T is also planning to work with the Secret Service, CBP, ICE, and FEMA to build component-specific R&D strategies that are linked to component acquisition programs.\nS&T’s previous Under Secretary instituted the Capstone Integrated Product Teams (IPT) process to coordinate R&D efforts between S&T and components. IPTs served as S&T’s primary mechanism for coordinating R&D and consisted of members from S&T and component agencies. In S&T’s 5-year R&D plan for fiscal years 2008 through 2013, S&T identified 12 IPTs, each of which was focused on a different topic and brought together decision makers from DHS components and S&T, as well as end users of technologies. Additionally, the IPT process included teams to coordinate R&D at the project level among S&T and components. IPTs solicited input from components to identify and address technology gaps and needs and were intended to assist operational units in making decisions about technology investments, based on S&T’s understanding of technology and the state of applicable technology solutions. For example, members of the cargo security IPT determined that the capability gap that should be addressed was enhancing cargo screening and examination systems through detecting or identifying terrorist contraband items, like drugs or illegal firearms. As a result, S&T identified CanScan, a nonintrusive inspection system as a means for addressing that gap.\nWe interviewed directors of divisions responsible for coordinating R&D activities throughout the department. These included Borders and Maritime Division, Chemical and Biological Division, Cyber Security Division, Explosives Division, Human Factors/ Behavioral Sciences Division, and Infrastructure Protection Division. focus on components’ operational needs.directors, these new teams are not yet fully implemented and they are still using established relationships with components through the IPT process to identify components needs and coordinate R&D. Additionally, S&T still maintains IPTs with TSA on surface transportation.", "R&D at DHS is inherently fragmented because several components within DHS—S&T, the Coast Guard, and DNDO—were each given R&D responsibilities in law, and other DHS components may pursue and conduct their own R&D efforts as long as those activities are coordinated through S&T. Fragmentation among R&D efforts at DHS may be advantageous if the department determines that it could gain better or faster results by having multiple components engage in R&D activities toward a similar goal; however, it can be disadvantageous if those activities are uncoordinated or unintentionally overlapping or duplicative.\nTo illustrate overlap and the potential for unnecessary duplication, we reviewed data on about 15,000 federal procurement contract actions coded as R&D taken by DHS components from fiscal years 2007 through 2012. See appendix 1 for details on our methodology for identifying overlap. Of those, we identified 50 R&D contracts issued by six DHS components—S&T, TSA, FEMA, the Office of Health Affairs (OHA), the Coast Guard, and CBP—that appeared to have similar activities with another contract and interviewed component officials about those R&D activities. We obtained 47 of those 50 contracts and reviewed their statements of work. On the basis of that analysis and our interviews with components, we identified 35 instances of overlap where components awarded R&D contracts that overlapped with R&D activities conducted elsewhere in the department. We also found that DHS did not have tracking mechanisms or policies to help ensure that this overlap be avoided and better coordinated. For example:\nS&T awarded four separate contracts to develop methods of detecting ammonium nitrate and urea nitrate for the counter-IED program. TSA also awarded a contract to a private vendor to investigate the detection of ammonium nitrate and ammonium nitrate-based explosives. These contracts were similar in that they all addressed the detection of the same chemical.\nS&T awarded four separate contracts to develop advanced algorithms for explosives detection, while TSA also awarded contracts to develop algorithms to evaluate images for explosives. We determined that these R&D contracts overlapped because both components were involved in developing algorithms for explosives detection.\nS&T awarded a contract to a private vendor for support and analysis for seismic hazards, while FEMA also awarded a contract to a private vendor to develop seismic guidelines for buildings in the event of an earthquake. These contracts overlapped because they were both similar in scope.\nAlthough the contracts we selected overlapped, we determined that they were not duplicative based on our analysis and our interviews with component officials. For example, TSA officials stated that all TSA R&D contracts we requested were initially awarded when TSA still conducted transportation security-related R&D and were managed by the Transportation Security Laboratory (TSL), which moved into S&T in 2006. As a result, TSA did not have oversight into those contracts. Additionally, TSA officials stated that some of the contracts may have overlapped in the scope of work but were focused on different operational missions. S&T officials agreed with TSA, stating that some of this overlap occurred during a period of time when TSA was still conducting R&D through TSL and during a time when S&T did not have the level of contract oversight that it has now. FEMA officials stated that FEMA’s research projects are related to earthquake hazards, rather than to multiple hazards like S&T’s research projects. They stated that FEMA’s coordination with S&T is dependent on prior personal relationships rather than through an established coordination process.\nAccording to S&T officials, a process does not exist at DHS or within S&T to prevent overlap or unnecessary duplication but that relationships with components mitigate that risk. They also stated that S&T has improved interactions with components over time. For example, S&T officials stated that when CBP requested mobile radios to improve communication among its field staff, S&T knew that the Secret Service and ICE were already working in that area. To address this technology need, S&T provided a senior official to lead the Tactical Communication Team to address communication among different operational components and better coordinate those efforts.\nIn conducting this analysis, we recognize that overlapping R&D activities across similar areas may not be problematic. However, the existence of overlapping R&D activities coupled with the lack of policies and guidance defining R&D (as mentioned previously) and coordination processes is an indication that not all R&D activities at DHS are coordinated to ensure that R&D is not unnecessarily duplicative. As a result, DHS could increase oversight of R&D, and improve coordination of R&D activities to ensure that any duplication in R&D activities is purposeful rather than unnecessary, as discussed later in this draft. Overlap and the associated risk of unnecessary duplication occur throughout the government, as we However, when have reported previously, and are not isolated to DHS.coupled with consistent programmatic coordination, the risk of unnecessary duplication can be diminished.", "DHS and S&T do not have the policies and mechanisms necessary to coordinate R&D across the department and reduce the risk of unnecessary duplication. First, as noted earlier in this report, DHS does not have the policies and guidance necessary to define and oversee R&D investments across the department. While S&T has taken steps to coordinate R&D, DHS has not developed a policy defining who is responsible for coordinating R&D and what processes should be used to coordinate it. Specifically, while S&T has R&D agreements with some components, S&T officials rely on the former IPT process to coordinate with components. For example, S&T division directors cited the IPT process and personal relationships as the primary means to coordinate R&D activities with components and generally felt that they were coordinating effectively.\nHowever, other component officials we interviewed did not view S&T’s coordination practices as positively. Specifically, we interviewed six components to discuss the extent to which they coordinated with S&T on R&D activities. Four components stated that S&T did not have an established process that detailed how S&T would work with its customers or for coordinating all activities at DHS. For example, one component stated that S&T has conducted R&D that it thought would address the component’s operational need but, when work was completed, the R&D project did not fit into the operational environment to meet the component’s needs. In addition, without an established coordination process, the risk for unnecessary duplication increases, because components can engage in R&D activities without coordinating them through S&T (see fig. 3).\nStandards for Internal Control in the Federal Government states that policies and procedures ensure that the necessary activities occur at all levels and functions of the organization—not just from top-level leadership. This ensures that all levels of the organization are coordinating effectively and as part of a larger strategy. Additionally, internal control standards provide that agencies should communicate necessary information effectively by ensuring that they are communicating with, and obtaining information from, external stakeholders that may have a significant impact on the agency achieving its goals. DHS and S&T could be in a better position to coordinate the department’s R&D efforts by implementing a specific policy outlining R&D roles and responsibilities and processes for coordinating R&D.\nFurthermore, S&T and DHS have not developed a mechanism to track all ongoing R&D projects conducted across DHS components. Specifically, neither DHS nor S&T tracks all ongoing R&D projects across the department, including R&D activities contracted through the national laboratories. The Homeland Security Act of 2002 gave DHS the authority to use DOE laboratories to conduct R&D and established S&T’s Office of National Laboratories (ONL) to be responsible for coordinating and using the DOE national laboratories. Additionally, DHS Directive 143 further directs ONL to serve as the primary point of contact to recommend contracting activity approval for work by the national laboratories, and review all statements of work issued from DHS and directed to the national laboratories. According to S&T, the purpose of that review is to ensure the proposed work is within the scope, and complies with the terms and conditions, of the prime contract between DOE and the national laboratories. We identified 11 components that reimbursed the national laboratories for R&D between fiscal years 2010 and 2013, but ONL could not provide us with any information on those activities and told us it did not track them.information on activities across the department is limited by components inconsistently operating within the DHS Directive 143 process for working with the national laboratories. According to the Director of ONL, to identify activities not reported through the DHS Directive 143 process, S&T uses other means such as relationships with components and S&T, as well as reviewing task orders sent to the laboratories from DHS, visiting laboratories, and laboratories self-reporting their work to ONL.\nAccording to S&T, ONL's ability to provide We previously reported in 2004 that DHS faced challenges using DOE’s laboratories and balancing the immediate needs of users of homeland security technologies with the need to conduct R&D on advanced technologies for the future. DHS agreed with our recommendation to create a strategic R&D plan to identify and develop countermeasures to chemical, biological, radiological, nuclear, and other emerging terrorist threats and to ensure that it detailed how DHS would work with other federal agencies to establish governmentwide priorities, identify research gaps, avoid duplication of effort, and leverage resources. DHS noted that such a plan was critical to the success of the department, and stated that S&T would complete a strategic planning process in 2004 that would be reviewed and updated annually. To date, DHS has not yet developed a departmentwide strategic plan for managing R&D, although S&T has developed its own plan.\nStandards for Internal Control in the Federal Government states that controls are needed to provide reasonable assurance that, among other things, reliable data are obtained, maintained, and fairly disclosed in reports and agencies comply with laws and regulations. In addition, in June 2010, we reported that R&D information should be tracked in a consolidated database in order to fully coordinate cybersecurity R&D activities to provide essential information about ongoing and completed R&D. We recommended that the Director of the Office of Science and Technology Policy (OSTP) direct its subcommittee on Networking and Information Technology Research and Development to exercise its leadership responsibilities by, among other things, establishing and using a mechanism to keep track of federal cybersecurity R&D funding. OSTP agreed with our recommendation. Additionally, we previously reported that agencies can enhance and sustain their collaborative efforts by, among other things, agreeing on roles and responsibilities and developing mechanisms to monitor, evaluate, and report on results.\nDHS officials agreed that such mechanisms to track R&D activities were necessary, and said they have faced similar challenges in managing investments across the department. DHS has attempted to address those challenges by, among other things, creating a database called the Decision Support Tool that is intended to improve the flow of information from component program offices to the DHS Management Directorate to support its governance efforts. The Decision Support Tool could provide an example of how DHS could better track ongoing R&D projects occurring in the department. DHS’s PARM officials stated that they recently added new data fields to capture more detailed information on component activities, such as additional financial data, at a low cost to DHS, and that such data fields could be added to collect information and track R&D activities across DHS, such as contracts with private companies or universities and the associated costs. However, we reported in March 2012 that DHS executives were not confident enough in the data to use the Decision Support Tool to make acquisition decisions, and that DHS’s plans to improve the quality of the data in this database were limited. We also reported that DHS had limited plans to improve the quality of the data because PARM only planned to check the data quality in preparation for key milestone meetings in the acquisition process. That could significantly diminish the Decision Support Tool’s value, because users cannot confidently identify and take action to address problems meeting cost or schedule goals prior to program review meetings. As a result, improvements to the Decision Support Tool’s data quality before expanding its use could improve the collecting and tracking of R&D information and could be used as an example of how to better track information occurring across components. DHS is taking actions to address the limitations to the Decision Support Tool’s data quality by working to validate the Decision Support Tool’s associated acquisition data. A policy that defines roles and responsibilities for coordinating R&D and coordination processes, as well as a mechanism that tracks all DHS R&D projects, could better position DHS to mitigate the risk of overlapping and unnecessarily duplicative R&D projects.", "Conducting R&D on technologies is a key component of DHS’s efforts to detect, prevent, and mitigate terrorist threats and is vital to enhancing the security of the nation. Multiple entities across DHS conduct various types of R&D in pursuit of their respective missions, but DHS does not have a department-wide policy defining R&D or guidance directing components how to report R&D activities and investments. As a result, DHS does not have the ability to maintain oversight of its total investment in R&D across the department, which also limits its ability to oversee components’ R&D efforts and align them with agencywide R&D goals and priorities. Establishing policies and guidance for defining R&D across the department and outlining the processes and procedures for overseeing R&D would provide more oversight of R&D investments across the department. Furthermore, DHS has taken some steps to coordinate R&D efforts across the department, but does not have a cohesive policy defining roles and responsibilities for coordinating R&D and mechanisms to track all DHS R&D projects. A policy that defines roles and responsibilities for coordinating R&D and coordination processes, as well as a mechanism that tracks all DHS R&D projects, could better position DHS to mitigate the risk of overlapping and unnecessarily duplicative R&D projects.", "To help ensure that DHS effectively oversees its R&D investment and efforts and reduces fragmentation, overlap, and the risk of unnecessary duplication, we recommend that the Secretary of Homeland Security develop and implement policies and guidance for defining and overseeing R&D at the department. Such policies and guidance could be included as an update to the department’s existing acquisition directive and should include the following elements: a well-understood definition of R&D that provides reasonable assurance that reliable accounting and reporting of R&D resources and activities for internal and external use are achieved, a description of the department’s process and roles and responsibilities for overseeing and coordinating R&D investments and efforts, and a mechanism to track existing R&D projects and their associated costs across the department.", "We provided a draft of this report to DHS for its review and comment. DHS provided written comments, which are reproduced in full in appendix V, and concurred with our recommendation. DHS also described actions it plans to take to address the recommendation. Specifically, according to DHS, it plans to evaluate the most effective path forward to guide uniform treatment of R&D across the department in compliance with OMB rules and is considering a management directive, multi component steering committee, or new policy guidance to help better oversee and coordinate R&D. DHS plans to complete these efforts by May 1, 2013. Such actions should address the overall intent of our recommendation. However, it will be important that whatever DHS chooses to do, its actions address the specific elements we outlined in our recommendation, including developing a definition of R&D, defining roles and responsibilities for oversight and coordination, and developing a mechanism to track existing R&D projects and investments.\nDHS also provided written technical comments, which we incorporated as appropriate.\nWe are sending copies of this report to the Secretary of Homeland Security, appropriate congressional committees, and other interested parties. This report is also available at no charge on GAO’s website at http://www.gao.gov.\nIf you or your staffs have any questions about this report, please contact me at (202) 512-9627 or [email protected]. Contact points for our Office of Congressional Relations and Public Affairs may be found on the last page of this report. Key contributors to this report are listed in appendix VI.", "This report answers the following questions: 1. How much does the Department of Homeland Security (DHS) invest in research and development (R&D) and to what extent does it have policies and guidance for defining R&D and overseeing R&D resources and efforts across the department? 2. To what extent is R&D coordinated within DHS to prevent overlap, fragmentation, and unnecessary duplication across the department?\nTo determine how much DHS invests in R&D and the extent that it has policies and guidance for defining R&D and overseeing R&D resources and efforts across the department, we reviewed DHS’s budget and congressional budget justifications to identify R&D investments reported from fiscal years 2011 through 2013. We analyzed R&D budget authority, outlays, and obligations included in budget submissions to the Office of Management and Budget (OMB) reported for fiscal years 2010 through 2013. We also analyzed Science and Technology Directorate (S&T), Domestic Nuclear Detection Office (DNDO), and Coast Guard budgets to identify obligations for R&D funded by non-R&D budget activities as identified in object class tables that present obligations by the items or services purchased (e.g. personnel compensation and benefits, contractual services and supplies, acquisition of assets, grants and fixed charges). In addition, we assessed DHS’s management and oversight of its R&D spending against criteria in GAO’s Standards for Internal Control in the Federal Government.\nWe analyzed data from the Federal Procurement Data System Next Generation (FPDS-NG) to identify R&D-related contracts across DHS for fiscal years 2007 through 2011. We filtered these contracts to include only those R&D stages coded as basic research, applied research, and exploratory development and advanced development, which align more closely with recognized definitions of R&D. We excluded the other four stages (engineering development, operational systems development, management/support, and commercialization) of R&D because these activities are linked more closely to procurements rather than R&D activities. We also analyzed data from the Department of Energy’s (DOE) national laboratories from fiscal years 2010 through 2012 to identify how much DHS components obligated for R&D-related work at the national labs.\nTo determine the extent that R&D is coordinated within DHS to prevent overlap, fragmentation, and unnecessary duplication, we\nReviewed component R&D plans and project documentation. We also reviewed department and S&T division strategic plans.\nInterviewed officials from DHS, DNDO, the Coast Guard, the Transportation Security Administration (TSA), the Office of Health Affairs (OHA), U.S. Customs and Border Protection (CBP), the National Protection and Programs Directorate (NPPD), and the Secret Service to discuss, among other things, their R&D efforts, R&D budgets, and coordination with S&T. We interviewed DHS budget and acquisition oversight officials to discuss how DHS oversees and manages its R&D resources.\nInterviewed S&T’s budget official and Homeland Security Advanced Research Projects Agency (HSARPA) officials, including directors from each of the six technical divisions, to discuss how they coordinated with components and prioritized R&D resources.\nUsed a data-collection instrument to collect information on S&T R&D projects, associated costs of R&D projects, and division customers from each HSARPA director and interviewed the Director of S&T’s Office of National Laboratories, responsible for coordinating S&T and DHS’s R&D work conducted at the DOE national laboratories to discuss DHS’s spending at and use of these laboratories.\nCompared DHS’s coordination efforts against the relevant legislation and criteria, including federal internal control standards as well as GAO’s recommended practices for collaboration and coordination to identify efforts to meet certain provisions and potential areas for improvement.\nTo seek examples of potential overlap and duplication, we\nReviewed data on about 15,000 federal procurement contract actions coded as R&D in the Federal Procurement Data System Next Generation (FPDS-NG) made by DHS components from fiscal years 2007 through 2012 to identify contracts that were potentially overlapping or duplicative of other contracts issued by different components. This was the total number of DHS contract actions taken from fiscal years 2007 through 2011.\nEstablished 32 key words based on our knowledge of the likely areas of overlapping R&D related to component missions in order to identify areas where components may have issued contracts that were similar in scope and to eliminate areas where duplicative activities were likely to be present but acceptable (e.g., personnel support and management services). We searched for the key words in the FPDS- NG data set to identify contracts containing the same key words issued by more than one component.\nIndependently analyzed the contract descriptions and identified 50 R&D contracts issued by six components—S&T, the Coast Guard, TSA, CBP, OHA, and the Federal Emergency Management Agency (FEMA)—that appeared to overlap and interviewed officials from those components to discuss the nature of those contracts.\nObtained 47 out of 50 contracts and analyzed each contract’s statement of work and objectives to determine the type of R&D activity and to identify whether each contract was overlapping or duplicative of any of the other 46 contracts. Two analysts independently reviewed each contract and then came to agreement regarding the presence of overlap and duplication.\nWe could not determine the full extent of duplication or overlap in the department, because the FPDS-NG data system captures only a portion of the total R&D activities occurring at DHS and we did not review the documentation for, or conduct a random sample of, all 15,000 R&D contract actions. However, the results from our analysis illustrate overlap and the potential for unnecessary duplication. We also used our past work on fragmentation, overlap, and duplication across the federal government; Standards for Internal Control in the Federal Government; and our prior reports to assess DHS’s coordination of R&D across the department.\nWe assessed the reliability of the data we used by reconciling the data with published data and applicable quality control procedures to maintain the integrity of the data, and interviewing DHS budget and procurement officials responsible for overseeing the data systems. In addition, we reviewed available FPDS-NG documentation, such as the user manual, and OMB guidance to identify related quality control mechanisms. We also assessed the reliability of data on DOE’s national laboratory work for others by interviewing DOE officials responsible for compiling and reporting those data. We concluded that these data were sufficiently reliable for the purposes of this report.\nWe conducted this performance audit from September 2011 through September 2012 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 that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives.", "Basic research Systematic study directed toward fuller knowledge or understanding of the fundamental aspects of phenomena and observable facts without specific applications toward processes or products.\nApplied research Systematic study to gain knowledge or understanding necessary to determine the means by which a recognized and specific need may be met.\nDevelopment Systematic application of knowledge or understanding, directed toward the production of useful materials, devices, and systems or methods, including design, development, and improvement of prototypes and new processes to meet specific requirements.\nSystematic study to gain knowledge or understanding of the fundamental aspects of phenomena and observable facts without specific applications toward processes or products.\nSystematic study to gain knowledge or understanding necessary for determining the means by which a recognized and specific need may be met.\nSystematic use of the knowledge and understanding gained from research for the production of useful materials, devices, systems, or methods, including the design and development of prototypes and processes.\nResearch directed toward increasing knowledge in science with the primary aim being a fuller knowledge or understanding of the subject under study, rather than any practical application of that knowledge.\nThe effort that (1) normally follows basic research, but may not be severable from the related basic research; (2) attempts to determine and exploit the potential of scientific discoveries or improvements in technology, materials, processes, methods, devices, or techniques; and (3) attempts to advance the state of the art.\nSystematic use of scientific and technical knowledge in the design, development, testing, or evaluation of a potential new product or service (or of an improvement in an existing product or service) to meet specific performance requirements or objectives.\nSystematic study directed toward fuller knowledge or understanding of the fundamental aspects of phenomena and observable facts without specific applications toward processes or products.\nSystematic study to gain knowledge or understanding necessary to determine the means by which a recognized and specific need may be met.\nSystematic application of knowledge or understanding, directed toward the production of useful materials, devices, and systems or methods, including design, development, and improvement of prototypes and new processes to meet specific requirements. (1) Systematic study directed toward greater knowledge or understanding of the fundamental aspects of phenomena and of observable facts without specific applications toward processes or precuts in mind. It is farsighted high payoff research that provides the basis for technological progress. (2) Systematic study to understand the means to meet a recognized and specific need. Systematic expansion and application of knowledge to develop useful materials, devices, and systems or methods. May be oriented, ultimately, toward the design, development, and improvement of prototypes and new processes to meet general mission area requirements. Applied research may translate promising basic research into solutions for broadly defined military needs, short of system development.", "", "", "", "", "", "In addition to the contact named above, Chris Currie, Assistant Director, and Gary Malavenda, Analyst-in-Charge, managed this assignment. Emily Gunn and Margaret McKenna made significant contributions to this report. Also contributing to this report were Katherine Davis, Michele Fejfar, Eric Hauswirth, Carol Henn, Richard Hung, Julia Kennon, Tracey King, Nate Tranquilli, Katherine Trimble, and Sarah Veale." ], "depth": [ 1, 2, 2, 2, 2, 1, 2, 2, 1, 2, 2, 2, 1, 1, 1, 1, 1, 1, 1, 1, 1, 2, 2 ], "alignment": [ "", "", "", "", "", "h0_title", "h0_full", "h0_full", "h2_title h1_full", "h1_full", "h2_full h1_full", "h2_full h1_full", "h2_full", "h0_full", "", "h0_full h2_full", "", "", "", "", "", "", "" ] }
{ "question": [ "What does the Department of Homeland Security currently lack?", "What are the components of DHS that conduct R&D?", "What did GAO identify as R&D obligations by other DHS components?", "How did DHS justify these misreported R&D investments?", "How can DHS improve their reporting of R&D activities?", "What are the effects of S&T taking steps to coordinate R&D efforts across DHS?", "Why is R&D at DHS inherently fragmented?", "How does S&T coordinate its R&D efforts?", "What flaws did GAO notice with the S&T coordination mechanisms?", "How could the DHS remedy its overlap, fragmentation, or duplication issues?", "Why is conducting R&D important?", "What has DHS done since its creation?", "What components within DHS conduct R&D?", "What was GAO asked to do?", "How did GAO go about investigating the DHS?" ], "summary": [ "The Department of Homeland Security (DHS) does not know the total amount its components invest in research and development (R&D) and does not have policies and guidance for defining R&D and overseeing R&D resources across the department.", "According to DHS, its Science & Technology Directorate (S&T), Domestic Nuclear Detection Office (DNDO), and U. S. Coast Guard are the only components that conduct R&D and, according to GAO’s analysis, these are the only components that report budget authority, obligations, or outlays for R&D activities to the Office of Management and Budget (OMB) as part of the budget process.", "However, GAO identified an additional $255 million in R&D obligations by other DHS components. For example, S&T reported receiving $50 million in reimbursements from other DHS components to conduct R&D. Further, 10 components obligated $55 million for R&D contracts to third parties and $151 million to Department of Energy (DOE) national laboratories for R&D-related projects, but these were not reported as R&D to OMB.", "According to DHS, it is difficult to identify all R&D investments across the department because DHS does not have a department wide policy defining R&D or guidance directing components how to report all R&D spending and activities. As a result, it is difficult for DHS to oversee components’ R&D efforts and align them with agency wide R&D goals and priorities.", "Developing specific policies and guidance could assist DHS components in better understanding how to report R&D activities, and better position DHS to determine how much the agency invests in R&D to effectively oversee these investments.", "S&T has taken some steps to coordinate R&D efforts across DHS, but the department's R&D efforts are fragmented and overlapping, which increases the risk of unnecessary duplication.", "R&D at DHS is inherently fragmented because S&T, the Coast Guard, and DNDO were each given R&D responsibilities in law, and other DHS components may pursue and conduct their own R&D efforts as long as those activities are coordinated through S&T.", "S&T uses various mechanisms to coordinate its R&D efforts including component liaisons, component R&D agreements, joint R&D strategies, and integrated R&D product teams composed of S&T and component officials.", "However, GAO identified 35 instances of overlap among contracts that DHS components awarded for R&D projects. For example, S&T and the Transportation Security Administration both awarded overlapping contracts to different vendors to develop advanced algorithms to detect the same type of explosive. While GAO did not identify instances of unnecessary duplication among these contracts, DHS has not developed a policy defining who is responsible for coordinating R&D and what processes should be used to coordinate it, and does not have mechanisms to track all R&D activities at DHS that could help prevent overlap, fragmentation, or unnecessary duplication. For example, S&T did not track homeland security-related R&D activities that DHS components contracted through DOE national laboratories from fiscal year 2010 through 2013; thus, it could not provide information on those contracts.", "Developing a policy defining the roles and responsibilities for coordinating R&D, and establishing coordination processes and a mechanism to track all R&D projects could help DHS mitigate existing fragmentation and overlap, and reduce the risk of unnecessary duplication.", "Conducting R&D on technologies for detecting, preventing, and mitigating terrorist threats is vital to enhancing the security of the nation.", "Since its creation, DHS has spent billions of dollars researching and developing technologies used to support its missions including securing the border, detecting nuclear devices, and screening airline passengers and baggage for explosives, among others.", "Within DHS, S&T conducts R&D and is the component responsible for coordinating R&D across the department, but other components, such as the Coast Guard and DNDO, also conduct R&D to support their respective missions.", "GAO was asked to identify (1) how much DHS invests in R&D and the extent to which DHS has policies and guidance for defining R&D and overseeing R&D resources and efforts across the department, and (2) the extent to which R&D is coordinated within DHS to prevent overlap, fragmentation, or unnecessary duplication.", "GAO reviewed information on DHS R&D budgets, contracts, and DHS spending on R&D at DOE national laboratories for fiscal years 2010 through 2012. GAO also reviewed DHS R&D plans and project documentation, and interviewed DHS headquarters and component officials." ], "parent_pair_index": [ -1, 0, 0, 2, 0, -1, 0, 0, -1, -1, -1, -1, -1, -1, 3 ], "summary_paragraph_index": [ 1, 1, 1, 1, 1, 2, 2, 2, 2, 2, 0, 0, 0, 0, 0 ] }
GAO_GAO-17-267
{ "title": [ "Background", "CNCS’s Grant Management Process", "Use of IT to Support CNCS’s Grant Management Process", "CNCS’s IT Modernization Program", "CNCS’s IT Modernization Projects Are Aligned with Business and Management Needs of the Existing Grant Monitoring Process, but Are Not Defined for a Future Risk- based Approach", "CNCS Has Made Limited Progress Toward Successfully Delivering a Modernized Grant Monitoring System, but Has Taken Steps to Help Avoid Continued Delays", "Delivery of the First Version of the Grant Monitoring System Has Been Delayed", "Weaknesses in Software Development Practices Introduced Risks to Successful Delivery of the First Version of the Grant Monitoring System", "Practices for Developing and Managing Schedules Do Not Fully Support Effective Project Monitoring and Tracking of Activities", "Testing Practices Introduced Risks to Successful Delivery of the System", "CNCS Enhanced Oversight of Contractor Performance to Help Avoid Continued Delays", "Conclusions", "Recommendations for Executive Action", "Agency Comments and Our Evaluation", "Appendix I: Objectives, Scope, and Methodology", "Appendix II: GAO Contact and Staff Acknowledgments", "GAO Contact", "Staff Acknowledgments" ], "paragraphs": [ "CNCS was created in 1993 with the enactment of the National and Community Service Trust Act of 1993. The agency is led by a Chief Executive Officer and Board of Directors who are appointed by the President, and with the advice and consent of the Senate. The Chief Executive Officer oversees the agency, which includes about 600 employees operating throughout the United States and its territories.\nThe agency provides grants to volunteer organizations throughout the United States to strengthen communities and foster civic engagement. For example, the National and Community Service Trust Act of 1993 established the CNCS and authorized it to make grants such as through the AmeriCorps state and national grant programs. The act also made the agency responsible for administering Volunteers in Service to America (VISTA) and National Senior Volunteer Corps. The Serve America Act was also enacted in 2009, which gave CNCS responsibility for administering several newly established programs, such as the Social Innovation Funds, which provide community-level grants.\nCNCS grants are typically awarded to fund programs for a 3-year period, with funds distributed annually. In fiscal year 2016, CNCS received appropriations totaling more than $787.9 million and used $783.9 million to fund approximately 2,300 grants. Table 1 shows the amounts and number of grants disbursed by each of the programs in fiscal year 2016.", "Within CNCS, the Chief of Program Operations, Chief Risk Officer, and Chief Financial Officer share responsibility for managing the grants. Program officers under the Chief of Program Operations and grant officers under the Chief Financial Officer manage the administration of the grants, including monitoring the use of grant funds by grantees. The program officers focus on issues related to grantee performance and compliance with program objectives, while the grant officers focus on grantees’ financial issues and performance.\nThe program and grant officers use IT systems to support monitoring and related activities. These systems are developed and maintained by the Office of Information Technology (OIT). This office is led by the agency’s CIO, who reports to the Chief Operating Officer. Figure 1 illustrates the position of the grant management entities within the agency as of April 2017.\nTo manage its grant program, CNCS conducts a four-phase process that covers pre-award grant reviews through actions taken to close out the grants when the period of related projects expires. According to CNCS policy, during the pre-award phase (before CNCS makes a grant award), grant officers evaluate the potential grantee’s financial management capabilities and other aspects, such as whether the grantee has any open audit findings on any current or prior grants, to determine if the grant should be awarded.\nOnce grants are awarded for the upcoming fiscal year, CNCS program and grant officers take steps to assess the grants and plan for monitoring the use of funds provided to the grantees. During the agency’s annual assessment phase, which is conducted between August and October of each year, the officers establish the upcoming year’s monitoring plan. During the monitoring phase, program and grant officers carry out the plans made during the assessment phase.\nLastly, when the period of the project supported by a grant expires, the grant is closed. During closeout and no later than 90 days after the expiration date of the grant, grantees submit required documentation to their grant officer and pay any outstanding obligations. CNCS’s program and grant officers verify completion of these actions and reconcile funds, then notify grantees when they have met all programmatic and fiscal requirements of the award. At that time, the grant is officially closed. An overview of the four phases of the monitoring process is depicted in figure 2.\nGrant monitoring activities are initiated by program and grant officers during the assessment phase, when awarded grants are assessed, rated, and prioritized, and monitoring plans are made. The assessment phase is made up of four steps.\nIn the first step of the assessment phase, officers determine which grants are to be monitored in the upcoming year. The universe of grants being assessed typically includes all grants that are active at the time CNCS is ready to begin the assessment phase, usually in mid-August of each year, and that are expected to be active during the fiscal year beginning in October.\nAt the second step of the process, the officers further assess each of the grants to be monitored to identify potential vulnerabilities based on a set of criteria related to program compliance, financial weakness, or other issues defined by the program and grant officers. CNCS defined 19 criteria that indicate a grant’s potential vulnerabilities to be examined during an assessment. The officers may consider other key concerns or challenges in their assessment on a case-by-case basis.\nBased on the outcomes of the second step, a third step is taken to determine the priority of each grant for monitoring purposes. Each grant is rated as high, medium, or low priority to determine the types of monitoring activities to be conducted during the year. The three priority categories are determined based on the presence of any of the pre-determined 19 criteria and an automated scoring process performed by the IT system that is used to support the agency’s grant monitoring process. The plan typically is to be prepared by the end of October.\nFinally, during the fourth step of the annual assessment, program and grant officers plan the monitoring activities for each grant that are to be conducted during the year, based on the priority ratings determined during the third step. For example, grant monitoring plans may include on-site compliance visits to the grantees’ facilities, desk reviews of documentation submitted by the grantees, reviews of grantees’ financial activities, and follow-up visits based on the outcomes of compliance visits and other reviews.\nThe monitoring phase is conducted each year between October and August, when program and grant officers are to complete the activities described in their plans. During that time, they may add or omit activities, with supervisory approval, for a number of reasons. For example, program and grant officers may consider adding an activity for a grantee based on newly identified issues, such as findings of the OIG that suggest the grantee may have demonstrated poor financial management capabilities in the past. In such cases, the officers may add additional on- site or follow-up visits to their plans.\nThe officers produce reports on the progress made by grantees to accomplish the objectives and meet performance measures associated with a particular grant. For example, the reports could include data that reflect the number of individuals who received assistance in disaster preparedness, mitigation, response, and recovery efforts; the percentage of economically disadvantaged people who received housing-related support; or the percentage of students served by a grant program who showed improvements in academic performance. In addition, the officers review grantees’ financial status reports that identify funds expended compared to funds allocated for the grantees’ awards through the CNCS budget. The information reported is used by the program and grant officers to help them identify areas that may need more focused attention or targeted monitoring.\nIn our March 2017 report on CNCS’s efforts to improve grant monitoring, we noted that the agency’s annual assessment process may not result in the riskiest grants receiving a high priority for monitoring because of limitations in its scoring model. We also noted that CNCS has not evaluated its monitoring efforts to identify opportunities to improve its assessment of, and response to, risks related to grant management. We recommended that CNCS, as part of its efforts to establish enterprise- wide risk-based management, develop a risk-based approach to grant monitoring and establish a policy to ensure that all grants expected to be active in a fiscal year are assessed for potential risk. Such an approach would incorporate key practices, such as identifying risks relevant to the use of funds awarded by the grant program, analyzing and responding to the risks, and addressing risks as part of the grant monitoring process. The agency did not comment on this recommendation and has not yet addressed it.", "CNCS’s legacy IT system, eGrants, has been used since 1998 to provide functionality needed to support the agency’s grant management process. Grant management includes annual assessment and monitoring activities such as planning, documenting related activities, generating correspondence, and reporting financial status and progress of grantees’ actions toward meeting performance goals. CNCS officials reported that, in fiscal year 2016, they spent about $11 million maintaining their legacy IT environment, which includes eGrants and other systems used to manage functions such as payroll and benefits.\nTo support the annual assessment process, program and grant officers record in eGrants the results of their evaluations of each grantee. Such evaluations are based on the 19 criteria that were defined to determine the priority of the grants to be monitored and the monitoring activities to be conducted. The officers indicate which of the criteria are present by choosing “yes” or “no” from a drop-down list. Then, based on the criteria, the system sorts and rates the priority of each grant as high, medium, or low. Figure 3 depicts the input screen of the eGrants Monitoring and Oversight Assessment Module, which is used by the officers to select criteria used to indicate the priority level of grants.\nOnce the assessment has been completed, the program and grant officers record activities that they plan to take during the year, such as conducting a follow-up visit with the grantee based on any audit findings in eGrants, along with the proposed time frames for conducting the activities. The program and grant officers also use eGrants to generate notification letters that are sent to grantees to schedule a site visit. After the visit has been conducted, the grant or program officers enter information regarding the results of the visit into the system, along with the grantee’s responses.\nAfter a site visit, the officers may also identify follow-up actions to be taken and use eGrants to record those actions. The program and grant officers also use the system to generate reports on the progress of the grantees toward addressing any deficiencies identified as a result of monitoring activities they conducted. Grant officers also enter information about the results of financial reviews into the system.\nHowever, CNCS has encountered challenges in using eGrants. For example, according to CNCS’s February 2013 IT Modernization Plan, data and information are not standardized and are entered into the grant management and monitoring systems with limited checks and validation, which results in data quality issues. In addition, according to the plan, technical limitations of eGrants make it difficult and time-consuming to integrate data from multiple sources and filter out inaccuracies. For example, agency officials stated that initiatives such as reporting on state- level grants require significant intervention by technical staff to obtain, integrate, and analyze data due to the disparate nature of the way the data are stored.\nIn October 2013, the CNCS OIG also reported problems with the agency’s legacy IT system used to support monitoring activities. The OIG reported that eGrants was inefficient and ineffective at supporting monitoring officers’ efforts to predict and detect improper use of funds awarded by CNCS grants. The OIG noted that, although the agency had collected data from its grantees to monitor their use of funds, its outdated systems did not provide the kind of data analytics capabilities needed to monitor early detection of fraud and mismanagement of grant funds. For example, the OIG reported that CNCS could not readily compare information across grants awarded or among the grantee population to identify anomalies and outliers that indicate potentially improper use of funds. The OIG further reported that the agency was falling behind in its efforts to increase the use of technology to support improved risk management practices, relying instead on inefficient processes for conducting oversight of the use of grant funds.\nRecognizing the growing gap between its business needs and its IT infrastructure, CNCS engaged a contractor to provide guidance on modernizing its infrastructure. In May 2014, the contractor reported the results of its independent evaluation of the agency’s IT strategy, modernization plan, technology adoption, and costs for supporting CNCS’s strategic goals. The evaluation highlighted the limited system collaboration and communication capabilities among CNCS end users, data inconsistency, system availability issues, and data transparency and reporting issues as areas needing improvement. In its report, the contractor noted that CNCS had been slowly migrating its legacy grant management system to a new, more current technology, but that its efforts had not kept pace with mission-related programmatic demands. Consequently, program staff had developed workaround solutions to manage critical information accessed from multiple disparate sources, such as spreadsheets, e-mail, local and shared files, and local databases.\nOur March 2017 report on CNCS’s grant monitoring process identified similar problems associated with eGrants. We reported that, according to CNCS officials, eGrants does not automatically produce standard historical reports, and, in order to produce a report from the system, significant manual manipulation of the data is required. We also discussed system users’ concerns regarding the usability of eGrants and its lack of integration with other tools used to collect monitoring data. For example, although each program officer has an electronic monitoring tool to use when conducting on-site monitoring, the data collected using these tools are not automatically integrated into and analyzed by eGrants. We further noted CNCS officials’ concerns that the agency’s existing IT environment did not provide automated mechanisms, such as trend analyses, that could help them identify patterns of potentially improper use of funds and risk factors to be considered when monitoring grants within a risk-based management approach.", "In February 2013, CNCS’ CIO released its IT modernization plan that describes a program intended to result in the development of systems to improve support of the agency’s grant management activities. Program documentation describes the implementation of systems that, when executed collectively, are to provide grantees and agency staff using the systems with new tools and capabilities to increase data quality and transparency, staff productivity, and program effectiveness. The IT modernization program has two overall goals.\nModernize grant management systems—Re-architect systems and standardize databases for greater agility; improve data quality and provide a better user experience through new data edits and validations, pre-populated forms, optimized navigation, and context- driven screens; maximize staff productivity by consolidating core staff functions currently in multiple systems into a common system.\nEnhance mobile web and information sharing—Optimize key CNCS information for mobile web viewing and develop capabilities to accept grantee system information and share CNCS data with the public.\nCNCS’s IT modernization program consists of three phases with projects in each phase that are intended to result in improvements to the overall IT computing platform, retirement of outdated legacy systems, and replacement of the retired systems. Specific projects are to be conducted as part of an overall initiative intended to result in the retirement of outdated legacy systems and the implementation of a modernized computing environment, referred to as the Grants and Member Management (GMM) platform.\nPhase 1 of the program includes projects to result in the development and delivery of systems to support existing grant management processes, such as planning and applying for grants, reviewing applications, awarding funds, reporting on grantee and project status, monitoring the use of grant funds and grantee activity, and closing out grants and projects.\nPhase 2 includes projects to develop systems to support services such as member recruitment, training, travel, awards, and enterprise risk management, including grant monitoring and oversight. This phase includes a project to deliver system capabilities that support the agency’s grant monitoring process as part of a future enterprise-wide risk management approach. The delivery of the systems to be developed during the first two phases is intended to allow the agency to retire outdated legacy systems.\nPhase 3, the final phase, is to retire any remaining legacy systems to complete the transition to the new GMM platform.\nCNCS defined IT modernization projects to be completed throughout the three phases of the initiative, such as the development of modernized systems to be used by the agency’s staff to manage grants, and the transition of all system functionality from the legacy environment to the platform. According to the modernization plan, the new systems are to be deployed via a technology platform that allows users to integrate data from external data sources in real time. Specifically, the platform is to be based on cloud computing that, according to CNCS’s IT strategic plan, is expected to lower IT costs, improve system access and stability, and enable IT staff to focus on supporting the needs of agency stakeholders who are to use the systems.\nTo implement the GMM cloud-based platform and develop the new systems, CNCS acquired the services of a development contractor through a task order that specifies software and services on a time and materials basis. The task order for the implementation of GMM was issued in September 2014, and the contractor began work on Phase 1, including the first modernized grant management system development project, in October 2014.\nIn January 2017, agency officials estimated the cost to complete all of the activities associated with the projects during the three phases of the IT modernization program to be $43.6 million—$39.3 million for labor and $4.3 million for software and services.", "To define system requirements that meet users’ business needs, key practices identified by SEI call for, among other things, ensuring that the business needs are understood and that supporting system requirements are defined and agreed upon by system stakeholders, including system developers and users. Consistent with these practices, CNCS’s software management processes identify steps for defining system functional and technical requirements, including the analysis of users’ needs, reviews to obtain stakeholders’ and management’s approval of requirements, and the development and maintenance of documentation that describes the requirements and any changes made throughout the development of the system.\nAs currently planned, CNCS’s projects to develop and deliver the modernized grant monitoring system align with the agency’s business and management needs for its existing process, but are not yet defined for a future risk-based process. When originally planning for the IT modernization Phase 1 projects, CNCS included the development of an initial version of the system to be used by program and grant officers to support activities they conduct in accordance with the existing grant monitoring process. Toward this end, initial requirements for the first version of the grant monitoring system were defined to replicate functionality provided by the legacy eGrants monitoring system and to provide enhancements needed to help program and grant officers more effectively conduct monitoring activities.\nCNCS took steps to define requirements for the first version of the system in accordance with its established processes. Specifically, OIT officials, the development contractor, and system users held requirements gathering sessions to determine users’ needs beginning in July 2015, as planned. As a result of the sessions, program and grant officers who were to use the system defined and documented 26 business requirements to be addressed by functionality implemented in the first version.\nOf these 26 requirements, 6 were defined to replicate the functionality provided by the legacy eGrants system. For example, the new system was to provide an input screen for users to document assessments of grant awards, and another screen for users to enter data for planning monitoring activities—functionality provided by the eGrants monitoring system. The system was also to replicate other functionality of the eGrants system, such as allowing users to record completed monitoring activities and to add flags to organizations’ records that indicate potential needs for additional monitoring.\nThe other 20 requirements that the system users defined were enhancements to help improve the outcomes of monitoring activities in support of CNCS’s goal to modernize grant management processes. For example, the system was to, among other things, enable the officers to create monitoring plans for awards and associate monitoring activities with plans—functionality that was not provided by eGrants.\nAccording to project planning documentation, the system users reached agreement with OIT officials and the contractor to deliver system functionality to meet all 26 requirements. However, as the contractor proceeded with developing the first version of the system, CNCS changed its plans for addressing the 26 requirements. Specifically, in a project review held in October 2015, OIT officials, the development contractor, and system users agreed to defer the 20 requirements for improving the outcomes of monitoring activities and to include them in the requirements definitions for the second version of the monitoring system. Consequently, the requirements that were defined to replicate the capabilities of the legacy eGrants system were addressed by functionality planned for the first version.\nOIT officials stated that the additional 20 requirements were deferred because the agency had not defined business needs for a grant monitoring system beyond those relevant to CNCS’s existing process. Specifically, agency officials responsible for assuring that major IT investments achieve business needs decided to minimize the investments to only support existing business needs and operations until a new risk management program is established and ongoing business process reengineering efforts are completed. Thus, the plans for delivering the first version of the system were modified to align with business needs of CNCS’s existing grant monitoring process.\nProject plans for the second version of the system call for enhancements to the IT capabilities delivered by the first version. These planning documents also indicate that, in addition to the requirements deferred from the first version, the second version of the system is to provide any additional functionality needed to align with business needs for monitoring grants within a risk-based approach to enterprise-wide management.\nHowever, in March 2017, we reported that CNCS had not evaluated its monitoring efforts to identify opportunities to improve its assessment of, and response to, risks related to grant management. We recommended that CNCS, as part of its efforts to establish enterprise-wide risk-based management, develop a risk-based approach to grant monitoring and establish a policy to ensure that all grants expected to be active in a fiscal year are assessed for potential risk. In addition, according to CNCS’s Chief Risk Officer and Chief Information Officer, as of April 2017, the agency had not defined a risk-based management approach and, therefore, had not defined business needs for monitoring grants based on risks. Because business needs for a risk-based monitoring process have not been determined, OIT officials and system stakeholders cannot begin to define requirements for the second version of the system to align with business and management needs for a future process, as intended by CNCS’s IT modernization plans.", "Although the agency and its development contractor took steps to align the first version of the system with changing business needs, CNCS has made limited progress toward developing and delivering the modernized system capabilities to support grant monitoring. CNCS began the development effort for the first version of the system in July 2015 and initially planned for the system to be delivered in April 2016. After subsequent delays, officials and the contractor then planned to deliver the system in September 2016. However, as of July 2017, the system still had not been delivered to support the agency’s existing monitoring process.\nIn CNCS’s and the contractor’s efforts to develop the system, incomplete project schedules and testing practices introduced risks to the agency’s ability to deliver the system. In addition, information documented by agency officials in weekly and monthly reports on the status of the project indicate that performance deficiencies on the contractor’s part contributed to delays in the completion of testing, development, and system delivery.", "OIT officials’ and the development contractor’s initial project schedules reflected plans to begin defining requirements for the first version of the system in May 2015 and to finalize requirements in November 2015. The development contractor was to begin testing to identify and correct any problems with the system in February 2016. The system users were also to begin participating in initial testing in February 2016 and complete their final testing in March 2016, at which time any problems detected during the earlier test phases were to be corrected and the system changes re- tested and approved. The system was to be in use by the end of April 2016.\nAs previously mentioned, OIT officials, the contractor, and system users began defining requirements for the system in May 2015, and finalized initial requirements in November 2015, as planned. The contractor also developed a test version of the system and, along with system users, completed the initial phases of testing in March 2016 according to plans. However, technical and functional problems encountered during subsequent phases of system testing caused delays in the completion of later testing phases, in which users were to participate. Specifically, test completion was delayed from April 2016 until October 2016—6 months later than initially planned, and 1 month after the revised date (of September 2016) that CNCS had said it intended to deliver the system.\nAccording to CNCS’s CIO and project planning documentation, the contractor’s testing of the first version of the grant monitoring system is now expected to be completed and available for final users’ testing in September 2017, and the system is expected to be delivered for operations in October 2017. OIT officials reported that, as of January 2017, the agency had spent $12.7 million on conducting the Phase 1 GMM platform modernization and related system development projects— $11.2 million on labor and $1.5 million on software and services.\nFurther, as part of its modernization program, CNCS initially planned to deliver the second version of the system in October 2017. However, because of delays in the delivery of the first version and the agency’s lack of progress in determining business needs for monitoring grants in a risk- based management environment, OIT officials, system users, and the development contractor are not able to define system requirements or to complete plans for developing and delivering the final system to support a future monitoring process. Thus, a new date for delivering the second version of the system has not been determined.\nFigure 4 provides a timeline of planned and delayed delivery dates for the first and second versions of the grant monitoring system.", "In the development of the first version of the system, CNCS and the development contractor did not follow all established software development practices. Specifically, OIT officials and the contractor did not develop project schedules that could be used to effectively track and monitor the progress of the system development effort, and they did not conduct complete testing of the grant monitoring system.", "According to practices defined in GAO’s Schedule Assessment Guide, an integrated master schedule should be the focal point of program management. Such a schedule constitutes a program-level schedule that includes the effort necessary from all agency and contractor stakeholders to ensure successful execution from start to finish. According to GAO’s guide, managers are to identify a baseline, or target, schedule that is to be maintained and updated with actual dates when activities are started and finished. The baseline is used to measure and monitor the performance of projects and to determine when actual dates differ from baseline dates and may affect future work. Further, it is useful in determining when strategies are needed to allocate resources more efficiently to meet time constraints. An agency’s program management office is ultimately responsible for the development and management of the schedule.\nHowever, CNCS and its contractor did not develop schedules for the Phase 1 projects of the GMM modernization plan that would have been useful for managing and tracking the progress of development and testing activities to ensure the first version of the grant monitoring system was delivered in a timely manner. CNCS’s contractor developed, and OIT officials approved, a schedule which they called an integrated master schedule. However, this schedule was not constructed as an integrated master schedule should be and, thus, did not provide a useful management tool. Specifically, the schedule that CNCS approved established baseline start and finish dates for activities, but did not reflect actual dates for managing the GMM Phase 1 system development projects, including the first version of the grant monitoring system. For example, one version of the schedule identified a testing activity for the grant monitoring system to take place from April 2016 through June 2016, but the schedule did not include dates for when the activity was actually started and completed. Another later version of the schedule included a planned delivery date of October 2017 for the system, but did not include the originally planned date of April 2016. Thus, the schedule could not be used to track the status of project activities or to monitor and measure the performance of the grant monitoring system development project to help ensure its successful completion.\nIn discussing this matter, OIT officials said they did not develop and maintain a baseline schedule that identified planned and actual start and completion dates because they believed that they would be able to effectively track the status of project-level activities using other tools and techniques inherent in their approach to developing the system. For example, the officials stated that they used a field included in the schedules for entering notes to identify actions that needed to be taken to complete activities and to track the status of each of the actions. However, in many cases, OIT officials included certain program-level actions and completion dates in the notes, but they did not record the status of the actions. For example, they did not indicate whether or not development and testing activities took place as planned. The officials also noted that their current approach requires users interested in referencing baseline changes to consult historic copies of the schedule or go through the tedious process of comparing the notes field with project files. As such, this approach could not be used as an effective tracking tool to determine the status of the activities or the project as a whole.\nRegardless of OIT officials’ approach to tracking the status of project activities, until they construct a complete integrated master schedule that includes both baseline and actual dates for developing the systems, the agency will lack an effective management tool that could be used to help avoid additional delays in delivering the first version of the modernized grant monitoring system to support its existing process and retiring the legacy eGrants system. Likewise, unless OIT officials and the development contractor develop a schedule that can be used to monitor and measure progress of the development and delivery of the second version of the system against baseline and actual dates, the agency will remain at risk that it will not be able to successfully execute all activities needed to deliver system capabilities that could support a future risk- based monitoring process.", "According to SEI, testing the functionality of a new IT system is essential to validate that the system will satisfy users’ requirements. Effective testing facilitates early detection and correction of software and system anomalies, provides an early assessment of software and system performance, and provides information to key stakeholders for determining the business risk of releasing the product in a current state. SEI guidance advises that a test plan be used to ensure that testing is carried out in a systematic manner. It describes the technical and management approach to be followed for testing a system or a component of a system, such as the projects within the CNCS IT modernization program.\nConsistent with SEI guidance, CNCS and the development contractor made plans to test the first version of the system early on and throughout the development phase. However, the program experienced halts and re- starts of testing activities, along with delays in system implementation, in part because the agency and its contractor did not conduct all stages of testing for the system.\nOIT officials describe in the plans for testing all the GMM Phase 1 systems, including the grant monitoring system, a sequence of testing events. For example, during the systems development process, the developer was to conduct initial testing activities to determine whether each of the systems was functioning independently as expected, addressed users’ requirements, and met usability and security requirements—referred to as unit testing. The contractor’s testing team also was to conduct another stage of testing to ensure that all aspects of the system affected by any changes made during initial unit testing functioned as they did prior to the modifications and adjustments that were made. This stage is referred to as regression testing.\nAccording to the plans, once the development contractor had completed unit and regression testing activities, the systems were to go through three more stages of testing in a system integration test environment— the last two involving system stakeholders and users. These test stages included:\nAlpha testing—testing conducted by the system developer which was to result in a working prototype that users and stakeholders could evaluate to determine whether to keep developing the product as built or to make modifications before completing additional development.\nAccording to test plans, the version of the system delivered after alpha testing was to include 50 percent of the desired functionality.\nBeta testing—testing conducted by the agency and stakeholders to validate a fully working prototype that the stakeholders could test more thoroughly prior to delivery. CNCS OIT and stakeholders were to conduct beta testing for about 8 weeks to validate that the functionality needed to address business needs was implemented. The beta testing phase was also intended to provide the CNCS user community an opportunity to provide feedback on the user interface before the system would be ready for the next phase of testing—user acceptance testing. The system resulting from the beta testing phase was to include more than 80 percent of the desired functionality required for the system.\nUser acceptance testing—testing conducted by users to finally accept the system, confirming that all functionality has been built and requirements met. User acceptance testing was to be conducted for 3 weeks to validate that the system would provide full functionality, as defined by system requirements, when deployed into a live, working environment.\nCNCS and its contractor completed and approved the results of the unit and regression test stages for the Phase 1 GMM systems in September 2015, as planned. However, although the agency conducted alpha testing according to plans, it did not include the grant monitoring system in that phase of testing.\nFor example, according to OIT officials, the development contractor and stakeholders tested 50 percent of the functionality of the GMM Phase I systems, as planned; however, this approach did not guarantee that all systems would be tested, and the grant monitoring system was not included in the alpha testing activities.\nSubsequently, OIT officials, the development contractor, and stakeholders began a first round of beta testing of the system on April 18, 2016, and tested through April 22, 2016. Throughout the beta test period, testers noticed significant problems related to usability and technical deficiencies, such as awkward screen layouts and a lack of data that were to be migrated from the legacy eGrants system—problems that should have been detected and corrected during alpha testing. Based on the extent of these problems, OIT officials determined that it was not appropriate to proceed with the testing and, on May 9, 2016, called off beta testing so that the development contractor could make the system changes needed to correct the problems.\nOIT officials resumed and completed the first round of beta testing (which had begun in April 2016) in October 2016. They subsequently began and completed a second round of testing in December 2016. Results of these testing activities were approved by OIT management and system users, who then planned to begin a final round of testing in April 2017. They also planned to conduct user acceptance testing from July through September 2017.\nOIT officials stated that the grant monitoring system was not included in the alpha testing because system test plans required that 50 percent of the overall GMM Phase 1 system functionality be tested during that phase—but not 50 percent of the functionality to be provided by each project. The officials stated that, in managing the development of the overall GMM program, they tested more than 50 percent of other Phase I systems’ functionality and, therefore, did not need to include the grant monitoring system to meet the requirement. In addition, the officials stated that, when alpha testing began for the other GMM Phase 1 systems in March 2016, they and system stakeholders still had not agreed on final requirements and, therefore, were not ready to test the system.\nHowever, because they did not complete all phases of testing needed to ensure early detection and correction of system problems throughout the development of the first version of the grant monitoring system, the agency was not prepared to conduct the beta and user acceptance phases of testing. Had they started beta testing with a version of the system that had passed alpha testing, CNCS could likely have detected and corrected system errors earlier in the testing process and, thus, avoided the problems experienced when conducting beta testing of the grant monitoring system. Further, unless OIT officials and the development contractor conduct alpha testing of grant monitoring functionality when managing the development of the second version of the system, they will likely experience similar challenges and risks to plans for delivering a system to support future risk-based monitoring processes.", "According to established practices defined by SEI, successful completion of IT development projects calls for the delivery of quality products by any contracting entities involved in the project and effective oversight on the part of the contracting agency. As such, CNCS’s agreement with the IT modernization development contractor specified that the contractor was to provide system development, modernization, and enhancement support including, but not limited to, program management and planning. The contractor was required to support all phases of the agency’s system development life cycle process, including requirements analysis, development, testing, documentation, deployment, and post-deployment support (e.g., training).\nIn addition, according to SEI, effective project oversight calls for close monitoring of contractor performance, including regular status reporting and progress reviews to management, and reviewing contractor deliverables that document the level of progress toward meeting milestones. SEI emphasizes the importance of project oversight to ensure progress is being made according to plans for system development projects, and calls for appropriate corrective actions to be taken when project performance deviates significantly from plans. Effective project oversight also includes notifying management as soon as the project performance deviates from plans.\nCNCS and the development contractor finalized initial requirements for the monitoring system in November 2015, as planned. However, even with agency officials’ initial efforts to oversee the contractor’s progress toward delivering the system, the project experienced repeated delays during the development and testing phases. For example, soon after development of the system began, OIT officials required the contractor to develop plans and schedules for resolving multiple technical and software quality issues. Nevertheless, minutes from project management meetings indicated that many of the issues remained unresolved, which called for repeated corrective action plans. Specifically, from November 2015 through July 2016, OIT officials required the contractor to develop and deliver seven corrective action plans to address deficiencies and defects related to the development of the system.\nAs the agency took steps to monitor the status of the contractor’s actions to address system deficiencies, the OIT staff responsible for overseeing the contractor’s performance and other management officials held weekly and monthly reviews of the contractor’s actions. In the reviews, the officials assessed any progress made toward completing the actions and planned contingencies for mitigating risks associated with any lack of progress noted.\nFor example, minutes from a December 2015 IT management review meeting documented the acceptance of the contractor’s first corrective action plan. The minutes also described plans to hold weekly status meetings to monitor progress and define actions that would be taken if the contractor did not meet milestones for correcting system development deficiencies. Later, following an April 2016 IT management meeting, OIT officials again noted that the contractor was behind schedule in developing data migration and training materials required by the fourth corrective action plan. As another example, in May 2016, when the contractor was addressing the fifth corrective action plan, OIT and other agency management officials documented their intention to make a decision on whether to issue a cure notice. Consequently, when the contractor had not resolved all the problems identified in the first five corrective action plans, CNCS issued a cure notice in June 2016, and required the contractor to deliver two additional corrective action plans in July 2016 and December 2016.\nThe first of the two additional corrective action plans—the sixth corrective action plan—was to result in the delivery of the first version of the system in October 2016. In a management review meeting held in August 2016, agency officials noted that the development contractor was on track to meet the requirements of the plan. Regardless, OIT officials reported that they made a decision to delay delivery of the system because they did not believe that there was enough time for users to adequately test and receive training on the new system. The officials then required the contractor to develop a seventh corrective action plan for delivering, by December 2016, a version of the system that had passed beta testing to allow the additional time needed for users to complete acceptance testing and for the agency to conduct training. Figure 6 depicts the timeline of CNCS’s corrective action plan requirements and the contractor’s delivery of the plans.\nAccording to CNCS’s CIO and documented results of status reviews held with IT management officials, since the last corrective action plan was delivered by the contractor in December 2016, performance has improved and the project is on track to deliver the first version of the grant monitoring system in October 2017. For example, the contractor delivered a version of the system and beta testing began in December 2016, along with plans to continue beta testing from April 2017 through September 2017. Weekly reports to management on the status of the project indicated that, as of June 2017, all requirements defined for the first version of the system had been implemented. The reports also indicated that the development contractor was taking steps to prepare for the user acceptance test phase, which was to be conducted from July through September 2017. The reports note that the contractor was continuing to resolve migration and integration issues identified in the April 2017 beta test phase, prepare training materials for system users, and obtain stakeholder input on deployment plans. In addition, OIT officials noted in a June 2017 report to IT management officials that there were no outstanding risks to the planned delivery of the system.", "CNCS’s IT modernization plans included projects that were to result in the delivery of system functionality to align with business and management needs of the agency’s grant monitoring processes—its existing process and a future process to be conducted as part of an enterprise-wide risk- based management approach. When developing the first version of the modernized grant monitoring system, CNCS officials managed requirements to align with changing business needs of the agency. However, agency officials do not have the information needed to define requirements and plan for the delivery of a second version of the system to align with grant monitoring processes within a future risk-based management approach. Specifically, as we reported in March 2017, the agency has not defined risk factors to be considered when prioritizing grants and grantees for monitoring activities.\nCNCS initiated the first project and planned to develop and deliver the first version of the system to support its existing grant monitoring process. This version of the system was to be delivered in April 2016, but weaknesses in schedule and testing management practices have introduced risks to the successful delivery of a modernized system. Unless CNCS officials make needed improvements in system development practices, successful delivery of system functionality necessary to support grant monitoring will remain at risk. Meanwhile, CNCS’s grant monitoring officers continue to rely on the agency’s outdated legacy system to support an inefficient and ineffective process for monitoring the use of hundreds of millions of dollars in grants awarded each year.", "We are making the following three recommendations to CNCS: The Chief Executive Officer should direct the Chief Information Officer to take steps needed to ensure that system requirements are defined to align with the business needs of CNCS’s future risk-based grants monitoring process (Recommendation 1).\nThe Chief Executive Officer should direct the Chief Information Officer to ensure that the system development project schedule identifies in the baseline both planned and actual dates for completing all project-level activities, and can be used to monitor and measure progress of the grant monitoring system project (Recommendation 2).\nThe Chief Executive Officer should direct the Chief Information Officer to ensure that test plans are defined and implemented to include the second version of the grant monitoring system in all stages of testing during development, and results of initial stages are approved before conducting subsequent test stages (Recommendation 3).", "We received oral comments on a draft of this report during a discussion with CNCS’s Chief Information Officer (CIO), Deputy CIO, and other agency officials. In their comments, the officials partially agreed with three of the five recommendations included in the draft report and disagreed with two of the recommendations. The officials also shared additional information regarding the agency’s actions to develop and test the modernized grant monitoring system and subsequently provided documentation to support their views. After reviewing the documentation, we revised relevant sections of the report and modified the conclusions and recommendations as appropriate. Further, as a result of incorporating the additional information provided by the officials, our final report reflects three, rather than the original five, recommendations.\nSpecifically, the officials partially agreed with our first recommendation that CNCS ensure that system requirements are aligned with the business needs of CNCS’s current and future risk-based grants monitoring processes. The officials agreed that they needed to take steps to ensure that requirements for the second version of the grant monitoring system will align with business needs of a risk-based monitoring approach and stated that they intend to continue to work with stakeholders to define such requirements. However, the officials disagreed with our initial conclusion that the first version of the system did not meet business needs of the current grant monitoring process and, consequently, disagreed with the part of the recommendation that they ensure the system’s requirements aligned with business need of the current process. We requested, and the officials provided in June 2017, additional documentation reflecting alignment of the first version of the system with current grant monitoring business needs. As a result of our assessment of the supporting documentation, we revised the report to incorporate the additional information and modified the initial conclusion and the related recommendation.\nThe officials also partially agreed with the second recommendation in the draft report regarding the need to develop a complete integrated master schedule for managing the grant monitoring system development project. Specifically, we recommended that the schedule include actual start and finish dates and detailed system-level schedules that identify specific activities, resource requirements, and interdependencies between activities. The officials agreed with that part of the recommendation stating a need for baseline schedules that document both planned and actual start and finish dates for project activities. The officials told us that they intend to include the dates in future planning efforts to allow for easier tracking of progress and more effective project management.\nHowever, the officials disagreed with the part of the recommendation that stressed a need to develop schedules for the development and testing phases of the individual Phase 1 systems, rather than the overall GMM Phase 1 modernization program. Contrary to statements made by OIT officials throughout our review, the officials stated that the agency had, in fact, developed such schedules. Subsequently, in June 2017, the agency provided us an integrated master schedule for the earlier phases of the project through the requirements definition phase, and that incorporated specific activities, interdependencies, and resources required for the individual system-level projects, as we initially recommended.\nThe officials added that they used other software development management tools and metrics to track the status of activities conducted during the system development and testing phases, and they provided documented evidence of those activities. The officials noted that their software development methodology and agreement with the contractor allowed for resource requirements to be identified in other project management artifacts and the contractor’s planning documents. After assessing the additional documentation, we revised the report to incorporate this information and modified the conclusion and recommendation regarding project schedule management practices.\nThe agency officials also partially agreed with our third recommendation. This recommendation called for the agency to use an integrated master schedule for managing the system development project that included all the elements identified in the second recommendation. Specifically, the officials agreed with the part of the recommendation addressing the need for CNCS to track the progress of the projects by comparing actual start and finish dates to target dates. However, as noted for the second recommendation, the officials disagreed with the need to use individual schedules to monitor the status of each system. After considering the additional evidence provided in the agency’s response to the second recommendation, we modified the report accordingly. We also combined the second and third recommendations contained in the draft report into one recommendation, as reflected in this final report.\nFurther, CNCS’s CIO and Deputy CIO disagreed with a fourth recommendation in the draft report which called for the agency to follow plans for testing the grant monitoring system. The officials asserted that the agency had followed plans when testing the first version of the system, and provided additional information regarding system testing requirements and processes. Based on our review of this additional information, we acknowledged in the report that the development contractor and system users had followed plans. Nevertheless, we continue to emphasize the need for CNCS to, in future project management activities, develop and implement test plans that ensure each system included in the GMM project is adequately tested throughout the early and all subsequent phases of testing. We modified our recommendation to reflect our position on this matter.\nFinally, the CIO and Deputy CIO disagreed with the fifth recommendation in the draft report, which pertained to deficient contractor oversight practices conducted by the agency. The officials stated that the actions taken by the agency to enhance oversight, as described in the draft report, had led to improvements in contractor performance and in the agency’s overall ability to get the project on schedule for an October 2017 delivery. To substantiate their position, in June 2017 the officials provided additional project management artifacts, such as weekly and monthly management reports, that documented the recent status of project activities. Specifically, the reports documented the contractor’s actions to correct system defects, plan for system deployment, and develop training materials. Based on our assessment of this documentation, we modified the relevant discussion in the report to incorporate the newly obtained information regarding the outcomes of CNCS’s actions. We also removed the recommendation.\nBeyond the aforementioned oral comments, CNCS’s Chief Operating Officer also provided technical comments via email, which we incorporated as appropriate.\nWe are sending copies of this report to the CNCS Chief Executive Officer, the Director of the Office of Management and Budget, and other interested parties. In addition, the report is available at no charge on the GAO website at http://www.gao.gov.\nShould you or your staff have questions on matters discussed in this report, please contact me at (202) 512-9286. I can also be reached by e- mail at [email protected]. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix II.", "The objectives of this study were to determine (1) to what extent the Corporation for National and Community Service’s (CNCS) planned information technology (IT) modernization projects align with business and management needs for grant monitoring and (2) what progress CNCS has made toward ensuring the successful and timely delivery of a new system to support its grant monitoring process.\nTo address the first objective, we collected and reviewed documentation that describes the CNCS IT modernization projects, including the IT Modernization Program Management Plan and related system development plans. We assessed whether the agency’s project plans aligned with needs of grant monitoring officials by comparing their contents against documentation that described the agency’s grant monitoring process and requirements for providing IT support of the current monitoring process. We identified enhancements needed to assist program and grant officers, by examining planning documentation, such as CNCS’s Strategic Plan, system requirements definitions, and presentations and minutes from business stakeholder requirements gathering sessions. We also reviewed documentation that noted changes to requirements and interviewed agency officials, such as the Chief Information Officer, to determine the rationale for the changes. We compared the final requirements definition to the needs initially defined by grant monitoring officials to determine the impact that changes had on the agency’s plans to align its IT modernization projects with business needs for grant monitoring.\nTo address the second objective, we first determined the progress CNCS had made toward delivering a modernized system to support its existing grant monitoring process. To do so, we collected and evaluated documentation that provided evidence of ongoing system development and implementation activities, including project schedules and status tracking reports. We compared planned dates and milestones documented in the schedules to actual dates obtained from project artifacts, such as monthly program performance reports, to determine whether milestones had been met and, when they had not, identified the tasks that were not conducted or completed as planned and that caused gaps between intended outcomes and functionality to be provided by the system and delays in the system development and delivery schedule. We also obtained and examined documentation describing the development contractor’s activities, such as minutes and presentations from program reviews, and weekly and monthly reports on the status of system development efforts, to identify any deficiencies in system development practices that may have affected CNCS’s and the development contractor’s ability to deliver the system.\nTo assess CNCS’s efforts to develop and manage project schedules, we compared schedules for developing, testing, and delivering the first version of the grant monitoring system, from October 2015 to December 2016, to criteria defined in GAO’s Schedule Assessment Guide and held discussions with GAO’s scheduling experts to determine appropriate criteria for assessing scheduling practices with an Agile software development methodology. We also examined data collected from project planning and management artifacts, such as reports that documented dates of regression and initial beta testing activities and status reports that provided evidence of ongoing and completed system development and implementation activities. We then compared the planned dates and milestones contained in the schedules to actual dates obtained from project artifacts, to determine whether the project schedules reflected planned and actual dates for the completion of activities, delays in meeting project milestones, and interdependencies and conflicts between activities and resources.\nTo assess CNCS’s efforts to test the system, we compared documentation that described agency practices for conducting system testing, such as test plans and reports on testing outcomes, to testing management criteria defined by the Software Engineering Institute (SEI) and documented in its Capability Maturity Model® Integration (CMMI®) framework. To determine whether CNCS had taken steps to ensure, through its testing activities, the successful delivery of the grant monitoring system, we assessed documentation of activities that were to occur as part of the alpha, system integration, beta, and user acceptance testing phases. Specifically, we examined test plans and reports of testing outcomes and compared them to criteria for effective system testing identified in SEI’s framework to determine whether CNCS conducted testing as planned and the impact of any deficiencies on the agency’s ability to deliver the system as planned.\nLastly, we determined the level of contractor oversight conducted by CNCS officials by examining documentation such as program schedules, documented requirements and deadlines for the contractor to address system deficiencies identified by the Office of Information Technology officials, corrective action plans delivered by the contractor, and correspondence between the agency and the contractor. We compared the activities to practices for conducting effective project oversight established by SEI.\nWe supplemented the information we obtained from our assessment of agency documentation by interviewing CNCS officials, including the Chief Information Officer, Deputy Chief Information Officer, and Chief Risk Officer, who were knowledgeable of efforts to develop systems and oversee the work of contractors to support the grant monitoring process.\nTo determine the reliability of the data obtained from CNCS’s information systems used for managing requirements and conducting system testing, we compared information obtained from documentation of requirements definitions and test plans against requirements tracking documents and reports of test results. We also discussed with knowledgeable agency officials within the Office of Information Technology the status of system development processes, including actions taken to define and manage system requirements and to conduct the various phases of testing. Based on our efforts, we determined that the data we used from these sources were sufficiently reliable for the purposes of our audit.\nWe conducted this performance audit from January 2016 through August 2017 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 that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives.", "", "", "In addition to the contact named above, Teresa F. Tucker (Assistant Director), Freda E. Paintsil (Analyst-In-Charge), Melina I. Asencio, Alexander H. Bennett, Christopher G. Businsky, Nancy E. Glover, Thomas E. Murphy, and Paige E. Teigen made key contributions to this report." ], "depth": [ 1, 2, 2, 2, 1, 1, 2, 2, 3, 3, 2, 1, 1, 1, 1, 1, 2, 2 ], "alignment": [ "h3_full h0_title", "h3_full", "", "h0_full h3_full", "h0_full", "h2_title h1_full", "h1_full", "h1_title", "h1_full", "h1_full", "h2_full", "h1_full", "", "h0_full h1_full", "h1_full", "", "", "" ] }
{ "question": [ "What are the CNCS information technology projects planned to do?", "What do the projects include?", "What did the CNCS officials agree to regarding the first version of the system?", "Why have OIT officials not yet defined requirements for the second version of the future system?", "How is CNCS progressing towards delivering the system?", "What has the CNCS's progress been in the past?", "What makes the development and delivery of IT systems successful?", "What made the development and delivery of the CNCS IT system not successful?", "What will happen if the CNCS does not improve its system development practices?", "Why did the grant monitoring system development project experience delays?", "What improvements did the agency make to avoid delays?", "What have CNCS officials reported about the performance of the project?", "How does the CNCS engage millions of Americans yearly in national volunteer service?", "How is the CNCS able to fund these grants?", "How is the agency planning to improve its IT infrastructure?", "What issues did the GAO note in its 2017 report?" ], "summary": [ "The Corporation for National and Community Service's (CNCS) information technology (IT) modernization projects are currently planned to align with the agency's business and management needs for its existing process, but are not yet defined for a future risk-based process.", "The projects include the development of a modernized system in two versions. The first version was planned to provide support for business needs of the agency's existing grant monitoring process. The second version is to provide additional functionality to support monitoring within a yet-to-be-defined risk-based process.", "CNCS officials and the development contractor responsible for delivering the first version of the system agreed to a set of requirements that address business needs for improving outcomes of the existing monitoring process.", "However, because business needs for a risk-based monitoring process have not been determined, OIT officials and system stakeholders have not defined requirements for the second version of the future system, as intended by CNCS's IT modernization plans.", "CNCS has taken steps to help avoid continued delays, but progress toward delivering the system has been limited.", "In July 2015, CNCS initiated a project that was to deliver the first version of the system in April 2016. After subsequent delays, agency officials updated plans to reflect a September 2016 delivery. However, as of July 2017, this version had not been delivered, and the delivery date was changed to October 2017.", "Successful development and delivery of IT systems relies on adherance to key practices for managing project schedules and testing.", "However, weaknesses in CNCS's practices introduced risks to successful delivery of the system. In particular, the system development project schedules could not be used to track progress because they did not include actual dates when activities were started and finished. In addition, although CNCS and its contractor conducted testing according to plans, the grant monitoring system was not included in all phases of testing. Agency officials used other tools to track progress, and plans did not require them to conduct all stages of testing for the system.", "However, unless CNCS officials improve system development practices for managing project schedules and testing, they will continue to introduce risks to successful delivery of system functionality that supports grant monitoring.", "The grant monitoring system development project experienced delays when CNCS did not initially conduct oversight needed to ensure that the contractor took corrective actions as planned.", "In monitoring the contractor's performance during system development and testing, agency officials enhanced oversight to avoid continued delays.", "In ongoing management reviews of the project, CNCS officials reported that, since the last corrective action plan was provided by the contractor in December 2016, performance has improved and the project is on track to deliver the first version of the grant monitoring system in October 2017.", "CNCS engages more than five million Americans yearly in national volunteer service by awarding grants to programs such as AmeriCorps and Senior Corps.", "In fiscal year 2016, CNCS received almost $800 million in appropriations to fund approximately 2,300 grants.", "The agency is taking steps to modernize its outdated IT infrastructure, including developing and delivering systems to replace its legacy grant management system and improve IT support of the agency's grant monitoring program.", "In a March 2017 report, GAO noted system deficiencies that resulted in usability, data quality, and other technical issues." ], "parent_pair_index": [ -1, 0, 0, -1, -1, -1, -1, -1, 3, -1, 0, -1, -1, 0, -1, -1 ], "summary_paragraph_index": [ 2, 2, 2, 2, 3, 3, 3, 3, 3, 4, 4, 4, 0, 0, 0, 0 ] }
CRS_R42504
{ "title": [ "", "Introduction", "The VA Loan Guaranty Program", "Borrower Eligibility", "Service Criteria", "Financial Criteria", "Uses of the Loan Guaranty", "Financing the Purchase, Construction, or Improvement of Dwellings or Farm Residences", "Purchase", "Construction", "Improvements", "Loan Guaranty for Manufactured Housing", "Separate Loan Guaranty for Manufactured Housing, 38 U.S.C. Section 3712", "Refinancing Loans", "Interest Rate Reduction Refinancing Loan", "Cash-Out Refinancing", "Limitations on Refinancing", "Number and Amount of Loans Guaranteed", "Amount of Coverage Provided by the Loan Guaranty", "The Maximum Guaranty Amount", "Maximum Guaranty for Alaska, Hawaii, U.S. Virgin Islands, and Guam", "Maximum Loan Amount", "Subsequent Loans: The Veteran's Entitlement", "How the VA Loan Guaranty Differs from FHA Insurance", "Direct VA Loans", "The Original Direct Loan for Veterans in Rural Areas, Now Limited to Veterans with Disabilities", "Direct Loans for Native American Veterans (Including Guam, American Samoa, and CNMI)", "Direct Loans Resulting from Borrower Delinquency or Default (Acquired and Vendee Loans)", "Funding for the VA Direct and Guaranteed Loan Programs", "Sources of Funding for Loan Programs", "The VA Budget and Congressional Appropriations for VA Loan Programs", "Fees from Borrowers", "Collection of Loan Payments and Property Sales", "The Specially Adapted Housing Program", "Specially Adapted Housing Grants, 38 U.S.C. Section 2101(a)", "Special Housing Adaptation Grants, 38 U.S.C. Section 2101(b)", "Use of Grants to Modify the Home of a Family Member", "Grant Limits", "Special Considerations on Trust Lands", "VA Actions in Event of Delinquency, Default, and Foreclosure", "Options to Prevent Foreclosure", "VA Actions in the Event of Foreclosure" ], "paragraphs": [ "", "The U.S. Department of Veterans Affairs (VA) administers several programs that assist individual veterans in purchasing and/or rehabilitating homes. The specific ways in which the VA assists veterans include (1) guaranteeing home mortgages from private lenders (through the Loan Guaranty Program, a form of insurance) to help veterans obtain financing for home purchases, improvements, or refinancing; (2) providing direct loans for home purchases to Native American veterans and to purchasers of homes that are in the VA inventory due to default and foreclosure; and (3) extending grants and loans to veterans with service-connected disabilities so that they can adapt housing to fit their needs through the Specially Adapted Housing Program.\nThis report discusses some of the legislative history behind each of these housing programs, and provides details about how the programs currently operate. There is a separate section on funding for VA loan programs, and the final section of the report discusses VA efforts to assist borrowers who face default and foreclosure. While the VA also provides housing assistance for homeless veterans, this report does not address these programs. For more information about homeless veterans and programs that assist them, see CRS Report RL34024, Veterans and Homelessness .", "The VA Loan Guaranty Program is a mortgage insurance program through which eligible veterans enter into mortgages with private lenders, and the VA guarantees that it will pay lenders a portion of losses that may be suffered as a result of borrower default. VA-guaranteed loans are available for the purchase, construction, or repair/rehabilitation of a dwelling —defined to include homes with up to four units, single condominium units, and manufactured homes classified as real property —or a farm and farm residence. The guaranty is also available to finance the purchase of a manufactured home not classified as real property, and to refinance an existing loan.\nThe VA loan guaranty came about as an alternative to a cash bonus for veterans returning from World War II, considered less expensive than a bonus, but still a way to provide benefits to veterans. Credit was seen as one of the areas where veterans were at a disadvantage compared to their non-veteran counterparts because they had not had the time to establish a career or credit history that would allow them to obtain a mortgage without a guaranty. The Servicemen's Readjustment Act of 1944 (P.L. 78-346) created the loan guaranty as part of a package of benefits for returning veterans. The act also included educational benefits (the 1944 act introduced the GI Bill), employment counseling and placement services, and payments for unemployed veterans. The package of benefits was meant to help veterans reintegrate into the civilian economy. The law provided that the VA would guaranty loans for veterans to purchase or construct a home, purchase a farm or farm equipment, or purchase a business. The guaranty was limited to the greater of 50% of the loan or $2,000, and loans could not have an interest rate above 4%. The VA paid the interest on the guaranteed portion of the loan during its first year. Veterans had the greater of two years from the termination of the war, or two years from their date of separation from the military, to apply.\nWithin a year, Congress amended the loan guaranty to address some of the aspects of the program that did not seem to be working (P.L. 79-268). The maximum guaranty was raised to $4,000 (prices of homes had risen), the maximum maturity was increased from 20 to 25 years (the shorter maturity period had resulted in higher payments), and veterans were given 10 years from the end of the war to apply (two years had been too short a time frame).\nOver time, the loan guaranty has been expanded to include all veterans who served on active duty from World War II on, with varying length of service requirements, as well as those who served in the selected reserves; the amount of the guaranty has grown; business purchases are no longer eligible and farm purchases have been limited; and the uses have expanded to include refinancing, energy efficiency improvements, and the purchase of manufactured homes. This section of the report describes eligibility for the loan guaranty (\" Borrower Eligibility \"), ways in which it can be used (\" Uses of the Loan Guaranty \"), coverage (\" Amount of Coverage Provided by the Loan Guaranty \"), and how the VA loan guaranty differs from the Federal Housing Administration (FHA) mortgage insurance program (\" How the VA Loan Guaranty Differs from FHA Insurance \").", "", "Veteran eligibility for the VA loan guaranty started narrowly, targeted to individuals who served during World War II. As additional conflicts arose, veterans of those conflicts, as well as peacetime eras, were made eligible for the program. Further, the loan guaranty statute defines the term veteran broadly to include the following categories.\nVeterans who served or are serving on active duty . To be eligible for VA loan benefits (and most other VA benefits), veterans must fulfill specific time period and duration of service requirements. See Table 1 for more details. Members of the Selected Reserve. 8 Reservists need not have served on active duty, unlike what is required for some other veterans' benefits, as long as they serve for at least six years. S pouses of veterans . Spouses of veterans who died in action, died of a service-connected disability, or who are missing in action, captured, or forcibly detained are eligible for the loan guaranty. In addition, spouses of veterans who die while receiving compensation (or who were eligible to receive compensation) for a service-connected disability rated totally disabling for a specified duration are eligible. Prior to 2012, only surviving spouses of veterans who died from their service-connected disabilities were eligible for the loan guaranty. See Table 1 for a complete list of eligibility categories.", "In addition to length of service requirements, the VA loan guaranty has underwriting criteria designed to ensure that veterans have the financial means to make mortgage payments. The statute gives the VA Secretary the authority to set underwriting standards in regulation, which are further supplemented by the VA Lenders Handbook . The underwriting standards consider a veteran's income, expenses, and credit history in determining whether he or she qualifies for a guaranteed loan. In seeking to balance income and expenses, a veteran must meet requirements established via a debt-to-income ratio standard and a residual income analysis.\nDebt-to-Income Ratio: In the debt-to-income analysis, a lender is to look at the ratio of a veteran's anticipated housing expenses and other long-term monthly obligations compared to his or her stable and reliable monthly income. To be stable and reliable, income is to be expected to continue \"for the foreseeable future.\" Examples of unreliable income include VA education benefits, unemployment compensation, and irregular overtime pay. A veteran's total debt-to-income ratio should not exceed 41%, although there are provisions to allow for exceptions to this requirement in cases where a lender is able to justify the loan to the VA. Residual Income: The residual income test is used to determine whether a veteran's income after payments for shelter expenses and other debts is adequate to meet living expenses. Unlike the debt-to-income ratio, the residual income test looks at additional expenses such as food, clothing, health care, and gasoline that are not captured as part of debt. The loan guaranty regulations contain a guide to sufficient residual income by region.\nThe Loan Guaranty Program does not require veterans to have a specific credit score to qualify for a loan, but the underwriting guidelines require lenders to analyze a borrower's credit history. Lenders must be able to explain decisions to extend credit to borrowers who have an adverse credit history, and certain situations, such as an unpaid court-ordered judgment or a bankruptcy within the previous one or two years, may disqualify a borrower from obtaining a guaranteed loan. A previous foreclosure is not a bar to obtaining a VA-guaranteed loan, but borrowers who had previous VA-guaranteed loans that were foreclosed upon may have to repay the government for any losses suffered prior to obtaining a new loan.", "", "Loan guarantees are available for the purchase or construction, or to make improvements (including energy efficiency improvements) to either a \"dwelling\" or farm residence. A dwelling is defined as a building primarily used and occupied as a home (defined as a \"place of residence\"), and that consists of no more than four single family units (under most circumstances), one of which will be occupied by an eligible veteran. While a daily physical presence is not necessary to occupy the property as a home, occupancy of the property must be more than intermittent. For example, the property should be near a borrower's place of employment, and if his or her job requires an absence for a \"substantial amount of time,\" there must be a history of continuous presence in the community prior to the absence, and there should be no attempt to establish a principal residence elsewhere. Use of a property as a vacation home would not qualify for the VA loan guaranty. An exception exists for instances where veterans are called away for active duty—their spouses or dependent children may satisfy the requirement by occupying the property as a home.", "VA-guaranteed loans can be used to purchase a dwelling. A range of housing qualifies as a dwelling for VA loan guaranty purposes. A single condominium unit qualifies as a dwelling, and a manufactured home may also be a dwelling if the veteran owns the land to which it is affixed and the state classifies it as real property. Note, however, that a manufactured home that does not meet these requirements may qualify separately under the manufactured housing section of the law (for more information, see the next section of this report entitled \" Loan Guaranty for Manufactured Housing \"). The loan guaranty can also include the purchase of land for both the construction of a single-family home or for placement of a manufactured home.", "In addition to purchasing property, an eligible veteran may enter into a guaranteed loan for the construction of housing. When this occurs, the loan closes prior to construction, and funds are placed in an escrow account and paid out as the construction progresses. As a home is built, a VA inspector is to inspect the progress in stages and confirm that the construction satisfies both VA minimum property requirements (MPRs) and the appraised value on which the loan is based. The loan guaranty is issued after the final inspection, and a borrower does not begin paying on the loan until construction is complete.", "A VA loan guaranty can be used to purchase a property that requires significant work (i.e., a fixer-upper). However, MPRs must be satisfied before VA will guarantee the loan. Among the MPRs are ensuring that major systems—including heating, water, roof, ventilation, electricity, etc.—are safe, structurally sound, and sanitary, and ensuring that the property is free of hazards and defective conditions, among other things. The cost of improvements are to be taken into account in determining the amount of the loan.\nThe loan guaranty can also be used for loans to make \"energy efficiency improvements\" to a property a veteran is purchasing or to a property already owned. Energy efficiency improvements are limited to $6,000, and may include such things as solar heating and cooling or conservation measures, such as insulation, weatherizing, and furnace replacement.", "The VA loan guaranty has evolved so that there are two ways in which manufactured housing is classified and guaranteed. First, as mentioned in the previous section, manufactured housing can be classified as a dwelling that may be guaranteed under the regular guaranty provisions of the statute (38 U.S.C. §3710). In addition, it can be classified and guaranteed under a separate manufactured housing portion of the law (38 U.S.C. §3712). Congress created the latter program first in 1970 (see the Veterans' Housing Act of 1970, P.L. 91-506), and later specified that manufactured housing could be included as a dwelling for the regular guaranty provisions in Section 3710 (see the Veterans' Compensation and Program Improvements Amendments of 1984, P.L. 98-223 ). Despite this flexibility, it appears that the VA has not guaranteed new manufactured housing loans under Section 3712 of the law since 1996.\nThe VA has slightly different definitions for manufactured housing based on the portion of the statute under which it is guaranteed. The definitions share in common that manufactured housing is\n[a] movable dwelling unit designed and constructed for year-round occupancy on land by a single family, which dwelling unit contains permanent eating, cooking, sleeping, and sanitary facilities. A double-wide manufactured home is a movable dwelling designed for occupancy by one family consisting of (1) two or more units intended to be joined together horizontally when located on a site, but capable of independent movement or (2) a unit having a section or sections which unfold along the entire length of the unit.\nThe definitions differ in that the regulations governing the Section 3710 guaranty require that the manufactured home be permanently affixed to a lot and classified as real property under state law. To be permanently affixed, the home must be placed on a foundation in a way that satisfies local building codes. This generally means being placed on a permanent foundation, and in some, but not all cases, connection to utilities and ownership of the land, although long-term rental agreements may suffice. Once a home is permanently affixed, it may be titled as real property rather than personal property (as a vehicle is titled). According to the Census Bureau, in 2010, approximately 73% of new manufactured homes were titled as personal property and 22% as real property.", "When Congress created the separate loan guaranty for manufactured housing in 1970, it was concerned that returning Vietnam veterans, some without significant financial resources, were unable to afford conventional homes and the costs of financing. The recommendation to include mobile homes as eligible properties for the loan guaranty originated from the President's Committee on the Vietnam Veteran, whose members saw growing construction costs of conventional homes as a barrier to home ownership for veterans. According to the committee, the lower costs of mobile homes represented \"an enormous potential in meeting the housing needs of many veterans with low to moderate incomes.\" It was necessary to add a new manufactured housing portion to the law because, unlike loans for site-built homes, manufactured housing is often financed with \"chattel mortgages,\" which are designed for moveable property and governed by different laws than mortgages for real property.\nManufactured housing loans that are guaranteed through Section 3712 differ from the Section 3710 loan guaranty in that the term of the mortgage is generally shorter depending on the type of manufactured housing, the maximum loan guaranty amount is set differently (see Table 3 ), and fees charged by the VA are less than for conventional housing (see Table 6 ), among other differences. However, as mentioned previously, the VA has not guaranteed loans pursuant to Section 3712 for a number of years. The VA cites several reasons that the Section 3712 loan has not been popular: interest rates are often higher for manufactured homes not permanently affixed to a foundation, the maximum loan amount cannot exceed 95% of the purchase price plus the VA fee (meaning that a veteran must make a down payment), and changed appraisal standards instituted in the 1980s that resulted in sales prices that exceeded appraised values.", "Veterans may use the loan guaranty to refinance an existing loan in two different ways: to reduce the interest rate of an existing VA-guaranteed loan (sometimes referred to as an interest rate reduction refinancing loan or IRRRL), or to refinance generally with fewer restrictions. Loans in the latter category are sometimes referred to as \"cash out\" refinancings because veterans may choose to take out equity as part of the transaction. The ability to refinance a loan on a property owned and occupied by an eligible veteran became part of the loan guaranty law as part of the Veterans' Housing Act of 1970 (P.L. 91-506). Manufactured housing loans became eligible for refinancing as part of the Veterans' Compensation and Program Improvements Amendments of 1984 ( P.L. 98-223 ).", "When a veteran refinances a loan that is already guaranteed by the VA as an IRRRL, generally the interest rate on the new loan should be lower than the loan being refinanced. However, a veteran may refinance from an adjustable-rate loan to a fixed-rate loan without the requirement for a lower rate. The amount of the new loan may not exceed the principal balance of the original loan, plus any closing costs, and the term of the new loan cannot exceed the original loan term by more than 10 years.\nA veteran may also take advantage of energy efficiency improvements as part of an IRRRL, in which case the principal balance of the new loan may be increased by the amount of the improvements. Another aspect of an IRRRL refinancing is that a veteran need not occupy the residence as a home after refinancing as long as it had been occupied as a home prior to refinancing. The limitation on occupancy was removed in 1987 ( P.L. 100-198 ) due to concern that servicemembers who were transferred or stationed elsewhere were unable to take advantage of refinancing. In general, no appraisal and no new underwriting are required for an IRRRL, and, unlike purchase-money VA loans, closing costs may be financed as part of the loan.", "A veteran may also refinance without the restrictions involved in an IRRRL. The VA considers a cash-out refinance to be the refinancing of any type of loan or lien, which may result in additional funds being taken out against the value of the property (but does not have to). The loan or lien being refinanced need not be VA-guaranteed, the new loan does not have to have a lower interest rate, the loan balance on the refinanced loan may be higher than on the original loan, and the veteran may receive cash from the refinancing for any purpose approved by the lender. Property improvements are often undertaken as part of a refinancing. However, there are requirements for cash-out refinancings that are not required for IRRRLs. A veteran must occupy the property as his or her home after the refinancing, and, unlike the IRRRL, an appraisal, credit check, and underwriting are required.", "In addition to any limitations specific to IRRRL or cash-out refinancing, Congress has imposed certain requirements to prevent lenders from taking advantage of veterans through multiple refinancings taking place over a short period of time in order to capitalize on fees. Multiple refinancings, in turn, may have the potential to destabilize the Government National Mortgage Association (Ginnie Mae) pool of loans into which VA loans are securitized. Congress put limitations into place as part of the Economic Growth, Regulatory Relief, and Consumer Protection Act ( P.L. 115-174 ), enacted in 2018. The limitations do not apply to a cash-out refinancing where the principal amount of the new loan exceeds the amount that was paid off.\nAmong the limitations in P.L. 115-174 are the following:\nThe interest rate of the new loan must be at least half a percentage point lower than that of the previous loan for fixed interest rates, and 2 percentage points lower for a fixed rate that is refinanced into an adjustable rate loan. All of the fees and costs of the new loan must be recouped (via lower loan costs) within 36 months of issuance. A veteran must wait the longer of 210 days from the first monthly payment or to the date of the sixth monthly payment before entering into another loan.", "VA-guaranteed loans make up a relatively small share of mortgage loans in the United States. According to the 2017 American Housing Survey, approximately 6.3% of primary mortgages outstanding were VA-guaranteed loans. Table 2 shows the number of loans that have been guaranteed by the VA from FY2000 through FY2017 broken down by purchase and refinance loans, the dollar amount of the loans, and the dollar amount of the portion guaranteed.\nDuring periods where interest rates have fallen, refinance loans make up a greater share of the total VA loans extended. And during the mid-2000s, when housing prices were at their height, the numbers of VA-guaranteed purchase loans were lower than the number entered into at both the beginning and end of the last decade. Among the reasons for this are the fact that looser lending standards on private mortgage loans, particularly subprime loans, might have made them more appealing for veteran borrowers. This may have been particularly true in a climate where the ability to close loans quickly was considered appealing to sellers, and bypassing the VA loan fee was appealing to veteran borrowers. In addition, higher home prices during the mid-2000s could have made it difficult for veterans living in high-cost areas to take advantage of the loan guaranty. Until enactment of legislation in 2008, the VA loan guaranty did not cover properties in high-cost areas where the cost exceeded $417,000. (For more information about maximum mortgage limits, see the next section of this report entitled \" Amount of Coverage Provided by the Loan Guaranty .\")", "While there is technically no limit to the amount that a veteran can borrow and still receive a loan guaranty through the VA, the VA limits the guaranty that it will provide based on the amount of the loan as well as the type of loan (purchase money, refinance, or energy efficiency mortgage). In most cases, the VA guaranty covers at least 25% of the principal balance of a loan. While the VA guaranty does not insure 100% of the loan (as Federal Housing Administration loan insurance does, for example), the guaranty covers what would typically be required as a down payment in a conventional mortgage transaction to avoid the requirement for private mortgage insurance. In cases where the loan guaranty does not cover 25% of the loan amount, a veteran may have to make a down payment.\nThe statute governing the loan guaranty for home purchase sets out four categories of coverage depending on the principal balance of the loan. (For all guaranty amounts, including manufactured housing, refinance loans, and energy efficiency mortgages, see Table 3 .) In general, the amount of the loan guaranty is based on the amount borrowed by a veteran.\nAt loan levels at or below $45,000, the VA guaranties 50% of the loan. For loans above $45,000 and up to and including $56,250, the guaranty is $22,500. At loan levels above $56,250 and up to and including $144,000, the VA guaranty is the lesser of $36,000 or 40% of the loan. For loan levels above $144,000, the maximum loan guaranty is the lesser of the \"maximum guaranty amount\" (described below) or 25% of the loan.", "The VA loan \"maximum guaranty amount\" is defined in 38 U.S.C. Section 3703 as 25% of \"the Freddie Mac conforming loan limit limitation determined under section 305(a)(2) of the Federal Home Loan Mortgage Corporation Act.\" The Freddie Mac conforming loan limit has most recently been set at $453,100 for single-family homes (for more information about the Freddie Mac conforming loan limit, see the text box). In addition, for certain high-cost areas, the loan limit may be as high as 115% of the area median home price, though it may not exceed 150% of the conforming loan limit (or $679,650). Note that for VA loans, the maximum guaranty amount is the same for 2-4 units of housing as it is for single units.\nIf the amount of a mortgage exceeds the maximum amount at which the VA will guarantee 25% of the loan (for example, the amount of a mortgage is $500,000 in a county where the loan limit is $453,100), then a veteran may have to make a down payment equal to 25% of the amount over the loan limit to qualify for the loan due to secondary market considerations (see the next section of this report entitled \" Maximum Loan Amount \" for more information about the secondary market). However, the majority of VA-guaranteed loans are made with no down payment (80% of purchase loans in FY2017 had no down payment), so the limits described here will apply to most veteran borrowers.", "The maximum single-family guaranty limit for Alaska, Hawaii, the U.S. Virgin Islands, and Guam is higher than in the other states and the District of Columbia due to costs of construction. The statutory Freddie Mac conforming loan limit for these areas is 50% higher than the $453,100 limit for the rest of the country, resulting in a statutory conforming loan limit of $679,650. Further, with the Freddie Mac statutory provision allowing the area limit to be increased up to 150% of the conforming loan limit for high-cost areas, it is possible for the loan limit in Alaska, Hawaii, the U.S. Virgin Islands, and Guam to exceed $1 million (150% of $679,650). In 2018, two communities in Hawaii saw their limits exceed $679,650.", "Although there is no limit to the amount a veteran may borrow and still participate in the VA loan guaranty program, lenders may be unwilling to extend a loan that exceeds the limit where the VA will guaranty 25% of the loan. VA loans are securitized through Ginnie Mae. Ginnie Mae may secure certain \"high balance loans\" originated after October 1, 2008—loans where the balance exceeds the conforming loan limit of $453,100 for single-family properties. However, according to the VA, the \"rule of thumb\" for Ginnie Mae to purchase a VA loan is that at least 25% of the principal balance either be guaranteed and/or covered by a down payment. As a result, the effective maximum loan limit with no down payment corresponds to the \"maximum guaranty amount\" described in the previous section.", "The term \"entitlement\" is used to refer to the amount of guaranty to which a veteran is entitled under the loan guaranty statute. It is different from the guaranty amount described in the previous section in that it is technically a lifetime limit on the amount of loan insurance coverage for which a veteran may qualify. However, given the broad circumstances under which entitlement may be restored (described below), veterans may use the guaranty for the purchase of more than one home during a lifetime, though not necessarily more than one home at a time.\nThe statute governing the VA loan guaranty limits a veteran's entitlement to $36,000 or, for loans that exceed $144,000, the \"maximum guaranty amount\" described in the previous section. The term \"basic entitlement\" is sometimes used to refer to entitlement up to $36,000, and the term \"bonus entitlement\" is used to refer to entitlement that exceeds $36,000. In general, due to the requirement that VA-guaranteed loans be used to purchase properties that a veteran will occupy as his or her home, unused entitlement cannot be used to purchase more than one home at a time.\nIn addition to being able to put unused entitlement toward a future guaranteed loan, there are instances in which already-used entitlement may be restored so that a veteran may use the maximum available loan guaranty to purchase another home. These circumstances cover most situations where a veteran has ended the previous loan transaction in some way.\nEntitlement is restored where a veteran has disposed of the property (e.g., through sale) or the property has been destroyed through natural disaster, and either (1) the loan is paid off in full; (2) if the VA suffered a loss on the loan, the loss is repaid; or (3) the VA has been released from liability on the loan. When one veteran assumes a guaranteed loan from another, entitlement is restored to the original mortgagor. In cases of refinancing, entitlement is restored either when a veteran has paid off the original loan prior to entering into a new loan or where proceeds from the refinancing will be used to pay off the original loan. Where a veteran has paid off a VA-guaranteed loan, but has not yet sold the property that secured it, the VA may do a one-time restoration of entitlement to be used toward the purchase of another property.\nIf available entitlement is less than 25% of the loan, then a lender may require a veteran to make a down payment to make up the difference between the loan guaranty and 25% of the loan to meet secondary market requirements.", "Both the Federal Housing Administration (FHA) loan insurance program and the VA loan guaranty program provide borrowers with the federal government's promise to reimburse lenders in the event of borrower default on private mortgages. Due to the insurance features of each program, borrowers who might not otherwise have the resources for a conventional mortgage may still be able to purchase a home. Despite similar purposes, however, the programs differ in their specifics. Aside from the requirement that a borrower through the VA meet service requirements, other features such as the amount of coverage, borrower fees, loan processing and underwriting, terms of the loan, etc., vary between the two.\nAmount of Coverage: As discussed earlier in the \" Amount of Coverage Provided by the Loan Guaranty \" section, the VA loan guaranty covers only a portion of the mortgage loan in the event of a borrower's default. Insurance through FHA covers 100% of the loan amount (up to a certain limit). Borrower Fees: Fees paid by veterans participating in the VA loan guaranty program are paid up front as a percentage of the loan (see Table 6 ), and borrowers do not pay additional annual premiums. Borrowers who go through the FHA program currently pay an up-front fee of 1.75% of the loan amount, and then pay annual premiums that are 0.80% and 0.85% of the mortgage balance for 30-year loans, depending on the loan-to-value ratio. Down Payment: Veteran borrowers who participate in the VA loan guaranty program are not required to make a down payment. However, if the loan balance exceeds loan limits, the borrower generally must make up the difference between the guaranty and 25% of the amount over the loan limit. In general, borrowers through FHA must make a 3.5% down payment (10% for credit scores ranging from 500 to 579). Fees Charged at Closing: While both the VA loan guaranty and the FHA insurance program have rules about what lenders may charge borrowers at closing, the VA loan guaranty is more restrictive. VA loan guaranty regulations list services where lenders are allowed to charge itemized fees to borrowers (such as appraisal, recording, and credit report fees), and any other fees must be recouped through a flat fee not to exceed 1% of the loan, limiting such charges as application fees, document preparation, interest rate lock-in fees, and charges from mortgage brokers. FHA rules are more general, specifying that lenders \"may only collect fair, reasonable, and customary fees and charges\" from borrowers. Minimum Credit Score: The VA loan guaranty does not require a specific credit score from a borrower, while FHA requires a credit score of at least 500. Appraisal: Appraisers for properties that are to be guaranteed through the VA loan guaranty program are approved by VA and placed on a list of VA appraisers. When homes are to be appraised, the VA selects an appraiser from its list. The VA Secretary establishes requirements for appraisers, which include a qualifying test, sample appraisals, years of experience, and recommendations from other appraisers. The statute requires the VA to review appraisals prior to loan closings, although the VA has a program in place to allow lenders to process appraisals after application and training. Although FHA maintains a list of approved appraisers on its Appraiser Roster and only appraisers on the Appraiser Roster and the Appraisal Subcommittee's National Registry can perform FHA appraisals, unlike VA loans, the appraiser is selected by the lender.\nIn addition, for a number of years, veterans were given special terms when entering into FHA loans. The Housing and Urban Development Act of 1965 (P.L. 89-117) first allowed veterans to enter into FHA loans with slightly higher maximum mortgages compared to nonveteran borrowers, and it also exempted them from what was then a 3% cash down payment requirement on the first $15,000 of the loan. Over time, some of the specifics of the maximum mortgage and down payment requirements changed, but veterans still retained favorable levels compared to nonveterans. In 2002, the FHA Downpayment Simplification Act ( P.L. 107-326 ) removed statutory language that allowed for higher maximum mortgages for veteran borrowers. And when the Housing and Economic Recovery Act of 2008 ( P.L. 110-289 ) was enacted, it eliminated the provision exempting veterans from the requirement of what had previously been a 3% down payment in cash or its equivalent.", "In addition to the VA loan guaranty program, through which the VA insures loans made to veterans by private lenders, there are several circumstances under which the VA makes loans directly to veterans, as well as occasionally to nonveterans. The direct loans through the VA can be put into two broad categories. The first category involves loans that are targeted to specific veteran populations: one program was created to address the needs of rural veterans, but has evolved to serve veterans with certain disabilities, and the other program is designed for Native American veterans. The second category involves loans made as the result of borrower default on guaranteed loans—these are referred to as \"acquired loans\" and \"vendee loans.\"", "The VA first made direct housing loans available to veterans who were unable to obtain mortgages through private lenders and were therefore unable to participate in the loan guaranty program. The direct loan portion of the program was enacted as part of the Housing Act of 1950 (P.L. 81-475), and was meant to be a \"last resort\" where private financing was not available to veterans. The direct loan program was made available specifically for veterans living in rural areas in 1958, and for veterans with disabilities in 1970.\nAs a result of the increased availability of private loan funds in rural areas, beginning in the FY1981 Department of Housing and Urban Development-Independent Agencies Appropriation Act ( P.L. 96-526 ), Congress specified that VA direct loans be made only for veterans with disabilities through the Specially Adapted Housing Program (described in a later section of this report entitled \" The Specially Adapted Housing Program \"). Congress has continued to include similar language in subsequent appropriations acts. Currently, direct loans are limited to $500,000 in obligations for Specially Adapted Housing loans of not more than $33,000 apiece. Interest rates on the loans are to be determined by the VA Secretary, and veterans are eligible as long as they qualify for the loan guaranty program.", "While the VA loan guaranty program is available to Native American veterans, due in part to certain tribal land ownership issues, Congress enacted a direct loan program specifically to provide mortgage assistance for Native American veterans. The direct loan program may also be used by veteran borrowers who are Native Hawaiians, Alaska Natives, and those who are native to American Samoa, Guam, and the Commonwealth of the Northern Mariana Islands (CNMI). Eligibility is based on definitions in statute. The statute defines \"Native American\" as an Indian (as defined by the Indian Self-Determination and Education Assistance Act), a Native Hawaiian (as defined by the Hawaiian Homes Commission Act of 1920), a Native Alaskan (within the meaning of the Alaska Native Claims Settlement Act), and a Pacific Islander (within the meaning of the Native American Programs Act of 1974).\nPrior to enactment of the direct loan program for Native American veterans, VA housing assistance to Native American veterans was minimal. In fact, the Advisory Committee on Native American Veterans had been unable to find a single instance of a Native American veteran benefitting from the loan guaranty program. While factors such as poverty and unemployment among Native American veterans may have contributed to their lack of participation, the unique nature of tribal land also presents obstacles to private lenders entering into mortgages. Much of tribal land is held in trust by the federal government, either for a tribe or for individual Native Americans (the latter situation is sometimes referred to as an allotment). Of the approximately 56 million acres of trust land, 45 million are held in trust for tribes and 11 million for individuals. In the case of tribal trust land, the land may be assigned or leased to individual tribal members. However, in neither case (tribal or individual trust) may the land be encumbered or transferred without federal government approval. Lenders could be reluctant to enter into mortgage arrangements where they would be unable to have the land transferred to them in the event of a veteran's default.\nSimilar issues apply to residents of American Samoa and CNMI, where land ownership is restricted. In American Samoa, approximately 90% of land is communally held, it may not be transferred without government approval, and it may not be transferred to anyone who is \"less than one half Samoan.\" The CNMI Constitution restricts land ownership and long-term interests (such as leases) to those of Northern Marianan descent. As with tribal land, a private lender may not be willing to extend a loan where transfer of the land in the event of default would violate territorial law. Guam does not have these restricted land ownership issues.\nAfter finding that only 15 of 24,000 veterans living on trust land had participated in any sort of housing benefit—all of whom received the Specially Adapted Housing benefit and none the loan guaranty—Congress initially enacted a demonstration program to make loans to Native American veterans that was included in the Veterans Home Loan Program Amendments of 1992 ( P.L. 102-547 ). The program was made permanent as part of the Veterans' Housing Opportunity and Benefits Improvement Act of 2006 ( P.L. 109-233 ). In order to participate in the VA direct loan program, and circumvent the issues of land ownership, a tribe must enter into a memorandum of understanding (MOU) with the VA to provide avenues for addressing default and foreclosure. Typically individuals enter into long-term leases for use of trust land. The MOU requires that a participating tribe set up a process through which a veteran borrower's leasehold interest in a property can be transferred to a lender, whether private or government, or their assignee in the event of default. The tribe must also establish a procedure for evicting and foreclosing on the veteran's interest in the land and property.\nAs of FY2017, the VA had entered into MOUs with 98 tribes or Pacific Island territories. Through FY2017, the VA had entered into just over 1,000 loans through the direct loan program, 24 of which were made in that year. The Direct Loan program for Native American veterans has had much of its participation in Hawaii and the territories. Prior to the program being made permanent in 2006, the VA noted in hearing testimony that the program was most successful in American Samoa, Guam, CNMI, and Hawaii, with 90% of loans at the time made in American Samoa and Hawaii. Reasons behind the lack of lending to Native American veterans were thought to include low income, lack of infrastructure, and poor credit.", "The VA may also enter into a direct loan arrangement in two situations involving a veteran's delinquency and/or default on a guaranteed loan.\nAcquired Loans: In situations where a veteran borrower with a guaranteed loan has difficulty making payments, the VA may purchase the loan from the lender (or current servicer) and continue to hold and service the loan. Vendee Loans: In cases where a veteran defaults on a guaranteed loan and the lender forecloses, the VA often acquires the property from the servicer and then resells it. As part of the resale, the VA may enter into a direct loan with a purchaser of the home, whether or not the purchaser is a veteran. The law also amended the statute to require that, of the properties acquired and sold by the VA as the result of veteran default, between 50% and 85% are to be financed by the VA as part of their purchase. After 2012, the VA stopped entering into vendee loans due to the need for new regulations.\nGenerally, the VA has had the authority to bundle and sell pools of vendee loans. The loans are sold to a trust, which in turn issues certificates that are backed by the mortgages and sold to investors. The VA guarantees that investors in the certificates will receive \"full and timely\" payments of principal and interest from the loans as well as against losses at foreclosure. The bundled loans appear in the VA budget as \"Guaranteed Loan Sales Securities.\"\nThe number of loans acquired by the VA, vendee loans entered into, and sales of vendee loans in a given year depend on borrower defaults, purchaser interest in foreclosed VA homes, and investor interest in VA securities. Table 5 shows the number of acquired loans, vendee loans entered into, and vendee loans sold from FY1998 through FY2017. As a result of the vendee loan program suspension in 2003 and again in 2013, the number of vendee loans entered into decreased during the subsequent years and is currently at zero. This has also resulted in the sale of fewer vendee loans. In addition, the number of VA acquired loans has fallen in recent years. According to the VA, there have been fewer acquired loans since the 1990s and early 2000s because both the VA and loan servicers focused efforts on loan modification and other options to help borrowers keep their homes, reducing the need for the VA to acquire loans. Efforts particularly increased in 2008 and thereafter, when the VA offered new incentives for servicers to work with borrowers (see the section of this report \" Options to Prevent Foreclosure \").", "Both the VA direct loan and loan guaranty programs are funded through several sources. These sources include congressional appropriations, fees paid by borrowers, proceeds from the rental or sale of foreclosed properties, collection of principal and interest payments made by borrowers, and any penalties paid by lenders. An important aspect of understanding how VA loans are funded, apart from the sources of funding, is how loans are accounted for in the federal budget.\nIn most federally funded grant programs, the cost to the federal budget is the amount appropriated, and federal involvement in funding generally ends after the outlay of funds. By contrast, the cost of loan programs may involve both an up-front outlay of funds as well as the recoupment of costs through payments of principal and interest, and/or collection of fees and penalties, over the lifetime of the loans. Loan programs may also suffer losses in subsequent years through defaults or lower-than-expected collection of fees. As a result, it is not always possible to capture the budgetary effects of loans in one particular year. Current government practice, instituted in 1992, is to determine the net present value of loans over their lifetime and to record this amount in the budget in the year the loans are extended. (See the text box for an explanation of the law implementing this budget process.)\nThe concept of net present value is helpful both in understanding how funds are appropriated for VA loans and in reading VA budget documents. The federal funding process is described briefly in the following subsection of this report, \" The VA Budget and Congressional Appropriations for VA Loan Programs .\" The two subsequent subsections describe loan fees paid by borrowers, and funds obtained through loan payments and property sales.", "", "The VA direct and guaranteed loan programs receive both discretionary and mandatory appropriations from Congress. The discretionary funds pay for the administrative expenses of the VA loan programs. The mandatory funding supports the loans themselves, and typically appears in appropriations laws as \"such sums as necessary.\"\nMandatory funding for the loan guaranty and direct loan programs is expressed as a percentage of the total loan volume. This is sometimes referred to as the \"subsidy rate\"; each year the estimated subsidy rate appears in the President's Budget Appendix for the Department of Veterans Affairs. The estimated subsidy rate of loans guaranteed or made in a given fiscal year is based on the net present value of expected expenses in the event of borrower defaults as well as expected income through fees and other sources. If the estimated present value of payments by the VA for a cohort of loans guaranteed or extended in a given fiscal year exceeds the estimated present value of fees paid by borrowers, recoveries, and other collections, then the subsidy rate is positive (i.e., the government subsidizes the loan program), and the program receives mandatory funding. If the net present value of cash flows for a cohort of loans is expected to result in a surplus of funds (more taken in than paid out), then the subsidy rate is negative (i.e., the program has excess revenue that is returned to the Treasury).\nAs part of the annual budget process, the VA estimates individual subsidy rates for each of the four types of loans either made directly by the VA or guaranteed by the VA. The four programs for which the VA estimates subsidy rates are guaranteed loans, guaranteed loan sale securities, acquired loans, and vendee loans. The initial estimated subsidy rate for each of these programs for a given fiscal year represents the net present value for that year's cohort of loans. However, the initial estimated subsidy rate may differ from the actual subsidy rate for the cohort of loans over their lifetime. Projecting the net present value of cash flows is uncertain, so subsidy reestimates are made by the VA each year, and additional mandatory funding is permanently available by the FCRA to cover any shortfalls. Factors that can affect the subsidy rate (and resulting mandatory appropriation) include changes in the interest rate used to determine the present value of future funding streams, revisions in estimates of borrower default or prepayment rates, the outcomes of property management decisions, and changes in the amount of fees actually paid by borrowers (compared to what was expected). Due to reestimates, a negative subsidy rate calculated in one year may be recalculated as positive in a subsequent year, resulting in an increased amount of mandatory funding needed for a loan program. Or, if the subsidy rate is recalculated as negative, funds are returned to the Treasury.\nAppropriations for VA direct and guaranteed loans are captured in one \"on-budget\" account, called the Veterans Housing Benefit Program Fund, sometimes referred to as the program account. (Note that direct loans for Native American veterans are funded separately.) In addition, several separate, off-budget accounts reflect inflows and outflows for direct and guaranteed loan cohorts, depending on when the loans were extended. Funds for direct and guaranteed loans made prior to 1992 are shown in a housing liquidating account, and funds for loans extended after 1992 are shown in direct and guaranteed loan financing accounts. The multiple accounts may be cause for confusion, so it is useful to keep in mind that appropriations appear in the Veterans Housing Benefit Program Fund, while the financing and liquidating accounts reflect the specific income and expenses associated with particular loan cohorts.", "The costs of the VA direct and loan guaranty programs are supported, in part, by fees paid by the borrowers. Veterans may finance the fees as part of the loan, and the guaranty is based on the loan amount, including the fees.\nFactors Determining VA Loan Fee: The amount of a borrower's fee is based on several factors: the amount of down payment, if any; whether the loan is extended through the loan guaranty or direct loan program; whether the borrower had active duty service or was a reservist; when the loan closed; whether the loan is purchase money or a refinance; whether the borrower is accessing the guaranty for the first time or entering into a subsequent loan; and whether the property is purchased under the manufactured housing portion of the loan guaranty statute. (See Table 6 .)\nWaiver of VA Loan Fee: Fees may be waived for veterans receiving compensation for a service-connected disability, for the surviving spouse of a servicemember who died of a service-connected disability, or for the surviving spouse of a veteran who died while receiving (or was entitled to receive) compensation for certain service-connected disabilities.\nVeterans were not always charged fees as part of the loan guaranty transaction and, in general, fees were not required prior to 1982. When the loan guaranty program was created, it was considered a benefit or entitlement for veterans. However, in 1982, the VA administrator wrote a letter to the Speaker of the House, together with draft legislation, suggesting that the VA require veterans to pay a 0.5% fee on the principal balance of each loan. The letter expressed concern regarding the \"costs to the taxpayers of operating the program,\" and noted that \"paying claims on the approximately 3.7 percent of the loans resulting in foreclosure are significant.\" Despite objections from veterans groups, Congress instituted the fee as part of the Omnibus Budget Reconciliation Act of 1982 ( P.L. 97-253 ). The fee was to be in effect for transactions entered into from FY1983 through FY1985, with an exemption for veterans with service-connected disabilities. Congress continued the fee beyond FY1985, and after the fee was raised to 1% as part of the Deficit Reduction Act of 1984 ( P.L. 98-369 ), Congress began to institute the more complicated fee schedule that exists today, with fees varying based on amount of down payment and whether the veteran received a loan guaranty or direct loan (Veterans' Benefits Amendments of 1989, P.L. 101-237 ).\nThe same VA loan fees have been in place since 2004, and most recently have been extended until September 30, 2027.", "In its direct loan portfolio, the VA owns some loans on which it collects principal and interest payments (acquired loans), and it also sells properties that it has acquired through foreclosure and enters into direct loans with the borrowers (vendee loans). In addition, the VA has the authority to pool and sell loans to investors. Each of these transactions results in income to the VA, although the income may not be sufficient to counteract losses. For example, because the VA guarantees payment of principal and interest on the loans that it sells, borrower default may result in greater outflows than inflows.", "The Specially Adapted Housing Program provides grants to veterans and servicemembers with certain service-connected disabilities to assist them in constructing, purchasing, or remodeling homes to fit their needs. While Specially Adapted Housing loans are also available (see discussion in the \" The Original Direct Loan for Veterans in Rural Areas, Now Limited to Veterans with Disabilities \" section of this report), the majority of funds are distributed as grants that veterans and servicemembers need not pay back.\nThe Specially Adapted Housing Program, which was introduced in 1948 in P.L. 80-702, initially targeted veterans with a total service-connected disability causing paralysis in the legs or lower body. Over the years, Congress amended the law to expand the range of disabilities eligible for assistance, to make family members' homes eligible for adaptation (P.L. 109-233), to include active duty servicemembers with service-connected disabilities (P.L. 110-289), to expand benefits to individuals residing outside the United States (P.L. 110-289), and to include loans as well as grants ( P.L. 96-526 ).\nWithin the Specially Adapted Housing Program are two grant programs for veterans and active duty servicemembers, which are discussed in separate subsections, below. The first, sometimes referred to as the Specially Adapted Housing (SAH) Grant (or Section 2101(a) grant, after the section of Title 38 of the U.S. Code), is targeted to veterans with mobility impairments, while the second, sometimes referred to as the Special Housing Adaptation (SHA) Grant (or Section 2101(b) grant) assists veterans who are blind or who have lost the use of their hands. The grant limits for the first category of adapted housing are higher than for the second, and both types of adapted housing are available to veterans with severe burn injuries. A veteran or servicemember may use the SAH and SHA grants up to three times, as long as total funding does not exceed grant limits.", "The original law authorizing the Specially Adapted Housing Program was enacted to assist veterans who had lost use of their legs due to either spinal cord disease or injury. The law originally provided for grants of up to $10,000 for veterans to build homes with features adapted to their disabilities, to purchase homes that were already adapted, or to purchase homes without adaptations and then modify them. Since the program was introduced, the grant limit has increased (see \" Grant Limits \") and the original disability requirement was modified and expanded to include veterans and servicemembers with a broader range of mobility impairments resulting from permanent and total service-connected disabilities.\nVeterans who have qualifying disabilities include the following:\nThose who have lost or lost the use of both lower extremities and require the aid of braces, crutches, canes, or a wheelchair for locomotion (P.L. 86-239). Veterans and servicemembers with blindness in both eyes and who have lost or lost the use of at least one lower extremity (P.L. 86-239). Those who have lost or lost the use of one lower extremity together with one of two conditions resulting in the requirement that the veteran or servicemember use a cane, crutches, braces, or wheelchair for locomotion: residuals of an organic disease or injury (P.L. 91-22), or the loss or loss of use of one upper extremity ( P.L. 95-117 ). Veterans and servicemembers who have lost or lost the use of both upper extremities such that they cannot use their arms at or above the elbows ( P.L. 108-454 ). Veterans and servicemembers with severe burn injuries ( P.L. 110-289 ). VA regulations define this to mean \"full thickness or subdermal burns\" reducing mobility in two or more extremities or at least one extremity and the trunk of the body. Veterans and servicemembers with limitations in their lower extremities incurred on or after September 11, 2001, may receive the SAH grant. ( P.L. 112-154 ). Veterans and servicemembers qualify if they have lost or lost the use of one or more lower extremities where the loss so affects balance and propulsion as to require the aid of braces, crutches, canes, or a wheelchair for ambulating. The Secretary may approve no more than 30 applications in any fiscal year. Finally, in 2013 the VA issued regulations specifying that the disability requirements for the Specially Adapted Housing Program are satisfied for veterans with service-connected amyotrophic lateral sclerosis (ALS). Since 2008, there is a presumption of service connection for ALS.", "In the Veterans' Disability Compensation and Housing Benefits Amendments of 1980 ( P.L. 96-385 ), Congress expanded the Specially Adapted Housing Program to include veterans who may need to modify their homes, but not to the degree required for veterans eligible for the Section 2101(a) grant. This portion of the program is sometimes referred to as the \"Special Housing Adaptation Grant.\"\nThe impetus to expand the Specially Adapted Housing Program grew out of the concern that the needs of totally blind veterans were not being met. Unless blind veterans were also without use of a lower extremity, they did not qualify for the Specially Adapted Housing Program, and while they could receive home modifications through VA's home health program, the modifications were limited to $2,500.\nIn 1980, Congress enacted the Veterans' Disability Compensation and Housing Benefits Amendments of 1980 ( P.L. 96-385 ), which created a new category in the Specially Adapted Housing Program for veterans who had blindness in both eyes with 5/200 visual acuity or less, as well as those who had lost or lost use of both hands. The Senate Veterans' Affairs Committee noted that home adaptation needs for these veterans might not be as extensive as those with mobility issues, and they did not warrant grant amounts at the same level (which was $30,000). At the time the law was enacted, the portion of the program to assist blind veterans and those without use of their hands was limited to $5,000.\nSince enactment, the Special Housing Adaptation Grant has been expanded to include veterans with severe burn injuries (P.L. 110-289). Eligibility is as follows:\nVeterans and servicemembers who have blindness in both eyes with 20/200 visual acuity or less in the better eye with use of corrective lenses. Those who have lost or lost the use of both hands. Veterans and servicemembers with severe burn injuries. According to VA regulations, a veteran qualifies for the grant if (1) the burns are considered \"deep partial thickness burns\" and result in limitation in motion of two or more extremities or one extremity and the trunk of the body, (2) the burns are considered \"full thickness or subdermal burns\" and result in limitation in motion of one or more extremities or the trunk of the body, or (3) the veteran has residuals of an inhalation injury.", "The law provides that veterans may use the Special Housing Adaptation grant (§2101(b)) to modify homes of family members in cases where a veteran or servicemember plans to continue living there. In addition, a separate provision in the law, enacted in 2006, specifically provides the authority to give these grants to veterans or servicemembers living temporarily in the homes of family members, whether the individuals meet disability requirements for Section 2101(a) or Section 2101(b). This is sometimes referred to as the Temporary Residence Adaptation (TRA) grant.\nThe TRA grant was set up as a five-year pilot program and enacted as part of the Veterans' Housing Opportunity and Benefits Improvement Act of 2006 (P.L. 109-233). There was concern that many injured veterans returning from Operation Iraqi Freedom and Operation Enduring Freedom did not have homes of their own and were instead returning to family members' homes. The grants for veterans and servicemembers living temporarily in the homes of family members allow individuals to access a portion of the full grant to which they are entitled. The program is authorized through December 31, 2022 (P.L. 112-154).", "When the Specially Adapted Housing and Special Housing Adaptation grant programs were created, the Section 2101(a) grant had a limit of $10,000, while the Section 2101(b) limit was set at $5,000. Over the years, Congress increased the statutory limits, most recently to $63,780 and $12,756, respectively ( P.L. 112-154 ); the new limits took effect one year after enactment of P.L. 112-154 , in August 2013. In addition, the Housing and Economic Recovery Act of 2008 ( P.L. 110-289 ) provided that the VA Secretary shall annually adjust the levels based on a residential home cost-of-construction index, to be established by the Secretary. In FY2019, as a result of the index adjustment, the levels were set at $85,645 for Section 2101(a) grants and $17,130 for Section 2101(b). The Section 2101(a) grant further provides that the grant not exceed a total percentage of the cost, generally 50% of the cost to acquire property or construct housing.\nThe limits for the TRA grants were initially set at $14,000 for Section 2101(a)-eligible recipients and $2,000 for Section 2101(b)-eligible recipients. In August 2012, as part of P.L. 112-154 , the limits were increased to $28,000 and $5,000, respectively. The law also provided that the maximum TRA grants be increased using the same cost of construction index that is used to increase the maximum grants for a veteran's or servicemember's own home. Prior to enactment of P.L. 112-154 , the TRA grants were not subject to annual adjustment. Pursuant to the cost of construction index adjustment, the limits in FY2019 are $37,597 and $6,713.\nA veteran may qualify for more than one housing grant under the Specially Adapted Housing Program. For example, a veteran or servicemember could make some improvements to his or her home using a Section 2101(a) grant, and receive an additional grant later, as long as the total of all grants did not exceed the cap. However, grants used in one component of the program count against the maximum grant for another component. For example, if a veteran received a TRA grant to improve the home of a parent with whom he or she was residing temporarily, the amount of that grant would reduce the total Section 2101(a) grant he or she would be eligible to receive if later purchasing their own home. Similarly, a veteran or servicemember who receives a Section 2101(b) grant, and who later qualifies for a Section 2101(a) grant, would have the maximum grant reduced by the amount already used.\nThe grant can be restored in cases where a previous adapted home is \"destroyed or substantially damaged in a natural or other disaster.\" The law provides that, where a damaged home was being used and occupied by a veteran or servicemember, he or she may receive funds to acquire another suitable home. It makes assistance available as if a veteran or servicemember had not already received assistance, and the assistance does not count toward a veteran's maximum benefit. The law sets the maximum benefit at the lesser of (1) the cost (as determined by VA) to repair or replace the property that is in excess of any insurance coverage; or (2) the statutory grant maximums for Section 2101(a), Section 2101(b), or the TRA grants, whichever is applicable.\nThe number and amount of Section 2101(a) and Section 2101(b) grants made in recent years are in Table 8 , below. Funding for the Specially Adapted Housing Program is mandatory funding provided through the Readjustment Benefits portion of the Veterans Benefits Administration budget. Grants are available to veterans and servicemembers based on eligibility rather than amounts appropriated. The appropriation does not contain a specific allocation for Specially Adapted Housing grants. Instead, the VA estimates the amount that will be obligated as part of its Congressional Budget Justifications, which is subsumed in the total for Readjustment Benefits.\nThe number and dollar amount of Specially Adapted Housing (§2101(a)) grants nearly doubled from FY2007 to FY2008, and have remained higher than in previous years since that time. In addition to an increase in need due to veterans returning from the wars in Iraq and Afghanistan, VA cited broadened eligibility as a factor contributing to the increases in grants distributed. The Housing and Economic Recovery Act of 2008 (P.L. 110-289) made a number of changes to the grants, among them making active duty servicemembers eligible for the grants, including severe burn injuries as an eligible disability, and increasing maximum grants from $50,000 to $60,000 for Section 2101(a) grants, and from $10,000 to $12,000 for Section 2101(b) grants. The increases applied to veterans who had previously received grant assistance.", "In order to qualify for the maximum available assistance through the Section 2101(a) grant, a veteran or servicemember must have an ownership interest in the property being purchased or modified. For some time, the allowable forms of ownership were somewhat limited. An ownership interest, defined in regulation, included a fee simple interest, a lease or interest in a cooperative of at least 50 years, or a life estate through a revocable trust. As mentioned in the VA direct loan program section, individuals living on Native American trust land may not have a traditional interest in property, and individuals living in American Samoa and the Commonwealth of the Northern Mariana Islands may not own property unless they meet nativity requirements.\nIn 2010, the VA, recognizing the limitations facing veterans or servicemembers living on trust land or in the territories, issued a final rule updating the regulations defining an ownership interest (among other changes). Individuals may now qualify for a Section 2101(a) grant if they have a life estate (without the limitation of a revocable trust), the functional equivalent of a life estate (such as a long-term lease or land installment contract), a lease pursuant to a memorandum of understanding between a tribe and the VA, or a beneficial interest in property located outside of the United States, defined as \"an interest deemed by the Secretary as one that provides (or will provide) an eligible individual a meaningful right to occupy a housing unit as a residence.\"\nVeterans or servicemembers using the Section 2101(b) grants may qualify for the full grant if they live in the home of a family member, so ownership interests may not be as important. For example, a veteran who does not meet the nativity requirements for property ownership in the territories may have a spouse who does.", "Delinquencies and foreclosures for all categories of loans increased about the same time that the country entered recession (December 2007). The housing market began to experience difficulties, with the percentage of all loans past due and the percentage of loans in foreclosure both beginning to grow. In the first quarter of 2007, the overall foreclosure rate was 1.28%; at its peak, in the fourth quarter of 2010, it reached 4.64%. While foreclosures for all categories of loans increased after the beginning of the recession, the foreclosure and delinquency rates for VA-guaranteed loans were lower than the rates for FHA loans, as well as lower than the overall rates.\nDelinquency and foreclosure rates for VA loans were not always lower than FHA loans or loans in general. The VA has suggested a number of factors that could contribute to the lower default rates experienced in the aftermath of the recession, including underwriting practices, oversight of lenders, and a robust default servicing program where the VA gets directly involved with borrowers and servicers, if necessary. The increased popularity of subprime loans leading up to the recession may also have contributed to comparably lower rates for VA loans by moving veterans away from VA loans.", "A number of options may exist for veterans who entered into mortgages through the VA Loan Guaranty Program and find themselves facing delinquency or foreclosure.\nServicer Workouts: One way in which the VA Loan Guaranty Program attempts to prevent properties from going to foreclosure is to encourage servicers to work out agreements with borrowers. In cases where veterans are delinquent on VA-guaranteed loans, the VA may make incentive payments to servicers that are able to work out arrangements with borrowers to prevent foreclosure. These arrangements, or loss mitigation efforts, include repayment plans, forbearance agreements, loan modifications, sales for less than the amount owed (\"compromise sales\"), or deeds in lieu of foreclosure. Most of these efforts were introduced when VA revised its regulations in 2008.\nUnder VA regulations, a lender may enter into a loan modification with a borrower without prior VA approval in circumstances where the borrower is in default, the reasons for loan default have been resolved and are not expected to recur, the borrower is a \"reasonable\" credit risk, at least 12 payments have been made since the loan closed, and a loan modification would reinstate the loan. On December 20, 2011, the VA published a final rule in the Federal Register modifying these regulations to further help encourage modifications. In cases where the conditions listed above have not been met, lenders can request approval from the VA to modify loans nonetheless. In addition, maximum interest rates for modified loans will be tied to the Freddie Mac weekly maximum interest rate (to make it easier to re-pool and securitize modified loans with loans having similar interest rates), and legal fees and foreclosure costs can be added to the principal balance of a modified loan.\nVA Servicing: The VA may intervene to assist with loss mitigation efforts if the servicer has been unwilling or unable to work with the borrower, or if the VA has determined that the loan servicing is inadequate. If loss mitigation is unsuccessful, the VA may purchase the loan and take over servicing; however, this occurs rarely, and only if the circumstances causing delinquency were temporary and the veteran is able to resume payments.\n\"HAMP-Style\" Modifications: In 2009, the Obama Administration introduced the Home Affordable Modification Program (HAMP), an initiative to help borrowers who are behind on their mortgage payments. Through HAMP, homeowners whose mortgage payments exceed 31% of their incomes (in general), and who face additional hardships that make it difficult to remain current on their mortgages, may work with their loan servicers to modify their loans so that they are affordable. Technically, VA loans are not included as part of the HAMP program, but the VA has issued guidance requiring loan servicers to determine whether borrowers are eligible for \"HAMP-style\" modifications before proceeding with foreclosure or similar alternatives.\nWhere a borrower has missed payments and loss mitigation efforts have been unsuccessful, loan servicers are to evaluate the borrower to see if the loan could be modified through methods such as reduced interest rates or forebearance on principal payments to a point where the payments are at or below 31% of borrower income. If necessary, the VA will adjust its guaranty for larger loan amounts. Unlike HAMP (where loans must have originated on or before January 1, 2009), any VA-guaranteed loan is potentially eligible. If a lender and borrower enter into a modified loan, unlike HAMP, there is no trial period, and any reduced interest rate lasts for the life of the loan.\nMortgages That Are Underwater, But Current: In addition to increased foreclosures, the downturn in the economy resulted in situations where some borrowers may have mortgages that exceed the value of their homes, sometimes referred to as being \"underwater.\" This makes it difficult to refinance mortgages to take advantage of lower interest rates because lenders generally do not want to lend more than a home's appraised value. In cases where borrowers are current on their mortgage payments, but owe more than their homes are worth, they may qualify for an interest rate reduction refinancing loan (IRRRL) through the VA, despite the fact that their debt exceeds their homes' values. Because an IRRRL does not require an appraisal, it is possible that some lenders may be willing to enter into a refinancing loan even where the loan exceeds the current property value.\nAgreement Between State Attorneys General and Large Mortgage Servicers: VA borrowers who are delinquent and/or underwater may also be eligible for assistance through an agreement reached between 49 state attorneys general, the attorney general for the District of Columbia, and five large mortgage servicers in March 2012. Under the agreement, $25 billion was made available to assist certain borrowers. In order to qualify for assistance, loans cannot have been purchased by Fannie Mae or Freddie Mac (and VA loans are not purchased by Fannie Mae or Freddie Mac), and they must be serviced by Bank of America, JPMorgan Chase, Wells Fargo, Citigroup, or Ally Financial. Pursuant to the settlement, the servicers must commit a minimum of $17 billion for foreclosure prevention, including principal reduction, and they must commit another $3 billion to assist underwater homeowners. Another $5 billion was awarded to the states, some of which, about $1.5 billion, consists of payments to borrowers who lost their homes to foreclosure. For more information, see CRS Report R42919, Oversight and Legal Enforcement of the National Mortgage Settlement (available to congressional clients upon request to CRS).\nServicemembers Civil Relief Act: Another potential protection for borrowers may come through the Servicemembers Civil Relief Act (SCRA), which provides financial protections for active duty servicemembers, including home mortgage protections. The act may assist veterans who entered into mortgages (including VA loans) prior to being called to active duty, and who are having trouble making their mortgage payments. In cases where a lender brings an action against a borrower for a mortgage obligation during a period of active duty, or within nine months after, the SCRA gives courts the authority to stay the proceedings. In addition, the SCRA also generally declares invalid any foreclosure or home sale that takes place during this time period.", "If arrangements cannot be worked out to avoid foreclosure and properties proceed to sale, in most instances, loan servicers acquire the property at foreclosure sale and, in turn, sell it to the VA. Whether a transfer to the VA occurs depends on the property value and the amount owed by the veteran borrower; each of these values is determined prior to the foreclosure sale. The procedures that the VA goes through in order to determine when it will acquire a property, and for how much, were set up to ensure that the VA would not spend more than the amount for which the loan was guaranteed. When a property goes to foreclosure, the VA will also pay the lender's claim against the guaranty. If the total indebtedness has been reduced over the life of the loan, then the guaranty is prorated, and the guaranty is limited to the borrower's total indebtedness minus the VA's purchase price.\nTable 9 , below, shows the number of properties with VA-guaranteed loans that are at some point in the foreclosure process, as well as foreclosed properties held in the VA inventory over the past decade. Since 2008, when the housing market began to experience difficulties, the number of homes with VA loans in foreclosure has increased, growing from about 4,700 homes in foreclosure in FY2007 to more than 9,000 in FY2008, 17,000 in FY2009, and exceeding 20,000 in each year since then with the exception of FY2013. Once the VA has acquired properties through the process of foreclosure, it attempts to resell them. In doing so, purchasers need not be veterans. In FY2016, the average time between VA acquisition of a foreclosed property and sale was six months. For more information about disposition of property, see the earlier section of this report entitled \" Direct Loans Resulting from Borrower Delinquency or Default (Acquired and Vendee Loans) .\"" ], "depth": [ 0, 1, 1, 2, 3, 3, 2, 3, 4, 4, 4, 3, 4, 3, 4, 4, 4, 2, 2, 3, 3, 3, 3, 2, 1, 2, 2, 2, 1, 2, 3, 3, 3, 1, 2, 2, 2, 2, 2, 1, 2, 2 ], "alignment": [ "h0_title h2_title h1_title h3_title", "", "h0_full h1_title", "h0_title", "h0_full", "", "", "", "", "", "", "", "", "", "", "", "", "", "h1_title", "h1_full", "", "", "", "h0_full", "h2_full", "", "h2_full", "h2_full", "h1_title", "h1_title", "", "h1_full", "", "h3_full h2_full", "", "", "h3_full", "", "", "", "", "" ] }
{ "question": [ "What are the eligibility requirements for a VA-guaranteed loan?", "What makes the loan \"VA-guaranteed\"?", "What portion of the loan does the VA insure?", "How are VA-guaranteed loan fees calculated?", "How do down payments affect this fee?", "How often are down payments made on these loans?", "How does the VA provide direct assistance with loans (as opposed to insuring them)?", "How does the VA limit the number of recipients of its direct loans?", "How does the VA use direct loans in tandem with its other programs?", "How does the VA provide housing assistance?", "How is the assistance delivered to the recipients?", "How is grant size determined?" ], "summary": [ "The loan guaranty has expanded over the years so that it is available to (1) all veterans who fulfill specific duration of service requirements or who were released from active duty due to service-connected disabilities, (2) members of the reserves who completed at least six years of service, and (3) spouses of veterans who died in action, of service-connected disabilities, or who died while receiving (or were entitled to receive) benefits for certain service-connected disabilities (see Table 1).", "Under the loan guaranty, the VA agrees to reimburse lenders for a portion of losses if borrowers default.", "Unlike insurance provided through the Federal Housing Administration (FHA) insurance program, the VA does not insure 100% of the loan, and instead the percentage of the loan that is guaranteed is based on the principal balance of the loan (see Table 3).", "Veterans who enter into VA-guaranteed loans must pay an up-front fee based on a number of factors that include the type of loan entered into (for example, purchase or refinance), whether service was active duty or in the reserves, whether the loan is the first or subsequent VA loan a borrower has entered into, and the amount of down payment (see Table 6).", "Borrowers are not required to make a down payment for a VA-guaranteed loan, but the up-front fee is reduced if there is a down payment of 5% or more.", "Most borrowers (80% of purchasers in FY2017) do not make a down payment.", "In addition to guaranteeing loans from private lenders, the VA also makes direct loans to borrowers in certain circumstances.", "The original VA direct loan, which was targeted to veterans in rural areas, is now available only to veterans or servicemembers with certain service-connected disabilities. Another direct loan program, originally enacted as a demonstration program in 1992, serves Native American veterans, including veterans living in American Samoa, Guam, and the Commonwealth of the Northern Mariana Islands.", "In addition, the VA may enter into direct loans in cases where a borrower is delinquent or defaults on a VA-guaranteed loan. The VA may either acquire a loan from a lender and continue servicing the loan itself (called acquired loans) or, in cases of foreclosure, the VA may purchase the property and resell it. In these cases, the VA may enter into a loan with a purchaser whether or not he or she is a veteran (called vendee loans).", "A third way in which the VA provides housing assistance to both veterans and active duty servicemembers is through the Specially Adapted Housing (SAH) Program.", "Through the SAH program, veterans with certain service-connected disabilities may obtain grants from the VA to purchase or remodel homes to fit their needs.", "The amount of a grant depends on the disability, and in some cases grants can be used to modify the homes of family members with whom veterans or servicemembers are staying (see Table 7)." ], "parent_pair_index": [ -1, -1, 1, -1, 0, 1, -1, -1, -1, -1, -1, 1 ], "summary_paragraph_index": [ 1, 1, 1, 2, 2, 2, 3, 3, 3, 4, 4, 4 ] }
GAO_GAO-15-648T
{ "title": [ "Background", "Veterans in Our Review Often Did Not Receive Recommended Care, and VA Lacks Methods to Track Whether Recommended Care Is Provided", "Data VA Collects on Veteran Suicides Were Not Always Complete, Accurate, or Consistent", "GAO Contact and Staff Acknowledgments" ], "paragraphs": [ "VA provides care to veterans with mental health needs in VAMC primary and specialty care clinics. The Uniform Mental Health Services in VA Medical Centers and Clinics handbook (Handbook), which defines VA’s minimum clinical requirements for mental health services, requires that VA facilities provide evidence-based treatment through the administration of medication, when indicated, consistent with the MDD clinical practice guideline (CPG) recommendations. The CPG is guidance intended by VA to reduce current practice variation between clinicians and provide facilities with a structured framework to help improve patient outcomes, but should not take the place of the clinician’s clinical judgment. The MDD CPG includes approximately 200 evidence-based recommendations to provide information and assist in decision making for clinicians who provide care for adults with MDD. CPG recommendations describe, for example, the use of standardized assessments of veterans’ depressive symptoms as part of an evidence-based treatment plan.\nThe Handbook requires VAMCs to have a suicide prevention coordinator whose responsibilities include establishing and maintaining a list of veterans assessed to be at high risk for suicide; monitoring these veterans; responding to referrals from staff and the Veterans Crisis Line; and collecting and reporting information on veterans who die by suicide and who attempt suicide. intended to improve VA’s suicide prevention efforts by identifying demographic, clinical, and other related information on veteran suicides that VA Central Office can use to develop policy and procedures to help prevent future veteran deaths. VA Central Office officials explained that the BHAP initiative allows them to collect more systematic and comprehensive information about suicides, including information gleaned from interviews of family members of those veterans who die by suicide. VA Central Office has provided suicide prevention coordinators with a BHAP guide on how to complete the fields in the BHAP template.", "Our recent work, based on the three CPG recommendations we selected, has found almost all of the 30 veterans with MDD in our review who had been prescribed antidepressants received care that deviated from the MDD CPG recommendations. For example, we found that although the CPG recommends that veterans’ depressive symptoms be assessed at 4-6 weeks after initiation of antidepressant treatment using a standard assessment tool to determine the efficacy of the treatment, 26 of the 30 veterans were not assessed using such a tool within this time frame. Additionally, 10 veterans did not receive follow up within the time frame recommended in the CPG. Table 1 below depicts the specific recommendations we reviewed and the number of veterans that did not receive care consistent with the corresponding CPG recommendation.\nWe also found that VA does not always know the extent to which veterans with MDD who have been prescribed antidepressants are receiving care as recommended in the CPG, and some clinicians at VAMCs we visited described instances in which they generally do not follow the CPG recommendations. For example, officials from two VAMCs we visited explained that they do not routinely use the nine item Patient Health Questionnaire (PHQ-9). According to officials at one of these VAMCs, the standard of care is to conduct a clinical interview and observation. However, the CPG recommendation states that the PHQ-9 combined with a clinical interview should be used to obtain the necessary information about symptoms and symptom severity. It also states that the PHQ-9 improves diagnostic accuracy and aids treatment decisions by quantifying symptom severity. Additionally, we found that VA Central Office has not developed a mechanism to determine the extent to which mental health care delivery in VAMCs conforms to the recommendations in the MDD CPG. While deviations from recommended practice may be appropriate in many cases due to clinician discretion, VA has not fully assessed whether these examples are acceptable deviations from the CPG. VA Central Office and some VAMCs have implemented limited methods to determine the extent to which veterans are receiving care that However, without is consistent with some of the CPG recommendations.a system-wide process in place to identify and fully assess whether the care provided is consistent with the CPG, VA does not know the extent to which veterans with MDD who have been prescribed antidepressants are receiving care as recommended in the CPG and whether appropriate actions are taken by VAMCs to mitigate potentially significant risks to veterans. The CPG is intended to reduce practice variation and help improve patient outcomes, but without an understanding of the extent to which veterans are receiving care that is consistent with the CPG, we concluded that VA may be unable to ensure that it meets the intent of the CPG and improves veteran health outcomes.\nTo ensure that veterans are receiving care in accordance with the MDD CPG, we recommended that VA implement processes to review data on veterans with MDD who were prescribed antidepressants to evaluate the level of risk of any deviations from recommended care and remedy those that could impede veterans’ recovery. VA concurred with our recommendations and stated that VA would examine associations between treatment practices and indicators of veteran recovery or adverse outcomes. VA Central Office officials reviewed whether a cohort of veterans with MDD received treatment with an antidepressant that was in line with MDD CPG recommendations. However, in choosing CPG recommendations to review, VA officials told us that they chose the recommendations for review based on the ease of obtaining the needed data and because the antidepressant medication coverage measure is nationally recognized, rather than based on a methodical review of all of the CPG recommendations to identify those that may put veterans at risk and could impede veterans’ recovery if not followed, as we recommended in our November 2014 report. Therefore, it is not clear whether the CPG recommendations that VA chose to review were among those that may put veterans at risk and could impede recovery if not followed. Moreover, VA has not indicated whether it has implemented a process that will review CPG recommendations on an ongoing basis to identify deviations that place veterans at risk and impede recovery. This recommendation remains open pending further VA action.\nDiagnostic coding discrepancies further complicate VA’s ability to know if veterans with MDD are receiving care consistent with the CPG. Specifically, we found that for 11 of the 30 veterans’ medical records we reviewed the clinician coded the encounter as “depression not otherwise specified,” a less specific code than MDD, even though the clinician documented a diagnosis of MDD in the veteran’s medical record. Therefore, VA’s data may not fully reflect the extent to which veterans have MDD due to a lack of diagnostic coding precision by clinicians, or As a the extent to which such discrepancies may permeate VA data. result, VA’s ability to monitor veterans with MDD and assess its performance in treating veterans as recommended in the MDD CPG and measuring health outcomes for veterans is further limited because VA may not be fully aware of the population of veterans with MDD.\nVA’s data on the number of veterans with MDD are based on the diagnostic codes associated with patient encounters.\nTo address this shortcoming, our report recommended that VA (1) identify the extent to which there is imprecise diagnostic coding of MDD by examining encounters with a diagnostic code of “depression not otherwise specified” and (2) determine and address the factor(s) contributing to imprecise coding. VA concurred with our recommendations and stated that they would examine patterns of diagnostic coding among veterans with new episodes of depression by evaluating diagnosis patterns and treatment settings, as well as conduct chart reviews for a sample of veterans to examine the diagnosis in the veteran’s medical record and the diagnostic code used for the encounter. VA’s review of the accuracy of diagnostic codes is ongoing. Additionally, during the course of our review, VA Central Office officials reported that they had discovered a software mapping error in VA’s medical record system where selection of MDD as a diagnosis when using a keyword search function may mistakenly result in the selection of the “depression not otherwise specified” diagnostic code. While this error has been resolved, according to VA officials the solution would only apply to encounters going forward and would not retroactively correct any previous coding discrepancies. As a result, any such instances would still be coded in VA’s system as “depression not otherwise specified,” even though these veterans were diagnosed with MDD, and therefore data VA collected prior to resolving the software error may still not fully reflect the number of veterans with MDD.", "Our recent work has found that demographic, clinical, and other data submitted to VA Central Office on veteran suicides were not always completely or correctly entered into the BHAP Post-Mortem Chart Analysis templates (BHAP templates)—a mechanism by which VA Central Office collects veteran suicide data from VAMCs’ review of veterans’ medical records. We found that over half of the 63 BHAP templates we examined had incomplete or inaccurate information (see fig. 1).\nIt is important that VA have complete, accurate, and consistent data because VA Central Office uses this information to compile internal reports as part of VA’s quality improvement efforts for its suicide prevention program, and unreliable data limits VA Central Office’s ability to develop policy and procedures aimed at preventing veteran deaths.\nVA Central Office used veteran enrollment information when compiling the BHAP report in March 2014. Specifically, VA Central Office included clinical data in the BHAP report only for veterans utilizing VA services. However, we found that clinical data for 23 of the 63 BHAP templates we reviewed would not be included in the report because of missing data, such as not indicating whether the veteran was enrolled in VA health care services, even though the veteran had a VA medical record.\nAdditionally, 40 of the 63 BHAP templates we reviewed included various data fields where no response was provided, resulting in incomplete data. For example, for 19 templates, VAMC staff did not enter requested data as to whether the veteran had all or some of 15 active psychiatric symptoms within 12 months prior to the veteran’s date of death. These missing fields are counted as “no” in the report, meaning that the veteran did not have these symptoms. For at least one BHAP template we reviewed, the nonresponse for the question about the psychiatric symptom of isolation would have counted as “no” in the report; however, officials from the responsible VAMC told us that the veteran did have this symptom. Furthermore, we found that VAMCs did not always submit BHAP templates for all veteran suicides known to the facility, as required by the BHAP guide, and VA Central Office does not have a process in place to determine whether it is receiving the BHAP templates for all known veteran suicides. For example, one VAMC had completed 13 BHAP templates at the time of our site visit but had not submitted them; however, neither the VAMC nor VA Central Office were aware that these templates had not been submitted until after we requested them from VA Central Office.\nWe also found numerous instances of inaccurate data in the 63 BHAP templates we reviewed. For example, we found 6 BHAP templates that included a date of death that was incorrect based on information in the veteran’s medical record. The difference in the dates of death in the veterans’ medical records and the dates of death in the BHAP templates ranged from 1 day to 1 year. The accuracy of the date of death recorded in the BHAP template is important because it is used as a point of reference to calculate other fields, such as the number of mental health visits in the last 30 days. Without accurate information, VA cannot use this information to determine whether policies or procedures need to be changed to ensure that veterans at high risk for suicide are being seen more frequently by a mental health provider to help prevent suicides in the future.\nWe also found several situations where VAMCs interpreted and applied instructions for completing the BHAP templates differently, resulting in inconsistent data being reported across VAMCs. For example, one VAMC included a visit to an immunization clinic as the veteran’s final visit, while another VAMC did not include this type of visit, even though this was the last time the veteran was seen in person. The BHAP guide indicates that the final visit should be the last time the veteran had in-person contact with any VAMC staff, but the BHAP guide does not identify the different types of visits that should be counted. Additionally, VA policy and guidance states that the BHAP template should be completed for all suicides known to the facility, but at the five VAMCs we visited, these data were not always being reported. VA policy and instructions do not explicitly state that veterans not being seen by VA also should be included, and in the absence of this declaration, some VAMCs interpreted the instructions to mean that only veterans being seen by VA should be included in the data submitted. Therefore, two VAMCs have submitted data only for veterans being treated by VA, while the others include data on all known veteran suicides—whether they have been treated by VA or not. When VAMCs do not provide consistent data, VA Central Office will receive and use inconsistent data in preparing its trend reports, such as BHAP reports, which are intended to be used to improve suicide prevention efforts.\nFurther, we found that VA did not have an established process for reviewing the accuracy of BHAP templates, and for the sites we covered in our review, BHAP templates were not being reviewed by VA officials at any level for accuracy, completeness, and consistency. Therefore, our findings at five VAMCs could be symptomatic of a nationwide problem, and other VAMCs may also be submitting incomplete, inaccurate, or inconsistent suicide-related information and VA may not be getting the data it needs across the department to make appropriate resource decisions and develop new policy. We also found that VA lacks sufficient controls, such as automated data checks, to ensure the quality of the existing BHAP data. Not reviewing the data is inconsistent with internal control standards for the federal government, which state that agencies should have controls over information processes, including procedures and standards to ensure the completeness and accuracy of processed data.\nTo improve VA’s efforts to inform its suicide prevention activities, we made three recommendations in our November 2014 report that directed VA to (1) clarify guidance on how to complete the BHAP templates to ensure that VAMCs are submitting consistent data on veteran suicides, (2) ensure that VAMCs have a process in place to review data on veteran suicides for completeness, accuracy, and consistency before the data are submitted to VA Central Office, and (3) implement processes to review data on veteran suicides submitted by VAMCs for accuracy and completeness. VA agreed with our recommendations and, to date, has made some progress in addressing these recommendations.\nVA has issued clarifying guidance to suicide prevention coordinators and VA officials reported that suicide prevention coordinators expressed being more comfortable with filling out the BHAP templates. We closed the first recommendation as implemented.\nThe last two recommendations remain unimplemented pending VA’s completion of planned actions.\nTo ensure that the BHAP data are accurate, complete, and consistent, VA created a checkbox in the BHAP template to indicate that the data were checked by VAMC leadership. VA’s initial random checks indicate the checkbox is being used and VAMC leadership is reviewing entries resulting in better consistency of the data. VA plans to run monthly reviews to determine compliance.\nAdditionally, VA created a software program to compare data from the BHAP templates to the data entered into another suicide prevention database maintained by VA. VA officials plan for this review to become part of the quarterly routine review process and information about missing cases will be sent back to the VAMCs for correction on a quarterly basis.\nChairman Coffman, Ranking Member Kuster, and Members of the Subcommittee, this concludes my prepared statement. I would be pleased to respond to any questions that you might have at this time.", "If you or your staff have any questions about this testimony, please contact Randall B. Williamson, Director, Health Care at (202) 512-7114 or [email protected]. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this statement. GAO staff who made key contributions to this testimony are Marcia A. Mann, Assistant Director; Emily Binek; Cathleen Hamann; Sarah Resavy; and Jennifer Whitworth.\nThis is a work of the U.S. government and is not subject to copyright protection in the United States. The published product may be reproduced and distributed in its entirety without further permission from GAO. However, because this work may contain copyrighted images or other material, permission from the copyright holder may be necessary if you wish to reproduce this material separately." ], "depth": [ 1, 1, 1, 1 ], "alignment": [ "h1_full", "h0_full h2_full", "h2_full h1_full", "h2_full" ] }
{ "question": [ "What is the VA's policy on antidepressant treatment?", "How frequent are deviations from policy?", "To what extent does the VA self-monitor adherence to policy?", "How does this failure to follow policy hinder successful treatments?", "How complete is the VA's data on veteran suicides?", "How does the VA aim to reduce veteran suicides?", "How is BHAP supposed to improve suicide prevention efforts?", "To what extent are the BHAP templates used correctly?", "Why is the improper use of BHAP templates detrimental to the suicide prevention efforts?", "What does this testimony address?", "How was the data for this testimony sourced?", "How did GAO conduct the November 2014 report?", "To what extent are these results an indicator of performance in the VA as a whole?", "How did GAO make sure that its recommendations were acted on?" ], "summary": [ "Department of Veterans Affairs (VA) policy states that antidepressant treatment must be consistent with VA's current clinical practice guideline (CPG) for major depressive disorder (MDD); however, GAO's recent review of 30 veterans' medical records found that most contained deviations.", "For example, although the CPG recommends that veterans' depressive symptoms be assessed at 4-6 weeks after initiation of antidepressant treatment using a standardized assessment tool, 26 of the 30 veterans were not assessed in this manner within this time frame. Additionally, 10 veterans did not receive follow up within the time frame recommended in the CPG.", "GAO found that VA (1) does not have a system-wide process in place to identify and fully assess the extent to which veterans with MDD who have been prescribed antidepressants are receiving care as recommended in the CPG and (2) does not know whether appropriate actions are being taken by VA medical centers (VAMC) to mitigate potentially significant risks to veterans.", "GAO also found that VA's data may underestimate the prevalence of MDD among veterans being treated through VA as a result of imprecise coding by clinicians, further complicating VA's ability to know if veterans with MDD are receiving care consistent with the CPG.", "GAO's recent work has found that the demographic and clinical data that VA collects on veteran suicides were not always complete, accurate, or consistent.", "VA's Behavioral Health Autopsy Program (BHAP) is a quality initiative to improve VA's suicide prevention efforts by identifying information that VA can use to develop policy to help prevent future suicides.", "The BHAP templates are a mechanism by which VA collects suicide data from VAMCs' review of veteran medical records.", "GAO's review of the 63 completed BHAP templates at five VAMCs found that (1) over half of the templates that VAMCs submitted to VA had incomplete or inaccurate data, and (2) VAMCs submitted inconsistent information because they interpreted VA's guidance differently.", "Lack of complete, accurate, and consistent data—coupled with GAO's finding of poor oversight of the review of BHAP templates—can inhibit VA's ability to identify, evaluate, and improve ways to better inform its suicide prevention efforts.", "This testimony addresses the extent to which (1) veterans with MDD who are prescribed an antidepressant receive recommended care and (2) VAMCs are collecting information on veteran suicides as required by VA.", "The testimony is based on GAO's November 2014 report, VA Health Care: Improvements Needed in Monitoring Antidepressant Use for Major Depressive Disorder and in Increasing Accuracy of Suicide Data ( GAO-15-55 ).", "For that report GAO analyzed VA data, interviewed VA officials, and conducted site visits to six VAMCs selected based on geography and population served. GAO also reviewed randomly selected medical records for five veterans from each of the six VAMCs, for veterans diagnosed with MDD and prescribed an antidepressant in 2012, as well as all completed BHAP templates.", "The results cannot be generalized across VA.", "GAO followed up in May 2015 to determine the status of GAO's previous recommendations." ], "parent_pair_index": [ -1, 0, -1, -1, -1, -1, 1, 1, -1, -1, -1, 1, -1, -1 ], "summary_paragraph_index": [ 2, 2, 2, 2, 3, 3, 3, 3, 3, 1, 1, 1, 1, 1 ] }
CRS_R44733
{ "title": [ "", "Background on the CFTC", "The CFTC Reauthorization Process", "The Commodity End-User Relief Act (H.R. 238): Selected Provisions", "Authorization of Appropriations", "Recent CFTC Appropriations", "Cost-Benefit Analysis", "Existing CFTC Requirements for Cost-Benefit Analysis", "Cost-Benefit Provisions in H.R. 238", "How Valuable Is Cost-Benefit Analysis?", "Which Companies Are \"Financial Entities?\"", "Changes to Definition of Bona Fide Hedging", "Global Cross-Border Swaps", "Background: Cross-Border Swaps and Extra-Territoriality", "Past CFTC Action", "H.R. 238 on Cross-Border Swaps", "Residual Interest" ], "paragraphs": [ "", "The Commodity Futures Trading Commission (CFTC) was created in 1974 through the enactment of the Commodity Futures Trading Commission Act to regulate commodities futures and options markets. At the time, these markets were poised to expand beyond their traditional base in agricultural commodities to encompass contracts based on financial variables, such as interest rates and stock indexes. The CFTC's mission is to prevent excessive speculation, manipulation of commodity prices, and fraud. The agency administers the Commodity Exchange Act (CEA), which was passed in 1936. Prior to the CFTC's creation, trading in agricultural commodities regulated by the CEA was overseen by the Commodity Exchange Administration, an office within the U.S. Department of Agriculture that also formed in 1936.\nThe CFTC oversees industry self-regulatory organizations (SROs)—such as the futures exchanges and the National Futures Association—and requires the registration of a range of industry firms and personnel, including futures commission merchants (or brokers), floor traders, commodity pool operators, and commodity trading advisers. The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (Dodd-Frank Act) significantly expanded the CFTC's jurisdiction to include over-the-counter (OTC) derivatives, also called swaps. As a result of Dodd-Frank, major participants in the swaps markets must register with the CFTC, and certain swaps must be cleared by clearinghouses and traded on electronic trading platforms similar to exchanges. Newly regulated swap market participants include swap dealers, major swap participants, swap clearing organizations, swap execution facilities, and swap data repositories. These entities are subject to new business conduct standards contained in the statute or promulgated as CFTC rules. Similar to the Securities and Exchange Commission (SEC), the CFTC generally does not regulate the safety and soundness of individual firms, with the exception of newly regulated swap dealers and major swap participants, for which it was instructed to set up capital standards pursuant to the Dodd-Frank Act.\nAlthough most derivatives trading in today's market relates to financial variables (e.g., interest rates, currency prices, and stock indexes), congressional oversight remains vested in the House and Senate Agriculture Committees in part because of the market's historical origins in agricultural commerce. Appropriations for the CFTC are under the jurisdiction of the House Agriculture Appropriations Subcommittee and the Senate Financial Services and General Government Appropriations Subcommittee.\nOrganizationally, the CFTC is led by five commissioners appointed by the President, with the advice and consent of the Senate, to serve staggered five-year terms. No more than three commissioners at any one time may be from the same political party. The President designates one commissioner to serve as chair. The agency is organized around four divisions:\nClearing and Risk , which oversees derivatives clearing organizations and other major market participants; Enforcement , which investigates and prosecutes alleged violations of the CEA and CFTC regulations; Market Oversight , which conducts trade surveillance and oversees trading facilities, such as futures exchanges and swap execution facilities, and swap data repositories; and Swap Dealer and Intermediary Oversight , which oversees registration and compliance by SROs, such as the futures exchanges (e.g., the Chicago Mercantile Exchange), the National Futures Association, and the registration of swap dealers and major swap participants.", "The CFTC was last reauthorized in 2008 as part of the Food, Conservation, and Energy Act ( P.L. 110-246 ), which included authorization of appropriations through FY2013. Although the underlying authority in the statute to administer programs does not have an explicit expiration, the authorization of appropriations only applied through FY2013. As a consequence, the authorization of appropriations assumes Congress will periodically act to authorize future appropriations. It has not been uncommon, however, for Congress to continue to fund the CFTC for several years beyond the expiration of previous authorizations of appropriations.\nThe 115 th Congress is considering a new CFTC reauthorization bill, H.R. 238 , the Commodity End-User Relief Act, which was passed by the House on January 12, 2017, and referred to the Senate Committee on Agriculture, Nutrition, and Forestry on January 17, 2017. H.R. 238 shares substantial similarities with the 114 th Congress CFTC reauthorization bill, H.R. 2289 , that the House passed, but differs in some respects from the Senate Agriculture Committee reauthorization bill, S. 2917 , which did not see Senate floor action in the 114 th Congress. Key similarities and differences are described throughout this report.\nHistorically, the reauthorization process often has been one of the principal vehicles for modifying the CFTC's regulatory authority and evaluating the efficacy of its regulatory programs. Congress has used the reauthorization process as a vehicle to consider a wide range of issues related to the regulation of derivatives trading.\nThe current CFTC reauthorization process is the first since the Dodd-Frank Act's passage brought the more than $400 trillion U.S. swaps market under regulatory oversight. For some in Congress, the reauthorization process may be an opportunity to reexamine Dodd-Frank provisions they feel may have created excessive regulatory burdens or industry costs. Others have been critical of any perceived weakening of derivatives oversight introduced in the wake of the financial crisis. Still others may be using the current CFTC reauthorization process to try to make changes to futures regulation that industry, or regulators themselves, have long sought.", "The next sections examine more closely selected major provisions of the House CFTC reauthorization bill, H.R. 238 , as passed by the House on January 12, 2017.", "Section 201 of H.R. 238 would authorize to be appropriated $250 million per year for each of FY2017 through FY2021 for the CFTC. Although Congress remains free to determine the level of funding provided in future appropriations legislation, the addition of language authorizing $250 million for each of FY2017 through FY2021 provides a specific procedural guideline of subsequent appropriations action over this period.\nH.R. 238 's approach differs from that of the previous proposed CFTC reauthorization bills, H.R. 2289 and S. 2917 , in the 114 th Congress. Like H.R. 238 , both H.R. 2289 and S. 2917 would have amended the short Authorization of Appropriations section in the CEA (7 U.S.C. §16(d)). The section currently authorizes the appropriation of \"such sums as are necessary to carry out\" the chapter of the CEA \"through 2013.\" Both H.R. 2289 and S. 2917 would have amended the section to extend such authorization through FY2019. H.R. 238 , however, replaces the \"such sums as are necessary\" language with a fixed flat amount of $250 million per year. CFTC funding levels have been a contentious issue. Some might argue the change to a flat amount per year could diminish the flexibility of congressional appropriators to adjust CFTC funding levels through annual appropriations in line with agency needs,whereas others might view a flat, fixed budgetary amount as indicative of fiscal restraint.", "The 2010 Dodd-Frank Act ( P.L. 111-203 ) brought the bulk of the previously unregulated OTC swaps markets under CFTC jurisdiction as well as the previously regulated futures and options markets. Because the swaps market is much larger than the futures market, a lingering question is whether CFTC has sufficient resources to meet the agency's newly added responsibilities. The question of appropriate CFTC-funding levels has grown somewhat contentious.\nFor FY2018, the Trump Administration requested $250 million for the CFTC, the same amount the agency received for FY2017. However, the CFTC's Budget Justification submitted to Congress under CFTC Chair Giancarlo, a Trump appointee, requested $281.5 million. In his May 23, 2017, transmittal letter accompanying the CFTC budget request, then-acting CFTC Chair Giancarlo did not specifically address the divergence from the Trump Administration's budget request. However, he did say, \"The $31.5 million in additional funds over FY 2017 is not a formulaic or superficial number, but a thorough and informed assessment of what the CFTC needs to execute its mission in FY 2018.\" He noted that the $31.5 million in additional funding would help the agency particularly with its examinations, including stress testing for large derivatives clearinghouses and resources to address financial technology innovation, among other purposes.\nTo meet the additional responsibilities for oversight of swaps stemming from the Dodd-Frank Act, the Obama Administration had requested additional funding for the CFTC. For FY2017, the Obama Administration requested $330 million. However, the CFTC was appropriated $250 million for FY2017, the same as for FY2015 and FY2016.\nFollowing the enactment of the FY2016 appropriation, former CFTC Chairman Timothy Massad issued a statement criticizing the lack of any increase for the agency despite its expanded oversight over the swaps market: \"The failure to provide the CFTC even a modest increase in the fiscal year 2016 budget agreement sends a clear message that meaningful oversight of the derivatives markets, and the very types of products that exacerbated the global financial crisis, is not a priority.\" He added that the flat appropriation failed to take into account the need for added resources to enforce oversight of the expanded, technologically complex swaps markets. This view was reiterated in the former President's FY2017 budget request, which stated that \"rules are meaningless without the resources available to implement and enforce them. Although the CFTC's budget has increased since the passage of the Dodd-Frank Act, the increase has not been commensurate with the Commission's expanded responsibilities and market growth. Funding levels have limited the Commission's ability to fulfill both its new and traditional responsibilities.\"\nA 2015 International Monetary Fund assessment of the U.S. financial system, evaluating both the CFTC and SEC, noted that, in the wake of the 2008 financial crisis,\nFunding limitations have impacted the timely delivery of new rules and the implementation of registration programs for the new categories of participants. These are transitory challenges. However, the markets under the agencie s' supervision have become larger and more complex. In this context, the number of expert staff in the SEC and CFTC does not appear to be sufficient to ensure a robust level of hands-on supervision.\nCritics of increased CFTC spending, however, argue, among other things, that \"access to more funding does not necessarily ensure that an agency will successfully achieve its mission, or spend that funding responsibly.\" Others have questioned whether more spending on the CFTC will demonstrably reduce the risk of another financial crisis, with one Member, in addressing former CFTC Chair Timothy Massad, stating,\nI would challenge the CFTC to show where this increase in taxpayer money has reduced risk in the marketplace. How do we know that even more cops on the beat will prevent another 'too big to fail'? It is difficult to see a direct correlation between CFTC's repeated increase and reduced risk. Can you provide any assurance that a 188 percent increase will guarantee there will not be another financial crisis?", "H.R. 238 would expand a number of factors for the CFTC to consider in cost-benefit analysis and would include the need for quantitative as well as qualitative analysis, among other changes. This section of the report first examines the existing requirements for the CFTC to conduct cost-benefit analysis. It then surveys the changes in H.R. 238 . Lastly, it discusses the academic research on cost-benefit analysis. S. 2917 , the 114 th Congress's Senate CFTC bill, did not have a similar provision on cost-benefit analysis.", "The CFTC already has certain requirements to perform cost-benefit analysis in its rulemakings under the CEA. The CFTC and other independent regulatory agencies (such as the SEC) are not subject, however, to the general requirements that apply to other government agencies to conduct cost-benefit analysis under Executive Order (E.O.) 12866.\nFor the CFTC, Section 15(a) of the CEA requires that \"before promulgating a regulation under this chapter or issuing an order (except as provided in paragraph (3)), the Commission shall consider the costs and benefits of the action of the Commission.\" In addition,\nthe costs and benefits of the proposed Commission action shall be evaluated in light of:\n(A) considerations of protection of market participants and the public;\n(B) considerations of the efficiency, competitiveness, and financial integrity of futures markets;\n(C) considerations of price discovery;\n(D) considerations of sound risk management practices; and\n(E) other public interest considerations.\nThe CFTC also may have additional required considerations when issuing a particular rule. Section 15(a) of the CEA applies more broadly than E.O. 12866, which applies only to rules deemed to reach a certain \"significance\" threshold; Section 15(a) applies to all rules issued by the CFTC.\nIn practice, the CFTC relies on guidance provided by the Office of Management and Budget's (OMB's) Office of Information and Regulatory Affairs (OIRA) when considering costs and benefits under Section 15(a) of the CEA, although it is not required to do so. This practice is documented in a May 2012 memorandum of understanding between OIRA and CFTC regarding implementation of the Dodd-Frank Act. OIRA has issued a variety of documents to assist agencies in conducting their cost-benefit analyses, including OMB Circular A-4 and accompanying guidance documents. Thus, although the CFTC is not subject to E.O. 12866's requirements, the CFTC's analyses conducted pursuant to the CEA likely share some similarities with analyses completed pursuant to the executive order.", "Section 202 of H.R. 238 would expand the CEA's current 5 cost-benefit analysis provisions listed above to 12 considerations. Some of the considerations are similar to requirements other agencies are subject to under E.O. 12866, and some are currently in Section 15(a) of the CEA.\nH.R. 238 includes the following factors:\n(A) considerations of protection of market participants and the public;\n(B) considerations of the efficiency, competitiveness, and financial integrity of futures and swaps markets;\n(C) considerations of the impact on market liquidity in the futures and swaps markets;\n(D) considerations of price discovery;\n(E) considerations of sound risk-management practices;\n(F) available alternatives to direct regulation;\n(G) the degree and nature of the risks posed by various activities within the scope of its jurisdiction;\n(H) the costs of complying with the proposed regulation or order by all regulated entities, including a methodology for quantifying the costs (recognizing that some costs are difficult to quantify);\n(I) whether the proposed regulation or order is inconsistent, incompatible, or duplicative of other federal regulations or orders;\n(J) the cost to the Commission of implementing the proposed regulation or order by the Commission staff, including a methodology for quantifying the costs;\n(K) whether, in choosing among alternative regulatory approaches, those approaches maximize net benefits (including potential economic and other benefits, distributive impacts, and equity); and\n(L) other public interest considerations.\nArguably, at least some of these considerations, such as liquidity and market efficiency, would incorporate the CFTC existing statutory mission.\nIn addition, Section 202 would add a requirement that the CFTC conduct quantitative as well as qualitative assessments of costs and benefits. The requirement for quantitative cost-benefit analysis appears to mark a change from previous practice. It also raises the question of how accurately one may quantify benefits, or costs, involving economic externalities . In economics, an externality refers to a consequence of an economic activity that is experienced by unrelated third parties; it can be either positive or negative. Pollution is often used as an example of a negative externality, in which the effects may be widely dissipated and hard to quantify. Risks to the financial system could be another example of a negative externality.\nQuantifications of such externalities may involve judgments or estimates as to the value of intangible or speculative benefits that might be experienced differently by individuals, such as the value of financial stability, or, in the case of pollution, the value of avoiding certain diseases. In the realm of financial regulation, benefits are often widely dissipated (e.g., prospective investors broadly benefit from fuller and more accurate corporate disclosures and investor-related protections), and are sometimes speculative (e.g., trying to measure the benefit of avoiding potential financial fraud). This, according to critics, can make benefits harder to reliably quantify. Costs of compliance, meanwhile, may be more easily measurable (e.g., through payment-hours for accountants, lawyers, and staff).", "Proponents of cost-benefit analysis argue that it can force agencies to focus on and clarify the benefits of their proposed rulemakings and better weigh the costs they will impose against those benefits. According to this line of reasoning, by putting cost-benefit requirements in statute, such as those in the CEA and those proposed in H.R. 238 , Congress can have some influence over the considerations and outcomes in agency rulemakings.\nBy contrast, some administrative law scholars have argued that the increased use of cost-benefit analysis has \"ossified\" the rulemaking process, slowing down the process or causing agencies to issue guidance documents rather than regulations, thereby avoiding rulemaking requirements altogether. Ossified rulemaking could lead to beneficial regulation being blocked or delayed. Some financial reform advocates argue that, particularly for financial rulemakings, costs can be easier to quantify than widely dispersed potential benefits (such as \"a safer financial system\" or \"better investor disclosure\"), and that this may lead to an overstatement of costs over benefits. Finally, critics argue that the practice opens the agency's rules to court challenges by industry groups on the grounds of inadequate cost-benefit analysis, tying up agency resources and at times leading to the invalidation of potentially beneficial regulations.", "Section 304 of H.R. 238 would modify the definition of a financial entity, potentially enabling a wider range of companies to claim the end-user exception to the clearing requirement in the Dodd-Frank Act. The end-user exception is limited to a company that \"is not a financial entity,\" as the term is redefined by H.R. 238 . Section 304 would potentially allow certain nonbank entities that primarily engage in financial activities to use the end-user exception even when trading on behalf of another nonbank entity that engages in activities that are financial in nature, so long as the entities do not have a prudential regulator and do not qualify as one of an enumerated list of companies designated as always falling under the definition of financial entity.\nSection 304 of H.R. 238 would exclude from the definition of financial entity one \"who is not supervised by a prudential regulator, and is not described in any of subclauses (I) through (VII) ... and is a commercial market participant, or enters into swaps, contracts for future delivery, and other derivatives on behalf of, or to hedge or mitigate the commercial risk of, whether directly or in the aggregate, affiliates that are not so supervised or described.\" Section 304 would define a commercial market participant as \"any producer, processor, merchant, or commercial user of an exempt or agricultural commodity, or the products or byproducts of such a commodity.\" Under this language, entities that are not supervised by a prudential regulator and are not swap dealers, major swap participants (MSPs), hedge funds, large banks, or other enumerated financial entities that enter into swaps to hedge the commercial risk of other affiliates that also are not supervised by a prudential regulator and are not among the types of entities listed in subclauses I-VII of the CEA (Section 2(h)(7)(C)) are not considered financial entities for the purposes of qualifying for the end-user exception.\nIn this respect, H.R. 238 could broaden the end-user exception from the Dodd-Frank clearing and exchange-trading requirements. It could allow certain nonbank financial entities that do not have banking regulators to be eligible for the exception if these entities could show that they were \"commercial market participants\" or that they met the requirements for trading on behalf of other non-prudentially supervised affiliates. The bill leaves to the CFTC to further clarify who would be a commercial-market participant and to determine which types of nonbank financial firms would qualify for the end-user exception.", "The concept of bona fide hedging refers to transactions that in some way genuinely offset commercial risks. The CFTC uses the concept to determine which derivatives count toward limits on position size, referred to as position limits . The CFTC also relies on its established rules and guidance on what constitutes a bona fide hedge to help determine which types of swaps count toward the requirement to register as a swap dealer or MSP. Section 311 of H.R. 238 would make changes to the definition of bona fide hedging in the CEA, discussed below, in a way that is substantially similar to the CFTC reauthorization bills passed by the House and reported by the Senate Agriculture Committee in the 114 th Congress ( H.R. 2289 and S. 2917 ).\nThe current definition of a bona fide hedge in the CEA specifies, among other factors, that\n(2) For the purposes of implementation of subsection (a)(2) for contracts of sale for future delivery or options on the contracts or commodities, the Commission shall define what constitutes a bona fide hedging transaction or position as a transaction or position that—\n(A) (i) represents a substitute for transactions made or to be made or positions taken or to be taken at a later time in a physical marketing channel;\n(ii) is economically appropriate to the reduction of risks in the conduct and management of a commercial enterprise....\nAmong other changes, H.R. 238 's Section 311 would change (A)(ii) above so as to read:\n(ii) is economically appropriate to the reduction or management of current or anticipated risks in the conduct and management of a commercial enterprise.... [emphasis added].\nThis change could potentially broaden the bona fide hedging definition so as to allow trades that were needed either to reduce risks or, alternatively, to manage commercial risks. This change could potentially enable more types of trades to be permitted under this bona fide hedging definition, in which case more trades would not count toward restrictions on position size for futures, options, and swaps or toward the registration requirements for swap dealers. The CFTC considered somewhat similar industry proposals for a broadening of the definition of economically appropriate risks in their December 30, 2016, position limits rule reproposal, which requested the agency\nconsider as economically appropriate any derivative position that a business can reasonably demonstrate reduces or mitigates one or more specific, identifiable risks related to individual or aggregated positions or transactions, based on its own business judgment and risk management policies, whether risk is managed enterprise-wide or by legal entity, line of business, or profit center.\nHowever, in their 2016 position limits rule reproposal, the CFTC opted against such changes, explaining, among other things, that it \"would permit an enterprise to cherry pick cash market exposures to justify exceeding position limits, with either a long or short derivative position, even though such derivative position increases the enterprise's risk.\" The comment period closed February 28, 2017, for the reproposed rule, and a number of industry associations complained in comment letters that the reproposed rule was too restrictive in its view of bona fide hedging. Since then, the CFTC's Division of Market Oversight on August 10, 2017, issued a no-action letter providing time-limited relief from certain aspects of the aggregation requirements for position limits. Aggregation requirements involve the degree to which an individual or entity is required to aggregate together all of their trading positions for the purposes of meeting position limits. This no-action relief indirectly impacts issues surrounding bona fide hedging requirements, as both the bona fide hedging definition and the aggregation requirements determine how strict position limits requirements prove practically speaking.", "", "The topic of cross-border swaps broadly relates to the question of to what degree did Congress intend, and did the Dodd-Frank Act authorize, the CFTC to have regulatory authority over swaps that may extend beyond U.S. borders or are transacted between U.S. and non-U.S. persons or two non-U.S. persons? Because the swaps market is international in nature, with considerable cross-border trading, this question is material. Section 722(d) of the Dodd-Frank Act stated that swaps reforms shall not apply to activities outside the United States unless the activities have \"a direct and significant connection with activities in, or effect on, commerce of the United States.\"\nThis mandate left much interpretive discretion to the CFTC. Former CFTC Chair Gary Gensler, under whom the CFTC first issued rules and interpretations implementing Section 722, stated that \"Failing to bring swaps market reform to transactions with overseas branches and overseas affiliates guaranteed by U.S. entities would mean American jobs and markets would likely move offshore, but, particularly in times of crisis, risk would come crashing back to our economy.\" Gensler and other financial experts noted that derivatives trading by overseas affiliates of U.S. financial conglomerates resulted in significant losses to U.S.-based entities. They cite examples such as AIG's London-based Financial Products Group, which sold credit default swap derivatives related to mortgage-backed securities that incurred losses during the financial crisis, and the J.P. Morgan \"London Whale\" derivatives trading losses of roughly $6 billion.\nBy contrast, industry participants have warned that if CFTC rules were too burdensome or not harmonized with other countries' regulations—putting in place requirements that other jurisdictions lacked—then \"swap business [would] migrate, in the short term, away from U.S. financial institutions to other jurisdictions that are putting in place similar regulatory reform initiatives but are not as far advanced in doing so as the United States.\" Industry participants also have warned that, once gone, such business would be unlikely to return to U.S. companies.", "The CFTC issued proposed guidance on the cross-border application of Title VII of the Dodd-Frank Act in 2012. In this guidance, the agency sought to clarify who would count as a \"U.S. person\" for the purposes of meeting the requirements of Dodd-Frank, such as the clearing requirement for swaps, among other cross-border issues. Subsequently, on December 21, 2012, the agency issued a temporary exemption, extending the deadline for meeting all the requirements for cross-border swaps, while it continued to work with foreign regulators to create a more uniform system of requirements. Then, on May 1, 2013, the SEC proposed a rule and interpretive guidance on cross-border security-based swaps—swaps related to a security, such as an equity—which the SEC regulates. The SEC's proposed rule has been widely interpreted as taking a narrower approach to defining who is a U.S. person than did the CFTC—and thus restricting the reach of Dodd-Frank requirements on security-based swaps to fewer overseas transactions or entities.\nThe CFTC issued its final guidance on July 26, 2013, setting out the scope of the term U.S. person , the general framework for determining which entities had to register as swap dealers and MSPs, and which swaps involving non-U.S. persons who were guaranteed by U.S. persons were subject to U.S. requirements. On November 14, 2013, the CFTC issued a staff advisory aimed at determining when to apply U.S. derivatives requirements to trades that were booked in an offshore affiliate but in which the non-U.S. affiliate used U.S. personnel to arrange, negotiate, or execute the swap. On December 4, 2013, three financial industry trade associations sued the CFTC, challenging the July 26, 2013, final guidance as well as the extraterritorial application of 14 Dodd-Frank swaps rules. In a decision issued September 16, 2014, the U.S. District Court for the District of Columbia (1) upheld the final guidance and (2) remanded, without vacating, some of the challenged rules for the CFTC to further consider extraterritorial costs and benefits and to determine whether changes were needed in the rules' substantive requirements. On remand, the CFTC solicited comments on differences between foreign and domestic costs and benefits, and concluded that any differences identified by the commenters did not establish a need to change the substantive requirements of the rules.\nThe CFTC continues to issue rules aimed at clarifying how to apply Dodd-Frank derivatives requirements to cross-border trades. In regard to the CFTC's cross-border rulemakings and substituted compliance determinations, in March 2016, the CFTC approved a substituted compliance framework for dually registered central counterparties, located in both the United States and European Union. This permits European CCPs registered with the CFTC to comply with the CFTC's rules by meeting corresponding European requirements. In May 2016, the CFTC approved its cross-border rules on margin for uncleared swaps. In the final rule, among other things, the CFTC set out its process for determining substituted compliance for its margin requirements for uncleared swaps. In September 2016, the CFTC determined that Japan's margin requirements for uncleared swaps were, with one exception regarding interaffiliate trades, comparable to the CFTC's margin requirements. In addition, in October 2016, the CFTC proposed certain cross-border rules on its swap dealer and MSP registration thresholds and the applicability of its external business conduct standards.", "H.R. 238 would mandate that, starting 18 months from its enactment, the swaps regulatory requirements of the eight largest foreign swaps markets must be considered comparable to those of the United States —unless the CFTC issues a rule or order finding that any of those foreign jurisdictions' requirements are not comparable to or as comprehensive as those of the United States. Section 312 of H.R. 238 bears some similarities to H.R. 1256 in the 113 th Congress and is identical to H.R. 2289 in the 114 th Congress.\nIt is not, however, immediately straightforward to list what those eight largest jurisdictions would be. For one thing, the list would depend on how regulators treated the European Union's member countries, for purposes of the statute. For another, the total notional value of swaps traded in a jurisdiction fluctuates over time, so how the 12-month period was drawn likely would impact the results. Further, regulators would have to determine \"where\" a swap is traded—that is, in whose jurisdiction it would fall—when a large portion of the market is considered \"cross-border\" in nature. This is essentially the same problem U.S. regulators face in deciding when a swap qualifies as a \"U.S. transaction.\"\nUnder H.R. 238 , if the CFTC were not to make such a determination (of noncomparability), then \"a non-United States person or a transaction between two non-United States persons shall be exempt from United States swaps requirements\" as long as it is in compliance with any of the eight permitted foreign jurisdictions. Effectively, the bill appears to substitute as a default, for trades that involved a non-U.S. person, the swaps requirements of the eight largest foreign swaps markets (which would encompass most of the world of swaps trading, particularly if countries in the European Union were treated as one swaps jurisdiction) for U.S. requirements—unless the CFTC found a foreign jurisdiction to be lacking.\nOne question that would presumably be left to the CFTC to determine in a rulemaking would be how widely to apply this provision to \"a non-United States person or a transaction between two non-United States persons,\" were the provision enacted. For instance, would any swap in which a non-U.S. person was at least one counterparty potentially be encompassed? If so, that would potentially encompass a large majority of swaps, the bulk of which appear to be transacted in some way between a U.S. and a non-U.S. person. H.R. 238 would presumably leave it to the regulator to interpret and clarify the application of this provision.\nSection 312 also includes a definition of a U.S. person, which, among other factors, includes \"any other person as the Commission may further define to more effectively carry out the purposes of this section\"—thereby apparently giving the CFTC some leeway. However, Section 312 would also specify that, in developing its cross-border rules, the CFTC \"shall not take into account, for the purposes of determining the applicability of United States swaps requirements, the location of personnel that arrange, negotiate, or execute swaps.\" This requirement drew some criticism in the 114 th Congress congressional debate over H.R. 2289 .\nThe provision would appear to overturn CFTC Advisory 13-69, which drew much industry opposition. The advisory was aimed at resolving questions regarding the precise conditions in which swaps between U.S. and non-U.S. persons would be subject to Dodd-Frank requirements. The advisory, which technically represented the opinion of only one division of the CFTC, held that the Dodd-Frank requirements would apply to a swap between a non-U.S. swap dealer—even if it were an affiliate of a U.S. swap dealer—and a non-U.S. person, as long as the foreign swap dealer used \"personnel or agents located in the U.S. to arrange, negotiate, or execute such swap.\" The CFTC has delayed the advisory's actual implementation several times.", "The term residual interest generally refers to capital from a futures commission merchant (FCM) committed to temporarily make up the difference for insufficient margin in a customer's account. H.R. 238 would essentially codify the deadline for FCMs to deposit any capital to cover residual interest as no earlier than 6:00 p.m. on the following business day. This move is broadly in line with the CFTC's March 17, 2015, final rule on residual interest.\nThe CFTC's Regulation 1.22 sets the deadline for posting residual interest. That deadline then affects when customers are required to post their collateral to cover insufficient margin amounts. Regulation 1.22 provided that the deadline, set for 6:00 p.m. on the following day, would automatically become earlier in several years, barring further CFTC action. The CFTC's final rule on March 17, 2015, amended Regulation 1.22 so that the FCM's deadline to post residual interest would not become earlier than 6:00 p.m. the following day without an affirmative CFTC action or rulemaking that included an opportunity for public comment.\nFormer CFTC Chair Timothy Massad noted in a statement on the CFTC rule that an earlier deadline could help to ensure that FCMs always held sufficient margin and did not use one customer's margin to support another customer's. But such a practice also could impose costs on customers who must deliver margin sooner. The March 17, 2015, final rule included a plan for the CFTC to conduct a study of how well the current rule and deadline function, the practicability of changing the deadline, and the costs and benefits of any change. In May 2016, the CFTC published its study, recommending that no change to the residual interest deadline be made." ], "depth": [ 0, 1, 1, 1, 2, 2, 2, 3, 3, 3, 2, 2, 2, 3, 3, 3, 2 ], "alignment": [ "h0_title h1_title", "h0_full", "h0_full", "h1_title", "h1_full", "h1_full", "h1_title", "", "h1_full", "", "h1_full", "h1_full", "h1_title", "", "", "h1_full", "" ] }
{ "question": [ "What is the CFTC?", "How does the CFTC renew its authority?", "Will the CFTC need to be reauthorized again?", "How likely is it for Congress to fund CFTC beyond the authorization of appropriations?", "How did the prior re-authorization bills plan to authorize funds?", "How do the amounts requested and received by the CFTC differ?", "How would cost-benefit analysis provisions be expanded?", "What is bona fide hedging used for?" ], "summary": [ "The Commodity Futures Trading Commission (CFTC), created in 1974, regulates futures, most options, and swaps markets. The CFTC administers the Commodity Exchange Act (CEA; P.L. 74-765, 7 U.S.C. §§1 et seq.), enacted in 1936, to monitor trading in certain derivatives markets.", "The CFTC was last reauthorized in 2008 as part of the Food, Conservation, and Energy Act (P.L. 110-246), which included authorization of appropriations through FY2013.", "Although the underlying authority in the statute to administer programs does not have an explicit expiration, the authorization of appropriations only applied through FY2013. As a consequence, the authorization of appropriations assumes Congress will periodically act to authorize future appropriations.", "It has not been uncommon, however, for Congress to continue to fund the CFTC for several years beyond the expiration of previous authorizations of appropriations.", "Both prior reauthorization bills introduced in the 114th Congress would have authorized \"such sums as are necessary\" to carry out the CEA, rather than a specific amount.", "The CFTC requested $330 million for FY2017 and received $250 million. expand the current 5 cost-benefit analysis provisions in the CEA to 12 considerations.", "It would add a requirement that the CFTC conduct quantitative as well as qualitative assessments, which appears to mark a change from previous practice. modify the definition of a financial entity, potentially enabling a wider range of companies to claim certain exemptions from the Dodd-Frank derivatives requirements.", "Bona fide hedging is often used to determine which swaps count toward registration requirements, position limits, large trader reporting, and other regulatory requirements." ], "parent_pair_index": [ -1, -1, 1, -1, -1, 0, -1, -1 ], "summary_paragraph_index": [ 0, 0, 0, 0, 4, 4, 4, 4 ] }
CRS_RL32855
{ "title": [ "", "Introduction", "Regulatory Review Under E.O. 12,291", "A. Reagan Administration", "B. George H.W. Bush Administration", "Regulatory Review Under E.O. 12,866", "A. Clinton Administration", "B. George W. Bush Administration", "Conclusion" ], "paragraphs": [ "", "Steadily increasing presidential involvement in agency rulemaking efforts has often been cited as one of the most significant developments in administrative law and domestic policymaking since the introduction of the first formal review programs in the 1970s. The evolution of presidential review of agency rulemaking efforts since the Reagan era in particular constitutes a significant assertion and accumulation of presidential power in the regulatory context. While initial presidential forays into centralized regulatory review were limited in scope, presidential review of rules has emerged as one of the most widely-used and controversial mechanisms by which a President can ensure the realization of his regulatory agenda.\nThe first formal regulatory review program was instituted by President Nixon in 1971 through the establishment of a \"Quality of Life Review\" program designed to improve \"the interagency coordination of proposed agency regulations, standards, guidelines and similar materials pertaining to environmental quality, consumer protection, and occupational and public health and safety.\" Under this program agencies were required to submit \"significant\" proposed and final regulations to the Office of Management and Budget (OMB), which then disseminated them to affected agencies for comment. President Ford extended regulatory review through Executive Order 11,821, requiring agencies to prepare \"inflation impact statements\" for any \"major\" regulatory action. President Carter expanded presidential review through the issuance of Executive Order 12,044, which required agencies to prepare a \"regulatory analysis\" of all proposed \"major rules,\" examining the potential economic impact of the proposal and an evaluation of alternative regulatory options. President Carter took the additional step of forming the Regulatory Council, which was tasked with coordinating agency rulemaking activities in an effort to avoid duplicative or conflicting regulatory regimes.\nWhile the programs established in the Nixon, Ford, and Carter Administrations illustrate a successive increase in the centralization of regulatory review with the Executive Office of the President, these programs are generally characterized as having been \"designed primarily to facilitate interagency dialogue.\" However, these programs laid the foundation for the implementation of a much more extensive and vigorous review process under the Reagan Administration.", "", "Shortly after taking office, President Reagan issued Executive Order 12,291, \"to reduce the burdens of existing and future regulations, increase agency accountability for regulatory actions, provide for Presidential oversight of the regulatory process, minimize duplication and conflict of regulations, and insure well-reasoned regulations.\" E.O. 12,291 required agencies to submit any proposed major rule to OIRA for review, along with a \"regulatory impact analysis\" of the rule, including a cost-benefit analysis. The Reagan order was significant in comparison to earlier efforts in this context, in that it centralized review within OMB and had the practical effect of giving OMB a substantial degree of control over agency rulemaking. President Reagan expanded this review scheme with the issuance of Executive Order 12,498, which required agencies to submit an annual plan listing proposed regulatory actions for the year to OMB for review. This procedure enabled OMB to exert influence over agency regulatory efforts at the earliest stages of the process and to ensure that agency actions were in accord with the aims of the Administration. Additionally the order created a \"Task Force for Regulatory Relief\"which was tasked with reviewing and seeking the elimination of unneeded or ineffective regulations. In practical effect, the impact of the Reagan orders on agency regulatory activities was immediate and substantial. Under the order, OIRA reviewed over 2,000 regulations per year and returned multiple rules for agency reconsideration. The practical effect of this rigorous review process was to sensitize agencies to the regulatory agenda of the Reagan Administration, largely resulting in the enactment of regulations that reflected the goals of the Administration.\nNot surprisingly, this review process generated criticism and controversy. In particular, the review scheme was seen by some as having a distinct anti-regulatory bias, leading to charges that the orders constituted an unlawful transfer of authority from the agencies to OMB; that the review process was too secretive and subject to influence by private interests; that OMB lacked the resources or expertise to properly assess submitted regulations; and that the required cost-benefit analysis did not take into account the unquantifiable social benefits of certain types of regulations. Additionally, E.O. 12,291 was criticized on the grounds that it allowed OIRA to delay indefinitely rules under review, unless a countervailing statutory deadline or court order mandated promulgation.\nThe order attempted to mitigate legal concerns regarding usurpation of agency decisionmaking authority by mandating that none of its provisions were to \"be construed as displacing the agencies' responsibilities delegated by law.\" Additionally, the Department of Justice's Office of Legal Counsel (OLC) drafted an opinion shortly before the publication of E.O. 12,291, supporting its constitutionality. The OLC asserted that the provisions of the order were valid as an exercise of the President's power to \"take care that the laws be faithfully executed,\" additionally relying upon its determination that \"an inquiry into congressional intent in enacting statutes delegating rulemaking authority will usually support the legality of presidential supervision of rulemaking by executive agencies. The opinion acknowledged, however, that \"the President's exercise of supervisory powers must conform to legislation enacted by Congress,\" and went on to state that presidential \"supervision is more readily justified when it does not purport to wholly displace, but only to guide and limit, discretion which Congress has allocated to a particular subordinate official.\"\nDespite these pronouncements in the OLC opinion and the order itself, allegations were made that OMB utilized E.O. 12,2291 to determinatively control agency rulemaking activities during the Reagan Administration. However, courts considering OMB involvement in agency rulemaking under the auspices of 12,291 did not address the constitutionality of such review. In Public Citizen Health Research Group v. Tyson , for instance, the court addressed the validity of a rule promulgated by OSHA governing ethylene oixide, including a challenge based on the argument that a critical portion of the proposed rule had been deleted based on a command from OMB. While stating that \"OMB's participation in the rulemaking presents difficult constitutional questions concerning the executive's proper rule in administrative proceedings and the appropriate scope of delegated power from Congress to certain executive agencies,\" the court nonetheless found that it had \"no occasion to reach the difficult constitutional questions presented by OMB's participation\" given its finding that the challenged deletion was not supported by the rulemaking record.", "The Reagan orders were retained during the first Bush Administration to similar effect and controversy, with Congress going so far as to refuse to confirm President George H.W. Bush's nominee for the position of Administrator at OIRA. In 1989 the Administration created the Council on Competitiveness, which was empowered to resolve disputes between OIRA and regulatory agencies covered under E.O. 12,291. The Council itself was likewise controversial, in one instance asserting its authority to uphold OMB's rejection of certain elements of a proposed Environmental Protection Agency rule. EPA acquiesced in the Council's decision, and excised the provisions from the final rule. When this deletion was challenged in court, the Court of Appeals for the District of Columbia did not address the propriety of the influence wielded by the Council, determining that the deletion was supported by the rulemaking record. Touching upon the Council's involvement, the court declared that EPA's deletion of the provisions at issue \"in light of the Council's advice ... does not mean that EPA failed to exercise its own expertise in promulgating the final rules.\" It is important to note that the court's treatment of the Council's involvement in the EPA rulemaking does not in any way indicate that the Council or OMB had authority to compel changes thereto. Instead, the court based its decision on a determination that there was a sufficient basis in the record to conclude that the EPA had exercised its independent expertise in promulgating a rule that was in accord with the Council's position. As such, the court's holding is illustrative of the proposition that it is \"very difficult, if not impossible, for the judiciary to police displacement if the agency accepts it.\"", "", "Many of the concerns voiced over the effects of E.O. 12,291 were assuaged, at least temporarily, by the review regime established by the Clinton Administration. Upon assuming office, President Clinton supplanted the Reagan Administration's review scheme through the issuance of Executive Order 12,866, entitled \"Regulatory Planning and Review.\" The preamble to E.O. 12,866 characterizes its provisions as presenting a more nuanced approach to the management of agency rulemaking, and declares that the objective of the order is to:\nenhance planning and coordination with respect to both new and existing regulations; to reaffirm the primacy of Federal agencies in the regulatory decision-making process; to restore the integrity and legitimacy of regulatory review and oversight; and to make the process more accessible and open to the public. In pursuing these objectives, the regulatory process shall be conducted so as to meet applicable statutory requirements and with due regard to the discretion that has been entrusted to the Federal agencies.\nWhile this language could be interpreted as a retreat from the broad executive authority asserted in the Reagan order, it is important to note that substantive changes to the regulatory review process made by E.O. 12,866 do not appear to have been developed as the result of a divergent interpretation of presidential power in this context. Rather, as is addressed in more detail below, the provisions of E.O. 12,866 indicate a similarly expansive view of presidential authority to control agency rulemaking. E.O. 12,866 was self-avowedly designed to ensure that federal agencies \"promulgate only such regulations as are required by law, are necessary to interpret the law, or are made necessary by a compelling public need.\" To accomplish this goal, the order requires agencies to supply OIRA with a \"Regulatory Plan\" of the \"most important significant regulatory actions that the agency reasonably expects to issue in proposed or final form\" in each fiscal year. Furthermore, the order provides for centralized review of all regulations, requiring each agency to periodically submit to OIRA a list of all planned regulatory actions, \"indicating those which the agency believes are significant regulatory actions.\" The order defines a \"significant regulatory action\" as:\nAny regulatory action that is likely to result in a rule that may:\n(1) Have an annual effect on the economy of $100 million or more or adversely affect in a material way the economy, a sector of the economy, productivity, competition, jobs, the environment, public health or safety, or State, local, or tribal governments or communities;\n(2) Create a serious inconsistency or otherwise interfere with an action taken or planned by another agency;\n(3) Materially alter the budgetary impact of entitlements, grants, user fees, or loan programs or the rights and obligations of recipients thereof; or\n(4) Raise novel legal or policy issues arising out of legal mandates, the President's priorities, or the principles set forth in this Executive Order.\nUpon receipt of such a list, OIRA has ten days to determine whether a planned regulatory action not identified as significant by the agency is in fact covered under the aforementioned definition. Planned actions that are not deemed significant are not subject to OIRA review, while those that are must be subjected to a cost-benefit analysis by the agency. A regulatory action that is deemed significant is further subject to the review and clearance provisions of the order. Under this process, OIRA is required to waive or complete review of preliminary regulatory actions (such as notices of inquiry or advance notices of proposed rulemaking) within ten working days after the submission of the draft action. For all other regulatory actions (such as notices of proposed rulemaking or final rules), OIRA must waive or complete review within 90 calendar days after the date of submission. The review process may be extended once by no more than 30 days upon request of the agency head and the written approval of the OIRA Administrator. These requirements mark a significant departure from the provisions of E.O. 12,291, which, as was noted above, was criticized for allowing OIRA to delay most rules indefinitely. The Administrator of OIRA may also remand a regulatory action to the agency \"for further consideration of some or all of its provisions.\" In the event that a disagreement or conflict between an agency head and OIRA cannot be resolved by the Administrator, the President (or the Vice-President acting at the President's request) may resolve the issue. Such consideration by the President or the Vice-President may only be initiated by the Director of OMB or the relevant agency head.\nThe Clinton Administration drafted this language to make the OIRA review process less onerous on agencies than had been the case in the preceding Reagan and Bush Administrations, and this goal manifested itself at OIRA in a selective review process that resulted in the consideration of significantly fewer rules. For instance, while OIRA reviewed an average of 2080 regulations in FY1982-FY1993, the number of regulations reviewed fell substantially during the Clinton Administration, from 1100 in 1994, to 663 in 1995, and down to 498 in FY1996. Furthermore, an average of 600 significant rulemaking actions were approved per year during the Clinton Administration, while only 25 rules, and none after 1997, were returned to agencies for further consideration.\nAdditionally, the Clinton order provides for a more transparent review process than was the case with E.O. 12,291. In particular, E.O. 12,866 imposes substantial disclosure requirements on OIRA \"in order to ensure greater openness, accessibility, and accountability in the regulatory review process.\" Specifically, the order regulates oral communications initiated by individuals not employed by the executive branch, mandating that only the Administrator of OIRA or a particular designee may receive any such communications \" regarding the substance of a regulatory action under OIRA review. \" The order further controls all substantive communications between OIRA personnel and individuals outside the executive branch by requiring that a representative from the issuing agency be invited to any OIRA meetings held with outsiders, and that OIRA forward any such communications, \" including the dates and names of individuals involved in all substantive oral communications, \" to the issuing agency within ten days of receipt. Additionally, the order requires OIRA to maintain a publicly available log containing information regarding contacts of the type mentioned above. Finally, the order requires OIRA to make available to the public all documents exchanged between the agency and itself during the review proceeding, \" after the regulatory action has been published in the federal register or otherwise issued to the public, or after the agency has announced its decision not to publish or issue the regulatory action. \"\nFrom these requirements, it is evident that E.O. 12,866 imposes significant information sharing and disclosure requirements between OIRA and an issuing agency, particularly with regard to substantive communications between OIRA and individuals outside of the executive branch. It should be noted, however, that the disclosure requirements of the order are less stringent in the context of inter-agency communications with OIRA during the review process. Specifically, whereas §6(b)(4) requires OIRA to disclose to the issuing agency any substantive communications with persons not employed by the executive branch, there is no similar requirement regarding communications with other agencies. Given this distinction, OIRA would not seem to be required to disclose communications with other agencies regarding a draft regulatory action to an issuing agency by the terms of the order. Accordingly, OIRA would likewise not appear to be required by the order to make such communications available to the public upon completion of the review process, as is generally required, unless it affirmatively discloses the communications to the issuing agency during review proceedings.\nAs touched upon above, the effects of OIRA review during the Reagan and Bush Administrations generated a great deal of debate regarding constitutional issues adhering to the displacement of agency decisionmaking authority. Not surprisingly, then, the transparency and selectiveness of E.O. 12,866, coupled with the more pro-regulatory stance of the Clinton era OMB, led to a rather rapid drop in debate concerning the proper scope of presidential review of agency rulemaking. However, it does not appear that the drop in rates of OIRA review during this period should be taken to indicate a concession that there were limits on presidential control over the agency rulemaking process, particularly in light of the vigor with which the Clinton Administration pressed agencies to effectuate its regulatory goals. For instance, President Clinton greatly expanded the use of formal presidential directives to executive agencies compelling specific action on their part. President Reagan and President Bush issued nine and four presidential directives respectively, three of which instructed agencies to either delay or terminate the issuance of regulations. President Clinton, however, issued 107 presidential directives, several of which were designed to compel agencies to initiate regulatory action to address a particular issue of importance to the administration.\nAlso, aspects of the Clinton order indicate just as expansive a view of presidential authority as the Reagan and Bush orders, despite the selectiveness and transparency that characterized OIRA review during the Clinton Administration. For example, E.O. 12,866, unlike Reagan ' s order, includes independent agencies within its ambit to a certain extent. The order does not require independent agencies to submit individual rules for review, but does require them to comply with the regulatory planning process established in the order. Another example of the broad assertion of Presidential authority included in the Clinton order is the fact that the order provides that conflicts between agencies or between OMB and an agency are to be resolved, \" To the extent permitted by law, \" by \" the President, or by the Vice President acting at the request of the President, with the relevant agency head. \" This language could be taken to indicate that agency heads are to retain some role in the resolution of a disagreement, but the order appears to vest ultimate decisionmaking authority in the President or Vice President, stating that \" the President, or the Vice President acting at the request of the President, shall notify the affected agency and the Administrator of OIRA of the President ' s decision with respect to the matter. \" Similar to the Reagan order, E.O. 12,866 mitigates the potential controversy that this type of presidential displacement of agency authority could generate by providing that this authority is to be exercised \" only to the extent permitted by law, \" thereby giving an agency head the opportunity to argue in a given case that the President could only issue an advisory opinion, but it seems that the potential implication of this provision is that the President is perceived as having determinative authority in this context.\nThis provision has turned out to have little effect, given that Clinton ' s assertion and exercise of authority over the regulatory process manifested itself outside of the traditional OMB process. As noted above, President Clinton used devices such as presidential directives to direct agency heads to take a specific course of action in furtherance of his Administration ' s regulatory agenda, in contrast to the Reagan and George H.W. Bush Administration ' s approach of using the processes mandated in E.O. 12,291 to curtail agency rulemaking efforts. However, from the perspective of analyzing presidential control over the administrative process, it is interesting to note that unlike the Reagan order, E.O. 12,866 could be interpreted as asserting direct presidential authority over discretionary actions that have been assigned to agency heads by Congress. Accordingly, while the operative aspects of E.O. 12,866 were welcomed by many as improving upon the transparency and selectiveness of OIRA review, other aspects of the order could be taken to indicate that the Clinton Administration ' s view of presidential authority over agency rulemaking was largely consonant with that of the Reagan and George H.W. Bush Administrations, with the manifestation of this perspective differing primarily due to the obvious differences in the political aims of these administrations.", "The George W. Bush Administration, while retaining E.O. 12,866, has developed a regulatory review policy that is subjecting rules to more stringent review than was the case during the Clinton Administration. In particular, it has been asserted that the current Administration has returned to the regulatory review dynamic that prevailed under E.O. 12,291, with OIRA going so far as to describe itself as the \"gatekeeper for new rulemakings.\" At the same time, however, the George W. Bush Administration appears to be taking a more nuanced approach to OIRA review than was the case under E.O. 12,291, enabling it to have a substantial impact on agency rulemaking while avoiding the degree of criticism and controversy occasioned by regulatory review under the Reagan and George H.W. Bush Administrations.\nOIRA has markedly increased the use of \"return\" letters to require agencies to reconsider rules under E.O. 12,866. According to a memorandum from OIRA Administrator John D. Graham for the President's Management Council, return letters may be issued \"if the quality of the agency's analyses is inadequate, if the regulatory standards adopted are not justified by the analyses, if the rule is not consistent with the regulatory principles stated in the Order, or with the President's policies or priorities, or if the rule is not compatible with other Executive orders or statutes.\" Under Administrator Graham's tenure, OIRA has returned over 20 rules for agency reconsideration. OMB has discussed two notable effects of the reinvigoration of this practice. First, the willingness to issue such letters emphasizes to agencies that OIRA \"is serious about the quality of new rulemakings.\" Second, agencies have begun to seek OIRA input \"into earlier phases of regulatory development in order to prevent returns late in the rulemaking process.\" In practical terms, this type of collaboration is arguably beneficial to the extent that it enables OIRA to ensure that rulemaking efforts comply with the aims of E.O. 12,866, while giving agencies confidence that their regulatory proposals will not be returned after the investment of significant resources in their formulation. Conversely, this dynamic buttresses executive control over agency rulemaking efforts by allowing the exertion of influence at the earliest stages of the formulation process, and, as is discussed in more detail below, raises concerns regarding the extent to which this type of influence is disclosed.\nIn a significant departure from the nature of OIRA review under the Reagan and George H.W. Bush Administrations, under the current Administration, OIRA has taken a proactive stance in identifying issues that the office feels are ripe for regulation, and has instituted the practice of issuing \"prompt letters\" to the appropriate agency to encourage rulemaking on those issues. OIRA has described the prompt letter as a \"modest device to bring a regulatory matter to the attention of agencies.\" As acknowledged by OIRA, prompt letters \"do not have the mandatory implication of a Presidential directive.\" Rather, the device \"simply constitutes an OIRA request that an agency elevate a matter in priority.\" OIRA has also taken steps to ensure that prompt letters are available to the public, in order to stimulate \"agency, public and congressional interest in a potential regulatory priority.\" Noting that prompt letters could be treated as confidential, OIRA has further stated that it feels publication is warranted \"in order to focus congressional and public scrutiny on the important underlying issues.\" By specifically identifying regulatory issues of importance to the Administration through prompt letters, OIRA has presumably been able to exert a substantial degree of influence over the pursuit and scope of regulatory efforts in those areas.\nIn addition to the use of prompt letters, OIRA has staved off criticism of the degree leveled at the Reagan and George H.W. Bush Administrations by increasing the transparency of the review process. As discussed above, the Reagan Administration in particular was criticized for its reluctance to open the OIRA review process to outside inspection. E.O. 12,866, as issued by President Clinton, established fairly expansive disclosure standards, requiring OMB and OIRA to disclose any closed door meeting between federal officials outside groups regarding a regulation. Under Administrator Graham, OIRA has retained these requirements and has significantly expanded access to this information by placing information regarding meetings and OIRA decisions on the OIRA website. With this step, information that was previously accessible only at OIRA's record room is now available via the internet, increasing access to OIRA information regarding meeting logs, communications between OIRA and agency officials, and general OIRA guidance on rulemaking. This approach has effectively undercut what was once a major avenue of attack on OIRA review, although concerns remain regarding OIRA's influence on the rulemaking process and the extent to which its involvement is disclosed.\nIn particular, a 2003 study by the General Accounting Office (GAO) raised concerns regarding the level of transparency governing certain \"preinformal review\" OMB contacts with outside parties, as well as with contacts between OIRA and agency officials during \"informal review.\" Specifically, one of the significant OIRA disclosure policies instituted by Administrator Graham establishes that OIRA will disclose substantive meetings and contacts with outside parties regarding rules under review even in instances where OIRA was engaged only in an informal review, including substantive telephone calls initiated by the Administrator. However, the GAO report found that OIRA does not consider a rule to be under review for purposes of these disclosure requirements if OIRA is in general consultation with an agency regarding a matter that has not become substantive or for which the agency has not submitted a draft rule for informal review. Accordingly, during this so-called \"preinformal review\" period, OIRA may communicate with outside parties without triggering the aforementioned disclosure requirements. Additionally, the GAO report found that, with regard to contacts with agencies, OIRA interprets disclosure requirements as applicable only to the period where a rule is under formal review pursuant to E.O. 12,866. In practical effect, this review dynamic allows varying degrees of unreported contacts both between OIRA and outside parties, and OIRA and the executive agencies. Furthermore, as noted by GAO, these preformal review proceedings would allow an agency to submit a proposal to OIRA for informal review and to alter that proposal in accordance with OIRA's input, without revealing any such changes to the public.\nAdditionally, OIRA appears to have reinvigorated review of existing rules, and has taken steps to involve the public in the review process. In May 2001, OIRA solicited the public to nominate rules that should be considered for recision or modification. OIRA received 71 nominations from 33 commentators, and concluded that 23 of the rules nominated merited \"high priority review.\" In February 2004, OIRA solicited public nomination of reforms of regulations in the manufacturing sector, specifically requesting suggestions for reforms to regulations, guidance documents, or paperwork requirements that would \"improve manufacturing regulation by reducing unnecessary costs, increasing effectiveness, enhancing competitiveness, reducing uncertainty and increasing flexibility.\" OIRA received 189 reform nominations from 41 commentators, determining that 76 of the 189 nominations \"have potential merit and justify further action.\" This review process serves to further illustrate the degree of involvement of the current Administration in all facets of regulatory review.\nAs touched upon above, OIRA's use of mechanisms such as return and prompt letters have served to encourage agency collaboration with OIRA at the earliest stages of the rule formulation process. Indeed, OIRA has stated that \"it is at these early stages where OIRA's analytic approach can most improve the quality of regulatory analyses and the substance of rules.\" The obvious potential for OIRA to exert a degree of influence over rulemaking at this stage of development that rivals or perhaps even exceeds that wielded during formal review proceedings could be seen as tempering the salutory effects of the increased transparency requirements imposed during the formal review process. Nonetheless, OIRA has maintained that \"its interactions with agencies prior to formal regulatory review are pre-decisional communications that should generally be insulated from public disclosure in order to facilitate valuable deliberative exchanges.\" In light of these developments, it seems apparent that while the aforementioned changes to disclosure requirements pertaining to the formal OIRA review process have shielded the current Administration from the degree of criticism occasioned by E.O. 12,291, the potential that OIRA may play an important and potentially unacknowledged role in the formulation of agency rules during preformal review proceedings may be viewed as raising the same concerns that have traditionally adhered in this context.", "As has been illustrated by the consideration of the review regimes discussed above, there has been a steady evolution of presidential review of agency rulemaking from the Nixon Administration to the current Administration of George W. Bush. While the initial programs established in the 1970s were generally viewed as benign, President Reagan's issuance of E.O. 12,291 ushered in a new era of presidential assertions of authority over agency rulemaking efforts, raising attendant concerns with regard to the proper allocation of authority between the President and Congress in this context. Despite these separation of powers based concerns over the propriety of such review regimes, no reviewing court has squarely addressed the issue. Furthermore, while the actions of both the Clinton and George W. Bush Administrations in implementing the provisions of E.O. 12,866 appear to indicate a conception of presidential authority consonant with that conveyed by the Reagan order, their more nuanced approach to exercising this authority has largely diminished charges against its constitutionality. In turn, presidential review of agency rulemaking has become a widely used and increasingly accepted mechanism by which a President can exert significant, and sometimes determinative, authority over the agency rulemaking process." ], "depth": [ 0, 1, 1, 2, 2, 1, 2, 2, 1 ], "alignment": [ "h0_title h1_title", "", "h0_title", "h0_full", "h0_full", "h1_title", "h1_full", "h1_full", "h1_full" ] }
{ "question": [ "How have regulations over agency rulemaking efforts changed under Reagan?", "How did Reagan's regulation change rulemaking processes?", "How did this affect agency regulatory activities?", "Why was the executive order criticized?", "To what extent was the program continued?", "How did Clinton address concern about E.O. 12,291?", "How have following administrations addressed E.O. 12,866?", "How was presidential review changed by Reagan's sucessors?", "How is the presidential review process currently used?" ], "summary": [ "In 1981, President Reagan issued Executive Order 12,291, ushering in a new era of presidential assertions of authority over agency rulemaking efforts.", "E.O. 12,291 required cost-benefit analyses and established a centralized review procedure for all agency regulations. E.O. 12,291 delegated responsibility for this clearance requirement to the Office of Information and Regulatory Affairs, which had recently been created within the Office of Management and Budget as part of the Paperwork Reduction Act of 1980.", "The impact of E.O. 12,291 on agency regulatory activities was immediate and substantial, generating controversy and criticism.", "Opponents of the order asserted that review thereunder was distinctly anti-regulatory and constituted an unconstitutional transfer of authority from the executive agencies.", "The review scheme established in the Reagan Administration was retained by President George H.W. Bush to similar effect and controversy.", "Many of the concerns voiced regarding E.O. 12,291 were assuaged by President Clinton's issuance in 1993 of Executive Order 12,866, which implemented a more selective and transparent review process.", "E.O. 12,866 has been retained by the current Administration, which has utilized it to implement a review regime subjecting rules to greater scrutiny than in the Clinton Administration.", "The actions of both the Clinton and George W. Bush Administrations in implementing the provisions of E.O. 12,866 could be taken to indicate a conception of presidential authority consonant with that conveyed by the Reagan order. However the comparatively nuanced exercise of this asserted authority by these Administrations has largely diminished arguments against the constitutionality of presidential review.", "Accordingly, presidential review of agency rulemaking has become a widely used and increasingly accepted mechanism by which a President can exert significant and sometimes determinative authority over the agency rulemaking process." ], "parent_pair_index": [ -1, 0, 0, 0, 0, -1, -1, -1, -1 ], "summary_paragraph_index": [ 2, 2, 2, 2, 2, 3, 3, 3, 3 ] }
GAO_GAO-15-654T
{ "title": [ "Background", "Non-VA Medical Care Program", "VA Clinical Contracting", "Significant Weaknesses Exist in VA’s Monitoring and Oversight of Non-VA Medical Care", "VA Lacks Critical Data on Wait Times and Cost- Effectiveness of Non-VA Medical Care", "VA Cannot Analyze the Cost-Effectiveness of Non- VA Medical Care", "VA Lacks Automated Processes for Monitoring Non-VA Medical Care Claims Processing and Has Limited Oversight Mechanisms for Validating VA Facility Actions", "Significant Limitations Exist in VA’s Monitoring and Oversight of Clinical Contracts and Contractors", "Contract Monitoring Is Limited by Heavy COR Workloads and Inadequate Training", "VA’s Oversight of VA Facility Clinical Contract Monitoring Is Limited", "GAO Contact and Staff Acknowledgments" ], "paragraphs": [ "", "There are two main non-VA medical care delivery methods— preauthorized care and emergency care—that are approved using two different processes. The first, preauthorized care, is approved in advance by VA facility officials. VA may authorize veterans to seek care from non- VA providers for a number of reasons, including when (1) wait times for appointments at VA facilities exceed VA standards; (2) the distance veterans must travel to VA facilities is impractical for the veteran; and (3) VA facilities do not offer the medical services the veteran needs. Preauthorized care accounts for the majority of spending and utilization (about 60 percent of spending and about 88 percent of utilization) for the Non-VA Medical Care Program. The second, emergency care, is not typically approved in advance by VA facility officials and has certain criteria that must be met in order for VA to approve reimbursement for the non-VA provider. (See table 1.)\nPreauthorizing non-VA medical care involves a multistep process conducted by the VA facility that regularly serves a veteran. The preauthorization process is initiated by a VA provider who submits a request for non-VA medical care to the VA facility’s non-VA medical care unit, which is an administrative department within each VA facility that processes VA providers’ non-VA medical care requests and verifies that non-VA medical care is necessary. Once approved by the VA facility’s Chief of Staff or his or her designee, the veteran is notified of the approval and can choose any non-VA provider willing to accept VA payment at predetermined rates. (See fig. 1.)", "Both acquisition and clinical staff at VA work together to plan, execute, and monitor clinical contracts at VA. On the acquisition side, contracting officers (CO) are responsible for planning, awarding, and administering contracts on behalf of the federal government. Each CO is authorized to obligate federal funds up to a specified limit and a CO must formally approve all clinical contracts at VA. Common tasks of a CO include developing acquisition planning documents used to begin a clinical contract, conducting market research to determine pricing and availability for a clinical contract, and completing the formal competitive or non- competitive solicitation process for contracts. Each CO works within a network contracting office and is overseen by managers within that office who report directly to VA Central Office. There are 21 network contracting offices throughout VA’s health care system that manage all the contracting activities of a single VISN.\nFor each VA clinical contract, the CO responsible for the contract designates a contracting officers’ representative (COR) at the VA facility to help develop the clinical contract and monitor the contract provider’s performance once the provider begins work. Common tasks delegated to the COR include providing input on the performance requirements for the clinical contract, determining how the contract provider’s performance will be measured and monitoring performance once work has begun, validating the contract provider’s invoices to ensure their accuracy, managing contract modifications, and assisting the CO in resolving any issues that may arise with the contract provider. At VA, CORs are commonly administrative personnel responsible for managing the operations of a specialty care line at a VA facility—such as primary care and surgery—where the contractor will be working. CORs are responsible for maintaining the official record of the contract provider’s performance and providing official performance assessments to the CO.\nVA Central Office has primary responsibility for overseeing network contracting offices and manages clinical contracting activities through the Veterans Health Administration (VHA) Procurement and Logistics Office. There are five primary offices within the VHA Procurement and Logistics Office that are responsible for overseeing various aspects of clinical contracting activities and report to VHA’s Deputy Chief Procurement Officer. (See fig. 3.)\nMedical Sharing Office. The Medical Sharing Office is responsible for providing guidance to network contracting offices regarding the content and structure of solicitations for clinical contracts and for reviewing several types of clinical contracts. The Medical Sharing Office reviews solicitations of all competitive clinical contracts valued at over $1.5 million, all non-competitive clinical contracts valued at over $500,000, and all organ transplant contracts.\nAll Medical Sharing Office reviews are conducted before a solicitation is issued to ensure that all the necessary provisions are in place prior to any competition or award.\nProcurement Operations Office. The Procurement Operations Office is responsible for providing ongoing guidance and monitoring of the COR population at VA. The Procurement Operations Office conducts reviews of COR files and publishes a COR newsletter.\nProcurement Audit Office. The Procurement Audit Office is responsible for ensuring compliance with VA policies and procedures related to contracting. This office conducts internal compliance audits of contracts, including clinical contracts, once they are executed to ensure that all required documentation was included in the final contract and audits the activities of network contracting offices and Service Area Offices (SAO) to ensure their compliance with VA policies and regulations.\nProcurement Policy Office. The Procurement Policy Office is responsible for providing guidance to VA’s acquisition workforce in network contracting offices and SAOs. This office produces and updates standard operating procedures for CORs and COs.\nService Area Offices. SAOs are the regional contract management entities created to oversee the activities of the 21 network contracting offices and the COs and supervisors that work within them. VHA created three SAOs—East, West, and Central—to manage the contracting activities of six to eight VISNs each. SAOs review solicitations for most clinical contracts during their initial stages to ensure that all necessary provisions are in place prior to any competition or award.", "", "As our recent work has found, critical data limitations related to the wait times veterans face in obtaining care from non-VA providers and the cost- effectiveness of such services hinder VA’s efforts to oversee the Non-VA Medical Care Program in an effective manner.\nVA does not collect data on how long veterans must wait to be seen by non-VA providers. We previously found that the amount of time veterans wait for appointments in VA facilities influenced VA’s utilization of non-VA medical care. For example, in our May 2013 report, VA officials from all six facilities we reviewed reported that they routinely referred veterans to non-VA providers to help ensure that veterans receive timely care and their facilities meet performance goals for wait times for VA facility-based care. Officials from one of these VA facilities explained that veterans needing treatment in several specialties—including audiology, cardiology, and ophthalmology—were referred to non-VA providers for this reason.\nIn fiscal year 2012, VA performance goals for wait times for care in VA facilities called for veterans’ primary care appointments to be completed within 7 days of their desired appointment date and veterans’ specialty care appointments to be scheduled within 14 days of their desired appointment date. However, since VA did not track wait times for non-VA providers, we found that little was known about how often veterans’ wait times for non-VA medical care appointments exceeded VA facility-based appointment wait time goals. Officials from one VA facility we reviewed explained that non-VA providers in their community also faced capacity limitations and may not be able to schedule appointments for veterans any sooner than the VA facility.\nWe recommended in May 2013 that VA analyze the amount of time veterans wait to see non-VA providers and apply the same wait time goals to non-VA medical care that have been used to assess VA facility- based wait times. VA concurred with this recommendation and detailed its plan to create a national consolidated monthly wait time indicator to measure performance for non-VA medical care referrals. In February 2015, VA reported that this monthly indicator had been developed and rolled out as a part of the Non-VA medical care coordination initiative. This monthly indicator tracks the number of veterans whose appointments with a non-VA provider are scheduled within 90 days—including generating the veterans’ authorization to receive the care, scheduling the appointment with the non-VA provider, and receiving the veterans’ medical records from the non-VA provider after the appointment is held. However, this indicator only partially implements our recommendation because it does not use the same wait time measures for non-VA medical care as are used for VA facility-based care.", "Our recent work found that limitations in the way VA collects non-VA medical care data did not allow the Department to analyze the cost- effectiveness of non-VA medical care provided to veterans. As we reported in May 2013, we found that VA lacked a data system to group medical care delivered by non-VA providers by episode of care—a combined total of all care provided to a veteran during a single office visit For example, we reported that during an office visit to or inpatient stay.an orthopedic surgeon for a joint replacement evaluation, an X-ray of the affected joint may be ordered, the veteran may be given a blood test, and the veteran may receive a physical evaluation from the orthopedic surgeon. The non-VA provider would submit a claim to VA for the office visit and the radiologist that X-rayed the affected joint and the lab that performed the veteran’s blood test would submit separate claims. However, VA’s non-VA medical care data system was not able to link the charges for these three treatments together. We found that this left VA without data for comparing the total non-VA medical care costs for various types of services with the VA facility-based alternative.\nWithout cost-effectiveness data, we concluded that VA is unable to efficiently compare VA and non-VA options for delivering care in areas with high utilization and spending for non-VA medical care. Two VA facilities we reviewed had undertaken such assessments of whether services should be provided through non-VA medical care or through an expansion of facility-based care, despite the limitations of current data.\nOfficials at one facility reported that they expanded their operating room capacity to reduce their reliance on non-VA surgical services, saving an estimated $18 million annually in non-VA medical care costs. Similarly, officials from the second facility reported that they were able to reduce their reliance on non-VA medical care by hiring additional VA staff and purchasing additional equipment to perform pulmonary function tests, an effort that reduced related non-VA medical care costs by about $112,000 between fiscal years 2010 and 2012. We also found that the lack of non- VA medical care data available on an episode of care basis prevents VA from efficiently assessing the appropriateness of non-VA provider reimbursement. Specifically, VA officials cannot conduct retrospective reviews of VA facilities’ claims to determine if the appropriate rate was applied for the care provided by non-VA providers.\nWe recommended in May 2013 that VA establish a mechanism for analyzing the episode of care costs for non-VA medical care. VA concurred with this recommendation and noted that the Department agrees that analyzing episode of care costs is an important part of its non-VA medical care monitoring activities. In February 2015, VA reported that a mechanism to analyze non-VA medical care costs on an episode of care basis would not be instituted until a planned redesign of the Department’s non-VA medical care data systems is completed in fiscal year 2016. As a result, this recommendation remains unimplemented.", "Our recent reports have found that crucial limitations exist in VA’s monitoring and oversight of non-VA medical care claims processing. Specifically, VA does not have automated systems to help VA facility- based claims processing staff determine whether a non-VA medical care claim is eligible for payment or notifying veterans that their claims have In addition, VA’s oversight mechanisms—including field been denied.assistance visits to VA facilities processing non-VA medical care claims and audits of VA facilities’ claims determinations—are limited due to weaknesses in their execution.\nAs we reported in March 2014, we found that there were no automated processes for determining whether a claim for non-VA medical care meets criteria for payment or ensuring that veterans are notified when a claim is denied.and diligence of VA facility-based claims processing staff reviewing each claim and their adherence to VA policies. We found that there were a number of steps in the claims review process that were susceptible to errors that could lead to inappropriate denials of non-VA medical care claims. For example, we found nine instances where a veteran’s claim was denied under VA’s emergency care authority for non-service connected conditions, but should have been paid under VA’s preauthorized non-VA medical care authority because a VA clinician had Instead these processes rely largely on the judgment referred the veteran to the non-VA provider. We found that in eight of these nine cases, VA facility-based personnel failed to complete critical steps in the non-VA medical care authorization process that impacted the information available to claims processing staff later in the process and without an automated process to prompt these claims processing staff to check for additional information, these claims were inappropriately denied.\nIn addition, according to VA policy, the Department must notify veterans in writing about denied claims and their appeal rights. However, as we reported in March 2014, we found that one VA facility we visited could not produce documentation of veteran notification for any of the 30 denied claims we reviewed. We concluded that when veterans are not informed that their claims for non-VA medical care have been denied and VA has inappropriately denied the claims, veterans could become financially liable for care that VA should have covered. Under such circumstances, veterans’ credit ratings may be negatively affected and they may face personal financial hardships if they are unable to pay the bills they receive from non-VA providers. Taken together, the absence of systematic processes for completing these actions significantly reduces the assurance VA Central Office has that VA facility-based claims processing staff can consistently make accurate determinations about whether or not to pay non-VA medical care claims and notify veterans of their appeal rights in the case of denials.\nIn March 2014, we made six recommendations aimed at improving VA’s processing of non-VA medical care claims, specifically emergency care claims for conditions not related to veterans’ service-connected disabilities. These recommendations directed the Department to establish or clarify its policies and take other actions to improve VA facilities’ compliance with existing policy requirements. VA concurred with these six recommendations. Based on updates we have received on VA’s implementation of these recommendations, we believe VA has fully implemented two of the six recommendations related to properly dating incoming claims and verifying that claims are submitted to the correct VA facility. However, we believe that for the remaining four of these recommendations, additional steps are needed to revise VA policies on claims processing roles and responsibilities. These unimplemented recommendations are related to VA’s non-VA medical care policies and procedures for processing claims and notifying veterans when claims are denied.\nOne of VA’s primary methods for monitoring its facilities’ compliance with non-VA medical care claims processing requirements is field assistance visits. As we reported in March 2014, we found a number of limitations in their use as an oversight mechanism. First, we found that VA’s criteria for selecting facilities for field assistance visits may not direct VA to those facilities most in need of this oversight because VA does not take into account the accuracy of claims processing activity when selecting facilities for review. Instead, we found that VA selected the 30 VA facilities that received a field assistance visit in fiscal year 2013 based on their claims processing timeliness. With a limited focus on the timeliness of claims processing and without attention to the accuracy of claims decisions, we concluded that VA Central Office does not have the opportunity to assist VA facilities in making accurate decisions that may impact veterans financial well-being. Second, we found that the checklist VA uses for its field assistance visits does not examine all practices that could lead VA facilities to inappropriately deny claims. For example, VA’s checklist does not examine VA facilities’ practices for determining whether veterans are enrolled at a different VA facility and whether they have been seen by providers at another VA facility in the last 24 months—a critical criterion for determining whether veterans are eligible for emergency care coverage for non-service connected conditions. Finally, we found that VA does not hold facilities accountable for correcting deficiencies identified during these visits, and it does not validate facilities’ self-reported corrections to deficiencies identified during these visits. Specifically, in our review of fiscal year 2012 and 2013 field assistance visit data, we found that some VA facilities had unresolved problems in their fiscal year 2013 field assistance visit that had originated and were identified during their fiscal year 2012 field assistance visit.\nIn March 2014, we made two recommendations aimed at revising the scope of field assistance visits and ensuring that deficiencies identified during these visits are corrected. VA concurred with both of these recommendations. VA has made some progress in implementing these recommendations as of May 2015 by expanding the topics covered during field assistance visits and updating their standard operating procedures. However, we believe that VA needs to undertake additional actions to sufficiently address them. Specifically, VA needs to ensure field assistance visits include a review of a sample of processed claims in order to determine whether staff are complying with claims processing requirements.\nOur recent work has also found that VA has no systematic process for auditing claims to ensure that they were appropriately approved or denied. VA officials stated that they recommend, but do not require, that managers of VA facility-based non-VA medical care claims processing units audit samples of processed claims—including both approved and denied claims—to determine whether staff processed claims appropriately. However, in March 2014 we found that VA did not know how many VA facilities conducted such audits and none of the four VA facilities we visited reported conducting them.\nTherefore, in March 2014, we recommended that VA institute systematic audits of the appropriateness of claims processing decisions. VA concurred with this recommendation and has made some progress implementing it as of May 2015 by instituting audits of some paid claims. However, we believe that to fully implement this recommendation, VA needs to undertake additional action. Specifically, VA needs to establish systematic audits of claims processing decisions—including both approvals and denials—made by VA facility-based claims processing staff.", "", "As we reported in October 2013, we found that CORs cited two challenges that may compromise VA’s monitoring of contractors’ performance—the heavy workload associated with the COR position and the lack of adequate training for CORs.\nRelating to workload, CORs at the four VA facilities we visited for our 2013 review consistently reported facing significant challenges in effectively carrying out their COR responsibilities for monitoring clinical contractors. One challenge cited by the majority of CORs we met with (37 of 40 that completed our data collection instrument) was the assignment of the COR role as a collateral duty. Many of these CORs’ primary positions require them to manage staff, maintain budgets, and oversee other clinical providers. We found that the average COR spends about one-quarter of his or her time monitoring approximately 12 contracts, according to estimates provided by the CORs; however, some of these CORs were responsible for overseeing significantly more contracts. For example, we found that 6 of these 40 CORs managed nearly 190 of the 452 (41 percent) contracts in place at the four VA facilities we reviewed and told us they estimated spending at most 30 percent of their work time on their COR duties. In addition, we found that the CORs responsible for managing the 12 contracts we reviewed in depth frequently did not have the time to effectively monitor the performance of contract providers. Specifically, CORs for 8 of the 12 contracts reported that the demands of their primary positions had at times prevented them from fully monitoring contract providers’ performance. In addition, CORs for 6 of these 12 contracts stated that they could not complete certain elements of their COR responsibilities— such as adequately monitoring contract costs—due to limited time and resources.\nVA guidance requires VA facilities to provide CORs with the time to complete their responsibilities and ensure that contract compliance is managed by a knowledgeable COR. Specifically, VA’s standard operating procedure for CORs requires VA facilities to provide CORs with the time and resources necessary to complete required training and fulfill their duties as a COR. In addition, to monitor clinical contracts effectively, CORs are required to perform a number of key functions—including completing quarterly reports on contract progress, quality assurance, and invoice audits. However, we found that VA’s guidance related to COR responsibilities did not include any information on how VA facilities are to determine the feasibility of whether a COR’s workload—including both COR and primary position responsibilities—will allow them to carry out their tasks as CORs for monitoring contract provider performance. The COR standard operating procedure also did not provide any guidance for determining when COR duties should be assigned as a collateral duty or a full-time responsibility. We concluded that without clear guidance on how to determine a COR’s workload, VA facilities can unintentionally assign COR duties to a staff member who does not have the time available to properly monitor clinical contractors. If CORs’ workloads prevent proper monitoring of clinical contracts, VA risks missing the opportunity to proactively identify and correct performance issues with contract providers and to recognize patient safety concerns potentially resulting from contract providers’ actions. By failing to identify performance concerns with contract providers, VA could unknowingly be receiving sub-standard service from these contractors, continue to receive services from these contract providers that do not meet the needs of the VA facilities, and risk patient safety problems when these contracts are extended for additional years.\nIn October 2013, we recommended that VA revise its standard operating procedures for CORs to provide guidance on the number of contracts, based on size and complexity, each COR should manage to ensure that all CORs maintain a workload that allows them to fulfill their duties as a COR and their primary position responsibilities. VA concurred with this recommendation and detailed plans to revise existing COR standard operating procedures to include guidance on the number of contracts, based on size and complexity, that each COR should manage to ensure that all CORs maintain a workload that allows them to fulfill their duties as a COR and their primary position responsibilities. However, in April 2015, VA Central Office officials informed us that the Department no longer plans to revise these standard operating procedures in this manner, and plans instead to place language in the COR nomination letter that states that the COR and their supervisor discussed their workload and determined they could effectively serve as the COR for the contract. We believe that to fully implement our recommendation, VA needs to provide guidance to CORs and their supervisors through a revision to the COR standard operating procedures that provides guidance on the number and type of contracts each COR should manage to ensure that VA facilities and CORs can better make these determinations.\nRelating to training, CORs from the four VA facilities we visited noted weaknesses in VA’s COR training courses and our own analysis of these courses confirmed these limitations. Specifically, over half of the 40 CORs from the four VA facilities we visited for our October 2013 review responded that either their COR training did not prepare them for their role as a COR or were neutral on whether or not this training was helpful preparation. In addition, CORs for 8 of the 12 contracts we reviewed in depth did not find the required COR training helpful or applicable to VA clinical contracting. For example, one COR stated that the training covered very broad areas of contracts and did not include specific information on which kinds of contracts need detailed quality assurance plans or information on how to manage a clinical contract rather than a supply contract. In addition, a few CORs stated that the instructors for their training courses had limited knowledge of clinical contracting.\nWe also reviewed the content of VA’s 32-hour COR training course administered by the VA Acquisition Academy and found that this course had several limitations in preparing CORs to manage clinical contracts in VA facilities, including the following:\nFocused on contracts that buy goods, not services. The primary examples used in the course did not include a discussion of clinical contracts at VA and instead walked students through the contracting process using examples such as replacing carpet and making a large computer equipment purchase. There were no examples focused on how to evaluate or measure the quality of services provided by a contract provider in a VA facility’s clinical setting.\nIncluded little information on monitoring responsibilities. The course content included limited information for CORs on post-award monitoring responsibilities for clinical contracts and instead was heavily weighted to discussing the pre-award development of a contract.\nTo supplement this required course, VA’s Medical Sharing Office in June 2013 developed and implemented an 8-hour training course for CORs managing clinical contracts. However, VA did not require this course be completed by all CORs managing clinical contracts.covered primarily pre-award contract development responsibilities of CORs and did not include any significant information on the post-award monitoring responsibilities of CORs managing clinical contracts.\nIn October 2013, we recommended that VA modify its COR training to ensure it includes examples and discussion of how to develop and monitor service contracts—including contracts for the provision of clinical care in VA facilities. VA concurred with this recommendation. In August 2014, VA provided us with a copy of its revised training modules for CORs and notified us the Department intends to require this training for all CORs.", "Our recent work has also found that VA has not established a robust method for overseeing the monitoring of clinical contractors by COs and CORs throughout its health care system. Our October 2013 report found that VA’s primary oversight entity for health care contracting activities, the VHA Procurement and Logistics Office, has a limited role in overseeing the monitoring actions of COs and CORs once a contract has been approved and initiated at a VA facility. The VHA Procurement and Logistics Office conducts limited oversight of contracting activities throughout the VA health care system through its SAOs and Procurement Operations Office.\nService Area Offices. According to officials from the three SAOs we interviewed for our October 2013 report, the role of the three SAOs in clinical contract monitoring is limited to an audit of the records COs maintain in VA’s electronic Contract Management System. These reviews focus only on the completeness of COs’ electronic contracting files—including documentation that a COR with current training records was assigned to the contract. SAO electronic Contract Management System audits did not include any reviews of CORs’ monitoring of clinical contractors.\nProcurement Operations Office. The VHA Procurement and Logistics Office’s Procurement Operations Office is the only entity responsible for overseeing the monitoring activities of CORs; however, the reviews conducted by this office were limited to a remote electronic documentation review of a small sample of COR files. Prior to the release of our October 2013 report, officials from the Procurement Operations Office told us that to select COR files for these reviews, a Procurement Operations Office staff member aims to select 25 COR files for active contracts per network contracting office—about 2.1 percent of clinical contracts in an average VISN if all 25 selected COR files are for clinical contracts. VA officials told us that, while the Procurement Operations Office sets a goal to review COR files from two network contracting offices each month, since implementing the program in March 2013 these reviews had been completed in only four network contracting offices and none of these four offices had received feedback on the outcomes of these reviews as of August 2013. These reviews also had a narrow focus on the completeness of COR files because the Procurement Operations Office staff member reviewing the files relies on a checklist to verify the presence or absence of required documentation of COR monitoring activities and does not review the quality of information contained within a COR’s records.\nWe concluded that the limited review schedule and narrow focus on file completeness did not allow the Procurement Operations Office to comprehensively assess the monitoring activities of COs and CORs throughout VA’s health care system. Without a robust monitoring system in place, VA cannot be reasonably assured that all CORs in all VA facilities are monitoring clinical contractors and maintaining the proper records of their efforts to monitor the activities of clinical contractors caring for veterans.\nWe recommended in October 2013 that VA increase its oversight of COs and CORs by ensuring that post-award contracting files are regularly reviewed for all network contracting offices. VA concurred with this recommendation and noted that the Department would revise COR standard operating procedures to ensure that regular reviews of post- award contract files from all network contracting offices are conducted. While VA has made progress in implementing this recommendation by completing 45 more reviews of COR files in fiscal year 2014 than in fiscal year 2013, these reviews were still only conducted in 5 of the 21 network contracting offices. We believe that to fully implement this recommendation VA needs to ensure that a sample of COR files are reviewed from all network contracting offices.\nChairman Coffman, Ranking Member Kuster, and Members of the Subcommittee, this completes my prepared statement. I would be pleased to respond to any questions that you may have.", "If you or your staffs have any questions about this statement, please contact me at (202) 512-7114 or [email protected]. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this statement. GAO staff who made key contributions to this statement include Marcia A. Mann, Assistant Director; Jackie Hamilton; Katherine Nicole Laubacher; and Emily Ryan.\nThis is a work of the U.S. government and is not subject to copyright protection in the United States. The published product may be reproduced and distributed in its entirety without further permission from GAO. However, because this work may contain copyrighted images or other material, permission from the copyright holder may be necessary if you wish to reproduce this material separately." ], "depth": [ 1, 2, 2, 1, 2, 2, 2, 1, 2, 2, 1 ], "alignment": [ "", "", "", "h0_title h1_title", "h0_full", "h1_full", "h1_full", "h0_title h1_title", "h0_full", "h1_full", "" ] }
{ "question": [ "What has GAO's review of the VA found?", "How was VA contractor monitoring compromised?", "What role do CORs play in contractor monitering?", "What prevents CORs from executing their duties properly?", "How could these challenges be addressed?", "How thoroughly does CORs training explain how to engage in monitoring of clinical contractors?", "What issues in the VA does this report cover?", "How did GAO source data for their three reports?", "What specific data did GAO collect?" ], "summary": [ "GAO's recent work has also found significant limitations in VA's monitoring and oversight of clinical contracts and contractors—a method VA uses to bring non-VA providers into VA facilities.", "As GAO reported in October 2013, contracting officer's representatives' (COR) heavy workloads and inadequate training compromised VA's monitoring of contractor performance.", "CORs are responsible for monitoring the work of non-VA providers working in VA facilities under a contract once the contract is in place.", "CORs for 8 of the 12 contracts GAO reviewed in depth reported that the demands of their primary positions at the VA facility have at times prevented them from fully monitoring contract providers' performance. Six of these CORs stated that they could not complete certain elements of their COR responsibilities—such as adequately monitoring contract costs—due to limited time and resources.", "Robust VA oversight would better ensure that the contract providers deliver high quality care to veterans and fulfill the responsibilities of their contracts. In addition, CORs from the four VA facilities GAO visited noted weaknesses in VA's COR training and GAO's analysis confirmed these limitations. Specifically, GAO found this training focused on teaching CORs to develop contracts that purchase goods and not clinical services.", "In addition, COR training included little information on how CORs should engage in post-award monitoring of clinical contractors.", "This testimony is based on three GAO reports issued in 2013 and 2014 and addresses the extent to which VA monitors and oversees its (1) Non-VA Medical Care Program and (2) clinical contracts and contracted non-VA providers working in VA facilities.", "For all three reports, GAO reviewed relevant requirements and visited a total of 14 VA facilities.", "For its May 2013 report on the oversight and management of the Non-VA Medical Care Program, GAO reviewed non-VA medical care data from fiscal year 2008 through fiscal year 2012. For its October 2013 report on clinical contract monitoring and oversight, GAO administered a data collection instrument to CORs and reviewed 12 selected clinical contracts. For its March 2014 report on non-VA emergency medical care for veterans' non-service connected conditions, GAO reviewed 128 denied claims." ], "parent_pair_index": [ -1, -1, -1, 2, 2, -1, -1, -1, 1 ], "summary_paragraph_index": [ 3, 3, 3, 3, 3, 3, 1, 1, 1 ] }
GAO_GAO-16-349
{ "title": [ "Background", "Television", "Television Advertising", "Other Local Media in Local Markets", "FCC Oversight", "JSAs Are Mostly in Smaller Markets, but Some JSAs Were Missing from Stations’ Public Files; Some Stakeholders Reported That Interconnects Are Mostly in Medium- to Large-Size Markets", "JSAs Are Mostly in Smaller Markets and Cover Similar Terms", "Some JSAs Were Not Filed in Stations’ Public Files in Accordance with FCC Rules", "Interconnects Allow MVPDs in a Local Market to Sell Advertising from a Single Point and Exist in Most Markets, According to Stakeholders", "Some Selected Stakeholders Said That Advertising Agreements Provide Economic Benefits, but Others Raised Concerns over the Market Effects of these Agreements", "Station Owners Said That JSAs Allow Stations to Cut Costs, but Other Stakeholders Raised Concerns about Effects on Competition, Diversity, and Localism", "MVPDs Said Interconnects Allow Their Advertising Time to Reach More of the Local Market, but Other Stakeholders Raised Concerns about Effects on Competition", "Conclusions", "Recommendation", "Agency Comments", "Appendix I: Objectives, Scope, and Methodology", "Appendix II: Local Media Advertising Revenue", "Appendix III: Comments from the Federal Communications Commission", "Appendix IV: GAO Contact and Staff Acknowledgments", "GAO Contact", "Staff Acknowledgments" ], "paragraphs": [ "", "Consumers access television through two principal types of media. The first is through local broadcast television stations, which provide free over- the-air programming for reception in consumers’ households by television antennas. Many local stations are affiliated with major broadcast networks, while others are independent stations that are not affiliated with a broadcast network. The second platform for accessing television services is through MVPDs, which are cable, satellite, or telecommunications companies that provide services through a wired platform or via satellite and charge their customers a subscription fee. MVPDs’ programming includes so-called “cable” networks, such as CNN or ESPN, and also the local stations, which they carry or retransmit through agreements with the local stations. These two forms of media have some similarities but also key differences, as described in table 1.", "Television advertising time may be sold at either the national or local level. National advertising time is sold by broadcast or cable networks— both of which produce and aggregate programming that will be aired nationally—to advertisers looking to reach audiences across the country. The advertisements are inserted with the programming that broadcast and cable networks provide to local stations and MVPDs, respectively. In contrast, local advertising time is sold to companies wanting to reach a local audience. This advertising time may be sold to local businesses— such as a car dealership or restaurant—or it may be sold to a national business—such as a car manufacturer or a large restaurant chain—that is purchasing local advertising time to reach a particular local audience. While local stations or MVPDs often directly sell local advertising time to local businesses, national advertising sales representatives may arrange the sale of local advertising time to national businesses.\nThe amount of advertising time available for a local station to sell during a given hour depends on the type of program airing at that time. Specifically, a local station sells all of the advertising time during the programming it produces, such as local news. In our 2014 report on media ownership, we found that advertising aired during local news in particular represents a substantial portion of a broadcast station’s revenue. A local station also sells a portion of the advertising time during programming it receives from its affiliated broadcast network, generally about 2 ½ to 3 minutes per hour, and may sell a portion of the time during syndicated programming, which is programming such as game shows and reruns produced nationally but aired on a station-by- station basis. Advertising on cable networks is mostly sold by the cable networks themselves; however, MVPDs also sell a small portion of the advertising time on the cable networks that they distribute, about 2 minutes per hour according to MVPDs we spoke to for this report. No advertising time on the local stations that MVPDs retransmit is available to MVPDs to sell, nor do MVPDs sell advertising time on premium cable channels that do not carry advertising, such as HBO. Table 2 presents example scenarios of how local and national advertising is sold and shown through both local stations and MVPDs. This table does not include information about how joint sales agreements among local stations and interconnects among MVPDs affect local advertising sales, which is discussed later in the report.\nSome broadcast stations and MVPDs have entered into agreements regarding the joint-selling of advertising, which have become more prevalent in recent years, according to media-industry stakeholders we spoke to.\nJSA: An agreement between local stations in which one station is authorized to sell advertising time on the other station. We refer to the station selling the advertising as the “sales-agent station” and the station that turns over its advertising time to be sold by the other station as the “customer-station.” JSAs are specifically defined by FCC rules. Interconnect: An arrangement among MVPDs in the same market in which one MVPD—typically the largest MVPD in the market—sells a portion of the local advertising time for all MVPDs participating in the interconnect and simultaneously distributes that advertising across all such MVPDs in a coordinated manner. Although interconnects were traditionally an arrangement between cable providers, in recent years, telecommunications and satellite providers have also participated in them. Interconnects are not defined by FCC.\nSome local stations also have other agreements, called shared service agreements, for sharing other functions such as news production, administrative, and operational services. For example, stations can enter into an agreement to share news-gathering resources, such as helicopters, reporters, and cameramen, or can enter into an agreement wherein one station produces another station’s local news. Our 2014 report on media ownership found that stations may have several agreements in place, such as a shared service agreement and JSA, or a single agreement that includes components typical of different types of agreements. Stations are not required to disclose shared service agreements in their public files. However, in 2014, FCC proposed new rules that would define shared service agreements and require their filing.", "In addition to television, there are a number of other outlets competing for advertisers looking to purchase advertisements in local markets, including radio, print media (such as newspapers and magazines), out-of-home advertising (such as billboards or advertising on buses), and Internet- based media (such as advertising through mobile devices or on websites). Local media advertising generated approximately $136 billion in revenue in 2014, a slight decrease from the $139 billion (2014 dollars) in 2011, according to data from BIA/Kelsey, a media research and consulting firm.\nThe geographic scope of local media markets are defined by Nielsen, a company that measures television viewership—a critical metric for determining advertising rates. Nielsen has divided the country into 210 local television markets, known as DMAs, ranked in size from the largest (New York, N.Y.) to smallest (Glendive, Mont.). Based on information from the stakeholders we interviewed about these markets, we will refer to the 25 largest markets (those ranked 1 through 25) as “large” markets, those ranked 26 through 100 as “medium” markets, and those ranked 101 through 210 as “small” markets.", "FCC assigns licenses for local stations to use the airwaves on the condition that licensees serve the public interest. FCC’s regulation of local stations is guided by long-standing policy goals to encourage competition, diversity, and localism. To advance these policy goals, and based on statutory requirements to serve the public interest, FCC has implemented rules that limit the number of stations an entity can own or control locally and nationally. Under FCC’s ownership rules, a single entity can own two local stations in the same DMA if the relevant service contours—the boundary of the area a station serves—do not overlap or, if they do overlap (1) at least one of the stations is not ranked among the top-four stations in terms of audience share and (2) at least eight independently owned and operating full-power commercial or noncommercial television stations would remain in the DMA. Because larger markets tend to have more stations, this limit tends to affect smaller markets more than larger ones, since an owner of a local station interested in acquiring a second station in a small market would be less likely to be able to meet these criteria. As previously discussed, FCC is required by statute to review its media ownership rules every 4 years and determine whether any such rules remain necessary in the public interest. FCC’s most recent review related to its media ownership rules was completed in 2008.\nFCC has also noted that arrangements other than outright ownership could exert similar influence as ownership. To address such issues, FCC developed attribution rules to determine what interests should be counted when applying these media ownership limits. In 2004, FCC sought comment on whether the use of certain television JSAs warranted attribution—that is whether the customer-station should be counted or attributed to the sales-agent station that sells advertising for that station for the purpose of applying FCC’s media ownership limits. FCC sought additional comment on this issue in its 2010 media ownership review. In 2014, FCC promulgated a final rule declaring that if a JSA provides that one station sells more than 15 percent of the weekly advertising time of another station located in the same market, both stations will be counted toward the ownership limit of the owner of the station selling the advertising (i.e., the sales-agent station). The rule is currently in effect; stations with JSAs existing at the time FCC issued the rule that result in violations of FCC’s media ownership limits have until October 2025 to amend or void their agreements or otherwise come into compliance with FCC’s ownership rules. As previously discussed, the rule is subject to ongoing litigation. FCC also has rules for stations to file certain documents with FCC and to maintain public inspection files that include documentation about the licensing and operation of each station. According to FCC, the purpose of the public inspection files is to make information more readily available that the public already has a right to access so that the public will be encouraged to play a more active part in dialogue with broadcast licensees. These rules include requirements for stations to file JSAs with FCC if the JSA is attributable under FCC’s attribution rules and to file all current JSAs, regardless of attribution status, in the stations’ public inspection files. Local television stations’ public inspection files are available online through FCC’s website.", "", "We found 86 JSAs among local-station owners in our review of JSAs available from stations’ online public inspection files. A little more than a third of DMAs had a JSA, with 98 percent of JSAs we identified being among stations in medium or small markets (see table 3).\nThe 86 JSAs we reviewed generally covered similar terms. We identified the following key provisions in our review of these agreements:\nAdvertising time: The JSAs specified the advertising that the sales- agent will sell. In most cases, this included all of the customer- station’s advertising time, including local advertising that airs during programming of the local station as well as advertising on the customer-station’s website. Four of the JSAs were created since FCC promulgated its 2014 JSA rule, and these JSAs specified that the sales-agent would sell no more than 15 percent of the customer- station’s advertising time. This 15 percent is the threshold FCC set in the JSA rule that, if exceeded, would trigger attribution under FCC’s ownership rules.\nStation identification: All of the JSAs identified the owners of both the sales-agent and customer-stations covered in the agreements and the call signs of the customer stations. About two-thirds (60) of the JSAs also identified the call signs of the sales-agent stations, while a little less than one-third (26) of the JSAs did not identify the call sign of the sales-agent station. According to FCC officials, FCC’s rules do not prescribe the way in which parties to JSAs are identified in the agreement, and it is not required that JSAs specifically identify the call signs of the stations involved in the agreements under FCC’s rules.\nTime frame: The JSAs generally covered 5 to 10 years with extensions based on the consent of both parties. Stations also sometimes filed documents indicating their JSAs had been extended.\nRevenue sharing: About half (40) of the JSAs indicated that the sales- agent retains 30 percent of the advertising revenue, while some (9) indicated a different percentage, a flat fee, or a commission. The remaining 37 JSAs had no information about revenue sharing because that information was either redacted or not provided.\nControl and responsibilities: All of the JSAs specified that the customer-station retains complete control of the station, including control over the operations, finances, personnel, programming, and responsibilities to meet FCC requirements.\nShared service agreement: Some of the JSAs included provisions typical of a shared service agreement and were characterized as both a JSA and a shared service agreement. FCC officials and stakeholders told us that JSAs and shared service agreements typically go together, and local station owners said it would be uncommon for a station to have a JSA without an accompanying shared service agreement. However, one station owner told us that its station has a JSA and no shared service agreements.\nProgramming: About one-third (26) of the JSAs reviewed included a provision for the sales-agent to provide programming for the customer station, generally up to 15 percent of the customer-station’s broadcast hours per week.", "While reviewing JSAs filed in stations’ online public inspection files, we found that some JSAs were not filed in both a sales-agent station file and a customer-station file, as required by FCC rules. Specifically, of the 86 JSAs we identified, 23 of them were filed in a customer-station file but not a sales-agent station file and 2 of them were filed in a sales-agent file but not a customer-station file. In most of these cases (20 of the 25 JSAs), the stations involved in the JSAs were specifically identified by their call- signs in the JSAs; in the other 5 JSAs, only the sales-agent station’s owner was identified and we had to determine the sales-agent station by contacting the other station named in the JSA or by examining information about station ownership in the same market. Although there may be legitimate reasons for a JSA to be missing—for example, if the JSA had been terminated and removed from one file but not yet from the other—the extent of missing JSAs raises a concern that there may be JSAs that should be filed that have not been.\nAs previously discussed, FCC’s rules require that all current JSAs be filed in stations’ public inspection files, which are available online through FCC’s website. The purpose of this requirement is to improve transparency of station operations for the public by making documents more readily available that the public already has a right to access. Further, according to FCC, the agency required stations to make this information available so that the public would be encouraged to play a more active part in dialogue with and oversight of broadcast licensees. Consequently, if interested parties look at the public file of a station involved in a JSA, they should expect to find that document in the file so that they may learn about how a station handles its advertising sales. If a station involved in a JSA does not have its JSA in its public inspection file, the transparency over this aspect of the station’s operations is lost. The standards for internal control in the federal government state that agency management should ensure there are adequate means of communicating with, and obtaining information from, external stakeholders that may have a significant impact on the agency achieving its goals. As previously stated, FCC’s media ownership rules are meant to serve the public interest, and FCC’s recent determination that JSAs are a factor in assessing whether stations are in compliance with the ownership rules indicates that JSAs could have a bearing on whether stations are serving the public interest. Furthermore, in October 28, 2014, following the enactment of its JSA rule earlier in 2014, FCC released a public notice reminding stations of their obligation to file all current JSAs in their public inspection files, regardless of whether the station is the sales-agent or the customer-station in the agreement. The notice stated that a station’s failure to comply with this rule may result in FCC taking an enforcement action.\nFCC officials said they do not monitor the contents of stations’ public files on an ongoing basis and have not reviewed stations’ JSA filings to ensure they are complete and up to date. They added that they have never identified or compiled copies of JSAs from these publicly available sources, either for attributable JSAs or all JSAs, for this purpose. FCC officials said they typically review compliance with public inspection file requirements in connection with a station’s license renewal application or in response to complaints from the public. According to FCC officials, FCC’s most recent round of license renewal reviews did not turn up any missing JSAs, and there were no stations self-reporting or petitions from others alleging missing JSAs. However, if FCC has not compiled a list of existing JSAs, it is unclear how it would know whether a JSA is missing when reviewing a file. Additionally, FCC officials said that if they receive a complaint that a public inspection file is incomplete, FCC may investigate and take action, such as contacting the station licensee and instructing it to update the file or issuing an admonishment or fine, as appropriate; however, FCC officials said they have not received any such complaints.\nAccording to FCC officials, this compliance approach reflects the agency’s policy objectives of encouraging greater public participation in broadcast licensing. However, FCC’s approach puts the burden of discovering the incompleteness of an inspection file on the public, and in the case of a file that is missing a JSA, it is not clear how a member of the public would be likely to know that a JSA is missing without undertaking a review of all stations’ JSA files, as we did, in order to uncover whether any other station has put a JSA agreement with that station in its file. Furthermore, FCC officials said that they take seriously the obligation to ensure that licensees comply with FCC rules and to vigorously enforce violations of the public inspection file that are identified as a result of self- disclosure, public complaints, discovery by FCC staff, or in connection with a station’s license renewal applications. FCC officials said that the public inspection file is meant to assist the public specifically, rather than FCC. However, without examining public inspection files to determine if they are complete, FCC may not be fully aware of violations.\nIf the public is to have the sort of dialogue with and oversight of stations that FCC suggests, then the public should have access to these documents through the public inspection files. FCC’s rules specify which documents should be included in the files, and FCC has the authority to take enforcement action against stations that do not follow its rules. Although FCC assured broadcasters that the online public file requirement would not lead to increased FCC scrutiny of the public inspection files, FCC has already reminded broadcasters of their responsibility to file JSAs in public inspection files and that FCC may take enforcement action if stations do not comply. If a member of the public is examining the file of a station that is involved in a JSA but the station has not put the JSA in the file, then it would not be apparent that the station’s operations involve another station as provided by a JSA. Specifically, this reduces the transparency around the station’s advertising sales, which is a principal source of station revenue. Public- interest stakeholders told us that lack of transparency regarding JSAs and other sharing agreements, particularly over what they do and who is involved, is a primary concern. If JSAs are missing from stations’ public inspection files, interested parties may not be able to access this critical piece of information about how stations operate in local markets.", "An interconnect involves two or more MVPDs combining a portion of their advertising time in a local market, creating a single-point for advertising sales across multiple MVPDs within a DMA (see fig. 1). Through technological means, these advertisements are then distributed simultaneously across the MVPDs participating in the interconnect. For example, MVPDs told us that an advertiser wishing to purchase advertising time in a local market on a particular cable-network show could, through a single transaction with an interconnect, arrange for its advertisement to air simultaneously during that show on all MVPDs in that market that are part of the interconnect. Without an interconnect, an advertiser wishing to reach the same audience would have to negotiate separate advertising time purchases for the same times and during the same shows with each MVPD in the local market. Although interconnects were originally created among cable companies, they have expanded in recent years to include telecommunications MVPDs. Additionally, MVPD stakeholders we spoke to explained that while satellite-based MVPDs do not directly participate in interconnects, satellite MVPDs have developed a way to insert local advertising into the programming they provide customers and have begun rolling this capability out in a limited number of markets. Through an arrangement with a cable-industry-owned advertising representation sales firm, advertisers can take advantage of this capability to reach satellite subscribers in some larger markets when purchasing local advertising through interconnects.\nStakeholders including two MVPDs, two MVPD advertising representation firms, three industry associations, one broadcast station owner, and one financial analyst provided information on the prevalence of interconnects. Seven of these stakeholders stated that interconnects exist in most markets, while two of these stakeholders indicated that interconnects are found mostly in medium- to large-size markets. According to an association of MVPD advertising sellers, the number of interconnects has increased in recent years as MVPDs realized their benefits and efficiencies, which we discuss later in this report. According to several MVPD stakeholders, there is no industry-wide definition of an interconnect. Consequently, there are differences in how the term is defined, making it difficult to obtain consistent information on the number of interconnects nationwide.\nMVPDs, cable associations, and financial analysts we interviewed identified the following key characteristics of interconnects:\nAdvertising time: According to MVPD stakeholders we interviewed, interconnects cover only advertising and do not cover other services. Interconnect managers: According to MVPDs, typically the largest MVPD provider in the market manages the interconnect. For example, one large MVPD told us that it created and manages about one-third of the nation’s interconnects and is a participant in interconnects managed by other MVPDs. This MVPD also said that creation and management of an interconnect requires significant investments in personnel and technology. MVPD stakeholders also told us that some interconnects are managed by national advertising representation firms.\nRevenue sharing: MVPDs said that revenue from the sale of advertising through an interconnect is generally prorated among the MVPDs in the interconnect based on the amount of inventory provided for sale and their number of subscribers in the DMA.", "Some stakeholders that filed comments in FCC proceedings and who we interviewed stated that local stations and MVPDs benefit economically from JSAs and interconnects, respectively. However, some stakeholders expressed concerns with how these agreements may impact local markets. Stakeholders we selected to interview included local station owners, MVPDs, industry associations, public-interest groups, academics, and financial analysts.", "According to most of the local station owners that commented in FCC’s JSA rulemaking and all that we interviewed, a primary benefit of JSAs, as well as other sharing agreements, is that they allow local stations to cut costs. As previously discussed, a JSA is generally accompanied by a shared service agreement, and they are sometimes the same agreement. Further, in discussing their views, a few station owners told us that while JSAs provide some cost savings, shared service agreements provide most of the savings and that it generally did not make sense to talk about JSAs without also discussing shared service agreements. Consequently, our discussion of stakeholders’ views is based on comments about the use of both JSAs and shared service agreements, which we refer to together as “sharing agreements.”\nAll of the station owners we interviewed said that the savings from these sharing agreements help financially struggling stations survive when they might otherwise go out of business, with some owners saying this is particularly the case with stations in smaller markets. Some station owners and financial analysts told us that as local stations are facing increased competition for advertising revenues from other media, such as Internet-based media and MVPDs, stations rely on sharing agreements to cut costs. Our analysis of BIA/Kelsey local advertising revenue data showed that the market share of Internet-based media increased from 11 percent in 2011 to 17 percent in 2014—a percentage comparable to the market share for broadcast television, which was 15 percent in 2014 (up slightly from 13 percent in 2011). This share is higher than the market share of MVPDs, which was about 5 percent in both years. (For more results of our analysis of this market data, see app. II.) Most media industry stakeholders and financial analysts whom we interviewed consistently identified the growth in Internet-based media as a major change in local advertising markets in recent years, coming at a time when market shares for other types of media, such as radio and newspapers, have been relatively flat or in decline.\nFurthermore, two station owners and two financial analysts told us that stations in smaller markets are more likely to use JSAs than stations in larger markets because local stations earn less advertising revenue in small markets than in large markets, while they said their costs are roughly the same regardless of market size. Our analysis of BIA/Kelsey estimates of local advertising revenue supports this revenue claim. Specifically, stations in the 25 largest DMAs had average revenue of $28.0 million per station in 2014—more than nine times the $3.0 million average revenue per station in the smallest DMAs (those ranked 101 to 210). According to some station owners and financial analysts, stations view JSAs and shared service agreements as a means of remaining financially viable in small markets. In contrast, a local station owner that has stations in larger markets said that there is no need for JSAs in markets like Los Angeles or New York.\nIn addition to cutting costs and helping local stations remain financially viable, station owners also told us that the associated cost savings from sharing agreements enable stations to make investments that help them compete with other local media and provide benefits to the stations and their communities, thereby supporting FCC’s goals of enhancing competition, diversity, and localism. Benefits station owners cited include: Investments in diverse programming: Some station owners filing in FCC’s JSA rulemaking (6 of 18) and whom we interviewed (4 of 10) said that sharing agreements allow them to enhance the diversity of local programming. For example, representatives from Univision, a Spanish-language network and a station owner, told us the company has used JSAs and shared-service agreements with another station owner, Entravision, to establish and expand Univision’s second Spanish-language network, UniMás. Under this arrangement, Entravision provides services for Univision’s stations that carry UniMás programming: According to Univision representatives, the resulting cost savings have allowed it to launch UniMás in six markets, growing the network faster than it could have without sharing agreements. Increased local news coverage: According to some station owners that filed comments in FCC’s JSA rulemaking and that we interviewed, producing local news is expensive and stations find it financially challenging to produce local news, particularly in smaller markets. Most station owners that filed FCC comments (10 of 18) and most that we interviewed (7 of 10) said JSAs and shared service agreements allow local stations to air local news when they would otherwise be unable to or to expand or improve their existing news coverage. For example, one owner of a small-market station told us its JSA and shared service agreement with a larger station owner in the same market have allowed both stations to share resources, thereby reducing costs and improving their news services. Improved services: Some station owners that filed FCC comments (8 of 18) and that we interviewed (4 of 10) said JSAs enable stations to improve service quality. For example, one station owner told us that savings associated with its JSA allowed the station to upgrade its broadcast to high definition, which helped the station better compete for advertising dollars, since many advertisers will not buy advertising unless it is in high definition.\nFCC itself has acknowledged that JSAs may have benefits. Specifically, in the order FCC released with its 2014 JSA rules, FCC stated that cooperation among local stations may have public-interest benefits under some circumstances, particularly in small to mid-sized markets. FCC also stated that JSAs may, for example, facilitate cost savings and efficiencies that could enable the stations to provide more locally oriented programming.\nConversely, some stakeholders raised concerns about how JSAs and shared service agreements may affect local markets. For example, one of the four public-interest groups that filed comments in FCC’s JSA rulemaking, as well as the two public-interest groups and one of the two academic stakeholders we interviewed, said that JSAs do not support the long-standing policy goals to encourage competition, diversity, and localism. Stakeholders raised concerns about JSAs in the following areas:\nUndue influence: One MVPD association, one labor union, and two public interest groups that filed comments in FCC’s JSA rulemaking and one MVPD, both public-interest groups, and both academic stakeholders we interviewed said that JSAs and other sharing agreements create the potential for undue influence over station operations. Specifically, according to some of these stakeholders, such influence could occur because the agreements create a financial interest. With JSAs, this is because the sales-agent station sells the customer station’s advertising, which is a principal source of the customer station’s revenue. Furthermore, one MVPD, two public- interest groups, and two labor unions that filed FCC comments, as well as both of the public-interest groups and one of the two academic stakeholders we interviewed, said JSAs and other sharing agreements allow station owners to circumvent FCC’s media ownership rules. As previously discussed, FCC’s ownership rules limit the number of local stations an entity can control in a local market.\nReduced competition for advertising: According to most public-interest groups (three of four) that filed FCC comments and two of the ten MVPDs, both of the public-interest groups, and one of the two academic stakeholders we interviewed, local stations’ use of JSAs effectively reduces competition for advertising dollars in local markets because, for example, stations within a JSA may combine their sales forces and no longer compete with each other for advertising revenue. Some of these stakeholders raised the concern that this reduced competition may create negative impacts in the market, such as allowing stations with JSAs to capture more of the local advertising market, putting other stations without JSAs at a disadvantage.\nReduced diversity: Both public-interest groups and one of the academic stakeholders we interviewed said that sharing agreements reduce diversity in local markets, including diversity in terms of programming or station ownership. For example, an academic stakeholder told us that the use of such agreements results in the same entity effectively controlling the content of one or more stations.\nReduced localism: According to one of the four public-interest groups and the one academic stakeholder that filed FCC comments, as well as both of the academic stakeholders we interviewed, the use of sharing agreements can lead to the reduced provision of local news. For example, an academic stakeholder said in its FCC filing that JSAs and shared service agreements have negatively impacted the Syracuse market, because two stations consolidated operations under these agreements and in the process cut one of the station’s news operations.", "According to 9 of the 10 MVPD stakeholders we interviewed, a primary benefit of an interconnect is to aggregate the available advertising time among various MVPDs in a local market. This enables MVPDs to collectively reach a greater number of households in that market than any single MVPD could reach with its advertising time. Six of these MVPDs said this increased reach enables MVPDs participating in interconnects to better compete with other local media, particularly local broadcast television stations, since it enables them to have a market reach that is closer to that of a local station. Further, four MVPDs also told us that this increased reach makes MVPDs’ advertising time more valuable to advertisers. According to some MVPD stakeholders, without interconnects, the reach of each MVPD’s advertising time would include only that MVPD’s subscribers, which could be a small percentage of households in the local market. As a result, according to three MVPDs, sometimes advertisers would not purchase MVPD advertising time. Nine of the ten MVPD stakeholders said that aggregating advertising inventory through interconnects also enhances the efficiency of advertising sales by enabling advertisers to buy advertising time across a number of MVPDs in a given local market through a single purchase.\nMVPD stakeholders we interviewed also noted that interconnects can reduce costs. Two MVPDs we interviewed and two larger MVPDs that filed comments in FCC’s Comcast/Time Warner Cable merger proceeding said interconnects allow some MVPDs to cut costs because one MVPD manages the advertising sales and technological implementation of the interconnect for all of the participating MVPDs, whereas without an interconnect, each MVPD would maintain a sales staff.\nIn contrast, smaller MVPD stakeholders that commented in the Comcast/Time Warner merger proceeding and some stakeholders we interviewed raised concerns about interconnects. Specifically, 6 of the10 station owners we interviewed told us MVPDs have an unfair competitive advantage over local stations because, for example, FCC regulates station owners’ JSAs but not MVPDs’ interconnects. Four of these station owners noted that MVPDs are therefore allowed to take advantage of efficiencies and savings through their own type of advertising sales agreement, while local stations face regulatory constraints in doing so. Additionally, five small MVPD stakeholders and an advertising representation firm that works with small MVPDs that commented in the Comcast/Time Warner merger proceeding said that larger MVPDs that manage interconnects treat smaller MVPDs unfairly—or have the potential to—by applying conditions to the smaller MVPDs’ participation in interconnects, such as excluding some smaller MVPDs from interconnects if the smaller MVPDs use an advertising representation firm that competes with the large MVPD’s national advertising arm. Four small MVPDs and an MVPD advertising representation firm that submitted comments in the Comcast/Time Warner merger proceeding said that excluding MVPDs from interconnects decreases revenue for the excluded MVPDs. Two larger MVPDs that provided comments in the merger proceeding, however, indicated that they do not engage in such practices.", "While opinion differ on how JSAs among local stations and interconnects among MVPDs affect the media landscape, FCC has defined JSAs and required that they be placed in local stations’ public inspection files. Moreover, in 2014, FCC issued a rule that requires that where a JSA encompasses more than 15 percent of another station’s weekly advertising time, the JSA will count toward the local-station ownership limit. FCC requires that each broadcast television station with a JSA file the JSA in its public inspection file, including in the station’s online file on FCC’s website—regardless of whether the station is the sales-agent station or the customer station. This requirement is intended to improve the transparency of local stations’ operations so that the public can have a more active role in assessing stations’ operations in their local markets. However, we found that a considerable number of JSAs filed by customer stations were not also filed by a sales-agent station—and that FCC has not taken sufficient steps to determine the extent to which broadcast television stations are complying with this rule. If stations that use JSAs as part of their advertising operations have neglected to file or update their JSAs in their public inspection files, interested parties may be unaware that the stations have such arrangements and therefore lack insight into this aspect of local television operations. Consequently, the transparency of local television markets is diminished, preventing the public from effectively assessing and engaging stations with regard to local stations’ public interest obligations.", "We recommend that the Chairman of FCC review JSAs filed in stations’ public inspection files to identify stations involved in those JSAs and take action to ensure that each station involved has filed its JSA as required.", "We provided a draft of this report to FCC for review and comment. We received written comments from FCC, which are reproduced in appendix III. In response to our recommendation, FCC stated that it shares our concern that potential noncompliance with FCC’s JSA filing requirement could affect the transparency of local television markets. Further, FCC stated it will take action to help ensure that broadcasters are aware of and in compliance with their public file obligations regarding JSAs and that any noncompliance is disclosed to FCC, as appropriate.\nAs agreed with your offices, unless you publicly announce the contents of this report earlier, we plan no further distribution until 30 days from the report date. At that time, we will send copies to the appropriate congressional committees, the FCC Chairman, and other interested parties. In addition, the report is available at no charge on the GAO website at http://www.gao.gov.\nIf you or your staff have any questions about this report, please contact me at (202) 512-2834 or [email protected]. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix IV.", "The objectives for this report were to examine (1) what available information indicates about the prevalence and characteristics of advertising sales agreements among local broadcast television stations (local stations) or multichannel video programming distributors (MVPD), and (2) selected stakeholders’ perspectives on the impacts of advertising sales agreements among local stations or MVPDs.\nTo determine the prevalence and characteristics of advertising sales agreements—specifically joint sales agreements (JSA)—among local broadcast television stations (local stations), we obtained and analyzed all JSAs found in the stations’ public inspection files on the Federal Communications Commission’s (FCC) website. We identified documents as JSAs if they were labeled as such or if they were a shared service agreement that included provisions for the joint-sale of advertising. We excluded duplicate copies of the same JSA in our analysis, a JSA that we determined had expired according to the date in the JSA, and documents filed in a JSA folder that were not JSAs, such as local marketing agreements and shared service agreements that did not have an advertising component. According to FCC officials, although stations are required to place copies of their JSAs in their public inspection files, FCC officials have not independently verified whether each station has done so, and the officials said that they were not aware of any JSAs that were mislabeled or misfiled. To provide assurance our review of JSAs was as comprehensive as possible, we also purchased JSA data from BIA/Kelsey, a media research and consulting firm. BIA/Kelsey developed its JSA data by reviewing information in the trade press, analyzing FCC filings, and through direct contact with television stations to ask for information such as the presence of JSAs. We compared BIA/Kelsey’s data against the JSAs we were able to identify in stations’ public inspection files and did not identify any additional JSAs in this data that were not available in the file. We assessed the reliability of using BIA/Kelsey’s JSA data for the purpose outlined here by obtaining information from BIA/Kelsey about how the data were collected and maintained and determined that the data were sufficiently reliable for this purpose. We analyzed the JSAs we obtained from FCC to determine their characteristics such as which stations and owners were party to the agreements, their date and duration, and advertising sales provisions. We also analyzed the filings of JSAs in stations’ public inspection folders to identify if any JSAs were filed in one station’s folder but missing from the folder of another station involved in the JSA. Where JSAs did not mention a specific sales-agent station, we identified the probable station by reviewing publicly available information about television station owners or contacting another station involved in the JSA and examined the public inspection files of those stations. We evaluated FCC’s efforts to ensure completeness of stations’ JSA filings based on FCC’s rules and stated expectations for stations’ public files and federal internal control standards related to information and communications.\nTo determine the prevalence and characteristics of advertising sales agreements—specifically interconnects—among MVPDs, we interviewed selected stakeholders (as listed later in this section) about their knowledge of the prevalence and characteristics of interconnects. We attempted to obtain data on the number of interconnects in the United States from various media industry sources; however, we were unable to establish the reliability of these data due to differences in the methodologies between the various sources that made the numbers inconsistent.\nTo assess selected stakeholders’ perspectives on advertising sales agreements among local stations and MVPDs, we reviewed filings in two FCC proceedings: 1) the proceeding for FCC’s rulemaking on television joint sales agreements and 2) FCC’s review of a 2014 proposed merger between Comcast and Time Warner Cable. We analyzed filings that stated specific benefits or concerns related to JSAs or interconnects. We also interviewed FCC officials and the following stakeholders about their perspectives on JSAs and interconnects: eight local station owners that we selected to represent companies of various sizes and those that do and do not have JSAs; five MVPDs selected to represent cable, satellite, and telecommunications providers and two companies selling advertising on their behalf; five media industry associations selected because they represent broadcasters, large and small MVPDs, and advertising sellers; two public interest groups and two academic stakeholders selected because they filed comments in the FCC JSA rulemaking or were recommended by other stakeholders; and five financial analysts selected based on our prior work and our research on their backgrounds.\nTable 4 is the list of stakeholders we interviewed.\nFor contextual information about the advertising revenue and market shares of local media, we purchased data from BIA/Kelsey on the estimated local advertising revenue of 12 types of local media: broadcast television stations, broadcast radio stations, MVPDs, newspapers, magazines, direct mail, out-of-home (a category of advertising that includes billboards and other signs in public places), yellow pages, online (i.e., websites), mobile, email, and Internet yellow pages. Since 2009, BIA/Kelsey has released nationwide forecasts for local media advertising with estimates of local advertising for these 12 media categories. BIA/Kelsey allocated its national estimates to each of the 210 Nielsen- defined local television markets, known as “designated market areas” (DMA), based on county-by-county demographic and economic data and BIA/Kelsey’s internal estimates on various media. BIA/Kelsey checked its estimates with publicly available information on many of the public companies that are part of its media categories. BIA/Kelsey stated that the resulting data should be considered as approximate estimates to provide a general view of local advertising markets and changes in those markets. We obtained these data for each of the 210 DMAs for years 2011 and 2014. We chose these years because 2014 would be the most recent year of complete data and 2011 would provide a comparison year during the economic recovery.\nPrior to purchasing the data from BIA/Kelsey, we researched potential sources of such data by interviewing stakeholders and reviewing our prior work on media ownership. We solicited proposals from companies that we identified as potentially having the data we needed and evaluated these proposals to determine which would meet our requirements. We assessed the reliability of BIA/Kelsey’s data for the purpose of providing contextual information about local media market shares by discussing these data with industry stakeholders and obtaining information from BIA/Kelsey about how they collect and maintain the data. We determined that the data were sufficiently reliable for this purpose.\nAs previously discussed, several broadcast television entities have filed an ongoing lawsuit against FCC over the 2014 JSA rule. This lawsuit alleges that FCC evaded its legal obligations by not completing its review of its media ownership rules and that FCC violated its statutory obligations by promulgating the JSA rule on the basis of these ownership rules. Due to this lawsuit, we limited the scope of our review. Specifically, we did not evaluate FCC’s efforts related to the JSA rulemaking, nor did we evaluate FCC’s efforts to review its media ownership rules.\nWe conducted this performance audit from April 2015 to March 2016 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 that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives.", "Revenue from the sale of advertising is earned by a variety of types of local media. Local media advertising generated approximately $136 billion in revenue in 2014, a slight decrease from the $139 billion (2014 dollars) in 2011, according to data from BIA/Kelsey, a media research and consulting firm. The market for local advertising revenue includes a number of different types of media, such as local television and out-of- home venues (which encompasses billboards and ads on buses, among other things). The percentage of local advertising revenue that goes to each type of media is referred to as its market share. Recent changes in the local media landscape have led to some shifts in market share. We obtained data on local advertising revenue from BIA/Kelsey for 2011 and 2014 for 12 types of local media: broadcast television stations, broadcast radio stations, MVPDs, newspapers, magazines, direct mail, out-of-home, yellow pages, online (i.e., websites), mobile, email, and Internet yellow pages. We analyzed these data to identify differences in the local advertising market shares among these various types of local media and how these market shares may have changed in recent years.\nAccording to our analysis of these data, the largest sellers of local advertising in 2014 were direct mail, broadcast television, and newspapers, which each have a market share of about 15 percent or more, based on estimates of their local advertising revenue across all U.S. local media markets. In contrast, MVPDs’ market share was about 5 percent in 2014, according to the BIA/Kelsey data. When the market shares of various Internet-based media (mobile, online, email, and Internet yellow pages) are combined, their market share (17 percent) rivals that of the largest local advertising sellers (see fig. 2).\nOur analysis also revealed some trends in the market shares of these media when comparing estimates for 2011 and 2014. The most significant change in market share in these recent years is among Internet-based media, with a market-share increase from 11 percent in 2011 to 17 percent in 2014 (see fig. 3). Most stakeholders we interviewed similarly identified Internet-based or “digital” media as having significant market growth during this time. Broadcast television’s market share grew slightly between 2011 and 2014, and MVPDs’ market share was relatively flat between 2011 and 2014, according to the data. Print media (newspapers, magazines, direct mail, yellow pages) and radio all saw market-share declines from 2011 to 2014, according to the data, and two of the financial analysts told us that television market share has flattened in recent years and may soon decline. According to many stakeholders, advertisers shifting their business to Internet-based media accounts for changes in market shares, particularly the declines among print media.", "", "", "Mark L. Goldstein, (202) 512-2834 or [email protected].", "In addition to the contact named above, Alwynne Wilbur (Assistant Director), Amy Abramowitz, Melissa Bodeau, Michael Clements, Leia Dickerson, Andrew Huddleston, Crystal Huggins, Hannah Laufe, Meredith Lilley, Grant Mallie, Malika Rice, Kelly Rubin, and Larry Thomas made key contributions to this report." ], "depth": [ 1, 2, 2, 2, 2, 1, 2, 2, 2, 1, 2, 2, 1, 1, 1, 1, 1, 1, 1, 2, 2 ], "alignment": [ "h0_title h2_title h1_title", "h2_full", "h0_full h1_full", "", "h2_full", "h0_title h2_title h1_title", "", "h0_full", "h0_full h2_full h1_full", "h2_title h1_full", "h2_full h1_full", "h1_full", "", "", "h0_full", "h0_full h3_full", "", "", "", "", "" ] }
{ "question": [ "What are joint sales agreements?", "What does the FFC require of stations involved in joint sales agreements?", "What is the purpose of this requirement?", "What did GAO find in its review of joint sales agreements in public files?", "How does the FCC review compliance of the joint sales agreement rules?", "What flaws exist in this review process?", "How do joint sales agreements affect stakeholders?", "How do joint sales agreements affect advertising costs?", "What type of stations most commonly use joint sales agreements?", "How might joint sales agreements negatively affect local markets?", "How do television stations and MVPDs differ?", "How does the FCC promote competition?", "Why were joint sales agreements created?", "How can joint sales agreements affect FCC ownership limits?", "What was GAO asked to review?", "What does this report examine?", "How did GAO collect data for this report?", "How were stakeholders selected?" ], "summary": [ "Agreements among station owners allowing stations to jointly sell advertising—known as “joint sales agreements”—are mostly in smaller markets and include provisions such as the amount of advertising time sold and how stations share revenue.", "The Federal Communications Commission (FCC) requires each station involved in a joint sales agreement to file the agreement in the station's public inspection file.", "According to FCC, these files are meant to provide the public increased transparency about the operation of local stations and encourage public participation in ensuring that stations serve the public interest.", "GAO also found inconsistencies in the filing of these agreements. Specifically, 25 of these agreements were filed by one station but not by others involved in the agreements.", "FCC addresses compliance with this filing requirement through its periodic reviews of station licensing and in response to complaints.", "However, FCC officials said neither of these approaches has identified agreements that should be filed but have not been, and FCC has not reviewed the completeness of stations' joint sales agreement filings. If stations with joint sales agreements are not filing these agreements as required, a member of the public reviewing such a station's public file would not see in the file that the station's advertising sales involve joint sales with another station.", "Stakeholders GAO interviewed—including station owners, MVPDs, media industry associations, and financial analysts—said that joint sales agreements and interconnects can provide economic benefits for television stations and MVPDs, respectively.", "Joint sales agreements allow stations to cut advertising costs, since one station generally performs this role for both stations. For example, some station owners said they used the savings from joint sales agreements and other service-sharing agreements to invest in and improve local programming.", "Some selected station owners and financial analysts said that stations in smaller markets are more likely to use joint sales agreements because stations in smaller markets receive less advertising revenue while having similar costs as stations in larger markets.", "For example, some public-interest groups said that using these agreements reduces competition in the local market and allows broadcasters to circumvent FCC's ownership rules.", "Television stations, which provide free, over-the-air programming, and MVPDs, which provide subscription television services, compete with other local media for advertising revenue.", "FCC rules limit the number of local stations an entity can own in one market to promote competition and other public interests.", "Some station owners created joint sales agreements to potentially cut costs.", "In 2014, finding that such agreements confer influence akin to ownership, FCC adopted rules that require that where such agreements encompass more than 15 percent of the weekly advertising time of another station, they will count toward FCC's ownership limits.", "GAO was asked to examine the role of advertising agreements in local media markets.", "This report examines (1) the prevalence and characteristics of such agreements, and (2) stakeholders' perspectives on these agreements.", "GAO examined publicly available joint sales agreements and interviewed FCC officials and media, public interest, academic, and financial stakeholders about their views.", "Stakeholders were selected to represent a range of companies and from those who submitted comments on FCC's rules, among other reasons." ], "parent_pair_index": [ -1, 0, 1, -1, -1, 4, -1, 0, 0, -1, -1, -1, -1, 2, -1, -1, 1, 1 ], "summary_paragraph_index": [ 2, 2, 2, 2, 2, 2, 3, 3, 3, 3, 0, 0, 0, 0, 1, 1, 1, 1 ] }
GAO_GAO-13-110
{ "title": [ "Background", "States Identified the Need for More Safeguards and Public Awareness Activities to Prevent Elder Financial Exploitation", "States Cited Need for More Safeguards to Prevent Elder Financial Exploitation", "State and Federal Officials Called for Greater Focus on Public Awareness", "Difficulty Gaining Expertise, Sustaining Collaboration, and Obtaining Data Hinders States’ Responses to Elder Financial Exploitation", "Special Knowledge and Skills Are Needed to Respond to Elder Financial Exploitation", "States Identified Additional Federal Support Needed to Sustain Crucial Collaborations across Systems and Levels of Government", "Collaboration between APS and Criminal Justice Systems", "Incomplete Data Hinder Efforts to Combat Elder Financial Exploitation", "Conclusions", "Recommendations for Executive Action", "Response to Agency Comments" ], "paragraphs": [ "Elder financial exploitation, one type of elder abuse, can occur in conjunction with, and might lead to other types of elder abuse.exploitation of older adults can take many forms and perpetrators can include family members, friends, legal guardians, paid caregivers, and strangers. Table 1 provides some examples.\nOlder adults are particularly attractive targets for financial exploitation by unscrupulous individuals. As a group, older adults tend to possess more wealth than those who are younger because they have had a longer time to acquire it. In addition, the incidence of Alzheimer’s disease and other dementias that undermine judgment increases with age. Moreover, financial capacity—the capacity to manage money and financial assets in ways that meet one’s needs—generally declines with age, and this decline may go unaddressed until it is too late.\nState and local agencies in the social services, criminal justice, and consumer protection systems in each state are at the forefront of efforts to prevent, detect, and respond to elder financial exploitation. Seven federal agencies whose missions correspond to the state and local social service, criminal justice, and consumer protection systems are positioned to contribute to state and local efforts in this area: AoA, CFPB, Justice, FTC, FinCEN, SEC, and the Postal Inspection Service (see fig. 1).\nAt the state and local level, APS agencies investigate and substantiate reports of suspected elder abuse, including financial exploitation and, if the client agrees to accept help, can arrange for services to secure their safety and meet their basic needs. APS can also refer cases to law enforcement agencies or district attorneys for criminal investigation and prosecution. Whether an elder financial exploitation case comes to the attention of criminal justice authorities through referral from APS or some other means, law enforcement agencies and district attorneys can exercise broad discretion when deciding if a case warrants any action on their part.\nState-level consumer protection agencies—such as banking, securities, and insurance regulators—conduct examinations to ensure that rules to protect consumers are followed and take enforcement actions against institutions that break the rules. State attorneys general may also prosecute cases or respond to consumer protection inquiries.\nAlthough combating elder financial abuse is explicitly included in the mission of only one federal agency, CFPB’s Office for the Financial Protection of Older Americans (Office for Older Americans), it is implicit in the mission of others that work to combat elder abuse, protect consumers or investors, or prevent fraud (see fig. 2).\nFederal legislation has established a foundation for the federal government to assume a leadership role in combating elder abuse, including elder financial exploitation, and basis for greater coordination across federal agencies in this area. The Older Americans Act of 1965 (OAA) requires AoA to develop objectives, priorities, policy, and a long- term plan for facilitating the development, implementation, and continuous improvement of a coordinated, multidisciplinary elder justice system in the United States; promoting collaborative efforts and diminishing duplicative efforts in the development and carrying out of elder justice programs at the federal, state, and local levels; establishing an information clearinghouse to collect, maintain, and disseminate information concerning best practices and resources for training, technical assistance, and other activities to assist states and communities to carry out evidence-based programs to prevent and address elder abuse, neglect, and exploitation; working with states, Justice, and other federal agencies to annually collect, maintain, and disseminate data on elder abuse, neglect, and exploitation, to the extent practicable; establishing federal guidelines and disseminating best practices for uniform data collection and reporting by states; conducting research on elder abuse, neglect, and exploitation; and carrying out a study to determine the extent of elder abuse, neglect, and exploitation in all settings.\nPub. L. No. 111-148, tit. VI, subtit. H, 124 Stat. 119, 782-804 (2010) (codified at 42 U.S.C. §§ 1320b-25, 1395i-3a, and 1397j-1397m-5). The EJA was enacted as part of the Patient Protection and Affordable Care Act, which was signed into law on March 23, 2010. o annually collect and disseminate data regarding elder abuse, neglect, and exploitation of elders in coordination with Justice;o develop and disseminate information on best practices and provide training for carrying out adult protective services; o conduct research related to the provision of adult protective o provide technical assistance to states and others that provide or fund the provision of adult protective services; o establish 10 elder abuse, neglect, and exploitation forensic centers, in consultation with Justice, that would (1) conduct research on forensic markers for elder abuse, neglect, or exploitation, and methodologies for determining when and how health care, emergency, social and protective, and legal service providers should intervene and when these cases should be reported to law enforcement; (2) develop forensic expertise regarding elder abuse, neglect, and exploitation; and (3) use the data they have collected to develop, in coordination with Justice, the capacity of geriatric health care professionals and law enforcement authorities to collect forensic evidence, including evidence needed to determine if elder abuse, neglect, or exploitation has occurred. § 2042(a)(1)(C), 124 Stat. 794 (codified at 42 U.S.C. § 1397m-1(a)(1)(C)). § 2042(a)(1)(D), 124 Stat. 794 (codified at 42 U.S.C. § 1397m-1(a)(1)(D)). § 2042(a)(1)(E), 124 Stat. 794 (codified at 42 U.S.C. § 1397m-1(a)(1)(E)).\nGrants to state and local governments for demonstration projects that test methods and training to detect or prevent elder abuse or financial exploitation; and\nAn Elder Justice Coordinating Council and an Advisory Board on Elder Abuse, Neglect, and Exploitation to develop priorities for the elder justice field, coordinate federal activities, and provide recommendations to Congress.\nCurrently, the Elder Justice Coordinating Council consists of the following federal agencies: Consumer Financial Protection Bureau, Corporation for National and Community Service, Department of Health and Human Services, Department of Housing and Urban Development, Department of Justice, Department of Labor, Department of the Treasury, Department of Veterans Affairs, Federal Trade Commission, Postal Inspection Service, and Social Security Administration.\nCoordination among federal agencies is also a feature of the Dodd-Frank Wall Street Reform and Consumer Protection Act, which established CFPB, requiring it to coordinate its consumer protection efforts of older CFPB’s Office for Older Americans is adults with other federal agencies. charged with facilitating the financial literacy of seniors on protection from unfair, deceptive, and abusive practices and on current and future financial choices.", "", "According to officials in the four states we visited, financial exploitation of older adults by financial services providers, power of attorney agents, and in-home caregivers is particularly difficult to prevent.\nOlder adults may consult with a variety of financial professionals, such as financial planners, broker-dealers, and insurance agents. However, older adults, similar to other consumers, may lack the information to make sound decisions about choosing a financial services provider and protecting their assets from exploitation. As a result, they may unknowingly put themselves at risk of financial exploitation.\nIndividuals who present themselves as financial planners may adopt a variety of titles and designations. In some cases, privately conferred designations—such as Certified Financial Planner®—require formal certification procedures, including examinations and continuing professional education credits, while other designations may merely signify that membership dues have been paid. Designations that imply expertise in advising older adults have been a source of particular concern among state securities regulators, according to the North American Securities Administrators Association (NASAA). Older adults may lack information to distinguish among the various senior specific designations. Indeed, in 2011, we reported that there is some confusion about what these titles mean and the level of skill required to obtain them.\nExploitation by “Senior Specialist”\nCalling himself a senior financial advisor, an insurance agent licensed in California met an 89-year-old partially blind, intermittently confused man at a senior center. The agent persuaded him to invest about $250,000 in a flexible premium deferred annuity, warning him not to let anyone talk him out of it. As a result, the man was left with no penalty-free access to his entire life savings for the next 11 years, while the agent earned a commission on this transaction. To earn about $16,000 more in commissions, the agent then convinced the man to move half the amount invested in the annuity into unregistered stock, which cost the man a surrender fee of about $10,000. The stock turned out to be worthless, leaving the man with a fraction of what he had when he met the agent. Attempts by the man’s nephew to retrieve his uncle’s money were unsuccessful. The nephew reported the insurance agent to the California Department of Insurance, which eventually revoked the agent’s license, but local police did not pursue the older adult’s case. While the insurance agent faced no criminal charges in this case, he was later sentenced to 3 years in prison for defrauding another older adult.\nAnother concern is that older adults may be fooled by investment professionals who use questionable tactics to market financial products, such as “free lunch seminars” at which financial professionals seek to sell financial products to older adults during a free meal. SEC, the Financial Industry Regulatory Authority (FINRA), and NASAA examined 110 firms that sponsored free lunch seminars from April 2006 to June 2007 offered in seven states and found that 63 seminars used misleading advertising and sales materials, 25 seminars resulted in unsuitable recommendations, and in 14 seminars there were fraudulent practices used, such as selling fictitious investments.\nPreventing the sale of unsuitable or fraudulent investments to older adults is difficult.features that might not provide its intended benefit during the investor’s lifetime. Older adults also can be sold what they believe to be legitimate investments, but are actually completely fraudulent products that hold little or no value.\nInvestment Fraud Using a “Ponzi” Scheme The founder and president of a real estate and financial consulting firm convinced around 200 individuals—about one-third of whom were older adults—to invest in real estate projects that failed to generate any significant revenue. He also convinced them to obtain reverse mortgages on their homes, and to invest the proceeds with his firm. The investments turned out to be a “Ponzi” scheme. Specifically, the perpetrator paid distributions to some investors from others’ deposits; misled investors with false amortization schedules; and used investors’ money to pay for his Porsche, mortgage, and other personal expenses. The scheme was reported to FINRA, investigated by the FBI, and prosecuted by the Eastern District of New York U.S. Attorney’s Office, which sought sentencing enhancements for targeting the elderly. Victims lost over $12 million. They also reported irreplaceable financial losses, emotional distress, feelings of betrayal and disbelief, and various physical symptoms as a result.\nSEC has developed some educational materials and SEC and CFPB have conducted research related to investment fraud that targets older adults. For example, SEC has published a guide for older adults that counsels them to check their investment adviser’s disciplinary history, lists warning signs of fraud, and provides information on where to go for help. SEC also provides a link to a FINRA website that provides consumers with the required qualifications, including educational requirements, of the designations used by securities professionals. In August 2012, SEC released a study on financial literacy among investors and stated the agency’s desire to develop a strategy for increasing the financial literacy of certain groups, including older adults. CFPB plans to issue a report in early 2013 to Congress and the SEC that will address providing information to older adults about financial advisors and their credentials. In June 2012, the CFPB issued a public inquiry for information about elder financial exploitation, including a question on what resources older adults have to determine the legitimacy, value, and authenticity of credentials held by investment professionals.expects to share its results in 2013.\nOlder adults can use a legal document referred to as a financial power of attorney to appoint another person (an agent) to manage their finances should they become incapable of doing so. Having a financial power of attorney enables an older adult (a principal) to choose the person who can legally make these decisions for them, when needed. Powers of attorney are easy for anyone to create, can vary in specificity and format, and do not require legal assistance or a court for execution. Each of the four states we contacted has a law that helps prevent misuse of powers of attorney by specifying the responsibilities of agents and, in at least one, penalties for misuse. However, powers of attorney can be forged or perhaps otherwise improperly obtained without a principal’s knowledge or consent and an agent can easily use the principal’s money for his or her own benefit. For this reason, many state and local officials we interviewed in the four states were concerned about misuse of these instruments. For example, one Pennsylvania official described power of attorney documents as a “powerful, simple, and dangerous tool.”\nA month after an elderly man with dementia and his wife agreed to add their daughter’s name to their bank account, the daughter convinced her mother to sign a document providing her financial power of attorney. When the woman signed, she was in the hospital for a broken hip and a stroke and later claimed she was heavily medicated. Over the next 3 months, the daughter placed the deed to her parent’s home in her name, wrote checks on their account totaling nearly $600,000 that were never questioned by the bank, and attempted to withdraw about $500,000 more. When the woman’s son discovered what had been happening, he had the bank stop payment on the $500,000 and asked the local district attorney to investigate. The daughter was charged with numerous counts of theft, pled guilty, and was sentenced to 3 years probation. The deed was transferred back to the woman and although the prosecutor sought restitution, the $600,000 was not recoverable—it had been used to pay off the daughter’s mortgage, country club membership, and other bills.\nSome APS and criminal justice officials we spoke to indicated that stronger state power of attorney laws could help prevent elder financial exploitation by agents. For example, Pennsylvania officials said that current state laws have been ineffective at (1) creating practices to monitor the activities of power of attorney agents and (2) encouraging banks to question power of attorney documents they find questionable. In California, law enforcement officials noted that notaries were not always held accountable for their role in signing power of attorney documents.\nTo help strengthen state laws designed to prevent misuse of financial powers of attorney, the Uniform Law Commission has developed the Uniform Power of Attorney Act, which explicitly defines the duties of the power of attorney agent, including fiduciary duties such as acting in good faith and keeping careful records; allows a third party to refuse to honor a power of attorney agreement if there is a good faith belief that the principal may be subject to abuse, and requires the third party to report to APS; allows co-agents to be appointed for additional third-party oversight; and imposes liability on agents who violate the law.\nAccording to the Uniform Law Commission, 13 states have adopted the entire Uniform Power of Attorney Act. Others have enacted various other power of attorney laws. For example, New York requires an agent to provide a full accounting to APS when it is investigating a report that the principal may be in need of protective or other services or the victim of abuse or neglect. If it is not provided within 15 days, APS can commence a special proceeding to compel the production of the information. Illinois has added safeguards for principals to its law and created additional court remedies for violations of the law. However, according to the Uniform Law Commission, a number of states have made no changes to laws governing powers of attorney since the Uniform Power of Attorney Act was published.\nPowers of attorney are generally regulated under state, not federal, law; however, AoA and CFPB are providing some information to states and power of attorney agents to help prevent power of attorney abuse. The AoA-supported National Legal Resource Center co-sponsors trainings for states on the adoption of the Uniform Power of Attorney Act. Furthermore, the CFPB is developing a guide to educate “lay fiduciaries”—including guardians and agents under powers of attorney—about their responsibilities, and is planning to develop several state-specific lay fiduciary guides, scheduled for release in 2013.\nThere are limited safeguards to protect older adults from abuse by guardians, who are granted authority by a state court to make decisions in the best interest of an incapacitated individual concerning his or her person or property. While guardians can play a key role in managing the assets of these older adults, we have noted in past reports that guardians are only subject to limited safeguards that could protect these older adults from financial exploitation. For example, local officials in California noted that it can be hard to determine whether a person applying to be a guardian is doing so to further his ward’s best interests. We have also reported that few states conduct criminal background checks on potential guardians. Moreover, we have noted concerns with weak court oversight of appointed guardians, as well as poor communication between the courts and federal agencies that have enabled guardians to chronically abuse their wards and/or others.\nExploitation by in-home caregivers was also cited by local APS officials, police, and district attorneys we spoke to as a type of abuse that is difficult to prevent. These caregivers range from personal care aides who provide non-medical assistance such as helping with laundry and cooking, to home health aides who check an older adult’s vital signs or assist with medical equipment. In-home caregivers may be employed by a private company approved to provide services via a state’s OAA program or independently hired by older adults or their families. Caregiver services may also be covered under a state Medicaid program if the individual is eligible for Medicaid.\nOlder adults may rely on and trust in-home caregivers, and some caregivers have used that relationship to exploit their clients. For example, a caregiver may be given access to an older adult’s ATM or credit card to help with banking or grocery shopping and later be found withdrawing money or purchasing items for themselves. As the population ages and public policies encourage older adults to remain in their homes for as long as practical, there will be an increased need for in-home caregivers.\nOAA Title III-B provides funding for in-home services, such as personal care, chore, and homemaker assistance. subject to limited, if any, background checks. A California law enforcement official told us that caregivers suspected of exploiting older adults sometimes have a history of theft. While the Medicaid program requires states to develop and implement home care provider qualification standards, there is no federal Medicaid requirement for criminal background checks. According to the National Conference of State Legislatures, while many states have required agencies to conduct background checks before employing in-home caregivers who are paid by Medicaid or with other state funds, these laws vary greatly in their breadth and scope and the amount of flexibility afforded the agencies when they use the checks to make hiring decisions. Napa County, California recently initiated an innovative paid in-home caregiver screening initiative. Before in-home caregivers can work in that county, they must submit to a background check and obtain a permit annually.\nWhile background checks for in-home caregivers help flag potential abusers, an AARP study has found that states do not always use all available federal, state, and local criminal data systems. For one, the implementation cost may discourage their use. Moreover, their effectiveness in reducing elder abuse, in general, is unproven. As required by the Patient Protection and Affordable Care Act of 2010, the Centers for Medicare and Medicaid Services implemented the National Background Check Program that encourages states to adopt safeguards to protect clients of in-home caregivers. This voluntary program provides grants to states to conduct background checks for employees of long- term care facilities and providers, such as home health agencies and personal care service providers. As of November 2012, 19 states were participating. The results of this program could provide data on the effectiveness of background checks in preventing elder abuse, including elder financial exploitation.\nState and local authorities in the four states we visited told us current safeguards are not always sufficient to prevent exploitation by those older adults depend on for assistance. Although states are generally responsible for laws and regulations regarding these issues, the OAA directs the federal government to disseminate information about best practices to prevent elder abuse, including elder financial exploitation. According to our analysis, there is a role for the federal government to provide more information and guidance to prevent these types of elder financial exploitation.", "Experts and federal, state, and local officials told us that older adults need more information about what constitutes elder financial exploitation in order to know how to avoid it.officials told us that it is difficult for them to reach many older adults with this message and that they have little funding to promote public awareness. For example, in one California county officials reported that due to budget cuts, they had lost many positions that involved educating the public about elder financial exploitation.\nHowever, APS and law enforcement Each of the seven federal agencies we reviewed independently produces and disseminates public information on elder financial exploitation that is tailored to its own mission. For example, SEC produces information to educate investors about fraud prevention, including an investment guide for older adults. FTC publishes information to protect consumers, and AoA disseminates information to help reduce elder abuse, including elder financial exploitation. (See table 2 for examples of the types of information provided by each of these agencies.) These seven agencies have also worked together at times to increase public awareness of elder financial exploitation. For example, each year FTC and the Postal Inspection Service collaborate on community presentations during National Consumer Protection Week.\nHowever, although the OAA calls for a coordinated federal elder justice system, which includes educating the public, the seven agencies we reviewed do not conduct these activities as part of a broader coordinated approach. In previous work, we found that agencies can use limited funding more efficiently by coordinating their activities and can strengthen their collaboration by establishing joint strategies. Similar calls for coordination were raised when the EJCC held its first meeting on October 11, 2012, to begin implementing its mandate to coordinate federal elder justice activities and develop national priorities. As EJCC Chairman, the Secretary of HHS stated that combating elder abuse—which includes elder financial exploitation—is an “all-of-government” effort and that federal programs are not organized in a strategic way, which decreases their effectiveness. One expert noted that there is a clear need for a strategic, multi-faceted public awareness campaign on elder abuse. An official from the Financial Services Roundtable added that many agencies are trying to focus on awareness and education, but their efforts appear unorganized and uncoordinated.", "", "According to state and local officials we spoke with in four states, effectively investigating and prosecuting elder financial exploitation requires special skills and knowledge, which APS workers, law enforcement officers, and district attorneys sometimes lack. For example, APS officials noted that some case workers have little background or training in investigating financial crimes, and would find it difficult to respond to these cases. Local law enforcement officials also noted that they receive little training on elder financial exploitation and need additional training to build expertise. In addition, we were told that some prosecutors and judges are reluctant to take on cases of suspected elder financial exploitation because of competing priorities and limited resources, a continuing belief that elder financial exploitation is primarily a civil issue, or a view of older adult victims as unreliable witnesses.\nState and local officials in the four states we reviewed are attempting to increase their expertise. For example, some state and local officials told us they attempt to acquire investigative expertise through formal and on- the-job training, by dedicating units or staff to investigate suspected cases of elder financial exploitation, or by contracting for assistance from certified fraud examiners or other forensic accountants. However, state and local officials also told us that funding constraints limited their ability to build this additional expertise. Moreover, officials and experts told us that in order to more effectively allocate their limited resources, state and local entities would need more information about which practices have proven to be most effective for investigating, as well as preventing, elder financial exploitation.\nAoA and Justice have developed some resources that could be used to help state and local agencies build expertise in identifying, investigating, and prosecuting elder financial exploitation (see table 3).\nUnder the EJA, HHS is authorized to develop and disseminate best practices and provide training for APS workers, and AoA-supported resource centers compile information about elder abuse in general for easy access. However, information pertaining specifically to elder financial exploitation topics—such as mass marketing fraud, power of attorney abuse, or investment fraud—may be dated or more difficult to find because it is intermingled with other materials.National Center on Elder Abuse (NCEA) has compiled a list of elder abuse training materials from a variety of sources, but we could find no quick and clear way to identify which trainings cover financial exploitation.\nFor example, AoA’s Additionally, Justice officials told us that it would be beneficial for more training to be available to prosecutors of elder abuse. Justice has identified providing training and resources to combat elder abuse as a strategy to achieve its objective of preventing and intervening in crimes against vulnerable populations. Justice officials indicated that they are developing an elder justice prosecution website that could serve as a resource and help build expertise. The website is expected to consolidate training materials in use across the country, primary litigation materials from local district attorneys, and information from relevant academic centers, such as the University of California at Irvine and Stanford University. However, it is unclear when this project will be completed, as Justice officials are waiting for materials from local district attorneys. As a result, prosecutors and other law enforcement officials currently do not have access to these materials.", "", "The OAA requires AoA to develop a plan for promoting collaborative efforts to support elder justice programs at all levels. Officials we met from state and local social service and criminal justice agencies in three of the four states we reviewed said that while collaboration between their systems is important for combating elder financial exploitation, collaborating can sometimes be difficult because the two systems differ in the way they respond to exploitation and carry out their work. Specifically, APS focuses on protecting and supporting the victim, and criminal justice focuses on prosecuting and convicting exploiters. However, according to experts, by working together, APS, the criminal justice system, and other Experts have partners can more easily accomplish both of these goals.noted that some type of multidisciplinary response to elder abuse— including elder financial exploitation—is prudent because of the complex nature of the problems faced by victims and the wide variety of responses required to help them and to prosecute exploiters.\nIn each of the four states we reviewed, local initiatives helped bridge the gap between APS and criminal justice agencies. In some locations APS, criminal justice agencies, and other public and private entities have formed groups that meet periodically to develop awareness activities, foster information sharing, and discuss and resolve individual cases. Some multidisciplinary groups discuss elder abuse broadly, such as elder abuse task forces in some Pennsylvania counties and multidisciplinary groups in New York City. Others concentrate on financial exploitation specifically, such as the Philadelphia Financial Exploitation Task Force, and Financial Abuse Specialist Teams in some California counties.\nAlthough multidisciplinary groups responding to elder financial exploitation already exist in each of the four states we visited and elsewhere, forming and sustaining these groups continues to be challenging, according to law enforcement officials in one state we visited and experts. Busy schedules and competing priorities make it difficult for some participants to attend meetings regularly, and a group’s focus influences how extensively members are willing to participate. For example, in one location officials told us that when the primary focus of their group shifted from prosecuting cases to providing services, participation by law enforcement officials declined. Collaborative efforts can also be undermined by a history of poor interaction between member organizations, differences in systemic understanding of elder financial exploitation, difficulties communicating across disciplines, different understandings of limits on information sharing, unclear roles, and failure to address the group’s long-term survival.relevant promising practices in this area could help promote creation of such groups—particularly when resources are limited—and ensure their success.\nHowever, information on Federal agencies have made some efforts to promote and inform collaboration between the APS and criminal justice systems in states. However, agencies have taken few steps to compile or disseminate promising practices in creating or sustaining multidisciplinary groups responding to elder financial exploitation, even though the OAA requires AoA to develop and disseminate information on best practices for adult protective services. AoA and Justice have offered a small number of grants to states to combat elder abuse or other crimes that require or encourage collaborative efforts such as multidisciplinary teams (see Table 4).\nAoA’s Elder Justice Community Collaborations program offered over 40 $10,000 grants, along with technical assistance and training, from 2007 to 2010 for the purpose of setting up elder justice coalitions. These coalitions, which included members across a broad range of disciplines, were required to create an elder justice strategic plan for their community, including plans for continuation beyond the grant period. This program was the only one we identified that was created specifically for the purpose of setting up new coalitions; other grants either allowed funds to be used for that purpose or required a coalition to be in place to implement the grant-funded initiative.\nInterstate or international mass marketing scams include “grandparent scams,” which persuade victims to wire money to bail “grandchildren” out of jail or pay their expenses, and foreign lottery scams that require victims to pay sizeable sums before they can receive their winnings. In 2011, the FBI’s Internet Crime Complaint Centercomplaints from victims of all ages about online fraud alone, with reported losses of about $485 million.\nLocal law enforcement authorities in the four states we visited indicated that investigating and prosecuting the growing number of cases involving interstate and international mass marketing fraud, which often target older adults, is particularly difficult for them. For example, coordinating with law so state enforcement authorities in other jurisdictions is labor intensive,and local officials are often unable to pursue these cases themselves. Furthermore, even though various federal agencies have the authority to investigate and prosecute interstate and international scams (see fig. 3),local law enforcement officials told us there is not enough information available on whom they should contact when they need to refer a case to the federal level. They indicated that the lines of communication between local and federal agencies tend to be informal, based on whom local law enforcement officers know in a federal agency. Providing accurate contact information is consistent with Justice’s strategic objective for fiscal years 2012-2016 to strengthen its relationships with state and local law enforcement. Justice officials told us they believe that local officials know which federal officials to contact about international and interstate cases, but state and local law enforcement officials told us that it would be helpful to have more specific information. Cases that local officials do not refer to a federal agency due to a lack of correct contact information may not be investigated or prosecuted by either federal or local authorities.\nIn addition to not knowing whom to contact, state and local law enforcement officials in the four states we reviewed told us that they are concerned that federal agencies do not take enough of the cases that are referred to them. For example, a law enforcement official from California described a case of widespread interstate check fraud, expressing frustration with federal agencies that would not provide any support when he requested it. Federal officials, on the other hand, told us that they cannot take all cases referred to them by state and local law enforcement and that they must prioritize their caseload to make the best use of their limited resources. Justice and FTC officials said they tend to focus on larger cases in which many victims were affected or a significant amount of money was lost, and Justice’s U.S. Attorneys also apply regional priorities, such as the vulnerability (including age) of the victim, when determining which cases to take.\nEven if federal agencies choose not to take a case a state or local agency refers to them, officials told us that consistent referrals of cases by state and local authorities allow them to identify patterns or combine several complaints against the same individual into one case. FTC’s Consumer Sentinel Network database (Consumer Sentinel) collects consumer complaint data and aims to be an information-sharing tool to enable state and local law enforcement to become more effective. Justice officials said they encourage individuals and state and local authorities to file a complaint of suspected fraud to either the Consumer Sentinel or the FBI’s Internet Crime Complaint Center. However, while some state Attorneys General were familiar with the FTC database, local law enforcement officials we spoke with did not say that they reported cases to it or used its data. One official said he did not find the Consumer Sentinel database useful because law enforcement officials are not familiar with it.\nFTC officials explained that while they have made attempts to get state- level offices to contribute to the Consumer Sentinel, barriers such as reservations about data sharing, obsolete technological infrastructure, and severe budgetary cutbacks have kept the numbers of contributors low. When state officials do not contribute to the Consumer Sentinel, the information in the database does not give a national picture of the extent of cross-border scams. As a result of this—in addition to the impact of some law enforcement officials not using the system—it may be more difficult to combat these scams, and officials at all levels may not have the information they need to target their resources appropriately.\nAccording to state and local officials, banks are important partners in combating elder financial exploitation because they are well-positioned to recognize, report, and provide evidence in these cases. Indeed, frontline bank staff are able to observe elder financial exploitation firsthand. For example, a bank teller who sees an older adult regularly is likely to notice if that individual is accompanied by someone new and seems pressured to withdraw money or if the older adult suddenly begins to wire large sums of money internationally.\nThere are state efforts and bank policies to help bank employees recognize exploitation. In Illinois, all state-chartered banks are required to train their employees on what constitutes elder financial exploitation. State and local agencies in California and Pennsylvania provide information and training to banks to help them recognize elder financial exploitation. Most of the six banks we spoke with had a policy for periodically training employees on identifying elder financial exploitation. In addition, these banks had a system in place that routinely monitors bank transactions for unusual activity and can help identify exploitation.\nBanks may also help report suspected elder financial exploitation to local authorities. Training initiatives, such as Illinois’ program, encourage bank employees to report exploitation. Most of the six banks we spoke with had procedures in place for frontline employees to report suspected elder financial exploitation to bank management. Some of these banks also had internal units that are dedicated to receiving staff reports of elder financial exploitation and referring them to the proper authorities.\nNotwithstanding such efforts, APS and criminal justice officials told us elder financial exploitation is generally underreported by banks.the training they receive, bank staff may not be aware of the signs of elder financial exploitation or know how to report it. In addition, in five of the six prosecuted cases we reviewed in depth, there were missed opportunities for banks to raise questions about transactions. For example, in one case, bank officials did not take any action in response to repeated withdrawals of large amounts of money that were not typical for Despite that customer. Bank officials said they do report suspected elder financial exploitation, but also emphasized that banks are not law enforcement agencies. Officials said their primary responsibility is to protect customer assets and privacy and ensure customers have access to their funds. In addition, a banking association representative told us that even though federal privacy laws do not prohibit banks from reporting suspected abuse, banks are concerned that they will be held liable if they report suspected exploitation that is not later substantiated.\nThree federal agencies—CFPB, AoA, and FinCEN—are positioned to encourage banks to identify and report elder financial exploitation, either due to the agency’s mission or via proposed or existing activities. The CFPB is the primary federal consumer protection regulator with respect to a variety of financial institutions, including banks. The Dodd-Frank Act authorizes the CFPB to protect consumers, including older adults, from abusive practices committed in connection with the offering or provision of consumer financial products or services. In a November 2011 congressional testimony, the Assistant Director of CFPB’s Office for Older Americans said the agency has a unique opportunity to help enhance, coordinate, and promote efforts of a variety of groups, including financial services providers.\nWhile the federal government generally requires banks to train employees on a variety of issues, such as money laundering, physical bank security, and information security, we could find no similar requirements for banks to train employees to recognize and report elder financial exploitation. However, AoA is considering collaborating with one large national bank on a project to encourage bank training on elder financial exploitation.\nBanks are also required to file Suspicious Activity Reports (SAR) with FinCEN to alert them of potentially illegal bank transactions that involve, individually or in the aggregate, at least $5,000, which could include elder financial exploitation. In February 2011, FinCEN issued an advisory to banks that described elder financial exploitation, provided potential indicators of elder financial exploitation, and requested the use of a specific term (“elder financial exploitation”) when applicable in SAR narratives related to this activity.\nBank records can help investigators track an older adult’s use of funds over time and detect irregularities. APS officials in Pennsylvania told us that although Pennsylvania state law grants APS access to bank records, they are often denied access on the basis of federal privacy laws or the bank’s policies. APS officials from California, Illinois, and New York also reported that they are denied access to bank records for the same reasons. As a result, investigators are unable to obtain the information necessary to investigate suspected exploitation, identify perpetrators, stop further exploitation from occurring, or obtain restitution for victims. Bank officials told us the federal government could help clarify bank roles and responsibilities related to privacy and financial exploitation of older adults.\nThere are two federal laws that generally protect the privacy of consumer banking records: the Right to Financial Privacy Act of 1978 (RFPA) and the Gramm-Leach-Bliley Act.must meet to safeguard customer banking information. The RFPA generally prohibits financial institutions, including banks, from providing any federal governmental authority with access to copies of information in any customer’s records without first providing notice to the customer. Because a government authority is defined in RFPA to include only federal agencies and officials, however, it should not prevent banks from reporting possible financial exploitation of older adults—or providing bank records to—state APS.\nEach establishes standards that banks The Gramm-Leach-Bliley Act generally prohibits financial institutions, including banks, from disclosing nonpublic personal information to third parties including, but not limited to, federal governmental authorities. Nonetheless, the act has a number of general exceptions permitting disclosure, such as: to protect against or prevent actual or potential fraud, unauthorized transactions, claims, or other liability; consistent with the RFPA, for an investigation on a matter related to public safety; or to comply with a properly authorized civil, criminal, or regulatory investigation, subpoena, or summons by federal, state, or local authorities.", "The NCEA and experts have called for more data on the cost of elder financial exploitation to public programs and for trend data on its extent. According to our analysis, these data could help determine what government resources to allocate and how best to prevent and respond to this problem. According to one Utah official, quantifying the impact of elder financial exploitation in that state helped that state’s legislators understand the importance of combating this problem and convinced them to simply decrease, rather than eliminate, state APS funding altogether.undertaken such a study.\nHowever, according to our analysis, no other state has Similarly, data on the extent of elder financial exploitation over time could help state and local APS, as well as law enforcement agencies, assess the effectiveness of their efforts to combat it. The OAA and EJA both require the federal government to take steps to collect and disseminate data on all types of elder abuse, yet the studies federal agencies have funded in this area have produced little data on its extent over time, as we previously reported, or on its cost.\nSeveral federal agencies do collect administrative data on the number of complaints submitted by consumers or criminal cases that sometimes involve elder financial exploitation (see table 5)—data that could help state and local APS and law enforcement authorities determine what resources to allocate and how best to prevent and respond to this problem. Each agency publishes material containing a range of administrative data from its system that is available to the public. FTC, for example, publishes statistics from the Consumer Sentinel on the number and types of complaints, amount of losses, and characteristics of victims.\nWhile the number of reported incidents of elder financial exploitation in each agency’s system represents only a portion of all cases that actually occur in a given period and geographic area, the number over time could provide an indication of fluctuations in the extent of certain types of elder financial exploitation.\nData from the Consumer Sentinel could be of particular interest to state and local APS and law enforcement authorities, because over half of the consumer complaints reported to this system involve financial exploitation through fraud. Individual complaints can be directly reported to the Consumer Sentinel by victims or others on their behalf. Cases reported to the FBI Internet Crime Complaint Center and non-governmental organizations, such as the Council of Better Business Bureaus, are also added to the complaints in the Consumer Sentinel. Currently, however, the Consumer Sentinel does not receive any of the complaints reported to any of the law enforcement or consumer protection agencies in 38 states. Moreover, less than half the complaints in the Consumer Sentinel contain the age of the victim because FTC does not require complaints to include this information or other indicators of whether the case involved elder financial exploitation. FTC officials told us the agency does not require complaints to include the age of the victim because of concerns regarding privacy and the potential burden this might place on individual complainants. In contrast, SARs in the FinCEN system will soon all be clearly identified when a filing institution reports suspected elder financial exploitation.\nIn 2011, we found that state-level APS data could provide useful information on the extent of elder abuse, including elder financial exploitation, over time. We recommended that AoA work with states to develop a nationwide system to collect and compile these data.officials told us they have initiated discussions with states about establishing such a system, but have been unable to develop a comprehensive plan for implementing one due to a lack of funding.", "Elder financial exploitation is a multi-faceted problem spanning social service, criminal justice and consumer protection systems of government. As a result, combating it is challenging and requires action on the part of not only many state and local agencies, but also multiple agencies at the federal level. Each of the seven federal agencies we reviewed is working to solve this problem in ways that are consistent with its own mission. However, the problem is large and growing. It calls for a more cohesive and deliberate approach governmentwide that, at a minimum, identifies gaps in efforts nationwide, ensures that federal resources are effectively allocated, establishes federal agency responsibilities, and holds agencies accountable for meeting them.\nThe EJCC has recognized that combating elder abuse, including elder financial exploitation, is an effort that requires federal agencies to work together. A clearly articulated national strategy is needed to coordinate and optimize such federal efforts to effectively prevent and respond to elder financial exploitation, and the EJCC can be the vehicle for defining and implementing this strategy. In the current economic climate, state and local APS and law enforcement agencies will find it increasingly difficult to cope with growing numbers of cases without a national strategy attuned to their need for information and guidance on preventing and responding to elder financial exploitation, as well as additional data on its extent and impact.\nIn addition to working together to build a national strategy to combat elder financial exploitation, there are a number of ways individual federal agencies could better support state and local APS and law enforcement agencies. For example, Justice has identified providing training and resources to combat elder abuse as a strategy to achieve its objectives of preventing and intervening in crimes against vulnerable populations. Without easily accessible information and guidance tailored to the needs of prosecutors nationwide, they may continue, given limited resources, to make such cases a low priority. Similarly, many cases cross jurisdictions and could involve multiple victims or have perpetrators located in other countries. These cases may not be investigated or prosecuted unless state and local law enforcement have better information on the process for contacting the federal government regarding these cases or the ways in which the federal government could provide support.\nWithout information to correct banks’ misconceptions about the impact of federal privacy laws on their ability to release bank records, APS and law enforcement agencies will continue to find it difficult to obtain the information they need from banks to investigate suspected cases of elder financial exploitation. Moreover, without educating bank employees nationwide on how to identify and report suspected elder financial exploitation, many cases will continue to go unreported, uninvestigated, and unprosecuted. The CPFB is positioned to provide additional information to banks, as part of the agency’s consumer protection regulatory function and dedication to protecting the financial health of older Americans.\nFinally, to fulfill its mission of protecting consumers against unfair, deceptive, or fraudulent practices, the FTC established the Consumer Sentinel Network database to enhance information-sharing and support law enforcement at all levels. The Consumer Sentinel could serve as a valuable source of data on the extent of some types of elder financial exploitation nationwide and as an important resource for law enforcement authorities as they identify, investigate, and prosecute cases. The Consumer Sentinel’s usefulness in this area, however, will continue to be limited until the number of contributors to it is increased and complaints are required to include the age of the victim or other indicators of whether the case involved elder financial exploitation. In the absence of the latter, it is difficult to determine the number of financial exploitation complaints that involve older adults, which in turn makes any Consumer Sentinel data contributed less useful to state and local APS and law enforcement agencies.", "To coordinate and optimize federal efforts to prevent and respond to elder financial exploitation, we recommend the Secretary of HHS, as chairman of the Elder Justice Coordinating Council, direct the Council to develop a written national strategy for combating this problem. This strategy should include a clear statement of its purpose and goals and indicate the roles and responsibilities particular federal agencies should have in implementing it. The strategy could address, among other things, the need to identify and disseminate promising practices and other information nationwide that can be used by state and local agencies to prevent exploitation, educate the public, and help state and local agencies collaborate, investigate, and prosecute elder financial exploitation; ensure coordination of public awareness activities across federal agencies; and collect and disseminate better data nationwide to inform federal, state, and local decisions regarding prevention of and response to elder financial exploitation.\nTo develop expertise among prosecutors and other criminal justice officials, we recommend the Attorney General establish timeframes for and take the steps necessary to launch the elder justice prosecution website that Justice has begun to construct.\nTo facilitate investigation and prosecution of interstate and international elder financial exploitation, we recommend the Attorney General conduct outreach to state and local law enforcement agencies to clarify the process for contacting the federal government regarding these cases and the ways in which the federal government could provide support.\nTo encourage banks to identify and report suspected elder financial exploitation and to facilitate release of bank records to APS and law enforcement authorities for investigating this activity, we recommend the Director of the Consumer Financial Protection Bureau develop a plan to educate banks nationwide on how to identify and report possible elder financial exploitation; and develop and disseminate information for banks on the circumstances under which they are permitted, under federal privacy laws, to release relevant bank records to law enforcement and APS agencies.", "We provided a draft of this report to the seven federal agencies that we reviewed for their comments. CFPB concurred with our recommendations and agreed that a collaborative and coordinated effort by federal agencies can help optimize strategies to combat elder financial exploitation (see appendix XVI). CFPB further noted that financial institutions can play a key role in preventing and detecting elder financial exploitation, and that CFPB is collecting information on financial institution training programs and considering how best to help institutions that request this information. HHS indicated in its general comments that our recommendations are consistent with what it heard during the inaugural meeting of the EJCC, and added that it looks forward to working with Congress to continue implementing the EJA (see appendix XVII).\nIn an e-mailed response, FTC’s Bureau of Consumer Protection noted that the Consumer Sentinel database provides law enforcement with access to millions of consumer complaints. FTC added that the database has no required fields, and expressed its belief that if consumers were required to provide detailed personal information as a condition to filing a complaint, they might refuse to do so, thereby decreasing the overall effectiveness of the system. FTC explained that almost 48 percent of all fraud complaints in 2011 included the voluntary submission of age, and that nearly half of its non-individual data contributors do not submit age information in the data they provide to FTC. Given the potential for the Consumer Sentinel database to support and enhance state and local law enforcement agencies’ response to elder financial exploitation, particularly interstate and international cases, we continue to believe that FTC should study the feasibility of requiring that all complaints to the Consumer Sentinel database include the victim’s age or another indicator of whether the complaint involves elder financial exploitation. In doing so, FTC can examine different options, including the use of a check box similar to the one that FinCEN has included in its SARs.\nWe are sending copies of this report to the seven agencies we reviewed, relevant congressional committees, and other interested parties. We will also make copies available to others upon request. The report is available at no charge on GAO’s website at http://www.gao.gov.\nIf you or your staff have any questions about this report, please contact me at (202) 512-7215 or [email protected]. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix XVIII.\nMission To develop a comprehensive, coordinated, and cost-effective system of home- and community- based services that helps elderly individuals maintain their health and independence.\nHow agency prioritizes elder financial exploitation Strategic goal of ensuring the rights of older people and preventing their abuse, neglect, and exploitation.\nCoordination with other agencies\nWorks with state aging agencies to help them develop statewide plans conduct research on and develop information on best practices for Adult Protective Services (APS),\nThrough NCEA, partnered with Treasury on its Go Direct financial\nPartnered with Treasury and the Financial Services Roundtable on a provide technical assistance to toolkit for training financial institutions on elder financial exploitation\nWorked with the SEC on several Seniors Summits that brought establish centers to conduct research, develop expertise, and improve law enforcement’s ability to combat elder financial exploitation agencies together to discuss elder financial exploitation\nChairs the Elder Justice Coordinating Council, a collaborative body of federal agencies created under the EJA to recommend federal policies to combat elder abuse and ways federal agencies should coordinate to implement these policies.\nContact information Call: (202) 619-0724\nCo-leads an informal interagency workgroup that helps facilitate federal elder justice activities.\nOn April 16, 2012, AoA became part of the Administration for Community Living, which also includes HHS’s Office on Disability and Administration on Developmental Disabilities." ], "depth": [ 1, 1, 2, 2, 1, 2, 2, 3, 2, 1, 1, 1 ], "alignment": [ "h0_full h3_full h2_full h1_full", "h0_title", "h0_full", "h0_full", "h2_title h1_title", "h1_full", "h2_title h1_title", "h2_full h1_full", "h2_full h1_full", "h1_full", "h3_full", "h0_full h3_full h2_full h1_full" ] }
{ "question": [ "What kinds of elder financial protection are needed?", "How is responsibility regarding this issue distributed?", "How are the reviewed agencies attempting to increase public awareness of this issue?", "What factors limit this strategy?", "What alternative methods exist for raising awareness?", "What factors hinder the response to elder financial exploitation?", "How have agencies attempted to mitigate these issues?", "How effective is this federal support?", "What are the limitations of the FTC's database?", "How could the database effectiveness be improved?", "What is elder financial exploitation?", "How prevalent is this issue?", "How is responsibility for fighting this issue delegated?", "What does this report cover?", "How should federal agencies approach elder financial exploitation?", "How did CFPB and HHS respond to GAO's recommendations?", "How did FTC respond to GAO's recommendations?" ], "summary": [ "Officials in each of the four states GAO contacted identified the need for more safeguards and public awareness activities to help prevent elder financial exploitation. They also noted that it is difficult to prevent exploitation by individuals such as financial services providers, power of attorney agents, guardians, and paid in-home caregivers.", "Although states have primary responsibility for combating elder financial exploitation, the federal government could disseminate information on model power of attorney legislation, for example, to help states better safeguard against power of attorney abuse--one type of federal activity authorized under the Older Americans Act of 1965.", "The seven federal agencies GAO reviewed have undertaken activities to increase public awareness of elder financial exploitation.", "While some experts observed that a nationwide approach to educating the public is needed, federal public awareness activities are not currently conducted as part of a broader coordinated approach, which GAO believes could help ensure the effective use of federal resources.", "The Elder Justice Coordinating Council, which held its first meeting in 2012, could be the vehicle for developing and implementing a coordinated national strategy. The Council is composed of officials from federal agencies and is charged with developing national priorities and coordinating federal elder justice activities.", "Experts and officials in each state GAO reviewed indicated that difficulty 1) gaining expertise, 2) sustaining collaboration between law enforcement and adult protective services agencies, and 3) obtaining data hinders their response to elder financial exploitation.", "As with prevention, many federal agencies have individually taken steps to address these challenges that are in line with their own missions. For example, the Department of Justice (Justice) has begun to construct a website that contains training and other materials prosecutors can use to build their expertise in investigating and prosecuting elder abuse, which includes elder financial exploitation.", "However, there are gaps in federal support in some areas. For example, law enforcement officials in each of the four states GAO reviewed indicated that it is not clear how they should obtain the federal support they need to respond to interstate and international cases.", "Similarly, the Federal Trade Commission's (FTC) Consumer Sentinel Network database compiles incidents of financial exploitation reported to it by many sources around the country but receives incidents from state government agencies in only 12 states.", "The database would be of greater use if FTC obtained incidents from more of the states and contained an indicator that the incident involved an older adult.", "Elder financial exploitation is the illegal or improper use of an older adult's funds or property.", "It has been described as an epidemic with society-wide repercussions.", "While combating elder financial exploitation is largely the responsibility of state and local social service, criminal justice, and consumer protection agencies, the federal government has a role to play in this area as well.", "This report describes the challenges states face in (1) preventing and (2) responding to elder financial exploitation, as well as the actions some federal agencies have taken to help states address these challenges.", "Federal agencies should develop a written national strategy addressing challenges GAO identified, facilitate case investigation and prosecution, and improve data, among other things.", "The Consumer Financial Protection Bureau and the Department of Health and Human Services supported GAO's recommendations.", "FTC did not believe it is necessary to examine the feasibility of requiring victim's age in complaints. GAO maintains the importance of its recommendation." ], "parent_pair_index": [ -1, 0, 0, 2, 2, -1, 0, 1, 0, 3, -1, 0, 0, 0, -1, 0, 0 ], "summary_paragraph_index": [ 2, 2, 2, 2, 2, 3, 3, 3, 3, 3, 0, 0, 0, 0, 4, 4, 4 ] }
CRS_R40206
{ "title": [ "", "Rationale for Program", "Overview of TAAF Program", "Requirements for a Commodity Group to Be Certified", "Individual Producer Eligibility Requirements", "TAAF Program Benefits", "Limitations on Producer Financial Assistance", "Written Notices to Producers", "Program Coordination", "History of TAAF Funding", "TAAF Program Implementation", "FY2003-December 2007", "FY2009 to Present", "Administrative Actions", "Certifications and Producer Approvals", "GAO Report", "USDA OIG Audit Called for Improved Oversight", "Major Trade Agreements Could Bring Adjustments" ], "paragraphs": [ "", "The origin of the Trade Adjustment Assistance for Farmers (TAAF) program can be traced back to a 2000 Department of Labor report recommending that a separate program be enacted \"to assist agricultural producers and workers affected adversely by imports\" if the objective is to assist them to remain in their current occupations. The report described the existing trade adjustment assistance (TAA) programs that provided (1) limited technical assistance to help business firms (including some that produced agricultural and food products) regain economic competitiveness or to shift into producing other goods, and (2) training assistance to workers (including those employed by some agricultural firms) to facilitate their transition into other occupations. It noted that the provision of direct financial assistance (such as income supplements) to farmers, or efforts to financially enable them to continue producing the commodity adversely affected by imports rather than help them adjust to employment in other sectors, would be inconsistent with the objectives of the then-existing TAA programs.\nObservers stated that farmers and ranchers typically did not qualify for the TAA workers program because they were self-employed (and thus rarely were eligible for unemployment benefits) and were less likely to want to be retrained for a new occupation (particularly if earning income from producing other crops or from non-farm sources). Others pointed out that agricultural producers who are most likely to be affected by import surges are those producing a commodity that receives little or no price protection and does not receive direct payments under traditional farm subsidy programs. Frequently cited at the time was the impact of increased competition that U.S. fruit and vegetable growers, as well as livestock producers, have encountered due to imports from Mexico and Canada under the North American Free Trade Agreement.", "The Trade Act of 2002 established a new Trade Adjustment Assistance for Farmers program by amending the Trade Act of 1974 ( P.L. 93-618 ). The U.S. Department of Agriculture's (USDA's) Foreign Agricultural Service (FAS) is the lead administrative agency for the TAAF program, with responsibility for certifying eligible commodities and producer groups. USDA's Farm Service Agency (FSA) has responsibility for processing and approving individual applications for assistance under TAAF, and for disbursing cash payments to eligible producers. A third USDA agency, the National Institute for Food and Agriculture (NIFA), provides training and technical assistance to producers who are approved for TAAF benefits. As amended by the enacted 2009 economic stimulus package ( P.L. 111-5 , Division B, Subtitle I), the program assists agricultural producers who have been adversely affected by competition from imports of a commodity that they produce. An \"agricultural commodity producer\" is defined as a \"person that shares in the risk of producing an agricultural commodity and that is entitled to a share of the commodity for marketing, including an operator, a sharecropper, or a person that owns or rents the land on which the commodity is produced,\" or a person who reports a gain or loss on a federal income tax return from \"the trade or business of fishing.\" Support is available in the form of enhanced technical assistance and seed money to enable a producer to formulate and implement a business adjustment plan. Producers of raw and natural agricultural commodities (crops, livestock, farm-raised aquatic products, and wild-caught seafood that competes with aquaculture products) and of \"any class of goods within an agricultural commodity\" must follow a two-part process to receive benefits.\nFirst, a producer group must be certified by USDA as eligible to apply for program benefits (see \" Requirements for a Commodity Group to Be Certified \"). Second, if the group is certified, individual producers in that group must meet certain requirements to be approved to receive technical assistance and cash payments (see \" Individual Producer Eligibility Requirements \" and \" TAAF Program Benefits \").", "A group of agricultural producers can petition the Secretary of Agriculture to be certified as eligible to participate in the TAAF program (i.e., to qualify for benefits). To certify a commodity group, the Secretary must determine that the increase in imports of the agricultural commodity produced by members of the group \"contributed importantly\" to at least a 15% decline in the national average price, quantity of production, or value of production or cash receipts of the commodity. In making a determination, the Secretary must compare the volume of imports of \"articles like or directly competitive with the agricultural commodity\" produced by the group in the marketing year in which the petition is filed, to the average volume of imports in the three preceding marketing years. The addition of two other qualifying factors—\"quantity of production\" and \"value of production/cash receipts\"—besides price gives the Secretary greater flexibility in determining if a commodity group is eligible to access program benefits. The Secretary then has 40 days to make a determination on a group's petition.", "If the Secretary certifies that a group qualifies for assistance, each producer in the group has 90 days to apply for TAAF benefits. To be eligible, an individual producer must show in the application submitted to USDA that (1) the agricultural commodity was produced in the year covered by the group's petition, and in at least one of the three preceding marketing years; (2) the quantity of the commodity produced in that year has decreased compared to the amount produced in a previous year, or the price received for the commodity in that year has decreased compared to the average price received in the preceding three marketing years; and (3) no cash benefits were received under the TAA for Workers and TAA for Firms programs, nor were benefits received based on producing another commodity eligible for TAAF assistance.\nThe reauthorization of TAAF through FY2021 under P.L. 114-27 does not alter the eligibility requirements for commodity groups or individual producers that existed heretofore.", "The changes enacted in 2009 refocus the TAAF program by (1) making technical assistance available to an eligible producer, and (2) providing financial resources so that a producer can put into effect a business plan to make adjustments in the operation.\nA producer approved for the TAAF program is entitled to receive initial technical assistance (TA) to improve competitiveness in the production and marketing of the commodity certified to receive benefits. Such assistance is to include information on what steps could be taken to improve the yield and marketing of that commodity, and on exploring the feasibility and desirability of substituting one or more alternative commodities for the one being produced. USDA can provide supplemental assistance to cover reasonable transportation and subsistence expenses that a producer incurs in accessing initial technical assistance if provided in a location outside a normal commuting distance.\nA producer who completes this initial phase is eligible to participate in intensive technical assistance. This includes training courses to assist the producer in improving the competitiveness of the same commodity or an alternative commodity, and financial assistance to develop an initial business plan based on the courses completed. USDA is required to approve a producer's initial business plan if it reflects the skills gained by the producer through the courses taken. Further, this plan must demonstrate how the producer will apply these skills to his circumstances. If the plan is approved, the producer is entitled to not more than $4,000 to implement this plan, or to develop a long-term business adjustment plan.\nA producer who completes the intensive phase and whose initial business plan has been approved is then eligible for assistance to develop a long-term business adjustment plan. USDA is required to approve this adjustment plan if it includes steps calculated to materially contribute to the producer's economic adjustment to changing market conditions, takes into account the interests of the workers employed by the producer, and demonstrates that the producer will have sufficient resources to implement the business plan. If approved, the producer is entitled to $8,000 to implement this long-term plan.", "The amount of assistance that a producer can receive to implement both the initial business plan and the long-term business adjustment plan is limited to $12,000 in the 36-month period after USDA has certified producers of the commodity as eligible for TAAF benefits. Further, TAAF-eligible producers cannot receive cash benefits under any other TAA program.\nAn applicant is ineligible for TAAF assistance in any year in which his average adjusted gross income exceeds the level specified in Section 1001D of the Food Security Act of 1985 as amended (i.e., $500,000 of non-farm income, or $750,000 of farm income, depending on the details of the applicant's involvement in a farm operation, beginning with the 2009 crop year).", "The Secretary of Agriculture is required to provide written notice to each agricultural commodity producer in a group certified as eligible to receive benefits. A notice stating the benefits available to certified producers must also be published in newspapers of general circulation in the areas in which such producers reside.", "When notified by the International Trade Commission (ITC) that it has begun a safeguard investigation of a particular agricultural commodity, the Secretary of Agriculture is required to conduct a study of (1) the number of agricultural commodity producers who are producing a competitive commodity who have been or are likely to be certified eligible for TAAF, and (2) the extent to which existing programs could facilitate producers' adjustment to import competition. A safeguard (e.g., in the form of additional tariffs, expanded quota, or another restriction on imports) is intended to provide relief from the adverse impact of imports when temporary protection will enable the domestic sector (i.e., producers) to make adjustments to meet import competition.\nWithin 15 days after the ITC has determined whether or not injury has occurred and reported its recommendations to the President, the Secretary must submit a report to the President on the USDA study's findings.", "The Trade Act of 2002 ( P.L. 107-210 ) that established the TAAF program authorized and appropriated $90 million annually for FY2003 through FY2007 to operate the program. Under Section 1(c) of P.L. 110-89 , Congress provided an appropriation of $9 million for TAAF for the first quarter of FY2008 (October 1 to December 31). Funding then lapsed until October 1, 2008, when Section 1887 of the American Recovery and Reinvestment Act of 2009 ( P.L. 111-5 ) authorized and appropriated $90 million in each of FY2009 and FY2010, and $22.5 million for the first quarter of FY2011 (October to December 2010). This provision also specified that funding shall cover the costs of administering the TAAF program.\nCongress temporarily extended funding for TAAF by providing an appropriation of $10.4 million for the period January 1, 2011, through February 12, 2011, in Section 101 of the Omnibus Trade Act of 2010 ( P.L. 111-344 ), but USDA viewed this six-week period as too short to implement another FY2011 program, so no activity occurred. Under Section 223 of the Trade Adjustment Assistance Extension Act of 2011 ( P.L. 112-40 ), Congress authorized $90 million in each of FY2012 and FY2013, and $22.5 million for the first quarter of FY2014 (i.e., October through December 2013). This provision, unlike those in the 2002 and 2009 authorizations, did not appropriate any funds. Because Congress did not subsequently appropriate funds, USDA did not announce TAAF programs for FY2012, FY2013, and the first quarter of FY2014. Authority to operate TAAF expired on December 31, 2013.\nMost recently, Section 403 of Title IV of the Trade Preferences Extension Act of 2015 ( P.L. 114-27 ) authorized TAAF to be appropriated $90 million each year for FY2015 through FY2021. As such, any program activity under TAAF will depend on the level of funding that Congress may appropriate. To date, no new funds have been appropriated.", "Because Congress in 2009 significantly revised TAAF's statutory provisions from those initially enacted, the text that follows describes how this program operated in the period before, and then in the period after, these changes. The break between periods reflects the lack of program authority in the January to September 2008 period.", "Activity under the TAAF in the FY2003-December 2007 period was much lower than authorized funding levels because of low producer participation and low payments, according to the Government Accountability Office (GAO). Of the $459 million authorized for the 5¼-year period through December 31, 2007, budget outlays totaled almost $49 million, according to USDA's Office of Inspector General (OIG) and USDA's Foreign Agricultural Service. This included $27.7 million in cash benefits paid to producers, $9.5 million for technical assistance, and $10.5 million for administrative costs ( Table 1 ).\nOf the 72 petitions filed by producer groups for assistance during the 5-year period that USDA received petitions, USDA certified or approved 30 groups ( Table 2 ). Shrimp and salmon producers accounted for most of the cash benefits paid out. Producers of Concord grapes, lychees, olives, wild blueberries, fresh potatoes, Florida avocadoes, snapdragons, and catfish were among other producer groups that USDA certified to be eligible for assistance ( Table 3 ). About 8,400 producers qualified for cash payments ( Table 2 ).", "", "On August 25, 2009, USDA's Foreign Agricultural Service published a proposed rule to establish procedures for a group to request certification of eligibility, and for individual producers to apply for technical assistance and cash benefits, under the amended TAAF program.\nOn March 1, 2010, USDA issued the TAAF interim rule and announced that it would immediately begin to implement the FY2010 program. This allowed producer groups to submit petitions to be certified for eligibility, which, if approved, permit individual members of a group to apply for program benefits. For FY2010, USDA accepted petitions through April 14, 2010. It certified 3 of the 11 petitions submitted by producer groups ( Table 2 ). If a petition was approved, eligible producers had to file applications for assistance within 90 days of the certification.\nOn May 21, 2010, USDA announced that it would accept petitions for the FY2011 TAAF program through July 16, 2010. USDA in late September 2010 certified 7 of the 19 producer groups that submitted petitions ( Table 2 ). Eligible producers had until late December 2010 to file applications for assistance.", "With the 2009 changes to the TAAF program that eased the criteria for a producer group to be certified and for individual producers to be approved for program assistance, more of the provided funding has been used than in the FY2003-December 2007 period. USDA committed $127 million of the almost $203 million authorized for the 2¼-year period ending December 2010. This included $81.1 million in cash benefits and training costs for producers, $34.0 million for developing the technical assistance resources to be used to provide training, and $12.0 million for administrative costs ( Table 1 ). Funds obligated under the 2009 amendments represented 63% of authorized funding. (For comparison, outlays in the earlier period of FY2003 through December 2007 accounted for 10% of funding authority.)\nOf the 30 petitions filed since FY2009 by producer groups seeking certification (i.e., eligibility to qualify for assistance), USDA certified 10 groups. These included producers of shrimp, catfish, lobsters, asparagus, and wild blueberries ( Table 3 ). USDA subsequently approved about 4,500 producers for training assistance and cash benefits in FY2010. Another 5,700 applications were approved under the FY2011 program ( Table 2 ). USDA data show that most of the benefits under both years' programs flowed to shrimp producers in Alaska and along the Gulf and southern Atlantic states.\nAs of late FY2012, of the 10,242 producers approved in FY2010 and FY2011 to receive program benefits, 80% had completed the intensive 12-hour training phase, 79% had completed their initial business plan, and 61% had completed their long-term business plan.\nBenefits to individual producers are based on the amount of funds authorized each year and are available only to those approved to receive technical and financial assistance. For the FY2010 program, approved producers were eligible for $12,000 in cash payments (see \" TAAF Program Benefits ,\" above, for details). But because only $22.5 million were available in the shortened FY2011 period for a larger number of approved applicants than in the previous year, each producer received pro-rated cash payments. During FY2012, FY2013, and FY2014, USDA continued to disburse financial assistance to producers approved to receive benefits under the FY2010 and FY2011 programs as they subsequently met certain benchmarks.", "As required by Section 1894 of P.L. 111-5 , the Government Accountability Office (GAO) in mid-July 2012 reported on the operation and effectiveness of the 2009 amendments made to the TAAF statute. It found that USDA certified relatively few commodities (five) under the changes made to the program, but that TAAF benefited most of the farmers and fishermen (over 10,200) who produced these certified commodities and had been approved to receive assistance. GAO discovered that the 2009 changes in the criteria used to determine whether a commodity can be certified were a factor leading to four of the five commodity certifications. For example, FAS under the pre-2009 criteria would not likely have been able to certify asparagus or shrimp solely on the basis of a decline in price. But in applying one new criterion—a decrease in the quantity produced of a commodity—as producers adjusted to increased imports, these two commodities were qualified to be certified.\nIn reviewing how USDA implemented the program, GAO offered three recommendations:\nRequire spouses of producers (i.e., those who share in the risk of producing an agricultural commodity) who may be eligible to apply for assistance to provide documentation on how they contribute to producing a certified commodity. This would address instances where USDA may have approved the applications of spouses who did not engage in producing a certified commodity, and thus had no assurance that TAAF assistance was appropriately targeted to intended recipients. Take steps to help ensure that any financial assistance payments made to producers are used for intended purposes (e.g., by requiring them to detail in their business plans how they plan to use these funds). This would address the acknowledgement made by USDA officials that some producers likely use the payments for unrelated expenses. Broaden the program's evaluation approach to help ensure that USDA can comprehensively evaluate the impact of the TAAF program on producers' competitiveness. GAO noted that the performance measures and surveys used by USDA do not measure quantifiable outcomes or cover all key areas of the program. To illustrate, conducting a final survey 6-12 months after producers complete the program does not allow for gathering insights into their perceptions of TAAF's long-term effectiveness. Also, USDA has not corroborated the results of surveys to help isolate the program's impact from other influences.\nUSDA commented that it generally agrees with these recommendations, and that if a future TAAF program retains the same statutory requirements, it will consider specific ways to address them.", "In an audit report of TAAF dated October 2013, the USDA's Office of Inspector General (OIG) identified a number of shortcomings in the administration of the TAAF program. The objective of the audit was to evaluate the internal controls established by FAS, FSA, and NIFA for administering the TAAF program, and to assess the program's policies and procedures. More specifically, the audit sought to determine whether (1) TAAF program recipients were eligible for program participation; (2) funds were properly obligated, distributed in a timely fashion, and accurately calculated; (3) program reporting requirements were met; and (4) oversight was sufficient to ensure that TAAF was administered in an accountable and equitable manner. A sampling methodology was developed to carry out this task. In brief, the OIG found the agencies did not have the appropriate controls in place to ensure that TAAF program participants were eligible, that payments were accurate, or that oversight was sufficient. The audit made a number of recommendations that follow from four key findings below. Agency responses to the findings and recommendations advanced by OIG are included in the audit report.\n1. At the end of FY2009, FAS did not return unobligated TAAF program funds to the Department of the Treasury, nor did it provide evidence to show that all remaining funds were needed to meet future financial obligations. 2. FAS did not sufficiently analyze the documentation submitted by producer groups in support of their request for price pre-certification approvals for their commodities under a streamlining procedure. As a consequence, FAS applied the pre-price certification approvals in an overly broad manner, with the result that two of five such approvals that OIG examined did not meet the criteria established for approval. 3. Although FAS was the lead agency with oversight responsibility for the TAAF program, the agency failed to effectively monitor, or conduct reviews of, the two other agencies' day-to-day administration of the program, with the result that OIG identified 85 ineligible producers who participated in the TAAF program and who received approximately $284,000 in program benefits to which they were not entitled. 4. NIFA did not ensure that the TAAF program database was in compliance with federal information system security requirements for certification and accreditation.", "Following the enactment of P.L. 114-26 —the law that provides the President with Trade Promotion Authority (TPA)—the Obama Administration concluded negotiations on the Trans-Pacific Partnership (TPP) regional free-trade agreement, which includes the United States and 11 other Pacific-facing nations, but to date the agreement has not been ratified by Congress or by other TPP countries. Meanwhile, negotiations between the United States and the European Union to conclude a Transatlantic Trade and Investment Partnership (T-TIP) agreement are ongoing. Considering the breadth of these two potential regional trade agreements, the economic diversity of the nations involved, and the broad range of U.S. agricultural and fishery products that might potentially be affected if TPP were to be implemented or if T-TIP were to be successfully concluded and implemented—or both—it is conceivable that some U.S. agricultural producers and fishermen might qualify for trade adjustment assistance under TAAF in the years ahead.\nWhether TAAF will be provided with funding to allow it to resume operations, and at what level, is for Congress to determine. In the event that Congress decides to appropriate funds to reactivate TAAF, Congress could provide oversight of the program in light of recommendations advanced by GAO and the USDA's Office of Inspector General." ], "depth": [ 0, 1, 1, 2, 2, 2, 2, 2, 2, 2, 1, 2, 2, 3, 3, 2, 2, 1 ], "alignment": [ "h0_title h1_title", "h0_full", "h0_full h1_title", "h0_full", "h0_full h1_full", "h0_full", "", "", "", "h1_full", "", "", "", "", "", "", "", "h1_full" ] }
{ "question": [ "What requirements must a producer group meet in order to be certified for program benefits?", "What requirements must individual producers within approved groups meet?", "What is the purpose of the training component?", "What is the purpose of the financial assistance?", "Under what context were the TAAF programs reauthorized?", "What funding has TAAF been authorized to receive?", "How has TAAF funding changed since the reauthorization?" ], "summary": [ "To be certified, a group must show that imports were a significant cause for at least a 15% decline in one of three factors: the price of the commodity, the quantity of the commodity produced, or the production value of the commodity.", "Once a producer group is certified, an individual producer within that group must meet three requirements to be approved for program benefits. These include technical assistance with a training component, and financial assistance. A producer must show that (1) the commodity was produced in the current year and also in one of the previous three years; (2) the quantity of the commodity produced decreased compared to that in a previous year, or the price received for the commodity decreased compared to a preceding three-year average price; and (3) no benefits were received under any other trade adjustment assistance program.", "The training component is intended to help the producer become more competitive in producing the same or another commodity.", "Financial assistance is to be used to develop and implement a business adjustment plan designed to address the impact of import competition.", "The 2015 reauthorization of TAAF programs follows directly in the wake of the enactment of Trade Promotion Authority (TPA) legislation (P.L. 114-26) that President Obama had requested of Congress to facilitate the conclusion of regional free trade agreements, including the Trans-Pacific Partnership (TPP) with 11 other Pacific-facing nations.", "Under P.L. 114-27, TAAF is authorized to receive $90 million annually for FY2015 through FY2021, subject to annual appropriations.", "No new funding has been appropriated since the program's reauthorization." ], "parent_pair_index": [ -1, 0, 1, 0, -1, 0, 1 ], "summary_paragraph_index": [ 2, 2, 2, 2, 5, 5, 5 ] }
CRS_94-261
{ "title": [ "", "Introduction", "What Constitutes the Intelligence Budget?", "Past Budgetary Practice", "Authorization", "Appropriations", "The Question of Disclosure", "Policy Arguments, Pro and Con", "Constitutional Questions Related to Disclosure of Aggregate Intelligence Budget Figure", "History of the Constitutional Language", "Judicial Interpretation", "Conclusions Regarding Statement and Account Clause", "Post-Cold War Developments", "Recommendations by the 9/11 Commission and Subsequent Legislation", "Conclusion" ], "paragraphs": [ "", "Since the creation of the modern U.S. intelligence community after World War II, neither Congress nor the executive branch has made public the total extent of intelligence spending except for two fiscal years in the 1990s. Rather, intelligence programs and personnel have largely been contained, but not identified, within the capacious expanse of the budget of the Department of Defense (DOD). This practice has long been criticized by proponents of open government. The intelligence reform effort of the mid-1970s that led to greater involvement of Congress in the oversight of the Intelligence Community also generated a number of proposals to make public the amounts spent on intelligence activities. Many observers subsequently argued that the end of the Cold War further reduced the need to keep secret the aggregate amount of intelligence spending. According to this view, with the dissolution of the Soviet Union, there are few foreign countries that can take advantage of information about trends in U.S. intelligence spending to develop effective countermeasures. Terrorist organizations, it is argued, lack the capability of exploiting total intelligence spending data.\nIn recent years, proposals for making public overall totals of intelligence spending have come under renewed consideration. In 1991 and 1992 legislation was enacted that stated the \"sense of the Congress\" that \"the aggregate amount requested and authorized for, and spent on, intelligence and intelligence-related activities should be disclosed to the public in an appropriate manner.\" Nevertheless, both the House and the Senate voted in subsequent years not to require a release of intelligence spending data. During the Clinton Administration, Director of Central Intelligence (DCI) George Tenet twice took the initiative to release total figures for appropriations for intelligence and intelligence-related activities. Despite the release of data for fiscal years 1997 and 1998, however, no subsequent appropriations levels have been made public.\nThe issue has not, however, died. The 9/11 Commission, in its final report, recommended that \"the overall amounts [or the \"top line\"] of money being appropriated for national intelligence and to its component agencies should no longer be kept secret. Congress should pass a separate appropriations act for intelligence, defending the broad allocation of how these tens of billions of dollars have been assigned among the varieties of intelligence work.\" A number of proposals for Intelligence reform legislation in 2004 included provisions for making the budget public, but the legislation ultimately enacted as the Intelligence Reform and Terrorism Prevention Act of 2004 ( P.L. 108-458 ) [hereafter referred to as the Intelligence Reform Act] did not include provisions for making budget numbers public. More recently, the FY2007 Intelligence Authorization legislation ( S. 372 ) reported in the Senate in January 2007 would require publication of budget totals for national, but not tactical, intelligence programs.\nThis report describes the constituent parts of the intelligence budget, past practice in handling intelligence authorizations and appropriations, the arguments that have been advanced for and against making intelligence spending totals public, a legal analysis of these issues, and a review of the implications of post-Cold War developments on the question. It also describes past congressional interest in keeping intelligence spending totals secret.", "The meaning of the term \"intelligence budget\" is not easily described. Although some may assume it is equivalent to the budget of the Central Intelligence Agency, in actuality it encompasses a wide variety of agencies and functions in various parts of the Federal Government that are involved in intelligence collection, analysis, and dissemination. At the same time, some important information collection efforts (such as reporting by U.S. embassies to the State Department) are not considered as intelligence activities and their funding is not included in the intelligence budget. A further complication, to be addressed below, is the separate category of intelligence-related activities undertaken in DOD that are included in overall intelligence spending categories. For some purposes, it is sufficient to describe intelligence and intelligence-related activities as those authorized by annual intelligence authorization acts.\nIn the context of annual budget reviews, both the executive branch and Congress have sought a comprehensive overview of all intelligence collection systems and activities. Thus, there emerged the concept of an intelligence community , not a monolithic organization but a grouping of governmental entities ranging in size from the CIA and NSA down to the small intelligence offices of the Treasury and Energy Departments. Except for the CIA, this community consists of components that are integral parts of agencies that are not themselves part of the Intelligence Community and their budgets are subject to separate authorization processes. Thus, for instance, the State Department's Bureau of Intelligence and Research is both part of the Intelligence Community and an organizational component of the Department of State. Its budget is considered as part of the overall intelligence budget and as a component of the State Department budget. Similar situations apply, on a much larger and expensive scale, in the Defense Department. Since these intelligence components are closely tied to their parent departments and share facilities and administrative structure with them, it is not always possible to desegregate intelligence and non-intelligence costs with precision.\nFor the purposes of this discussion, the U.S. \"intelligence budget\" is considered to consist of those activities authorized by the annual intelligence authorization acts, viz. the intelligence and intelligence-related activities of the following elements of the United States government:\n(1) the Central Intelligence Agency (CIA);\n(2) the National Security Agency (NSA);\n(3) the Defense Intelligence Agency (DIA);\n(4) the National Geospatial-Intelligence Agency (NGA) (formerly the National Imagery and Mapping Agency (NIMA));\n(5) the National Reconnaissance Office (NRO);\n(6) the intelligence elements of the Army, Navy, Air Force, and the Marine Corps\n(7) the State Department's Bureau of Intelligence and Research (INR);\n(8) the Federal Bureau of Investigation (FBI);\n(9) the Department of Homeland Security (DHS);\n(10) the Coast Guard;\n(11) the Department of the Treasury;\n(12) the Department of Energy;\n(13) the Drug Enforcement Administration (DEA).\nThe parameters of the intelligence budget are, to some extent, arbitrary. Lines between intelligence and other types of information-gathering efforts can be fine. As noted earlier, reporting by the State Department's Foreign Service Officers is an invaluable adjunct to intelligence collection, but is not considered an intelligence activity. Similarly, some reconnaissance and surveillance activities, mostly conducted in DOD, are very closely akin to intelligence, but for administrative or historical reasons have never been considered as being intelligence or intelligence-related activities per se .\nThe intelligence budget as authorized by Congress is now divided into two parts, the National Intelligence Program (NIP) and the Military Intelligence Program (MIP). NIP programs (formerly categorized as the National Foreign Intelligence Program (NFIP)) are those undertaken in support of national-level decision making and are conducted by the CIA, DIA, NSA, the NRO, NGA, and other Washington-area agencies. MIP programs are those undertaken by DOD agencies in support of defense policymaking and of military commanders throughout the world. Until September, 2005, there were two sets of programs within DOD—the Joint Military Intelligence Program (JMIP) and Tactical Intelligence and Related Activities (TIARA). JMIP programs, established as a separate category in 1994, supported DOD-wide activities. TIARA programs were defined as \"a diverse array of reconnaissance and target acquisition programs which are a functional part of the basic military force structure and provide direct support to military operations.\" In recent years the overlap among intelligence and intelligence-related activities has grown—satellite photography, for instance, can now be made immediately available to tactical commanders and intelligence acquired at the tactical level is frequently transmitted to national-level agencies. As a result, JMIP and TIARA were combined by the Defense Department into the MIP in September 2005.\nWithin the MIP are programs that formerly constituted the JMIP that support DOD-wide intelligence efforts as well as programs directly supporting military operations that were formerly categorized as TIARA. The relationship of intelligence-related programs to regular intelligence programs is a complex one that is not likely to be understood by many public observers. In 1994, then-DCI R. James Woolsey described them as a \"loose amalgamation of activities that may vary from year to year, depending on how the various military services decide what constitutes tactical intelligence.\" Intelligence-related programs, which may constitute somewhere around a third of total intelligence spending, are integral parts of defense programs; in many cases they are also supported by non-intelligence personnel and facilities. (The administrative expenses, for instance, of a military base that has intelligence-related missions as well as non-intelligence functions would probably not be included in intelligence accounts.) The role of intelligence-related programs is sometimes misinterpreted in public discussions of the multi-billion dollar intelligence effort.\nWith the passage of the Intelligence Reform Act in 2004, the Director of National Intelligence (DNI) has extensive statutory authorities for developing and determining the NIP and for presenting it to the President for approval. The President in turn forwards the NIP to Congress as part of the annual budget submission in January or February of each year. The Office of the DNI (ODNI) serves as the DNI's staff for annual budget preparation and submission. The DNI participates in the development of the MIP by the Secretary of Defense. The Under Secretary of Defense for Intelligence (USD(I)) has the responsibility to \"oversee all Defense intelligence budgetary matters to ensure compliance with the budget policies issues by the DNI for the NIP.\" The USD(I) also serves as Program Executive for the MIP and supervises coordination during the programming, budgeting, and execution cycles. Thus, in the development of both the NIP and the MIP essential roles are played by the Office of the DNI and the office of the USD(I). The two offices have overlapping responsibilities and close coordination is required.", "Budgeting for secret intelligence efforts has long presented difficult challenges to the Congress. Realizing the need for some direction over the intelligence effort that had been disbanded in the immediate aftermath of World War II, President Truman established, in a directive of January 22, 1946, a coordinative element for intelligence activities, the Central Intelligence Group (CIG), headed by a Director of Central Intelligence, and consisting of representatives from the State, War, and Navy Departments. This was not the creation of a new agency, but a coordinative group; personnel and facilities were to be provided \"within the limits of available appropriations.\" This arrangement was questioned, however, because of concern that specific authorization by Congress would be legally required to make funds available to any agency in existence more than a year. Thus, it might have been illegal for the CIG to expend funds after January 22, 1947.\nShortly after taking office in June, 1946, the second DCI, General Hoyt S. Vandenberg, arranged for the creation of a \"working fund\" consisting of allotments from the Departments of State, War, and the Navy, under the supervision of the Comptroller General, to cover the costs of the relatively small CIG. It cannot be readily determined if funds were transferred from all three departments; the larger budgets of the War and Navy Departments may have made them more likely contributors than the State Department.\nVandenberg, realizing the administrative weakness of this situation, began an effort to obtain congressional approval of an independent intelligence agency with its own budget. The National Security Act of 1947, which created the unified National Defense Establishment, included provisions for a Central Intelligence Agency, headed by a Director of Central Intelligence. It also authorized the transfer of \"personnel, property, and records\" of the CIG to the new CIA; it did not, however, provide additional statutory language regarding the administration of the CIA. With the creation of the CIA by the National Security Act of 1947, arrangements were made for the continuation of previous funding mechanisms; \"[t]he Agency was to conform as nearly as possible to normal procedures until further legislation by Congress should make exceptions fitting the special needs of the Agency.\"\nIt was recognized that follow-on enabling legislation would be required. After some delays, Congress passed the Central Intelligence Act of 1949 (P.L. 81-110) to provide a firmer statutory base for the CIA and to establish procedures for regular appropriations. This legislation, reported by the two armed services committees, provided authority for the CIA \"to transfer to and receive from other Government agencies such sums as may be approved by the Bureau of the Budget [predecessor of today's Office of Management and Budget]....\" The 1949 Act also provided that \"sums transferred to the [CIA]... may be expended for the purposes and under the authority of this Act without regard to limitations of appropriations from which transferred....\"\nRepresentative Carl Vinson, speaking on the floor of the House shortly after passage of the 1949 Act, stated that the legislation contained:\nthe authority to transfer and receive from other Government agencies such sums as may be approved by the Bureau of the Budget for the performance of any of the agency functions. This is how the Central Intelligence Agency gets its money. It has been going on since the agency was created, and this simply legalizes that important function which is the only means by which the amount of money required to operate an efficient intelligence service can be concealed.\nIn practice, the CIA Act of 1949 provides funding for CIA through the defense authorization and appropriation process. Funding for other intelligence activities undertaken by DOD agencies was logically included in defense bills.\nFor many years, authorizations and appropriations for CIA were handled by a relatively small number of Members and staff of the two appropriations committees with consultation with members of the two armed services committees. According to available sources, senior Members of the Appropriations Committees insisted on maintaining the secrecy of the contents of the CIA's budget requests and congressional actions in response. In 1956, subcommittees were created in the Armed Services and Appropriations Committees of each House to oversee the CIA. Many assessments of the practice of congressional oversight of intelligence activities during the Truman, Eisenhower, Kennedy, and Johnson Administrations have concluded that the congressional role was in large measure supportive and perfunctory. This view has, however, come under serious challenge and there is considerable evidence that Congress took close interest in intelligence spending, especially in regard to major surveillance systems and the construction of headquarters buildings. The small handful of Members responsible for intelligence oversight had a close working relationship with the CIA. For a number of years, beginning in the Eisenhower Administration, Senator Richard Russell served both as chairman of the Armed Services Committee and of the Subcommittee on Defense Appropriations and had an especially important influence on intelligence spending.\nDuring these Cold War years, intelligence budgets grew considerably in significant part because of efforts to determine the extent of Soviet nuclear capabilities through overhead surveillance by manned aircraft such as the U-2s and reconnaissance satellites, and through a worldwide signals intelligence effort. NSA and DIA emerged as major intelligence agencies with large budgets; other agencies were created to launch satellites and interpret overhead photography. These capabilities, which contributed directly to the design of strategic weapons systems and to the negotiation of strategic arms control agreements with the Soviet Union, cost many billions of dollars. These programs were initiated, funded by Congress, and administered in secrecy and involved a number of intelligence agencies and components of DOD. President Lyndon Johnson said on March 16, 1967:\nI wouldn't want to be quoted on this but we've spent 35 or 40 billion dollars on the space program. And if nothing else had come out of it except the knowledge we've gained from space photography, it would be worth 10 times what the whole program has cost. Because tonight we know how many missiles the enemy has and, it turned out, our guesses were way off. We were doing things we didn't need to do. We were building things we didn't need to build. We were harboring fears we didn't need to harbor. Because of satellites, I know how many missiles the enemy has.\nDuring the Ford Administration, E.O. 11905 of February 18, 1975, consolidated the budget for all intelligence agencies and provided for a comprehensive review of the National Foreign Intelligence Program by the DCI and senior DOD and NSC officials. Subsequent executive orders (most recently E.O. 12333 of December 4, 1981) and the Intelligence Authorization Act for FY1993 ( P.L. 102-496 ) clarified and strengthened the DCI's role. The Intelligence Reform and Terrorism Prevention Act of 2004 ( P.L. 108-458 ) gave the newly established position of Director of National Intelligence (DNI) authority to coordinate intelligence activities across the government and to manage the NIP. The DNI has specific responsibilities for developing and determining the annual consolidated NIP budget. The DNI also participates in the development of the MIP which is the responsibility of the Secretary of Defense.\nA key factor encouraging consolidated review of the intelligence budget has been increasingly detailed oversight by Congress. Efforts in the 1950s and 1960s to establish intelligence committees or to involve a larger number of Members in intelligence oversight were rebuffed, with oversight remaining in the hands of a small number of senior members. This situation was altered in the aftermath of the Vietnam War. In reaction to a series of revelations about allegedly illegal and improper activities by intelligence agencies in 1975, Congress created two (temporary) select committees to investigate the CIA and other intelligence agencies. The Church and Pike Committees investigated a wide range of intelligence issues and conducted well-publicized hearings. Although budgetary issues were not at the heart of the investigations, there emerged a consensus that congressional oversight of intelligence agencies needed to be strengthened and formalized and permanent intelligence committees established. There was also widespread sentiment expressed that more information regarding intelligence agencies and activities should be made public.\nFollowing the work of the Church and Pike Committees, Congress moved to revamp oversight of intelligence agencies. The Senate Select Committee on Intelligence (SSCI) was established in 1976, the House Permanent Select Committee on Intelligence (HPSCI) in 1977. Each of these committees was granted oversight of the CIA as well as other intelligence agencies and charged to prevent the types of abuses that the Church and Pike Committees had criticized. In conjunction with their oversight duties, HPSCI and SSCI were responsible for authorizing funds for intelligence activities undertaken by the CIA and other agencies throughout the government. There is, however, a crucial difference between the charters of the two committees. Although HPSCI has oversight of NIP and shares (with the Armed Services Committee) oversight of the MIP, the SSCI has oversight only over the NIP. In the Senate, oversight of the MIP is conducted by the Armed Services Committee (with informal consultation with the intelligence committee). Both SSCI and the Senate Armed Services Committee are represented in conferences on intelligence authorization bills; the final bill, as reported by the conference committee, authorizes both intelligence activities and intelligence-related activities.\nThe two intelligence committees are not the sole organs of congressional oversight. The armed services committees often issue sequential reports on intelligence authorization bills. Annual defense authorization acts include the large national intelligence agencies in DOD as well as the intelligence efforts of the four services. Intelligence activities of agencies outside of CIA and DOD are authorized in other legislation although some departments have standing authorizations rather than annual authorization acts.", "As is the case with other congressional committees, intelligence oversight has entailed reviewing annual budget proposals for the Intelligence Community submitted by the administration, conducting hearings, preparing an annual authorization bill, and managing it for the respective chamber. The two committees publish reports to accompany the annual intelligence authorization bills, with dollar amounts for various intelligence agencies and activities included in classified annexes. The classified annexes are available to all Members, but only within Intelligence Committee offices and sanctions exist for any unauthorized release of classified data.\nThe intelligence committees, however, do not have exclusive jurisdiction over expenditures for intelligence programs. National defense authorization acts also contain authorizing legislation for intelligence activities funded within their purview. There are various parts of defense authorization bills that are classified; some cover what are known as special access or \"black\" programs. These include not only some intelligence programs but also procurement of new weapons systems such as stealth aircraft. Members can obtain information about classified parts of defense authorization bills from the Armed Services Committees.\nOther authorization bills cover some intelligence activities providing a form of shared oversight. Budgets for INR, DEA and the FBI are funded through the appropriation bills that cover the Departments of Commerce, Justice, and State and similar procedures are used for Treasury and Energy Department intelligence entities in the Treasury, Postal Service, and General Government and Energy and Water Development appropriations bills. All of these combined, however, represent a small percentage of total intelligence spending–for instance, the FY2007 budget request for INR totaled only $51 million and other agencies are considerably smaller.\nThere has been some controversy regarding the nature of authorizing legislation required. Section 504(a) of the National Security Act provides that appropriated funds may be obligated or expended for an intelligence or intelligence-related activity only if ... those funds were specifically authorized by the Congress for use for such activities... .\" The nature of specific authorization had not, however, been defined. On November 30, 1990, President George H.W. Bush refused to sign (\"pocket vetoed\") the FY1991 Intelligence Authorization bill when it was presented to him (after the 101 st Congress had adjourned) and for over eight months intelligence activities were continued without an intelligence authorization act. Although some believed that authorizations contained within the National Defense Authorization Act for FY1991 ( P.L. 101-510 ) were sufficiently specific to meet the requirements of the statute, the House Intelligence Committee subsequently stated that, \"It is the view of the congressional intelligence committees that only an intelligence authorization bill provides the degree of specificity necessary to comply with the meaning and intent of Section 504(a).\" In 1993, language was included in the House report accompanying the FY1994 Defense Authorization Act that the Armed Services Committee \"does not intend that the inclusion of ... authorization [of NFIP programs] be considered a specific authorization, as required by section [504] of the National Security Act of 1947... .\" (This statement indicated that, whereas NFIP programs were not specifically authorized in defense authorization bills, TIARA programs were.) In addition, section 309 of the FY1994 Intelligence Authorization Act for FY1994 ( P.L. 103-178 ) amended the National Security Act of 1947 to make it explicit in law that the general authorization included in the 1947 legislation does not satisfy the requirement for specific authorization of intelligence and intelligence-related activities.\nIn some years when appropriations have been passed prior to final action on authorization bills, the appropriations acts have included a provision similar to section 8092 of the FY2006 Defense Appropriations Act ( P.L. 109-148 ):\nFunds appropriated by this Act, or made available by the transfer of funds in this Act, for intelligence activities are deemed to be specifically authorized by the Congress for purposes of section 504 of the National Security Act of 1947 (50 U.S.C. 414) during fiscal year 2006 until the enactment of the Intelligence Authorization Act for fiscal year 2006.\nNo FY2006 intelligence authorization bill was passed and, as a result, this brief clause in the appropriations bill served as the requisite authorization during FY2006. The FY2007 defense appropriations bill was passed prior to floor consideration of a FY2007 intelligence authorization bill and a similar clause was included in the defense appropriations bill ( P.L. 109-289 , section 8083). (No intelligence authorization legislation was passed in the 109 th Congress, but an intelligence authorization bill for FY2007 ( S. 372 ) was reported in the Senate in January 2007.) Although these provisions meet the statutory requirement for a \"specific authorization,\" significantly less congressional guidance is provided for intelligence programs.", "As is the case with all government activities, the appropriations committees have a central role in intelligence programs. Even during the Cold War period when congressional oversight of intelligence activities received little public attention, annual appropriations were required and extensive hearing were held. In recent years, appropriations committees have had an increasingly significant influence on the conduct of intelligence activities. In 1998 a supplemental appropriation act ( P.L. 105-277 ) added substantial funds for intelligence efforts not included in the annual authorization bill, and in the post-9/11 period the practice of relying on supplemental appropriations for funding the regular operations of intelligence agencies has limited the extent of congressional guidance in regard to the intelligence budget.\nThe reliance on supplemental appropriations has been widely criticized; the House Intelligence Committee in 2003 noted that while supplemental appropriations had reflected crisis in the aftermath of terrorist attacks, \"The repeated reliance on supplemental appropriations has an erosive negative effect on planning, and impedes long-term, strategic planning. The Committee hopes that the IC has finally reached a plateau of resources and capabilities on which long-term strategic planning can now begin.\"\nIn addition to use of supplemental appropriations to fund intelligence activities, as noted above the required \"specific authorization\" of intelligence programs required by the section 504 of the National Security Act has in FY2006 been supplied by one paragraph (section 8092) of the FY2006 defense appropriations act ( P.L. 109-148 ). The reliance on appropriations measures to authorize intelligence programs may change the contours of intelligence oversight in Congress by emphasizing the role of the two appropriations committees.\nThe defense subcommittees of the two appropriations committees review intelligence budget requests and approve funding levels for intelligence agencies that are part of DOD or whose budgets are contained (but not publicly identified) in defense appropriations acts, that is, CIA as well as NSA, DIA, the NRO, and NGA. There is a difference between appropriations for the CIA and the ODNI which, although included in defense appropriations acts, are transferred by the Office of Management and Budget (OMB) directly to the DNI and the CIA Director without the involvement of DOD. The Secretary of Defense is, however, heavily involved in the budgets and activities of intelligence agencies in DOD. The CIA and the defense agencies account for the vast bulk of all intelligence spending. Much smaller amounts are funded in appropriations measures for other departments that contain elements of the Intelligence Community.\nThe role of the appropriations committees can be significant. For instance, in 1992, the Defense Appropriation Act for FY1993 ( P.L. 102-396 ) reportedly reduced intelligence spending to a level significantly lower than authorized by the Intelligence Authorization Act ( P.L. 102-496 ). In 1990-1991, the Senate Appropriations Committee and the SSCI worked closely together to sponsor a facilities consolidation plan for some CIA activities without the active involvement of the HPSCI. Substantial changes have been made to intelligence programs by appropriations measures and in FY2006 no intelligence authorization act exists and thus agencies rely solely on appropriations legislation.", "Since the creation of the modern Intelligence Community in the aftermath of World War II, intelligence budgets have not been made public. At the conclusion of hostilities in August 1945, intelligence activities were transferred from the Office of Strategic Services (OSS) to the Army, Navy, and State Departments, which assumed responsibility for their funding. Meeting the expenses of the CIG, created in 1946, required the establishment of a \"working fund,\" as noted above, which received allocations from the three departments. This pattern was continued when the CIA was established the following year (although there may have been relatively few, if any, transfers from the State Department). The transfer of appropriated funds was done secretly, reportedly at the insistence of Members of Congress.\nThere are several parts of the intelligence budget that are made public. The costs of the Intelligence Community Management Account (CMA) are specified in annual intelligence authorization acts as are the costs of the CIA Retirement and Disability System (CIARDS). The CMA includes staff support to the DNI role and the CIARDS covers retirement costs of CIA personnel not eligible for participation in the government-wide retirement system. For FY2005, $310.4 million was authorized for 310 full-time CMA personnel and $239.4 million was authorized for CIARDS. In addition, the budget for the State Department's Bureau of Intelligence and Research is made public and some, but not all, tactical intelligence programs are identified in unclassified DOD budget submissions. Careful scrutiny of officially-published data on intelligence expenditures would not, however, provide a valid sense of the size and content of the intelligence budget.\nThe Church and Pike committees both called for public disclosure of the total amounts of each annual intelligence budget. The then DCI, George H.W. Bush, and President Ford both appealed to the Senate not to proceed with disclosure and the question was referred to the newly created SSCI. After conducting hearings, SSCI recommended (by a one vote margin) in May 1977 ( S.Res. 207 , 95 th Congress) that aggregate amounts appropriated for national foreign intelligence activities for FY1978 be disclosed. The full Senate did not, however, act on this recommendation.\nHPSCI, established by House Rule XLVIII after the termination of the Pike Committee, made an extensive study of the disclosure question. After conducting hearings in 1978 (and despite the willingness of then DCI Stansfield Turner to accept disclosure of \"a single inclusive budget figure\") the House Committee concluded unanimously that it could find \"no persuasive reason why disclosure of any or all amounts of the funds authorized for the intelligence and intelligence-related activities of the government would be in the public interest.\" With the failure of either chamber to take action, the disclosure question receded into the background as efforts (ultimately unsuccessful) were underway during the Carter Administration to draft a legislative charter for the entire Intelligence Community. The Reagan Administration showed markedly less interest in such questions as it launched a major expansion of intelligence activities. The issue would return during the Clinton Administration after the end of the Cold War and again in the recommendations of the 9/11 Commission as noted below.\nIt should be understood that with the establishment of the two intelligence committees in the 1970s, Members have been able to review budget figures contained in the classified annexes accompanying reports intelligence authorization bills, although rules of both chambers prevent the divulging of classified information.", "Since the 1970s, arguments for and against the public disclosure of intelligence spending levels have turned on essentially the same issues, viz. the constitutional issue regarding the requirement for full reports of government expenditures (discussed below) and the broader question of the value of open political discourse, the dangers of revealing useful information to actual or potential enemies, and the difficulty of providing and debating aggregate numbers without being drawn into providing details.\nAdvocates of disclosure argue that greater public discussion of intelligence spending made possible by the disclosure of spending levels would ultimately lead to a stronger intelligence effort. They maintain that no organization, even one with superior management and personnel, is immune to waste and inefficiency and that wider appreciation of the costs and benefits of intelligence could contribute in the long run toward improvements in the organization and functioning of intelligence. Senator William Proxmire put the case as follows:\n... people not only have a right to know, but you are going to have a much more efficient government when they do know. We only make improvements when we get criticized, and you can only criticize when you know what you are talking about, when you have some information.\nIf you know that there is a certain amount being spent on intelligence, then you are in a much stronger position to criticize what you are getting for that expenditure.\nAlso, in terms of efficiency, publication of an aggregate figure for intelligence spending would result in a cleaner, more accurate defense budget. As presently handled, the defense budget includes significant unspecified national intelligence expenditures (e.g., the greater part of the CIA budget) that in many cases are not actually part of defense spending per se . Such expenditures make the defense budget and various components of it seem larger than is the case. Identification of those intelligence expenditures that are extraneous to defense could give the public a more accurate perception of defense costs.\nThose holding this position argue, in addition, that publication of limited intelligence spending totals would provide no useful information to a present or future adversary. Even during the height of the Cold War, Soviet authorities, they maintain, undoubtedly had a reasonably accurate knowledge of the extent of the U.S. intelligence budget and, in any event, were more concerned with the nature of our activities rather than the size of expenditures. Noting the demise of the Soviet Union, Representative Dan Glickman, then the Chairman of the House Intelligence Committee, stated in 1994 that \"Unless a justification on national security grounds exists, keeping the budget totals secret serves only one purpose, and that is to prevent the American taxpayer from knowing how much money is spent on intelligence.\"\nOpposition to public release has been based on the conviction that intelligence by its very nature stands apart from other activities of the government and the publication of general budgetary information, potentially exploitable by an adversary attempting to discern U.S. intelligence capabilities and operations, could compromise the nation's intelligence capabilities. This concept perceives intelligence to be an exceptional activity that cannot be handled according to normal procedures of an open society. This is particularly true of those operations that involve the collection of intelligence information. Sophisticated reconnaissance devices, electronic technology, and human resources operating at significant risk are particularly vulnerable to human error or hostile penetration; consequently, they require extraordinary protective measures. In 1983, HPSCI described the unique vulnerabilities of intelligence systems as follows:\nIntelligence activities and capabilities are inherently fragile. Unlike weapons systems, which can be countered only by the development of even more sophisticated systems developed over a long period, intelligence systems are subject to immediate compromise. Often they can be countered or frustrated rapidly simply on the basis of knowledge of their existence. Thus budget disclosure might well mean more to this country's adversaries than to any of its citizens. Further, this information could then be used to frustrate United States intelligence missions.\nAt the end of the Cold War along with the downsizing of the defense budget it was argued that intelligence spending should be significantly reduced. Some advocates of reduction anticipated that publication of spending totals would lead to a perception by the public that such levels of intelligence spending were unjustified and could be lowered. This potential for public opposition to existing levels of spending was also recognized by many who defended intelligence spending levels and probably reinforced their opposition to making the budget public.\nAlthough such perspectives may have been widely shared in the early 1990s, later in the decade the emergence of international terrorism and other transnational threats lead to concerns that intelligence spending should not be further reduced. The 9/11 attacks altered the climate regarding intelligence spending; even though there was widespread criticism of the performance of intelligence agencies, there was a pervasive determination to spend whatever was necessary on intelligence as part of the global war on terrorism. In recent years the argument for making intelligence spending levels public has not in general been a proxy argument for reducing intelligence spending inasmuch as few would argue that less intelligence is needed given the realistic potential for more Al Qaeda attacks.\nOther opponents of disclosure have argued that making public a few numbers indicating total spending levels (whether budget requests, authorizations, or appropriations) will be meaningless to the public debate. Explanations will be immediately required to show that these figures are divided among several functions, threats, and agencies, cover national and tactical programs, may or may not include administrative and logistical support, etc. Pressures will in a politically adversarial context mount to publish these sub-totals as well as an aggregated figure. It is further argued that these explanations would likely result in a degree of transparency for U.S. intelligence activities that would allow adversaries to take effective countermeasures.\nThere is also a contrary argument that intelligence spending, even within the NIP, is in large measure related to defense programs and could be usefully expressed as a percentage of overall defense spending. Admiral Bobby Ray Inman, who served as Deputy Director of Central Intelligence in the early Reagan Administration, testified in 1991 that, \"I am certainly prepared to make unclassified the total amount, and defend to the public why 10% of our total defense efforts spent for both national and tactical intelligence is not a bad goal at all. Just as I don't think that 11 or 12% of the budget for research and development is a bad goal at all for the country.\"\nSome opponents of greater disclosure point out that large fluctuations in intelligence spending might also reveal major new programs under development (the example of the U-2s and satellites is sometimes mentioned). Premature exposure of such new capabilities could severely limit their ability to acquire valuable information before adversaries become aware of U.S. capabilities. On the other hand, according to a 1991 Senate report, DCI Stansfield Turner \"testified in 1977 that there had been no 'conspicuous bumps' in the intelligence budget for the preceding decade. The [Senate] Select Committee's experience is similarly that no secrets would have been lost by publishing the annual aggregate budget total since then.\" Unconvinced defense analysts insist that revealing the fact of significant changes in U.S. intelligence budgets from year to year will alert unfriendly governments or groups to new efforts against them (or to a slackened effort by the U.S. that can be exploited).\nPublic discussion of the question of making intelligence budgets public has usually turned on the question of the constitutionality or the propriety of keeping intelligence spending figures classified. Beyond these issues, however, lies the less-discussed issue of the nature of intelligence and intelligence-related spending. The existence of the NIP and the MIP has been publicly acknowledged in many Executive and Legislative Branch publications. However, the respective roles of the separate programs are not well known outside of a relatively narrow circle of intelligence specialists. The role of tactical programs in particular is rarely considered in the context of discussions of making intelligence spending levels public. Observers express concern that characterizing some projects related to information support for targeting as a tactical intelligence program could be characterized in some cases as arbitrary inasmuch as similar projects may be included in other parts of the Defense budget. Reportedly, inclusion of some projects in the MIP program is not consistent from year to year and thus could lead to confusion in tracking intelligence spending.\nSome consideration has been given to making public only the budget for the NIP which contains funding for the CIA, the National Reconnaissance Office (NRO), the National Geospatial-Intelligence Agency (formerly the National Imagery and Mapping Agency (NIMA)), and the National Security Agency (NSA).\nWhen making total NIP spending public, some observers would consolidate responsibility for authorizing NIP in the two intelligence committees, leaving the armed services to deal with the MIP. It is likely that jurisdiction of the Armed Services committees will continue inasmuch as the NIP includes the budgets of major defense agencies that report to the Secretary of Defense and to which are assigned many thousands of military personnel. Some argue that the close ties between the NRO, NGA, and NSA and other Defense agencies also require that their budgets be prepared in the same Department.\nIn 2002 the position of Under Secretary of Defense for Intelligence (USD(I)) was established by section 901 of the FY2003 National Defense Authorization Act ( P.L. 107-314 ). The incumbent of this position, currently Stephen Cambone, is charged with overseeing the budgets of DOD's intelligence agencies, including the portions that fall within the NIP and those are contained in the MIP. The USD(I) is the key point of contact between DOD and the Office of the DNI and the two offices collaborate in the preparation of annual budget submissions to Congress along with those of other intelligence agencies.", "An issue that arises in considering whether or not to disclose an aggregate intelligence budget figure is whether the Statement and Account Clause of the United States Constitution requires such disclosure. The pertinent constitutional language is contained in Article I, Section 9, Clause 7, which states:\nNo money shall be drawn from the Treasury, but in Consequence of Appropriations made by Law; and a regular Statement and Account of the Receipts and Expenditures of all public Money shall be published from time to time. [Emphasis added.]\nA brief examination of the history of this language and of the scant case law interpreting the Statement and Account Clause may be of assistance in placing the disclosure issue in context.", "During the Constitutional Convention in Philadelphia, the first language on the subject of statements and accounts was offered on September 14, 1787, by George Mason. The debate on the matter, as reflected in Madison's \"Notes of Debates,\" was as follows:\nCol. Mason moved a clause requiring \"that an Account of the public expenditures should be annually published\" Mr. Gerry 2ded. the motion\nMr Govr. Morris urged that this wd. be impossible in many cases.\nMr. King remarked, that the term expenditures went to every minute shilling. This would be impracticable. Congs. might indeed make a monthly publication, but it would be in such general Statements as would afford no satisfactory information.\nMr. Madison proposed to strike out \"annually\" from the motion & insert \"from time to time\" which would enjoin the duty of frequent publications and leave enough to the discretion of the Legislature. Require too much and the difficulty will be get a habit of doing nothing. The articles of Confederation require half-yearly publications on this subject—A punctual compliance being often impossible, the practice has ceased altogether—\nMr Wilson 2ded. & supported the motion—Many operations of finance cannot be properly published at certain times.\nMr, Pinckney was in favor of the motion.\nMr. Fitzimmons—It is absolutely impossible to publish expenditures in the full extent of the term.\nMr. Sherman thought \"from time to time\" the best rule to be given.\n\"Annual\" was struck out—& those words—inserted nem: con:\nThe motion of Col. Mason so amended was then agreed to nem: con: and added after—\"appropriations by law as follows—\"And a regular statement and account of the receipts & expenditures of all public money shall be published from time to time.\"\nDuring the Virginia ratifying convention, the Statement and Account Clause occasioned comment on at least two occasions. On June 12, 1788, James Madison observed:\nThe congressional proceedings are to be occasionally published, including all receipts and expenditures of public money, of which no part can be used, but in consequence of appropriations made by law. This is a security which we do not enjoy under the existing system. That part which authorizes the government to withhold from the public knowledge what in their judgment may require secrecy, is imitated from the confederation—that very system which the gentleman advocates.\nOn the 17 th of June, 1788, George Mason raised a question as to the \"from time to time\" language, and the following debate ensued:\nMr. GEORGE MASON apprehended the loose expression of \"publication from time to time\" was applicable to any time. It was equally applicable to monthly and septennial periods. It might be extended ever so much. The reason urged in favor of this ambiguous expression was, that there might be some matters which require secrecy. In matters relative to military operations and foreign negotiations, secrecy was necessary sometimes; but he did not conceive that the receipts and expenditures of the public money ought ever to be concealed. The people, he affirmed, had a right to know the expenditures of their money; but that this expression was so loose, it might be concealed forever from them, and might afford opportunities of misapplying the public money, and sheltering those who did it. He concluded it to be as exceptionable as any clause, in so few words, could be.\nMr. LEE (of Westmoreland) thought such trivial argument as that just used by the honorable gentleman would have no weight with the committee. He conceived the expression to be sufficiently explicit and satisfactory. It must be supposed to mean, in the common acceptation of language, short, convenient periods. It was as well as if it had said one year, or a shorter term. Those who would neglect this provision would disobey the most pointed directions. As the Assembly was to meet next week, he hoped gentlemen would confine themselves to the investigation of the principal parts of the Constitution.\nMr. MASON begged to be permitted to use that mode of arguing to which he had been accustomed. However desirous he was of pleasing that worthy gentleman, his duty would not give way to that pleasure.\nMr. GEORGE NICHOLAS said it was a better direction and security than was in the state government. No appropriation shall be made of the public money but by law. There could not be any misapplication of it. Therefore, he thought, instead of censure it merited applause; being a cautious provision, which few constitutions, or none, had ever adopted.\nMr. CORBIN concurred in the sentiments of Mr. Nicholas on this subject.\nMr. MADISON thought it much better than if it had mentioned any specified period; because, if the accounts of the public receipts and expenditures were to be published at short, stated periods, they would not be so full and connected as would be necessary for a thorough comprehension of them, and detection of any errors. But by giving them an opportunity of publishing them from time to time, as might be found easy and convenient, they would be more full and satisfactory to the public, and would be sufficiently frequent. He thought, after all, that this provision went farther than the constitution of any state in the Union, or perhaps in the world.\nMr. MASON replied, that, in the Confederation, the public proceedings were to be published monthly, which was infinitely better than depending on men's virtue to publish them or not, as they might please. If there was no such provision in the Constitution of Virginia, gentlemen ought to consider the difference between such a full representation, dispersed and mingled with every part of the community, as the state representation was, and such an inadequate representation as this was. One might be safely trusted, but not the other.\nMr. MADISON replied, that the inconveniences which had been experienced from the Confederation, in that respect, had their weight in him in recommending this in preference to it; for that it was impossible, in such short intervals, to adjust the public accounts in any satisfactory manner.\nMr. HENRY. Mr Chairman, we have now come to the 9 th section, and I consider myself at liberty to take a short view of the whole. I wish to do it very briefly. Give me leave to remark that there is a bill of rights in that government.\nThere are express restrictions, which re in the shape of a bill of rights; but they bear the name of the 9 th section. The design of the negative expressions in this section is to prescribe limits beyond which the powers of Congress shall not go. These are the sole bounds intended by the American government. Whereabouts do we stand with respect to a bill of rights? Examine it, and compare it to the idea manifested by the Virginian bill of rights, or that of the other states. The restraints in this congressional bill of rights are so feeble and few, that it would have been infinitely better to have said nothing about it. The fair implication is, that they can do every thing they are not forbidden to do. What will be the result if Congress, in the course of their legislation, should do a thing not restrained by this 9 th section? It will fall as an incidental power to Congress, not being prohibited expressly in the Constitution....\nIf the government of Virginia passes a law in contradiction to our bill of rights, it is nugatory. By that paper the national wealth is to be disposed of under the veil of secrecy; for the publication from time to time will amount to nothing, and they may conceal what they may think requires secrecy. How different it is in your own government! Have not the people seen the journals of our legislature every day during every session? Is not the lobby full of people every day? Yet gentlemen say that the publication from time to time is a security unknown in our state government! Such a regulation would be nugatory and vain, or at least needless, as the people see the journals of our legislature, and hear their debates, every day. If this be not more secure than what is in that paper, I will give up that I have totally misconceived the principles of the government. You are told that your rights are secured in this new government. They are guarded in no other part but this 9 th section. The few restrictions in that section are your only safeguards. They may control your actions, and your very words, without being repugnant to that paper.\nThe existence of your dearest privileges will depend upon the consent of Congress, for they are not within the restrictions of the 9 th section....\nSome attention to this clause was also given in the New York ratifying convention and in the Maryland House of Delegates. The pertinent portion of the New York debates took place on June 27, 1788. During those debates, Mr. Chancellor Livingston, in expounding upon concerns raised with regard to the power to tax, stated in pertinent part:\n... You will give up to your state legislatures every thing dear and valuable; but you will give no power to Congress, because it may be abused; you will give them no revenue, because the public treasures may be squandered. But do you not see here a capital check? Congress are to publish, from time to time, an account of their receipts and expenditures. These may be compared together; and if the former, year after year, exceed the latter, the corruption will be detected, and the people may use the constitutional mode of redress....\n... I beg the committee to keep in mind, as an important idea, that the accounts of the general government are, \"from time to time,\" to be submitted to the public inspection.\nHon. Mr. SMITH remarked, that \"from time to time' might mean from century to century, or any period of twenty or thirty years.\nThe CHANCELLOR asked if the public were more anxious about any thing under heaven than the expenditure of money. Will not the representatives, said he, consider it essential to their popularity, to gratify their constituents with full and frequent statements of the public accounts? There can be no doubt of it.\nOn November 29, 1787, the Delegates to the Constitutional Convention were called before the Maryland House of Delegates to explain the Principles, upon which the proposed Constitution was founded. James McHenry, in his explanation of Section 9, stated in part:\n... When the Public Money is lodged in its Treasury there can be no regulation more consistent with the Spirit of Economy and free Government that it shall only be drawn forth under appropriation by Law and this part of the proposed Constitution could meet with no opposition as the People who give their Money ought to know in what manner it is expended.\nThus, the history of this provision sheds some light upon the range of views with regard to anticipated benefits and intended sweep of this language, but does not give great attention to the possibility of secret funding for intelligence activities. Rather, the debate focused principally upon the general need for such a provision, the timing of the statements and accounts, and the practical impact of such a requirement. Nevertheless, there were a few indications that some of the delegates considered the possibility of secrecy attached to some of those statements and accounts. For example, one might compare Mr. Wilson's observations during the Constitutional Convention with those of Mr. Mason at the Virginia ratifying convention. Mr. Wilson noted that some financial operations could not be published at certain times. Mr. Mason recognized that at times necessity might dictate that some secrecy would attach to military operations or foreign negotiations, but rejected the notion that receipts and expenditures of public money should ever be concealed. The most explicit mention of receipts and expenditures shrouded in secrecy is contained in the remarks of Mr. McHenry. He regarded the clause's requirement of publication from time to time as so broad as to permit the Congress to dispose of the public wealth in secrecy or to conceal what they determine requires secrecy. The history of the clause leaves it uncertain whether or to what extent his views were shared by others.\nIt appears clear that the concern over how public funds would be spent was the motivating force behind the inclusion of the Statement and Account Clause. The clause seems to impose an affirmative duty to disclose information with regard to public receipts and expenditures. These general outlines do not appear to provide unequivocal guidance as to the scope and frequency of these disclosures, however, and there are some indications that at least delay in releasing some information and possibly secrecy of some information was anticipated, whether with approbation or alarm, by some of those at the Constitutional Convention and the ratifying conventions.", "Further insight may be drawn from an examination of judicial interpretation of the clause in the intelligence budget context. Several cases appear to be of significance in this regard. In 1974, the United States Supreme Court decided United States v. Richardson , 418 U.S. 166 (1974). There a federal taxpayer challenged the constitutionality of provisions of the Central Intelligence Agency Act of 1949 concerning public reporting of expenditures on the ground that they violated the Statement and Account Clause. The provisions at issue permitted the CIA to account for its expenditures solely on the certificate of the Director, 50 U.S.C. § 403j(b).\nRichardson had made several attempts to obtain detailed information regarding the CIA's expenditures from the Government Printing Office and the Fiscal Service of the Bureau of Accounts of the Treasury Department, but found the information he received unsatisfactory. He questioned the constitutionality of the provision and requested that the Treasury Department seek an opinion from the Attorney General on this question. The Treasury Department declined to do so, and Richardson then filed suit. The district court dismissed for lack of standing and on the ground that the subject matter raised political questions not amenable to judicial determination. Richardson's request for a three-judge court to try the matter was also rejected by the District Court. The Court of Appeals for the Third Circuit, sitting en banc, reversed, and remanded for consideration by a three-judge court.\nThe Supreme Court granted certiorari and reversed. The issue before the Court was whether the respondent had standing to sue. The Court found that he did not, without reaching the merits of the constitutional question. In so doing, the Court noted:\nIt can be argued that if respondent is not permitted to litigate this issue, no one can do so. In a very real sense, the absence of any particular individual or class to litigate these claims gives support to the argument that the subject matter is committed to the surveillance of the Congress, and ultimately to the political process....\nIn footnote 11, 418 U.S. at 178, the Court also observed:\nAlthough we need not reach or decide precisely what is meant by \"a regular Statement and Account,\" it is clear that Congress has plenary power to exact any reporting and accounting it considers appropriate in the public interest. It is therefore open to serious question whether the Framers of the Constitution ever imagined that general directives to the Congress or the Executive would be subject to enforcement by an individual citizen. While the available evidence is neither qualitatively nor quantitatively conclusive, historical analysis of the genesis of cl. 7 suggests that it was intended to permit some degree of secrecy of governmental operations. The ultimate weapon of enforcement available to the Congress would, of course, be the \"power of the purse.\" Independent of the statute here challenged by respondent, Congress could grant standing to taxpayers or citizens, or both, limited, of course, by the \"cases\" and \"controversies\" provision of Art. III.\nNot controlling, but surely not unimportant, are nearly two centuries of acceptance of a reading of cl. 7 as vesting in Congress plenary power to spell out the details of precisely when and with what specificity Executive agencies must report the expenditure of appropriated funds and to exempt certain secret activities from comprehensive public reporting. See 2 M. Farrand, The Records of the Federal Convention of 1787, pp. 618-619 (1911); 3 id. , at 326-327; 3 J. Elliot, Debates on the Federal Constitution 462 (1836); D. Miller, Secret Statutes of the United States 10 (1918).\nSeveral lower court decisions are also instructive here. In Harrington v. Bush , 553 F.2d 190 (D.C. Cir. 1977), a Member of Congress sought declaratory and injunctive relief to foreclose the CIA from using the funding and reporting provisions of the 1949 Central Intelligence Act in connection with allegedly illegal activities. The United States Court of Appeals for the District of Columbia Circuit dismissed the suit for lack of standing. Plaintiff did not challenge the constitutional sufficiency of the funding and reporting provisions. In outlining the statutory and constitutional framework to set the case in context, the court noted that the funding and reporting requirements of the CIA Act\n... represent an exception to the general method for appropriating and reporting the expenditure of federal funds. Article I, section 9, clause 7 of the U.S. Constitution ... is not self-defining and Congress has plenary power to give meaning to the provision. The Congressionally chosen method of implementing the requirements of Article I, section 9, clause 7 is to be found in various statutory provisions....\nWith respect to the reporting of expenditures, the key statutory provision of general application is 31 U.S.C. § 1029 which imposes a duty on the Secretary of the Treasury to provide Congress on an annual basis with \"... an accurate, combined statement of the receipts and expenditures ... of all public moneys....\" Since Congressional power is plenary with respect to the definition of the appropriations process and reporting requirements, the legislature is free to establish exceptions to this general framework, as has been done with respect to the CIA....\nIn Halperin v. CIA , 629 F.2d 144 (D.C. Cir. 1980), a private citizen sought access to CIA documents regarding legal bills and fee arrangements of private attorneys retained by the Agency through the Freedom of Information Act, 5 U.S.C. § 552. The documents were held to be exempt from disclosure under FOIA, exception 3, which addressed documents specifically exempted by statute. Judge Gasch found both that the documents were exempted under the protection from unauthorized disclosure afforded intelligence sources and methods, 50 U.S.C. § 403(d)(3) (1976), and that the information sought was specifically exempted by Section 6 of the Central Intelligence Act, 50 U.S.C. § 403g (1976). The plaintiff argued that application of these statutes under the FOIA exemption was violative of the Statement and Account Clause. The appellate court, relying upon United States v. Richardson, supra , rejected his argument, holding that he lacked standing to challenge the constitutionality of secret appropriations and expenditures for the CIA. The court found that the nature of the injury alleged by the plaintiff under FOIA was undifferentiated and common to all members of the Public and therefore, like the taxpayer in Richardson , the plaintiff had not shown the \"`particular concrete injury' required for standing.\"\nIn determining the constitutionality and justiciability of statutory secrecy for CIA expenditures, the Halperin court reviewed the history of the Statement and Account Clause. As to the debates in the Virginia ratifying convention in June of 1788, the court opined:\nMason's statement clarifies several points concerning the Framers' intent. First it appears that Madison's comment on governmental discretion to maintain the secrecy of some expenditures, far from being an isolated statement, was representative of his fellow proponents of the \"from time to time\" provision. Second, as to what items might legitimately require secrecy, the debates contain prominent mention of military operations and foreign negotiations, both areas closely related to the matters over which the CIA today exercises responsibility. Finally, we learn that opponents of the \"from time to time\" provision, exemplified by Mason, favored secrecy only for the operations and negotiations themselves, not for receipts and expenditures of public money connected with them. But the Statement and Account Clause, as adopted and ratified, incorporates the view not of Mason, but rather of his opponents, who desired discretionary secrecy for the expenditures as well as the related operations....\nThe court regarded Patrick Henry's concern over the \"time to time\" language and the potential for expenditures being concealed by Congress as confirmation for the court's interpretation of the Madison-Mason debate. It observed further:\nViewed as a whole, the debates in the Constitutional Convention and the Virginia ratifying convention convey a very strong impression that the Framers of the Statement and Account Clause intended it to allow discretion to Congress and the President to preserve secrecy for expenditures related to military operations and foreign negotiations. Opponents of the \"from time to time\" provision, it is clear, spoke of precisely this effect from its enactment. We have no record of any statements from supporters of the Statement and Account Clause indicating an intent to require disclosure of such expenditures.\nThe Halperin court also found confirmation for its conclusion that the Statement and Account Clause did not require disclosure of the expenditures at issue from the historical evidence of government practices with regard to disclosure and secrecy before and after the advent of the Constitution. The Committee of Secret Correspondence of the Continental Congress was created on November 29, 1775, Congress resolving to provide for expenses incurred by the Committee in sending out its \"agents\". When the Committee received information from Arthur Lee, one of its agents, regarding French plans to send arms and ammunition to the Continental Army, it determined to maintain strict secrecy, even from Congress, because of the nature and importance of this information. The court notes that the Congress appears to have exerted greater direct control over the Committee after the Declaration of Independence.\nThe camouflaging of the actual recipient and intended use of intelligence funds also appears to have had early usage under George Washington, commander-in-chief of the colonial armies, as reflected in a letter to him from Robert Morris, a member of the Committee of Secret Correspondence, from January 21, 1783. The letter reflects both the provision of a cash account in anticipation of needs which might arise for contingencies and secret service. Drafts drawn from that account appear to have been drawn in favor of member's of Washington's family on account of secret services, seemingly a means of concealing the identity of the actual recipients.\nThe court also noted a series of statutes creating contingent funds or secret service funds giving the President a means of providing secret funding for foreign intelligence activities. For example, in the Act of July 1, 1790, 1 Stat. 128 (10), the Congress created such a fund, appropriating such monies for \"persons to serve the United States in foreign parts.\" In this act, the President was required to provide a regular statement and account of his expenditures from the fund, but permitted him to not disclose \"such expenditures as he may think it advisable not to specify.\" By the Act of February 9, 1793, 1 Stat. 299, 300 (1793), Congress re-enacted the 1790 statute, but modified its language to allow the President to make secret expenditures without specification by making a certificate or by directing the Secretary of State to make a certificate for the amount. It might be noted that although the specific expenditures from these funds do not appear to have been expected to be disclosed, the statutes did include aggregate numbers for the appropriations for the funds created.\nIn Aftergood v. Central Intelligence Agency , 355 F. Supp. 2d 557 (D.D.C. 2005), the plaintiff sought historical intelligence budget information for the years 1947 through 1970, as well as subsidiary agency budget totals, from the Central Intelligence Agency (CIA) under FOIA. The CIA responded that the by asserting that the information sought was exempt from disclosure under exemption 3, 5 U.S.C. § 552(b)(3), based upon 50 U.S.C. § 403-3(c)(7), which provided that the Director of Central Intelligence shall \"protect intelligence sources and methods.\" Both parties filed for summary judgment. The court granted the CIA's motion and denied Mr. Aftergood's motion. The plaintiff argued, in part, that the Statement and Account Clause required publication of the information he requested. Based upon the \"unequivocal[]\" holding of the U.S. Court of Appeals for the D.C. Circuit in Halperin , which, in turn, relied on Richardson , Judge Urbina rejected plaintiff Aftergood's contention and held that \"a FOIA plaintiff does not have standing under the Statement and Account [C]lause to challenge the constitutionality of CIA budget secrecy.\"", "The Statement and Account Clause appears to impose an affirmative duty upon the Congress to periodically make a statement and account of its disposition of the public funds. The questions that arose during the debates upon this clause at the Constitutional Convention and the ratifying conventions went largely to the timing and scope rather than the fact of that obligation. The debates suggest that at least some of the delegates to the Constitutional Convention and the participants in the debates on ratification anticipated that some secrecy might be expected or needed in dealing with military and foreign affairs, and that the language of the clause might be broad enough to permit the Congress to determine what expenditures should be kept secret. Historically, both before and after the Constitution's advent, some provision in practice or statute appears to have been made to keep the substance of some intelligence information or activities closely-held, as well as the nature and recipients of funds for intelligence activities. The early statutes creating funds for contingent expenses or secret service do seem to include aggregate figures as to the money appropriated, but permit circumspection as to the documentation of expenses from the funds so created.\nThe judicial interpretation of the statement and account clause appears to lay the power to define the sweep of the language in the hands of the Congress. The courts have been consistent in denying standing to those who have sought to challenge the constitutionality of the funding structure of the Central Intelligence Agency Act of 1949 under the Statement and Account Clause to try to access information not disclosed because of the strictures of the 1949 Act. The Richardson Court and its progeny have indicated that the Congress possesses plenary authority to give substance to the language of the Clause and to require such reporting of expenditures as it deems in the public interest. The vehicle by which Congress gives substance to the Clause's obligations is by statutory mandate. The courts seem to suggest that secrecy as to some expenditures particularly in the area of foreign or military affairs appears to have been anticipated in the crafting of the clause and reflected in contemporaneous practice.\nSince the early years of the nation, Congress has from time to time, by statute, created funds for expenditures for foreign intelligence activities, and has permitted expenditures from those funds to be made by certificate. Many of the statutes do specify aggregate amounts to be appropriated for the contingent or secret funds in question, but do not require detailed reporting on the nature of the expenditures therefrom. The Central Intelligence Agency Act of 1949 permits transfer of funds for intelligence purposes from funds appropriated for other agencies, thereby facilitating concealment of the actual intelligence funding levels.\nIt appears that there was some uncertainty among the Framers of the Constitution as to the scope of the obligation the clause imposed upon the Congress. From our review of the constitutional language, its history, and the sparse judicial interpretation of its import, it seems that the courts regard the Congress as having the power to define the meaning of the clause. The courts have not had occasion to address the issue on the merits, and, indeed, might refuse to do so on political question grounds if the issue were presented; however, the judicial interpretation of the Statement and Account Clause to date suggests that a court would be unlikely to find the disclosure of the aggregate intelligence budget constitutionally compelled.", "The end of the Cold War had a significant effect on intelligence budgets. Since the country does not face the relentless challenge of an enemy superpower with its own hostile intelligence services, significant reductions in intelligence spending were enacted and criticisms of the continued need for budgetary secrecy were raised anew. Senator Robert Kerrey stated in November 1993: \"Openness is the order of the day, and unless a threat as formidable and as lethal as the old Soviet Union comes along, our society and Government will steadily become more open. Our task is to make intelligence more useful to more Americans, not hoard it.\" Some also maintained that the alleged failures of intelligence agencies to appreciate the essential fragility of the Soviet system or to collect intelligence on the Iraqi nuclear capabilities, warrant a significant overhaul and downsizing of collection and analytical efforts.\nReductions in defense spending across the board affected intelligence spending in two ways. First, it was assumed that a smaller military force structure reduced requirements for intelligence infrastructure; fewer forces would likely require fewer intelligence support personnel. This argument was countered by some who argued that leaner force structures actually required stronger intelligence support to ensure their most effective and efficient use. Secondly, as the bulk of intelligence funding continued to be \"hidden\" within the DOD budget, reductions in overall defense spending required either proportional reductions in intelligence programs or disproportionate reductions in non-intelligence programs to compensate for maintaining intelligence spending at existing levels. The latter alternative engendered strong resistance among defense planners already hard pressed to maintain other priority programs. In short, as defense spending contracted, it became more difficult to launch new intelligence efforts or even to maintain intelligence programs.\nThis debate over future requirements for intelligence programs was related to (albeit not identical with) the continuing controversy over the desirability of public disclosure of intelligence spending levels. Some opposed to existing or higher levels of intelligence spending consider that public knowledge of the high costs of intelligence spending would lead to demands that they be drastically reduced. Efforts to reduce funding levels in intelligence authorization bills are complicated by the question of shared oversight. In 1991, there was concern that reductions in FY1992 intelligence programs were reallocated to other defense programs rather than being used to reduce the deficit.\nWith the end of the Cold War, the question of the desirability of making public the extent of the intelligence budget re-emerged in congressional debates and floor votes for the first time since 1975. In the consideration of the FY1992 intelligence authorization bill, the SSCI reported a bill ( S. 1539 ) that would have mandated disclosure of three different versions of the total intelligence and intelligence-related budget figure: the aggregate amount requested by the President; the aggregate amount authorized to be appropriated by the conference committee on the Intelligence Authorization Act; and the aggregate amount actually obligated by the executive branch. (The SSCI eschewed publication of the amount appropriated because it doubted \"that such a figure could be tallied ... by the time a conference committee issued its report, due to the large number of line-items in which the intelligence appropriation is found.)\" The Senate Armed Services Committee, which received the bill by sequential referral, noted that these requirements represent major departures from past practices of both Congress and the executive branch that have \"profound implications for the conduct of United States intelligence activities and the formulation of intelligence policy which have not been considered in detail by all of the committees of jurisdiction.\" The Armed Services Committee proposed that the effective date of these provisions be postponed until FY1993 to allow for detailed consideration. The HPSCI version of the bill ( H.R. 2038 ) had no provision relating to public disclosure of the intelligence spending. The conference committee \"while agreeing with the objective of the Senate provisions\" chose to avoid mandating disclosure by law and stated its hope that the \"[Intelligence] Committees, working with the President, will, in 1993, be able to make such information available to the American people, whose tax dollars fund these activities, in a manner that does not jeopardize U.S. national security interests.\" Section 701 of the final version of the legislation as enacted ( P.L. 102-183 ) stated:\nIt is the sense of Congress that, beginning in 1993, and in each year thereafter, the aggregate amount requested and authorized for, and spent on, intelligence and intelligence-related activities should be disclosed to the public in an appropriate manner.\nOpposition by the George H.W. Bush Administration may have exerted an important influence on the dropping of mandatory disclosures. Bush, himself a former DCI who had argued against public disclosure in 1977, stated upon signing the final version, \"Because secrecy is indispensable if intelligence activities are to succeed, the funding levels authorized by the Act are classified and should remain so.\" This was the Administration position, despite the statement by Robert Gates at his confirmation hearing for the DCI position in September 1991 that \" ... from my personal perspective—and it's not ultimately my decision, I suppose, but the President's—I don't have any problem with releasing the top line number of the Intelligence Community budget. I think we have to think about some other areas as well. But, as I say, it's controversial.\"\nThe following year, the two Intelligence Committees were focused on proposals to reorganize the Intelligence Community and held extensive hearings on the question. The Senate version of the FY1993 intelligence authorization bill ( S. 2991 ) included the same \"sense of Congress\" provision that had previously appeared in the FY1992 legislation. Although the House version ( H.R. 5095 ) again did not contain a similar provision, the conference committee included the Senate provision (as Section 303 in the final version) and there was no dissent among conferees who \"reiterate[d] their hope that the intelligence committees, working with the President, will, in 1993, be able to make available to the American people, in a manner that does not jeopardize U.S. national security interests, the total amounts of funding for intelligence and intelligence-related activities.\" In the midst of the election campaign President Bush signed the legislation ( P.L. 102-496 ) on October 24, 1992, without comment.\nWith the advent of the Clinton Administration in January 1993, some observers believed that the question would be revisited with a different conclusion. Senator Howard Metzenbaum, a member of the SSCI, wrote to the President on February 24, 1993, urging the public disclosure of the intelligence budget. Woolsey, the newly appointed DCI, testified to HPSCI on March 9, 1993, of his concerns regarding making the intelligence budget public:\nThere is no electronic or data fence around the United States or around American citizens. Disclosing that [intelligence spending levels] and the ensuing debate publicly means disclosing it to the people overseas who [ sic ] we target our intelligence assets on.\nMy real sense of skepticism about this derives principally from the fact that coming forth with a single number communicates really nothing until one knows what goes into the number; and, therefore, proposals either to reduce or to increase that number would require a public debate. In such a debate, it is inconceivable to me that we wouldn't release information and details as the public and the Congress debated these issues in public and that would be damaging.\nClinton himself responded to Metzenbaum on March 27 asking for the opportunity to \"evaluate both the benefits and legitimate concerns which are associated such public disclosure.\" The House version of the FY1994 Intelligence Authorization bill ( H.R. 2330 ) contained no provision regarding public disclosure, but for the first time in three years the Senate version ( S. 1301 ) also lacked such a provision. According to Senator Arlen Specter, the provision was not included \"on the expectation that there would be a stronger resolution compelling disclosure.\"\nOn August 4, 1993, the House, considering H.R. 2330 under an open rule, debated an amendment offered by Representative Barney Frank mandating disclosure of \"the aggregate amounts requested and authorized for, and spent on, intelligence and intelligence-related activities\" beginning in 1995. The amendment failed on a vote of 169-264. Many of those who voted for the Frank amendment supported other amendments aimed at reducing the size of the intelligence budget and many observers hoped or feared, depending on their point of view, that making the budget public would lead to public demands for spending cuts. This view was not, however, universal.\nIn the Senate an amendment to the FY1994 Defense Appropriation bill ( H.R. 3116 ) was introduced on October 18, 1993, by Senator Daniel P. Moynihan to require \"a separate, unclassified statement of the aggregate amount of budget outlays for the prior fiscal year for national and tactical intelligence activities. This figure shall include, without limitation, outlays for activities carried out under the Department of Defense budget to collect, analyze, produce, disseminate or support the collection of intelligence.\" Although Senator Moynihan, a critic of the Intelligence Community who had also introduced legislation ( S. 1682 ) to transfer the functions of the CIA to the State Department, withdrew the amendment shortly after introducing it, the proposal drew support from Senator Daniel Inouye, then the Chairman of the Appropriations Committee Subcommittee on Defense.\nThree weeks later, on November 10, 1993, the Senate debated an amendment to the FY1994 Intelligence Authorization bill offered by Senator Metzenbaum to include essentially the same \"sense of Congress\" language as included in the two previously enacted intelligence authorization bills. Although the provision had not been controversial in the Senate on the two earlier occasions, in 1993, the incoming Republican vice chairman of the SSCI, Senator John Warner, spoke out against the proposal. After lengthy debate, the Senate first voted not to table the Metzenbaum amendment by a vote of 49-51 and then voted 52-48 to incorporate it into the FY1994 Intelligence Authorization bill ( S. 1301 ). The amendment passed with the support of Senator DeConcini, the new SSCI chairman.\nThe Committee of Conference on the two intelligence authorization bills subsequently met, but it did not include the provision regarding public disclosure of the intelligence budget in the final version. The conference report stated: \"House conferees were of the view that, in light of the House vote [on the Frank amendment], they could not agree to the inclusion in the conference report of the Senate's 'sense of the Congress' provisions and therefore voted to insist on the House position.\" Thus, the FY1994 Intelligence Authorization Act ( P.L. 103-178 ) that was signed by President Clinton on December 3, 1993, did not address the question of public disclosure of the intelligence budget.\nAlong with the strong opposition to public disclosure by Senator Warner, the vice chairman of the SSCI (unlike his predecessor, Senator Frank Murkowski, who supported disclosure), an important factor was opposition from the Clinton Administration. During the November 10, 1993, debate, Senator Warner inserted into the Congressional Record sections of a letter from the Office of Management and Budget, dated October 18, 1993, that stated, \"... the Administration opposes any change to S. 1301 [the Senate version of the FY1994 intelligence authorization bill] that would disclose, or require the disclosure of, the aggregate amount of funds authorized for intelligence activities. The current procedure that provides for the authorization of appropriations in a classified annex continues to be appropriate.\"\nThe issue did not disappear. The conference committee had indicated that both intelligence committees had agreed to hold hearings on the question of disclosure in early 1994 \"in preparation for thoroughly evaluating a provision to require disclosure of the aggregate intelligence budget figure which may be considered during preparation of the Intelligence Authorization Act for Fiscal Year 1995.\" Shortly after final passage of the FY1994 authorization bill on November 20, 1993, a group of senior congressional leaders, including Speaker of the House Foley, Senate Majority Leader Mitchell, and other present and former leaders of committees having intelligence oversight responsibilities, signed a letter to the President urging a change in Administration policy to permit public disclosure of intelligence spending. The Members stated that, \"The level of intelligence spending (although not the details) must be open to the public.\" Further, \"[t]he norms of our democratic system require that the public be informed.\"\nThe President, replying in a December 27, 1993 letter to Representative Glickman, noted his opposition to the proposal in 1993 \"because I believed that the cost of disclosure outweighed the benefits.\" He added, however, that he had asked Anthony Lake, the National Security Adviser, in concert with the DCI and others, to \"look carefully at our position in light of your arguments and in consultation with Congress.\"\nBy January 1994, both the executive and legislative branches were committed to review the advisability of making intelligence spending levels public. Congressional hearings were scheduled for 1994 and an NSC-level review was underway. At the HPSCI hearings conducted on February 22-23, 1994, DCI Woolsey repeated his opposition to budgetary disclosure. He emphasized the difficulty of conducting a debate on intelligence programs and priorities in public and his concern that it would be impossible to avoid moving from one aggregate number to disaggregated details that would educate \"the rulers of North Korea, Iran, Iraq, Libya, terrorist groups, and others about our plans and programs.\"\nThe 1994-1995 debate took place in the context of declining budgets and an intelligence community grappling with a world that, in the oft-quoted phrase used by DCI Woolsey in his confirmation hearings, has seen the slaying of the Soviet dragon, but still contained jungles \"filled with a bewildering variety of poisonous snakes.\" Nevertheless, on July 19, 1994, the House voted (in the Committee of the Whole) 194-221-24 to reject an amendment to the intelligence authorization bill ( H.R. 4299 ) proposed by Representative Glickman, Chairman of the Permanent Select Committee on Intelligence, to amend the National Security Act of 1947 to require annual reports of amounts expended and amounts requested for intelligence and intelligence-related activities. The Senate version did not address the question of making intelligence spending levels public.\nA similar scenario unfolded in subsequent years. On September 13, 1995 the House voted (in the Committee of the Whole) 154-271-9 to reject an amendment to the intelligence authorization bill ( H.R. 1655 ) proposed by Representative Frank to disclose aggregate amounts requested and authorized for intelligence and intelligence-related activities. Again, the Senate bill had no provision relating to the question.\nThe Senate did support disclosure in 1996, when it passed its version of the FY1997 intelligence authorization bill ( S. 1718 ) with a provision requiring the President to include with the annual budget submission the aggregate amount appropriated for the current year for intelligence and intelligence-related activities and the amount requested for the next year. On May 22, 1996, however, the House voted (in the Committee of the Whole) 176-248-9 to reject an amendment to the intelligence authorization bill ( H.R. 3259 ) proposed by Representative Conyers to require the President to submit a separate, unclassified statement of the appropriations and proposed appropriations for national and tactical intelligence activities. The subsequent Conference Committee acceded to the House and dropped the provision.\nOn July 9, 1997 the House voted 192-237-5 (in the Committee of the Whole) to reject an amendment to the FY1998 Intelligence Authorization bill ( H.R. 1775 ) offered by Representatives Conyers that would require the President to submit a separate, unclassified statement of the appropriations and proposed appropriations for the current fiscal year, and the amount of appropriations requested for the fiscal year for which the budget is submitted for national and tactical intelligence activities. The Senate voted shortly thereafter, on June 19, 1997, 43-56-1, to reject an amendment to the FY1998 intelligence authorization bill ( S. 858 ) proposed by Senator Torricelli to require the President to submit annual aggregate figures on amounts requested and amounts appropriated for intelligence and intelligence-related activities.\nDespite these congressional votes interest in and pressure for public release of intelligence spending levels persisted. The Commission on the Roles and Capabilities of the U.S. Intelligence Community, known as the Aspin-Brown Commission, established pursuant to the FY1995 Intelligence Authorization Act ( P.L. 103-359 ), recommended in 1996:\n... that at the beginning of each congressional budget cycle, the President or a designee disclose the total amount of money appropriated for intelligence activities for the current fiscal year (to include NFIP, JMIP, and TIARA) and the total amount being requested for the next fiscal year. Such disclosures could either be made as part of the President's annual budget submission or, separately, in unclassified letters to the congressional intelligence committees. No further disclosures should be authorized.\nResponding to the Commission's recommendations, on April 23, 1996 President Clinton authorized Congress to make public the total appropriation for intelligence at the time the appropriations conference report was approved. Such action was not, however, taken by the Legislative Branch.\nIn October 1997, DCI Tenet announced that President Clinton had authorized him to release the aggregate amount appropriated for intelligence and intelligence-related activities for FY1997 ($26.6 billion). His press release indicated that the decision was based on two important points:\nFirst, disclosure of future aggregate figures will be considered only after determining whether such disclosures could cause harm to the national security by showing trends over time.\nSecond, we will continue to protect from disclosure any and all subsidiary information concerning the intelligence budget: whether the information concerns particular intelligence agencies or particular intelligence programs. In other words, the Administration intends to draw a firm line at this top-line, aggregate figure. Beyond this figure, there will be no other disclosures of currently classified budget information because such disclosures could harm national security.\nThe press release took note of the lawsuit filed earlier under the Freedom of Information Act and indicated that the President had preferred to take action concerning the declassification of the intelligence budget \"in concert with the Congress,\" but \"the present circumstances related to this lawsuit do not allow for joint action.\"\nThe following March, Tenet announced that the aggregate amount appropriated for intelligence and intelligence-related activities for FY1998 was $26.7 billion. In the announcement Tenet stated that the determination that \"this release will not harm national security or otherwise harm intelligence sources and methods.\"\nThe release of the figure for FY1998 was, however, the final such release. After litigants had sought to require the release of the amount requested for intelligence (in addition to the amount appropriated which had been made public), Tenet declined to make public the amount appropriated for FY1999. Some observers speculate Tenet may have been reluctant to address the substantial additional intelligence funds that were reportedly incorporated in the Supplemental Appropriation Act ( P.L. 105-277 ), enacted on October 21, 1998. In any event, no such releases have been made subsequently.", "The attacks of September 11, 2001, had a profound affect on intelligence issues. No longer was there a concern to reduce intelligence spending; the goal was to determine why there had been no tactical warning of the attacks that shattered thousands of American lives. A series of investigations was launched to fix the blame and to make recommendations for improved intelligence performance. There was a clear disposition in the Executive Branch and in Congress to increase intelligence spending significantly in support of the counterterrorism effort. Many of the recommendations for intelligence reorganization lie beyond the scope of this Report, but some addressed issues of intelligence acquisition and budgeting. Ultimately, a new position, the Director of National Intelligence (DNI) was established. The DNI has been given statutory authorities for developing and determining the national intelligence budget and for ensuring the effective execution of the budget for intelligence and intelligence-related activities.\nIn addition, the National Commission on Terrorist Attacks Upon the United States, known as the 9/11 Commission, recommended that the \"overall amounts of money being appropriated for national intelligence and to its component agencies should no longer be kept secret.\" This would be different from the Clinton Administration's practice in FY1997 and FY1998 when the total appropriated amount for all intelligence and intelligence-related activities was released.\nThe Senate bill introduced in response to the recommendations of the 9/11 Commission ( S. 2845 ) provided that the NFIP would be renamed the National Intelligence Program (NIP) and that the President disclose for each fiscal year the aggregate amount of appropriations requested for the NIP. Furthermore, Congress would be required to make public the aggregate amounts authorized and appropriated for the NIP. (The House bill dealing with intelligence reorganization ( H.R. 10 ) contained no similar provision.) An amendment to remove this provision in the Senate bill was tabled on October 4, 2004 by a vote of 55 to 37.\nUltimately, the legislation that was enacted largely in response to the recommendations of the 9/11 Commission, the Intelligence Reform and Terrorism Prevention Act of 2004, P.L. 108-458 , did not include the Senate's provision to make intelligence spending figures public.\nThe issue resurfaced in 2006 when the Senate Intelligence Committee reported its version of authorization legislation for FY2007, S. 3237 . Section 107 of the bill would require that the President disclose to the public the aggregate amount of appropriations requested annually for the NIP. The bill would further require that Congress make public the aggregate amount authorized and appropriated by Congress on an annual basis which would presumably include funds provided by supplemental appropriations bills. The bill further mandates a study by the DNI of the advisability of making such information public for each of the 16 elements of the Intelligence Community. No similar provision exists in the House version of FY2007 intelligence authorization legislation ( H.R. 5020 ). An identical provision was included in the FY2007 intelligence authorization bill ( S. 372 ) reported in the Senate in January 2007.\nIn approaching the provision in S. 3237 , Congress will likely weigh a number of factors. Some Members believe that not only the spirit of constitutional provisions but also the interests of democracy have always required that intelligence budgets be identified. Even some of those who believed that Cold War conditions necessitated that intelligence budgets be kept secret now argue that conditions have changed and that current enemies would not be able to make use of information on overall levels of intelligence budgets. This view is opposed by others, especially in the House, who believe that the declassification of the intelligence budget could inevitably lead to the compromise of important information on sources and methods.\nThere are, in addition, other factors that Members may wish to take into consideration. First, making the NIP public might lead to the need for a separate intelligence appropriations bill. This, in turn, could prevent the possibility of easy trade-offs between intelligence and non-intelligence defense programs, arguably to the detriment of the intelligence effort. Second, is the fact that actions taken in regard to national intelligence efforts in supplemental appropriations bills would have to be reflected in accounts of intelligence spending arguably with more public justification than would be desirable in some circumstances.\nIn addition, providing information on the NIP but not the MIP could give a false sense of the dimensions of the intelligence effort. Most observers argue that in operational terms, intelligence and intelligence-related activities are mutually supportive, even intertwined, and that considering them separately does not permit an understanding of intelligence capabilities. This could affect both those who want to reduce intelligence spending across the board as well as those who argue that intelligence spending has not kept up with the growth of the threats facing the country. If the intelligence-related activities were to be included, as was the case when FY1997 and 1998 budget levels were made public by DCI Tenet, there would have to be a recognition of the subtle and porous dividing lines between intelligence-related activities and other targeting and information-gathering and processing efforts. It would be possible to play \"budget games\" to demonstrate greater or lesser levels of commitment to intelligence by moving individual programs into or out of intelligence-related categories.", "After decades of debate, the issues surrounding the question of public disclosure of the intelligence budget have not changed. There is a question of the degree to which the Constitution requires such budgetary information to be made public. Another question centers on whether limited budgetary data can be made public without leading to detailed revelations of properly classified programs and whether information might be made available to adversaries who will use it against the U.S.\nBeyond these questions, there is an issue of how to frame an informed public debate on the extent of intelligence spending. How do you provide a sense of how the complex and disparate U.S. Intelligence Community fits together without revealing the extensive detail that almost all observers would consider unwise. Even sophisticated outside analysts are unlikely to appreciate some of the finer (and, in some cases, arbitrary) distinctions among military and national programs and the relationship of non-intelligence communications and reconnaissance programs to the overall intelligence effort. Funding for intelligence-related activities presents special difficulties; budgetary totals can fluctuate from year to year solely because certain DOD programs are transferred into or out of intelligence accounts. Making public only the figure for national intelligence programs would simplify the task, but would not give the public an accurate understanding of the extent of the whole intelligence effort.\nThere will continue to be philosophical and political disagreements concerning how much, if any, information regarding the intelligence budget should be provided. The disagreements may in some cases mask policy objectives. Some argue for as inclusive a number as possible, pointing to the size of the total as the basis for urging its reduction in order to transfer funds to what they consider more important governmental functions or to reduce the federal deficit. Others will seek to show bare-bones intelligence spending and urge more rather than less intelligence spending to cope with the uncertainties of the current international environment.\nUltimately, the fundamental issue is whether adequate resources are being devoted to intelligence given the extent of requirements by policymakers, military commanders, and other government officials. The more immediate issue for Congress is how to ensure that there is enough information available to inform this public debate without placing intelligence sources and methods at risk." ], "depth": [ 0, 1, 1, 2, 2, 2, 1, 2, 1, 2, 2, 2, 1, 2, 1 ], "alignment": [ "h0_title h2_title h1_title h3_title", "h0_full h3_full h2_full h1_full", "h3_full", "", "", "", "h2_title h1_title h3_title", "h3_full h2_full h1_full", "h1_title h3_title", "h3_full", "", "h1_full", "h0_title h2_title h3_title", "h0_full h3_full h2_full", "h3_full" ] }
{ "question": [ "To what extent does the federal government make intelligence spending public?", "How is intelligence spending disclosed?", "To what extent is this practice supported?", "What did the 9/11 Commission recommend regarding intelligence spending disclosure?", "What power does Congress have over public disclosure issues?", "To what extent has this mandate been applied to intelligence spending?", "Why is intelligence spending cloaked?", "How have previous bills supporting transparent intelligence spending fared?", "What actions did the Clinton Administration take regarding intelligence transparency?", "How successful have attempts to increase transparency been?", "What agencies do intelligence authorization bills include?", "Why is the scope of these authorization bills relevant?", "What pending legislation would change the makeup of intelligence authorization bills?", "How will this report remain current?" ], "summary": [ "Although the United States Intelligence Community encompasses large Federal agencies—the Central Intelligence Agency (CIA), the Defense Intelligence Agency (DIA), the National Reconnaissance Office, the National Geospatial-Intelligence Agency (NGA), and the National Security Agency (NSA)—among others—neither Congress nor the executive branch has regularly made public the total extent of intelligence spending.", "Rather, intelligence programs and personnel are largely contained, but not identified, within the capacious budget of the Department of Defense (DOD).", "This practice has long been criticized by proponents of open government and many argue that the end of the Cold War has long since removed any justification for secret budgets.", "In 2004, the 9/11 Commission recommended that \"the overall amounts of money being appropriated for national intelligence and to its component agencies should no longer be kept secret.\"", "The Constitution mandates regular statements and accounts of expenditures, but the courts have regarded the Congress as having the power to define the meaning of the clause.", "From the creation of the modern U.S. Intelligence Community in the late 1940s, Congress and the executive branch shared a determination to keep intelligence spending secret.", "Proponents of this practice have argued that disclosures of major changes in intelligence spending from one year to the next would provide hostile parties with information on new program or cutbacks that could be exploited to U.S. disadvantage. Secondly, they believe that it would be practically impossible to limit disclosure to total figures and that explanations of what is included or excluded would lead to damaging revelations.", "Legislation has been twice enacted expressing the \"sense of the Congress\" that total intelligence spending figures should be made public, but on several separate occasions both the House and the Senate have voted against making such information public.", "The Clinton Administration released total appropriations figures for intelligence and intelligence-related activities for fiscal years 1997 and 1998, but subsequently such numbers have not been made public.", "Legal efforts to force release of intelligence spending figures have been unsuccessful.", "Intelligence authorization bills have included not just the \"National Intelligence Program\"—the budgets for CIA, DIA, NSA et al., but also a wide variety of other intelligence and intelligence-related efforts conducted by the Defense Department.", "Shifts of tactical programs into or out of the total intelligence budgets have hitherto been important only to budget analysts; disclosing total intelligence budgets could make such transfers matters of concern to a far larger audience.", "Legislation reported by the Senate Intelligence Committee in January 2007 (S. 372) would require that funding for the National Intelligence Program be made public but it does not address other intelligence activities.", "This report will be updated as circumstances change." ], "parent_pair_index": [ -1, 0, 1, 1, -1, 0, 1, -1, 0, 0, -1, 0, 0, -1 ], "summary_paragraph_index": [ 0, 0, 0, 0, 1, 1, 1, 2, 2, 2, 3, 3, 3, 3 ] }
CRS_RL33351
{ "title": [ "", "Introduction", "Policy Issues", "Report Overview", "Data and Analysis", "What is Immigration Enforcement?", "Authority to Conduct Immigration Enforcement14", "Overview of Select Major Immigration Enforcement Legislation Since 1986", "Interior vs. Border", "Interior Enforcement Strategies", "Border Enforcement", "Types of Immigration Enforcement", "Removal (Deportation)", "Expedited Removal43", "Institutional Removal Program", "Removal Proceedings", "Voluntary Departure", "Absconder Initiative", "Criminal Aliens", "Removal Statistics", "Selected Removal Issues", "Number of Investigators", "Executive Office for Immigration Review", "Long-Term Residents and Children", "Detention", "Detention Statistics", "Selected Detention Issues", "Coordination between CBP and ICE", "Alien Smuggling and Trafficking", "DHS' Role in the Anti-Smuggling Effort", "ICE's Anti-Smuggling Role", "CBP's Anti-Smuggling Role", "ICE and CBP Smuggling Memorandum of Understanding", "The Role of Other Federal Agencies", "Human Smuggling and Trafficking Center", "Selected Alien Smuggling Issues", "Smuggling or Humanitarian Assistance", "Immigration Fraud", "Defining Immigration Fraud130", "Measuring Fraud", "Investigating Fraud", "Staffing of Fraud Investigations", "Selected Fraud Issues", "Worksite Enforcement", "Policy Changes", "Coordination with Department of Labor", "Program Performance", "Current Policy Issues and Options", "Resources", "Employment Eligibility Verification", "Employer Sanctions", "Role of Other Federal Agencies in Worksite Enforcement", "Immigration Enforcement at Ports of Entry: Immigration Inspections186", "Interception of Smuggled Goods", "Databases", "Selected Immigration Inspections Issues", "Screening Aliens and Implementation of the US-VISIT Program", "Biometric Verification System (BVS)", "Enforcement Between Ports of Entry205", "Apprehensions212", "Enforcement of Immigration Laws and Local Law Enforcement213", "Resource Allocation", "Interior Enforcement Hours", "Overview", "Criminal", "Worksite Enforcement", "Fraud", "Smuggling", "Status Violators", "Administrative and Other", "Border Enforcement", "Inspectors", "USBP", "Comparison", "DHS Organizational Structure", "Inherited INS Issues", "Database Integration", "Separation of Immigration Functions into Separate DHS Agencies", "OIG Merger Report", "Investigations", "Intelligence", "Conclusion", "Appendix. List of Acronyms" ], "paragraphs": [ "", "It is estimated that there are more than 11 million unauthorized aliens currently living in the United States, and the resident unauthorized alien population is estimated to increase by 500,000 people per year. In addition, each year approximately 1 million aliens are apprehended while trying to illegally enter the United States. Although most of these aliens are entering the United States for economic opportunities or fleeing civil strife and political unrest, some are criminals, and some may be terrorists. All are violating the immigration laws of the United States.\nThe existence of a large unauthorized population creates an illicit industry devoted to creating fraudulent identities and documents to aid unauthorized aliens in living and working in the United States. Illegal identity documents may be used by terrorists and other criminals who desire to remain hidden from law enforcement. In addition, some argue that it would be harder for unauthorized aliens, including criminals and terrorists, to stay in the United States if finding a job were more difficult. The Center for Immigration Studies found that eight of the 48 al Qaeda foreign born terrorists operating in the United States since 1993 worked in the United States illegally.\nSome have argued that the U.S. government has been unsuccessful in controlling illegal immigration due to a conflict in political will; the desire to prevent the illegal entry of those who might seek to harm the United States and its populace (e.g., terrorists, criminals), and the need to provide workers for labor-intensive industries (e.g., agriculture, food processing, restaurants). There is evidence of this conflict as far back as the mid-1800s with the arrival of Irish immigrants.", "The large unauthorized alien population raises concerns since it is very difficult to know if any unauthorized aliens are terrorists or criminals. In addition, the existence of a underground population leads to the propagation of an illegal document industry. Nonetheless, the majority of unauthorized aliens work in the United States, raising concerns that their removal will harm the U.S. economy and illustrating a desire or need of some employers for this pool of labor. What are the best methods to decrease the unauthorized population without disrupting sectors of the economy that depend on foreign labor? Should the United States increase its efforts to reduce the unauthorized alien population, and what are the best methods and use of resources to achieve this goal? Are the current laws adequate? Should other federal agencies or local law enforcement agencies become more involved in immigration enforcement? Is the Department of Homeland Security conducting immigration enforcement in an efficient manner?", "This report provides an analysis of immigration enforcement within the United States. The report opens with a definition of immigration enforcement, a discussion of the statutory authority to conduct immigration enforcement, and an overview of immigration enforcement related legislation since 1986. It follows with an exposition on the dichotomy of interior and border enforcement. The report then details different aspects of immigration enforcement in the United States including detention and removal, alien smuggling and trafficking, document and benefit fraud, worksite enforcement, inspections at ports of entry, and patrolling the border between ports of entry. The report continues with a discussion of the role of state and local law enforcement in the enforcement of immigration laws. The report then presents a comparative analysis of the resources devoted to divergent immigration enforcement activities. It concludes with a discussion of crosscutting immigration enforcement issues related to the structure of the Department of Homeland Security. A list of acronyms is provided in the appendix.", "The report uses different workload measures for the distinct immigration enforcement activities, and these measures are presented for the most current years that the data are available. For example, for the removal of aliens, the workload measure used is the number of removals, while the workload for worksite enforcement in measured in the issuance of Notices of Intent to Fine (NIF's). Nonetheless, none of these measures are comparable with each other. For example, comparing the number of NIF's issued with the number of removals does not provide any insight into the disparate resource allocation for these two tasks. In addition, due to the changes in immigration enforcement priorities after the attacks of September 11, 2001, wherever possible, measures of enforcement activities are presented prior to and after FY2001.\nTo compare the resources devoted to different enforcement activities, the report analyzes data on agent work hours for each enforcement activity. The data are from the Department of Homeland Security's Performance Analysis System (PAS). The hours are presented as workyears, as 2,080 hours equal one workyear. Due to data limitations, the analysis of the hours is limited to FY1992 through FY2003. During 2004, Immigration and Customs Enforcement (ICE) and Customs and Border Protection (CBP) switched their accounting system from PAS to the U.S. Customs Service's Treasury Enforcement Communications System (TECS), and as a result, data for 2004 onward are not comparable with previous years. TECS contains fewer data fields than PAS, which means that some of the measures in PAS do not exist in TECS. In addition, the data for FY2004 are incomplete in both systems, as the different components in DHS did not switch from PAS to TECS at the same time.", "Immigration enforcement is the regulation of those who violate provisions of the Immigration and Nationality Act (INA). This includes violations of the civil provisions of the INA (e.g., aliens who enter without inspection or violate the conditions of their admittance), as well as U.S. citizens or aliens who violate the criminal provisions of the INA (e.g., marriage fraud or alien smuggling).\nSome of the duties under immigration law have aspects of immigration enforcement but also contain adjudicative functions (sometimes referred to as services) and are not universally considered enforcement. Immigration inspectors are the classic example of this \"dual\" role, as inspectors are responsible for keeping those who seek to harm U.S. interests out while letting bona fide travelers in. An alien who is denied entry to the United States by an inspector has not violated any provision of the INA, unless the alien has committed some type of fraud to gain entry. Indeed, there have been people (both aliens and U.S. citizens) who have been wrongly denied entry by an immigration inspector. It could also be argued that a Department of Homeland Security (DHS) Citizenship and Immigration Services (USCIS) adjudicator is performing an enforcement function by denying an alien's application for a benefit to which he is not entitled. Others would argue that this is an example of a purely adjudicative function, for unless the alien has committed fraud to receive the benefit, he or she has not committed a violation under the INA.\nAccording to DHS, immigration enforcement should be viewed as part of a comprehensive homeland security strategy that unifies and coordinates law enforcement operations across formerly separate agencies (e.g., the Immigration and Naturalization Service (INS), the Federal Protective Service, the U.S. Coast Guard, and the U.S. Customs Service). The former Commissioner of INS, James Zigler, was quoted as saying, \"We need to set up a regime where we don't have to spend so much of our time and effort in enforcement activities dealing with people who are not terrorists, who are not threats to our national security, who are economic refugees.\"\nSome argue that since the terrorists responsible for the 9/11 attacks were aliens, immigration enforcement has recently had an anti-terrorism focus. Moreover, the Center for Immigration Studies found that at least 22 of the 48 al Qaeda foreign-born terrorists found operating in the United States since 1993 had committed significant violations of immigration laws. Thus, it can be argued that more stringent enforcement of the immigration laws may have disrupted some of the terrorists' plans.", "The Immigration and Nationality Act (INA), as amended, is the primary law by which Congress legislates on immigration. Basic enforcement authority for immigration officials stems from §287 and §235 of the INA. INA §287 gives any officer or employee of the former INS (now employees of the DHS) authorized under regulation prescribed by the Attorney General (now the Secretary of DHS) the general power, without a warrant, to interrogate aliens, make arrests, conduct searches, board vessels, and administer oaths. INA §235 authorizes \"immigration officers\" to inspect all aliens who are applicants for admission or otherwise seeking admission or readmission to or transit through the United States. As evidenced above, the INA makes no distinction in its law enforcement provisions between the various types of employees or officers of the former INS (e.g., border patrol (USBP), investigators, and deportation officers). Rather, it is through regulation where specific types of DHS personnel, including the USBP, are authorized and designated to conduct certain law enforcement activities.", "Since 1986, there have been several bills with major immigration enforcement provisions. The following highlights some of the most important enacted legislation for immigration enforcement activities in the United States, and provides a brief summary of the important changes. The enacted immigration enforcement legislation includes the:\nImmigration Reform and Control Act of 1986 (IRCA; P.L. 99-603 ), which addressed the control of illegal immigration by creating sanctions for employers who hire or continue to employ aliens who are not authorized to work, and by legalizing most of the unauthorized aliens present in the United States at that time; Violent Crime Control and Law Enforcement Act of 1994 ( P.L. 103-322 ), which gave the Attorney General the option to bypass deportation proceedings for certain alien aggravated felons, enhanced penalties for alien smuggling and reentry after deportation, and increased appropriations for the border patrol; Illegal Immigration Reform and Immigrant Responsibility Act of 1996 (IIRIRA; P.L. 104-208 ), which added to the grounds of inadmissibility and deportability, expanded the list of crimes constituting an aggravated felony, created expedited removal procedures, and reduced the judicial review of immigration decisions; USA Patriot Act of 2001 ( P.L. 107-56 ), which broadened the terrorism grounds for excluding aliens from entering the United States, and increased monitoring of foreign students; Enhanced Border Control and Visa Reform Act of 2002 ( P.L. 107-173 ), which required the development of an interoperable electronic data system to be used to share information relevant to alien admissibility and removability, and required the implementation of an integrated entry-exit data system; Homeland Security Act of 2002 ( P.L. 107-296 ), which transferred the majority of INS' functions to DHS, leaving the Executive Office of Immigration Review in the Department of Justice; National Intelligence Reform Act of 2004 ( P.L. 108-458 ), which expanded the grounds of inadmissibility and deportability, accelerated the deployment of the entry/exit system, and increased criminal penalties for alien smuggling; and REAL ID Act of 2005 ( P.L. 109-13 ), which established statutory guidelines for removal cases, expanded the terrorism-related grounds for inadmissibility and deportation, included measures to improve border infrastructure, and required states to verify an applicant's legal status before issuing a driver's license or personal identification card that may be accepted for any federal purpose.", "Although many make the distinction between interior and border enforcement, questions have been raised about the usefulness of the distinction. Many immigration professionals do not accept the rationale that there is a distinct interior enforcement mission, since interior enforcement can be viewed as a continuum of border enforcement (i.e., violators not caught at the border, must be apprehended and processed in the interior). However, certain aspects of interior enforcement lack a border component. For example, fugitive taskforces, investigations of alien slavery and sweatshops, and employer sanctions do not require close coordination between DHS Customs and Border Protection (CBP) and DHS Immigration and Customs Enforcement (ICE). As an illustration that not all enforcement activities contain a border component, in FY2004, CBP referrals accounted for only 23% of all ICE criminal investigations.", "A Government Accountability Study (GAO) report in October 2004 found that although ICE does not have a formal interior enforcement strategy, all the objectives contained in INS interior enforcement strategy have been incorporated within a broader mission to strengthen homeland security. INS interior enforcement strategy, issued in 1999, was designed to address, in order of priority, (1) the detention and removal of criminal aliens, (2) the dismantling and diminishing of alien smuggling and trafficking operations, (3) community complaints about illegal immigration including those of law enforcement, (4) immigrant benefit and document fraud, and (5) employers' use of unauthorized aliens. Overall, the strategy aimed to deter illegal immigration, prevent immigration related crimes, and remove those illegally in the United States.\nTwo ICE offices, the Office of Investigations (OI) and the Office of Detention and Removal (DRO), bear the primary responsibility for immigration interior enforcement functions. OI is responsible for addressing smuggling and trafficking in aliens, benefit fraud, responding to community complaints of illegal immigrations, and worksite enforcement. DRO is responsible for identifying and removing criminal aliens with some assistance from OI. In addition, the compliance unit within ICE's National Security Investigations Division analyzes data from various databases, such as United States Visitor and Immigrant Status Indicator Technology (US-VISIT) Program and the Student and Exchange Visitor Information System (SEVIS), to identify those who may have violated the terms of their entry or be a risk to national security.", "Border enforcement includes inspections at ports of entry (POEs) and the patrolling of areas between POEs. In 1994, the USBP strategy to deter illegal entry was \"prevention through deterrence,\" i.e., to raise the risk of being apprehended to the point where aliens would find it futile to try to enter. The strategy called for placing USBP resources and manpower directly at the areas of greatest illegal immigration in order to detect, deter, and apprehend aliens attempting to cross the border between official points of entry.\nAfter September 11, 2001, the USBP refocused its strategy on preventing the entry of terrorists and weapons of mass destruction. In order to prevent and deter terrorist entry, intelligence and surveillance operations have been focused on known smuggling operations that have previously trafficked aliens from significant interest countries. The USBP also coordinates and shares intelligence with Canadian and Mexican authorities. It is important to note, however, that the increased emphasis on preventing terrorist entry into the United States did not change the scope of the USBP's mission—preventing unauthorized aliens from entering the country. There is evidence that although border enforcement has increased, forcing aliens to take more dangerous routes to enter the United States, and increasing the risks and costs of those attempting to illegally enter the United States, the number of unauthorized aliens in the United States has continued to increase.", "The INA includes both criminal and civil components, providing both for criminal charges (e.g., alien smuggling, which is prosecuted in the federal courts) and for civil violations (e.g., lack of legal status, which may lead to removal through a separate administrative system in the Department of Justice). Being illegally present in the U.S. has always been a civil, not criminal, violation of the INA, and subsequent deportation and associated administrative processes are civil proceedings. For instance, a lawfully admitted nonimmigrant alien may become deportable if his visitor's visa expires or if his student status changes. Criminal violations of the INA, on the other hand, include felonies and misdemeanors and are prosecuted in federal district courts. These types of violations include the bringing in and harboring of certain undocumented aliens (INA §274), the illegal entry of aliens (INA §275), and the reentry of aliens previously excluded or deported (INA §276).", "An alien is \"removable\" if (1) the alien has not been admitted to the United States and is inadmissible under INA §212, or (2) the alien has been admitted to the United States and is deportable under INA §237. The Illegal Immigration Reform and Immigrant Responsibility Act of 1996 (IIRIRA) combined \"exclusion\" and \"deportation\" proceedings into a single removal proceeding. INA §237 specifies six broad classes of deportable aliens including aliens who:\nare inadmissible at time of entry or violate their immigration status; commit certain criminal offenses (e.g., crimes of moral turpitude, aggravated felonies, alien smuggling, high speed flight); fail to register (if required under law) or commit document fraud; are security risks (such as aliens who violate any law relating to espionage, engage in criminal activity which endangers public safety, partake in terrorist activities, or assisted in Nazi persecution or genocide); become a public charge within five years of entry; or vote unlawfully.\nIn removal proceedings an immigration judge (IJ) from the Department of Justice's Executive Office for Immigration Review (EOIR) determines whether an alien is removable. The proceeding commences when the alien is issued a notice to appear (NTA) which can be issued by a variety of DHS personnel including border patrol officers in CBP, asylum and examination officers in USCIS, and detention officers in ICE.\nWith certain exceptions, a removal proceeding under INA §240 is the \"exclusive procedure\" for determining whether an alien should be removed from the United States. These exceptions include expedited removal (INA §235, and removal proceedings under the Institutional Removal Program (IRP). Those who are removed are subject to bars to reenter the country.\nThe courts have ruled that removal proceedings are civil not criminal, and that deportation is not punishment. Thus, there is no right to counsel, no right to a jury trial, and the due process protections are less than in a criminal trial. Furthermore, a decision on removablity does not have to be proven beyond a reasonable doubt. In addition, because deportation is not punishment, Congress may impose new immigration consequences for actions that previously occurred (i.e., actions that would not have made the alien deportable when they occurred may make the alien deportable at a later date if Congress changes the law).", "Under expedited removal, an alien who lacks proper documentation or has committed fraud or willful misrepresentation of facts to gain admission into the United States is inadmissible and may be removed from the United States without any further hearings or review, unless the alien indicates either an intention to apply for asylum or a fear of persecution.\nAliens subject to expedited removal must be detained until they are removed and may only be released due to medical emergency or if necessary for law enforcement purposes. Although under law the Attorney General may apply expedited removal to any alien who has not been admitted or paroled into the United States and cannot show that they have been continuously present for two years, expedited removal has only been applied to aliens\narriving at ports of entry; arriving by sea who are not admitted or paroled; and, recently, who are present without being admitted or paroled, are encountered by an immigration officer within 100 air miles of the U.S. international land border, and have not established to the satisfaction of an immigration officer that they have been physically present in the United States continuously for the 14-day period immediately preceding the date of encounter.", "INA §238(a) allows for removal proceedings to be conducted at federal, state, and local prisons for aliens convicted of crimes. This program as instituted is known as the Institutional Removal Program (IRP). Under the IRP, the proceedings are held while the alien is incarcerated. Nonetheless, under the INA aliens must complete their criminal sentences before they can be removed from the United States. INS developed a nationwide automated tracking system for the federal Bureau of Prisons (BOP) and deployed them to IRP sites. The system covers foreign born inmates incarcerated under the federal system and tracks the hearing status of each inmate.", "As discussed above, when DHS encounters an alien that it thinks should be removed from the United States, the alien is presented a notice to appear (NTA), which commences the removal proceeding. The NTA outlines the charges against the alien and identifies the part of the INA that the alien is being charged with violating. If the alien is not subject to mandatory detention (discussed below), the alien may be detained, or released on bond or his own recognizance (OR).\nIn a court removal proceeding an ICE attorney (i.e., the government's attorney) must prove the charges in the NTA, witnesses are presented, and the immigration judge rules on whether the alien is removable from the United States or is eligible for relief from removal. An alien who fails to appear for a removal hearing (absent exceptional circumstances) can be removed in absentia and becomes inadmissible for five years, and ineligible for relief from removal for 10 years. Within 30 days after the hearing, the government's attorney or the alien may appeal the decision to the Board of Immigration Appeals (BIA) in EOIR. After the BIA decision the alien may appeal to a federal court.", "The majority of aliens who are removed do not undergo formal removal proceedings in front of an IJ. Most aliens are given the opportunity to depart voluntarily from the United States, and most of them agree to voluntary departure. At the border, voluntary departure is only available for aliens from contiguous territories (i.e., Canada and Mexico), and aliens are escorted to the point of departure. CBP inspectors also can permit an alien traveling through a POE to withdraw their application for admission and return to their point of origin. Aliens who do not take one of these options (and are not under expedited removal), when offered, are subject to formal removal proceedings in front of a DOJ immigration judge and ICE's Office of Detention and Removal (DRO) assumes responsibility for the alien's custody management (detention or release, and possible reapprehension of released aliens) and removal of the alien (which may include escorting the alien to their home country).\nIn addition, certain aliens who have been issued NTA's may request voluntary departure before (in lieu of), during or after formal removal proceedings. Criminal aliens are ineligible for voluntary departure. The DHS officer or the IJ must specify the period of time allowed for departure and may impose conditions, such as bond or detention, deemed necessary to assure the alien's departure. Voluntary departure is not available to any alien who was previously allowed to depart voluntarily. Furthermore, aliens who fail to depart within the time period specified for voluntary departure are subject to monetary penalties and ineligible for voluntary departure or other relief from removal for 10 years.\nVoluntary departure costs less than formal removal since, in most cases, the government does not have to pay for the alien's repatriation. In addition, the resources that would be needed if all aliens apprehended along the borders were subject to formal removal proceedings would be prohibitive. Nonetheless, in the interior, many aliens subject to voluntary departure fail to leave the country. It is estimated that each year, 40,000 non-detained aliens fail to leave the United States as ordered (either under voluntary departure or as ordered by an IJ).", "Designed by the Office of Detention and Removal (DRO) in January 2002, and run by both DRO and OI, the National Fugitive Operations Program (NFOP) seeks to apprehend, process, and remove aliens who have failed to comply with removal orders. As part of the Alien Absconder Initiative, NFOP teams work exclusively on fugitive cases, giving priority to aliens convicted of crimes. The absconder initiative was the first systematic attempt to enforce every final removal order issued. Nonetheless, as Figure 1 shows, although there has been a concerted effort since FY2002 to remove absconders, the number of absconders went from 376,003 in FY2002 to 536,644 in FY2005, an increase of 43% in three years. However, this increase could be due to the increase in aliens who are given final orders of removal. In FY2001, 282,396 aliens received final orders of removal, while in FY2005, 368,848 final orders were issued.", "Criminal aliens are aliens who have committed crimes that make them removable. The potential pool of removable criminal aliens is in the hundreds of thousands. Some are incarcerated in federal, state, or local facilities, while others are free across the United States, because they have already served their criminal sentences. DHS' Criminal Alien Program is directed at identifying criminal aliens in federal, state, and local prisons, and assuring that these aliens are taken into ICE custody at the completion of their criminal sentences. Although federal prisons have a system to notify ICE when there is an alien in custody, notification from state and local prisons and jails is not systematic, and many criminal aliens are released after their criminal sentences are completed rather than taken into ICE custody, making it more difficult to locate the aliens for deportation and raising the concern that the released aliens will commit new crimes. Like ICE, INS had historically failed to identify all removable imprisoned aliens.", "The number of removals has declined since FY2000 (See Figure 2 ). In FY2000, INS removed 1.9 million aliens, the largest number of aliens removed in a single year. The total number of removals declined from FY2000 to FY2003, but increased in FY2004.\nThe decline in total removals was due primarily to a decrease in the number of voluntary departures. As Figure 3 shows, the number of formal removals significantly increased after FY1996, when the Illegal Immigration Reform and Immigrant Responsibility Act of 1996 made more crimes deportable offenses, increasing the number of aliens required to undergo formal removal proceedings. In FY1996, there were 69,680 formal removals. The number of formal removals continuously increased between FY1996 and FY2000, then decreased in FY2001 and FY2002. The decrease between FY2001 and FY2002, may have been the result of a backlog in cases before the Board of Immigration Appeals (BIA). Since FY2002, the number of formal removals has increased, reaching an all-time high of 204,193 aliens in FY2005. The increase in formal removals in FY2003, could be attributed to the Attorney General's decision to streamline the immigration appeals process, see discussion below.\nAs previously noted, most of the removals from the United States are voluntary departures as opposed to formal removals. Figure 2 illustrates the percent of formal removals compared to all removals increased steadily between FY1996 and FY2003, and then decreased in slightly between FY2003 and FY2004. The decrease was most likely the result of a decrease in apprehensions along the border (discussed below). In FY1996, 4.2% of all removals were formal removals, compared to 17.6% in FY2003. In FY2004, 16.4% of all removed aliens went through the formal removal process.\nIn addition, as Figure 3 demonstrates, since FY1996, the majority of aliens formally removed were noncriminal aliens. In FY1996, 53.7% of all formal removals were criminal aliens; since then, noncriminal aliens have comprised the majority of formally removed aliens. In FY2005, 42.7% of formally removed aliens were criminal aliens.\nAs shown in Figure 4 , the three most common reasons for formal removals are (1) attempted illegal entry; (2) criminal grounds (i.e., committing a crime in the United States); and (3) not in status (i.e., unlawful presence). In addition, the proportion of the formally removed population which was removed due to being previously removed increased almost threefold between 1995 and 2004.", "The government's ability to remove aliens who do not have permission to be in the United States, or have violated the terms of their admission (e.g., aliens who commit crimes) has been an issue of continual interest for Congress. As discussed above, there are an estimated 11 million unauthorized aliens residing in the United States. Following is a discussion of some of the reasons why the removal policy has been unable to keep pace with the unauthorized population.", "On June 4, 2002, the INS had 1,944 on-duty special agents including supervisors, fewer than the number of officers in the Dallas police department. In any given day, there were only 1,365 special agents to investigate fraud and smuggling cases, conduct enforcement operations at work sites, support local task forces, respond to local law enforcement officials, arrest immigration violators, and assist the Federal Bureau of Investigation (FBI) in their counterterrorism work. The number of agents has a direct impact on the ability of ICE to be able to remove unauthorized aliens, as ICE agents are charged with locating and arresting removable aliens. In 2002, there were an estimated 9.3 million unauthorized aliens in the United States, which was approximately 4,784 unauthorized aliens per special agent.\nThe number of ICE special agents increased from a total of 5,449 in FY2003 to 5,614 in FY2004, and 5,769 in FY2005. However, since agents from the former INS and the former U.S. Customs Service were combined into ICE, it is unknown what percentage of time the ICE special agents spend on immigration enforcement functions compared to tasks of the former U.S. Customs Service. As a result, it is not known if and to what extent the number of agents devoted to immigration enforcement has increased since the creation of DHS.", "The ability to remove aliens is also influenced by the functioning of the immigration courts, as formally removed aliens who are not in expedited removal are entitled to a hearing before the courts. In FY2002, there was concern about the backlog of cases before the Board of Immigration Appeals (BIA). As a result, then Attorney General John Ashcroft, made changes to streamline the appellate review within the immigration courts.\nRecently, there has been an increase in immigration cases before the federal appeals courts. As Figure 5 shows, between FY2000 and FY2005, the number of appeals has increased sevenfold, while the number of cases heard by BIA during the same time increased 43%. Immigration cases increased from 3.2% of the federal appeals court's workload in FY2000, to 18% of the workload in FY2005. In addition, some federal appeals judges have harshly criticized the BIA and immigration judges. Some appeals judges argue that the streamlining of the BIA has shifted the work to their courts. When a federal appeals judge overturns the decision of an immigration judge, the case is returned to EOIR to be heard by a different immigration judge, increasing the alien's time in removal proceedings (i.e., the length of the removal process) and increasing the use of EOIR resources. If the alien is being detained, the delay in finalizing a removal decision also increases the consumption of detention resources.", "In addition, there are some policy concerns surrounding the deportation of aliens who have lived in the United States for many years and established community ties. Deportation (removal) can be controversial and seem punitive for those who have been in the United States for long periods of time and for those who entered the United States as young children and know no other country. Long term residents often have to abandon homes and businesses when they are deported. In addition, these aliens often have ties in the communities where they reside, which can result in a backlash when the government attempts to remove the alien.\nFurthermore, some countries (e.g., Vietnam) refuse to accept the return of their nationals who entered the United States as children. These children often have few ties to their birth countries, and may not speak the language. If the alien is being deported due to a criminal act, the home countries often contend that since U.S. society created the person's antisocial behavior, the United States should take responsibility for the person. However, others note that if these aliens had not violated the laws of the United States they would not be removable.", "The INA (§236) provides broad authority to detain aliens while awaiting a determination of whether they should be removed from the United States, and specifies categories of aliens subject to mandatory detention. Aliens not subject to mandatory detention may be detained, paroled, or released on bond or their own recognizance. Decisions on parole made by the Secretary of DHS and bond decisions made by the Attorney General are not subject to review. Aliens paroled or released may be rearrested at any time.\nThe large majority of detained aliens have committed a crime while in the United States, have served their criminal sentence, and are detained while undergoing removal proceedings. Other detained aliens include those who arrive at a port of entry without proper documentation (i.e., expedited removal), but most of these aliens are quickly returned to their country of origin. The majority of aliens arriving without proper documentation who claim asylum are held until their \"credible fear hearing,\" but some of these aliens are held until their asylum claims have been adjudicated.\nThe Office of Detention and Removal (DRO) in ICE is responsible for the daily detention of aliens, but under law the Attorney General may still retain the authority to arrest and detain aliens. The Illegal Immigrant Reform and Immigrant Responsibility Act of 1996 (IIRIRA) amended the INA, effectively specifying levels of detention priority and classes of aliens subject to mandatory detention. Mandatory detention is required for certain criminal and terrorist aliens who are removable, pending a final decision on whether the alien is to be removed.\nIn October 1998, the former INS issued a memorandum establishing detention guidelines consistent with the changes made by IIRIRA. According to the guidelines, detainees are assigned to one of four detention categories: (1) required, (2) high priority, (3) medium priority, and (4) lower priority. Aliens in required detention are mandatory detainees, while aliens in the other categories may be detained depending on detention space and the facts of the case. Higher priority aliens should be detained before aliens of lower priority. Additionally, the USA-PATRIOT Act amended the INA to create a new section (236A), which requires the detention of an alien whom the Attorney General certifies as someone the Attorney General has \"reasonable grounds\" to believe is involved in terrorist activities or in any other activity that endangers national security.\nIn June 2005, 87% of detention bed space was filled with mandatory detainees, making bed space scarce and increasing the need for both good management of detention space, and alternative forms of detention. A lack of bedspace can lead to an increase in the number of apprehended aliens who must be released into the community, and aliens who are not detained are less likely to appear for their removal proceedings and to leave the country if they are ordered removed. For example, in FY2005, 60% of nondetained aliens failed to appear for their removal hearing. Moreover, only 18% of aliens released into the community who subsequently receive final removal orders leave the United States. To counteract the high percentage of nondetained aliens who fail to leave the United States, DHS has a pilot program which began in Hartford, Connecticut, and was expanded to Atlanta and Denver in March 2004, that immediately detains all aliens subject to final orders of removal, so that ICE can ensure that the aliens depart from the United States.", "Although Congress increased the number of DRO officer positions by 25% between FY2004 and FY2005, the actual number of officers increased only slightly (see Figure 6 ), affecting the ability of DRO to detain and remove aliens. From FY2003 to FY2004, the number of officer positions increased by only six, but the actual number of officers working increased by 139, as the number of vacancies deceased. From FY2004 to FY2005, although the total number of officers increased by 788, the number of filled positions increased slightly, from 2,842 to 2,871, while the number of vacancies increased almost threefold. The lack of actual hires was the result of financial management issues, which lead to a hiring freeze in ICE and DRO between March 2004 and May 2005.\nAs Figure 7 shows, between FY1994 and FY2001 the average size of the daily noncitizen detention population increased steadily. There was a slight decrease in the size of the detention population between FY2001 and FY2002, and then a steady increase between FY2002 and FY2004. The daily population decreased between FY2004 and FY2005 and then increased in the beginning of FY2006. The size of the daily population increased by 129%, from 9,011 to 20,594, between FY1996, when IIRIRA was enacted, and FY2006. The largest increase occurred between FY1997 and FY1998, the year that all the provisions of the IIRIRA became enforceable. Some argue that the size of the detained population is dependent on the amount of detention space. Thus, the increase in the detained population after FY1998 reflects an increase in detention space, not in the number of people eligible to be detained.\nFigure 7 reveals that generally the daily detention population is higher than the funded number of beds. In FY2003 through FY2005, on average there were more than 1,000 aliens detained above funded bedspace, which implies that the funding to detain these aliens needs to be taken from elsewhere in DRO's or ICE's budget. In FY2006, so far the funded number of beds has outpaced the daily population.", "Since most nondetained aliens remain illegally in the United States, the detention of noncitizens relative to the availability of bedspace has been an ongoing Congressional issue. Many contend that DHS does not have enough detention space to house all those who should be detained. They contend that the increase in the number of classes of aliens subject to mandatory detention has impacted the availability of detention space for lower priority detainees. There are over half a million aliens in the United States who have been ordered deported who are presumed to still be in the country. Some argue that these aliens would have left the country if they had been detained once they were ordered deported. As discussed above, only 18% of nondetained aliens with final orders of removal leave the United States. On the other hand, 94% of detained aliens who were part of the Hartford Pilot (mentioned above) were deported. Concerns have been raised that decisions about which aliens to release and when to release them may be based on the amount of detention space, not on the merits of individual cases, and that the amount of space may vary by area of the country, leading to inequities and disparate policies in different geographic areas.\nFurthermore, the overall increase in the number of noncitizens in DHS detention has raised questions about the cost of detaining noncitizens. For FY2004, DHS budgeted $80 a day for each detainee held in detention. This cost does not include transportation or the cost of deporting the alien.", "Reportedly, Immigration and Customs Enforcement's (ICE's) funding and accounting difficulties, as well as the failure to coordinate planning and budgets between ICE and Customs and Border Protection (CBP) has contributed to a resource imbalance. As CBP's apprehension capabilities grew, ICE's detention and removal capabilities did not. The imbalance has placed an increasing strain on the Office of Detention and Removal (DRO) resources, as well as impacted CBP's alien apprehensions.\nThere is no organizational requirement that CBP notify ICE's DRO of its apprehension initiatives and expected need for detention resources. Similarly, ICE is under no obligation to notify CBP about any new initiatives which may impact the availability of detention and removal resources. In addition, although at points DRO units are responsible for the transport of aliens in CBP custody, some CBP officials have said that DRO is not providing the level of transport required, and as a result, the United States Border Patrol has had to assume an increasing share of transportation responsibilities. Improved coordination between the ICE and CBP may have reduced the negative impact of this resource imbalance; however, DRO's removal functions are ultimately governed by appropriations. Better coordination can improve allocation of limited resources but the agency is still constrained by the funds available for detention space and removal costs.", "The INA specifies criminal penalties for bringing in and harboring certain aliens, commonly referred to as alien smuggling. Specifically, INA §274 prohibits and specifies penalties for any person who:\nattempts to bring in an alien at any place other than a POE; knowing or in reckless disregard that an alien is illegally present transports the alien within the United States; conceals, harbors, or shields the alien knowing or in reckless disregard that the alien is illegally present; and encourages or induces an alien to come to the United States, knowing or in reckless disregard that the alien will be illegally present.\nIn addition, there are separate penalties for any person who aids or assists an alien who is inadmissible on criminal or security grounds, or brings in an alien for immoral purposes.\nAlien smuggling is a transnational crime due to the fact that it involves more than one country, and typically the alien has consented (even paid) to be smuggled. In most cases when the aliens reach their destination, they have no continuing relationship with the smuggler. In human trafficking, the alien may agree to be smuggled into the United States, but once they arrive they are subjected to exploitive arrangements, including prostitution or forced labor, that produce long-term profits for the trafficker. Under immigration law, a trafficked alien is a victim, while an alien who consents to be smuggled may be subject to criminal prosecution and deportation.\nAlien smuggling and trafficking investigations are often complicated by language and humanitarian issues (e.g., the alien has been traumatized and is unable to aid in the investigation), as well as logistical challenges and difficulties (e.g., transporting, housing, and processing aliens). In addition, certain types of investigative techniques, such as controlled delivery operations, cannot be used as humans are involved. Moreover, unlike drug trafficking cases where the contraband itself is proof of the illegal activity, the successful prosecution of alien smuggling cases relies on the availability of witnesses (unauthorized aliens) who may refuse to testify because of fear of retribution against themselves or their families.\nMany contend that alien smuggling of persons into the United States constitutes a significant risk to national security and public safety. Since smugglers facilitate the illegal entry of persons into the United States, terrorists may use smuggling routes and organizations to enter undetected. It is estimated that the international alien smuggling and sex trafficking trade generates $9.5 billion for criminal organizations worldwide, and the profits are used to finance additional criminal enterprises, such as the trafficking of drugs, weapons, or other contraband.\nIn addition to generating billions of dollars in revenues for criminal enterprises, alien smuggling can lead to collateral crimes including kidnaping, homicide, assault, rape, robbery, auto theft, high speed flight, vehicle accidents, identity theft, and the manufacturing and distribution of fraudulent documents. For example, smugglers may hold an alien hostage to extort a ransom from the alien's family. In addition, smugglers often establish \"safe houses\" (also called \"drop houses\") where aliens are kept until they can be moved into the interior of the United States. The often squalid conditions of these \"safe houses\" endanger the lives of the aliens and create health and safety issues for people living in the community. Also, others note an increase in traffic accident causalities due to the unsafe condition of vehicles used by smugglers. (Often smugglers rig the vehicles to hide as many aliens as possible, making the vehicle unsafe to operate.) Some border deaths are tied to smuggling, as some smugglers mislead their charges about how far it is to the United States and how much water is needed to make the journey.\nAlien smuggling-related activities may be prosecuted under a variety of criminal statutes including immigration document fraud and bribery. In addition, other federal crimes may be applicable as alien smuggling is listed among the Racketeer Influence and Corrupt Organization (RICO) predicate offenses and is included in the definition of specified unlawful activities for money laundering statutes. Furthermore, criminal and civil forfeiture statues may apply to alien smuggling cases. From October to March FY2005, ICE reported the seizure of $7.8 million from alien smuggling investigations.", "Under the INS, two separate entities in the organization, the border patrol (USBP) and the INS investigations program, conducted alien smuggling investigations. The Government Accountability Office (GAO) found that due to a lack of program coordination between the two INS entities, there were several anti-smuggling units that overlapped in their jurisdictions, operated autonomously, and reported to different officials. The abolishment of the INS and the transfer of its functions to DHS may have resolved some of these issues. According to an ICE Office of Investigations (OI) official, the border patrol has a minor role in alien smuggling and trafficking and is required to coordinate with OI before initiating anti-smuggling investigations. Nonetheless, it is unclear that this coordination is functioning smoothly. (Recently a sting was compromised because of lack of coordination between ICE and CBP when ICE agents were trying to cross the border with money and drugs to uncover the entire smuggling operation.)", "ICE works to identify and dismantle large-scale transnational smuggling organizations in collaboration with other law enforcement agencies, both foreign and domestic. Major investigations are conducted with the cooperation and assistance of other federal, state, and local law enforcement agencies, as well as the appropriate bureaus of foreign governments. ICE reports that it coordinates the anti-smuggling efforts of all divisions in DHS, including investigations offices, overseas offices, inspections at ports-of-entry (POEs), and Border Patrol units between POEs. It is also the primary DHS component for investigating alien smuggling, but Customs and Border Protection (CBP) and the U.S Coast Guard are also involved.\nICE is developing a foreign and domestic strategy to combat alien smuggling which includes implementing critical incident response teams, and using the money laundering statutes and the identification and seizure of assets and criminal proceeds to strip away the assets and profit incentive of smuggling organizations. Nonetheless, reportedly ICE has not finalized its strategy for combating alien smuggling. Begun in summer 2003—soon after the formation of DHS—the strategy is being adjusted to focus on the southwest border and to encompass the smuggling of aliens, drugs, and other contraband.\nICE places a significant emphasis on targeting alien smuggling organizations that present threats to national security, recognizing that terrorists are likely to align themselves with alien smuggling networks to obtain undetected entry into the United States. It is widely believed that there are factors which have created an environment in which terrorist and smuggling enterprises may combine their criminal efforts to pose a significant threat to national security. These factors include the increase in sophistication of criminal organizations, the ability of these organizations to exploit public corruption, and the lax immigration controls in transit countries. In addition, smuggling pipelines that are used by unauthorized aliens and criminals seeking to enter the United States could also be used by terrorists to gain entrance into the United States. DHS' global Anti-Smuggling/Human Trafficking Strategy concentrates efforts on intelligence-driven investigations against major violators, specifically targeting organizations with ties to countries that support terrorist organizations such as al Qaeda.", "The U.S. Border Patrol (USBP) in CBP is responsible for interdicting aliens smuggled between ports of entry. Generally, after the USBP makes an interdiction, the smuggled aliens are separated from members of the smuggling organization; interviews are conducted of both groups; sworn statements are solicited from material witnesses; fingerprints are taken; and other relevant information is accumulated. CBP refers to ICE's Office of Investigations only those cases that involve a significant scope, violence, or other egregious circumstances. The USBP also makes referrals to ICE based on more in-depth or strategic analyses conducted by USBP's intelligence units which routinely analyze alien-smuggling interdictions to develop information on smuggling patterns and identify leads warranting further investigation.", "A recent GAO report noted that the effectiveness of ICE's anti-smuggling strategy would depend partly on the clarification of the ICE and CBP's roles in anti-smuggling activities. In April 2004, ICE and CBP signed a Memorandum of Understanding (MOU) which stated that,\nICE would assume the full burden of administratively supporting, equipping, and funding the anti-smuggling units. ICE would have lead responsibility for certain nationally designated cases as well as Joint Terrorism Task Force cases. USBP would have responsibility for border-related interdiction activities, including checkpoint operations. USBP and ICE would be jointly responsible for ensuring the proper and timely sharing of information and intelligence. There is a need to develop a more comprehensive agreement regarding the working relationship between ICE investigations and CBP.\nIn November 2004, ICE and CBP signed a second MOU addressing the bureaus' roles and responsibilities, including provisions for sharing information and intelligence. The MOU reiterated that ICE's Office of Investigations has primary responsibility for all investigations, while the USBP has primary responsibility for interdictions between ports of entry. Nonetheless, the MOU stated that the missions of the two bureaus \"are intricately connected and complementary.\" However, at this time, there is no mechanism for tracking the status of cases referred to ICE by CBP, which may cause the agency to miss opportunities to identify and investigate large smuggling operations. In addition, there have reportedly been communications issues between ICE and CBP during some smuggling investigations.", "Other federal agencies, including the Department of Justice's Criminal Division, Federal Bureau of Investigation, U.S. Attorney's Office, Department of Treasury's Internal Revenue Service's Criminal Division, and the Financial Crimes Enforcement Network (FinCEN), play a role in combating alien smuggling. Likewise, since alien smuggling and document fraud are often linked, the Department of State's Bureau of Diplomatic Security also is involved in the anti-smuggling effort due to its mission to protect travel documents. Additionally, the Department of State's Bureau of International Narcotics and Law Enforcement Affairs coordinates international anti-smuggling efforts (e.g., helping countries draft alien smuggling legislation, providing funds to foreign countries that have intercepted smuggled aliens to assist in returning these aliens to their home countries). The Central Intelligence Agency's (CIA) Office of Transnational Issues provides analytical assessments related to alien smuggling, and the Department of Defense's National Security Agency (NSA) assists in the interdiction of smuggled aliens overseas.", "The Human Smuggling and Trafficking Center (HSTC) is an interagency group—including the Departments of Justice, State, and Homeland Security—which provides information to counter migrant smuggling, trafficking of persons, and clandestine terrorist travel. The center's three primary objectives are (1) prevention and deterrence of smuggling and related trafficking activities, (2) investigation and prosecution of the criminals involved in such activity, and (3) protection of and assistance for victims as provided in applicable law and policy.", "The number of individuals smuggled into the United States has increased dramatically, and smuggling organizations have become more sophisticated. Furthermore, there were concerns about the former INS' ability to combat alien smuggling, and it is unknown how many of these problems carried over into ICE. For example, the INS lacked the field intelligence staff to collect and analyze information on alien smuggling. In addition, a 2000 GAO report noted the lack of program coordination and the absence of an automated case management system as impeding anti-smuggling efforts.\nNonetheless, the ability of DHS to combine alien smuggling and money laundering investigations reportedly has aided in alien smuggling investigations. ICE has the ability to pursue money laundering charges related to smuggling since DHS has the authorities of the former U.S. Customs Service. This capacity did not exist in INS, and INS would have had to seek outside assistance to pursue additional charges. On the other hand, there have been reports of a lack of coordination on alien smuggling between ICE and CBP which has lead to inefficiencies in alien smuggling investigations.", "The line between humanitarian assistance and alien smuggling is not always clearly defined. In 1986, the Reverend John Fife was convicted of alien smuggling for his work in the \"sanctuary movement,\" providing shelter to illegal aliens from Central American, most of whom were fleeing civil wars. In July 2005, two volunteers from the group No More Deaths, which provides water and medical care to unauthorized aliens crossing the Arizona desert, were arrested and charged with alien smuggling. According to the volunteers, they were transporting three unauthorized aliens to a church in Tucson, Arizona to provide medical care. Nonetheless, the aliens were being transported in furtherance of their unlawful presence, and the group did not intend to notify USBP.\nIn addition, the group Humane Borders sets up water stations in the desert for aliens trying to cross illegally into the United States and recently printed a map of the routes through the Arizona desert into the United States, illustrating USBP beacons, Humane Borders water stations, and migrant places of death. According to the group, the objective of the maps is to try to dissuade migrants from undertaking an illegal border crossing by warning them of the risks. However, others argue that Humane Borders is aiding and abetting illegal entry, and is engaging in alien smuggling.", "", "Immigration fraud is generally grouped into two types—immigration-related document fraud and immigration benefit fraud.\nImmigration-related document fraud includes the counterfeiting, sale and/or use of identity documents or \"breeder documents\" (i.e., documents used to confirm identity, such as birth certificates or Social Security cards), as well as alien registration documents and stamps, employment authorizations, passports, visas, or any documents used to circumvent immigration laws. Benefit fraud encompasses the willful misrepresentation of a material fact to obtain an immigration benefit in the absence of lawful eligibility for that benefit.\nSome view immigration fraud as a continuum of events because people may commit document fraud en route to benefit fraud.\nThe INA addresses immigration fraud in several ways. First, the law makes \"misrepresentation\" (e.g., obtaining a visa by falsely representing a material fact or entering the United States by falsely claiming U.S. citizenship) a ground for inadmissibility. Second, the INA has civil enforcement provisions, distinct from removal or inadmissibility proceedings, to prosecute individuals and entities that engage in immigration document fraud.\nIn addition to the INA, §1546 of the U.S. Criminal Code makes it a criminal offense for a person to knowingly produce, use, or facilitate the production or use of fraudulent immigration documents such as visas, border crossing cards, and other documents covered by immigration-related statute or regulation. The U.S. Criminal Code furthermore criminalizes immigration fraud pertaining to the knowing falsification of naturalization, citizenship, or alien registry. More generally, the U.S. Criminal Code criminalizes the knowing commission of fraud in connection with a wide range of identification documents.", "Immigration fraud is reportedly widespread, though estimates of its pervasiveness are not available. The conventional wisdom is that document fraud increased following the enactment of the Immigration Reform and Control Act of 1986, which first required employers to inspect the documents of prospective employees. Large-scale black market enterprises providing counterfeit immigration documents and \"breeder\" documents developed to supply unauthorized alien workers with necessary papers. Given that calculations based upon the 2005 Current Population Survey estimated that 11.1 million aliens were residing in the United States without legal authorization, it is reasonable to presume that many of these unauthorized aliens are committing document fraud. Nonimmigrant visa fraud among aliens temporarily in the United States has also been an ongoing problem. It is possible that many of those people who broker in immigration fraud are legal residents or citizens of the United States.\nMany policy analysts maintain that the pervasiveness of immigration fraud facilitates the entry and assimilation of those aliens who pose threats to the United States. The National Commission on Terrorist Attacks Upon the United States (commonly known as the 9/11 Commission) showed that several of 19 hijackers responsible for the 9/11 attacks were able to obtain visas to enter the United States through the use of forged documents. Incomplete intelligence and screening enabled many of the hijackers to enter the United States despite flaws in their entry documents or suspicions regarding their past associations. According to the 9/11 Commission, up to 15 of the hijackers could have been intercepted or deported through more diligent enforcement of immigration laws.", "The types of fraud investigations range in circumstances and scope. Many investigations focus on facilitators, i.e., those who sell, distribute or manufacture counterfeit or altered documents and on criminal organizations that broker large-scale illegal schemes such as sham marriage rings or bogus job offers. Investigations of immigration benefit applications are another major activity.\nAs immigration enforcement strategies have changed and resources have shifted over time, it has long been evident that investigations of immigration fraud has declined as a priority. In FY1986, for example, the productive workyears devoted to fraud investigation reportedly equaled 256 special agents, and they completed 11,316 fraud cases. Ten years later (FY1995), there were 181 special agent workyears, and they completed only 6,455 cases. When the INS issued its \"Interior Enforcement Strategy\" in 1999, however, minimizing immigration benefit fraud and other document abuse was listed as the fourth among five top priorities.\nEvaluations of the government's efforts to combat immigration benefit fraud and document abuse have generally been critical. GAO noted that \"INS did not believe it had sufficient staff to reach its program goals.\" GAO also reported that benefit fraud investigations were hampered by a lack of integrated information systems. \"The operations units at the four INS service centers that investigate benefit fraud operate different information systems that did not interface with each other or with the units that investigate benefit fraud at INS district offices. ... Thus, INS was not in the best position to review numerous applications and detect patterns, trends, and potential schemes for benefit fraud.\"", "The cuts in fraud investigations between FY1992 and FY2003 appear to have been generally across the board in terms of types of investigations pursued. As Figure 8 depicts, workyears spent investigating facilitators of counterfeit or altered documents, organizations that broker large-scale illegal schemes and persons suspected of immigration benefit fraud have all decreased. Note that the \"all other\" category in FY2003 includes the investigations of civil violations of document fraud (INA §274C) that were enacted in1996, and likely account for its relative increase.", "There appears to be a continued lack of coordination between U.S. Citizenship and Immigration Services (USCIS) and ICE in the area of fraud and national security investigations. USCIS established the Office of Fraud Detection and National Security to work with the appropriate law enforcement entities to handle national security and criminal \"hits\" on aliens and to identify systemic fraud in the application process. Many of these duties were formerly performed by the INS enforcement arm that is now part of ICE. The GAO has reported, \"The difficulty between USCIS and ICE investigations regarding benefit fraud is not new.... As a result, some USCIS field officials told us that ICE would not pursue single cases of benefit fraud. ICE field officials who spoke on this issue cited a lack of investigative resources as to why they could not respond in the manner USCIS wanted.\"\nThe inter-agency coordination problems, coupled with the observable decline in investigator work years allocated to document and benefit fraud, are more relevant when considering the role bogus documents and benefit fraud play in facilitating other violations of law. Some maintain that limited enforcement resources should not be spent going after purveyors who primarily are providing false identification so that unauthorized aliens can work. Others argue that it is critical to investigate the black market in counterfeit documents and benefit fraud because it is especially important to international terrorists, organized crime syndicates, and alien smuggling rings—all of whom rely on fraudulent documents to minimize detection.", "The INA prohibits the unlawful employment of aliens and related discrimination. These prohibitions were added to the INA by the Immigration Reform and Control Act of 1986 (IRCA). The provisions on unlawful employment sought to deter unauthorized immigration by reducing the magnet of employment. These provisions, as amended, make it unlawful for an employer to knowingly hire, or recruit or refer for a fee, or continue to employ an alien who is not authorized to be so employed. They require employers to verify the employment eligibility of new hires by examining documents that establish identity and work eligibility, and to complete and retain verification forms. Employers violating these requirements may be subject to civil and/or criminal penalties, known as employer sanctions. The term employer sanctions is also used generally to refer to the provisions on unlawful employment. The ICE Office of Investigations has primary responsibility for enforcing these provisions. The related anti-discrimination provisions, as amended, prohibit employment discrimination against U.S. citizens or work-authorized aliens based on national origin or on citizenship or immigration status. These provisions are enforced by the Office of Special Counsel for Immigration-Related Unfair Employment Practices (OSC) in the Civil Rights Division of the U.S. Department of Justice.\nFull enforcement of the employer sanctions provisions began in June 1988 in the nonagricultural sector and in December 1988 in agriculture. Primary enforcement responsibility at the time rested with the former INS as part of its investigations program. In the early years, educating employers about their responsibilities in order to promote voluntary compliance continued to be a key focus of the program. At the same time, an increasing emphasis was placed on enforcing penalties against violators. At that time, enforcement of employer sanctions combined \"traditional investigations—based on leads about suspected violations—with compliance investigations based on neutral, or random, selection of employers.\"", "Policies governing the enforcement of employer sanctions have changed over the years. On April 5, 1991, then-INS Commissioner Gene McNary issued a memorandum ordering the Office of Enforcement and the Office of the General Counsel to launch a six-month initiative to strengthen enforcement of employer sanctions. An implementation plan accompanying the memorandum stated: \"The message to employers must be unequivocal—INS is prepared to vigorously enforce administrative and criminal sanctions against those who violate the law.\" According to the implementation plan, INS investigators were to spend at least 30 percent of their time for the remainder of FY1991 on each of three investigations program priorities—employer sanctions, criminal aliens, and fraud. New fraud cases were to focus predominantly on employer sanctions-related fraud. In addition, INS worksite enforcement resources were to be directed toward enforcement activities and not used for employer education. In January 1992, the enhanced worksite enforcement initiative was extended indefinitely.\nIn February 1995, President Clinton issued a memorandum which identified worksite enforcement and employer sanctions as a major component of the Administration's overall strategy to deter illegal immigration. The Administration's approach was to \"target enforcement efforts at employers and industries that historically have relied upon employment of illegal immigrants.\"\nFor FY1996, the Clinton Administration requested, and Congress appropriated, significant funding increases for interior enforcement, including worksite enforcement and employment eligibility verification. At that time, Congress also enacted the Illegal Immigration Reform and Immigrant Responsibility Act of 1996 (IIRIRA), which established three pilot programs for employment eligibility confirmation; reduced the number of acceptable documents for purposes of completing employment eligibility verification forms, known as I-9 forms; and provided employers with the possibility of a \"good faith\" defense against technical violations of I-9 requirements. During the 1995-1998 period, INS conducted numerous onsite workplace raids and arrested thousands of unauthorized aliens.\nIn 1998, INS changed its approach to worksite enforcement. Apparently, the change was prompted largely by complaints about INS tactics during worksite raids. The new procedures responded to complaints by Congress and others, and incorporated the \"best practices\" of various offices. An INS memorandum at that time noted that \"worksite enforcement operations [actions by INS to arrest unauthorized aliens at a worksite] are sometimes misunderstood by the general public\" leading to a lack of public support. Given that the \"purpose of worksite enforcement is to deter the unlawful employment of aliens... worksite enforcement investigations that involve alien smuggling, human rights abuses, and other criminal violations must take precedence.\"\nAs discussed above, in 1999, INS unveiled a new interior enforcement strategy, which included five priorities, two of which related to worksite enforcement. In a prepared statement for a July 1999 hearing by the House Judiciary Committee's Subcommittee on Immigration and Claims, INS Executive Associate Commissioner for Policy and Planning Robert Bach explained the relationship between these two worksite enforcement priorities as follows:\nINS believes there is a clear nexus between defeating smuggling organizations—which is Priority 2—and blocking access to and removing undocumented workers—Priority 5. Disrupting and dismantling a smuggling organization that transports undocumented workers across the U.S. border will have a direct impact on limiting employers' access to this exploitable source of labor. Additionally, anti-smuggling efforts generate leads on employers and industries employing undocumented workers.\nAccording to Bach, the new interior enforcement strategy emphasized both working cooperatively with employers to improve their compliance with employment eligibility verification requirements and reduce unauthorized employment, as well as prosecuting employers who violate the law. He indicated that INS would focus on criminal employer cases, cases in which there was a pattern or practice of knowingly employing unauthorized workers, and would target, in particular, employers who abused their workers and who violated multiple laws.\nUnder the 1999 interior enforcement strategy, INS pursued the general tactical approach of auditing I-9 forms to identify suspected unauthorized aliens. It did so on a large-scale basis in an operation targeting the meatpacking industry, called \"Operation Vanguard.\" Launched in the fall of 1998, Operation Vanguard involved subpoenaing the I-9 forms and other employment records of workers in all the meatpacking plants in Nebraska and in some plants in Iowa and South Dakota. By checking these records against INS, Social Security Administration, and other databases, INS developed lists of employees whose work authorization it could not verify. These lists were then distributed to employers, who arranged interviews for the workers with INS.\nAt the July 1999 House Immigration and Claims Subcommittee hearing, Mark Reed, then director of the INS Central Region office, maintained that the Operation Vanguard approach was more effective than the workplace raids and arrests of past years:\nIf the numbers were smaller, if we had less people in the United States unlawfully, if we had less employers engaging in this, doing raids and removing people would be a much more effective strategy, but we simply can't do that.\nOperation Vanguard prompted a strong political backlash, however, and was ended. Testifying at a May 2005 joint hearing by the Senate Judiciary Committee's Subcommittees on Immigration, Border Security, and Citizenship and Terrorism, Technology, and Homeland Security, Reed, now with a consulting firm, offered his retrospective views on Operation Vanguard:\nVanguard demonstrated an efficient and effective capability to bar unauthorized workers from employment in any given sector. When the capability was realized, it was stopped as well. In reality, the implementation of Vanguard was not good government.... Depriving these [meatpacking] plants the ability to remain competitive was a major threat to the livelihood of everyone in the community.\nIn the aftermath of the September 11, 2001 attacks, interior enforcement resources were redirected from traditional program areas, including worksite enforcement, to national security-related investigations. While criminal employer cases remained a stated priority of the worksite enforcement program, they became subordinate to \"removing unauthorized workers from critical infrastructure facilities such as airports, military bases, research facilities, nuclear plants, etc.\" A 2003 memorandum issued by ICE headquarters suggests the extent of the post-9/11 emphasis on critical infrastructure investigations. The memorandum requires field offices to request headquarters approval before opening a worksite enforcement investigation not related to critical infrastructure protection.", "While ICE has primary responsibility for enforcing INA provisions on the unlawful employment of aliens, the Department of Labor (DOL) also has a role. The INA requires that employers retain completed I-9 employment eligibility verification forms and make them available for inspection by DOL. In addition to this statutory role, it is widely believed that DOL, specifically the Employment Standards Administration (ESA), can help reduce unauthorized employment by carrying out its core responsibilities to enforce labor standards. Enforcing labor standards can help deter unauthorized employment, it is argued, by depriving employers of some of the potential financial advantages of employing unauthorized workers at substandard wages and working conditions.\nIn 1992, INS and DOL's ESA entered into a memorandum of understanding (MOU) to improve cooperation and coordination between the agencies. Under the terms of the 1992 MOU, ESA was given authority to issue warning notices to employers for violations of the employment eligibility verification requirements. ESA also was to promptly refer suspected substantive violations to INS. At the same time, the MOU stated that ESA, would not take any action which would compromise its ability to carry out its fundamental mission [of enforcing labor standards statutes], regardless of the workers' immigration status. DOL officials took the position that investigating worksite immigration matters, beyond reviewing I-9 forms, could impede their efforts to enforce worker protection laws. Thus, ESA's role was limited mainly to reviewing employers' I-9 forms and reporting results to INS.\nESA and INS signed a new MOU in 1998 that sought to address DOL's concerns about conducting worksite immigration enforcement and to clarify the enforcement roles and responsibilities of each agency. Under the 1998 MOU, ESA investigators are to inspect employer compliance with I-9 requirements in conjunction with labor standards enforcement only in directed investigations, that is, investigations not based on complaints. According to the MOU, this limitation \"is intended and will be implemented so as to avoid discouraging complaints from unauthorized workers who may be victims of labor standards violations by their employer.\" During these compliance inspections, ESA investigators are not to make inquiries about workers' immigration status and are not to issue warning notices or Notices of Intent to Fine. ESA is to promptly refer to INS all suspected serious violations uncovered during directed investigations. While this MOU remains in effect, it is of less relevance at the present time in light of ICE's current worksite enforcement focus on critical infrastructure facilities.", "As discussed above, employers who violate INA provisions on the unlawful employment of aliens may be subject to civil and/or criminal penalties. For violations of I-9 paperwork requirements or of the prohibition against knowingly hiring or continuing to employ aliens who lack employment authorization, employers may be subject to fines. If ICE believes that an employer has committed a violation of these provisions, the agency may issue the employer a Notice of Intent to Fine (NIF). A NIF may result in a Final Order for civil money penalties, a settlement, or a dismissal. Employers convicted of having engaged in a pattern or practice of knowingly hiring or continuing to employ unauthorized aliens may face fines and/or imprisonment.\nTable 1 provides data on worksite enforcement program performance for FY1999 through FY2003. As shown, the number of NIFs issued and the amount of fine collections decreased steadily during this period. Policy changes and reallocations of resources can help explain these trends. As discussed above, INS's 1999 interior enforcement strategy de-emphasized non-criminal employer cases, which can generate administrative fines, in favor of criminal cases. In accordance with this strategy, \"criminal employer cases presented for prosecution\" became the only worksite enforcement program production quota assigned to INS field offices in FY1999.\nIn light of the priority given to criminal prosecutions, however, the significant decrease from FY1999 to FY2000 in this measure is puzzling. The decreases in the three measures between FY2001 and FY2002 presumably reflect, at least in part, the post-September 11, 2001 redirection of enforcement resources toward national security-related investigations. Underreporting may also have contributed to these decreases, especially the sharp drops in \"criminal cases presented for prosecution.\" According to ICE, data for FY2002 and FY2003 may understate actual activity.\nWhile the availability of resources and policy shifts help explain changes in worksite enforcement program performance over time, the program also faces more perennial challenges that impact performance. Among these challenges are the applicable legal standards for sanctioning employers and the prevalence of fraudulent documents. INA §274A makes it unlawful for employers to knowingly hire or continue to employ unauthorized aliens. Under the law, an employer is required to attest that he or she has verified that an employee is not unauthorized to work by examining documentation provided by the employee. An employer is considered to be in compliance with this examination requirement \"if the document reasonably appears on its face to be genuine.\" INA §274A also provides that an employer who establishes that he or she has complied in good faith with the I-9 requirements has an affirmative defense against the charge of knowingly hiring an unauthorized alien. The widespread availability and use of fraudulent documents makes it difficult to prove that an employer knowingly hired an unauthorized alien and, thus, should be subject to penalties. With respect to sanctions for violations of the I-9 requirements, a 1996 amendment to INA §274A provides employers with the possibility of a good faith defense against technical or procedural violations.", "Worksite enforcement is a current focus of congressional interest. Among the reasons for this is the large and growing unauthorized alien population, the majority of whom are in the labor force. According to estimates by the Pew Hispanic Center, in 2004 the unauthorized alien population totaled about 10.3 million and the unauthorized alien working population totaled about 6.3 million. Particularly since the 2001 terrorist attacks, security concerns have been raised about having such a large unauthorized population.\nIn addition, the issue of worksite enforcement has gained attention recently in connection with guest worker proposals. In January 2004, President Bush outlined a proposal for a new temporary worker program, and called for increased workplace enforcement as part of the program. As Congress turns its attention to worksite enforcement, there are several key policy issues it may opt to consider:", "Historically, as discussed above, investigative time devoted to employer cases has been limited. In the aftermath of the 2001 terrorist attacks, resources available for worksite enforcement further dwindled, as interior enforcement increasingly focused on national security investigations. Policy questions include whether additional personnel or other resources would improve the performance of the worksite enforcement program and whether such resources should be provided.", "Related to worksite enforcement and its goal of reducing unauthorized employment is the process of employment eligibility verification. Under the mandatory I-9 system, employers examine documents to verify a new hire's identity and work authorization, and employers and employees complete I-9 forms. There is broad agreement that the widespread availability and use of fraudulent documents has largely undermined the I-9 system. Another available mechanism for employment eligibility verification is the Basic Pilot program, in which participating employers electronically verify new hires' I-9 information through Social Security Administration and CIS databases to determine whether individuals are authorized to work. The Basic Pilot program is now available nationwide and participation is, for the most part, voluntary. Policy questions include whether to revise or replace the current verification systems. Options under discussion include making the Basic Pilot program mandatory for some subset of, or all, employers, and requiring job seekers to have some type of tamper-proof work authorization document. These and other options may, in turn, raise concerns about privacy and discrimination.", "Another policy question concerns whether the current penalties for employers who violate the law on the unlawful employment of aliens should be changed. Some have argued that employer sanctions and the prohibition against hiring unauthorized aliens should be repealed entirely, on the grounds that they have not succeeded in curbing unauthorized employment and have had other negative effects, such as lowering wages and undercutting efforts to improve working conditions. Others have argued, alternatively, that existing penalties should be raised and vigorously enforced to increase their deterrent effect.\nSome have argued that worksite enforcement has never been truly implemented as employer sanctions were never systematically enforced. The former INS conducted few inspections and they were generally performed randomly instead of targeting industries that were most likely to hire unauthorized aliens.", "There are other federal agencies which could play a larger role in aiding DHS's worksite enforcement efforts. The most obvious agencies who could aid in worksite enforcement are the Department of Labor (DOL), since many argue that those who commit wage and hour violations are also likely to use unauthorized alien labor, and Social Security Administration (SSA), since the agency can detect possible fraudulent uses of social security numbers (SSN's). However, increasing the immigration enforcement role of other federal agencies is controversial and could distract the agencies from their primary missions. GAO has testified that coordination between the INS and with other federal agencies was sometimes problematic, noting that the Department of Labor (DOL) was hesitant to delve into work authorization issues as it might cause workers to fail to report potential wage and safety violations.\nIn addition, recently ICE has been criticized for impersonating other federal agencies to locate unauthorized aliens. For example, in 2005, ICE agents conducted an operation by pretending to be from the Occupational Safety and Health Administration (OSHA), and tricking workers into attending a \"mandatory training session.\" The operation was successful, leading to the arrest of 48 unauthorized workers, but was also criticized by the DOL, local officials, and immigration and job safety advocates, who argued that the operation could cause immigrant workers to distrust safety officials responsible for protecting the workers by reducing injury rates.\nDepartment of Labor . Discussing the MOU at the July 1999 House hearing, John Fraser, then Deputy Administrator of ESA's Wage and Hour Division, described \"the fundamental dilemma of worksite enforcement\" for DOL:\nDOL needs the cooperation of workers, including undocumented workers, to report on labor standards violations or provide information needed to develop enforcement cases. Unfortunately, many vulnerable low-wage workers—the primary focus of DOL labor standards enforcement—are often much less willing to report workplace exploitation or cooperate in DOL investigations when they perceive that doing so threatens their continued employment either because of retaliation by their employer or because contact with DOL could trigger an INS action to deport them, their family or their friends.\nAs discussed above, in 1998 and 1999, the INS experimented with alternative raids called Operation Vanguard, using SSA's work records to identify unauthorized aliens rather than conducting worksite raids. Operation Vangaurd did not result in many deportations, but may have worked as a deterrent, reducing the desirability of the meat packing industry to unauthorized aliens. Nonetheless, Operation Vangaurd was criticized by workers, farmers, and industry leaders for violating workers' privacy rights and targeting Hispanics. In 1999, SSA stopped allowing INS to check employee records against their database, citing privacy concerns, unless INS has \"reasonable cause to believe that a worker is unauthorized.\nMark Krikorian, Executive Director of the Center of Immigration Studies, testified that in the late 1990's the INS received criticism for worksite enforcement in Nebraska's meat packing plants and Georgia's onion fields. As a result, it developed a new interior enforcement strategy which focused entirely on criminal aliens and smugglers.\nSocial Security Administration (SSA) . SSA has data which could be used to aid DHS in the identification of unauthorized alien workers. For example, SSA maintains a Nonwork Alien File which contains social security numbers (SSNs) issued to aliens without work authorization. Earnings posted to numbers in the Nonwork Alien File might indicate that an alien is working without authorization. However, the alien may have received work authorization after the nonwork SSN was issued. DHS has said that the agency would have to invest significant resources to determine whether the alien is working without authorization, and that this use of resources may not be cost effective and would pull resources from other national security-related initiatives. In addition, neither SSA nor DHS can easily update work status, since their records lack a common identifier.\nIn addition to data issues, there may be public resistance to SSA increasing their role in the enforcement of immigration laws. For example, in 2002, a policy change at SSA that substantially increased the number of \"no-match\" letters sent to employers received much attention due to its impact on unauthorized aliens. No-match letters are sent to employers to inform them of a discrepancy between a W-2 form and SSA's records, so that workers can be properly credited with their earnings, and to combat identity fraud. Importantly, receipt of a no-match letter does not imply that the employee is using a fraudulent SSN; the discrepancy could be the result of a clerical error. For tax years 1993 through 2000, an employer only received no-match letters if 10 or more employees had discrepancies and the number of employees with mismatches equaled at least 10% of the employer's workforce.\nFor the 2001 tax year, SSA implemented a new policy of sending no-match letters to every employer with at least one employee with discrepancies on his or her W-2. For tax year 2000, SSA sent out approximately 110,000 no-match letters compared to approximately 950,000 for tax year 2001. However, the result was an increase in complaints from employers who did not understand the purpose of the no-match letter. In addition, immigration advocates contend that tens of thousands of aliens left their jobs or were fired as a result of the letters. Due to the controversy, SSA again changed their policy, sending out approximately 110,000 no-match letters for tax year 2002.", "The Immigration and Nationality Act (INA) requires the inspection of all aliens who seek entry into the United States and in some cases at a preinspection site in a foreign country. The purpose of the inspection is to determine the admissibility of a traveler to the United States. Section 287 of the INA enumerates the following authorities for immigration officers, including immigration inspectors:\nto question under oath any person seeking to enter the United States in order to determine admissibility, and to search, without warrant, the person and belongings of any applicant seeking admission.\nThe majority of immigration inspections take place during the primary inspections process. Primary inspections is the first level of inspection, which consists of a brief interview with an inspector, a cursory check of the traveler's documents, and a query of the Interagency Border Inspection System (IBIS). Primary inspections are quick (usually lasting no longer than a minute), however, if the inspector is suspicious that the traveler may be in violation of the INA or other U.S. laws, the traveler is referred to a secondary inspection.\nDuring secondary inspections, aliens are questioned extensively and travel documents are further examined. Several immigration databases are queried as well, including lookout databases. The majority of travelers, however, are not subject to a secondary inspection.\nIn addition to conducting inspections, immigration inspectors enforce various criminal and immigration statutes. For example, immigration inspectors are on the front line with respect to intercepting fraudulent documents used by aliens as well as intercepting aliens, drugs, weapons and explosives that are smuggled into the United States. Immigration inspectors also encounter criminal aliens who attempt to gain entry into the United States. While immigration inspectors may encounter enforcement-related issues during primary inspections, it is during secondary inspections that immigration inspectors conduct enforcement-related activities. In FY2003, immigration inspectors spent 13% of their time on enforcement-related activities. Over the most recent four years for which data are available, the time spent by immigration inspectors on enforcement activities has steadily risen, with the exception of FY2001 when it dropped 3% from FY2000 (see Figure 9 and Table 2 ).\nImmigration inspectors generate cases that are referred to ICE's investigative unit for investigation and prosecution. An analysis of the data shows that the number of cases that were referred to investigations during the period that was analyzed peaked in 2002, at 1,782 cases (see Table 3 ). In FY2003, the number of cases referred to investigations dropped 42% from FY2002, to 1,028 cases.", "Immigration inspectors play a key role in intercepting the smuggling of humans, narcotics and contraband. The interception of aliens that are smuggled into the United States led all other types of smuggling at U.S. ports of entry for the years that were analyzed by CRS. During the four years that were analyzed by CRS, immigration inspectors intercepted more aliens and narcotics being smuggled into the country each year after FY2000 (see Table 2 ).", "Immigration inspectors use several systems and databases to assist them with identifying aliens who are potentially inadmissible under the INA or otherwise may pose a threat to the country. In particular, four systems are commonly used to screen out individuals:\nInteragency Border Inspections System (IBIS), Automated Biometrics Identification System (IDENT), National Crime Information System (NCIC III), and Passenger Analysis Unit System.\nIn FY2003, these systems intercepted over 207,000 aliens. In FY2002, over 254,000 aliens were intercepted, an increase of over 66,000 from FY2001.", "Since the September 11, 2001, terrorist attacks, considerable concern has been raised because the 19 terrorists were aliens who apparently entered the United States on temporary visas. Although the INA bars terrorists, consular officers issuing the visas and immigration inspectors working at the borders did not have access to all the law enforcement and intelligence data that might identify potential terrorists. Congress has enacted major laws requiring information sharing and interoperable databases to screen potential terrorists and criminal aliens, the most recent being the REAL ID Act of 2005. Whether these provisions are being successfully implemented remains an important policy question.", "While the U.S. Visitor and Immigrant Status Indicator Technology (US-VISIT) program—the automated entry and exit data system that is present at various ports of entry—has been heralded as a tool to enhance border security, critics question whether it will effectively track the entry-exit of suspicious foreign nationals. Some have expressed concern that most Canadians and the 6.4 million Mexicans with border crossing cards are not subjected to the requirements of the US-VISIT program, thus establishing a variety of avenues for potential terrorists and criminals to elude detection through US-VISIT's biometric background checks.\nWhile almost all observers agree that the implementation of US-VISIT has proven to be challenging, especially at land ports of entry, many express confidence that it will ultimately be successful. Administration officials cite the number of aliens apprehended or denied entry as the result of the various systems and databases that comprise US-VISIT as evidence that US-VISIT can achieve its objectives. In 2004, the Administration reported that 100 aliens had \"hits\" in US-VISIT.\nCurrently, the US-VISIT program is being implemented at land POEs and therefore only includes a fraction of the total traveling public. According to a DHS Office of Inspector General report published in February 2005, only 2.7% of the traveling public are vetted. The remaining 97.3% are currently exempt from the requirements of the program. To put this in context, of the 97.3% that are not screened through US-VISIT, the plurality (34%) are citizens of the United States, roughly 29% comprise of Mexicans who possess a Laser Visa and 15% are visa-exempt Canadians. Another major category is comprised of Legal Permanent Residents of the United States (which make up 21% of the entering population).\nDHS' OIG expressed concern about the number of travelers who are currently exempt from the requirements of the program, including Mexican nationals in possession of a BCC (unless traveling beyond the border zone), and visa-exempt Canadian nationals. Visa-exempt Canadian nationals are exempt from the current travel document requirements, at least until the Western Hemisphere Travel Initiative is implemented, Mexican nationals in possession of a Laser Visa are also exempt from such requirements.", "Mexican nationals who plan to stay in the United States for a specified period of time, travel within a certain geographical distance from the border and possesses a Laser Visa are exempt from the requirements of the US-VISIT program. The Administration exempted this category of individuals primarily due to the extensive background check that includes the querying of several criminal and watchlisting databases that is conducted on all Laser Visa applicants. The Administration also contends that the Laser Visa document is read and scanned at the time the Mexican national presents himself for entry to the U.S. at a POE, thus providing an extra layer of security. Observers note, however, that the equipment necessary to read and scan the documents are not at every POE. At POEs where the equipment is being piloted, the equipment is reportedly in the secondary inspections area and does not operate 100% of the time. Moreover, the BVS is not integrated with other critical data systems and databases.", "The law prohibits aliens from entering or attempting to enter the United States at any time or place which has not been designated by an immigration officer (i.e., a port of entry). It also prohibits any alien from eluding inspection by immigration officers. The United States Border Patrol (USBP) is tasked with detecting and preventing the entrance of aliens trying to evade inspection by crossing into the United States between ports of entry (POEs). USB's primary mission is to detect and prevent the entry of terrorists, weapons of mass destruction, and unauthorized aliens from coming into the country, and to interdict drug smugglers and other criminals between official ports of entry.\nThe USBP patrols 8,000 miles of the international borders with Mexico and Canada and the coastal waters around Florida and Puerto Rico. The Southwestern border accounts for over 97% of all illegal alien apprehensions and as a result of this commands the lion's share of USBP resources and manpower. The Northern border, conversely, poses a severe logistical challenge given its length, geography, and comparative lack of manpower.\nAbout 90% of USBP agents are deployed along the Southwest border with Mexico. This deployment reflects the USBP's decade long policy of \"Prevention Through Deterrence,\" which aims to place enough agents and resources directly on the border to deter would-be border crossers and reroute illegal border traffic from traditional urban routes to less populated and geographically harsher areas, providing USBP agents with a tactical advantage over illegal border crossers and smugglers. It also reflects the operational reality that the vast majority of unauthorized migration into the U.S. originates in Mexico.\nShortly after the creation of DHS, the USBP was directed to formulate a new Border Patrol National Strategy that would better reflect the realities of the post 9/11 security landscape. In March of 2005, the USBP unveiled the new strategy, which places greater emphasis on interdicting terrorists and features five main objectives:\nestablishing the substantial probability of apprehending terrorists and their weapons as they attempt to enter illegally between the ports of entry; deterring illegal entries through improved enforcement; detecting, apprehending, and deterring smugglers of humans, drugs, and other contraband; leveraging \"Smart Border\" technology to multiply the deterrent and enforcement effect of agents; and reducing crime in border communities, thereby improving the quality of life and economic vitality of those areas.\nIn the national strategy, DHS notes that while many classify aliens attempting to enter the country illegally between POE as \"economic migrants,\" an \"ever present threat exists from the potential for terrorists to employ the same smuggling and transportation networks, infrastructure, drop houses, and other support then use these masses of illegal aliens as 'cover' for a successful cross-border penetration.\" In an attempt to address this threat, the USBP's new strategy focuses on laying the foundation for achieving operational control over the border. The USBP defines operational control as \"the ability to detect, respond to, and interdict border penetrations in areas deemed as high priority for threat potential or other national security objectives.\" The strategy places greater emphasis on a hierarchical and vertical command structure, featuring a direct chain of command from headquarters to the field.\nThe strategy also builds on the \"Prevention Through Deterrence\" strategy outlined in the agency's previous National Strategic Plan by placing added emphasis on enhancing its ability to rapidly deploy agents in response to emerging threats. Tactical, operational, and strategic intelligence is critical to this new emphasis on rapid deployment, as it will allow the USBP to assess risks and target its enforcement efforts to best address those risks. According to the strategy, much of this intelligence will be generated through the use of next generation surveillance systems, including cameras, sensors, and other technologies. Additionally, the USBP will coordinate closely with CBP's Office of Intelligence and other DHS and Federal agencies' intelligence apparatuses. Lastly, the new USBP National Strategy formulates different strategies tailored to each of the agency's three operational theaters: the Southwest border, the Northern border, and the coastal waters around Florida and Puerto Rico.", "The impact of the \"Prevention Through Deterrence\" strategy has been difficult to gauge. There is considerable evidence that it has made border crossing more challenging, expensive, and dangerous for illegal aliens. However, the total number of aliens apprehended increased steadily from 1994 to 2000 as the number of personnel and resources deployed along the border more than doubled. It is possible that the increased presence of agents and resources stationed on the border led the INS to catch more unauthorized aliens, accounting for the increase in apprehensions. It is also possible that the increase in apprehensions during that period instead reflects an increase in the number of people trying to enter the country in order to benefit from the quickly growing economy of the mid to late 1990s.\nFigure 10 shows the recent trends in USBP apprehensions along the border. USBP apprehensions increased steadily through the late 1990s, reaching a peak of 1.68 million in 2000. From 2000 to 2003 apprehensions have declined steadily, reaching a low of 931,557 in 2003. This reduction could be attributed to the \"Prevention Through Deterrence\" strategy finally reaching a critical mass of enough agents and resources placed directly on the border to severely inhibit illegal migrants from entering the country. Conversely, the reduction may be the result of fewer unauthorized aliens trying to enter the country due to the economic recession and rising unemployment during this period that made finding low paying jobs increasingly difficult for illegal aliens. In addition, the reduction could be an indication that increasing staffing does not increase the USBP's effectiveness. In FY2004, apprehensions increased by 25% to 1.16 million; apprehensions remained relatively stable in FY2005, increasing slightly to 1.2 million.", "DHS has a limited number of interior investigators who are charged with enforcing immigration, customs, and other federal law within the interior of the country, compared to over 600,000 state and local law enforcement officers. In an effort to carry out the country's anti-terrorism mission and strengthen the interior enforcement of immigration law, DHS has entered into agreements (Memoranda of Understanding) with several localities that include the deputizing of local law enforcement officers to assist the federal government with enforcing certain aspects of immigration law.\nThe origins of these agreements date back to 1996. The Illegal Immigration Reform and Immigrant Responsibility Act of 1996 amended the INA by permitting the Attorney General to enter into written agreements with states and localities to allow law enforcement personnel to perform certain immigration functions relating to the investigation, apprehension, or detention of aliens so long as it is consistent with state and local law. The law required that law enforcement personnel performing such functions have knowledge of relevant federal laws and receive adequate training to perform the functions.\nProponents of these agreements argue that the initiative would assist DHS to enforce the immigration law further into the interior of the United States. Also, they assert that the initiative would make it easier to arrest more potential terrorists and foreign born criminals, thus providing an elevated level of security for the nation.\nOpponents contend, however, that these agreements undermine the relationship between local law enforcement agencies and the communities they serve, noting that there are existing tensions between local law enforcement agencies and many minority communities, and this tension is heightened when local law enforcement engages in immigration enforcement. For example, potential witnesses and victims of crime may be reluctant to come forward to report crimes in fear of actions that might be taken against them by DHS. They contend that the initiative could result in the reduction of local law enforcement resources as well as the inconsistent application of immigration law across jurisdictions. Some law enforcement officers have raised concerns about the complexities of immigration law creating liability issues.", "Previously in this report, workload measures were presented for the different types of immigration enforcement activities. For example, for removals, workload was measured in the number of removals, for worksite enforcement in NIFs, for inspectors, the number of inspections. Nonetheless, none of these measures are comparable with each other. For example, comparing the number of inspections with the number of removals does not provide any insight into resource allocation, especially since the staff time devoted to each task is different. It may take three minutes of an inspectors time to process an alien entering the country, where as it may take days or weeks for a special agent to locate and apprehend one illegal alien.\nThis section examines the actual hours spent on different tasks by Special Agents and Immigration Agents from 1992 through 2003. As previously discussed, during 2004, ICE and CBP switched their accounting system from INS' Performance Analysis System (PAS) to the U.S. Customs Service's Treasury Enforcement Communications System (TECS), and as a result, data for 2004 onward are not comparable with previous years. TECS contains fewer data fields than PAS, which means that some of the data in PAS do not exist in TECS. In addition, the data for FY2004 are incomplete in both systems, as the different parts of ICE did not switch from PAS to TECS at the same time.", "As discussed above, activities typically label as interior enforcement include the detention and removal of aliens who entered illegally or violated the terms of their admittance, alien smuggling and trafficking investigations, worksite enforcement, and investigations of benefit and document fraud.", "Figure 11 shows that, of the years examined, the number of hours devoted to \"interior\" enforcement activities was lowest in FY1992 (1,375 workyears). The number of workyears increased slightly between FY1992 and FY1994, and then decreased in FY1995 (1,393 workyears). Between FY1995 and FY1999, the number of workyears increased. Of the years analyzed, the number of workyears reached a peak of 2,081 in FY1999 (the same year that INS released its interior enforcement strategy), declined until FY2002 (1,806), and then increased in FY2003 (1,892).\nBetween FY1992 and FY2003, the largest number of workyears were devoted to locating and arresting criminal aliens, approximately one-third of all the workyears (see Figure 12 ) . The proportion of workyears related to worksite enforcement has decreased, though not consistently, since FY1992. In FY1992, worksite enforcement accounted for 18.1% of all workyears, whereas in FY2003, worksite enforcement only comprised 3.5% of all workyears. Similarly, the percentage of workyears devoted to fraud investigations was larger in FY1992 (15.3%) than in FY2003 (7.7%). Conversely, the proportion of total hours devoted to status violations and non-investigative work were larger in FY2003 than in FY1992. The percentage of time devoted to smuggling remained relatively stable compared to the trends in the other types of investigations. Notably, in FY2004 and FY2005, ICE suffered funding shortfalls, resulting in training, travel, recruitment, pay, and awards shortages, and as a result it is unlikely that ICE was able to devote additional resources to immigration enforcement during those years.", "Historically, the largest proportion of work hours have been devoted to criminal alien cases (see Figures 11 and 12 ). In FY1992, 433 workyears were spent locating and arresting criminal aliens. That number increased in FY1993 and FY1994 (550), and then decreased in FY1995 (498). Between FY1997 and FY1999, the number of hours devoted to criminal aliens increased, and peaked in FY1999 at 811 workyears. The number of hours devoted to these cases decreased between FY1999 and FY2003. In FY2003, the number of workyears devoted to criminal alien cases was 740, almost double the amount of hours spent on these cases in FY1992.\nIn addition, the increase in actual hours does not correspond to a doubling of the proportion of time spent on criminal alien cases. In FY1992, 31.5% of all hours were spent on criminal alien cases. The proportion of time increased to 37.5% in FY1994, and decreased to 33.4% in FY1997. Between FY1997 and FY2002, the percentage of time devoted to criminal alien cases rose to 41.6% and then decreased to 39.1% in FY2003.\nFigure 13 shows that the number of workyears devoted to criminal aliens and the number of criminal alien removals are highly correlated. As the number of workyears devoted to criminal aliens increased, so did the number of aliens removed on criminal grounds. However, from FY2002 to FY2003, the number of hours decreased slightly while the number of criminal removals increased, which may be related to the drop in criminal removals in FY2002. Based on this analysis, one could argue that an increase in resources for criminal alien investigations would result in an increase in removals of criminal aliens. Nonetheless, there may be a limit to the effect that addition of resources will have on criminal alien investigations. For example, an increase in the number of criminal alien arrests would increase the workload of the Executive Office for Immigration Review (EOIR). Thus, if ICE significantly increases their arrests of criminal aliens, the removal cases will still have to be adjudicated by EOIR before the alien can be removed. In addition, since criminal aliens are subject to mandatory detention, increasing the arrests of criminal aliens will increase the need for detention bedspace.", "An analysis of INS investigation workload data reveals that time spent on employer cases by agents, supervisors, and non-clerical support personnel accounted for less than 18% of total investigation workyears in each year from FY1992 through FY2003 (See Figures 11 and 12 ). One factor routinely cited to explain why a greater share of interior enforcement resources was not available for employer cases is the growth of the criminal alien workload in the 1990s. According to Under Secretary Hutchinson, the criminal alien workload \"eventually grew to the point that it consumed more investigative hours than any other enforcement activity.\"\nFigures 11 and 12 reflect a series of changes to the worksite enforcement program that occurred over the FY1992-FY2003 period. During the first half of this period, as Figures 11 and 12 show, time spent on worksite enforcement, both in terms of number of workyears and as a percentage of total investigations workyears, decreased until FY1994 and then began increasing. The mid-1990s increase coincided with actions by the Clinton Administration and Congress to bolster worksite enforcement.\nAfter FY1997, as Figures 11 and 12 show, time spent on employer cases trended downward. In FY2003, worksite enforcement accounted for 3.5% of the total investigation workyears, less than one-fifth of its share in FY1992. The start of this decline coincided with a change in INS's approach to worksite enforcement, set forth in a May 1998 memorandum by INS Executive Associate Commissioner for Field Operations Michael Pearson. Apparently, the change was prompted largely by complaints about INS tactics during worksite raids. According to Pearson, the new procedures described in the memorandum and the accompanying materials responded to complaints by Congress and others, and incorporated the \"best practices\" of various offices.", "As Figures 11 and 12 illustrate, fraud investigations have declined from FY1992 through FY2003, both as percent of interior enforcement and in terms of actual workyears. Although there appears to be an upturn, most likely due to the 1999 Interior Enforcement Strategy mentioned previously, the overall trends have been downward. As a percent of interior enforcement workyears, fraud investigations dropped from 15.3% in FY1992 to 7.7% in FY2003. Actual workyears fell from 210 to 146 over the same period.", "For the years analyzed, the peak workyears and the largest percentage of all interior enforcement hours devoted to alien smuggling correspond to the first three years of the INS interior enforcement strategy (FY1999 through FY2001) when alien smuggling was the agency's second highest priority. (The removal of criminal aliens was the first priority.) After FY2001, the number of workyears as well as the percentage of all hours devoted to alien smuggling declined, possibly as a result of shifting priorities after the terrorist attacks in September 2001. The number of hours devoted to smuggling cases was the lowest in FY1995 (211 workyears), and largest in FY1999 and FY2000 (348 workyears). The proportion of all interior enforcement hours devoted to alien smuggling was smallest in FY1997 (14.5%), and largest in FY2001 (18.6%). In FY2003, 279 workyears were devoted to smuggling cases which corresponded to 14.7% of all interior enforcement workyears. Nonetheless, according to ICE the resources and time devoted to alien smuggling are larger if other relevant investigative programs (such as criminal aliens, identity and benefit fraud, and the Joint Terrorism Task Force) are included in the total. (See Figures 11 and 12 .)", "Status violators are aliens who have entered without inspection or have overstayed their visas (i.e., the alien is out of status). As shown in Figure 11 , the number of hours spent on status violators almost tripled between FY1992 and FY2000, from 46 workyears to 124 workyears. The percentage of overall investigative time spent on status violation investigations doubled during that time period, as did the resident unauthorized alien population in the United States. (See Figure 12 .) In FY1992, 3.3% of all hours were devoted to status violations compared to 6.7% of all hours in FY2003. The number of hours spent on status violators, as well as the percent of time devoted to status violators, declined between FY2000 and FY2001, then increased between FY2001 and FY2003. Nonetheless, it is interesting to note, that in the most recent data year, only 6.7% of investigative hours were spend on status violators when the unauthorized population was estimated to be almost 10 million.", "The amount of hours spent on administrative and non-investigative tasks more than doubled between FY1992 and FY1998, from 205 workyears to 477 workyears, as illustrated in Figure 11 . Similarly, as shown in Figure 12 , the percent of hours devoted to administrative tasks increased from 14.9% to 23.2%, the largest proportion devoted to administrative duties for any year. It is interesting to note that in 1999, INS released its interior enforcement strategy which may account for the increase in non-investigative hours. In addition, the increase in administrative and other hours may be the result of an increase in time devoted to developing databases, including the development of an entry/exit system which was mandated in IIRIRA in 1996.\nIn FY2003, 23% of all hours (435 workyears) were devoted to administrative and non-investigative tasks. In addition, the percent of time devoted to miscellaneous tasks remained under 1% until FY2002 and FY2003, and then increased in both years. (See Figure 12 .) This increase may be attributable to the productivity time lost/needed when DHS was being formed.", "", "As Figure 9 and Table 2 above shows, the number of hours spent on inspection duties increased between FY1992 (2,273 workyears) and FY1994 (2,446 workyears), decreased in FY1995 (2,245 workyears), and then steadily increased until FY2000 (3,189 workyears). The total number of hours decreased between FY2000 and FY2001, increased between FY2001 and FY2002, and then decreased to the lowest level of the period in FY2003 (2,098 workyears).\nThe largest percentage of hours for inspectors is spent in primary inspections, and this proportion has been fairly constant through the years analyzed, ranging from 62.2% (FY1998) to 69.8% (FY2001). In FY2003, immigration inspectors spent 13% of their time on enforcement-related activities. Over the previous 11 years, the time spent by immigration inspectors on enforcement activities has steadily risen, with the exceptions of FY1996 when the percentage dropped by one percent from FY1995, and FY2001 when the percentage dropped by three percent from FY2000. (See Figure 9 and Table 2 .)", "The number of hours worked by the USBP, mostly spent patrolling the border between points of entry, almost doubled between FY1997 and FY2002, from 3,073 workyears to 6,096 workyears (See Figure 14 ). The number of USBP workyears decreased slightly, by three workyears between FY2002 and FY2003. The workyears for USBP increased dramatically between FY2003 and FY2005. In FY2004, USBP spent 6,591 workyears on enforcement efforts, and in FY2005, 8,018 workyears.\nInterestingly, as illustrated in Figure 15 , an increase in workyears does not automatically result in an increase in apprehensions. Between FY1997 and FY2000, both workyears and apprehensions increased. In FY2001 and FY2002, although USBP workyears continued to increase, the number of apprehensions decreased. Between FY2003 and FY2004, the workyears increased eight percent from 6,093 to 6,591, while apprehensions increased 25% from 931,557 to 1.2 million. Comparatively, between FY2004 and FY2005, the number of USBP workyears increased 22% from 6,591 to 8,018, while the number of apprehensions increased only 3%. The decrease in apprehensions since FY2000 may be attributable to fewer unauthorized aliens trying to enter the country due to the economic recession, and the increased difficulty finding employment. USBP argues that the reason why apprehensions do not seem to be increasing at the same rate as resources is because the \"Prevention through Deterrence\" strategy is finally reaching a critical mass of enough agents and resources placed directly on the border to severely inhibit illegal migrants from entering the country. It may be that additional agents do not have a large effect on apprehensions, or that the additional number of agents is not large enough to actually increase apprehensions.", "Figure 14 illustrates that many more resources (measured in staff hours) have been allotted to enforcement between the ports of entry than enforcement within the United States and at the ports of entry. While the amount of USBP resources significantly increased between FY1997 and FY2003, the resources for both inspections and interior enforcement increased more modestly between FY1997 and FY1999, while inspection hours also increased between FY1999 and FY2000. Hours for interior enforcement, saw a mix of increases and decreased during that period. Between FY2000 and FY2002 interior enforcement hours decreased, and then increased between FY2002 and FY2003. Nonetheless, for the years analyzed, workyears spent on interior enforcement were highest in FY1999, the first year of the INS' interior enforcement strategy. Inspection hours decreased between FY2000 and FY2001, increased in FY2002, and then decreased again in FY2003. The amount of time inspectors spend on enforcement activities, increased between FY1997 and FY2000, decreased substantially in FY2001, and then increased substantially in FY2002. Between FY2002 and FY2003, the number of inspector enforcement hours decreased.\nComparing FY1997 with FY2003, the USBP hours almost doubled from 3,073 to 6,093 workyears, while the interior enforcement hours increased slightly from 1,832 to 1,892 workyears, and the number of inspection hours fell from 2,665 to 2,098. Nonetheless, a comparison of FY1997 and FY2003, shows that amount of time inspectors spent on enforcement activities almost doubled, from 141 workyears to 271 workyears. Importantly, inspection hours are dependent on workload, (i.e., how many people are entering the country in any one year), but since the number of aliens illegally present in the country continues to grow, it is difficult to argue that there has been a decrease in the interior or border enforcement workload.", "Questions have been raised concerning the impact of DHS's organizational structure on the effective enforcement of immigration laws. Nonetheless, any attempt to determine the consequence of DHS's structure on immigration enforcement, involves disentangling (1) issues that remain from the former INS (i.e., are the problems encountered by ICE and CBP the same as those found in the former INS); (2) issues related to the time needed for a newly created department to function smoothly; and (3) issues related to the separation of immigration enforcement functions into separate agencies—especially the distinction between CBP and ICE. Although this section focuses on some of the issues facing the new department, it is important to note that there are benefits to combining the disparate agencies in the new department.. For example, ICE can pursue money laundering charges related to smuggling and document fraud through the Financial Investigations Division. This capacity did not exist in INS, and INS would have had to seek outside assistance to pursue additional charges.", "Over the years, GAO completed several reports on the management in the former INS which noted that INS faced significant challenges in assembling the basic systems and processes that organizations need to complete their goal. GAO found a lack of\nclearly delineated roles and responsibilities leading to overlapping responsibilities and ineffective use of resources (e.g., lacking the ability to determine staffing needs); policies and procedures to balance competing priorities such as working level guidance; effective internal and external communication and coordination (i.e., a lack of clarity on responsibilities and authorities); and automated systems to provide accurate and timely information to support its operations.\nIn testimony before the House Judiciary Committee, Subcommittee on Immigration, Border Security, and Claims in April 2003, GAO noted that \"unless these elements were established, enforcing immigration laws..., and effectively participating in the government wide efforts to combat terrorism would be problematic regardless of how the immigration function was organized . \"\nINS faced numerous challenges implementing its interior enforcement strategy. Historically, Congress and INS devoted five times more resources (staff and funding) to border enforcement than to interior enforcement. The INS claimed that it lacked sufficient staff to reach its interior enforcement goals, but the agency never performed a systematic assessment of their staffing needs to reach program goals and the best allocation of existing staff resources. GAO testified in 2003 that the challenges in the Interior Enforcement program would require high-level attention and a concerted effort from ICE. For example, there were hundreds of thousands of criminal aliens, the number of aliens smuggled into the United States had grown along with the complexity of the alien smuggling operations, tens of thousands of aliens illegally seek to gain immigration benefit, and millions of unauthorized aliens use fraudulent documents to gain employment.\nIn a 2004 report, GAO found that DHS management issues were similar to those in the former INS. For example, as in the former INS, DHS lacks clarity and formal guidelines for addressing overlapping roles and responsibilities of ICE and CBP, which has lead to disagreements, confusion, and institutional barriers between the two agencies.", "INS had a longstanding history of using antiquated databases and in some cases had paper-based systems. Several GAO reports and one by the DOJ Inspector General noted the outdated systems and databases that immigration officials used to conduct their daily business. Prompted by the 2001 terrorist attacks, in 2002 Congress passed the Enhanced Border Security and Visa Entry Reform Act of 2002. The act mandated the integration of immigration data systems and databases. The act also called for the integration of data systems and databases that contain federal law enforcement and intelligence information relevant to making decisions on visa admissibility and the removal of aliens.\nMany assert that the need for all agencies involved in admitting aliens to share intelligence and coordinate activities is essential for U.S. immigration policy to be effective in securing the homeland. Some maintain that the reforms Congress made in the mid-1990s requiring all visa applicants to be checked against lookout databases were inadequate because the databases across the relevant agencies were not interoperable and the various agencies were territorial with their data. They maintain that, in the long run, the most efficient and effective guard against the entry of aliens who would do us harm is an interagency and inter-departmental database that is accessible in \"real time\" to consular officers, CBP inspectors, and key law enforcement and intelligence officials.\nOthers point to the cost, time, and complexity of developing interoperable databases. They cite the difficulty thus far in determining what biometric identifiers are most appropriate for screening aliens. They point out competing technologies of the existing databases in which various key agencies have already heavily invested. Some maintain that success of the interoperable database technology depends on 100% inclusion of aliens applying for visas and seeking admission, but that the sheer scope of such a system poses \"real time\" implementation issues. They also warn that if intelligence data becomes too accessible across agencies, national security may actually be breached because sensitive information may be more likely to fall into the wrong hands. Privacy concerns arise as well as the data sharing and interoperability broadens.", "When ICE and CBP were created, neither agency was given responsibility for all immigration enforcement activities, and neither was designated the lead agency in immigration enforcement. ICE received INS' investigations and intelligence functions, as well as its detention and removal. CBP received the inspections functions and the border patrol. CBP and ICE need to heavily rely on each other because within the new structure, enforcement efforts initiated by CBP often are supposed to be completed by ICE. In addition, CBP border patrol agents are dependent on ICE's DRO for the detention and removal of some of the aliens that they apprehend. Nonetheless, there have been reports of rivalries between ICE and CBP, which inhibit coordination. Moreover, the creation of the DHS has meant that in order to implement an interior enforcement strategy, ICE has to coordinate with CBP and Bureau of Citizenship and Immigration Services (USCIS). As discussed above, when the Department of Homeland Security was formed, USCIS was tasked with the adjudication (service) functions of the former INS.\nINS and U.S. Customs Service investigators and intelligence analysts were merged into ICE's investigations and intelligence offices, and INS' detention and removal program was placed in ICE's detention and removal office (DRO). Traditionally, INS investigators specialized in immigration enforcement (e.g., locating criminal aliens, alien smuggling) while Customs investigators specialized in customs enforcement (e.g., drug smuggling, money laundering). In addition, INS investigators primarily investigated civil violations of immigration law, while customs investigators investigated criminal violations related to Customs law. INS and Customs investigators brought their own cultures, policies, mission priorities, procedures to the newly created ICE, which is the second largest investigative bureau in the federal government with approximately 20,000 employees. Conversely, CBP blended entities with similar missions.\nAlthough much of the Congressional attention has focused on the division of ICE and CBP, some issues have also been raised concerning the interaction between USCIS and ICE. INS' approach to benefit fraud was fragmented and unfocused. INS also failed to establish guidance to assure that high-priority cases were investigated. With the creation of DHS, investigating benefit fraud became the responsibility of ICE. Nonetheless, ICE reportedly did not do this, and USCIS established its own benefits fraud investigations unit. According to ICE, it only handles cases of large and expansive benefit fraud which are referred to them from USCIS. All other cases of benefit fraud are handled by USCIS.", "DHS' Office of the Inspector General (OIG) examined the merits of merging CBP and ICE, in a report based largely on testimonial evidence. The OIG analyzed whether the difficulties encountered were due to the implementation of the new department or to inherited pre-existing conditions from the former INS. The report also considered other factors such as funding problems and accounting system difficulties. The OIG concluded that organizational structure at the time contributed to the problems in three major areas: (1) coordination between apprehensions and detention and removal efforts, (2) coordination between interdiction and investigative efforts, and (3) coordination of intelligence activities.\nThe report found that the role of integrating ICE and CBP activities had been the responsibility of Directorate of Border of Transportation Security (BTS) which oversaw both ICE and CBP, but due to staffing shortfalls and a lack of authority (including budget authority) over the bureaus, BTS failed to: (1) prevent ICE and CBP from working at cross purposes; (2) synchronize CBP and ICE operations; and (3) resolve conflicts between the two agencies. The report concluded that CBP and ICE had failed to coordinate efforts, and that each organization engaged in discrete planning and strategy development processes (leading to different priorities), and field staff were accountable to separate chains of command. In addition, the report indicated that the division between ICE and CBP is marked by a clear institutional barrier, and the shortfalls in operational coordination and information sharing have fostered negative relations between CBP and ICE personnel, including competition and mistrust.\nMany have said that a merger the magnitude of DHS would take five years or more to settle into satisfactory operations; however, the OIG concluded that the integration has not progressed as well as expected, noting that the people they interviewed almost universally stated that the current problems were seen as unresolvable because of the \"unnatural separation\" of interdependent functions. Nonetheless, DHS responded to the OIG's recommendation to merge ICE and CBP by maintaining another reorganization would entail costs, including loss of employee productivity during the transition. In addition, DHS noted that the new organization could be too big and unwieldy, with an overly large span of control. Moreover, the report indicated that other agencies may fear that a combined border security agency would become the dominant law enforcement entity.\nFurthermore, the Secretary of Homeland Security, Michael Chertoff, undertook a review of the department (called the Second Stage Review) and after careful study concluded that the best course was not to merge ICE and CBP, but to institute a new management structure to reduce bureaucracy, improve accountability, and enhance coordination. Secretary Chertoff also concluded that a merger would diminish the roles of the Assistant Secretary of ICE and the Commissioner of CBP, creating a new bureaucratic reporting mechanism which would diminish coordination rather than enhance it. Secretary Chertoff recommended innovation rather than another massive reorganization.", "The OIG concluded that the current organizational structure has also hampered coordination of interdiction and investigative efforts. Since the investigative functions have been separated into ICE, CBP officers have reported that ICE no longer accepts as many case referrals from CBP inspectors and border patrol agents. ICE reported that investigative coordination is declining because CBP increasingly refers cases to other agencies such as the FBI and DEA without notifying ICE. In addition, ICE has reported that investigations have been compromised due to CBP's \"inexperienced\" investigative work. Reportedly, CBP is now developing its own investigative capabilities. Nonetheless, CBP and ICE managers have asserted that the policy is to refer all cases to ICE for investigation.", "With the formation of DHS, all immigration intelligence agents including those from the border patrol were placed in ICE's intelligence program, which is responsible for collecting, analyzing, and disseminating immigration related intelligence used by ICE, CBP and USCIS. However, CBP recently established its own intelligence program. CBP and ICE intelligence requirements overlap to a large extent, but the two bureaus have separate intelligence structures and products. The OIG reported that the intelligence coordination needs to improve, and that the only significant coordination between ICE and CBP relates to intelligence received from other agencies.\nThe organization's primary means of sharing intelligence is through the Treasury Enforcement Communications System (TECS) which was not designed for this purpose as it does not highlight trends or detect anomalies. In addition, most CBP personnel lack the required clearance to retrieve critical information entered into TECS by ICE. The OIG concluded that the reliance on the system is inhibiting the timely and effective exchange of information.", "Many duties are incorporated under the banner of immigration enforcement. These include removing aliens who should not be in the United States, investigating alien smuggling and trafficking, patrolling between and at ports of entry, combating document and benefit fraud, and enforcing the prohibitions against employers hiring aliens without work authorization. Due to the breadth of immigration enforcement activities, the allocation of resources appears to be significant in determining the ability to enforce the immigration laws. Nonetheless, some contend a policy based solely on enforcement is bound to fail, and only a legalization program, providing a clean slate, can reduce the unauthorized population. However, others assert that the United States has not tried immigration enforcement, arguing that most of the resources have been devoted to border enforcement, and that the United States has not fully engaged in other types of immigration enforcement, most notably worksite enforcement.\nThe majority of aliens come to the United States for economic opportunities and for family reunification. The ability to contain illegal migration caused by those seeking family reunification may also depend on the ability of DHS to clear the backlog of immigration petitions, and process new petitions. In addition, the per-country ceilings on certain types of family based immigration affect the ability of aliens from countries with high levels of immigration (e.g., the Philippines) to immigrate. Congressional action would be needed to change the per-country ceilings. Some maintain that only reform of the legal immigration system can decrease illegal immigration.\nIn addition, the amount of illegal migration may also be dependent on the economic health of the sending countries, especially of those countries in the Americas. Factors in other countries effect the desire of their populations to immigrate, legally or illegally, to the United States. For example, between 2000 and 2003, Uruguay experienced a recession increasing the propensity of its citizens to live and work illegally in the United States. Thus, some argue that only a guest worker program, creating opportunities for a large number of immigrants to come to the United States to work, could significantly reduce the unauthorized migration. However, others argue that better worksite enforcement and enforcement document fraud would make it more difficult for unauthorized aliens to find work, resulting in a decrease in the unauthorized population. It is possible that a combination of a guest worker program and increased worksite enforcement may be utilized to reduce the unauthorized population.\nAlthough within the United States, the enforcement of immigration law is primarily the responsibility of the Department of Homeland Security's Bureaus of Immigration and Customs Enforcement (ICE) and Customs and Border Protection (CBP), one possible option to aid in the reduction of the unauthorized alien population might be to increase the coordination and information sharing with other federal agencies, such as the Social Security Administration and the Department of Labor. Another approach may be to increase the role of local law enforcement agencies in the enforcement of immigration laws. Yet many fear that these options will distract the agencies from their primary missions and could hinder the agencies ability to perform other functions if unauthorized aliens will not interact with them.\nIn some instances, the enforcement of certain immigration laws can be controversial. Although few would argue that aliens should be allowed to enter without being inspected by an immigration officer, and that smugglers and traffickers should not be punished, enforcement against longer-term, noncriminal, unauthorized aliens is often politically difficult due to these aliens' long standing ties to their communities. Often these aliens are integrated in their communities, and the government's attempts to remove them can result in a backlash from the community. Furthermore, there are concerns that increased enforcement against aliens working illegally will disrupt sectors of the economy that depend on foreign labor, and harm the United States economy. The conflicting pressures to reduce the unauthorized population while safeguarding the U.S. economy and maintaining good will among the populace, as well as resource constraints and management issues in DHS, combine to make immigration enforcement policy a complex issue.", "" ], "depth": [ 0, 1, 2, 2, 3, 1, 2, 2, 2, 3, 3, 1, 2, 3, 3, 3, 3, 3, 3, 3, 3, 4, 4, 4, 2, 3, 3, 4, 2, 3, 4, 4, 4, 3, 4, 3, 4, 2, 3, 3, 3, 3, 3, 2, 3, 4, 3, 3, 4, 4, 4, 4, 2, 3, 3, 3, 4, 4, 2, 3, 1, 1, 2, 3, 3, 3, 3, 3, 3, 3, 2, 3, 3, 2, 1, 2, 3, 2, 3, 4, 4, 1, 2 ], "alignment": [ "h0_title h2_title h1_title", "h0_full", "", "", "", "h2_title", "h2_full", "", "", "", "", "h2_title", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "h2_title", "", "", "", "h2_full", "", "", "", "", "", "", "", "", "", "", "", "", "h2_full", "h2_title h1_title", "h2_title h1_title", "h1_full", "", "", "h2_full", "", "", "", "", "", "", "h1_full", "", "", "", "", "", "", "", "h0_full h2_full", "" ] }
{ "question": [ "How is the population of unauthorized aliens in the United States projected to change?", "How many aliens are caught while attempting to illegally enter the United States?", "Why do these aliens attempt to enter the United States?", "To what extent is this immigration legal?", "How are enforcement resources distributed?", "How have levels of enforcement resources changed between FY1997 and FY2003?", "How are interior enforcement efforts divided?", "What resources are devoted to worksite enforcement?", "How has Congress dealt with immigration enforcement?", "What debates exist over the distribution of immigration enforcement resources?", "What is a potential negative effect of expanding the immigration enforcement role of other federal agencies?", "What alternative methods exist?" ], "summary": [ "An estimated 11 million unauthorized aliens reside in the United States, and this population is estimated to increase by 500,000 annually.", "Each year, approximately 1 million aliens are apprehended trying to enter the United States illegally.", "Although most of these aliens enter the United States for economic opportunities and family reunification, or to avoid civil strife and political unrest, some are criminals, and some may be terrorists.", "All are violating the United States' immigration laws.", "Historically, more resources (measured in staff hours) have been allotted to enforcement at the border than enforcement within the United States.", "While the amount of U.S. Border Patrol (USBP) resources almost doubled between FY1997 and FY2003, time spent on other enforcement activities increased only slightly, while the number of inspection hours decreased.", "Furthermore, focusing on \"interior\" enforcement, in FY2003, the largest amount of staff time was devoted to locating and arresting criminal aliens (39%), followed by administrative and non-investigative duties (23%) and alien smuggling investigations (15%).", "Only 4% was devoted to worksite enforcement (i.e., locating and arresting aliens working without authorization, and punishing employers who hire such workers).", "Congress has spent much time debating immigration enforcement and the unauthorized alien population. Congress could allocate more resources to immigration enforcement activities, raising the question of what is the most efficient allocation of resources among the different enforcement tasks.", "For example, some assert that the United States has not truly tried immigration enforcement, arguing that most of the resources have been devoted to border enforcement, instead of fully engaging in other types of immigration enforcement; others contend that only a legalization program can reduce the unauthorized population. In addition, Congress could expand the immigration enforcement role of other federal agencies and state and local law enforcement.", "Many fear, however, that this option will distract the agencies and local law enforcement from their primary missions.", "Since many of the unauthorized aliens come to the United States for economic opportunities, some argue that a guest worker program, creating opportunities for a large number of aliens to come to the United States to work, could significantly reduce unauthorized migration. Others argue that an increase in the enforcement of the prohibition against hiring illegal alien workers and the use and manufacturing of fraudulent documents would make it more difficult for unauthorized aliens to find work, resulting in a decrease in the unauthorized population." ], "parent_pair_index": [ -1, 0, 0, 2, -1, 0, -1, 2, -1, 0, 1, 1 ], "summary_paragraph_index": [ 0, 0, 0, 0, 2, 2, 2, 2, 3, 3, 3, 3 ] }
GAO_GAO-13-53
{ "title": [ "Background", "Key Efforts Present the Bureau with Both Opportunities and Risks", "All Three Key Efforts Present the Bureau with Cost Saving Opportunities", "Internet", "The Bureau Has Identified 2020 Census Program- Level and Project-Level Risks but Has Not Developed Project-Level Mitigation and Contingency Plans", "Project-Level Cost Estimates Have Not Been Developed", "Research and Testing Project Plans Were Delivered on Schedule, but Not All Project-Level Resources and Performance Metrics Have Been Identified", "Conclusion", "Recommendations for Executive Action", "Agency Comments and Our Evaluation", "Appendix I: Objectives, Scope, and Methodology", "Appendix II: Fourteen Research Projects Will Inform Design Decisions on Key Efforts (Text for Interactive Figure 3)", "Appendix III: Census Mapping and Address Contracts", "Total", "Appendix IV: Comments from the Department of Commerce", "Appendix V: GAO Contact and Staff Acknowledgments", "GAO Contact", "Staff Acknowledgments", "Related GAO Products" ], "paragraphs": [ "The Bureau’s 2020 Census early research agenda is focused on conducting the 2020 Census at a lower cost than the 2010 Census while maintaining high quality results. In order to do this the Bureau has developed a range of design alternatives for the 2020 Census. The Bureau’s 2020 design alternatives have potential for containing costs but also have the potential to increase risks. The design alternatives focus on options to use the Internet and other social media to increase response rate, target address canvassing, and expand the use of administrative records. Figure 1 shows the current range of six 2020 Census design alternatives currently being considered and how the three key efforts fit into them. According to the Bureau, the final 2020 design is likely to incorporate both existing approaches as well as design alternatives that have never been used in the decennial census. Greater changes to the overall design will result in greater potential for cost savings. However, greater design changes also could result in greater risk, and testing will be needed to identify the risks, costs, and benefits of any new approaches. According to the Bureau, alternative one has the lowest risk because it most closely mirrors the 2010 Census design (mailout of census forms, and in-person follow-up of non respondents) and is not dependent on implementing innovations such as increased use of administrative records and targeted address canvassing.\nThe Bureau formally kicked off initial planning for the 2020 Census on October 3, 2008, with the 2020 Census Planning Summit. At that meeting, decennial-census managers and subject matter experts discussed challenges, strengths, and weaknesses that would need to be considered during the 2020 Census strategic decision-making process. From 2009 to 2011, during the options analysis phase of 2020 Census planning, Bureau officials went through a research topic winnowing process where they: identified cost and quality drivers, conducted brainstorming sessions, received expert input (e.g., National Academy of Sciences), cataloged over 600 ideas, clustered those ideas into over 100 projects with research questions, and then prioritized them against the for the 2020 Census. The Bureau identified Bureau’s Guiding Principles26 research projects to inform preliminary design decisions with the goal of conducting the 2020 Census at a lower cost than the 2010 Census, while maintaining high quality.\nUsing the 26 research projects, Bureau officials plan to validate the feasibility of the various strategies for reducing costs between fiscal years 2012 and 2014. Bureau officials stated that they are planning to narrow down the design alternatives by September 2014, and that research would continue into the next phase. Bureau officials believe that conducting research earlier in the decade will better position them to make more effective changes to the 2020 Census design. Figure 2 shows the five phases of the life cycle for the 2020 Census.\nThe Bureau is now in the “Early Research and Testing” phase and is currently refining and developing its 26 project plans. These plans include, among other requirements, project goals, objectives, scope, limitations, and skills required, and had a set of required iterative research and testing deliverables due 30, 60, 90, and 120 days after project kickoff. According to Bureau documentation, this process encouraged the development and proper consideration of ideas. The Bureau selected 17 of the 26 projects to start in fiscal year 2012. The remaining projects are scheduled to begin in fiscal years 2013 and 2014. Of the 17 research projects the Bureau is conducting in 2012, 14 projects are to inform design decisions related to the Internet, administrative records, and targeted address canvassing. See figure 3 for a list of these 14 research projects and their objectives. According to the Bureau’s timeline, project teams are to complete their work on these 14 projects by September 2014.\nMove mouse over each activity to see more information afterwards CLICK to close the open pop-up information display panel.\nTo print text version of this graphic, go to appendix II.", "Research on new methods likely to result in a more cost-effective 2020 Census must be accomplished early enough in the decade to confirm their likely impact on both cost and quality and to inform timely design decisions. The use of the Internet as a response option, a potential move towards targeted address canvassing, and the possible use of administrative records to replace data collected during census field operations present the Bureau with opportunities to reduce costs while maintaining a high quality census. As part of the 2020 Census planning process the Bureau has identified both program-level and project-level risks associated with these options. According to the Bureau, program- level risks span the entire 2020 research and testing phase and if not managed properly could jeopardize the phase’s goals and objectives. In contrast, project-level risks pertain to the successful completion of specific projects. However, the Bureau has not developed mitigation and contingency plans for the project-level risks. Also, the Bureau has not developed cost estimates for any of its 2020 research and testing projects as required in guidance provided to project teams. Finally, some of the project plans we reviewed were incomplete. For example, not all project plans identified the necessary staff resources, while other project plans failed to provide performance metrics for measuring progress and for determining the project’s final outcome.", "", "During the 2000 Census, the Bureau piloted an Internet response option that had a limited number of respondents. They considered building on this 2000 experience for the 2010 Census, but the Bureau decided in July 2006 not to include the Internet option in the design for the 2010 Census because test results indicated that the Internet option did not increase the overall response rate, including response among hard-to-count population groups, and they had underestimated the costs of the contract that included developing the Internet option.\nHowever, more recent tests conducted in 2011 showed that adding an Internet response option increased the overall response rate. The 2011 test results, coupled with the increased prevalence and accessibility of the Internet, led Bureau officials to commit to providing an Internet response option for the 2020 Census. With regard to the cost for the 2020 Census, if this option can help achieve an overall increase in the response rate it can save money, since Bureau field staff would need to visit fewer households during nonresponse follow-up (NRFU), which is the largest and most costly census field operation. Furthermore, testing has shown that the cost of an Internet survey is low compared to a mail survey, which incurs printing and postage costs. Moreover, web survey responses are generally available more quickly and are of better quality than responses from a mail survey because there is no lag time as the responses are captured in real time and there are reminders to prompt the respondent if a question is unanswered. Quicker and complete responses can also help reduce the amount of time and money spent on following up on late or incomplete census forms.\nIn April and November 2011, the Bureau tested an Internet response option in its American Community Survey (ACS), and beginning in January 2013, the Bureau plans to offer it as a response option. Bureau officials have stated that they intend to build on this existing information technology infrastructure in order to reduce the cost of implementing an Internet option for the 2020 Census.\nGiven the Bureau’s decision to move forward with an Internet design option, six research and testing projects are focused on how best to implement an Internet response option in concert with other self-response options. The project team with primary responsibility for coordinating the design of the Internet response option is tasked with answering the following research question:\nHow does the Bureau leverage technology and new response modes (including the Internet) to increase self-response, improve nonresponse follow-up data collection strategies, while maintaining overall quality?\nOne objective of this project is to determine what contact strategy should be used to inform the public that census responses can be filed via the Internet in order to increase self-response (i.e., Bureau use of email, social networks or phone for initial contact or for reminders). Contact strategy testing will examine the impact of various Bureau instructions to respondents, as well as the timing of the delivery of the mailing pieces, on such factors as response rates, return rates, percentage of Internet returns, and speed of returns. This project will also determine what mode (paper, Internet, or phone) is best for each demographic, geographic, and language group, as well as determine the effect a lack of access to technology has on each demographic group. Additionally this project will refine and test security features. The other five projects will cover such areas as types of languages that will be offered by response mode, public perception and potential concerns about an Internet response, and management of the workload for multiple modes of response.\nIn the 2010 and earlier censuses, the Bureau mounted a full address canvassing operation, where field staff verified every housing unit in the nation to update the Master Address File (MAF) and the associated mapping system called TIGER® (Topologically Integrated Geographic Encoding and Referencing). This labor-intensive effort was one of the more expensive components of the 2010 Census: the 2010 Address Canvassing Operation required 140,000 temporary workers to verify 145 million addresses (by going door-to-door) at a cost of $444 million, or 3 percent of the $13 billion total cost of the 2010 Census. One of the reasons the Bureau conducted a full address canvassing for the 2010 Census was because it wanted to capture hidden and hard-to-capture addresses, such as housing units in converted garages and large storage sheds. For the 2020 Census the Bureau would like to reduce the amount of field work and cost of address and map updates by targeting the address canvassing operation. According to Bureau planning documents, through early research and testing the Bureau plans to attempt to determine the quality and stability of its address file in terms of the number of changes (adds, deletes, duplicates, and corrected addresses) that took place to each census block in 2010. Depending on that outcome, the Bureau would target for address canvassing only those blocks where the quality of the addresses was determined to be inadequate.\nTo determine whether to target address canvassing for the 2020 Census, the Bureau has two ongoing efforts to improve the Bureau’s map and address databases. First, the Bureau’s Geography Division is working with the United States Postal Service (USPS) and other federal agencies on a new program called the Geographic Support Systems (GSS) Initiative, which allows government agencies at all levels to regularly share and continuously update their address lists with the Bureau. According to current plans, USPS will continue providing the Bureau with address updates. Likewise, tribal, state, and local governments, which maintain address lists for purposes such as emergency response and property assessment, will also have the opportunity to share addresses with the Bureau throughout the decade, rather than solely 2 years prior to the decennial, as had been the case in prior decennial censuses. Additionally, the GSS Initiative is working to develop, and in some cases improve, methods for identifying and capturing hidden and hard-to- capture addresses.\nAs part of this first effort, the Bureau is investigating the role and possible contributions the private sector can make in improving its address and mapping databases. For the 2010 Census the Bureau relied heavily on the private sector to update addresses and maps. Specifically, in June 2002, the Bureau awarded an 8-year contract of about $200 million to improve the accuracy of its mapping database and investigate options and methods of updating its address database. The contract, among other tasks, corrected in TIGER® the location of streets, boundaries, and other map features so that coordinates would be aligned with their true geographic locations. According to Bureau officials, continued reliance on the private sector is necessary in order to maintain the major upgrades that were made to its address and mapping databases last decennial. The Geography Division has nine contracts in place, totaling about $90 million dollars, to help it manage its mapping and address database (see app. III for a list of those contracts). Some of the work being done by the private sector includes a service contract to provide system upgrades and maintenance to the MAF/TIGER® database and a data entry services contract to update the MAF/TIGER® database with address information provided by state and local governments.\nMoreover, to ensure the most current address and mapping data are available for the 2020 Census, the Bureau, in April 2012, began conducting market research with three private-sector firms to assess how those firms might assist the Bureau with its address and mapping needs. Possibilities to be explored include how to best maintain address and map data, understand private-sector innovation and technology, and options for address and map data-sharing methods. According to Bureau officials, negotiations concerning the scope, tasks, and activities to be completed with the first contractor have taken place. However, negotiations with the remaining two firms have not begun. Use of the private sector for mapping is an area we have previously reported needs to be explored. Specifically, in December 2010, we listed a number of reexamination areas which have particular implications for controlling costs and improving accuracy and raised the question: To what extent can private-sector and other sources of information such as maps, address lists, and geographic databases be employed to help support the census?\nThe second effort to improve the Bureau’s address and mapping database is centered on the 2020 Research and Testing Program. There are three research projects designed to inform the Bureau’s decision about the extent to which it might be able to conduct a targeted address canvassing operation. Two projects will use modeling to predict where coverage errors (e.g., missed or duplicate addresses) occur in the MAF. These models will be used to assess the quality of data sources, types of errors, and what information, such as a missing map location for an address, is not in the MAF. If the Bureau decides to conduct targeted address canvassing, this information will be used to determine which areas meet acceptable quality standards, as well as where targeted address canvassing would be effective. According to the Bureau, collectively the two projects are to answer the following question:\nAs the related GSS Initiative proceeds, how will the Bureau determine the required level of quality needed in the address frame to conduct an accurate census and then measure the quality of the continually updated MAF for that purpose?\nThe third research project in this effort, the Local Update of Census Addresses (LUCA) Program Improvement project, will examine how to modify the Bureau’s existing partnership program in consultation with the GSS Initiative. The LUCA program is a partnership program that provides an opportunity for local and tribal governments to review and update individual address information or block-by-block address counts from the MAF and associated geographic information in the TIGER® database just prior to the decennial. The goal of LUCA is to improve the completeness and accuracy of address information. This research project’s objective is to determine the best way to modify and improve LUCA procedures to ensure compatibility with continual updating of address information throughout the decade. The project will also determine whether it is necessary for local and tribal governments to actively participate in LUCA, a once-a-decade operation, if they have been submitting addresses and mapping data continuously throughout the decade as part of the GSS Initiative.\nAdministrative records are a growing source of information on individuals and households. For purposes of the decennial census, the Bureau is considering administrative records from government agencies, including tax data and Medicare records, as well as commercial sources to identify persons associated with a particular household address. During the 2010 Census, the Bureau made limited use of administrative records. For example, the Bureau used USPS files to update its address list, and federal agency records (such as those from the Department of Defense) were used to count military and federal civilian employees stationed outside of the United States.\nThe amount of and quality of administrative records the Bureau is able to collect will impact the amount of cost savings the Bureau is able to realize. could allow the Bureau to reduce the scale of its NRFU operation and reduce the need for field office space and staff. The 2012 research and testing projects are also focused on identifying the best available administrative records to use for address frame building. Administrative data from other sources would be combined with USPS data, thus allowing the Bureau to continuously update its MAF throughout the decade. Finally, administrative records could reduce the cost of quality control, according to Bureau officials. In order to ensure the accuracy of the field work conducted during census field operations, such as NRFU, the Bureau sends quality control staff into the field to verify the work completed by a random sample of enumerators. Bureau officials are determining for 2020 whether administrative records can be used as a quality control check, rather than sending staff into the field.\nThere are nine research and testing projects that will inform the Bureau’s decision making on the extent to which the Bureau can expand the use of administrative records in order to reduce costs. These research and testing efforts are focused on determining whether the quality of administrative records is sufficient to be used for this purpose. Initial testing is to be completed and decisions on these matters are to be made by September 2014. Of the nine, there are two primary administrative records research projects. They are tasked with answering the following research questions:\nHow can the Bureau best develop and maintain an independent collection of administrative records and assess the quality of those records (best sources and methods)?\nHow can the Bureau leverage administrative records (including commercial files) to significantly reduce decennial census cost while maintaining quality?\nThe objective of one of these projects is to acquire, process, and analyze administrative records from federal, state, and commercial sources to assess their utility for the 2020 Census. The other project will research and test methods to enhance NRFU operations with administrative records, such as replacing phone or in-person collected data with administrative data.", "Bureau officials are aware that the changes they want to make to the decennial census come with many risks. The Bureau has identified and prioritized from high to low both program-level and project-level risks. According to the Bureau, program-level risks span the entire 2020 research and testing phase and if not managed properly could jeopardize the phase’s goals and objectives. In contrast, project-level risks pertain to the successful completion of projects. In accordance with best risk management practices, the Bureau has identified and drafted mitigation plans for all of the 14 program-level risks it has identified. In May 2012 the Bureau designated two of the 14 program-level risks as high risk:\nTimely research and testing results: The 2020 research and testing strategy involves “many small field tests to research design alternatives with an accelerated, agile, and informed decision-making process for incorporating changes to the 2020 Census design.” According to the Bureau, if the research and testing results are late, then decisions will not be made on time and the program may not be ready to move out of the research and testing phase on schedule. According to the Bureau’s 2020 Census Risk Management Mitigation Plans, officials have begun implementing a mitigation strategy for this risk, including documenting clear roles and responsibilities and communicating them to staff; establishing a schedule that contains decision milestones and tracking interdependencies of research results and testing projects; and reviewing ongoing project status including updates on dependencies, risks, and metrics.\nSignificant budget cuts: The Bureau reported that if its funding for 2020 Census planning is significantly reduced for fiscal year 2013, key projects will have to be delayed and as a result the Bureau could have major technical and operational difficulties making preliminary design decisions. According to Bureau documents, to mitigate this risk, Bureau officials have briefed staff from House of Representatives Subcommittee for Commerce, Justice, Science and Related Agencies, Committee on Appropriations, and the Office of Management and Budget on the implications of reduced funding and plan to brief oversight committee staff. In addition, Bureau officials reported they have analyzed budgetary needs for fiscal year 2013 and prioritized projects to manage limited resources.\nRelated to these risks, a June 2012 congressional hearing held by the Joint Economic Committee discussed the impact of eliminating or reducing funding to the ACS. According to Bureau officials, such action would have a significant impact on the 2020 Census research and testing program because ACS is one of its testing platforms. This risk is not listed as a program-level risk, or part of the current risk mitigation plans, but Bureau managers told us they are strategizing on what they will do if ACS is not funded and will update the risk mitigation plan accordingly.\nThe Bureau has identified lack of support from external stakeholders as a medium program-level risk. Bureau officials are concerned that if external stakeholders, such as Congress, the Office of Management and Budget, and the National Academy of Sciences, do not support research on alternative design options, then the research and testing agenda will have to be redesigned. To manage this risk, Bureau officials have communicated the alternative design options to a wide range of external stakeholders, but are concerned that support may diminish as time passes and stakeholders change. To mitigate this risk, the Bureau is engaging external stakeholders in communications regarding 2020 research and testing efforts and seeking feedback on Bureau plans. According to Bureau documents, the Bureau has met with external stakeholders, including congressional staff on its House of Representatives and Senate oversight committees, to discuss 2020 Census planning, and is working on a strategy for keeping stakeholders informed as plans progress.\nUnlike the program-level risks, risk mitigation and contingency plans have not been drafted to address the project-specific risks. Specifically, each of that the Bureau’s research and testing projects has its own risk registeridentifies and prioritizes the risks associated with that project, but no risk mitigation or contingency plans have been developed for these project- level risks. Several risks appear in multiple project team risk registers, including tight time frames and accurate cost information. For example, one Internet-related project listed that there is a risk that if tests are not timed properly, and if time frames are too tight then they may not be able to apply what they have learned from one test to the next. Similarly, one of the administrative records project teams was concerned that one year to integrate data, build a model, and conduct adequate analysis of administrative records was “not realistic.” In another example concerning cost data, two teams stated that without accurate cost data at the project level, research results will not be sufficient to inform the design of the 2020 Census.\nProject teams also identified project-level risks directly related to the use of administrative records in place of data collected by enumerators during field visits. Among these risks is access to administrative records to build a high quality compilation of administrative records for each household across the country. To accomplish this task, the Bureau needs timely access to data collected by the federal government and, as previously mentioned, is currently compiling administrative records from various federal agencies including the Departments of Housing and Urban Development and Health and Human Services. However, not all agencies are authorized to provide their data to the Bureau thus limiting, and in some cases preventing, the Bureau’s use of that data. Bureau officials provided us with two examples of agency administrative record sources that they are not authorized to access: records maintained under the Family Educational Rights and Privacy Act and the National Directory of New Hires. Bureau officials said they would like to have access to these and other data sources for statistical purposes in order to further increase the number and improve the quality of available administrative records. According to Bureau officials, reviewing and determining whether they have access to administrative records with every agency is a time consuming process and the Bureau would like to have the ability to fully access and use agency administrative data, especially since the confidentiality of census data are protected by Title 13.forward, according to a senior Bureau official, legislation might need to be enacted that would compel federal agencies to provide the Bureau with access to administrative data for the decennial census. However, the To move this enactment of such legislation is likely to be a time consuming process that raises serious policy concerns including whether the Bureau has made a sufficiently strong case that it needs access to all federally collected data and the resulting impact on personal privacy protections.\nAccording to Bureau officials, the project teams did not submit risk mitigation and contingency plans for the project-level risks as required at the 90-day checkpoint because after reviewing all of the project-level risk registers the project leaders first wanted to unduplicate similar risks across projects in order to prevent redundancies. Bureau officials were not able to provide a date for when risk mitigation and contingency plans would be available. However, they stated they are committed to managing risk in order to avoid the missteps encountered in 2010 when the Bureau was on our high-risk list due to weaknesses in managing IT, operational planning, and cost estimating. In our prior work, we reported that risk mitigation involves identifying, analyzing, prioritizing, and documenting risks, and ideally more than one alternative should be assessed. The Department of Commerce’s Inspector General has recommended that risk management activities begin from the outset of the current decennial census life cycle, rather than just before field operations. Without mitigation plans the 2020 Census planning team may not be able to fully manage risks associated with these projects.", "The Bureau did not develop cost estimates for any of its 2020 research and testing projects by the 90-day checkpoint as required in guidance provided to project teams. The importance of reliable cost estimates is underscored by the Bureau’s experience leading up to the 2010 Census, where we found that the Bureau’s cost estimates lacked detailed documentation on data sources and significant assumptions and was not comprehensive because it did not include all costs. Partly as a result, some operations had substantial variances between their initial cost estimates and their actual costs. For example, the 2010 address canvassing operation cost $88 million more than the original estimate of $356 million, an overrun of about 25 percent; and the Bureau’s 2010 NRFU operation cost $1.6 billion, about $660 million, or 29 percent, less than the Bureau initially estimated.\nAccording to 2020 Census planning documents, at the 90-day checkpoint project teams were to: (1) prepare and submit cost estimate requests needed for the project; (2) document estimates for completing the work for the project; (3) identify and document funds needed for additional resources and requirements, and (4) prepare and submit requests for additional funds. According to a senior Bureau official, cost estimates have not yet been completed because more work needs to be done to determine project costs and they are in the process of formulating cost estimates for each project.", "The Bureau’s early research and testing is currently refining the project plans associated with the14 projects related to the Internet, administrative records, and targeted address canvassing. Each of the research and testing projects has a set of required deliverables due 30, 60, 90, and 120 days after project kickoff. We determined that each project team had provided the 120-day required deliverables on schedule to Bureau managers in June 2012. The research and testing documents required by the 2020 Census planning team and delivered by the 14 project teams describe management and technical plans for each project, and include a team charter, project plan, resources, preliminary schedule, and field tests. These documents are important because they serve as the baseline for each of the research and testing projects.\nHowever, not all resource requirements were documented. For example, some project teams did not fully document the types of skills needed, or perform a skills gap assessment to determine the resources needed to carry out their respective projects as required in the Bureau’s planning template (the template lays out in detail what is to be included in the deliverables). Bureau officials plan to use this skills information to allocate staff to ensure teams have the skills necessary to complete their projects. While 11 project teams provided all the required information, 2 project teams conducting research on issues that will inform decisions on targeted address canvassing and expanded use of administrative records, respectively, did not provide documentation that a skills gap analysis was conducted and another project researching expanded use of administrative records did not provide the necessary skill sets. According to Bureau officials, they are working to document these skills sets, as well as any gaps. Completing this analysis is important to ensuring sufficient resources are available for conducting the research and testing projects.\nWe also found incomplete performance metric documentation for several projects. According to Bureau guidance, project teams were to provide performance metrics (including the methodology for monitoring and evaluating project performance), as well as exit criteria for determining each project’s final outcome. However, the “Enhancing Demographic Analysis” team that is researching the use of administrative records to assess the accuracy of census counts at the national level did not provide any of the required performance metrics, while six teams failed to include performance metrics that could be used to monitor research and testing progress. According to Bureau officials, not all teams followed the project templates, and those teams have been asked to adhere to the requirements and provide all necessary information. Project performance metrics are a key element of effective project planning. As we have noted in prior work on project planning, measurable performance goals should be identified and performance data should be gathered to determine progress and whether desired outcomes have been achieved. Absent such metrics, the Bureau does not have the assurance that it will be able to avoid potential slips in the research and testing schedule, or certainty as to whether project outcomes will be adequate for making decisions.", "Just over 7 years remain until Census Day 2020. While this might seem like an ample amount of time to shore up the Bureau’s planning process and take steps to control costs, past experience has shown that the chain of interrelated preparations that need to occur at specific times and in the right sequence leave little room for delay or missteps. According to the Bureau, if 2010 operations are repeated in 2020, continued growth in population size and complexity will likely lead to an unsustainable increase in census cost. Further, traditional enumeration methods may no longer effectively produce a high quality census. To contain costs and maintain quality, bold innovations in both planning for and conducting the 2020 Census will be required.\nThe early research and testing phase represents a critical stage in preparing for the 2020 Census. At this time Bureau management is shaping the next decennial census as it determines what new operations will be a part of the 2020 Census design, which operations need to be revised, what risks remain, and how those risks will be mitigated. We have highlighted some of the cost savings that can be attained through three new operational changes being considered—the use of the Internet as a self-response option, replacing enumerator collected data with administrative records, and targeting only certain addresses for field verification.\nHowever, these innovations also come with risks that need to be managed. Specifically, while the Bureau has identified project-level risks for the 14 projects we reviewed, it has not developed risk mitigation plans for them. Given the number of changes the Bureau would like to make for 2020 it is imperative that risks are sufficiently managed and that mitigation plans be in place. For example, the Bureau needs to manage the risk for accessing federally collected administrative data that it will use for the 2020 Census. While it currently has access to some federally collected data, the Bureau would like access to all federally collected data, which according to the Bureau would require a statutory change. However, such a change raises serious policy concerns including the impact on personal privacy protections, and most likely would be a time consuming process. Therefore, it is imperative that risk mitigation and contingency plans be in place if the Bureau is unable to successfully gain access to all federally collected data. Other areas that need attention include ensuring that all research and testing projects have reliable cost estimates, so as to avoid research and funding shortfalls, that performance metrics are identified to ensure project goals are monitored and met, and that skills are identified to ensure the selection and assignment of appropriate staff to each project.", "We recommend that the Acting Secretary of Commerce require the Under Secretary for Economic Affairs who oversees the Economics and Statistics Administration, as well as the Acting Director of the U.S. Census Bureau, to take the following three actions to improve the Bureau’s Research and Testing for the 2020 Census, and thus better position the Bureau to carry out a cost-effective decennial census:\nDevelop risk mitigation and contingency plans for all projects to ensure that risks are adequately managed to minimize their effect on the project.\nDevelop cost estimates for each project.\nEnsure documentation for projects are complete, including specifying the performance metrics that will be the basis for determining that each of the projects has completed its work and identifying skills needed to inform the selection and assignment of appropriate staff to each research project.", "The Acting Secretary of Commerce provided written comments on a draft of this report on October 22, 2012. The comments are reprinted in appendix IV. The Department of Commerce agreed with the assessments and recommendations of the report. In addition, the Acting Secretary of Commerce provided a technical comment and suggestion where additional context might be needed, and we revised the report to reflect this comment.\nThe Bureau in its comments stated that our report accurately represented the extensive work that has been completed during the early research and testing phase for the 2020 Census. To address our concerns, the Bureau noted that it is now focusing on managing risks at the project level and will begin obtaining more specific cost estimation details for each project. The Bureau also agrees with our recommendations to ensure that performance metrics and skill sets are identified for all projects and teams. Finally, the Bureau stated that these efforts are either already underway or are planned as a major focus during fiscal year 2013.\nAs arranged with your offices, unless you publicly announce the contents of this report earlier, we plan no further distribution until 30 days after the date of this report. At that time, we will send copies of this report to the Acting Secretary of Commerce, the Under Secretary of Economic Affairs, the Acting Director of the U.S. Census Bureau, and interested congressional committees. The report also is available at no charge on the GAO website at http://www.gao.gov.\nIf you have any questions on matters discussed in this report, please contact me at (202) 512-2757 or by e-mail at [email protected]. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. Key contributors to this report are located in appendix V.", "This report evaluates the U.S. Census Bureau’s (Bureau) efforts to improve the cost-effectiveness of the enumeration, paying particular attention to the following three key efforts that past Bureau research has shown could result in substantial cost savings: (1) leveraging the Internet to increase self-response; (2) improving how the Bureau builds its address and mapping databases, including a possible move to targeted address canvassing, and use of private-sector geographic data; and (3) using administrative records, such as tax data, to reduce nonresponse follow-up costs. To meet our objectives of identifying what opportunities and risks, if any, the Bureau might need to consider for these efforts going forward, and examining to what extent these three efforts are on track with respect to scheduling, resources, and other performance metrics, we reviewed Bureau documents pertaining to the early planning of the 2020 Census. These generally consisted of the Bureau’s operational plans, strategic framework documents, strategies and planning memorandums, timelines, and benchmarks. Many of these documents were considered draft, but Bureau officials said they were sufficiently developed for purposes of our review. To describe the Bureau’s efforts to use private-sector firms to assist with its address and mapping needs, we spoke to agency officials and reviewed the Bureau’s current mapping and address contracts and its request for information to solicit input from private-sector firms. We interviewed Bureau officials responsible for the early planning of the 2020 Census and inquired about their process for designing their research and testing program, as well as opportunities and risks presented by these three key efforts.\nWe reviewed our prior reports on and other reports on leading practices to identify gaps in the Bureau’s research and testing efforts as it relates to schedule, resources, and performance metrics. We also reviewed reports from and spoke to knowledgeable stakeholders, such as officials at the National Academy of Sciences to determine opportunities and risks related to the Internet, administrative records, and the address and mapping databases. In addition, we spoke with Bureau officials and reviewed our prior work to identify obstacles the Bureau may need to address moving forward; for example, legal barriers to the Bureau’s access to administrative records.\nTo assess the Bureau’s progress in meeting its stated goals for the research and testing program, we evaluated whether each of the 14 research projects the Bureau initiated in 2012 had provided the required deliverables: the 120 day project plan, the project schedule, the project charter, and the project risk register. We also performed a content analysis of Bureau planning documents. For this analysis we examined the deliverables for each of the 14 research projects. We developed a data collection instrument to record the presence or absence of 11 pieces of information, or elements, in the deliverables for each project. The 11 elements were identified through a review of the Bureau’s project plan template which outlines information that each project was expected to report by the end of the 120-day initiation phase. A coding dictionary was created to provide a uniform set of coding criteria for each element coded. Each element could be coded as present, partially present, or absent. During the coding process, two analysts independently coded documents for each project using the coding dictionary as a guide. In the next phase, the two coders met to reconcile any discrepancies between their coding decisions and then made a final determination for that element. In cases of disagreement, the engagement methodologist was consulted as a tiebreaker. Following the coding process, the team analyzed the number of present and absent elements to identify patterns for each element across the 14 projects, as well as the completeness of documentation for each project.\nThis engagement did not examine the Bureau’s information technology policies, procedures, and information security in depth because our information technology team is working on two engagements that cover these issues.", "Appendix II: Fourteen Research Projects Will Inform Design Decisions on Key Efforts (Text for Interactive Figure 3)\nObjectives in Internet development Develop requirements for the Internet response option and coordinate the relationship between different response modes (i.e., Internet, paper, telephone)", "Appendix III: Census Mapping and Address Contracts Description of services Develop, implement, and support a system which allows the Census Bureau (Bureau) to update its Master Address File (MAF) with TIGER® (Topologically Integrated Geographic Encoding and Referencing) data, the U.S. mapping data, as the data is received.\nAnalyze mapping data as it is provided by state and local governments and other agencies, and upload changes into TIGER®.\nCustomize and maintain software so that over 40,000 state, local, and tribal governments can update and verify the Bureau’s address and mapping databases.\nSupply digital map files and digital aerial imagery to maintain and update the MAF/ TIGER® database.\nCustomize, install, and provide technical support for software to process and edit files to outline geographic areas, and support mapping applications, including the use of handheld computers to collect and edit data.\nProvide software to match addresses from surveys and other agencies to the MAF/ TIGER® database.\nDevelop and maintain software which automatically places text on Bureau maps so all map features are clearly identified.\nUpdate and consolidate the infrastructure, servers and database, of the MAF/ TIGER® system.", "Provide services for the modernization of the Bureau’s MAF/TIGER® system, including expansion, design, programming, operation and maintenance of the infrastructure supporting the MAF/ TIGER® system.\nCost of the most recent purchase.", "", "", "", "Other key contributors to this report include Lisa Pearson, Assistant Director; David Bobruff; Robert Gebhart; Richard Hung; Kirsten B. Lauber; Andrea Levine; and Timothy Wexler.", "2020 Census: Sustaining Current Reform Efforts Will Be Key to a More Cost-Effective Enumeration. GAO-12-905T. Washington, D.C.: July 18, 2012. 2020 Census: Additional Steps Are Needed to Build on Early Planning. GAO-12-626. Washington, D.C.: May 17, 2012.\nDecennial Census: Additional Actions Could Improve the Census Bureau’s Ability to Control Costs for the 2020 Census. GAO-12-80. Washington, D.C.: January 24, 2012. 2010 Census: Preliminary Lessons Learned Highlight the Need for Fundamental Reforms. GAO-11-496T. Washington, D.C.: April 6, 2011. 2010 Census: Data Collection Operations Were Generally Completed as Planned, but Long-standing Challenges Suggest Need for Fundamental Reforms. GAO-11-193. Washington, D.C.: December 14, 2010.\nGAO Cost Estimating and Assessment Guide: Best Practices for Developing and Managing Capital Program Costs. GAO-09-3SP. Washington D.C.: March 2, 2009. 2010 Census: Census Bureau Should Take Action to Improve the Credibility and Accuracy of Its Cost Estimate for the Decennial Census. GAO-08-554. Washington, D.C.: June 16, 2008.\nInformation Technology: Significant Problems of Critical Automation Program Contribute to Risks Facing 2010 Census. GAO-08-550T. Washington, D.C.: March 5, 2008. 2010 Census: Cost and Design Issues Need to Be Addressed Soon. GAO-04-37. Washington, D.C.: January 15, 2004.\nHigh-Risk Series: Quick Reference Guide. GAO/HR-97-2. Washington, D.C.: February 1997." ], "depth": [ 1, 1, 2, 3, 2, 2, 1, 1, 1, 1, 1, 1, 1, 2, 1, 1, 2, 2, 1 ], "alignment": [ "h0_full h1_full", "h0_full", "h0_title", "h0_full", "h0_full", "h0_full", "h1_full", "", "", "h3_full", "h2_full", "", "", "", "", "", "", "", "h0_full h3_full h2_full" ] }
{ "question": [ "How can the Census Bureau reduce costs while maintaining quality?", "What is the focus of the 2020 Research and Testing Program?", "To what extent does the Bureau assess the risks of these projects?", "To what extent has the Bureau followed the guidance issues to project teams?", "Why are reliable cost estimates critical?", "To what extent did the Bureau meet its goals for the research projects?", "What flaws existed in the planning?", "How is the Bureau working to remedy this?", "Why is this important?", "To what extent did project teams provide full performance metric documentation?", "Why are these metrics critical?", "What has GAO previously found regarding the Bureau?", "What does this report examine?", "What aspects of these efforts did GAO assess?", "How did GAO collect information for this report?", "What did GAO recommend?", "How did the DOC respond to GAO's findings?", "How has the Bureau acted on the recommendations?" ], "summary": [ "Three key efforts--(1) the use of the Internet as a response option, (2) a potential move towards targeted address canvassing, and (3) the possible use of administrative records to replace data collected during census field operations--present the Bureau with potential opportunities to reduce costs while maintaining quality.", "The Bureau's 2020 Research and Testing Program has 14 fiscal year 2012 projects focused on informing design decisions related to the three key efforts.", "Bureau officials are also aware that the changes they are testing come with many risks, and for each project the Bureau has identified a number of risks and prioritized them from high to low. However, the Bureau has not developed mitigation or contingency plans for these project risks. For example, there are several risks, including tight time frames and accurate cost information, without mitigation and contingency plans.", "Additionally, GAO found that the Bureau had not developed cost estimates for any of its 2020 research and testing projects as required in guidance provided to project teams.", "Unreliable cost estimates was one of the reasons the 2010 Census was placed on GAO's high-risk list. Without timely cost estimates, it will be difficult for the Bureau to ensure that resources are adequate to support the research and testing program.", "The Bureau met its internal deadline for submitting each of its 14 research project's plans and charters. However, not all the project plans were complete.", "For example, some project teams did not fully document the types of skills needed or perform a skills gap assessment to determine the resources needed to carry out their respective projects as required in the Bureau's planning template.", "According to Bureau officials, they are working to document these skills sets, as well as any gaps in skills.", "Completing this analysis is important to ensuring sufficient resources are available for conducting the research and testing projects.", "However, one team did not provide either of these required performance metrics, while six other teams did not include performance metrics that could be used to monitor research and testing progress.", "Absent these metrics, the Bureau does not have the assurance that it will be able to avoid potential schedule slips or the certainty as to whether project outcomes will be adequate for making decisions.", "GAO's prior work has shown that it will be important for the Bureau to reexamine the design of the census in order to ensure a cost effective census in 2020.", "As requested, this report evaluates the Bureau's efforts to improve the cost-effectiveness of the enumeration, paying particular attention to the following three key efforts: (1) leveraging the Internet to increase self-response; (2) improving how the Bureau builds its address and mapping databases, including a possible move to targeted address canvassing, and use of private-sector geographic data; (3) and using administrative records to reduce nonresponse follow-up costs.", "This report (1) identifies what opportunities and risks, if any, the Bureau might need to consider for these efforts going forward and (2) examines to what extent these three efforts are on track with respect to scheduling, resources, and other performance metrics.", "To meet these objectives, GAO reviewed Bureau documents and interviewed officials.", "GAO recommends that the Acting Census Director take a number of actions to improve the Bureau's research and testing for the 2020 Census, such as developing risk mitigation plans, contingency plans and cost estimates for each project, and performance metrics and skill sets for those projects that do not have them.", "The Department of Commerce concurred with GAO's findings and recommendations and provided one clarification, which was included in the final report.", "Also, the Bureau in its comments noted that it has begun to address GAO's recommendations." ], "parent_pair_index": [ -1, 0, 1, 0, 3, -1, 0, 1, 1, 0, 4, -1, -1, 1, 1, -1, 0, 0 ], "summary_paragraph_index": [ 1, 1, 1, 1, 1, 2, 2, 2, 2, 2, 2, 0, 0, 0, 0, 3, 3, 3 ] }
GAO_GAO-15-814
{ "title": [ "Background", "The ROC Has Provided Valuable Analytic Capabilities to the Oversight Community", "Treasury Decided Not to Transfer the ROC’s Assets but Has an Opportunity to Transfer Additional Information That Could Benefit the Do Not Pay Center Business Center", "Treasury Decided Not to Transfer the ROC’s Assets, Citing Cost, Lack of Investigative Authority, and Other Reasons", "Despite Identified Challenges, Treasury Has an Opportunity to Transfer Additional Information to the Do Not Pay Center Business Center", "The ROC’s Dissolution Creates a Capability Gap for the Oversight Community That It Could Begin to Mitigate through Developing a Legislative Proposal", "Conclusions", "Matter for Congressional Consideration", "Recommendation for Executive Action", "Agency Comments and Our Evaluation", "Appendix I: Objectives, Scope, and Methodology", "Appendix II: Comments from the Department of the Treasury", "Appendix III: Comments from the Council of the Inspectors General on Integrity and Efficiency", "Appendix IV: GAO Contact and Staff Acknowledgments", "GAO Contact", "Staff Acknowledgments", "Related GAO Product" ], "paragraphs": [ "The American Recovery and Reinvestment Act of 2009 (Recovery Act) created the Recovery Board composed of Inspectors General to promote accountability by overseeing recovery-related funds. The board was to do so, in part, by providing the public with easily accessible information. The Recovery Act appropriated $84 million for the Recovery Board to carry out its duties and set a termination date of September 30, 2013, for its oversight activities. The act provided the Recovery Board with the following specific powers and functions: audit and review spending on its own or in collaboration with federal OIGs; issue subpoenas to carry out audit and review responsibilities; refer instances of fraud, waste, and mismanagement to federal OIGs; hold public hearings and compel testimony through subpoenas; enter into contracts with public agencies and private entities; review whether there are sufficient and qualified personnel overseeing Recovery Act funds; and make recommendations to federal agencies on measures to prevent fraud, waste, and mismanagement of Recovery Act funds.\nTo fulfill its mandate under the Recovery Act, the Recovery Board utilized data analytics to carry out its oversight responsibilities and increase accountability. Data analytics is a term typically used to describe a variety of techniques that can be used to analyze and interpret data to, among other things, help identify and reduce fraud, waste, and abuse. Specifically, predictive analytic technologies can be used to identify potential fraud and errors before payments are made, while other techniques, such as data mining and data matching of multiple databases, can identify fraud or improper payments that have already been awarded, thus assisting agencies in recovering these dollars. In October 2009, the Recovery Board established the ROC to analyze the use of Recovery Act funds by employing data analytics, specifically to provide predictive analysis capability to help oversight entities focus limited government oversight resources, based on risk indicators such as programs previously identified as high-risk, high-dollar-value projects, past criminal history of key parties involved in a project, and tips from citizens; and in-depth fraud analysis capability using public information to identify relationships between individuals and legal entities.\nThe ROC served as a centralized independent repository of tools, methods, and expertise for identifying and mitigating fraud, waste, and mismanagement of Recovery Act funds and the associated parties through the use of such predictive and other analytic technologies. The Recovery Board’s assets supporting the ROC include human capital, hardware, data sets, and software. (See fig. 1 for a description of the ROC’s assets.)\nSubsequent legislation expanded the Recovery Board’s mandate to include oversight of other federal spending, including those funds appropriated for purposes related to the effects of Hurricane Sandy. In addition to expanding its authority, the legislation extended the termination date of the Recovery Board from September 30, 2013, to September 30, 2015. Figure 2 illustrates the timeline of legislation authorizing the Recovery Board and any corresponding appropriations.", "As we reported in our July 2015 testimony describing the progress made in the initial implementation of the DATA Act, the ROC has provided significant analytical services to its clients, including many OIGs, in support of their antifraud and other activities. Specifically, on the basis of the ROC’s client-service performance data that we reviewed, as part of the ROC’s analysis supporting investigations and audits, the ROC researched roughly 1.7 million entities associated with $36.4 billion in federal funds during fiscal years 2013 and 2014 at the request of various OIGs and other entities. As described below, examples of such research include Appalachian Regional Commission OIG audits of high- risk grantees and Department of Homeland Security OIG oversight of debris-removal contracts following Hurricane Sandy. The largest single user of ROC assistance over this time was the Appalachian Regional Commission OIG in fiscal year 2012 and the Department of Homeland Security OIG in fiscal years 2013 and 2014 (see fig. 3).\nThe ROC developed specialized data-analytic capabilities to better ensure federal spending accountability. Since January 2012—after the Recovery Board’s mandate was expanded to address federal funds beyond those authorized by the Recovery Act—over 50 federal OIGs and agencies have asked for assistance from the center. Two major tools the ROC used on behalf of the OIGs included (1) link analysis and (2) unstructured text mining: Link analysis assists analysts in making connections by visually representing investigative findings. Link-analysis charts visually depict how individuals and companies are connected, what awards an entity has received, and how these actors may be linked to any derogatory information obtained from multiple data sets. Such tools, when combined with enhanced Geographic Information System capabilities, enable ROC analysts to conduct geospatial analysis by displaying data from multiple data sets on maps to help them make linkages and discover potential problems. (See figs. 4 and 5 for an example of link analysis and two visualizations of the data.) Although link analysis can be applied to a wide range of subjects, the ROC often applied this tool to issues that involved law-enforcement-sensitive data that the Recovery Board had authority to handle.\nThe figure below shows an example of a request made by a federal agency to investigate Subject Company 1 as a delinquent federal debtor. Analysis by the ROC included checking entities identified against relevant events and associations, which include debarments, criminal history, and other factors. The initial review of Subject Company 1 determined that it was the recipient of an award under the Recovery Act totaling $6.4 million from a federal government agency. Further review of this company determined that it was not registered in the System for Award Management and had not previously received any federal awards. ROC analysts identified a news article that explained that this company had been created as a joint venture between Subject Company 2 and an individual, Subject 1. Analysis of Subject Company 2 revealed that four of its employees were previously indicted for fraud in 2006 and three of them were placed on the Excluded Parties List System, debarring them from receiving federal contracts.\nAs part of the same analysis as in figure 4, the ROC determined Subject 1 was listed as the Registered Agent of 42 companies with vague names in a variety of industries. Geospatial analysis, represented in figure 5 below, determined that 15 of the companies were registered at the individual’s home address in Florida. The other 27 companies were registered in Gary, Indiana, at the same address as Subject Company 1.\nGeospatial analysis identified the address as a vacant lot in an industrial area.\nIn another example, the Environmental Protection Agency OIG used the ROC’s data visualizations of a link analysis that identifies relationships among entities involved in activities such as collaborating to commit fraud. An Environmental Protection Agency OIG official said that the visualization of these relationships made it easier for juries to understand how entities had collaborated in wrongdoing.\nThe ROC’s unstructured/structured text mining tools were developed to proactively identify high-risk entities. This tool uses key words or phrases to rapidly filter through thousands of documents and pinpoint high-risk areas to uncover trends and conduct predictive analysis across agencies, programs, and states and to identify and assign weights to risk factors or concepts.\nThe Appalachian Regional Commission OIG used the results of the ROC’s unstructured text-mining analyses to identify the highest-risk grantees for review by analyzing text from A-133 Single Audit data to search for indications of risk, such as when a material finding was identified in the audit. A Single Audit includes an audit and an opinion on compliance with legal, regulatory, and contractual requirements for major programs as well as the auditor’s schedule of findings and questioned costs. The unstructured text tool could be directed to identify entities such as grantees that had previous negative audit findings and that therefore could represent a higher risk for using grant funding. This approach allowed the Appalachian Regional Commission OIG to better identify grantees subject to risk and facilitate the establishment of risk based priorities to allocate audit and investigative resources. According to a commission OIG official, this allowed the OIG to establish risk-based priorities to allocate audit and investigative resources.\nIn addition to these examples, OIGs highlighted using the ROC’s analytic capabilities to identify fraud, waste, and abuse in federal spending in the following ways: In fiscal year 2013, the Department of Homeland Security OIG submitted 104 entities receiving debris-removal contracts totaling $329 million from 32 cities in New York and New Jersey to the ROC for further research. The ROC analysts’ review was forwarded to the department OIG for appropriate investigative or audit follow-up actions. ROC analysts also provided a risk analysis of these entities to the department OIG for use in planning future audits. Findings submitted to the department OIG included identification of the following:\nDebris-removal firms whose owners had federal and state tax liens.\nFirms previously listed on the Excluded Parties List System, indicating potential financial problems.\nTwo companies that received contracts despite having filed for Chapter 7 bankruptcy in December 2010 and having federal tax liens totaling more than $1 million since 2011.\nOrganizations with previous fraudulent activities receiving debris- removal contracts from cities where there was an indication the company heads had relationships with city officials.\nIn part on the basis of these findings, the Department of Homeland Security OIG opened three criminal investigations involving Hurricane Sandy Public Assistance program funds, and the Department of Homeland Security OIG Emergency Management Office conducted four Hurricane Sandy–related audits.\nThe ROC assisted the Department of Housing and Urban Development OIG with information confirming allegations that a loan guarantee specialist had sold HUD-owned properties for less than fair market value to shell companies that he owned and operated, stealing over $843,000 in federal funds. Due in part to the analysts’ efforts, the employee pleaded guilty to wire fraud for his involvement and was sentenced to 26 months in jail.", "", "In May 2015, Treasury officials told us that the department did not plan to exercise its discretionary authority to establish a data-analysis center or expand an existing service under the DATA Act. Officials explained that transferring the ROC assets would not be cost-effective or add value to Treasury operations that identify, prevent, and recover improper payments and identified the following principal concerns regarding the utility of transferring ROC assets:\nHardware. Treasury officials viewed hardware, such as monitors and servers, as being feasible to transfer, but raised questions about whether it was cost-effective to do so because the ROC’s hardware is aging, lessening the value of these assets. In addition, they noted that hardware requires software support contracts to be functional, and as discussed below such contracts are not transferrable.\nHuman capital (personnel). Federal personnel rules would not allow a direct transfer of ROC staff to Treasury. Instead Treasury would have to advertise and hire for these positions using the competitive hiring process, which can be time-consuming. In addition, because some ROC personnel were term-limited hires or contractors, a competitive hiring process would not guarantee that ROC staff would ultimately be selected for employment.\nData sets. The ROC obtained access to federal datasets through memorandums of understanding (MOU), which neither Treasury officials nor ROC officials believed could be transferred. Instead Treasury would have to negotiate new MOUs with the federal agency that owned a data set Treasury wished to use. Commercially procured data sets also are not transferrable but would instead have to go through a procurement process.\nSoftware contracts. Because the Recovery Board extended its software contracts on a sole-source basis when it was reauthorized 2 years ago, Treasury would need to use a competitive procurement process to obtain these data-analytic tools again. Such processes can be time-consuming and lengthy.\nIn July 2015, Treasury’s Fiscal Assistant Secretary testified before the House Committee on Oversight and Government Reform’s Subcommittee on Government Operations and Subcommittee on Information Technology and addressed the point mentioned above that while the DATA Act authorized Treasury to transfer the Recovery’s Board’s assets, the act did not transfer the Recovery Board’s authorities to Treasury. For instance, the Recovery Board was granted law enforcement authorities available under the Inspector General Act of 1978, which allowed the Recovery Board to negotiate relevant access so that the ROC could handle, analyze, and store law-enforcement-sensitive data, including evidence to support grand jury investigations. Similarly, the Recovery Board had special hiring authority that allowed it to select and employ term-limited hires, which provided the Recovery Board greater flexibility in selecting individuals with specific technical expertise and experience. Treasury officials noted that the DATA Act did not transfer the specific mission of the Recovery Board to Treasury, and that, combined with the absence of law-enforcement authority, created a barrier to fulfilling an identical role as that of the ROC.", "Although Treasury officials identified cost and other practical challenges to transferring ROC assets, it has an opportunity to transfer information and documentation that could support Treasury’s efforts to prevent improper payments—particularly, information on the design of data sharing agreements and requests for software contracts for analytic tools. Treasury officials told us that they believe the ROC’s most-valuable asset is its expertise and said they sought opportunities to informally leverage the ROC knowledge base in several ways. These efforts centered on sharing knowledge between the ROC and Treasury’s Do Not Pay Center Business Center (DNP), which assists federal agencies in preventing improper payments and leverages some of the same analytical methodologies as the ROC. Some of these efforts include the following:\nLeveraging the knowledge of ROC staff by applying their skills to similar analytic challenges facing DNP. For example, officials stated that the current Director of Outreach & Business Process for DNP is the former Assistant Director for Data and Performance Metrics at the Recovery Board. Her responsibilities at the Recovery Board included the assessment and testing of several prototype systems to support the work of the ROC and its external users in the oversight community. The capabilities of these systems were very similar to the capabilities of the DNP systems, in that entity names were matched against open-source databases to identify high-risk vendors. Officials also noted that another Recovery Board employee was hired to DNP, where she uses her knowledge of the root causes of improper payments to help agencies utilize DNP services more efficiently.\nDocumenting business processes, procedures, and lessons learned. DNP is also working with the Recovery Board to document business processes and procedures, and lessons learned, as appropriate, in order to incorporate best practices into Treasury’s improper-payment prevention infrastructure. Treasury officials provided documentation of the timeline for obtaining information from the ROC through several meetings and indicated that they were in the process of documenting this information.\nTreasury officials said they considered DNP as a possible host of the ROC’s assets but ultimately concluded that the transfer of ROC assets to Treasury would not be cost-effective or add value to Treasury’s efforts. Officials explained that Treasury already provides services, such as those provided by DNP and Treasury’s Philadelphia Financial Center to agencies and OIGs to assist in the identification, prevention, and recovery of improper payments. In addition, we note that while Treasury and the ROC were similar in that both sought to address improper and potentially fraudulent payments, there are differences in the particular types of challenges addressed by both entities. For instance, as part of its mission, DNP scrutinizes various data sources at the preaward, prepayment, payment, and postpayment stages and analyzes them for indications of potential improper payments and fraud. It does this regularly and on a large scale, matching up to $2.5 trillion in payments each year. DNP’s primary tools for doing this include batch matching payment information to various excluded parties and other “bad-actor” lists, and conducting analysis on payment files to examine irregularities, such as duplicates or the same unique identifier associated with different names. The ROC also used data-matching techniques to identify risk, but it generally applied this technique to issues other than payment data, such as assisting law-enforcement investigations to identify instances when several entities were collaborating to commit fraud. Treasury officials have noted that the DATA Act did not grant Treasury the same authorities that the Recovery Board had to support law-enforcement efforts. See figure 6 for a summary of DNP and ROC key activities.\nWhile Treasury has taken some steps to transfer expertise to DNP, it may be missing an opportunity to transfer other information and documentation from the ROC to DNP. In May 2014, Recovery Board officials provided Treasury with a transition plan that outlined its assets, including the data sets used by the ROC. The plan indicated that the Recovery Board had used MOUs with the federal agency owning certain data sets to arrange access to the data.\nWe note that some of the ROC’s documentation—particularly the MOUs that it had to develop to gain access to certain data sets—represent expertise that may be transferred to supplement DNP’s resources and help support its mission; Treasury might benefit by reconsidering its decision not to assume some of these assets. For example, Treasury is responsible for developing MOUs for data sharing with original source agencies and periodically reviewing the MOUs to determine whether the terms are sufficient. The development of data-sharing agreements is difficult and time-consuming. The Recovery Board maintains information of potential use to Treasury in this regard—namely, it currently retains copies of all MOUs between the Recovery Board and the original source agency. Some information will be archived or destroyed when the Recovery Board sunsets. These documents may provide Treasury with a template for future data-sharing agreements—for instance, by providing language on how data might be shared, secured, used, and disposed of that the agency owning the data found acceptable.\nIn addition, as part of procuring the software to develop the ROC’s analytic capabilities, Recovery Board staff worked with the General Services Administration to draft requests for proposals that included technical specifications for the software. This documentation along with other guidance or technical information that the ROC developed or retained could serve as templates as DNP expands its capabilities over time. Standards for Internal Controls in the Federal Government provides guidance on the importance of managers achieving results through effective stewardship of public resources. Taking advantage of the opening created by the DATA Act to expand its data-analysis capabilities by transferring the expertise gained through the operation of the ROC could assist DNP in its mission to reduce improper payments. In addition, documenting the rationale for any future decisions on transferring information and documentation would ensure transparency and would be consistent with Standards for Internal Controls in the Federal Government guidance on recording and communicating information, including to external stakeholders that may have a significant effect on the agency achieving its goals.", "The ROC provided analytic services to its clients, including many OIGs, in support of their audits and investigations supporting fraud prevention and detection. As part of an oversight mission, these entities are often required to improve the efficiency and accountability of federal spending and address fraud, waste, and abuse. However, because Treasury currently does not plan to transfer the assets of the ROC, the center’s users will need to consider alternatives when the Recovery Board closes. Some large OIGs that previously used the ROC told us that they intend to develop their own analytic capabilities. For instance, Department of Homeland Security OIG officials said they hired analysts familiar with link analysis and the relevant software as well as rebidding contracts in an attempt to replicate some of the resources currently offered at the ROC. Expanding the analytic capabilities of OIGs could help to strengthen the rigor of oversight, allow OIGs to develop tools that are the most useful for their portfolios, and broaden the types of audit and investigative activities OIGs can undertake. However, it is unknown whether OIGs developing these capacities on their own may lead to potential duplication and fragmentation as well as whether the expansion of these capabilities across many entities would offer the same level of expertise and efficiency that OIG officials obtained from the ROC. In addition, such an expansion could also be duplicative if each OIG purchased the same types of software and support resources, which may not be the most efficient use of federal funds.\nWhile OIGs with the financial resources to do so may pursue replication of the ROC’s tools, the ROC’s termination may have more effect on the audit and investigative capabilities of some small- and medium-sized OIGs that do not have the resources to develop independent data analytics or pay fees for a similar service, according to some OIG officials. According to these officials, the loss of the ROC’s analytical capabilities could also result in auditors and investigators working much longer to research the same types of linkages as opposed to verifying the information that the ROC could provide more efficiently and in a shorter time frame.\nAccording to CIGIE officials, maintaining a centralized data-analytics center like the ROC might help reduce unnecessary duplication of effort across the OIG community, and help ensure that all OIGs continue to have these resources at their disposal, especially the small- to medium- sized offices that do not have the funding to obtain separate capabilities. Established by the Inspector General Act of 2008, CIGIE currently provides oversight resources and guidance to the OIG community and has taken steps to expand the analytic capabilities of the OIGs. For instance, CIGIE developed a virtual platform that allows OIG community members to both contribute and use shared resources such as algorithms, best practices, models, and support documentation. While these resources are helpful, the ROC provided more advanced, customized data-analytics services to the OIGs, and also allowed them to leverage ROC software that otherwise would not have been available.\nIn 2013, CIGIE explored the viability of assuming some of the ROC’s assets as a way to provide some additional analytic capabilities to the OIG community. At the time, CIGIE estimated that it would cost about $10 million per year to continue to operate the ROC. Because CIGIE is primarily funded by membership dues, CIGIE determined the additional cost to operate the ROC would be too burdensome for the organization. A CIGIE official indicated the organization has continued to look for opportunities to provide centralized data-analytic resources to OIGs. However, this official said that, given its financial resources (about $6.5 million in operating funds in fiscal year 2016), even if CIGIE were able to do so, this capability would be at a significantly scaled-back level compared to the ROC.\nThrough the DATA Act, Congress provided Treasury the option to transfer the ROC’s assets. The act specifically identifies improving the efficiency and transparency of federal spending and the reduction and prevention of improper payments as functions of a data analysis center or expanded service, if Treasury chose to establish or expand one. In this regard, the Chairmen and Ranking Members of the Senate Committee on Homeland Security and Governmental Affairs and the House Committee on Oversight and Governmental Reform wrote a joint letter to the Secretary of the Treasury in July 2015 expressing their concern that the ROC’s powerful analytical capabilities would be lost at the end of the fiscal year, and underscored their interest in preserving these capabilities. In highlighting the ROC’s evolution since the Recovery Act to assume multiple roles in improving efficiencies in federal spending, the committees stressed that the ROC’s various data-analytics capabilities are essential to detect and prevent fraud and reduce improper payments. Specifically, the committees noted that federal agencies agree fraud detection and prevention could be significantly improved with greater access to data and analytical tools, such as those provided by the ROC.\nA legislative proposal that explicitly articulates the relative costs and benefits of developing an analytics center with a mission and capabilities similar to the ROC could help Congress decide whether to authorize and fund such an entity. Given its close connection to the oversight community, and the research it has already undertaken pertaining to the ROC, CIGIE is a logical entity to develop that proposal. If it were to do so, CIGIE could identify and recommend the resources needed—particularly in terms of employees and technology—to establish a ROC-like entity under its auspices. A proposal might also outline the data-analytic services that center could offer the OIG community and the potential results those services might provide. In addition, a proposal could outline any additional authorities, such as the ability to handle law-enforcement- sensitive data—that Treasury noted was a barrier for DNP to provide similar services to the ROC. That element of the proposal would help ensure such a new entity would effectively support the oversight community in matters related to law enforcement. By creating a legislative proposal, CIGIE could thus present Congress the detailed information Congress would need to make an informed decision about the merits of creating a CIGIE-led data-analytics center.\nCIGIE officials stated that they have not developed such a proposal absent specific direction from Congress, but these officials expressed concerns about the effect of the September 30, 2015, sunset of the Recovery Board on the OIG community and, as noted above, have sought options within their current budget to increase analytic resources available to OIGs. Further, CIGIE officials stated that with Congress’s support they could develop such a proposal, which would be intended to (1) expand analytic resources for the oversight community and (2) help refine the tools Congress and the oversight community use to address improper payments and fraud, waste, and abuse.", "Agencies seeking to address improper payments and fraud, waste, and abuse face challenging prospects, especially in an environment in which estimated improper payments rose by $19 billion to $124.7 billion in fiscal year 2014. To help address such challenges, agencies need sophisticated capabilities to help narrow the window of opportunity for improper payments, including fraud. Such capabilities include data- analytic tools such as those that permit Treasury to perform large-scale analysis of payment data at DNP, as well as the ROC’s link analysis and unstructured-text-mining tools that identify and target risk and that, in conjunction with the Recovery Board’s investigative authority, aid the government in preventing and reducing improper payments. Although cost and other challenges may limit the viability of transferring certain of the ROC’s assets to Treasury, other assets—especially information and documentation that could serve as templates for data sharing or developing the technical specifications for procuring additional software— may assist DNP as it expands its services and capabilities to address improper payments. The ROC’s May 2014 transition plan may serve as a basis for Treasury to further assess whether certain data sets could be of assistance to DNP, and documentation of MOUs could help Treasury more quickly replicate such arrangements.\nSuch action by Treasury will not ultimately prevent some loss of capabilities for the oversight community as DNP and the ROC generally serve different communities of users and deploy their analytic tools to address different types of problems. Thus, maintaining a separate centralized form of analytic and investigative support for the oversight community would help prevent OIGs from losing valuable tools useful for targeting oversight resources in a data-driven, risk-based manner. In addition, a centralized analytics resource could help prevent a potentially inefficient use of funds that could result if OIGs proceeded to duplicate similar oversight tools upon the loss of the ROC. Further, a centralized analytics resource could help maintain high-quality analyses by ensuring regular use of those tools and expertise. Given that congressional oversight committees have shown substantial interest in the ROC’s capabilities, recognized its value in helping combat fraud, waste, and abuse in federal spending, and demonstrated intent in preserving this value for its users, a legislative proposal could begin the process of reestablishing a ROC-like capability to help OIGs sustain their oversight of federal expenditures.", "To help preserve a proven resource supporting the oversight community’s analytic capabilities, Congress may wish to consider directing CIGIE to develop a legislative proposal to reconstitute the essential capabilities of the ROC to help ensure federal spending accountability. The proposal should identify a range of options at varying scales for the cost of analytic tools, personnel, and necessary funding, as well as any additional authority CIGIE may need to ensure such enduring, robust analytical and investigative capability for the oversight community.", "To capitalize on the opportunity created by the DATA Act, we recommend that the Secretary of the Treasury reconsider whether certain assets— especially information and documentation such as MOUs that would help transfer the knowledge gained through the operation of the ROC—could be worth transferring to DNP to assist in its mission to reduce improper payments. Additionally, the Secretary should document the decision on whether Treasury transfers additional information and documentation and what factors were considered in this decision.", "We provided Treasury, CIGIE, and the Recovery Board with a draft of this report for review and comment. Treasury and CIGIE provided written comments, and the Recovery Board did not provide official comments on our draft report.\nIn its written comments, which are reproduced in appendix II, Treasury concurred with our recommendation that it should consider additional knowledge transfers from the ROC to assist in the DNP’s mission to reduce improper payments and will document its rationale and final decision in this regard. In its response, Treasury noted that it has taken steps to preserve the knowledge gained through the operation of the ROC, including hiring ROC personnel. Furthermore, Treasury noted that it has a robust program in place that is meeting the needs of federal agencies in preventing, reducing, and recovering improper payments including DNP and the Philadelphia Financial Center.\nIn its written comments, which are reproduced in appendix III, CIGIE agreed that the ROC provided valuable assistance to many OIGs in support of their investigative, audit, evaluation, and inspection efforts and this support will be missed when the Recovery Board closes. In its response, CIGIE noted that the OIG community has long recognized the importance of using a variety of techniques, including data analysis, to assist in its oversight responsibility and there may be efficiencies achieved in the development of analytics capabilities by CIGIE that could support the entire OIG community. CIGIE stated that it has already undertaken steps to develop an array of scalable options for such data- analytic capabilities with appropriate regard to both the costs and benefits of such options and the current needs of the OIG community. However, to expand these efforts, it would need additional resources to develop and maintain data-analytic activities. CIGIE also stated that it is essential that CIGIE have a steady stream of funding for it to develop and maintain any kind of data-analysis function.\nTreasury, the Recovery Board, and CIGIE also provided technical comments that were incorporated into the report, as appropriate.\nWe are sending copies of this report to relevant congressional committees, the Secretary of the Treasury, the Chair of the Council of the Inspectors General on Integrity and Efficiency (CIGIE), and the Chair of the Recovery Accountability and Transparency Board (Recovery Board). This report will also be available at no charge on the GAO website at http://www.gao.gov.\nIf you or your staff have any questions about this report, please contact me at (202) 512-6722 or [email protected]. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix IV.", "To determine the analytic value of the Recovery Operations Center’s (ROC) assets and capabilities to the oversight community, we interviewed Recovery Accountability and Transparency Board (Recovery Board) officials who worked on ROC operations. We also obtained documentation on the types of data sets, analytic tools, and other capabilities the ROC offers to its primary users—namely, the oversight community, which included the Offices of Inspector General (OIG) but also other government entities tasked with ensuring the appropriate use of federal funds, such as law-enforcement agencies and sometimes agency programs. To gather information on how the oversight community used the ROC’s assets, we developed criteria to select ROC users to interview based on agency size and, based on an analysis of client- service data from fiscal years 2014 through March 2015, including the frequency and consistency with which the organizations used the ROC. On the basis of these criteria, we interviewed officials from the OIGs of the Department of Homeland Security, the Appalachian Regional Commission, the Environmental Protection Agency, the Department of Housing and Urban Development, the Export-Import Bank, the National Science Foundation, the United States Postal Service, and the Department of Justice, as well as officials from the National Intellectual Property Rights Coordination Center.\nTo examine the Department of the Treasury’s (Treasury) plans for a transfer of ROC assets, we interviewed Treasury officials responsible for making decisions on transferring the ROC’s assets as well as Recovery Board officials for their observations on transition activities undertaken by Treasury. We reviewed relevant transition-plan documents developed by the Recovery Board that included milestones and guidelines for the transition of ROC assets, which they provided to Treasury. We also reviewed documentation from the Recovery Board on the ROC’s resources, including hardware, software contracts, data sets, and human capital, as well as information on its staffing levels over time, to develop a complete picture of the capabilities that Treasury could obtain through a transition.\nTo evaluate the effect of the ROC’s capabilities on its audit and investigative user communities, we reviewed documentation from the Recovery Board on the ROC’s outcomes, how its clients made use of its resources, and what they achieved. We also conducted interviews with OIGs to understand under what circumstances they used the ROC’s assets. We analyzed these interviews, characterizing themes that were similar and different based on the size of the OIG, the frequency with which the OIG used the ROC, and whether the OIG has any in-house data-analytics capabilities. We also discussed plans the OIGs had to replace any ROC capabilities should Treasury opt not to assume all of the ROC’s assets. We also interviewed the Council of the Inspectors General on Integrity and Efficiency (CIGIE) officials to obtain their perspectives on how the closure of the ROC may affect the oversight community. We also reviewed their budget information and their estimate of the cost of ROC resources and budget information. We did not verify the accuracy of CIGIE’s estimate of the cost of ROC resources and did not conduct an analysis of whether CIGIE’s budget appears to be sufficient for covering these costs.", "", "", "", "", "In addition to the contact mentioned above, the following staff members made significant contributions to this report: Joah Iannotta, Assistant Director; Lauren Kirkpatrick, Analyst-in-Charge; Giny Cheong; Beryl Davis; Peter Del Toro; Kathleen Drennan; Vijay D’Souza; Colin Fallon; Shirley Hwang; Maria McMullen; Paula Rascona; Brynn Rovito; and Andrew Stephens.", "DATA Act: Progress Made in Initial Implementation but Challenges Must be Addressed as Efforts Proceed. GAO-15-752T. Washington, D.C.: July 29, 2015." ], "depth": [ 1, 1, 1, 2, 2, 1, 1, 1, 1, 1, 1, 1, 1, 1, 2, 2, 1 ], "alignment": [ "h0_full", "h0_full", "h0_title h1_title", "h0_full h1_full", "h1_full", "h2_full", "h1_full", "", "", "", "h0_full h3_full h2_full", "", "", "", "", "", "" ] }
{ "question": [ "What services does ROC provide to OIG?", "Why did Congress initially establish the Recovery Board?", "How did Congress expand the Recovery Board's mandate?", "What was the scope of ROC's research in FY2012 and FY2013?", "Why doesn't Treasury plan to transfer the ROC's assets?", "How could Treasury assist agencies in preventing improper payments?", "How could data-sharing agreement documentation help the DNP efforts?", "What factors determine the viabiliity of transferring ROC assets?", "What resources will ROC's users use after the closure of the Recovery Board?", "To what extent can CIGIE offer services previously administered by ROC?", "How could the center's essence be preserved for the benefit of the users?", "To what extent has CIGIE explored this proposed idea?", "What ROC data did GAO review?", "On what basis did GAO interview ROC users?", "What other officials did GAO interview?" ], "summary": [ "The Recovery Accountability and Transparency Board's (Recovery Board) Recovery Operations Center (ROC) provided significant analytical services primarily to Offices of the Inspector General (OIG) to support antifraud and other activities.", "Congress initially established the Recovery Board to oversee funds appropriated by the American Recovery and Reinvestment Act of 2009.", "Subsequently, it expanded the Recovery Board's mandate to include oversight of other federal spending, and most recently through the Digital Accountability and Transparency Act of 2014 (DATA Act) authorized the Department of the Treasury (Treasury) to transfer ROC assets to Treasury by September 30, 2015, when the Recovery Board closes.", "On the basis of the ROC's client-service performance data that GAO reviewed, the center researched roughly 1.7 million entities associated with $36.4 billion in federal funds in fiscal years 2012 and 2013.", "Treasury does not plan to transfer the ROC's assets, such as hardware and software, citing cost, lack of investigative authority, and other reasons.", "However, Treasury could transfer additional information to its Do Not Pay Center Business Center (DNP), which assists agencies in preventing improper payments.", "For instance, transferring documentation of data-sharing agreements, which can be difficult and time-consuming to establish, could serve as a template for DNP efforts to expand the number of data sets it uses to identify improper payments.", "Although cost and other challenges may limit the viability of transferring certain of the ROC's assets to Treasury, other assets—especially those that could serve as templates for negotiating access to and procuring additional data—may assist DNP as it expands its services and capabilities.", "Specifically, officials from some large OIGs that have used the ROC told GAO they intend to develop their own analytical capabilities. However, officials from some small- and medium-sized OIGs said they do not have the resources to develop independent data analytics or pay for a similar service, thus foregoing the ROC's capabilities.", "The Council of the Inspectors General for Integrity and Efficiency (CIGIE) could reconstitute some of the ROC's analytic capabilities and has explored options to do so. However, CIGIE officials stated that CIGIE does not currently have the resources to accomplish this reconstitution.", "A legislative proposal that articulates for Congress the relative costs and benefits of developing an entity with a mission and capabilities similar to the ROC could be an appropriate first step in preserving the essence of the center's proven value to its users.", "CIGIE officials stated that they have not developed such a proposal absent congressional direction, but noted that they support Congress's expressed interest in preserving and expanding analytic resources for the oversight community.", "GAO reviewed documentation on the ROC's assets, a transition plan developed by the ROC, and its performance data from fiscal year 2012 through March 2015.", "On the basis of factors such as frequency of requests for assistance and agency size, GAO interviewed various ROC users about their views.", "GAO also interviewed Treasury and CIGIE officials to obtain their perspectives on the ROC's capabilities and its future status." ], "parent_pair_index": [ -1, -1, 1, 1, -1, 0, 0, 0, -1, 0, 0, 2, -1, 0, 0 ], "summary_paragraph_index": [ 3, 3, 3, 3, 7, 7, 7, 7, 8, 8, 8, 8, 2, 2, 2 ] }
GAO_GAO-18-145
{ "title": [ "Background", "Select Agent Regulations and Program Roles, Responsibilities, and Requirements", "History of the Select Agent Program", "Select Agent Program Does Not Fully Meet Key Elements of Effective Oversight or Have Joint Strategic Planning Documents to Guide Its Efforts Select Agent Program Does Not Fully Meet Oversight Elements Related to Independence, Performing Reviews, Technical Expertise, Transparency, and Enforcement", "Program Is Not Independent and Has Not Formally Assessed All Risks Posed by Its Current Structure", "Reviews May Not Target the Highest-Risk Activities", "Select Agent Program Has Taken Steps to Hire Additional Expert Staff and Improve Technical Expertise, but Gaps in Workforce and Training Remain", "Security Concerns Have Limited the Program’s Transparency", "Program Has Authority to Enforce Compliance with Requirements and Is Working to Address Concerns about Clarity and Consistency of Enforcement Actions", "Select Agent Program Does Not Have Joint Strategic Planning Documents to Guide Oversight", "Selected Countries and Regulatory Sectors Employ Other Approaches to Promote Effective Oversight", "Structural Independence of Oversight Bodies", "Risk-Based Approaches to Performing Reviews", "Drawing on Technical Expertise of Advisory Panels and Laboratories", "Transparency through Sharing Information on Agency Websites and Other Means", "Mechanisms of Enforcement and Nonpunitive Reporting Systems", "Conclusions", "Recommendations for Executive Action", "Agency Comments and Third-Party Views", "Appendix I: Key Elements of Effective Oversight", "Appendix II: List of Experts and Selection Methodology", "• Bob Buchanan, Ph.D., Professor and Director of Center for Food Safety and", "Appendix III: Comments from the Department of Health and Human Services", "Appendix IV: Comments from the Department of Agriculture", "Appendix V: GAO Contacts and Staff Acknowledgments", "GAO Contacts", "Staff Acknowledgments" ], "paragraphs": [ "This section provides information on select agent regulations and program roles, responsibilities, and requirements; and the history of the Select Agent Program.", "The Select Agent Program is fragmented because oversight responsibility is, by law, split between CDC and APHIS. The two agencies have delineated roles and responsibilities to regulate laboratories—including conducting inspections and other activities—that possess, use, or transfer biological select agents. CDC’s Division of Select Agents and Toxins is responsible for the oversight and regulation of select agents that could pose a threat to public health and safety, such as the Ebola virus. APHIS’s Agriculture Select Agent Services is responsible for the oversight and regulation of select agents that could pose a threat to animal or plant health or animal or plant products, such as the virus that causes foot-and- mouth disease. Some select agents, such as Bacillus anthracis (the bacterium that causes anthrax), are regulated by both agencies because they pose a threat to both human and animal health; these agents are known as overlap agents. As part of their oversight, CDC and APHIS maintain a list of select agents that they are required to review and republish at least every 2 years.\nGenerally, laboratories (including those at federal agencies and private institutions) and individuals who possess, use, or transfer these select agents must register with CDC or APHIS and renew their registration every 3 years. Most laboratories registered with the Select Agent Program are registered with CDC (238 of 276). (See fig. 1 for information about the laboratories registered with the program.) In fiscal year 2016, CDC’s budget to manage its component of the Select Agent Program was about $21 million and APHIS’s was about $5.5 million.\nSelect agent regulations govern the possession, use, and transfer of designated select agents. To apply for a certificate of registration, the laboratory must submit an application package to either CDC or APHIS, and laboratory personnel must submit to a security risk assessment conducted by the Federal Bureau of Investigation (FBI). The Select Agent Program conducts an on-site inspection before issuing a new certificate of registration or renewing an existing registration; both are valid for a maximum of 3 years. Once approved, a laboratory’s certification of registration may be amended to reflect changes in circumstances, such as replacement of the responsible official or other personnel changes, changes in ownership or control of the laboratory, changes in the activities involving any select agents, or the addition or removal of any select agents. As a condition of registration, the select agent regulations require each laboratory to designate an individual to be its responsible official, who is responsible for ensuring compliance with the regulations. In addition, the regulations require laboratories to develop various written plans, as well as provide training and maintain records of training and other activities. For example, the regulations require that laboratories registered with the program develop and implement a written security plan sufficient to safeguard each select agent against unauthorized access, theft, loss, or release; develop and implement a written biological safety plan that is commensurate with the risk of the select agent, given its intended use; provide training on biological safety and security for individuals with access to select agents; and maintain records on the activities covered by the select agent regulations.", "Several historical security incidents involving hazardous pathogens resulted in a series of laws and other regulatory activity that served to establish and amend the Select Agent Program. First, Congress passed section 511 of the Antiterrorism and Effective Death Penalty Act of 1996 after an individual in the United States unlawfully obtained Yersinia pestis, the bacterium that causes plague, by mail order. Section 511 directed the Secretary of HHS to promulgate regulations identifying a list of biological agents that have the potential to pose a severe threat to public health and safety, providing procedures governing the transfer of those agents, and establishing safeguards to prevent unauthorized access to those agents for purposes of terrorism or other criminal activities. The HHS Secretary delegated the authority to regulate select agents to CDC, thus establishing the Select Agent Program in its initial form. In carrying out this authority, CDC required laboratories transferring select agents to be registered with the program.\nAfter the terrorist events of September 11, 2001, and the subsequent anthrax attacks in October 2001, Congress passed the USA PATRIOT Act of 2001 and the Public Health Security and Bioterrorism Preparedness and Response Act of 2002. These acts significantly expanded the Select Agent Program by restricting access to select agents and increasing safeguards and security measures for select agents. The 2002 act also expanded the program to include not only the regulation of the transfer but also the use and possession of select agents, and it granted comparable authority to USDA for select agents that pose a threat to animal or plant health, or animal or plant products. The Secretary of Agriculture delegated the authority to regulate select agents that affect animal or plant health to APHIS. The act also required HHS and USDA to coordinate on overlap agents and required the Secretaries of both departments to establish, maintain, and biennially review and republish the select agent list, making revisions as appropriate to protect the public.\nOn July 2, 2010, the President signed Executive Order 13546, “Optimizing the Security of Biological Select Agents and Toxins in the United States.” The executive order directed HHS and USDA, as a part of their ongoing review, to tier the select agents on the list, consider shortening the list, and establish physical security standards for select agents with the highest risk of misuse; HHS and USDA did so in final rules published October 5, 2012. About half of the laboratories registered with the program as of December 2016 were registered to work with tier 1 agents (142 of 276).", "The Select Agent Program does not fully meet key elements of effective oversight. In particular, the program has oversight shortcomings related to each of the five key elements: independence, performing reviews, technical expertise, transparency, and enforcement. In addition, the program does not have joint strategic planning documents to guide its oversight efforts, such as a joint strategic plan and workforce plan; it did, however, begin taking steps to develop a joint strategic plan over the course of our review.\nThe Select Agent Program does not fully meet our key elements of effective oversight. Specifically, the program is not independent from all laboratories it oversees, and it has not formally assessed the potential risks posed by its current organizational structure. In addition, the program regularly performs reviews of laboratories’ compliance with regulatory and program requirements, but these reviews may not target the activities that pose the highest risk to biological safety and security. Moreover, even though the program has taken steps to hire additional staff and enhance the technical expertise of its staff, workforce and training gaps remain. The program has increased transparency since 2016, but the information it shares is limited and there is no consensus about what additional information could be shared, given security concerns. Lastly, the Select Agent Program has authority to enforce compliance with program requirements, but is still working to address past concerns about the need for greater consistency and clarity in actions it takes in exercising this authority.", "Independence The organization conducting oversight should be structurally distinct and separate from the entities it oversees.\nAccording to our key elements of effective oversight, to be independent, the organization conducting oversight should be structurally distinct and separate from the entities it oversees. The Select Agent Program is not structurally distinct and separate from all of the laboratories it oversees but has taken some steps to reduce conflicts of interest potentially posed by its current structure within CDC and APHIS. The two components of the Select Agent Program are located in CDC and APHIS, both of which also have high-containment laboratories registered with the program. Many experts at our meeting raised concerns that the Select Agent Program cannot be entirely independent in its oversight of CDC and APHIS laboratories because the Select Agent Program is composed of divisions of those agencies. In particular, one expert stated that to be independent, the agencies cannot regulate themselves, and others said that the agencies’ oversight of their own laboratories may present a conflict of interest. However, laboratories owned by CDC and APHIS are not generally located within the same agency divisions and thus are not in the same chain of command as the Select Agent Program. The one exception is an APHIS-owned complex of laboratories in the same division as the APHIS component of the program, but that complex is registered with CDC, which means that CDC leads its inspections and oversight.\nSenior program officials, many laboratory representatives, and some experts cited a number of benefits to the Select Agent Program’s current structure within CDC and APHIS, including the ability for inspectors to have access to experts and other support from their respective divisions. For example, program officials said that the Select Agent Program had reached out to CDC scientists for assistance in developing guidance documents for the program. In addition, inspectors sometimes obtain technical assistance from experts in CDC and APHIS, such as in cases where the inspectors are not familiar with certain techniques or equipment being used in a registered laboratory. However, program officials also said that they have tried to limit the extent that they rely on CDC and APHIS scientists from outside the program, so as not to raise concerns about conflicts of interest. Senior program officials from CDC and APHIS also said that the Select Agent Program’s current locations within the two agencies allow for access to additional support as needed, including additional funds and administrative services. Senior program officials from CDC further stated that being located in an office focused on preparedness and response is advantageous because the Select Agent Program can quickly pivot into incident response mode, allowing for rapid response and assessment of incidents that occur in registered laboratories. They noted that this location proved advantageous during an incident in 2015, for example, when the program responded to the discovery that a DOD laboratory had inadvertently sent live Bacillus anthracis, the bacterium that causes anthrax, to nearly 200 laboratories.\nThe location of the program has also raised some concerns in the past, which the Select Agent Program has taken some steps to address. In response to past concerns about conflicts of interest and separation of duties raised by HHS OIG, APHIS, and us, both CDC and APHIS made structural changes to increase the Select Agent Program’s independence within their respective agencies. In particular, in 2003, in response to concerns from HHS OIG and us, CDC moved its component of the Select Agent Program into the agency’s Office of Public Health Preparedness and Response because that office did not have any laboratories registered with the program. (See fig. 2 for HHS’s organizational chart, including a depiction of where CDC’s Select Agent Program component currently sits in relation to other agency divisions.) According to CDC officials, the director of the CDC component of the Select Agent Program has access to senior leadership at CDC as needed.\nSimilarly, since 2013, APHIS has also made some organizational changes, including realigning supervisory responsibilities for the program and creating a direct line of communication from the director of the APHIS component of the Select Agent Program to the APHIS administrator. Previously, the program reported to a director whose division had a suite of laboratories that the program inspects. Now it is managed through APHIS’s National Import Export Services, which has different senior-level managers that report directly to the Office of the Administrator rather than the managers who oversee registered laboratories. According to agency officials, these changes increased the level of independence between the Select Agent Program and APHIS-owned laboratories but did not fully address the appearance of a lack of independence within APHIS, since the agency’s organizational chart still places the APHIS component of the Select Agent Program under Veterinary Services. (See fig. 3 for USDA’s organizational chart, including a depiction of where APHIS’s Select Agent Program component currently sits in relation to other agency divisions). The APHIS director of the Select Agent Program and the Associate Administrator of APHIS meet regularly to discuss incidents involving select agents, enforcement actions, and operation of the Select Agent Program, among other issues, according to agency officials, but this reporting structure is not documented. According to federal standards for internal control, management should establish an organizational structure, assign responsibility, and delegate authority to achieve the entity’s objectives and should develop and maintain documentation of its internal control system. Until APHIS formally documents the reporting structure for its component of the Select Agent Program from the APHIS director of the program to the administrator of APHIS, it will continue to appear to have conflicts of interest in its oversight of APHIS-owned laboratories.\nIn addition to these structural changes, the program has put mechanisms in place to reduce organizational conflicts of interest, but the agencies do not always follow a key mechanism. In particular, CDC and APHIS signed a memorandum of understanding in 2012 that stated that APHIS would provide the lead inspector for all inspections of registered laboratories owned by CDC. However, in practice, CDC inspectors still participate in inspection activities because of their expertise in human agents. In March 2015, the memorandum was amended to state that CDC would lead inspections of all USDA-owned laboratories.\nHowever, since the memorandum was amended, the APHIS component of the Select Agent Program has led at least three inspections of USDA- owned or operated laboratories. In particular, APHIS led an inspection of a laboratory owned by another USDA agency, the Agricultural Research Service, in November 2015; one run by the Agricultural Research Service and APHIS scientists in May 2015; and one owned by APHIS in December 2015. APHIS officials we interviewed said that they had overlooked this amendment to the memorandum of understanding and the program does not have a process in place to help ensure the memorandum is followed. According to federal standards for internal control, management should design control activities to achieve objectives and respond to risk. Such internal control activities help ensure that management directives such as those outlined in the memorandum of understanding are carried out, and should be effective and efficient in accomplishing the program’s control objectives. One example of a control activity would be establishing a process to ensure APHIS and CDC comply with the memorandum to help ensure APHIS does not inspect its own laboratories. Without establishing control activities to help ensure that each component of the program carries out its inspection responsibilities as outlined in the program’s memorandum of understanding, the Select Agent Program cannot have reasonable assurance that its key mechanism to reduce conflicts of interest is implemented.\nAlthough the Select Agent Program has taken steps to help reduce conflicts of interest, it has generally done so in response to concerns raised by others. The program itself has not formally assessed all potential risks posed by its current structure and the effectiveness of its mechanisms to address those risks. For example, the program did not identify all of the areas noted above that may present conflicts of interest and has not considered whether there may be additional areas of concern. An expert in our meeting identified benefits of an independent, third-party review of the Select Agent Program. For example, we and other audit organizations are subject to an external peer review at least once every 3 years that includes a review of documentation related to independence, among other issues. According to senior program officials we interviewed, the program as a whole has not engaged in comprehensive risk management activities but they would be willing to do so in the future.\nOMB’s Circular A-123 requires federal agencies to integrate risk management activities into their program management to help ensure they are effectively managing risks that could affect the achievement of agency objectives. According to the circular, once initial risks are identified, it is important for agencies to regularly re-examine risks to identify new risks or changes to existing risks. In addition, federal internal control standards state that management should identify, analyze, and respond to risks related to achieving defined objectives. Without (1) regularly assessing the potential risks posed by the program’s current structure and the effectiveness of its mechanisms to address them, such as by commissioning external reviews, and (2) taking actions as necessary to ensure any identified risks are addressed, the program may not be aware of or effectively mitigate impairments to its independence that could affect its ability to achieve its objectives.", "Ability to perform reviews The organization should have the access and working knowledge necessary to review compliance with requirements.\nAccording to our key elements of effective oversight, the organization conducting oversight should have the ability to perform reviews, including access to facilities and working knowledge necessary to review compliance with requirements. The Select Agent Program performs several types of reviews to ensure compliance with regulatory and program requirements, including registration inspections for laboratories seeking certification to use select agents, renewal inspections for laboratories seeking to renew their registration, and verification inspections. (See fig. 4 for additional information on these inspections). The program has the ability to access any registered laboratory for inspection, including without prior notification. Inspections typically include review of registration and other documents—such as biological safety and security plans and inventory and personnel training records— as well as physical inspections of laboratory workspace and interviews with laboratory representatives, among other inspection activities. During inspections, Select Agent Program inspectors go through checklists that are based on the select agent regulations, the Biosafety in Microbiological and Biomedical Laboratories manual, and guidelines from NIH. The inspections cover a variety of topics—such as facility design and operation, incident response, security, training, records management, and biological safety—and may last anywhere from 1 day with 1 or 2 inspectors for simpler laboratories, to a couple of weeks with up to 10 inspectors for larger and more complex laboratories. Most laboratory representatives we spoke with said that the inspectors generally had the working knowledge necessary to review compliance and that the inspections and resulting reports were in-depth and generally fair and accurate.\nHowever, the program may not target the highest-risk activities in its inspections, in part because it has not formally assessed which activities pose the highest risk to biological safety and security. According to Select Agent Program officials, the program’s policy is to conduct at least one verification inspection of all registered laboratories—regardless of their past history or performance—between each 3-year renewal inspection, and the program may consider additional inspections at laboratories that pose a higher risk. Specifically, the program scores laboratories’ risk based on a number of factors, such as past inspection findings. However, a 2017 HHS OIG report found that the CDC component of the Select Agent Program had evaluated some, but not all, variables that could inform the risk a laboratory poses to health and safety and concluded that CDC may wish to enhance its risk assessment by considering additional factors, such as whether a laboratory has previously reported losses or releases of a select agent, to better inform a laboratory’s level of risk over time. In addition, some experts at our meeting and laboratory representatives we interviewed raised concerns that the program’s inspections do not target resources to the highest-risk activities. For example, some experts said that the program has historically not put enough emphasis on verifying that certain laboratory procedures are safe and effective, which some said may have contributed to high-profile incidents in 2014 and 2015 in which select agents were inadvertently released from high-containment laboratories. However, according to the Select Agent Program, the program does not validate or verify laboratory procedures as it is the responsibility of the laboratories themselves to do so. Further, many experts at our meeting and laboratory representatives we interviewed raised concerns about the amount of time inspectors spend assessing compliance with inventory controls (e.g., by counting and examining vials containing select agents) and reviewing inventory records during the inspection process, which takes time away from inspecting other aspects of biological safety and security. Experts at our meeting said that these activities do little to reduce the risk of theft of select agents because samples could be clandestinely removed from vials and replicated without being detected by the inventory controls currently in place. Finally, other laboratory representatives told us that activities to assess compliance with certain program requirements did little to reduce risk and were unnecessarily burdensome, such as time- consuming reviews of records so that nicknames such as “Rob” match up to registered names, such as “Robert.” These inspection activities are generally intended to address biological security concerns, such as theft; however, recent high-profile incidents at registered laboratories have been related to biological safety rather than security, and no thefts have been reported since 2003, when notification requirements were first implemented, according to program officials and documents.\nExperts at our meeting generally agreed that the Select Agent Program has historically put more focus on security than on biological safety in its reviews, given that the program was established in response to terrorist incidents. For example, some experts said that the program has not focused enough on ensuring the health and safety of researchers and reducing the potential for their exposure to select agents, which some noted are more likely to occur than thefts due to security issues. Many experts questioned if the focus on security continues to be appropriate, in light of recent biological safety incidents. According to senior APHIS officials we interviewed, the Select Agent Program has been mandated to focus on security and if they move the program’s focus too far from security to biological safety, they may lose the goals established when the program was formed. They also noted that, according to the select agent regulations, laboratories are responsible for developing and implementing a written biological safety plan, and therefore a balance should be maintained between the laboratories’ execution of these plans and the level of oversight from the Select Agent Program. In addition, these officials stated that, during inspections, it is much easier for inspectors to ensure laboratories are meeting security requirements than carrying out their biological safety plans. For example, inspectors can easily check to make sure laboratories have required security barriers in place, such as locks on doors, but it is harder to measure whether laboratories are carrying out laboratory procedures safely. They also noted that the program does not want to be prescriptive with respect to biological safety so that laboratories can implement those biological safety practices that are most appropriate for their facility.\nA 2015 internal review of the CDC component of the Select Agent Program acknowledged uncertainties and gaps in understanding how best to balance laboratories’ ability to conduct critical research using select agents with the program’s need to ensure the safety and security of the public and laboratory workers. The resulting report recommended that the CDC and APHIS components of the program work together to analyze inspection and investigation data to identify trends and associations between inspection findings and risk and to improve the inspection process. According to program officials we interviewed, the Select Agent Program has not yet addressed the recommendation because the program does not currently have adequate tools to do so. They noted that the program is transitioning to a new database that will enhance their ability to analyze program data to identify such trends and associations and thereby guide improvements to the inspection process. However, the program did not provide a plan for when or how the program will carry out these analyses or use the information to improve the inspection process. Federal internal control standards state that management should identify, analyze, and respond to risks related to achieving defined objectives. In addition, the Project Management Institute’s Standard for Program Management calls for program scheduling planning as a leading practice to ensure organizational activities are completed. Without developing and implementing a plan to identify which laboratory activities carry the highest biological safety and security risks and to respond to those risks by aligning inspections and other oversight efforts to target those activities, the Select Agent Program will not have assurance that it is effectively balancing the potential safety and security gains from its oversight efforts against the use of program resources and the effect on laboratories’ research.", "According to our key elements of effective oversight, the organization conducting oversight should have sufficient staff with the expertise to perform sound safety and security assessments. CDC and APHIS have hired additional staff for the program and improved training to enhance expertise, but workforce and training gaps remain.\nTechnical expertise The organization should have sufficient staff with the expertise to perform sound safety and security assessments.\nThe CDC and APHIS components of the Select Agent Program increased the number of full-time federal inspectors in 2016 and 2017, but have faced challenges in hiring and retaining sufficient staff with the requisite expertise to perform the necessary work in a timely manner. According to agency reports, agency officials, and laboratory representatives, Select Agent Program inspectors are subject to a large workload with an intensive travel schedule. Inspectors perform a variety of tasks, including conducting on-site inspections of laboratories, developing written reports of inspection results, processing requests for amendments to laboratory registrations, and communicating program requirements to laboratory representatives.\nAccording to agency reports and inspectors we spoke with, inspectors often travel 30 percent to 50 percent or more of their time in performing their duties. This intensive workload and travel schedule has led to delays in both the issuing of inspection reports and processing of registration amendments. According to a 2017 CDC report, the time to process CDC’s inspection reports in 2016 ranged from 4 to 224 business days, with about 27 percent of reports exceeding the Select Agent Program’s 30-day target for issuance. Workload issues were cited as one of the key reasons for delays. A 2016 APHIS internal report also identified delays in issuing inspection reports. According to the 2016 report, the time to process APHIS’s inspection reports in 2014 averaged 36 days, but some reports were issued more than 100 days from the date the inspection concluded. Similarly, the processing time for amendments to registrations, which the program has not routinely tracked in the past, generally varies from a couple of weeks or months to approve simpler amendments (such as personnel changes) to a year or more to approve major changes to facilities (such as adding new laboratory space), according to laboratory representatives. Delays in issuing inspection reports or processing amendments may hamper the implementation of corrective measures to address safety issues identified in inspections or impede laboratories’ research on select agents, according to agency reports and laboratory representatives. For example, representatives from one laboratory told us that they lost grant funding because it took over a year for the Select Agent Program to review and approve an amendment to its registration to allow the proposed research to be conducted.\nWorkload issues have also created problems with retention, according to agency documents and program officials we interviewed, and have sometimes resulted in staff from the APHIS component of the Select Agent Program being assigned responsibilities outside their areas of expertise. For example, at the time of our review, an APHIS security specialist was given the additional responsibility of conducting reviews not related to his area of expertise, such as inspecting ventilation systems, which are critical to ensuring select agents are not released into the environment. According to the 2016 internal APHIS report, the APHIS component of the program has historically struggled with resource deficiencies and has had to implement strategies to fulfill its legal mandates and meet basic goals and objectives within its limited resources.\nBoth the CDC and APHIS components of the Select Agent Program have individually taken steps to identify and address gaps in their workforce but have not coordinated these actions to manage fragmentation across the program. CDC developed a formal workforce plan for its component of the Select Agent Program in 2016, identified and secured the necessary resources to implement the plan, and is working to fill needed positions. As of August 2017, the CDC component of the program had 7 vacancies out of its 51 total inspector positions. APHIS also identified additional needed positions, through development of its 5-year business plan, and has used money from an APHIS contingency fund to fill them. APHIS hired additional inspectors in 2016 and 2017 and now has 11 inspector positions, up from 7 in 2015. APHIS also added several other new positions in the first half of 2017, including a scientific officer, a security manager, and a program analyst, among others.\nHowever, according to program officials we interviewed, even with the additional recently hired inspectors, the program may not have adequate staff to handle surges in workload. For example, if there is a need to respond to critical incidents similar to those that occurred at CDC and DOD in 2014 and 2015, the program may find it challenging to respond to those incidents in addition to meeting its annual inspection schedule. Moreover, according to the 2016 APHIS internal review and CDC and APHIS officials we interviewed, the complexity of laboratories that work with select agents, the select agent regulations, and inspections have continued to increase, which may continue to contribute to workload issues in the future. Program officials we interviewed said they are hopeful that the new database the program is implementing will allow the program to gain efficiencies in amendment processing and other areas, which may reduce workload issues in the future.\nTraining to Improve or Maintain Expertise Most laboratory representatives we interviewed said that, in their experience, Select Agent Program inspectors generally had appropriate expertise to perform reviews. According to agency documents, the vast majority of the program’s inspectors have advanced degrees, including many inspectors from CDC with doctoral degrees in microbiology or related fields and many inspectors from APHIS with doctoral degrees in veterinary medicine. However, CDC and APHIS internal reviews from 2015 and 2016, respectively, as well as some laboratory representatives we interviewed, identified some shortcomings and inconsistencies in inspectors’ expertise and approach related to their regulatory responsibilities. In particular, the reports found that inspectors had inconsistent knowledge about the select agent regulations, variabilities in skill level, and divergent approaches to inspections, both within and across the two components of the Select Agent Program. In addition, several laboratory representatives said that some inspectors imposed requirements on laboratories that the inspectors considered to be best practices rather than requirements of the select agent regulations or items on inspection checklists.\nBoth CDC and APHIS officials in the program identified gaps in the training available to maintain their expertise. CDC inspectors we interviewed told us they need additional training opportunities to keep up with scientific changes in the field, such as advances in laboratory techniques and equipment. APHIS officials we interviewed also identified areas where they need additional training, including in facilities and engineering aspects of laboratories; decontamination; and new laboratory techniques, technologies, and equipment. In addition, some APHIS inspectors we interviewed said that they sometimes do not have the necessary knowledge to effectively perform all aspects of inspections and, in some cases, depend on inspectors from CDC to address gaps in expertise. Relying on CDC inspectors when APHIS is inspecting CDC- owned laboratories raises conflict of interest concerns. Furthermore, according to inspectors from both CDC and APHIS, they are rarely able to attend external conferences or other external training because of their intensive workload and travel schedules and because they must compete for training funds with CDC or APHIS scientists who are not assigned to the program. Priority is given to those scientists presenting information at conferences, which Select Agent Program staff rarely do because their inspection work is not the type of information shared at conferences, according to program officials.\nIn response to these concerns, both the CDC and APHIS components of the Select Agent Program have individually taken steps to improve training for program staff, including inspectors, but have not always coordinated steps to manage fragmentation across the program. For example, in 2016, APHIS increased training opportunities for two inspectors to better enable them to inspect BSL-4 laboratories. In addition, CDC developed a training strategy that identified various areas in its training program that needed improvement, including the need to provide funding support for existing training activities and enhanced professional development opportunities.\nAccording to CDC’s training strategy, the complexity of the inspector position and evolving science on select agents demand ongoing training and professional development opportunities for staff. Among other recommendations, the strategy identified the need for three additional full- time-equivalent positions in the training area—in addition to the one the CDC component of the program currently has; as of August 2017, CDC was in the process of hiring one additional training specialist. APHIS has not developed a similar formal training strategy, but during the course of our review, APHIS sought and received approval and funds to hire a full-time training coordinator, which it was in the process of filling as of July 2017. Because APHIS has not had a training coordinator dedicated to the Select Agent Program in the past, the APHIS component of the program has generally relied on CDC to address training needs, although APHIS does provide its own training to its inspectors and has coordinated with CDC to develop some training, according to APHIS officials. A senior APHIS official noted that having its own training coordinator moving forward will help ensure APHIS’s training needs are met, as animal inspection needs have not explicitly been addressed in the past when CDC has taken the lead on training.", "Transparency The organization should provide access to key information, as applicable, to those most affected by operations.\nAccording to our key elements of effective oversight, the organization conducting oversight should provide access to key information, as applicable, to those most affected by operations. Past White House and other reports, as well as experts at our meeting, also emphasized the importance of transparency, including the sharing of information on incidents and lessons learned, in the Select Agent Program. However, the program limits the information it shares about registered laboratories and violations of the select agent regulations, mainly because of security concerns. For example, the program does not disclose to the public or other laboratories the locations of laboratories registered with the program, the agents that laboratories work with, or details on violations of select agent regulations.\nThe Select Agent Program has recently increased the transparency of high-level laboratory and program information it shares with the public and registered laboratories, partly in response to recent federal reports. For example, in 2016, the Select Agent Program issued its first annual public report on the program. The report provided a variety of information, such as background information on the program, statistics about registered laboratories, and aggregated information on the potential losses and releases reported to the program. In 2015, the program developed a mechanism for laboratories to request interpretation of the select agent regulations from the program and has since published several regulatory interpretations on its website. In addition, starting in summer 2016, the Select Agent Program worked with a nongovernmental organization, the American Biological Safety Association International, to develop an online forum for registered laboratories to share information with one another, which laboratory representatives told us has been very helpful. The Select Agent Program also held a workshop for responsible officials from registered laboratories in December 2016 to disseminate program information; the workshop also provided the opportunity for attendees to interact. Many laboratory representatives told us that this was very helpful, and some noted that they had not had an opportunity to communicate and share lessons learned with responsible officials from other registered laboratories in the past.\nEven so, some experts, agency officials, and laboratory representatives we interviewed said there needs to be more transparency to the public about select agent research and incidents in order to increase public trust concerning the activities conducted at high-containment laboratories. For example, several laboratory representatives noted that the media has incorrectly described their laboratories as conducting “bioterror” research, when the research they conduct is to mitigate the consequences of a bioterrorist attack—for example, by developing vaccines and other measures to help diagnose, prevent, or treat exposure to or infection with select agents. On the other hand, many laboratory representatives told us that the program was already sharing an appropriate amount of information with the public. According to officials from HHS and USDA, this issue has been examined and discussed extensively within their departments, partly in response to recent federal reports. CDC officials pointed out that laboratories themselves could share additional information about their select agent research and any incidents. For example, the U.S. Army Medical Research Institute for Infectious Diseases and the National Biodefense Analysis and Countermeasures Center, both at Fort Detrick in Maryland, and the Galveston National Laboratory in Galveston, Texas, voluntarily share information about their select agent research and incidents with the public via their websites.\nIn addition, many laboratory representatives we interviewed said the program needs to be more transparent for registered laboratories. In particular, some said that it would be helpful for the program to share more information among laboratories about select agent research and incidents to enhance the sharing of lessons learned to improve biological safety and security. According to experts at our meeting, it is important for information, such as lessons learned from incidents, to be shared among laboratories so that they can learn from one another’s experiences to improve their own operations. Some laboratory representatives also said that it would be helpful for the Select Agent Program to provide additional guidance in certain areas, such as regarding the use and storage of toxins. Federal internal control standards state that management should internally and externally communicate the necessary quality information to achieve the entity’s objectives. However, there is no consensus about what additional information should be shared with laboratories. Without determining what additional information about laboratories’ use of select agents, incidents, and violations of the select agent regulations is appropriate for the Select Agent Program to share with registered laboratories, the program may be missing opportunities to provide key information that ultimately could help improve biological safety and security.", "According to our key elements of effective oversight, the organization conducting oversight should have clear and sufficient authority to require entities to achieve compliance with requirements. The Select Agent Program has the authority to and takes a range of enforcement actions for violations of the select agent regulations and is working to address concerns about the clarity and consistency of enforcement actions. When the Select Agent Program identifies a possible violation of the select agent regulations, the program may take several types of compliance or enforcement actions, as follows:\nAdministrative actions: The Select Agent Program can propose a corrective action plan; suspend or revoke a registered laboratory’s registration; or deny a laboratory’s application to possess, use, or transfer select agents.\nReferrals to HHS OIG or APHIS’s Investigative and Enforcement Services: The Select Agent Program may refer violations to HHS OIG or APHIS’s Investigative and Enforcement Services, both of which can levy civil money penalties, issue a Notice of Violation letter, or close the case.\nReferral to the FBI: The Select Agent Program can refer possible violations involving criminal negligence, criminal intent, or suspicious activity or person to the FBI for further investigation. Criminal enforcement may include imprisonment for up to 5 years, a fine, or both.\nThe Select Agent Program has taken enforcement actions against laboratories but did not always do so consistently or according to any available criteria. The Select Agent Program has taken a range of enforcement actions for violations of the select agent regulations— including suspending or revoking registrations or proposing corrective action plans—as well as referring violations to HHS OIG or APHIS’s Investigative and Enforcement Services for further investigation.\nFollowing investigation, HHS OIG and APHIS’s Investigative and Enforcement Services have taken other enforcement actions, including levying civil money penalties and issuing Notice of Violation letters. However, we previously found in 2016 that the Select Agent Program did not consistently refer laboratories to investigative entities for violations of the select agent regulations or enforce regulations related to incidents involving incomplete inactivation, and we found that this appears to be true beyond incidents involving incomplete inactivation as well. For example, from 2003 through 2016, the program suspended or revoked 10 laboratories’ registrations in response to violations of the select agent regulations, only 1 of which was a federal laboratory, and neither HHS OIG nor APHIS’s Investigative and Enforcement Services have levied a civil money penalty against a federal laboratory. Moreover, we previously found that the program referred various laboratories to HHS OIG for incidents involving incomplete inactivation but did not refer HHS laboratories for two incidents in 2014. We recommended in 2016 that the Select Agent Program develop and implement consistent criteria and documentation requirements for referring laboratories to investigative entities and enforcing regulations.\nThe Select Agent Program is taking steps to address such past concerns about the need for greater consistency and clarity in enforcement actions and implement our recommendation. In particular, in September 2017, the program finalized a document that provides guidance on when to refer laboratories for violations and options for enforcement. This document categorizes regulatory departures along a spectrum of severity with associated enforcement options, so that inspectors and laboratories have a clear understanding of what to expect during and as a result of inspections, regardless of which Select Agent Program component conducts them. In addition, the CDC component of the program worked with HHS OIG to develop criteria to guide referrals to OIG, which CDC finalized and implemented in June 2017. APHIS is not developing a similar document at this time because APHIS officials believe the guidance on when to refer laboratories for violations and options for enforcement actions described above provides sufficient guidance on referrals for the Select Agent Program. The program’s development of guidance with criteria is a positive step and the program continues to develop associated documentation requirements for referring violations to investigative entities and enforcing regulations, according to a senior program official.", "As of August 2017, the Select Agent Program does not have joint strategic planning documents to guide its shared oversight efforts across CDC and APHIS. For example, the program does not have a joint mission statement to collectively define what the program seeks to accomplish through its oversight. It also does not yet have a strategic plan, although it is taking steps to develop one. Agencies can use strategic plans to set goals and identify performance measures for gauging progress towards those goals. Strategic plans can also outline how agencies plan to collaborate with each other to help achieve goals and objectives, as well as describe the strategies and resources required to achieve the goals and objectives.\nMission statements for the two components of the Federal Select Agent Program The Centers for Disease Control and Prevention’s (CDC) Division of Select Agents and Toxins reduces the risks for thefts, losses, and releases of biological agents by ensuring regulated laboratories or importers are safe and select agents are secure through its monitoring of facilities and enforcement of regulations. The Animal and Plant Health Inspection Service’s (APHIS) Agriculture Select Agent Services is a team of Agriculture Health Professionals dedicated to providing superior customer service to safeguard the health of domestic animals, plants, and their products from agricultural biological agents and toxins.\nEach component of the program has conducted some strategic planning—each has an individual mission statement, some strategic planning documents, and performance measures—but the components differ in what they seek to achieve and how they measure the effectiveness of their efforts. For example, according to CDC officials, in the past, the CDC component has developed yearly strategic goals, such as to improve regulatory oversight through inspections and the biological safety and security of laboratories. In contrast, APHIS developed a 5-year business plan for its component of the Select Agent Program in 2014, which it updated in July 2017. In addition, it identified a number of annual goals in 2015, 2016, and 2017, such as developing additional BSL-4 training and filling vacancies in existing and new positions. CDC’s and APHIS’s performance measures also differ. For example, CDC has a range of performance measures, such as tracking the number of laboratory-acquired infections and the timeliness of inspection reports, whereas APHIS’s performance measures address the number of thefts, losses, and releases involving select agents and the processing of amendments.\nThe Select Agent Program also does not have a joint workforce plan that collectively identifies workforce and training needs to ensure the program as a whole has the appropriate workforce with sufficient expertise to carry out its responsibilities and that resources are being leveraged appropriately across the two components of the program. According to our past work, strategic workforce planning is an essential tool to help agencies align their workforces with their current and emerging missions and develop long-term strategies for acquiring, developing, and retaining staff. Moreover, the Select Agent Program has not collectively determined its training needs. The APHIS component of the program has generally relied on CDC to help meet its ongoing training needs, as noted, but we found through our review of CDC’s training strategy that it did not specifically address APHIS’s training needs. According to program officials, joint training provided in the past has not always explicitly addressed animal inspection needs, as noted. Program officials noted that the program has taken some steps to coordinate training, such as holding joint inspector training and webinars.\nSenior program officials told us that, even without joint strategic planning documents, the CDC and APHIS components of the Select Agent Program manage fragmentation by collaborating on many aspects of the program, such as through maintaining frequent communication at the director level. They also said that the program had not developed a joint mission statement or strategic planning tools in the past because they prioritized other efforts in recent years, including responding to incidents that occurred in 2014 and 2015, addressing recommendations from recent reports, and developing a new database for the Select Agent Program. In addition, each component of the program has generally focused on its own agency’s needs when conducting workforce planning. One senior CDC official said that the Select Agent Program had always been in “reactive mode” and noted that the program could improve its oversight if it took a more strategic view.\nDuring the course of our review, senior program officials told us that they were taking steps to develop a joint strategic plan for the Select Agent Program and, in August 2017, the program began soliciting bids from contractors for the plan’s development. The statement of work for the contract states that the contractor shall develop guiding principles for the Select Agent Program along with a mission statement, strategic goals and objectives, and performance measures, among other requirements. However, the statement of work for the contract does not have any requirements related to development of a joint workforce plan. We have found in the past that agencies’ strategic workforce planning should be clearly linked to the agency’s mission and long-term goals developed during the strategic planning process. Developing a joint workforce plan that assesses workforce and training needs for the program as a whole would help the program to better manage fragmentation by improving how it leverages resources to ensure all workforce and training needs are met; this assessment should be done in conjunction with the development of the strategic plan. Leveraging of resources is especially important given fiscal constraints and the uneven level of resources across the two components of the program.", "Selected countries and regulatory sectors employ approaches to promote effective oversight that, in some cases, differ from those of the Select Agent Program. For example, other countries and sectors have regulatory bodies that are structurally independent from the entities they oversee, take a risk-based approach to performing reviews, rely on scientists and other laboratory personnel to have requisite technical expertise on the pathogens and activities in their laboratories, share incident information on their public websites, and have prosecutorial authority when incidents occur.", "Some countries and sectors we reviewed have regulatory bodies that are structurally independent from the entities they oversee. For example, Great Britain’s Health and Safety Executive, whose mission is to protect worker and public health and safety and who oversees laboratories that work with pathogens, is an independent central government agency, according to officials. It has a chief executive accountable to the UK government’s Department of Work and Pensions and a public-private board composed of representatives from a range of industries, including trade unions. Officials noted that this structure, an independent agency with direct access to a departmental head, allows the Health and Safety Executive to have control over defining its own budget and staffing needs. According to officials from the Health and Safety Executive and laboratory representatives we interviewed, one strength of this approach is that it avoids potential organizational conflicts of interest because none of the laboratories that the Health and Safety Executive oversees are part of the same agency.\nGreat Britain’s Health and Safety Executive The Health and Safety Executive is an independent regulator in Great Britain whose mission is to prevent death, injury, and illness in the workplace. It was originally established following a government review of the health and safety system in the country in 1974. One division within the Health and Safety Executive—the Chemical, Explosives and Microbiological Hazards Division—regulates sectors that have the potential for low- probability, high-consequence incidents, including work in high-containment laboratories. It began overseeing laboratories following a smallpox outbreak in 1978. Great Britain reviewed the regulations for animal pathogens and rewrote them to make them more aligned with the human pathogen and genetically modified organism frameworks after a 2007 safety incident in which a Great Britain laboratory inadvertently released foot and mouth disease into the environment. The Health and Safety Executive is responsible for safety oversight of pathogens that present a risk to human health as well as animal pathogens. A separate entity, the National Counter Terrorism Security Office, is responsible for security oversight of a subset of pathogens that pose biological security concerns, similar to the United States’ select agents. The Health and Safety Executive and the National Counter Terrorism Security Office work closely together in providing oversight, according to officials. As of July 2017, Great Britain had a total of 434 registered high-containment laboratories across the government, academic, and private sectors.\nSome other regulatory sectors in the United States are also structurally independent from regulated facilities as a mechanism to ensure independence. For example, prior to the creation of NRC in 1974, the U.S. Atomic Energy Commission was responsible for both promotion and oversight of the nuclear industry. The Energy Reorganization Act of 1974 established NRC as a separate, independent entity. According to a relevant Senate committee report, this was a response to growing criticism that there was a basic conflict between the U.S. Atomic Energy Commission’s regulation of the nuclear power industry and its development and promotion of new technology for the industry. Independence is one of NRC’s “Principles of Good Regulation” that the commission seeks to follow in carrying out its regulatory activities. NRC’s Office of Nuclear Reactor Regulation uses performance metrics associated with these principles—including measures of the objectivity and independence of its inspectors—to annually evaluate the effectiveness of its Reactor Oversight Process in meeting its pre- established goals and intended outcomes. This office reports the results of this analysis to NRC in an annual report on the self-assessment of the Reactor Oversight Process.", "Other countries and sectors we reviewed have adopted risk-based approaches to reviewing compliance with regulatory requirements. In particular, regulators in some countries, including Great Britain and Canada, apply a risk-based approach to target their reviews to laboratories with a documented history of performance issues or those conducting higher-risk activities. Great Britain’s Health and Safety Executive prioritizes which laboratories to inspect during the year by assessing the level of risk a specific laboratory or program may have on worker or public health and safety or the environment, according to officials. This assessment takes into consideration factors such as which pathogens pose a greater risk, how these pathogens are used in the laboratory, and the potential consequences of an incident. For example, officials noted that a laboratory complex that works with many pathogens that may pose a significant risk to the country—such as animal pathogens that affect livestock and the food supply—may be subject to more oversight and additional inspections from regulators, based on the associated risk assessment, than a diagnostic laboratory that may destroy samples after testing.\nThe Public Health Agency of Canada is responsible for promoting and protecting the health of Canadians through various public health initiatives. It was established in 2004, partly in response to an outbreak of severe acute respiratory syndrome (SARS) in 2003, when it became evident that Canada had no legal requirements for domestic laboratories to report information such as whether they were working with SARS samples, and therefore officials could not determine the potential scope of the problem. The agency sits under Canada’s Minister of Health and its Centre for Biosecurity is responsible for administering and enforcing Canada’s Human Pathogens and Toxins Act to oversee the safe and secure handling of human pathogens and toxins. The act came into full force in December 2015, following an extensive consultation process with stakeholders. The Centre for Biosecurity has authority to license and oversee laboratory activities involving human pathogens and toxins, some animal pathogens, and a subset of human pathogens that have additional biological security concerns. Oversight responsibility for the other animal pathogens rests with the Canadian Food Inspection Agency. As of June 2017, Canada had a total of 63 licensed high-containment laboratories across the government, academic, and private sectors.\nSimilarly, officials from the Public Health Agency of Canada’s Centre for Biosecurity, whose mission is to protect the health and safety of the public against the risks posed by human pathogens and toxins, stated that their division for the oversight of laboratories that work with pathogens also has a risk-based licensing and inspection scheme. Under this scheme, the stringency of licensing and inspection requirements largely depends on the pathogen’s risk level. In addition, the Public Health Agency of Canada places different requirements on activities carried out in laboratories depending on their sector (e.g., public health or research) because it determined that activities in certain sectors present a higher risk than others, with the research sector having the highest associated risks. As such, the Public Health Agency of Canada places additional requirements on research scientists conducting certain activities with pathogens than it does with respect to personnel conducting activities in other types of laboratories. For example, the agency requires research scientists to develop and submit documentation that demonstrates a reasonable plan to manage risk and promote compliance with requirements. Officials noted that this approach helps the agency to understand where best to focus its efforts to achieve the desired risk mitigation results. According to officials from both Great Britain and Canada, this risk-based approach helps the oversight bodies in both countries focus their limited resources on laboratories they have identified as having the highest risks.\nIn addition, Great Britain’s Health and Safety Executive and the Public Health Agency of Canada apply a risk-based approach in determining the focus of their inspections. For example, according to agency officials in Great Britain and Canada, because they have not found stringent inventory requirements to be effective in reducing biological safety risks in the laboratory, neither country places as much focus, time, or resources on inventory management as the Select Agent Program does. For example, neither country spends time during every inspection counting and examining vials and comparing them to inventory logs, according to officials. Instead, Great Britain’s Health and Safety Executive’s approach is to sample laboratories’ biological safety measures and assess whether they have mechanisms in place to mitigate the consequences of incidents should they occur. Similarly, in Canada, the Canadian Biosafety Standard requires that laboratories working with pathogens in high-containment have an inventory tracking system that is based on the risks internally identified by the laboratory, in order to allow for timely identification of missing vials if necessary.\nIn addition to having less prescriptive inventory requirements than the Select Agent Program, both Great Britain’s Health and Safety Executive and the Public Health Agency of Canada generally focus their oversight on (1) biological safety, and (2) regulation of all potentially hazardous pathogens in laboratories. In contrast, the Select Agent Program originated from security-related concerns and regulates only those pathogens identified on the U.S. select agent list and no other pathogens, such as West Nile virus, that may be handled in high- containment but are not select agents. In both Great Britain and Canada, specific biological safety incidents provided the impetus for establishing oversight for laboratories that work with pathogens and, as a result, their regulatory agencies generally focus on biological safety. Both Great Britain and Canada have additional oversight requirements, such as security clearances for personnel, for a limited number of pathogens for which they have heightened security concerns, similar to the security requirements for working with select agents in the U.S. For example, in Great Britain, the Health and Safety Executive focuses on only biological safety in its oversight of high-containment laboratories and works with the National Counter Terrorism Security Office for oversight of pathogens with biological security concerns. In addition, to ensure compliance with biological safety regulations, officials we interviewed in Great Britain and Canada told us it was beneficial for their programs to have oversight over all hazardous pathogens that present biological safety risks to laboratory workers and the public, regardless of their containment level and their potential to pose biological security concerns. For example, the Public Health Agency of Canada regulates any pathogens with characteristics that require handling in laboratories equivalent to U.S. BSL-2, -3, or -4, which currently covers thousands of pathogens, according to officials, as opposed to the 66 agents on the U.S.’s select agent list.\nNRC also considers risk in its oversight of nuclear reactors, fuel cycle facilities, and radioactive materials. In particular, for facilities that work with nuclear materials, NRC conducts inspections of a fraction of these facilities each year because, according to officials, there is a lower risk associated with nuclear materials than there is with nuclear power plants. There are no resident inspectors at these facilities; instead, the frequency of inspections for nuclear materials is based on the risk associated with, among other things, the specific material and each facility’s past performance. Sites with past issues will receive more attention, while sites with a history of good performance will generally be subject to the minimum frequency of inspections applicable to that type of site. In contrast, as part of its Reactor Oversight Process, NRC places at least two resident inspectors at each of the country’s commercial nuclear power plants because they pose a higher risk. For nuclear power plants, potential incidents can have high-consequences and far-reaching effects, such as the effects of the 2011 nuclear accident at the Fukushima Daiichi reactor in Japan. To ensure that each nuclear power plant is complying with federal safety requirements, these inspectors oversee a variety of activities on a daily basis, including by visiting control rooms, reviewing logbooks, performing visual assessments, and observing tests and repairs.", "Other countries have adopted various approaches to help ensure they have access to individuals with the appropriate expertise to perform sound safety and security assessments. According to officials in Great Britain, regulators at the Health and Safety Executive have access to external expert advisory committees to advise on issues related to new or emerging pathogens, diseases, or other scientific issues that inspectors may encounter during inspections or when developing policy. Health and Safety Executive officials noted that they generally go to the committees with questions of science and not regulation, as the inspectors are expected to be experts in biological safety and Great Britain regulations. Both France and Germany also have expert advisory committees that regulators can consult on scientific and technical issues, according to officials from these countries.\nMerging Oversight of Human and Animal Pathogens in Great Britain and Canada Great Britain merged the inspection and oversight responsibilities for human and animal pathogens into one oversight body, the Health and Safety Executive, in 2008, following the 2007 accidental release of foot and mouth disease into the environment. Oversight of animal pathogens was originally under the United Kingdom’s Department for Environment, Food, and Rural Affairs (DEFRA). When oversight of animal pathogens was first transferred to the Health and Safety Executive, DEFRA initially retained the licensing of sites with animal pathogens. In 2015, DEFRA transferred all oversight responsibilities, including licensing, to the Health and Safety Executive, but retained responsibilities for policy matters. According to agency officials and laboratory representatives in Great Britain, this change had a number of benefits, including creating a single agency contact for laboratories that work with regulated pathogens, strengthening the oversight of animal pathogens, and improving the logistics and ease of the system. Similarly, in 2013, Canada transferred the oversight responsibility for a subset of animal pathogens from the Canadian Food Inspection Agency (CFIA) to the Public Health Agency of Canada to strengthen and harmonize its biological safety oversight framework and reduce the regulatory and administrative burden on researchers and laboratory officials. CFIA continues to issue permits for other animal pathogens, such as emerging animal diseases, which, according to officials, only make up a small number of pathogens.\nOfficials from the Public Health Agency of Canada noted that they address the issue of technical expertise in part by placing substantial responsibility on the scientists and other personnel in each laboratory to understand and address the risks associated with their specific work, such as the equipment and procedures used in that laboratory. Officials from the Public Health Agency of Canada noted that personnel working in licensed laboratories are the ones most at risk if a safety lapse or other incident occurs, so the agency expects the responsible individuals at the laboratories to reinforce the requirements and help ensure everyone works safely and is in compliance with requirements. Under this approach, the main responsibility is with the laboratory officials to understand and manage the risks inherent in the work being performed at their facility, while the role of the inspector is to verify that they have taken appropriate steps to identify and address the risks.\nAccording to officials in the Netherlands, regulators place responsibility for laboratory biological safety on biological safety officers at each of the laboratories by accrediting them for the oversight of biological safety. Regulators conduct the accreditation process, which includes a review of personnel credentials, before individuals can be accredited. A 2-day course on the laws—such as details of biological safety requirements, case studies, review of transportation rules, and incident examples—is offered to each new accredited biological safety officer. Biological safety officers usually first seek accreditation for the equivalent of U.S. BSL-1 or -2 laboratories and must request additional reviews to receive accreditation for higher levels after acquiring the requisite knowledge and applied laboratory experience for the levels for which they are requesting accreditation. Officials from the Netherlands noted that it is important to have biological safety officers in laboratories as these individuals are versed in biological safety and can convey to researchers what they should be doing to ensure safety, as the regulator cannot be on-site every day.", "Some countries and regulatory sectors have approaches that provide transparency to entities and the public in a number of ways. For example, in Great Britain, the Health and Safety Executive shares information on licensing, enforcement actions, and prosecutions, among other information, through its website and the public register. Health and Safety Executive officials noted that the agency also issues information to licensed laboratories when there are safety alerts, lessons learned, or key decisions that it feels are pertinent to the regulated community. However, officials limit the sharing of any information that is sensitive or has security concerns, such as the names of individuals cleared to work with pathogens, which poses additional security concerns. Regulators in the Netherlands stated that they are also authorized to share a great deal of information related to some regulated pathogens, such as laboratory risk assessments, with the public and individuals who request the information. Similarly, in Switzerland, the public can request some information about laboratory licenses and the types of activities that occur at laboratories, but regulators do not share information on laboratory exposures because, according to a Swiss official, the public is not generally affected by them so the officials do not feel a need to share such information.\nNRC shares safety-related information on nuclear facilities with the public, including by posting the locations of nuclear facilities, inspection reports, and policies on its website. According to NRC officials, NRC believes transparency is important because, otherwise, secrecy can lead to distrust and negatively affect NRC’s relationship with industry and the public. In addition, NRC has written policies available on its website that detail what information it shares with registered facilities and the public, as well as guidance for NRC staff on what they can and cannot share.\nNRC officials stated that NRC strives for a balance between openness and security and that, because the nuclear sector’s needs and the public’s concerns are constantly changing, it is important to reassess policies as the necessity arises. For example, after the September 11, 2001, terrorist attacks, NRC decided to remove some information from the public sphere in response to concerns that such information could be misused and exploited for future terrorist attacks.\nThe Federal Aviation Administration also shares information with the public through its Aviation Safety Information Analysis and Sharing System, which collects information from multiple databases, including voluntarily reported near-miss data and accident information. This system is intended to promote an open exchange of safety information to continuously improve aviation safety, and it allows users to perform integrated queries, search safety data, and review incident investigations conducted by the National Transportation Safety Board. For example, analysts from the Federal Aviation Administration analyzed data from the Aviation Safety Information Analysis and Sharing System to determine which weather-related factors posed the biggest threats to pilots and aircraft. In addition, the Federal Aviation Administration provides public access to a library of lessons learned from historically significant, policy- shaping accidents to share key knowledge across the industry to improve aviation safety through the application of such lessons and to understand how the current safety regime has been influenced by past accidents. For example, the library discusses how two similar high-terrain crashes in the 1990s led to a requirement in 2000 to install a warning system in aircraft to reduce the incidence of such terrain accidents.", "Countries and regulatory sectors we reviewed employ a range of mechanisms to take enforcement actions against entities or to encourage incident reporting. For example, Great Britain, Canada, France, and Switzerland all have the ability to pursue criminal prosecution in response to serious violations of their laws or regulations governing high- containment laboratories, in addition to the ability to suspend work or shut down laboratories. In Canada, penalties for the most serious violations can include up to 10 years in prison. Officials from the Public Health Agency of Canada and representatives from laboratories we spoke with noted that laboratory personnel are still encouraged to report incidents in laboratories, such as laboratory-acquired infections, regardless of the potentially heavy penalties, because certain information that is voluntarily provided during the course of an incident cannot then be used in any subsequent criminal proceedings against that individual. In addition, experts from our meeting noted that the nonpunitive nature of airline reporting systems also encourages people to report incidents, which in turn provides valuable information to regulators, pilots, airlines, and the public that has been used to improve airline safety, as noted.", "In their joint management of the Select Agent Program, CDC and APHIS share a critical role in ensuring that important research on select agents can be conducted in high-containment laboratories in a safe and secure manner. This role is especially important given the significant risks that pathogens handled in high-containment laboratories may pose to laboratory workers and the public. The Select Agent Program has made a number of improvements over the past few years, such as hiring additional staff and sharing more information with the public and registered laboratories. Nevertheless, the program does not fully meet all key elements of effective oversight. For example, the program is not independent in that it is not structurally distinct and separate from all of the laboratories it oversees. Both CDC and APHIS have individually made structural changes and put mechanisms in place to reduce conflicts of interest, but the APHIS component of the program has not documented the reporting process it developed to reduce conflicts of interest. Until APHIS formally documents the reporting structure for its component of the program from the APHIS director of the program to the administrator of APHIS, it will continue to appear to have conflicts of interest in its oversight of APHIS-owned laboratories. Moreover, APHIS has, on at least three occasions, inspected its own or other USDA laboratories, which is not in keeping with the memorandum of understanding it signed with the CDC component of the program. Without establishing control activities to help ensure that each component of the program carries out its inspection responsibilities as outlined in the program’s memorandum of understanding, the Select Agent Program cannot have reasonable assurance that its key mechanism to reduce conflicts of interest is implemented.\nIn addition, the program has not formally assessed all potential risks posed by its current structure and the effectiveness of its mechanisms to address those risks. For example, the program did not identify some areas that may present conflicts of interest, such as APHIS carrying out inspections of its own laboratories, and has not considered whether there may be additional areas of concern. Without (1) regularly assessing the potential risks posed by the program’s current structure and the effectiveness of its mechanisms to address them, such as by commissioning external reviews, and (2) taking actions as necessary to ensure any identified risks are addressed, the program may not be aware of or effectively mitigate impairments to its independence that could affect its ability to achieve its objectives.\nFurther, regarding the ability to perform reviews, the program may not be targeting the highest-risk laboratory activities in its inspections and other oversight efforts. Without developing and implementing a plan to identify which laboratory activities carry the highest biological safety and security risks and to respond to those risks by aligning inspections and other oversight efforts to target those activities, the program will not have assurance that it is effectively balancing the potential safety and security gains from its oversight efforts against the use of program resources and the effect on laboratories’ research. Moreover, the program is not fully transparent because it shares only limited information about lessons learned and other matters with registered laboratories, and there is no consensus about what additional information should be shared. Without determining what additional information about laboratories’ use of select agents, incidents, and violations of the select agent regulations is appropriate for the Select Agent Program to share with registered laboratories, the program may be missing opportunities to provide key information that ultimately could help improve biological safety and security. In addition, the program has not had clarity and consistency in its enforcement actions and is taking steps to address our past recommendation.\nFurther, regarding technical expertise, the two components of the Select Agent Program have individually hired additional staff for the program and improved training to enhance expertise, but workforce and training gaps remain. Although the program has begun to take steps towards development of a joint strategic plan to collectively guide oversight efforts, it does not have a joint workforce plan. Developing a joint workforce plan that assesses workforce and training needs for the program as a whole would help the program to better manage fragmentation by improving how it leverages resources to ensure all workforce and training needs are met; this assessment should be done in conjunction with the development of the strategic plan. Leveraging of resources is especially important given fiscal constraints and the uneven level of resources across the two components of the program.", "We are making 11 recommendations to the agencies that manage the Select Agent Program, including 6 to APHIS and 5 to CDC: To improve independence, the Administrator of APHIS should formally document the reporting structure for the APHIS component of the Select Agent Program from the APHIS director of the program to the Administrator of APHIS. (Recommendation 1)\nTo improve independence, the CDC director of the Select Agent Program should work with APHIS to establish control activities to help ensure that each component of the program carries out its inspection responsibilities as outlined in the program’s memorandum of understanding. (Recommendation 2)\nTo improve independence, the APHIS director of the Select Agent Program should work with CDC to establish control activities to help ensure that each component of the program carries out its inspection responsibilities as outlined in the program’s memorandum of understanding. (Recommendation 3)\nTo improve independence, the CDC director of the Select Agent Program should regularly assess the potential risks posed by the program’s structure and the effectiveness of its mechanisms to address those risks, such as by commissioning external reviews, and take actions as necessary to ensure that any identified risks are addressed so that impairments to independence do not affect its ability to achieve its objectives. (Recommendation 4)\nTo improve independence, the APHIS director of the Select Agent Program should regularly assess the potential risks posed by the program’s structure and the effectiveness of its mechanisms to address those risks, such as by commissioning external reviews, and take actions as necessary to ensure any identified risks are addressed so that impairments to independence do not affect its ability to achieve its objectives. (Recommendation 5)\nTo improve the ability to perform reviews, the CDC director of the Select Agent Program should work with APHIS to develop and implement a plan to identify which laboratory activities carry the highest biological safety and security risks and to respond to those risks by aligning inspections and other oversight efforts to target those activities. (Recommendation 6)\nTo improve the ability to perform reviews, the APHIS director of the Select Agent Program should work with CDC to develop and implement a plan to identify which laboratory activities carry the highest biological safety and security risks and to respond to those risks by aligning inspections and other oversight efforts to target those activities. (Recommendation 7)\nTo improve transparency, the CDC director of the Select Agent Program should work with APHIS to determine what additional information about laboratories’ use of select agents, incidents, and violations of the select agent regulations is appropriate for the program to share with registered laboratories. (Recommendation 8)\nTo improve transparency, the APHIS director of the Select Agent Program should work with CDC to determine what additional information about laboratories’ use of select agents, incidents, and violations of the select agent regulations is appropriate for the program to share with registered laboratories. (Recommendation 9)\nTo improve technical expertise and overcome fragmentation, the CDC director of the Select Agent Program should work with APHIS to develop a joint workforce plan that assesses workforce and training needs for the program as a whole. This assessment should be done in conjunction with the development of the strategic plan. (Recommendation 10)\nTo improve technical expertise and overcome fragmentation, the APHIS director of the Select Agent Program should work with CDC to develop a joint workforce plan that assesses workforce and training needs for the program as a whole. This assessment should be done in conjunction with the development of the strategic plan. (Recommendation 11)", "We provided a draft of this report for review and comment to DOD, HHS, the Department of Homeland Security, NRC, the Department of Transportation, and USDA. We also provided copies to officials from Great Britain, Canada, and the Netherlands, as well as experts who participated in our expert meeting at the National Academy of Sciences.\nHHS and USDA—the agencies to whose components our recommendations are directed—both provided written comments agreeing with all of our recommendations. These comments are reprinted in appendixes III and IV, respectively. In their comments, HHS and USDA provided additional information about steps they are taking, or planning to take, to improve their oversight of select agents and to address our recommendations. For example, HHS and USDA stated that the Select Agent Program will explore options to improve independence, including reexamining previous reviews and assessing the need for additional reviews to ensure potential risks posed by the program’s structure are adequately assessed and addressed. In addition, to improve the ability to perform reviews, HHS and USDA stated that the Select Agent Program is transitioning to a new secure information system that will allow the program to develop analytical tools and procedures to analyze risk- related data to improve the inspection process. Further, to enhance transparency, HHS and USDA said the program is exploring ways to disseminate information regarding common deficiencies identified during inspections. Finally, to improve technical expertise and overcome fragmentation, HHS and USDA said that the program has initiated contract support for development of a joint strategic plan that will include the assessment of workforce and training needs.\nHHS and USDA also provided technical comments, as did the Department of Homeland Security; officials from Great Britain, Canada, and the Netherlands; and a number of experts who participated in our expert meeting at the National Academy of Sciences. We incorporated these comments as appropriate. DOD, NRC, and the Department of Transportation did not comment on this report.\nAs agreed with your offices, unless you publicly announce the contents of this report earlier, we plan no further distribution until 30 days from the report date. At that time, we will send copies to the appropriate congressional committees; the Secretaries of Agriculture, Defense, Health and Human Services, Homeland Security, and Transportation; the Chairman of NRC; the Director of CDC; the Administrator of APHIS; and other interested parties. In addition, the report will be available at no charge on the GAO website at http://www.gao.gov.\nIf you or your staff have any questions about this report, please contact Timothy M. Persons, Chief Scientist, at (202) 512-6412 or [email protected] or John Neumann, Director, Natural Resources and Environment, at (202) 512-3841 or [email protected]. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix V.", "This appendix describes the steps we took to confirm the applicability of five elements of effective oversight we have used in the past for our evaluation of the Federal Select Agent Program (Select Agent Program). We have used these key elements in the past for assessing the effectiveness of oversight in other areas where low probability adverse events can have significant and far-reaching effects. These elements are as follows: Independence: The organization conducting oversight should be structurally distinct and separate from the entities it oversees.\nAbility to perform reviews: The organization should have the access and working knowledge necessary to review compliance with requirements.\nTechnical expertise: The organization should have sufficient staff with the expertise to perform sound safety and security assessments.\nTransparency: The organization should provide access to key information, as applicable, to those most affected by operations.\nEnforcement authority: The organization should have clear and sufficient authority to require that entities achieve compliance with requirements.\nWe took several steps to confirm the applicability of these elements for our examination of the Select Agent Program. First, we discussed the applicability of the criteria with senior officials from both components of the Select Agent Program, within the Centers for Disease Control and Prevention (CDC) and the Animal and Plant Health Inspection Service (APHIS). Second, we discussed the elements with representatives from the American Society of Microbiology and American Biological Safety Association International, which were selected because of their focus on microbiology and biological safety, respectively. Finally, we discussed the elements with experts during our National Academy of Sciences meeting (see app. II for information on this meeting). The officials, representatives, and experts generally agreed that the five elements were appropriate for our examination of the Select Agent Program. We compared information from federal documents about the Select Agent Program’s oversight, interviews with laboratory representatives and agency officials, and our expert meeting against the five elements of effective oversight.", "", "Security Systems, University of Maryland\nAndrew Cottam, Ph.D., Head of the Microbiology and Biotechnology Unit, Health and Safety Executive, United Kingdom John Eakin, Principal Investigator, Air Data Research\nDavid Franz, DVM and Ph.D., Former Commander, United States Army Medical Research Institute for Infectious Diseases\nGigi Kwik Gronvall, Ph.D., Senior Associate, Johns Hopkins Center for Health\nMarianne Heisz, Ph.D., Director, Office of Biosafety Programs and Planning, Public Health Agency of Canada\nRuthanne Huising, Ph.D., Associate Professor, McGill University\nGavin Huntley-Fenner, Ph.D., Principal Consultant, Huntley-Fenner Advisors Joseph Kanabrocki, Ph.D. and NRCM(SM), Associate Vice-President for Research Safety, Professor of Microbiology, University of Chicago\nPaul Keim, Ph.D., Regents Professor and Cowden Chair, Northern Arizona James LeDuc, Ph.D., Director, Galveston National Laboratory, University of Texas Medical Branch\nCarol Linden, Ph.D., Director, Office of Regulatory Science and Innovation, Food\nAllison MacFarlane, Ph.D., Professor and Director, Center for International Science and Technology Policy, George Washington University\nBrian O’Shea, Ph.D., Senior Biological Safety Officer, Battelle Memorial Institute\nKarlene Roberts, Ph.D., Professor Emeritus, Haas School of Business, University Jonathan Rosen, Principal Industrial Hygiene Safety and Health Consultant, AJ Rosen and Associates, LLC The comments of these experts generally represented the views of the experts themselves and not the agency, university, or company with which they are affiliated.\nThe meeting with these experts was held at NAS in January 2017. To identify experts to participate in the meeting, we worked iteratively with NAS staff to identify and review biographical information and relevant qualifications of experts, as well as factors such as representation from academia, industry, and federal government and expertise in a range of areas. The Board on Life Sciences of NAS solicited nominations for the expert panel from its extensive contacts in laboratory safety, biological security, and other regulatory sectors, such as occupational safety and health, airline safety, food safety, and chemical safety. These contacts included current and former committee members, current and former members of the Board on Life Sciences, and select members of NAS. NAS received responses from approximately 45 nominees. From this initial list, NAS selected experts based on their knowledge and expertise in the above-mentioned areas as well as their ability to attend the meeting on the chosen dates and obtained our approval of its selections. In order to facilitate discussion among participants, NAS did not include any federal employees or contractors of the Select Agent Program. The final list of 18 experts was then evaluated for any conflicts of interest. A conflict of interest was considered to be any current or financial or other interest that might conflict with the service of an individual because it (1) could impair objectivity and (2) could create an unfair competitive advantage for any person or organization. The 18 experts were determined to be free of conflicts of interest, and the group as a whole was judged to have no inappropriate biases.\nWe developed the session topics for the 2-day meeting based on our researchable objectives and issues that we identified in our audit work, including our analysis of agency documents and interviews with agency officials and representatives from registered laboratories. The meeting was recorded and transcribed to ensure that we accurately captured the experts’ statements, and we reviewed and analyzed the transcripts as a source of evidence. Although the expert meeting was not designed to reach formal consensus on the issues, a number of themes emerged from the group’s discussion to which there was general agreement.", "", "", "", "", "In addition to the individuals named above, Mary Denigan-Macauley (Assistant Director), Sushil Sharma (Assistant Director), Amy Bowser, William Carrigg, Marcia Crosse, Caitlin Dardenne, Shana Deitch, Karen Doran, Jack Melling, Cynthia Norris, Lesley Rinner, Sara Sullivan, Walter Vance, and Elizabeth Wood made key contributions to this report." ], "depth": [ 1, 2, 2, 2, 3, 3, 3, 3, 3, 2, 1, 2, 2, 2, 2, 2, 1, 1, 1, 1, 1, 2, 1, 1, 1, 2, 2 ], "alignment": [ "h0_title h2_title h1_title", "", "", "h0_title h1_title", "h0_full", "h1_full", "", "", "", "h2_full", "h0_title", "h0_full", "", "", "", "", "h0_full h2_full h1_full", "", "", "", "", "", "", "", "", "", "" ] }
{ "question": [ "What is an important aspect of oversight?", "What are flaws in the Select Agent Program's oversight process?", "How do these flaws affect the SAP's oversight?", "What is an important aspect of oversight?", "How can reviews be made more effective?", "Why is the lack of risk assessment detrimental to reviews?", "What is a flaw in the program's oversight planning?", "To what extent is the program developing a planning process?", "Why is there a need for a comprehensive planning process?" ], "summary": [ "GAO's past work identified independence as a key element of effective oversight.", "However, the Select Agent Program is not structurally independent from all laboratories it oversees, and it has not assessed risks posed by its current structure or the effectiveness of mechanisms it has to reduce organizational conflicts of interest.", "Without conducting such assessments and taking actions as needed to address risks, the program may not effectively mitigate impairments to its independence.", "Another key element of effective oversight is the ability to perform reviews.", "Some experts and laboratory representatives raised concerns that the program's reviews may not target the highest-risk activities, in part because it has not formally assessed which activities pose the highest risk.", "Without assessing the risk of activities it oversees and targeting its resources appropriately, the program cannot ensure it is balancing its resources against their impact.", "Moreover, the program does not have joint strategic planning documents to guide its oversight.", "Although it began taking steps to develop a joint strategic plan during GAO's review, the program is not developing workforce plans as part of this effort.", "GAO's past work has found that strategic workforce planning is an essential tool to help agencies align their workforces with their missions and develop long-term strategies for acquiring, developing, and retaining staff. Developing a joint workforce plan that assesses workforce and training needs for the program as a whole would help the program leverage resources to ensure all workforce and training needs are met." ], "parent_pair_index": [ -1, -1, 1, -1, 0, -1, -1, -1, 1 ], "summary_paragraph_index": [ 4, 4, 4, 5, 5, 5, 7, 7, 7 ] }
GAO_GAO-13-111
{ "title": [ "Background", "Federal Funding for Rural Water Infrastructure Projects", "Application Process and National Environmental Policy Act Requirements", "Federal Agencies’ Coordination for Rural Water Infrastructure", "Fragmentation and Overlap in EPA and USDA Programs Can Result in Potential Duplication of Community Efforts to Apply for Funding", "The SRF and RUS Programs Provide Overlapping, but Not Duplicative, Funding to Communities with Populations of 10,000 or Less", "Federal and State Actions Have Not Fully Facilitated Coordination for Funding Communities’ Projects", "Agencies Have Taken Some Actions to Encourage Coordination at the State and Community Level but Not Others", "State-Level Programs Took Varied Actions to Coordinate in Five States We Visited", "Conclusions", "Recommendations for Executive Action", "Agency Comments and Our Evaluation", "Appendix I: Objectives, Scope, and Methodology", "Appendix II: Drinking Water and Clean Water State Revolving Fund Program Funds Provided to Communities with Populations of 10,000 or Less", "Appendix III: Comments from the Environmental Protection Agency", "Appendix IV: Comments from the U.S. Department of Agriculture’s Office of Rural Development", "Appendix V: GAO Contact and Staff Acknowledgments", "GAO Contact", "Staff Acknowledgments" ], "paragraphs": [ "Rural communities often have small or aging drinking water and wastewater systems. The need for a water project can arise for multiple reasons, including replacing or upgrading outdated or aging equipment that does not treat water to meet water quality standards and systems that do not produce water to meet new treatment standards. For example, arsenic is often present naturally in groundwater, and to meet new federal arsenic standards for drinking water, many rural communities using groundwater as a drinking water source will have to improve their drinking water systems to remove arsenic. EPA estimates that drinking water and wastewater infrastructure for small communities over the next several decades could cost more than $100 billion.\nThis section describes (1) federal funding for drinking water and wastewater infrastructure projects in rural communities; (2) the process for applying for these federal funds, including the requirements state and federal agencies must ensure rural communities meet under the National Environmental Policy Act; and (3) our prior work on coordination among federal agencies and rural water infrastructure programs.", "The federal government administers a number of programs that assist rural communities in developing water and wastewater systems and complying with federal regulations, with EPA’s drinking water and clean water SRF programs and USDA’s RUS program providing the most funding. Communities typically pay for drinking water and wastewater infrastructure through the rates charged to users of the drinking water and wastewater systems. Large communities serve many people and can spread the cost of infrastructure projects over these numerous users, which makes projects more affordable. Small or rural communities have fewer users across which to spread rate increases, making infrastructure projects less affordable and these communities more reliant on federal funding to help lower the cost of projects through lower interest rates or grants that do not need to be repaid.\nThe Safe Drinking Water Act and the Clean Water Act authorize the Drinking Water SRF and Clean Water SRF programs, respectively, as well as EPA’s authority to regulate the quality of drinking water provided by community water supply systems and the discharge of pollutants into the nation’s waters. Under the Safe Drinking Water Act, EPA sets standards to protect the nation’s drinking water from contaminants, such as lead and arsenic. In 1996, amendments to the act established the drinking water SRF program to provide assistance for publicly and privately owned drinking water systems. Under the Drinking Water SRF program, states make loans and are required to provide a certain percentage of funding in loan assistance to communities of less than 10,000. The Clean Water Act is intended to maintain and restore the physical, chemical, and biological integrity of our surface waters, such as rivers, lakes, and coastal waters. In 1987, amendments to the Clean Water Act established the Clean Water SRF program to provide assistance to publicly owned wastewater treatment facilities. Using the federal funds EPA provides to capitalize the state SRF programs, states provide loans to communities for drinking water and wastewater treatment projects. In order to qualify, states must contribute an amount equal to 20 percent of the federal capitalization grant. States that qualify for funding are responsible for administering their individual SRF programs, and communities of any size can apply for assistance. Loans are generally provided at below-market interest rates, saving communities money on interest over the long term. As communities repay the loans, the states’ funds are replenished, enabling them to make loans to other eligible drinking water and wastewater projects, and creating a continuing source of assistance for communities. See figure 1 for a description of the state Drinking Water and Clean Water SRF program funding sources. Nationwide, there are almost 52,000 publicly and privately owned drinking water systems and 16,000 publicly owned wastewater treatment facilities.\nUSDA’s RUS administers a water and wastewater loan and grant program for rural communities with populations of 10,000 or less. The program is designed to address public health concerns in the nation’s rural areas by providing funding for new and improved drinking water and wastewater infrastructure. RUS provides a mix of loan and grant funding to communities that have been denied credit through normal commercial channels. Like the SRF programs, the RUS program makes loans at below-market rates to save communities interest over time but, unlike the SRF programs, the RUS program can make loans for up to 40 years, which helps lower communities’ annual repayment costs. In addition, communities do not need to repay funds received as grants, further helping to reduce the overall financial burden they incur upon a water project’s completion. To determine the amount of loans and grants a community receives, RUS assesses the potential increase in the water or sewer user rate needed to repay the loan. RUS provides grants to communities when necessary to reduce user rates to a level that the agency determines to be reasonable.\nOther federal agencies have programs that provide funds for drinking water and wastewater infrastructure, including HUD’s Community Development Block Grant program and the Department of Commerce’s Economic Development Administration’s Public Works and Economic Development Program. Under HUD’s program, communities use block grants for a broad range of activities to provide suitable housing in a safe living environment, including water and wastewater infrastructure. Thirty percent of block grant funds are allocated by formula to states for distribution to communities of 50,000 or less. Drinking water and wastewater needs compete with other public activities for funding and, according to HUD officials, account for about 10 percent of all block grant funds nationally. Economic Development Administration’s Public Works and Economic Development Program provides grants to small and disadvantaged communities to construct public facilities, including drinking water and wastewater infrastructure, to alleviate unemployment and underemployment in economically distressed areas. In addition, the U.S. Army Corp of Engineers and the Department of the Interior’s Bureau of Reclamation provide financial assistance for some large drinking water and wastewater projects, but these projects must be authorized by Congress prior to construction.\nIn addition to these federal programs, some states have created their own programs to provide assistance for drinking water and wastewater infrastructure. For example, the North Carolina Rural Economic Development Center provides infrastructure loans for communities in the state’s rural counties. In Montana, the Treasure State Endowment Program provides grants to make drinking water and wastewater projects more affordable for the state’s communities.", "The state SRF programs and the RUS program each have their own application process through which communities can apply for funding, although the application processes generally include similar steps: (1) completing an application that asks for, among other things, basic demographic, legal, and financial information associated with the project; (2) developing a preliminary engineering report that provides basic design specifications and other technical information for the project; and (3) conducting an environmental analysis that considers the environmental effects of the proposed project and alternatives. The state agencies responsible for EPA’s SRF programs and USDA state offices review these documents, prioritize the projects based on agency-determined criteria, provide comments to communities on how their applications can be improved, and ultimately approve or reject the request for funding. Communities can choose to apply for funding to different federal and state programs at any stage during the process. In some cases, the SRF and RUS programs will work together to jointly fund the same project if the project is too large for one agency to fund, or if it will make the project more affordable for the community. If their requests are approved, communities design the projects, obtain construction bids, contract to build the projects, and are reimbursed by the funding agency. Communities usually hire a consulting engineer to develop the preliminary engineering reports and conduct the environmental analyses for a project. In addition, EPA and USDA pay for technical service providers that communities can use to help them understand and apply for their programs. Communities can also get assistance from local planning districts, which are voluntary associations of county and municipal governments that provide development assistance to their membership.\nA preliminary engineering report describes the proposed project, including its purpose, features of the proposed location, condition of any existing facilities, alternative approaches considered, design features, and costs. Figure 2 shows the application process and timeline that is generally followed for both EPA and RUS programs.\nThe state SRF and RUS state-level programs review the likely environmental effects of projects they are considering funding using different levels of environmental analysis. These reviews occur either under the National Environmental Policy Act of 1969 (NEPA) for the RUS program, or for the SRF programs, under a state environmental review process similar to NEPA. EPA regulations define the necessary elements of these state “NEPA-like” reviews. Typically, a proposed water or wastewater project is subject to an environmental assessment or, in the rare case that the project is likely to significantly affect the environment, a more detailed environmental impact statement. If, however, the agency determines that activities of a proposed project fall within a category of activities the agency has determined has no significant environmental impact—a determination called a categorical exclusion—then the project applicant or the agency, as appropriate, generally does not have to prepare an environmental assessment or environmental impact statement. Because many community water and wastewater infrastructure projects either upgrade or replace existing infrastructure, projects rarely result in significant environmental impacts, and NEPA requirements can be satisfied through an environmental assessment or a categorical exclusion. In addition, in some cases, the funding agency may help complete the environmental analysis documents for a planned project.", "Our previous work has raised questions regarding sufficient coordination between drinking water and wastewater infrastructure funding programs, despite federal efforts to improve coordination at the state and local level. In December 2009, we reported that EPA, USDA, and other agencies that fund drinking water and wastewater infrastructure for rural communities along the U.S.-Mexico border, lacked coordinated policies and processes and did not efficiently coordinate their programs, priorities, or funding. Specifically, without efficient coordination, applicants faced significant administrative burdens that, in some cases, resulted in project delays because the programs required separate documentation to meet the same requirements and did not consistently coordinate in selecting projects. For example, an engineer in Texas told us that one community applying for funding had to pay $30,000 more in fees because the engineer had to complete two separate sets of engineering documentation for EPA and USDA. As we stated in our December 2009 report, the applicant could have saved these funds had EPA and USDA established uniform engineering requirements. To resolve such inefficiencies, we suggested Congress consider establishing an interagency mechanism, such as a task force, of federal agencies working in the border region. One of the responsibilities of this task force would be to work with state and local officials to develop standardized applications and environmental review and engineering documents, to the extent possible, for the federal and state agencies working in the border region.\nSimilarly, our October 2005 report discusses collaboration and practices that federal and state agencies can engage in to enhance and sustain interagency collaboration. In the report, we define collaboration as any joint activity that is intended to produce more public value than could be produced when organizations act alone. According to the report, agencies can enhance and sustain interagency collaboration by engaging in one or more of the following practices:  define and articulate a common outcome;  establish mutually reinforcing or joint strategies; identify and address needs by leveraging resources;  agree on roles and responsibilities;  establish compatible policies, procedures, and other means to operate  develop mechanisms to monitor, evaluate, and report on results; reinforce agency accountability through agency plans and reporting; and reinforce individual accountability for collaborative efforts through performance management systems.\nFor a number of these practices, the report states that nonfederal partners, key clients, and stakeholders need to be involved in decision making. Additionally, a number of important factors, such as leadership, trust, and organizational culture, are necessary elements for a collaborative relationship.\nConsistent with the findings of our October 2005 report, the 1997 joint memorandum signed by EPA, USDA, and HUD encourages cooperation in developing strategic plans for each agency’s program and encourages cooperation among program managers at the state level to remove as many barriers as possible in program regulations or policy. In addition, the memorandum encourages the development of common practices across agencies, including regularly communicating and leveraging funds to make the most efficient use of available resources. Moreover, the memorandum encourages the signing agencies to prepare common documents, including one environmental analysis per project, that meet all the federal and state agencies’ requirements. This memorandum is similar to governmentwide NEPA regulations and various guidance issued by the Council on Environmental Quality, which emphasize the need for coordination among federal and state agencies on environmental and other requirements. Most recently, the council issued a March 2012 guidance that encourages federal agencies to cooperate with state, tribal, and local governments so that one document satisfies as many applicable environmental requirements as practicable. In addition, the guidance encourages federal agencies to enhance coordination under NEPA by designating a lead agency responsible for conducting an environmental analysis. Furthermore, according to the guidance, a federal agency preparing an environmental analysis should consider adopting another federal agency’s environmental analysis if it addresses the proposed action and meets the standards for an adequate analysis under NEPA and the adopting agency’s NEPA guidance.", "Drinking water and wastewater infrastructure funding is fragmented among the three programs we reviewed—EPA’s Drinking Water and Clean Water SRF programs and USDA’s RUS program. As a result, overlap can occur when communities with populations of 10,000 or less apply to one of the SRF programs and the RUS program. For the 54 projects we reviewed in the five states we visited, this overlap did not result in duplicate funding or funding for the same activities on the same project. Specifically, for 42 projects that we reviewed, the state SRF programs or the RUS program funded the projects individually, and for the remaining 12 projects that we reviewed, the state SRF and RUS programs each contributed a portion of the overall project cost because none of the programs could cover the full cost individually, according to community officials. However, we identified potentially duplicative efforts by communities to complete funding applications and related documents for both agencies.", "Overlap can occur among the state SRF and RUS programs because they can each direct funding to communities with populations of 10,000 or less. As a result, these communities are eligible to apply for funding from more than one of these programs. For example, communities of 10,000 or less can apply to the state Clean Water SRF and RUS programs for funds to install or upgrade wastewater treatment plants and sewer lines. In addition, communities of 10,000 or less can apply to the state Drinking Water SRF and RUS programs for funds to install, repair, improve, or expand treatment facilities, storage facilities, and pipelines to distribute drinking water.\nThe state SRF and RUS programs have funded projects in communities with populations of less than 10,000 in recent years, according to our analysis of SRF and RUS data from July 1, 2007, through June 30, 2011. Specifically, over this time frame, communities with populations of 10,000 or less received $3.2 billion, or 36 percent of total Drinking Water SRF funding. Similarly, such communities received $6.3 billion, or 24 percent of total Clean Water SRF funding. In accordance with its mission, the RUS program has directed all of its funding for drinking water and wastewater infrastructure projects to such communities, for a total of $11 billion from October 1, 2006, through September 30, 2011. The amount of program funding overlap between the state SRF and RUS programs varies among the states, with some states showing greater overlap than others. State Drinking Water SRF program funding overlap with the RUS program ranged from 7 percent in Rhode Island to 93 percent in Virginia, and state Clean Water SRF program funding overlap with the RUS program ranged from 8 percent in California to 74 percent in Pennsylvania. Additional information about variations in program funding overlap is provided in appendix II.\nOverlap in program funding could lead agencies to fund the same project, resulting in the potential for duplication. However, for the state SRF and RUS programs, the majority of projects we reviewed in the five states were funded by either one of the SRF programs or the RUS program, in conjunction with other federal or state program funds, such as HUD’s Community Development Block Grant program, Montana’s Treasure State Endowment Program, and programs from the North Carolina Rural Economic Development Center. Table 1 shows the funding awards for community projects in states we visited. In the five states we visited— Colorado, Montana, North Carolina, Pennsylvania, and South Dakota—42 of the 54 projects we reviewed received funding from the SRF or RUS programs, in addition to other sources.\nIn addition to the 42 projects that were separately funded by the state SRF or RUS programs, 12 projects we reviewed received funding from both the SRF and RUS programs (see table 2 for funding details). Our analysis of these projects showed the programs did not pay for the same activities with their funding, and according to state and community officials, the joint funding for a community’s project was beneficial and warranted. Specifically, according to federal, state, and community officials we interviewed, jointly funded projects tended to be relatively expensive projects that exceeded one or the other agency’s ability to fund independently or that needed additional funding to make the project affordable for community residents. Following are examples:  Washington, Pennsylvania, population approximately 3,500, sought funding from both the Clean Water SRF and RUS programs, and other programs, for its nearly $21 million sewer project to install over 200,000 feet of sewer lines. The community initially sought funding from the Clean Water SRF program, but then decided to seek additional funding from the RUS program after realizing the project exceeded available funding from the SRF program, according to the consulting engineer the community used. The Clean Water SRF program provided $10.3 million, and the RUS program provided $5.5 million.  Hertford, North Carolina, population approximately 2,200 sought funding from the Drinking Water SRF and RUS programs for its project to expand drinking water capacity by drilling wells, installing water supply lines, expanding the water treatment plant, and constructing an elevated storage tank. Similar to the Washington, Pennsylvania, project, community officials said that the Hertford project was too expensive for a single agency to fund. The Drinking Water SRF program provided $2.6 million toward the project, and the RUS program provided $772,000.  Faulkton, South Dakota, population approximately 800, sought funding from the Drinking Water SRF, the RUS program, and the Community Development Block Grant program to replace water pipelines and install a water tower. The town applied to multiple programs to receive grants to help ensure that the project would be affordable to its residents. The Drinking Water SRF program provided a loan in the amount of $500,000 and immediately forgave the balance of the loan, effectively providing these funds at no cost to the community. The RUS program provided $2.1 million in funds to this project, including grant funds, which helped keep the project affordable. The Community Development Block Grant program provided approximately $519,000 in additional funds, and the community put forth $149,000.\nProgram overlap among the state SRF and RUS programs can result in potential duplication of communities’ efforts to prepare funding applications and related documents, including preliminary engineering reports and environmental analyses, according to our analysis of project documents and interviews with engineers and community officials in the five states we visited. In these states, as with others, the state SRF and RUS programs require the communities to submit a preliminary engineering report and an environmental analysis as part of their loan applications.\nPreliminary engineering reports submitted by communities to the SRF and RUS programs contained many of the same components, but the format and the level of detail required varied. Table 3 shows the similar or common components included in these preliminary engineering reports of four projects we reviewed. We judgmentally selected an example from one community in each state that had at least one jointly funded project or that had applied to both programs for funding, and that prepared preliminary engineering reports.\nAs table 3 shows, the preliminary engineering reports for both programs asked for similar information such as project location, community growth and population, existing facilities, alternative approaches to the project, and environmental and technical details of the project. The preliminary engineering reports prepared for the RUS program also included information on debt service and short-lived assets—those assets that have a planned life less than the repayment period of the loan—while the SRF engineering reports did not include such information.\nEngineers and community officials we interviewed in some states told us that they prepare separate preliminary engineering reports for each agency when a community applies for funding from both agencies, which can increase costs to the communities. Specifically, officials and engineers in some states told us the requirements for USDA’s RUS preliminary engineering report are generally more rigorous. They stated that these reports contain similar information but with different formats and levels of detail. Examples are as follows: In North Carolina, engineers and a technical service provider we interviewed told us that the state SRF and RUS formats for the preliminary engineering reports differed significantly in format but contained much of the same information. State officials told us the state SRF programs do not typically accept preliminary engineering reports completed for the state-level RUS program because they try to maintain a common format to enable efficient review. Similarly, the state-level RUS program officials said that they do not accept reports completed for the state SRF programs.\nIn Colorado, an engineer for several projects we reviewed told us that the engineering firm had to complete preliminary engineering reports for both the state SRF programs and the RUS program even though the reports had similar formats and information.\nIn South Dakota, engineers told us that to minimize effort, time, and cost to the community, they prepare preliminary engineering reports to meet state SRF, RUS, and other program requirements even if the community does not initially seek funds from all of these programs. These engineers said doing so helps minimize the additional effort it would take to revise the report at a later time if the community decided to seek additional funds. According to another engineer, if the preliminary engineering report is completed to meet just the SRF programs’ requirements, the firm will require additional time and money to meet the additional preliminary engineering report requirements necessary to apply for funding through the RUS program.\nMontana and Pennsylvania take a different approach than the other three states we visited as follows:  Montana has a uniform preliminary engineering report accepted by most federal and state agencies. Engineers said that the agencies ask for some different information, which they gather in amendments to the report instead of having communities submit similar information multiple times.\nIn Pennsylvania, officials from state SRF and state-level RUS programs said they encourage communities to apply to either the SRF or RUS programs and do not often jointly fund projects. Officials from both programs told us that when they do fund projects jointly, they try to accept one another’s documents to avoid duplicating them.\nWe also found similarities in the environmental analyses submitted by communities to the SRF and RUS programs for four of the projects in the states we visited. According to our review of environmental analyses submitted to the state SRF and RUS programs—we judgmentally selected one in each of four communities and states that had jointly funded projects or applied to both programs for funding—each environmental analysis followed a similar overall format and contained many of the same components, but the level of analysis and the level of detail needed to satisfy federal and state requirements varied. Table 4 shows the overall format and similar components for these environmental analyses. The agencies ask for information on many of the same components, including purpose and need, alternatives analysis, and environmental consequences.\nThe extent to which communities duplicate their environmental analyses for each program varies by state, depending on the extent to which water and wastewater infrastructure programs in the state accept each other’s work or use each other’s documents. In Colorado, North Carolina, and South Dakota, the communities can submit the final approved environmental analyses prepared for the RUS program to the SRF programs, which eliminates one of the documents they have to prepare. However, in these states, the state-level RUS program will not typically accept the analysis prepared for the SRF program because the state analyses are less rigorous, according to RUS officials. In Pennsylvania, the state programs have agreed to uniform environmental requirements, and the communities therefore submit the same document to both programs. Communities may be required to submit additional information, as needed, to meet requirements specific to each program. In Montana, the state SRF programs prepare an environmental analysis for the community that is primarily based on information that the community submits in the preliminary engineering report, but the community prepares the environmental analysis that it submits to the state RUS program.\nFurthermore, in some cases, the state programs may require the same type of environmental analysis for a project but, in other cases, the state programs may require different levels of environmental analysis—such as a categorical exclusion. For example, for a single wastewater project, the town of Conrad, Montana, completed an environmental analysis for the state-level RUS program, while the state SRF program completed the environmental analysis for the town. In contrast, Pagosa Springs, Colorado, submitted an environmental checklist to the state SRF program for its wastewater project and received a categorical exclusion but had to submit an environmental analysis for the application it submitted to the state-level RUS program for the same project. Variation exists across states despite NEPA regulations stating that federal agencies should eliminate duplication with state and local procedures by providing for joint preparation of environmental analyses or by adopting appropriate environmental analyses. According to state SRF officials, state-level RUS officials do not always accept state analyses because NEPA regulations under the RUS program are rigid and because some state RUS officials are not flexible in their interpretation of the requirements for environmental analyses. State RUS officials, however, told us that environmental analyses by some state environmental programs are not sufficient to meet federal NEPA standards, making it difficult for them to accept these environmental analyses.\nPotentially duplicative application requirements, including preliminary engineering reports and environmental analyses, may make it more costly and time-consuming for communities to complete the application process. For example, if consulting engineers have to provide similar, or even the same, information, in two different engineering reports or environmental analyses, their fees to the community may be higher. Engineers we interviewed estimated that preparing additional preliminary engineering work could cost anywhere from $5,000 to $50,000 and that the cost of an environmental analysis could add as little as $500 to a community’s costs or as much as $15,000. Moreover, having to complete separate preliminary engineering reports or environmental analyses may delay a project because of the additional time required to complete and submit these documents. State officials in Montana told us that coordination between federal and state programs and the implementation of uniform application requirements could reduce the time it takes an applicant to complete a rural water infrastructure project by up to half.", "Our review of five states and local communities in those states showed that EPA and USDA have taken some actions to coordinate their programs and funding at the federal and state level to help meet the water infrastructure needs of rural communities, but not others specified in the 1997 memorandum. Because these federal programs are implemented at the state level, efforts to coordinate between the agencies primarily occur among state officials managing the SRF and other water infrastructure programs, the RUS state-level offices, and the communities whose projects they fund. In some cases, inconsistent coordination at the state level has led to potential duplication for communities applying for funding and inefficiencies in program funding. EPA and USDA, at the federal level, and the state SRF and RUS state-level offices, have taken some actions to coordinate but have not taken others that could help avoid duplication of effort by communities applying for project funding.", "Recognizing the importance of coordinating the SRF and RUS programs at the state level, EPA and USDA agencies have taken some actions at the federal level to encourage coordination between the state-level programs and communities but not other actions specified in the 1997 memorandum. The 1997 joint memorandum signed by EPA and the USDA sought to improve coordination among federal and state agencies as they help fund community projects. It identified four major actions that state and state-level federal offices can take to improve coordination and reduce inefficiencies and potential duplication of effort. These actions are consistent with several of the leading practices we identified in our October 2005 report on interagency collaboration. These actions are as follows: Cooperate in preparing planning documents. The memorandum encourages state SRF and RUS programs to cooperate in preparing planning documents, including operating, intended use, and strategic plans that are required under each agency’s programs. The memorandum says that the federal and state programs should endeavor to incorporate portions of each agency’s planning documents to minimize duplication of planning efforts. This action is consistent with two leading practices for interagency collaboration identified in our previous work— defining and articulating common outcomes and developing joint strategies—through which partner agencies can overcome significant differences in agency missions and cultures, and align their activities and resources to accomplish common goals.\nCooperate to remove policy and regulatory barriers. The memorandum states that agencies should cooperate in removing as many barriers to coordination as possible in program regulations or policy by, for example, coordinating project selection systems and funding cycles. This action is consistent with a leading practice for interagency collaboration identified in our previous work—promoting compatible policies and procedures.\nCooperate on project funding. The joint memorandum encourages state SRF and state-level RUS officials to meet on a regular basis to cooperate in determining what projects will receive funding and which program should fund which project, and to discuss the possibility of jointly funding projects when necessary. This action is consistent with two of the leading practices for interagency collaboration identified in our previous work— agreeing upon roles and responsibilities and leveraging resources. Through such actions, federal and state agencies funding water and wastewater infrastructure can clarify which agencies will be responsible for taking various steps and for organizing joint and individual agency efforts and thereby obtain benefits that they would not have realized by working individually.\nCooperate in preparing environmental analyses and meeting other common federal requirements. The joint memorandum states that, whenever possible, agencies should cooperate on federal requirements that are common across agencies—environmental analyses and other common documents, such as preliminary engineering reports—in order to create one comprehensive application package per project. This action is consistent with our leading practice for interagency collaboration of establishing compatible policies and procedures for operating across agency boundaries. Through such an action, federal and state agencies would seek to make policies and procedures more compatible.\nIn February 2012, EPA, USDA, and several other federal and state agencies created a working group to examine the feasibility of developing uniform guidelines for preliminary engineering report requirements. The group plans to develop a draft outline for uniform preliminary engineering report guidelines by September 2012 and has received numerous examples and comments from participating states. According to RUS officials, however, once the draft outline is developed it must be reviewed by participating state and federal agencies before it is considered final, and the final outline could be delayed if agency review and response times are slow. In addition, EPA and USDA have taken action at the federal level to help the states coordinate better and make programs more efficient for communities applying for funding. Specifically, EPA and USDA coordinate at the federal level to encourage states to emphasize coordination between their SRF programs and RUS, as well as with local communities. According to EPA and USDA officials, to inform state officials and communities about the programs and funding opportunities available in their respective states, the federal agencies participate in conferences and workshops, conduct Webinars, and sponsor training. The federal agencies also issue guidance to their programs. For example, EPA issued a report in 2003 providing case studies and innovative approaches on how state SRF programs could better coordinate with other programs with similar purposes. In addition, in June 2011, EPA and USDA signed a Memorandum of Agreement to work together to help communities implement innovative strategies and tools to achieve short- and long-term water and wastewater infrastructure sustainability. Among other things, the memorandum encourages the agencies to share and distribute resources and tools to communities that promote long-term sustainability and to provide training and information that encourages the adoption and adaptation of effective water infrastructure management strategies.\nThe actions that EPA and USDA have taken to date, such as providing guidance in the 1997 memorandum, have helped states and state-level federal agencies to coordinate generally but have not facilitated better coordination at the state level in more specific ways. In particular, the federal agencies have not taken actions, highlighted in the 1997 memorandum, to develop common documents for communities to apply to different funding programs. For example, EPA and USDA have not created a working group or taken similar action to work with other federal and state officials to develop a uniform environmental analysis. Making environmental analyses more compatible would be consistent with the March 2012 Council on Environmental Quality guidance on eliminating duplication in federal NEPA efforts. Similar to the 1997 joint memorandum, Council of Environmental Quality NEPA regulations and guidance encourage coordination between state and federal agencies in preparing environmental documents to reduce the time and cost required to make federal permitting and review decisions while improving outcomes for communities and the environment. According to agency officials, the agencies have not taken such action because they believe they have coordinated sufficiently. According to EPA officials, the states conduct NEPA-like analyses but are not required to meet the same NEPA requirements as federal agencies, and EPA cannot therefore dictate what documents the states use. In addition, USDA officials said that the RUS program’s NEPA guidance documents already encourage state-level RUS offices to coordinate with the state SRF programs to accept RUS’s environmental analyses, as appropriate and consistent with guidance from the Council on Environmental Quality. Without agreement to use common environmental analyses, however, rural communities could continue to spend more effort and resources to meet application requirements for improving their water and wastewater infrastructure.", "In the five states we visited, the state-level programs varied in the actions they took to coordinate their water and wastewater infrastructure programs consistent with the 1997 joint memorandum. In some states, the state SRF and RUS programs have developed innovative ways to coordinate and remove barriers to coordination consistent with the 1997 memorandum but, in other states, the state SRF and RUS programs have been less successful, leading to potential duplication for communities applying for funding and inefficiencies in program funding. Table 5 shows the extent of actions to coordinate taken by the state SRF programs and state-level RUS programs in the five states we visited. Some community officials we met with suggested that, for the drinking water and wastewater infrastructure programs, good coordination among state officials would involve meeting on a regular basis to cooperate in determining what projects would receive funding, thereby leveraging agency funds that are increasingly limited.\nIn the five states we visited, the state SRF and state-level RUS programs varied in the number and types of action they had taken to coordinate, as described in the memorandum. However, the state-level programs did not take actions to cooperate in preparing planning documents. The extent of actions taken by the five states consistent with the memorandum are as follows: Cooperate in preparing planning documents. In the states we visited, state SRF and RUS programs do not regularly coordinate when developing agency-specific planning documents. State SRF officials identify the projects that apply to their program in planning documents called intended use plans. In these plans, the states rank projects using state-determined criteria following EPA guidance, such as environmental and health concerns. Similarly, state-level RUS officials develop funding plans in which they separately rank projects applying to their program using national criteria that focus primarily on economic development, as well as environmental and health concerns.\nCooperate to remove policy and regulatory barriers. The state SRF and RUS programs in three of the states we visited had cooperated to remove policy barriers to coordination, such as differences in funding cycles. Specifically, in those states, federal and state officials meet regularly to ensure funding cycles are aligned to avoid unnecessary project delays. For example, in South Dakota, the state’s SRF and other state water and wastewater infrastructure funding programs have the same funding cycles and application timelines, which are administered by one agency. State and local officials told us that having the state funding programs aligned made it easier to navigate differences in funding cycles with RUS and other federal funding programs operating in the state. In addition, Montana officials created a working group to share information across state water and wastewater infrastructure programs and coordinate funding cycles. State and local officials in Montana said that regular coordination between federal and state officials on individual projects helped manage programmatic differences, such as differing funding cycles, to avoid lengthy delays in funding projects. Officials and engineers in both states said that the benefits of these joint efforts included reductions in community costs and administrative burdens for submitting applications and related documents, as well as reductions in the federal and state agencies’ time in reviewing the documents. Other states have not worked to remove policy and regulatory barriers to coordination. For example, state and local officials in North Carolina told us that differences in application processes and funding cycles for the federal and state programs, including state SRF programs and the RUS program, increased the complexity and cost of applying for funding. Multiple agencies in the state that fund drinking water and wastewater infrastructure projects, including the SRF programs, have different funding cycles, so that communities have to apply separately to each program and at different times to make the project affordable. State and local officials in Colorado told us that they faced similar barriers.\nCooperate on project funding. Officials in all the states we visited meet at various times during the year, although some meet more frequently and discuss project funding in greater detail. Officials in Montana and South Dakota told us that they meet regularly to discuss upcoming projects, project applications, and coordination of funding, when possible. For example, officials from federal and state drinking water and wastewater funding programs in the Montana working group share information and discuss current projects and communities applying for funding. Community representatives said that state SRF program officials hold monthly meetings between the applicant and other state and federal funders to ensure that adequate funding is available to keep the project moving forward and to resolve any differences between the community and the federal and state programs providing funding. Similarly, in South Dakota, officials for the state SRF and RUS programs told us that they discuss project applications routinely and work closely with officials from local planning districts who, in turn, use their expertise working with federal and state programs to help communities apply for funding. In Pennsylvania, the state SRF and state-level RUS programs coordinate early in the application process by (1) conducting joint outreach sessions with communities interested in applying for drinking water and wastewater project funding and (2) directing communities to the program that better fits their needs, according to state officials we spoke with. State-level officials and engineers we spoke with identified improvements in the efficiency and effectiveness of the programs because the officials direct communities to the program that best fits their needs or provides the best opportunity for a successful application.\nOfficials in Colorado and North Carolina also meet but do not regularly discuss project funding or the communities that have applied for funding, and said that they have experienced lapses in program efficiency and effectiveness, such as loss of federal funding for the state. Officials in both states told us coordination is complicated by communities not disclosing that they have applied to other state or federal programs for funding. Specifically, according to federal and state officials, in some cases, communities and the consulting engineers representing them will sign a funding agreement with either the state SRF or state-level RUS program but continue to seek additional grant or subsidized loan funding from other state and federal programs to get additional grant funding or better loan terms. State SRF and state-level RUS program officials in North Carolina and Colorado told us that not disclosing multiple funding sources can lead to inefficiencies when state SRF program officials and state-level RUS officials are unaware that a community has applied to both programs. Specifically, state-level officials who administer the RUS program in North Carolina and Colorado reported having to or expecting to deobligate a total of more than $20 million that they had committed to fully fund projects because they were unaware that the state SRF programs had committed to fully fund the same projects. The state-level RUS program in North Carolina expects to have to deobligate funding for three projects totaling about $4.9 million in loan and grant funding, and the RUS program in Colorado had to deobligate funding for seven projects totaling $15.6 million. The two RUS state offices could not meet internal agency deadlines to fully obligate their available funds and, as a result, had to return these funds to the RUS headquarters pool. State officials in North Carolina recently developed a uniform cover sheet for all state drinking water and wastewater funding program applications that asks communities to disclose other sources of funding. However, in our review of the uniform cover sheet, applicants are not asked to provide information on funding requested from RUS and other federal drinking water and wastewater funding programs.\nCooperate in preparing environmental analyses documents and other common federal requirements. In our visits to Montana and Pennsylvania, we learned that federal and state programs, including the state SRF and RUS programs, have coordinated to streamline the application process in their states. For example, in Montana, these programs coordinated to develop uniform application materials and preliminary engineering report requirements that are accepted by all federal and state water and wastewater infrastructure programs in the state. Similarly, in Pennsylvania, program officials agreed upon uniform environmental analyses that are accepted by all programs, which reduce the cost and time for completing applications. Other states we visited have not agreed on uniform application requirements. According to federal and state officials in Colorado, North Carolina, and South Dakota, the state SRF and RUS programs have not developed documents with common formats and requirements for drinking water and wastewater infrastructure projects because of difficulty in integrating multiple program requirements. Specifically, state and local officials said that much of the information required in the environmental analyses was the same, but that agencies could not agree on a standard format and level of detail. For example, state SRF and RUS program officials in Montana told us they had tried, but were unable, to develop a uniform format for the presentation of their environmental analyses even though they had done so for their preliminary engineering reports. Furthermore, officials in Colorado and North Carolina expressed concern that having uniform documents that incorporated both state SRF and RUS program requirements would slow the application processes for all three programs and make them more costly. Specifically, officials administering both of the state SRF programs were concerned that, by adopting a format compatible with RUS policies and procedures, they would make the state SRF application process more onerous.", "Rural communities rely on federal grants and loans to meet their water and wastewater infrastructure needs and to keep their drinking water and sewer user rates affordable. It is therefore important to make the most efficient use of limited federal funds to help as many communities as possible and to eliminate potential duplication of effort by communities when they apply for funds. EPA and USDA recognized in a 1997 memorandum that it is necessary to more effectively and efficiently coordinate the SRF and RUS programs at the state level through four major actions: in preparing planning documents, removing policy and regulatory barriers, meeting regularly to discuss project funding, and preparing common environmental analyses and other common federal requirements. In addition, EPA and USDA have taken actions to encourage states to improve coordination over the past 15 years. Specifically, recent actions by EPA and USDA, such as their efforts to inform state officials and communities about the programs and funding opportunities by participating in conferences and workshops, conducting Webinars, and sponsoring training, as well as creating a working group to examine the possibility of developing guidelines to assist states in developing uniform preliminary engineering reports to meet requirements for federal and state programs, are encouraging and will help communities. However, the guidelines have not yet been completed, and EPA and USDA have not initiated a similar effort to develop guidelines for uniform environmental analyses that can be used to meet federal and state requirements. Without uniform documents, rural communities face a continuing burden and additional costs when applying for federal funds to improve their water and wastewater infrastructure. The state-level programs in the five states we reviewed varied in the number and types of actions they had taken to coordinate across the four key areas in the 1997 memorandum. Some state-level programs have developed innovative ways to coordinate and remove barriers to coordination, but in other states, the programs have been less successful, warranting stronger federal attention. Moreover, the state-level programs did not take actions to cooperate in preparing planning documents in any of the states. Until the state-level programs are regularly coordinating across the four key areas in the 1997 memorandum, including when developing planning documents, they will continue to risk potential program inefficiencies. Additional delays in taking actions to help improve such coordination could prevent EPA and USDA from more effectively and efficiently providing limited resources to needy communities.", "To improve coordination and to reduce the potential for inefficiencies and duplication of effort, we recommend that the Secretary of Agriculture and the Administrator of EPA take the following three actions:  ensure the timely completion of the interagency effort to develop guidelines to assist states in developing their own uniform preliminary engineering reports to meet federal and state requirements;  work together and with state and community officials to develop guidelines to assist states in developing uniform environmental analyses that could be used, to the extent appropriate, to meet state and federal requirements for water and wastewater infrastructure projects; and  work together and with state and community officials through conferences and workshops, Webinars, and sponsored training to reemphasize the importance of coordinating in all four key areas in the 1997 memorandum.", "We provided EPA and USDA with a draft of this report for their review and comment, and both agencies provided written comments. EPA neither agreed nor disagreed with our first two recommendations but concurred with the third. USDA neither agreed nor disagreed with any of our recommendations. EPA’s comments are provided in appendix III and USDA’s comments are provided in appendix IV. Both agencies made technical comments that we incorporated as appropriate. In addition, we sent relevant portions of this report to state or federal officials responsible for administering the state SRF programs and state-level RUS programs for their review and technical comment.\nIn its comments on our first recommendation, that the agencies complete their efforts to develop uniform requirements for preliminary engineering reports, EPA stated that it supported the intent of the recommendation but noted it does not have the authority to require states to adopt a required format and that some states may not utilize it. EPA recommended that we replace the word “requirements” with the word “format.” USDA also indicated that EPA and HUD have no authority to require state governments to use a particular preliminary engineering report outline and requested that we therefore change the word “requirements” to the word “guidelines.” We recognize and agree that states have discretion to develop their own requirements for their SRF programs. In making our recommendations, we did not intend to limit states’ discretion in adopting their own preliminary engineering report requirements. However, we continue to believe that the federal agencies could do more to help states identify common requirements for their own uniform preliminary engineering report documents. We changed our recommendation to reflect that the states do have discretion and that the federal agencies should develop guidelines to help the states develop uniform preliminary engineering report requirements.\nIn its comments on our second recommendation, to develop uniform requirements for environmental analysis documents, EPA stated that in principle it agreed with our recommendation but said it is not realistic to develop a one-size-fits-all approach. EPA said that developing the “essential elements” for environmental analyses should achieve the same outcome and requested that we change the word “requirements” to “essential elements.” USDA stated that it did not necessarily disagree with the intent of the recommendation but noted that EPA has limited authority to dictate specific requirements to states implementing the SRF program. It also identified several procedural and policy hurdles including the fact that USDA’s NEPA requirements are typically more stringent than the reviews under the SRF programs. USDA stated that it would work with EPA to discuss the concept of unified reviews and identify what would be required to achieve such reviews. USDA suggested that the Council on Environmental Quality could be called on to facilitate a working group between federal water and wastewater infrastructure funding programs on NEPA implementation. In making our recommendation, we did not intend to limit states’ discretion in adopting their own requirements for environmental analyses. We changed the wording of our recommendation to clarify that the agencies would develop guidelines to assist states in developing common requirements for environmental analyses. We also note that USDA’s suggestion for the Council on Environmental Quality to facilitate a working group seems reasonable but did not make this part of our recommendations because we did not review the Council on Environmental Quality as part of our work.\nEPA concurred with our third recommendation, that the agencies work together and with state and community officials in all four key areas of the 1997 memorandum, while USDA neither agreed nor disagreed with the recommendation. EPA said that our report showed that little overlap existed between the programs but that state-level coordination should be encouraged more broadly. USDA said that it had no control over communities that choose to change funding sources to a state SRF program after accepting funding from the state-level RUS programs. We understand that communities have the discretion to change funding sources if better loan and grant terms are available, but strong coordination can help the agencies know when communities are applying to other programs and what other communities might need funding. Such coordination, envisioned in the 1997 memorandum, can avoid the loss of funds from states with high needs and other inefficiencies identified in this report. Furthermore, as EPA confirmed in its comments, state-level coordination can be encouraged more broadly to help other state and federal water and wastewater infrastructure funding programs better leverage limited state and federal funds.\nFinally, in its general comments on the draft report, USDA commented on GAO’s use of a relatively small sample of states for this review and that the RUS programs in those states were experiencing a transition in leadership and had not had time to develop relationships and learn other agencies’ programs. We selected states that had high rural water and wastewater infrastructure needs and a range of experience coordinating their water and wastewater infrastructure funding programs. We clearly state in the report that the sample is small and that our results cannot be generalized to all states. We recognize that the experience and trust established through long-term relationships is critical to the establishment of good coordination between federal and state programs. However, given the amount of time the memorandum has been in place, we believe that if good coordination between state SRF and state-level RUS programs had been established prior to the transition in state-level RUS leadership, it would have facilitated a smoother transition, and many of the challenges identified in our report may have been avoided.\nWe will send copies of this report to the Administrator of EPA, the Secretary of Agriculture, the appropriate congressional committees, and other interested parties. In addition, the report will be available at no charge on the GAO Web site at http://www.gao.gov. If you or your staff members have any questions about this report, please contact me at (202) 512-3841 or [email protected]. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made major contributions to this report are listed in appendix V.", "The objectives of this report examine (1) the potential for fragmentation, overlap, and duplication between the Environmental Protection Agency’s (EPA) Drinking Water and Clean Water State Revolving Fund (SRF) programs and the U.S. Department of Agriculture’s (USDA) Rural Utilities Service (RUS) Water and Wastewater Disposal program, both of which address water and wastewater infrastructure needs in rural communities, and (2) the extent to which these programs coordinate with each other at the federal and state level to help meet the water infrastructure needs of rural communities. We selected these programs for this review because they provided the highest amount of federal funds to water and wastewater infrastructure projects, which include projects in rural communities—defined for this report as communities with populations of 10,000 or less—in fiscal year 2011. The federal government has not established a formal or consistent definition of what constitutes a rural community; however, RUS defines a rural community as having a population of 10,000 or less. EPA, although it does not define communities as rural, gathers data on funding to communities of various sizes, including communities with populations of 10,000 or less. For both agencies, communities can include entities such as towns, cities, or counties, which make the decision whether to apply for funding from the programs. In some cases, regional water utilities or other utility associations can apply on behalf of a community or a group of communities. Using this definition allowed us to obtain and analyze similar data from both agencies.\nTo address both objectives, we reviewed government reports, statutes, regulations, guidance, budgets, and other relevant documents to identify federal support for rural water infrastructure programs and specifically the support provided by the Clean Water SRF, Drinking Water SRF, and RUS programs. In addition, we interviewed officials from EPA and USDA and from relevant nonprofit organizations, including the environmental finance center at Boise State University and the Council of Infrastructure Financing Authorities to collect financial and other information on the extent of fragmentation, overlap, duplication, and coordination among these rural water funding programs, as well as the current challenges facing rural communities. We then selected a nongeneralizable sample of five states to visit—Colorado, Montana, North Carolina, Pennsylvania, and South Dakota—to review the extent of fragmentation, overlap, and duplication among the EPA and USDA programs and the extent of coordination among the programs at the state level. The information from this sample cannot be generalized to all states but provides illustrative examples of their experiences in applying for funding from the EPA and USDA programs. We conducted site visits to these states to observe federally funded projects, discuss the funding process, and discuss community experiences applying for funding from the EPA and USDA programs. In each state, we judgmentally selected a nongeneralizable sample of communities to visit and projects to observe by analyzing lists of water and wastewater infrastructure projects we obtained from state SRF and state-level RUS program officials, and obtaining recommendations from officials we interviewed. We used the lists of projects to identify communities and projects that had applied for or received funding from the state SRF and RUS programs, or both. We reviewed a total of 54 projects in a total of 31 communities across five states, all of which had experience in applying for funds for a drinking water or wastewater project, or both, from the SRF or RUS programs. As with the state sample, the information from the communities and projects we selected cannot be generalized to other communities and projects but provide illustrative examples.\nTo address the first objective, we assessed fragmentation between the Clean Water SRF, Drinking Water SRF, and RUS programs by examining statutes, regulations, and guidance relevant to the programs. To determine overlap between the programs, we calculated the proportion of SRF funding that was allocated to communities with populations of 10,000 or less for state fiscal years 2007 through 2011 (state fiscal years generally start in July and end in June). We used data from EPA’s National Information Management System (NIMS), which collects and summarizes data on Clean Water and Drinking Water SRF program funding directed to communities of populations of all sizes, including communities with populations of 10,000 or less by states—the same size of communities toward which RUS directs its funding. We conducted interviews with EPA officials to assess the reliability of the NIMS data and found it reliable for our purposes of identifying state SRF funding for communities with populations of 10,000 or less. We compared this proportion of SRF funding with total RUS funding provided from USDA’s accounting system. We interviewed RUS officials about how these funding data are maintained and determined that it was reliable for our purposes of identifying USDA funding for communities with populations of 10,000 or less.\nTo determine the potential for duplication at the project and activity level, we collected funding data for projects that had been funded by the state SRF programs, the state-level RUS programs, or both, as well as funding data from the communities we visited or whose officials we spoke with. In addition, we spoke with state SRF, state-level RUS, and community officials and consulting engineers to assess the extent to which projects were funded separately by state SRF or state-level RUS programs, or were jointly funded by these programs, and what activities were conducted. Duplication occurs when two or more agencies or programs are engaged in the same activities or provide the same services to the same recipients; however, in some instances, duplication may be warranted because of the magnitude or nature of the federal effort. Further, we collected and analyzed application materials—preliminary engineering reports and environmental analyses—from communities if the community had a project that was jointly funded by both the SRF and RUS programs or had applied to both programs for the same project. On the basis of this criterion, we obtained preliminary engineering reports for four projects in four states and environmental analyses for four projects in the same four states. To analyze the documents, we identified the components of each document and compared them with the others to determine those that were similar and different. We spoke with consulting engineers in those communities to determine whether the communities were required to submit separate documents with similar information to both programs. Because of the limited size of each sample, the results of our analysis are not generalizeable to all such documents.\nTo address the second objective, we reviewed documents and initiatives, including a 1997 joint memorandum signed by EPA and USDA promoting better coordination between the state SRF and state-level RUS programs and interviewed headquarters officials at EPA and USDA to identify national efforts to encourage better coordination at the state level. To analyze whether EPA and USDA efforts and initiatives incorporated leading practices for interagency collaboration, we compared guidance in the 1997 memorandum with our prior work on practices that can help federal agencies enhance and sustain collaboration. In the states we visited, to determine how closely the state SRF and state-level RUS programs coordinate and whether their efforts to coordinate are consistent with the 1997 memorandum, we reviewed state-level guidance and documentation from state coordinating bodies and interviewed state- level SRF and RUS program officials, community officials, consulting engineers, and technical assistance providers. We identified actions taken by states that were consistent with actions identified in the 1997 memorandum and assessed whether these fulfilled the actions identified in the memorandum using “yes” to indicate the action was fully taken, “no” to indicate that it was not taken at all, and “partial” to indicate the action had not been fully taken.\nWe selected the five states we visited using a multistep process and several sources of information: funding needs for rural areas; geographic location; and level of coordination between state and community partners. We first narrowed the number of states we could visit to 15 states by analyzing EPA and USDA data on funding needs. To do so, we determined the relative level of funding needed in each state using the following data, by state, for communities with populations of 10,000 or less: (1) per capita needs for drinking water infrastructure, (2) per capita needs for clean water infrastructure, (3) drinking water infrastructure needs as a percentage of total state drinking water needs, (4) clean water infrastructure needs as a percentage of total state clean water needs, (5) the number of backlogged RUS water and wastewater infrastructure project requests, and (6) the total amount of RUS loan and grant funding requested for the backlogged projects. We obtained and analyzed these six categories of data from EPA’s Drinking Water and Clean Water Needs Assessment reports, and USDA’s data on backlog of funding applications. To assess the reliability of EPA’s data, we reviewed the agency’s quality control efforts over the data. To assess the reliability of the USDA data, we interviewed RUS officials on how they obtained and verified the data. We determined that both sets of data were sufficiently reliable for our purposes of selecting a sample of states to visit. Because not all states had complete data, we created three groups of states for analysis: 35 states had full data, or data for all 6 categories; 11 states had partial data, or data for 4 of the 6 categories; and 4 states had mixed data that we determined was not sufficient to analyze. Because the amount of data varied for each group, we determined that we would sample from each group separately.\nNext, for the 35 states that provided complete data, we ranked the states from highest to lowest (numbering the highest 1 and so on) within each of the six categories, basing the ranking on either percentage or dollars, depending on the category. We then identified the top 10 states in each category, selected the 10 states that appeared in three or more of the six categories and added the scores across the six categories for each state.\nWe then conducted a very similar process for the 11 states that had partial data, except that we identified the states with the top five highest values in each of the four categories of data and then selected the three states that appeared in at least three of the four categories. This parallel analysis gave us 10 states from the full data group and 3 states from the partial data group. We then selected 2 states from the third group of states, which had mixed data available, on the basis of their physical size and the fact that they had the most data available in the group.\nWe further narrowed down the number of states we could visit using geographic dispersion as a criterion. We located the 15 states selected through our analysis of funding data in six Department of Census divisions and selected five that were ranked first according to the six categories. We also selected 2 states from the partial-data group and one state from the mixed-data group, for a total of 8 states.\nFrom the eight remaining states, we selected Colorado, Montana, North Carolina, Pennsylvania, and South Dakota to visit based on the extent of coordination among the state SRF and RUS programs and the communities they served. We called the state SRF and RUS state-level officials to discuss whether the programs met and how frequently they jointly funded projects. We considered the range of coordination in each of the eight states to judgmentally select the five states we visited.\nWe conducted this performance audit from September 2011 to September 2012 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 that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives.", "Table 6 provides information on the percentages and amounts of funding provided, by state, through EPA’s Drinking Water and Clean Water SRF programs to communities with populations of 10,000 or less.", "", "", "", "", "In addition to the individual above, Susan Iott, Assistant Director; John Barrett; Elizabeth Beardsley; Mark Braza; Elizabeth Curda; Richard Johnson; Micah McMillan; Sara Ann Moessbauer; Dan Royer; Tina Sherman; Carol Herrnstadt Shulman; and Kiki Theodoropoulos made key contributions to this report." ], "depth": [ 1, 2, 2, 2, 1, 2, 1, 2, 2, 1, 1, 1, 1, 1, 1, 1, 1, 2, 2 ], "alignment": [ "", "", "", "", "h0_full h2_full", "h0_full", "h1_full", "h1_full", "h1_full", "h1_full", "", "h2_full", "h0_full h2_full", "", "", "", "", "", "" ] }
{ "question": [ "How is rural water and wastewater funding administered?", "To what extent do these programs overlap?", "How widespread is this overlap?", "Nonetheless, how can the potential for overlap be reduced?", "How can reports be simplified to be used across all agencies?", "How have efforts to reduce overlap progressed?", "What areas are the agencies currently collaborating in?", "How have agencies taken action on a large scale?", "To what extent have agencies eliminated overlap on a state level?", "How is uneliminated overlap harmful to local communities?", "To what extent is overlap uniform across the US?", "Why is it important to quickly resolve overlap issues?", "What are challenges rural communities face with water?", "How does the federal government oversee water programs?", "What does this report assess with regards to federal water funding programs?", "How did GAO source their data?", "How did GAO recommend resolving the overlap issue?", "How did the agencies respond to GAO's recommendations?" ], "summary": [ "Funding for rural water and wastewater infrastructure is fragmented across the three federal programs GAO reviewed, leading to program overlap and possible duplication of effort when communities apply for funding from these programs.", "The three federal water and wastewater infrastructure programs--the Environmental Protection Agency's (EPA) Drinking Water and Clean Water State Revolving Fund (SRF) programs and the U.S. Department of Agriculture's (USDA) Rural Utilities Service (RUS) Water and Waste Disposal program--have, in part, an overlapping purpose to fund projects in rural communities with populations of 10,000 or less.", "For the 54 projects GAO reviewed in the five states it visited, this overlap did not result in duplicate funding, that is funding for the same activities on the same projects.", "However, GAO identified the potential for communities to complete duplicate funding applications and related documents when applying for funding from both agencies.", "In particular, some communities have to prepare preliminary engineering reports and environmental analyses for each program. GAO's analysis showed--and community officials and their consulting engineers confirmed--that these reports usually contain similar information but have different formats and levels of detail. Completing separate engineering reports and environmental analyses is duplicative and can result in delays and increased costs to communities applying to both programs.", "EPA and USDA have taken some actions to coordinate their programs and funding at the federal and state levels to help meet the water infrastructure needs of rural communities, but GAO's review in five states showed that their efforts have not facilitated better coordination at the state level in more specific ways.", "EPA and USDA signed a joint memorandum in 1997 encouraging state-level programs and communities to coordinate in four key areas: program planning; policy and regulatory barriers; project funding; and environmental analyses and other common federal requirements.", "As of July 2012, EPA and USDA had taken action at the federal level to help the states coordinate better and make programs more efficient for communities applying for funding. For example, EPA and USDA had formed a working group to draft uniform guidelines for preliminary engineering report requirements, but this effort is not yet complete.", "However, the agencies have not taken action to help states develop uniform environmental analysis requirements, as called for in the 1997 memorandum.", "Without uniform requirements, communities face a continuing burden and cost of applying for federal and state funds to improve rural water and wastewater infrastructure.", "Coordination in the four key areas varied across the five states GAO visited. For example, state and federal officials in Montana created a drinking water and wastewater working group to coordinate project funding and to resolve regulatory barriers such as different funding cycles between the programs. In addition, state and federal officials in Pennsylvania coordinated to develop uniform environmental analysis requirements. However, in North Carolina and Colorado, state-level programs did not coordinate well initially about project funding, which resulted in the state-level programs planning to pay for the same projects. The programs were able to avoid paying for the same projects, but state-level RUS programs have or expect to deobligate almost $20 million committed to these projects and return the funding to USDA.", "Further delays in coordinating programs could prevent funds from reaching needy communities.", "Many rural communities with populations of 10,000 or less face challenges in financing the costs of replacing or upgrading aging and obsolete drinking water and wastewater infrastructure.", "EPA and USDA oversee the three largest federally funded drinking water and wastewater funding programs for these communities.", "In response to Pub. L. No. 111-139, which directs GAO to identify and report on duplicative goals or activities in the federal government, this report examines the (1) potential for fragmentation, overlap, and duplication between EPA and USDA drinking water and wastewater infrastructure programs and (2) extent to which these agencies coordinate at the federal and state level to fund community water infrastructure projects.", "GAO analyzed relevant laws and regulations and program data and documents. GAO also visited five states based on high rural funding needs and geographic location (Colorado, Montana, North Carolina, Pennsylvania, and South Dakota) to meet with federal, state, and community officials and visit projects.", "GAO recommends that EPA and USDA complete guidelines to help states develop uniform preliminary engineering reports, develop guidelines to help states develop uniform environmental analyses, and reemphasize the importance of statelevel coordination.", "EPA neither agreed nor disagreed with GAO's first two recommendations and concurred with the third. USDA neither agreed nor disagreed with the recommendations." ], "parent_pair_index": [ -1, -1, 1, 1, 3, -1, 0, -1, -1, -1, -1, -1, -1, -1, -1, 2, -1, 4 ], "summary_paragraph_index": [ 1, 1, 1, 1, 1, 2, 2, 2, 2, 2, 2, 2, 0, 0, 0, 0, 0, 0 ] }
CRS_R44454
{ "title": [ "", "Introduction", "Evolution of the FY2017 Defense Budget Request", "November 2016—Overseas Contingency Operations Budget Amendment", "March 2017- Request for Additional Appropriations", "The Strategic Context", "The Budgetary Context", "The FY2017 Caps on Defense Spending", "Budget Request in a Historical Context", "FY2017 National Defense Authorization Act (H.R. 4909 and S. 2943)", "The Defense Appropriations Act, 2017 (H.R. 5293, S. 3000, H.R. 1301, and H.R. 244)", "Selected FY2017 Defense Funding and Policy Issues", "DOD Organization", "Acquisition Reform", "DOD Contracting Procedures", "Security Cooperation Management", "Military Personnel Matters", "Active Duty and Reserve Component End Strength", "Basic Pay", "Ground Vehicle Programs", "See the summary of congressional action authorizing funding for selected ground vehicle programs in Table A-1. Table B-1 provides a summary of appropriations actions related to such programs. Following are selected highlights:", "M-1 Abrams Tank Improvements34", "Paladin Self-propelled Artillery", "Stryker Combat Vehicle", "Armored Multi-Purpose Vehicle (AMPV)35", "Shipbuilding Programs", "Virginia Class Attack Submarine Program37", "CVN-78 Class Aircraft Carrier Program38", "Cruiser Modernization40", "DDG-51 Destroyer Program41", "Littoral Combat Ship (LCS) Program42", "LHA-8 Amphibious Assault Ship", "Selected Aviation Programs", "Air Force Aviation Programs44", "F-35A Joint Strike Fighter", "KC-46A Pegasus Tanker", "Army Aviation Programs", "Navy and Marine Corps Aviation Programs", "Strategic Nuclear Forces", "Ohio Replacement Ballistic Missile Submarine Program49", "B-21 Long-Range Strike Bomber", "Nuclear-capable Missiles", "Ballistic Missile Defense Programs", "U.S. Homeland Missile Defense", "Missile Defense of Europe", "Israeli Missile Defenses", "Space and Space-based Systems", "Evolved Expendable Launch Vehicle (EELV) Satellite Launcher", "DOD Overseas Contingency Operations Funding", "OCO Funding in the FY2017 NDAA", "FY2017 Defense Appropriations OCO Funding", "FY2017 \"Additional Appropriations\"" ], "paragraphs": [ "", "This report discusses the fiscal year (FY) 2017 defense budget request and provides a summary of congressional action on the National Defense Authorization Act (NDAA) for FY2017 ( H.R. 2943 / P.L. 114-328 ), and the Defense Appropriations Act, FY2017 (Division C of H.R. 244 / P.L. 115-31 ).\nThe FY2017 process reflected a running debate about the size of the defense budget given the strategic environment and budgetary issues facing the United States. The debate spanned the end of the Obama Administration and the start of the Trump Administration and concluded about two-thirds of the way through the fiscal year.\nThe Obama Administration's FY2017 budget request for national defense-related activities, and the initial versions of the FY2017 defense authorization and appropriations bills taken up in the House and Senate appear to be similar to one another and consistent with provisions of the Bipartisan Budget Act of 2015 (BBA/ P.L. 114-74 ). However, a closer look reveals a relatively substantial disagreement between the Obama Administration and the Senate, on the one hand, and the House, on the other hand. The disagreement centered on the intended purpose of as much as $18 billion within that total.\nOn its face, the issue was the allocation of Department of Defense (DOD) funds designated for Overseas Contingency Operations (OCO). Previously labeled \"Global War on Terror\" funding, the OCO category was adopted by the Obama Administration in 2009 to designate the budget for activities related to operations in Afghanistan and Iraq. The remainder of DOD funding—that is, the budget for all activities not designated as OCO—is referred to as the base budget .\nIn the Obama Administration's February 2016 budget request for FY2017, $5.1 billion of the $58.8 billion in OCO-designated funds were intended to be used for base budget purposes. The Senate-passed version of the NDAA ( S. 2943 ) and the Senate committee-reported version of the defense appropriations bill ( S. 3000 ) followed suit.\nOn the other hand, the House-passed version of the NDAA ( H.R. 4909 ) would have increased the amount of OCO-designated funding for base budget purposes to $23 billion—$18 billion more than the Obama Administration proposed—leaving approximately $36 billion in OCO-designated funding for actual OCO operations through the end of April 2017. The House position was that a newly inaugurated president could then request a supplemental appropriation to carry OCO activities through the remaining five months of FY2017.\nHouse and Senate negotiations leading to the final NDAA resulted in an authorization of $8.3 billion in OCO-designated funds to be used for base budget purposes—$3.2 billion more than the Administration proposed. President Obama signed the FY2017 NDAA conference agreement on December 23, 2016, enacting P.L. 114-328 .\nThe enacted FY2017 defense appropriations bill—Division C of H.R. 244 —provided $586.2 billion in funding for the Department of Defense. CRS estimates the amount appropriated include a total of $19.9 billion in funding for base budget purposes that is designated as Overseas Contingency Operations funding. That bill was the outcome of a sequence of House and Senate actions on the FY2017 defense appropriations bills that paralleled the respective chambers' actions on the NDAA.\nIn H.R. 5293 —the version of the FY2017 defense appropriations bill passed by the House on June 16, 2016—the total amounts designated as base budget and as OCO conformed with the amounts specified by the BBA. However, the House bill would have increased the amount of OCO-designated funding to be used for base budget purposes, adding $15.1 billion to the $5.1 billion so-designated in the Obama Administration's request. On the other hand, the version of the defense appropriations bill reported by the Senate Appropriations Committee ( S. 3000 ) would not have increased (above the Obama Administration's request) the amount of OCO-designated funding to be used for base budget purposes.\nThe Senate did not act on S. 3000 before October 1, 2016, the start of FY2017. By that date, DOD's FY2017 military construction budget had been funded in the annual appropriations bill that also funded the Department of Veterans Affairs and certain other agencies ( H.R. 5325 / P.L. 114-223 ). P.L. 114-223 also included a continuing resolution (CR) to provide temporary funding for federal agencies for which no FY2017 funds had been appropriated by the start of the fiscal year. This first CR ( H.R. 5323 / P.L. 114-223 ) provided continuing budget authority for FY2017 effective October 1, 2016, through December 9, 2016. For more information see CRS Report R44636, FY2017 Defense Spending Under an Interim Continuing Resolution (CR): In Brief , by [author name scrubbed] and [author name scrubbed].\nOn November 10, 2016, the Obama Administration submitted an amendment to the OCO budget request, seeking an additional $5.8 billion to maintain approximately 8,400 troops in Afghanistan, to provide additional aviation assets for the Afghan Air Force, to support additional requirements in Iraq/Syria, and to address emerging force protection issues. This brought the FY2017 OCO budget request to $64.6 billion.\nOn December 10, 2016, the initial FY2017 continuing resolution ( H.R. 5323 / P.L. 114-223 ) was succeeded by a second continuing resolution ( H.R. 2028 / P.L. 114-254 ). This second CR provided funding through April 28, 2017. Division B of this second FY2017 CR ( P.L. 114-254 ) also appropriated a total of $5.8 billion for OCO-designated DOD funds for FY2017—including $1.5 billion in additional funding requested by the Obama Administration's November 2016 budget amendment.\nAfter the 115th Congress convened in January 2017, negotiators for the House and Senate Appropriations Committees drafted a new FY2017 defense appropriations bill— H.R. 1301 . It was based on the original February 2016 budget request for FY2017, with a deduction of $1.5 billion for OCO activities that had been funded by Division B the second FY2017 continuing resolution ( H.R. 2028 / P.L. 114-254 ). The House passed H.R. 1301 on March 8, 2017, by a vote of 371-48. However, no action followed in the Senate and a third continuing resolution ( H.J.Res. 99 / P.L. 115-30 ) was enacted April 28, 2017, to extend the provisions of the second continuing resolution ( P.L. 114-254 ) through May 5, 2017.\nOn March 16, 2017, the Trump Administration submitted a request for \"Additional Appropriations\" for FY2017. The request totaled $30 billion—$24.7 billion for the DOD base budget and $5.1 billion for OCO. The Obama Administration's base budget request was at the $551 billion BCA limit on defense discretionary budget authority. However, the Trump request included a proposal to increase by $25 billion the FY2017 cap on defense spending.\nOn May 3, 2017, a third version of the FY2017 defense appropriations bill passed the House as Division C of H.R. 244 , the Consolidated Appropriations Act, 2017. Division C generally aligned with H.R. 1301 but included a new title (Title X) which provided $14.8 billion in \"Additional Appropriations\" for DOD, all of which were designated as funding for Overseas Contingency Operations. H.R. 244 became P.L. 115-31 on May 5, 2017.", "The Obama Administration submitted its original FY2017 defense budget request to Congress in February of 2016. The request totaled $551.1 billion in \"base budget\" discretionary appropriations for the National Defense function of the federal budget (designated function 050). While approximately 96% of this total was funding for the Department of Defense (DOD), it also included funding for defense-related activities of the Department of Energy, the Federal Bureau of Investigation, and other agencies. In addition, the Administration requested $58.8 billion in discretionary funding for OCO (see Table 1 ).\nThe FY2017 defense budget request went through two modifications after its initial presentation—an amendment by the Obama Administration in November 2016 to increase amounts for OCO by $5.8 billion and a request for additional appropriations by the Trump Administration in March 2017 for an additional $30.0 billion in funding ($24.9 billion for base and $5.1 billion for OCO). These modifications brought the total amount (mandatory and discretionary) requested for national defense (050) in FY2017 to $655.2 billion ($585.5 base and $69.7 in OCO). See Table 2 .", "On November 10, 2016, the Obama Administration submitted an amendment to the FY2017 defense budget seeking an additional $5.8 billion in OCO-designated funds, bringing the total OCO request to $64.6 billion. More than half the additional funds ($3.4 billion) would support operations related to Afghanistan, including funds to slow the withdrawal of U.S. troops and to expand the Afghan Air Force. The balance of the additional request would support additional requirements in the campaign against the Islamic State. See Table 3 for more detail on the request.", "On March 16, 2017, the Trump Administration requested an additional $24.9 billion for DOD base budget activities and an additional $5.1 billion in OCO funding in FY2017. By this date, the FY2017 NDAA had been enacted, the original FY2017 defense appropriations bill ( H.R. 5293 / S. 3000 ) had not been enacted by the end of the 114 th Congress, and a new FY2017 appropriations bill, drafted by negotiators from the House and Senate Appropriations Committees ( H.R. 1301 ), had passed the House.\nAccording to DOD, the requested $24.9 billion in base budget authority was intended to compensate for:\ninsufficient funding for near-term and mid-term combat readiness-related expenses such as equipment maintenance, munitions stocks, and intelligence operations; and unanticipated expenses resulting from enactment of the FY2017 NDAA ( P.L. 114-328 ) such as a higher than budgeted 2017 military pay raise (2.1% vs. 1.6%).\nThe increase included $13.5 billion—that is, 54%— for procurement including nearly $2.7 billion for missiles and other munitions. For Operation and Maintenance (O&M) accounts, the proposed increase would amount to $7.2 billion (see Table 3 ).", "The Obama Administration presented its FY2017 defense budget request in the context of an increasingly complex and unpredictable international security environment. Some of the unforeseen events that have challenged U.S. security interests since 2014 include\nthe continued rise of the Islamic State; Russian-backed proxy warfare in Ukraine; North Korean provocation and recent missile test launches; Chinese \"island building\" in the South China Sea; a series of terrorist attacks in Western Europe (Paris, Nice, Brussels, Berlin, Manchester); the Syrian refugee crisis; and the Ebola outbreak in 2014.\nIn their essentials, none of these challenges is \"new\" in its own right. What makes them uniquely problematic, perhaps even \"unprecedented,\" is the speed with which each of them has developed, the scale of their impact on U.S. interests and those of our allies, and the fact that many of these challenges have occurred—and have demanded responses—nearly simultaneously. The 2015 National Military Strategy (NMS) organized the key security challenges confronting the United States into two primary categories: revisionist states intent on disrupting the international order, such as Russia, Iran, and China, and violent extremist organizations, such as al Qaeda and the Islamic State. This NMS is the first official statement of strategy in more than two decades to assert that there is a \"low but growing\" possibility that the United States may find itself in a conflict with another major power.\nIn developing the FY2017 budget to deal with the challenges to U.S. security interests, DOD said it focused on the following priorities:\nbeing able to deter the most technologically advanced potential adversaries with conventional weapons, without assuming that U.S. forces would match the size of enemy forces; increasing the combat effectiveness of U.S. forces by modernizing their equipment and changing their organization rather than by enlarging their numbers; and emphasizing innovation.\nSome observers have called for DOD to be more flexible and agile in order to meet a variety of expected and unexpected threats. One of DOD's more high-profile initiatives, called the \"Third Offset,\" is an effort to develop and use advanced technologies to mitigate adversaries' numerical and technological advantages. Under this rubric, according to DOD, priority is being given to technologies relevant to guided munitions, undersea warfare, cyber and electronic warfare, and human-machine teaming, as well as wargaming and the development of new battlefield operating concepts.\nShortly after taking office, President Trump directed the Secretary of Defense to conduct a \"30-day Readiness Review\" which included an assessment of \"military training, equipment maintenance, munitions, modernization and infrastructure.\" This readiness review, in part, led to the Trump Administration's March 2017 request for additional appropriations for DOD. In a letter to House Speaker Paul Ryan on March 16, 2017, President Trump said the $30 billion request for additional funds in FY2017 would address \"critical budget shortfalls in personnel, training, equipment, munitions, modernization and infrastructure investment. It represents a critical first step in investing in a larger, more ready, and more capable military force.\"", "Congressional deliberations on the FY2017 defense budget have been one facet of a broader budget discussion regarding the annual limits on discretionary appropriations (through FY2021) as established by the Budget Control Act of 2011(BCA/ P.L. 112-25 ).\nThe BCA spending limits – one on defense spending (budget function 050), and one on nondefense spending (defined as all other federal programs) – apply to discretionary appropriations for the base budget and are enforced by a budgetary mechanism referred to as sequestration .\nTable 4 shows the statutory changes made to the national defense (function 050) discretionary limits since enactment of the BCA. Although the BCA does not establish limits on the subfunctions (051, 053 and 054), the BCA limits on function 050 have been applied proportionally to the subfunctions in practice.\nThe BCA spending limits do not apply to funds designated for OCO and the law does not define or otherwise limit the term \"Overseas Contingency Operations.\" Therefore, the OCO designation can be applied to any appropriation which the President and Congress agree to so-designate. That fact undergirds two questions that dominated debate over the allocation of OCO-designated funds in the FY2017 defense budget:\nHow much in excess of the defense spending cap would be provided for DOD base budget purposes by designating such funds as OCO funds (to avoid triggering sequestration); and Would both the defense and nondefense categories of spending be allowed to exceed their respective spending caps (using OCO-designated funds) by roughly equal amounts?\nSince 2009, the OCO designation has been applied to a widening range of activities, including those associated with operations against the Islamic State and activities intended to reassure U.S. allies in Europe confronted by Russian assertiveness.\nIn the Obama Administration's February 2016 budget request for FY2017, $5.1 billion of the $58.8 billion in OCO-designated funds were intended to be used for base budget purposes. The Trump Administration's request for additional appropriations distinguished between the $24.9 billion for the base budget and the $5.1 billion for OCO. It also proposed reducing non-defense spending by $18.0 billion to offset the proposed base budget defense increase and for increasing the cap on defense spending by $25 billion.", "The Bipartisan Budget Act of 2015 (BBA/ P.L. 114-74 ) raised the Budget Control Act limits for FY2017 by $30 billion—increasing both defense and nondefense parts of the FY2017 budget by $15 billion. In addition, the BBA identified a nonbinding target of $58.8 billion for OCO funding for DOD in FY2017. Similarly, the BBA set a $14.9 billion target for (nondefense) international affairs OCO funding.\nHouse Armed Services Committee Chairman Mac Thornberry is one of many congressional defense committee members who maintained that the negotiations from which the BBA emerged contemplated a higher FY2017 National Defense base budget. In a February 5, 2016 letter to House Budget Committee Chairman Tom Price, Thornberry contended that the appropriate benchmark for the FY2017 National Defense base budget was \"approximately $574 billion,\"– the amount incorporated into the House-passed version of the FY2016 congressional budget resolution ( H.Con.Res. 27 ) based on the Administration's February 2015 projection for FY2017.\nInstead of matching its original projection, however, the Obama Administration's FY2017 base budget request for national defense matched the BBA's $551.1 billion cap and the $58.8 billion OCO level. Of the OCO request, approximately $5 billion was identified for base budget activities. Thus, the Administration's budget request would provide a total of $556.1 billion for FY2017 base budget defense operations—$18 billion less than the previously projected request. Chairman Thornberry argued the Obama Administration had erred in treating the BBA's nonbinding OCO level as \"a ceiling, not a floor\" and failed to sufficiently resource the needs of the Department.\nTo bring FY2017 base defense funding up to $574 billion—$23 billion higher than that BBA defense cap—without triggering sequestration, Thornberry called for authorizing $23 billion of OCO-designated funding for base budget purposes (about $18 billion more than the Administration's OCO for base budget request). Keeping with the $58.8 billion OCO target set by BBA, Thornberry proposed that the resulting shortfall in funding for actual OCO requirements could be made up for by a supplemental appropriations request submitted early in 2017 by the newly installed Administration.\nH.Con.Res. 125 , the FY2017 House Budget Resolution reported by the Budget Committee on March 23, 2016, mirrored Chairman Thornberry's proposal to allow $574 billion for national defense base budget purposes. Of that amount, $551 billion would be designated as base budget funding and the remaining $23 billion would be drawn from OCO-designated funding.\nThe committee-reported budget resolution also contained reconciliation instructions to 12 House committees, directing them to report legislation that would reduce the deficit over the period of FY2017 to FY2026. In addition to reconciliation instructions, the resolution included a policy statement declaring that the House would consider legislation, early in the second session of the 114th Congress, to achieve mandatory spending savings of not less than $30 billion over the period of FY2017 and FY2018 and $140 billion over FY2017-FY2026. Ultimately, the resolution was not passed by the House or Senate and, therefore, had no force.\nIt was in this environment that the House and Senate began legislative activity on the FY2017 NDAA and defense appropriations bill.", "The $523.9 billion requested by the Obama Administration for DOD's FY2017 base budget was approximately 0.4% higher than the corresponding FY2016 appropriation of $521.7 billion. The Trump Administration's March 2017 request for additional FY2017 appropriations brought the DOD military base budget request to $549.5 billion. Compared with the FY2016 appropriation of $522 billion, it would provide an increase of 5%.\nThese increases followed three consecutive years (FY2013-15) in which the DOD base budget hovered between $495.0 billion and $496.1 billion after having dropped in FY2013 by approximately $35 billion (without adjusting for inflation) from the FY2012 level. A 7% reduction in DOD's budget in FY2013 reflected the government-wide spending reduction program initiated by the 2011 BCA (see Figure 1 ).\nAdjusted for the cost of inflation, the Obama Administration's February 2016 budget request for FY2017 was approximately 9% higher than the average (mean) annual defense budget authority since the end of the Vietnam War (1975). In further comparison, the initially requested amount was about 14% lower than the enacted amount in FY1985, the peak year of defense spending during the Cold War. The base budget was 24% higher than the last defense budget enacted before the attacks of September 11, 2001. If the $58.8 billion initial OCO request is included, the total request was 38% more than the FY2000 enacted base budget (see Figure 2 ).\nAt the February 2016 requested level, the total FY2017 DOD budget (including OCO funds) would amount to approximately 3.1% of the Gross Domestic Product (see Figure 3 ).\nSpending on defense, as a percentage of total federal outlays by budget category, has declined from approximately 41.1% in 1965 to 14.3% in FY2017. Defense spending is projected to further decline to 11.6% of the budget by 2021, while mandatory spending and net interest is forecast to consume 65.1% of budgetary resources (see Figure 4 ).", "The debate about how much to spend on defense in FY2017 played out in Congress' deliberations on the NDAA.\nBoth the Obama Administration's original FY2017 defense budget request and H.R. 4909 as passed by the House aligned with the BCA defense cap for FY2017. Likewise, the total OCO amounts reflected the 2015 BBA agreement—the Administration request and the House-passed bill each designated $58.8 billion of the amount authorized for DOD as OCO funding.\nHowever, the House-passed bill would have allocated $23.1 billion of OCO-designated funding to DOD base budget purposes—$18.0 billion more than the Administration proposed. According to the House Armed Services Committee, the remaining OCO funds authorized by H.R. 4909 —amounting to $35.7 billion—would cover the cost of OCO through April 2017. By then, the committee said, the newly elected President could request a supplemental appropriation to cover OCO funding requirements through the remaining months of FY2017.\nThe Senate-passed NDAA also would have complied with the BCA caps and the 2015 BBA agreement on minimum funding for OCO by authorizing $523.9 billion for base budget activities and $58.8 billion for OCO. During floor debate on the bill, Senate Armed Services Committee Chairman John McCain proposed an amendment to S. 2943 t hat would have authorized an additional $17 billion designated as OCO funding to be used for base budget purposes. Had the amendment been agreed to, the Senate bill nearly would have matched the House-passed bill, while also providing full year OCO funding.\nSenator Jack Reed and Senator Barbara Mikulski, senior Democrats on the Armed Services and Appropriations Committees, respectively, proposed an amendment to the McCain amendment that would have increased non-DOD spending by $18 billion to provide \"parity\" between defense and nondefense spending. Motions to invoke cloture (that is, to end debate and force a vote) on each amendment failed to achieve the required three-fifths majority. Accordingly, the McCain amendment was withdrawn, nullifying the Reed/Mikulski amendment as well, and the bill was passed by a vote of 84-13.\nThe conference report on the FY2017 NDAA, enacted as P.L. 114-328 , designated $8.3 billion in OCO funds for base budget purposes, about $3.2 billion more than the Administration had requested. (See Table 6 .) President Obama signed the FY2017 NDAA conference agreement on December 23, 2016, enacting P.L. 114-328 .", "In drafting H.R. 5293, the House Appropriations Committee generally followed the HASC and approved $510.6 billion in base discretionary budget authority and $58.6 billion for OCO-designated funding, with $17.5 billion of that designated as \"base budget requirements.\" As noted, the Administration and many in Congress have objected to providing defense funding for base budget requirements in excess of the spending cap unless it is accompanied by a comparable increase in funding for nondefense, base budget programs. Despite these objections, H.R. 5293 passed the House without amendment to the designation of OCO funding for base requirements on June 16, 2016.\nThe Senate version of the defense appropriations bill, S. 3000, was reported out of the Senate Appropriations Committee on May 26, 2016 and would have provided $509.5 billion in discretionary base budget authority along with $58.6 billion for OCO requirements Unlike the House, the Senate did not use OCO-designated funds to increase the base budget.\nHowever, the Senate committee noted in a press release that the committee identified \"$15.1 billion from more than 450 specific budget cuts and redirect[ed] those savings to high-priority national security needs.\" In addition to routine reductions due to lower-than-anticipated fuel costs and unobligated balances from prior-year appropriations totaling $5.4 billion, S. 3000 proposed additional savings achieved through efforts to \"improve funds management,\" \"restore acquisition accountability,\" and \"maintain program affordability.\" Many of the programmatic increases proposed by the Senate committee (and offset in large part by the $15.1 billion in savings described above) were aligned with the increases proposed by one or another of the NDAA versions ( H.R. 4909 and S. 2943 ) or by H.R. 5293 .\nThe Senate did not act on S. 3000 before October 1, 2016, the start of FY2017. By that date, DOD's FY2017 military construction budget had been funded in the annual appropriations bill that also funded the Department of Veterans Affairs and certain other agencies ( H.R. 5325 / P.L. 114-223 ). P.L. 114-223 also included a continuing resolution (CR) to provide temporary funding for federal agencies for which no FY2017 funds had been appropriated by the start of the fiscal year. This first CR ( H.R. 5323 / P.L. 114-223 ) provided continuing budget authority for FY2017 effective October 1, 2016, through December 9, 2016.\nOn December 10, 2016, the initial FY2017 continuing resolution ( H.R. 5323 / P.L. 114-223 ) was succeeded by a second continuing resolution ( H.R. 2028 / P.L. 114-254 ). This second CR provided funding through April 28, 2017. Division B of this second FY2017 CR ( P.L. 114-254 ) also appropriated a total of $5.8 billion for OCO-designated DOD funds for FY2017—including $1.5 billion in additional funding requested by the Obama Administration's November 2016 budget amendment.\nAfter the 115th Congress convened in January 2017, negotiators for the House and Senate Appropriations Committees drafted a new FY2017 defense appropriations bill— H.R. 1301 . It was based on the original February 2016 budget request for FY2017, with a deduction of $1.5 billion for OCO activities that had been funded by Division B the second FY2017 continuing resolution ( H.R. 2028 / P.L. 114-254 ). The House passed H.R. 1301 on March 8, 2017, by a vote of 371-48. However, no action followed in the Senate and a third continuing resolution ( H.J.Res. 99 / P.L. 115-30 ) was enacted April 28, 2017, to extend the provisions of the second continuing resolution ( P.L. 114-254 ) for an additional week, to allow negotiators to finalize the agreement. (See Table 8 .)\nOn March 16, 2017, the Trump Administration submitted a request for \"Additional Appropriations\" for FY2017. The request totaled nearly $30 billion—$24.7 billion for the DOD base budget and $5.1 billion for OCO. The Obama Administration's base budget request was at the $551 billion BCA limit on defense discretionary budget authority. Congress was faced with three main options: raise the BCA limit; designate any additional appropriations as OCO; or not respond to the newly elected President's request for additional FY2017 resources for defense.\nOn May 3, 2017, a third version of the FY2017 defense appropriations bill passed the House as Division C of H.R. 244 , the Consolidated Appropriations Act, 2017. Division C generally aligned with H.R. 1301 but included a new title (Title X) which provided $14.8 billion in \"Additional Appropriations\" for DOD, all of which were designated as funding for Overseas Contingency Operations. In total, H.R. 244 provided $586.2 billion in funding for the Department of Defense. H.R. 244 became P.L. 115-31 on May 5, 2017. The amounts appropriated include a total of $19.9 billion in funding for base budget purposes that is designated as Overseas Contingency Operations funding. (See Table 9 .)\nTable 10 provides summaries of selected highlights of the House-passed and Senate-committee passed FY2017 Defense Appropriations Act:", "", "Both the House and Senate versions of the FY2017 NDAA included provisions intended to make DOD more agile and adaptable to meet emerging threats. At least in modified form, many of these initiatives were incorporated into the compromise final version of S. 2943 .\nFollowing are selected provisions of S. 2943 , as enacted, that address the organization of the DOD leadership and the National Security Council:\nSection 921 extends from two years to four years the terms of office of the Chairman and Vice-Chairman of the Joint Chiefs of Staff . It also requires that their terms be staggered and that the Vice-Chairman be ineligible for service as chairman or any other position in the armed forces, a limitation which the President can waive if deemed in the national interest. Similar provisions had been included in both H.R. 4909 (Section 907) and the Senate-passed version of S. 2943 (Section 921). Section 903 limits the number of persons assigned to the Joint Staff to no more than 2,069 of whom no more than 1,500 can be military personnel on active duty. The original Senate bill included the ceiling on the number of active-duty military personnel assigned to the Joint Staff, but it also included limits on the number of civilians assigned to the offices of the Secretary of Defense and the Secretaries of the Army, Navy and Air Force (Section 904). Section 1085 provides that the professional staff of the National Security Council (NSC) shall include no more than 200 persons, approximately half the number of staff of the Obama Administration NSC. The original Senate bill would have capped the size of the NSC staff at 150 persons, while H.R. 4909 would have required Senate confirmation of the President's National Security Advisor if the staff exceeded 100 persons. Section 923 elevates the U.S. Cyber Command (USCYBERCOM) to the status of a combatant command which is the same status as Strategic Command, European Command, Central Command and DOD's other major operational arms. Section 911 of H.R. 4909 was similar. Section 922 is intended to enhance the authority of the Assistant Secretary of Defense for Special Operations and Low-Intensity Conflict (SO/LIC) to provide bureaucratic advocacy and support for the U.S. Special Operations Command (USSOCOM) in the same way that the Secretaries of the Army, Navy, and Air Force support those services. Section 923 of the original Senate bill was similar.", "As enacted, the FY2017 NDAA includes several provisions intended to rebalance the way DOD manages risk in developing and procuring weapons systems. Despite Administration objections, the bill's Section 901 would divide the authority over the entire weapons acquisition process—from the earliest phases of research and development to production and sustainment—between two senior DOD officials. This authority is currently vested in the Under Secretary of Defense for Acquisition, Technology, and Logistics (AT&L). Pursuant to S. 2943 , the AT&L position will be replaced by an Under Secretary for Research and Engineering and an Under Secretary for Acquisition and Sustainment, a move for which House and Senate conferees on the bill expressed the following rationale:\nThe conferees believe the technology and acquisition missions and cultures are distinct. The conferees expect that the Under Secretary of Defense for Research and Engineering would take risks, press the technology envelope, test and experiment, and have the latitude to fail, as appropriate. Whereas the conferees would expect that the Under Secretary of Defense for Acquisition and Sustainment to focus on timely, cost-effective delivery and sustainment of products and services, and thus seek to minimize any risks to that objective.\nThe original Senate-passed version of S. 2943 had a similar provision (Section 901). As enacted, the bill provides that these organizational changes will take effect on February 1, 2018.\nThe enacted NDAA also includes provisions intended to make DOD's weapons acquisition process more agile, among which are the following:\nSection 805 requires that, to the maximum extent practicable, major weapons systems will be designed following a \"modular open system approach\" intended to make it relatively easy to add, remove, or update major components of the system, thus facilitating competition among suppliers to provide incremental improvements. The House bill had included a similar provision (Section 1701). Section 806 would make various changes to the rules governing the development of major weapons systems including changes intended to require that programs incorporate only \"mature\" technologies . In other words, DOD would not gamble on unproven technologies which, if not realized, would delay or stymie procurement of the proposed new weapon.", "The enacted version of the NDAA also includes several provisions relating to DOD contracting procedures, among which are the following:\nSection 829 modifies DOD's acquisition regulations to establish a preference for fixed-price contracts (rather than contracts that reimburse the contractor's costs and provide an additional fee). The enacted provision allows more flexibility for the use of other types of contracts than had the corresponding provision (Section 827) in the original, Senate-passed version of S. 2943 . Section 813 limits the circumstances under which DOD could award a contract to the bidder who submitted the lowest price, technically acceptable (LPTA) offer. Contracting by the LPTA rule bars the government from paying a higher price for a proposal it deems technically superior to (or offered by a more reliable contractor than) the lowest-price proposal. Similar provisions had been included in the House-passed bill (Section 847) and in the original Senate bill (Section 825). Section 885 requires a report to Congress on the bid protest process by which the award of a DOD contract can be challenged on grounds that the award violated relevant laws and regulations. Such protests are adjudicated by the GAO. The House-passed bill contained a similar provision (Section 831). The original Senate-passed bill (in Section 821) would have required the protestor (if it was a large contractor) to cover the cost of the process if GAO denied all elements of the protest.", "The enacted version of S. 2943 includes in Subtitle E of Title XII several dozen provisions on \"security cooperation,\" defined as programs, activities, and other interactions of the U.S. Department of Defense (DOD) with the security forces of other countries that are intended to increase partner country capabilities, provide U.S. armed forces with access, or promote relationships relevant to U.S. national security interests.\nStatutes governing security cooperation have been enacted piecemeal over time and are scattered through U.S. Code and public law (such annual NDAAs). In the debates over the FY2017 defense funding bills, DOD and the congressional defense committees developed various proposals to streamline the existing security cooperation authorities and facilitate congressional oversight.\nThe agreed on provisions, consolidated into a new Chapter 16 of Title 10 of the U.S. Code, govern:\nMilitary-to-military engagements, exchanges, and contacts, including payment of personnel expenses and the extension of such authorities to nonmilitary security personnel (with the concurrence of the Secretary of State); Combined exercises and training with foreign forces; Operational support and foreign capacity building, including logistics support, supplies, and services associated with operations that the U.S. military is not directly participating in; defense institution building; and authority to train and equip foreign forces as well as sustain such support; and Educational and training activities, including foreign participation in service academies and other DOD-sponsored programs, such as the DOD State Partnership Program, the Regional Centers for Security Studies, and the Regional Defense Combating Terrorism Fellowship Program.", "For active-duty and reserve component military personnel costs, the original FY2017 budget request included $135.3 billion in the base budget and $3.6 billion in OCO, for a total of $138.8 billion. The Administration also proposed reductions in military manpower and changes in military compensation—some of which were incorporated into the budget request—that would reduce the rate at which personnel cost-per-troop increased.", "The annual personnel budget is driven partly by the number of military personnel, measured in terms of authorized end strength. Over the past decade, authorized active duty end strengths have shifted in response to the build-up and draw-down associated with conflicts in Afghanistan and Iraq.\nThe past five years have witnessed substantial reductions in personnel strength, with ground forces bearing the brunt of the cuts. Overall, the Administration proposed an active duty end strength for FY2017 of 1.28 million, a reduction of 2.1% from the previous fiscal year and down 8.4% from the most recent peak in 2011 (see Figure 5 ).\nThe Army has seen the biggest end strength reductions in the past five years, dropping from a peak of nearly 570,000 in 2011 to a little under 475,000 at the end of FY2016—a reduction of nearly 17%. The Administration's budget would have continued that trajectory, reaching an Army end-strength of 460,000 by the end of FY2017, with a goal of reaching 450,000 by the end of FY2018.\nThe Marine Corps has also seen substantial reductions in recent years, dropping from peak active-duty end strength of 202,000 in 2010 to 184,000 in FY2016 with the budget proposing an additional cut to 182,000, which would amount to a 10% reduction from the peak year.\nThe Senate NDAA ( S. 2943 ) would have authorized end-strengths identical to the Administration's request, while the House bill ( H.R. 4909 ) would not only reject the proposed cuts but would authorize an overall increase in troop levels, adding a total of 1,700 troops to the FY2016 authorized level and 28,715 to the FY2017 total requested by the Administration. The House-proposed increase would be most noticeable for the Army, which would be authorized 5,000 more members than its 2016 end-strength and 20,000 more than the Administration proposed for FY2017. (See Table 11 .).\nThe enacted version of the NDAA came closer to the House's provisions on endstrength, authorizing 24,000 more personnel than requested, including 16,000 Army troops.\nThe House and Senate Appropriations Committees each followed the lead of their respective Armed Services Committee. Thus, the House-passed defense appropriations bill (H. 5293) would have added to the Administration's request $1.66 billion to cover the personnel costs of the increased end-strength that would have been authorized by H.R. 4909 , while the bill approved by the Senate Appropriations Committee included no such addition.\nH.R. 1301 —the version of the FY2017 defense appropriations bill passed by the House on March 8, 2017-added to the request a total of $1.3 billion to fund both the higher end-strength authorized by the NDAA and a higher military pay raise than the Obama Administration had requested.", "In addition to shrinking the force size, a major theme in recent defense budget debates has been an effort to reduce the rate of increase in military compensation costs. A number of proposals accompanying this year's budget request seek to further rein in the rate at which those costs increase.\nSection 1009 of Title 37, United Stated Code provides a set formula for calculating automatic annual increases in military basic pay indexed to the annual increase in the Employment Cost Index (ECI), a government measure of changes in private sector wages and salaries. However, that law also gives the President authority to specify an alternative pay adjustment that supersedes the automatic adjustment.\nFrom FY2001 through FY2010 increases in basic pay were generally above ECI. From FY2011-FY2014 pay raises were equal to ECI per the statutory formula. From FY2014 to FY2016, pay raises were less than the ECI because, in those years, the President invoked his authority to set an alternative pay adjustment, and Congress did not act to overturn that decision (see Figure 6 ).\nFor FY2017, the Obama Administration attempted to continue that recent trend, proposing a 1.6% increase in basic pay for military personnel rather than the 2.1% increase that would result from the ECI calculation. Assuming the lower pay raise allowed the Administration to save approximately $264 million.\nThe Senate-passed version of S. 2943 reflected the Administration's proposal. However, the enacted version of the bill included a provision from the House-passed NDAA mandating a pay raise that would match the ECI projection.\nThe first House-passed version of the FY2017 defense appropriations bill ( H.R. 5293 ) added $340 million to the budget request. H.R. 244 , the version of the FY2017 defense appropriations bill that was enacted, added to the request a total of $1.3 billion to fund both the higher end-strength authorized by the FY2017 NDAA and a higher military pay raise than the Obama Administration had requested.", "Of the nearly $3.5 billion originally requested in FY2017 for acquisition of armored combat vehicles, more than 80% was allocated to upgrade the Army's current fleet of Abrams tanks, Bradley infantry fighting vehicles, Stryker 8x8 armored troop carriers, and Paladin self-propelled artillery. The remainder of the request was to continue development of three new vehicles: a troop carrier for support roles (designated AMPV), a new amphibious landing vehicle for the Marine Corps (designated ACV) , and a combat vehicle with a tank-like cannon that will be light enough to be dropped by parachute with airborne troops.\nThe original budget request also included $735.4 million for continued development and the third year of procurement funding of the Joint Light Tactical Vehicle (JLTV) intended ultimately to replace nearly 17,000 of the High-Mobility Multi-purpose Wheeled Vehicles (HMMWVs) or \"Humm-vees\" used by the Army and Marine Corps.", "", "The original budget request included $480 million to continue upgrading the Army's fleet of M-1 Abrams tanks, the newest of which was manufactured in 1994. Subsequently, the Army asked Congress to increase that amount by $172 million to be transferred from other parts of the Army budget request. The House and Senate versions of the NDAA each authorized the increased amount with the House bill also authorizing an additional $140 million for M-1 modifications. As enacted, the NDAA authorized the revised total request ($652 million with $72 million of the increase authorized as OCO funding) but not the additional House increase.\nThe initial House-passed FY2017 defense appropriations bill would have provided for M-1 improvements all but $4 million of the $652 million requested by the Army plus $80 million. The Senate committee version of that bill— S. 3000 —would have provided $652 million, the amount of the revised request.\nAs enacted, the consolidated appropriations bill ( H.R. 244 / P.L. 115-31 ) provides $664 million for M-1 improvements, a net addition of $12 million to the Army's adjusted request.", "As requested, the versions of the NDAA passed by the House and Senate, as well as the enacted version, authorized $595 million to continue modernizing the Army's fleet of Paladin 155 mm. cannons and their associated ammunition carriers. In addition to modernizing the vehicles' electronic components, the Army is replacing their tracked chassis (manufactured in the 1970s and 1980s and refurbished since then) with new chassis based on the Bradley infantry fighting vehicle.\nThe initial House-passed appropriations bill would have provided the total requested amount, while the Senate committee-approved S. 3000 would have cut $31 million. The enacted appropriations bill provides $584 million for Paladin modernization, cutting $10 million from the request on account of anticipated contract savings.", "The budget requested $727 million to continue developing various upgrades and installing them in the Army's fleet of Stryker wheeled armored troop carriers. Some of the funds will be used to install on some older Strykers a V-shaped underside to partially deflect the blast of a buried landmine. Other funds will be used to enhance the firepower of Strykers based in Europe by replacing their .50 caliber machine guns with a 30 mm. cannon.\nThe Senate-passed version of the NDAA trimmed $11 million from the request and the enacted version of the bill followed suit.\nThe initial House-passed defense appropriations bill would have cut $4 million from the Stryker request while the Senate committee-approved S. 3000 would have cut $34 million on grounds that those funds would not be needed in FY2017.\nThe initial House-Senate defense appropriations compromise ( H.R. 1301 ) would have provided $701 million from Stryker procurement, cutting $26 million from the request on grounds that it was not justified. However, the enacted appropriations bill restored $8 million of that reduction, providing a total of $709 million.", "The budget requested $184 million to continue development of a new tracked vehicle designated the Armored Multi-Purpose Vehicle (AMPV) that would replace thousands of Vietnam-era M-113 vehicles as battlefield ambulances and mobile command posts, and filling other combat support roles. The new vehicle will be based on the Bradley infantry fighting vehicle. The FY2017 funds would be used to complete production of 29 prototype AMPVs slated for shakedown testing at government test sites.\nThe enacted version of the NDAA authorized the full amount requested, as had both the House and Senate versions of that bill. Similarly, the House-passed and Senate committee versions of the initial defense appropriations bill ( H.R. 5293 and S. 3000 , respectively) would have provided the full amount requested for AMPV, as does the enacted bill.", "The planned size of the Navy, the rate of Navy ship procurement, and the prospective affordability of the Navy's shipbuilding plans have been matters of concern for the congressional defense committees for the past several years. Concerns over the current and future size and capability of the Navy have intensified with the recent shift in the international security environment to a situation featuring renewed great power competition.\nThe Navy's original FY2017 budget requested funding for the procurement of seven new ships—two Virginia-class attack submarines, two DDG-51 class destroyers, two Littoral Combat Ships (LCSs), and one LHA-6 class amphibious assault ship. The Navy's FY2017-FY2021 five-year shipbuilding plan includes a total of 38 new ships, compared to the five-year plan sent to Congress in 2015, which projected funding of 48 new ships during this period.\nSee the summary of congressional action authorizing funding for selected shipbuilding programs in Table A-2 . Table B-2 provides a summary of appropriations actions related to such programs. Following are selected highlights:", "The original budget request included $5.1 billion to continue procuring Virginia class attack submarines at a rate of two per year under a ten-ship multiyear procurement (MYP) contract for FY2014-FY2018. The Navy's FY2017-FY2021 five-year shipbuilding plan proposes including in one of the two Virginia-class boats projected for FY2019, and in all Virginia class boats procured in FY2020 and subsequent years, the Virginia Payload Module (VPM)—an additional ship section that will increase the boat's payload of Tomahawk cruise missiles from 12 to 40. The budget request included $98 million to continue development of the VPM. The Navy's FY2016 budget submission proposed building some, but not all, Virginia class boats procured in FY2020 and subsequent years with the VPM.\nThe Senate version of the NDAA would have authorized the amounts requested for the submarine and for VPM development, but the House version of that bill and the enacted version of S. 2943 also authorized an additional $85 million in \"advance procurement\" (AP) funding to buy components for boats that primarily would be funded in future budgets.\nThe Senate committee version of the first defense appropriations bill S. 3000 would have provided the requested amounts for the submarines and the VPM, while the House-passed version ( H.R. 5293 ) would have added $85 million to the amount requested for the subs.\nLike the initial House-passed appropriations bill, the enacted bill added $85 million to the $5.1 billion requested for submarines.", "The Navy's originally proposed FY2017 budget included a $1.29 billion increment of the estimated $12.9 billion in procurement funding for CVN-79, the second Gerald R. Ford (CVN-78) class aircraft carrier. The budget also requested $1.37 billion in AP funding for CVN-80, the third ship in the class.\nOne issue for Congress during its consideration of the FY2017 request was whether to provide AP funding in FY2017 for the procurement of materials for CVN-81, the fourth ship in the class (which is scheduled for procurement funding in FY2023). Earlier funding for the fourth ship would permit a combined purchase of materials for CVN-80 and CVN-81 and thereby reducing the combined procurement cost of the two ships. The Navy's proposed FY2017 budget did not request any AP funding for CVN-81; the Navy's plan was to request initial AP funding for CVN-81 in FY2021.\nThe enacted version of the NDAA, like the versions passed by the House and Senate, authorizes the full amount requested for the second and third ships, a total of $2.7 billion The House version also would have authorized an additional $263 million for AP funding for the fourth carrier in the class, but that was not included in the final version of the authorization bill.\nThe House-passed version of the initial defense appropriations bill would have followed suit with the House-passed NDAA, providing an additional $263 million for the fourth carrier, while the Senate committee-approved S. 3000 would have trimmed $20 million from the overall $2.66 billion carrier request.\nThe enacted appropriation bill ( H.R. 244 / P.L. 115-31 ) provides a total of $2.63 billion for the second and third carriers, trimming $36 million from the request. It did not provide AP funding for a fourth carrier.", "Congress in recent years has pushed back against Navy proposals for operating and modernizing its force of 22 Aegis cruisers. When the Navy proposed retiring seven of the ships years before the end of their service lives, Congress rejected the proposal. When the Navy then proposed taking 11 of the 22 ships temporarily out of service for modernization, and then returning them to service years later as one-for-one replacements for the other 11 ships in the class, Congress modified the Navy's proposed schedule. In its proposed FY2017 budget, the Navy once again asked to modernize the 11 ships along the Navy's preferred schedule, rather than the modified schedule directed by Congress.\nThe House-passed NDAA and the enacted version of the bill ( S. 2943 ) each contained a provision (Section 1024) that requires the Navy to modernize the 11 ships on the schedule directed by Congress. The Senate-passed NDAA contained a provision (Section 1011) that would have allowed the Navy to retire some of the cruisers if certain prescribed criteria were met.\nBoth House and Senate versions of the initial defense appropriations bill rejected the Navy's proposal for the cruisers, as does the enacted appropriations bill.", "The FY2017 request included $3.3 billion to continue procurement of DDG-51 destroyers at an average rate of two ships per year under a 10-ship MYP contract for FY2013-FY2017. As part of its markup of the Navy's FY2016 budget, Congress had provided $1.0 billion in additional procurement funding to help pay for the procurement of an additional DDG-51. The Navy's proposed FY2017 budget noted this $1.0 billion in funding but did not include an additional ship in its shipbuilding plan. The $433 million needed to complete the funding for this additional destroyer, however, was included as the second item on the Navy's FY2017 Unfunded Requirements List (URL).\nThe House and Senate versions of the NDAA each authorized the $3.3 billion requested for the destroyers with the House bill approving an additional $433 million and the Senate bill an additional $50 million for the ship that Congress partially funded in the FY2016 budget. The enacted version of the bill authorized the request plus $50 million.\nIn addition to providing the $3.3 billion requested for the destroyers in FY2017, the House-passed version of the initial defense appropriations bill would have added $433 million for the partially funded FY2016 ship as does the enacted bill ( H.R. 244 / P.L. 115-31 ). The Senate committee-approved version of the first bill ( S. 3000 ) would have added $404 million for the FY2016 ship.", "In December 2015, then-Secretary of Defense Ashton Carter directed that the LCS program be reduced from a planned total of 52 ships to a planned total of 40 ships, that annual procurement quantities of LCSs be reduced during the Navy's FY2017-FY2021 five-year shipbuilding plan, and that the Navy choose one of the two current LCS builders, so that LCSs procured in FY2019 and subsequent years would be produced by only one builder. Reflecting this direction, the Navy's proposed FY2017 budget requested $1.1 billion for the procurement of two LCSs, rather than the three LCSs that had been projected for FY2017 under the FY2016 budget submission.\nIn addition to authorizing the funding requested for two LCSs, the House version of the NDAA would have authorized an additional $384.7 million for a third ship. The enacted version of that bill did not included authorization for a third ship and followed the Senate-passed version of the bill in trimming $28.0 million from the request for two ships.\nThe House-passed version of the initial defense appropriations bill would have cut $71 million from the total amount requested for two ships but also would have added $384 million for a third LCS. The Senate committee bill would have provided $1.1 billion as requested plus $475 million for a third ship.\nThe enacted appropriation bill cuts $36 million from the $1.1 billion requested for two LCSs but would add $475 million for a third ship of this type.", "In recent years, LHA-type amphibious assault ships—carrier-like ships designed to carry some 1,700 Marines and a mix of aviation assets—have been funded using split funding (i.e., two-year incremental funding). The Navy's FY2017 budget submission proposes using split funding—$1.6 billion requested in FY2017 and a plan to request $1.7 billion in FY2018—to procure an amphibious assault ship designated LHA-8.\nThe enacted NDAA, like the House and Senate versions of that bill, authorized the $1.6 billion requested for the ship in FY2017. The initial House-passed appropriations bill would have reduced the funding by $64 million, while the Senate committee version would have provided the amount requested.\nThe enacted bill ( H.R. 244 / P.L. 115-31 ) trims $5 million from the amount requested for the LHA.", "In their initial FY2017 budget requests, the Army and Air Force chose to delay their previously planned aircraft purchases, and the Navy planned to meet its aviation modernization goals by inviting Congress to add funds to its budget request to pay for so-called \"unfunded requirements.\" Army officials emphasized that the service's FY2017 budget request gave priority to readiness over modernization. Within the Army's modernization budget, helicopter programs felt the brunt of the budget squeeze. The Army's $3.9 billion budget request for aircraft procurement in FY2017 (which includes modernization as well as the acquisition of new aircraft), amounted to less than one-third of the service's FY2016 aircraft procurement account.\nSee the summary of congressional action authorizing funding for selected aviation programs in Table A-3 . Table B-3 provides a summary of appropriations actions related to such programs. Following are some highlights:", "The budget squeeze confronting the Air Force's modernization plans has been widely recognized. The simultaneous attempt to modernize Air Force fighters with the F-35, bombers with the B-21, trainers with the T-X, and other systems has created a classic \"bow wave\" of acquisitions, in which systems already being procured and others moving from development into procurement exceed the available procurement budget. The Air Force original FY2017 budget submission attempted to relieve some of that budget pressure by deferring planned acquisitions.", "The FY2017 request included $4.4 billion for 43 F-35A Lightning II fighters, five fewer than projected in the FY2016 budget request. All told, the Air Force's new plan would acquire 45 fewer F-35A's during the period FY2017-FY2021 than had been planned in January 2016.\nThe enacted NDAA, like the Senate version of that bill, authorizes the requested amount for 43 of the fighters. Besides approving that amount, the House-passed NDAA also would have authorized $691 million for 5 additional aircraft.\nThe initial House-passed defense appropriations bill would have provided a total of $4.8 billion, adding to the requested amount $352 million for five additional F-35As. The Senate committee version of that bill ( S. 3000 ) would have cut the FY2017 procurement amount by $418 million, but would have added $100 million to the $405 million requested for advance procurement funds with the aim of supporting the higher FY2018 production rate that had been planned prior to the FY2017 budget submission.\nThe enacted appropriation provides a net increase of $201 million to the $4.4 billion requested for 43 F-35As. The bill cuts $294 million from the amount requested on account of \"efficiencies\" and adds $405 million for five additional aircraft.", "The enacted NDAA, like both the House and Senate versions, authorized the $2.9 billion requested for 15 KC-46A mid-air refueling tankers. However, all three versions of the legislation cut the $262 million requested to continue development of the aircraft by more than 50%, to $122 million on grounds that the program had unspent funds from prior years' appropriations and had encountered fewer problems than the budget request had anticipated.\nThe initial House-passed defense appropriations bill would have cut $83 million from the $2.9 billion KC-46A procurement request and $32 million from the R&D request. The Senate committee version of the appropriations bill would have provided the amounts requested both for procurement and for development of the plane.\nThe enacted appropriation ( H.R. 244 / P.L. 115-31 ) cuts the procurement request by $167 million—double the amount that would have been cut by the initial House-passed appropriations bill—while cutting $32 million from the tanker's R&D request.", "Reductions in planned aircraft procurement also were evident in the Army's original FY2017 request, which would procure 110 helicopters instead of the 144 projected in 2015. Army leaders attributed these deferrals primarily to budget concerns and force structure issues resulting from the recently issued report of the National Commission on the Future of the Army.\nSpecifically, the FY2017 budget request included:\n$929 million for 74 UH-60M Black Hawk helicopters (26 fewer than projected last year); $565 million for 22 CH-47 Chinook helicopters (5 fewer than projected last year); and $1.1 billion to remanufacture 52 AH-64 Apache helicopters (5 fewer than projected last year).\nThe enacted version of the FY2017 NDAA—like the version passed by the Senate—authorized the originally requested amounts for these programs. The House-passed version would have added a total of $703 million for 41 additional helicopters.\nThe initial House-passed FY2017 defense appropriations bill would have added to the amount requested $1.1 billion for a total of 51 additional helicopters while the Senate committee version ( S. 3000 ) would have added $368 million for additional Black Hawks to equip National Guard units.\nThe enacted appropriation bill adds to the amount requested $674 million for additional helicopters, including at least 5 newly built Apaches and 25 Black Hawks for the Army and National Guard.", "Navy officials have been telling congressional defense committees in recent years that the service has too few strike fighters—aircraft designed for both air-to-air and air-to-ground combat. This is, in part, because of tight budgets and, in part, because of delays in fielding the F-35 Joint Strike Fighter (JSF), which is intended gradually to supplant the fleet of F/A-18s that have equipped Navy and Marine Corps squadrons since the 1980s. Over the course of the past three fiscal years (FY2014-FY2016), Congress has added to the Administration's budget requests a total of $2.9 billion for 32 aircraft of the F/A-18 type, including 27 equipped for electronic warfare, which are designated as E/F-18Gs.\nThe original FY2017 Navy budget request included $185 million for 2 F/A-18 Super Hornet fighters of the most recent E and F models, $891 million for 4 F-35B Joint Strike Fighters (the version of the F-35 designed to operate from aircraft carriers), and $2 billion for 16 F-35Cs which is the Marine Corps' version of the JSF, designed for short take-off, vertical landing (STOVL) operations from large amphibious landing ships.\nHowever, the Navy also sent Congress an \"unfunded requirements list\" (URL) requesting an additional 14 Super Hornets and 6 additional F-35s. In the letter to Congress accompanying the URL, the Chief of Naval Operations stated\nOur legacy strike fighters (F/A-18A-D) are reaching end of life faster than planned due to use and wear. Improving the inventory of F/A-18F and F-35C aircraft will help reconcile a near term (2018-2020) strike fighter inventory capacity challenge, and longer term (2020-2035) strike fighter model balance within the carrier air wing. It will reduce our reliance on legacy-model aircraft which are becoming increasingly expensive and less reliable.\nThe Navy linked its avowed strike fighter shortage to its proposal—as a part of the FY2017 budget—to reduce the number of carrier air wings from 10 to nine. In recent years, the number of carrier air wings has usually been one less than the number of carriers in commission, in recognition of the fact that, at any given moment, one carrier is undergoing a lengthy mid-life nuclear refueling overhaul and thus cannot deploy.\nThe Navy's proposal to reduce the number of carrier air wings from 10 to 9 would mean that the number of air wings would be two less than the number of carriers since the Navy's carrier force is scheduled to increase from 10 to 11 next year with the commissioning of the first Gerald R. Ford-class carrier. Navy officials have testified that in light of how the Navy now operates and maintains the carrier force, it will now make sense for the number of carrier air wings to be two less than the number of carriers. The Navy might need legislative relief to implement its proposal—Section 1093 of the FY2012 NDAA requires the Navy to maintain 10 carrier air wings.\nThe House-passed NDAA would have authorized the additional aircraft requested in the Navy's URL, but the enacted bill—like the Senate-passed version—authorized only those included in the Administration's budget request.\nSimilarly, the initial House-passed FY2017 defense appropriations bill would have added to the Navy's aircraft request a total of $1.8 billion for the additional F/A-18s and JSFs mentioned in the Navy's URL while the Senate committee version ( S. 3000 ) would have funded only the aircraft requested in the budget.\nThe enacted appropriation ( H.R. 244 / P.L. 115-31 ) includes—in addition to the amounts requested—$979 million for 12 F-18E/Fs and $757 million for six F-35s.\nThe enacted version of the FY2017 NDAA includes a provision (Section 1042) that would allow the Navy to reduce the number of active-component carrier air wings from 10 to nine until such time as the navy fields enough carriers to support 10 wings or the start of FY2026, whichever comes first.", "The original FY2017 DOD budget request included nearly $4.7 billion in R&D and procurement funding to upgrade and replace U.S. nuclear weapons delivery systems. See the summary of congressional action authorizing funding for selected long-range strike aircraft and missile programs in Table A-3 . Table B-3 provides a summary of appropriations actions related to such programs.\nFollowing are some highlights:", "The Navy's proposed FY2017 budget included $1.1 billion for continued research and development funding and $773.1 million for the first increment of advance procurement (AP) funding for the Ohio replacement program, a program to build a class of 12 new ballistic missile submarines.\nThe House and Senate versions of the NDAA approved the full amount requested for the new class of missile subs, as did the enacted version of the bill. The House bill had authorized the advance procurement funds in the National Sea-based Deterrence Fund, but the final version of the bill authorized those funds in the Navy's shipbuilding account.\nThe House-passed and Senate committee versions of the initial defense appropriations bill also provided the full amount requested for the new class of missile subs, as does the enacted appropriation bill.\nSee the summary of congressional action authorizing funding for this program in Table A-2 . Table B-2 provides a summary of related appropriations actions.", "For FY2017, the budget requested $1.36 billion to continue development of the B-21 Long Range Strike Bomber, which is almost 40% less than the FY2017 budget for the program that the Air Force had projected in 2015. The Air Force attributed the reduction to lower than expected bids for the work and, all told, reduced the projected B-21 budget over the period FY2017-FY2021 by $3.5 billion.\nThe Senate version of the NDAA would have reduced the B-21 request by $302 million; however the enacted bill—like the House version—approved the originally requested amount.\nSimilarly, the House-passed defense appropriations bill would have cut $302 million from the request while the Senate committee version would have provided $1.4 billion, as requested.\nThe enacted appropriation ( H.R. 244 / P.L. 115-31 ) would provide $1.3 billion for the bomber program.", "For the most part, Congress has supported the original FY2017 budget request for continued development of nuclear-armed ballistic missiles and a long-range cruise missile that could carry a nuclear warhead. The Obama Administration request included:\n$1.1 billion for modifications and life-extension for the D-5 Trident II ballistic missile carried on Ohio-class submarines and slated to arm the replacement subs nearing construction. $109 million for research into the new ground-based strategic deterrent, which will eventually replace existing Minuteman III long-range intercontinental ballistic missiles (ICBMs); and $96 million for development of the a new long-range stand-off missile (LRSO), which will replace the existing bomber-launched cruise missile.\nThe enacted FY2017 NDAA authorized the amounts requested for all three programs and the initial House-passed appropriations bill would have provided those amounts. The Senate committee version of the appropriations bill would have fully funded the request for the ICBM replacement missile and the LRSO, but would have trimmed $8 million from the amount requested for Trident II modernization.\nThe enacted FY2017 appropriations bill cut $4 million from the Trident II modernization request and $5 million from the ICBM development program.", "For FY2017 the Obama Administration requested $9.1 billion to develop and deploy ballistic missile defense (BMD) capabilities, which was a decrease of about $700 million from the FY2016-enacted level of $9.8 billion. The request included $7.5 billion for the Missile Defense Agency (MDA) and the remainder primarily for the Army Patriot missile defense program.\nA summary of congressional action authorizing funding for selected elements of the missile defense program can be found in Table A - 4 . Table B-4 provides a summary of appropriations actions related to such programs. Following are some highlights:", "For defense of U.S. territory, the FY2017 budget request included $862.1 million to maintain the commitment to high operational readiness of the Ground-based Missile Defense (GMD) system based at Fort Greely, AK, and Vandenberg Air Force Base, CA and to increase the total number of interceptor missiles at those two sites from 30 to 44. The enacted NDAA—like the House and Senate versions—authorizes the requested amount.\nThe initial House-passed appropriation bill would have provided $862 million for the homeland defense system, as requested, but the initial Senate committee bill ( S. 3000 ) would have added $111 million for an unspecified \"program increase,\" as does the enacted appropriation ( H.R. 244 / P.L. 115-31 ).\nCongress has expressed strong interest in establishing, in the eastern United States, a third GMD site. MDA is currently evaluating three military bases for deployment of a possible third GMD site (Fort Custer, MI, Fort Drum, NY, and Camp Ravenna, OH). The enacted NDAA authorizes $15 million, not requested by the Obama Administration, for planning and design work on a third GMD site.", "The FY2017 request continued to support the European Phased Adaptive Approach (EPAA), which is the U.S. commitment to NATO's territorial BMD effort. At the end of 2015, the United States completed Phase 2 of the EPAA with the deployment of an Aegis Ashore site in Romania. The FY2017 request supports the implementation of Phase 3 of the EPAA, to include the deployment of an Aegis Ashore site in Poland during FY2018.\nThe enacted NDAA as well as the House-passed and Senate committee-approved versions of the initial defense appropriations bill and the enacted appropriation all approved the amounts requested for European missile defense: $58 million for procurement of Aegis Ashore equipment and $43 million to continue development of the land-based version of the SM-3 interceptor missile.", "The FY2017 request also continues U.S. contributions to production of the Israeli-designed Iron Dome system designed to defeat short-range rockets and continues support for continued development of Iron Dome as well as the Israeli Arrow and the David's Sling weapon systems.\nThe enacted NDAA would add a total of $455 million to the $150 million requested for these three programs as would the House-passed and Senate committee-approved versions of the initial defense appropriation bill and the enacted appropriation ( H.R. 244 / P.L. 115-31 ).", "For FY2017 the Obama Administration's request includes $7.1 billion for Air Force national security space programs, an increase of about $100 million above the FY2016 enacted level. DOD has stated this budget request allows the United States to maintain supremacy in space and provides communications, navigation, missile warning, space situational awareness, and environmental monitoring.\nSee the summary of congressional action authorizing funding for selected space-based systems and launch vehicle programs in Table A-5 . Table B-5 provides a summary of appropriations actions related to such programs.", "The budget request included $738 million for the Evolved Expendable Launch Vehicle (EELV) program to procure five launches for national security space missions, three of which will be awarded competitively. It also included $297 million to continue developing the family of launch vehicles used in this program and $769 million maintain a launch infrastructure that would allow the launch of up to eight national security space missions each year.\nThe enacted NDAA would reduce launch procurement program by $26 million and the infrastructure program by $201 million on grounds that those funds were not yet needed for the programs. On the other hand, the bill authorized $380 million—$183 million more than requested—for EELV development.\nThe versions of the initial defense appropriations bill passed by the House and approved by the Senate Appropriations Committee each would have cut the EELV procurement requests, on grounds that two of the five planned launches would not occur during FY2017. The House bill would have cut $478 million and the Senate committee bill $425 million.\nThe enacted FY2017 appropriations bill cut the EELV request by $253 million.", "In addition to revising the caps for DOD's base budget, the BBA identified a nonbinding FY2017 budget level of $58.8 billion for OCO. President Obama's February 2016 OCO budget request matched this level, which included $5.1 billion for base budget activities that were not funded in the base budget due to the budget caps. President Obama submitted an amendment to the OCO budget request to Congress on November 10, 2016, adding $5.8 billion to the DOD FY2017 OCO budget request.\nThe second FY2017 continuing resolution ( H.R. 2028 / P.L. 114-254 ), enacted on December 10, 2016, appropriated $5.8 billion for OCO-designated elements of the DOD budget request that were deemed to be particularly urgent.\nOn March 16, 2017, the Trump Administration requested additional DOD funds for FY2017, including $5.1 billion designated as OCO-related. This brought DOD's total FY2017 budget request for OCO-designated spending in FY2017 to $69.7 billion—$64.6 billion for contingency operations and $5.1 billion for base requirements (see Table 12 ).\nIn the Obama Administration's original FY2017 OCO request, roughly 70% of the funds were to support President Obama's plan to extend the continued presence of U.S. forces in Afghanistan (Operation Freedom's Sentinel). Funding associated with intensified operations in Syria and Iraq (Operation Inherent Resolve) accounted for most of remainder of the initial request. However, the request also included $3.4 billion―about 5% of the initial OCO request―for supporting continued operations of the President's European Reassurance Initiative (ERI), a sharp increase in funding over FY2016 levels for a program designed to signal the U.S. commitment to the security of NATO allies and partners through an expanded U.S. presence in Europe.\nPresident Obama's November 2016 amendment to the OCO request reflected the Administration's decision to increase U.S. troop levels in Afghanistan and Iraq (see Table 13 ).", "The House and the Senate passed their respective versions of the FY2017 NDAA ( H.R. 4909 and S. 2943 ) before President Obama sent Congress his November 2016 OCO budget amendment. The final version of the bill was enacted into law after the November 2016 budget amendment, but before President Trump requested an additional FY2017 OCO funding increase.\nBased on the initial February 2016 OCO request, the House-passed NDAA would have provided a total of $58.8 billion designated as OCO funding, cutting less than $5.0 million from the requested amount. However, of that total, the House bill would have used $23.1 billion for base budget purposes—approximately $18.0 billion more than the $5.1 billion in FY2017 OCO funding the Obama Administration planned to use for base budget expenses.\nMost of the remaining OCO funds authorized by the House bill—$35.7 billion—would remain available to cover OCO activities through April 30, 2017. By that date, leaders of the House Armed Services Committee contended, the President elected in November 2016 could request supplemental appropriations to cover OCO funding requirements through the remaining months of FY2017.\nThe Senate-passed version of the NDAA would have authorized $58.9 billion in OCO-designated funds, an increase of $93 million over the February request. No OCO-designated funds in the Senate bill were explicitly directed to base budget expenses.\nAs enacted—after President Obama increased the total FY2017 OCO request to $64.6 billion—the final version of the FY2017 NDAA authorized $67.8 billion, $9.0 billion more than the original request and $3.2 billion more than the adjusted request. Of that increase, $3.2 billion was dedicated to base budget purposes (see Table 14 ).", "In their treatment of OCO-designated funds, the versions of the initial FY2017 defense appropriations bill passed by the House and approved by the Senate Appropriations Committee generally tracked the House-passed and Senate-passed versions of the NDAA, respectively.\nH.R. 5293 , the FY2017 defense appropriations bill passed by the House on June 16, 2016, would have provided $58.6 billion for OCO, of which $15.7 billion was intended to cover base budget expenses with the balance of the OCO funds intended to meet OCO costs through the end of April 2017.\nAs with the Senate-passed version of the NDAA, the first Senate committee-approved defense appropriations bill would provide $58.6 billion in OCO-designated funds, with no increase in the amount of OCO funds for base budget purposes.\nFollowing President Obama's November 2016 request for $5.8 billion in additional OCO funding, the second continuing resolution ( H.R. 2028 / P.L. 114-254 ) was enacted. Division B of H.R. 2028 provided $5.8 billion in OCO appropriations; however, the amounts were not directly aligned with President Obama's request.\nH.R. 1301 (the second FY2017 defense appropriations bill) was generally based on the Obama Administration's initial FY2017 budget request, balancing the November 2016 OCO budget amendment and the amount provided by H.R. 2028 ( P.L. 114-254 ).\nTitle IX of Division C of the Consolidate Appropriations Act, 2017 ( H.R. 244 / P.L. 115-31 ) carried forward the OCO funding levels proposed in H.R. 1301 . However, Title X provided an additional $14.8 billion in \"Additional Appropriations,\" all of which were designated as OCO funding but were not associated with requirements for contingency operations (see Table 15 ).", "Title X of Division C of the Consolidated Appropriations Act, 2017 ( H.R. 244 / P.L. 115-31 ) included $14.8 billion in \"Additional Appropriations\" for the Department of Defense. These additional appropriations partly respond to the Trump Administration's March 2017 request for an additional $30.0 billion to be added to the Obama Administration's budget request for FY2017. The Trump Administration's request included $24.9 billion in additional funding for the base budget and $5.1 billion in funding for Overseas Contingency Operations.\nThe current national defense discretionary limit set by the BCA is $551.0 billion for FY2017. The Trump Administration's request for additional appropriations was accompanied with a request to raise the FY2017 BCA limit on defense spending by $25.0 billion in order to accommodate the additional $24.9 billion in base budget authority.\nCongress did not act on the Trump Administration's request to raise the FY2017 BCA limit, instead choosing to designate the additional appropriations provided—$14.8 billion of the $24.9 billion requested—as Overseas Contingency Operations funding. This effectively precludes the additional appropriations from triggering sequestration. Table 16 provides a comparison of the Trump Administration's request and the additional appropriations provided by Title X of Division C of P.L. 115-31 .\nConsideration of the FY2017 defense budget request spanned two Presidents and two Congresses over 15 months, making it difficult to cogently compare the budget request with the final amounts appropriated. The NDAA, enacted in December 2016, authorized additional base appropriations by redirecting amounts that were requested for OCO. In their final actions on FY2017 funding, the appropriators responded to the Trump Administration's request for additional base budget authority by increasing the level of OCO-designated funds. Table 17 provides a comparison of authorization and appropriations of OCO funding for contingency operations.\nSubject to the same considerations that limit reasonable comparison of final authorization and appropriations levels, Table 18 provides the amounts designated in the NDAA ( P.L. 114-328 ) as OCO funding for base budget purposes, and the \"additional appropriations\" designated as OCO funding in Division C, Title X of Consolidated Appropriations Act, 2017 ( P.L. 115-31 ).\nAppendix A. Authorization Action on Selected Programs\nSource: H.Rept. 114-840 , Conference Report to accompany S. 2943 , National Defense Authorization Act for FY2017 .\nSource: H.Rept. 114-840 , Conference Report to accompany S. 2943 , National Defense Authorization Act for FY2017 .\nAppendix B. Appropriations Action on Selected Programs" ], "depth": [ 0, 1, 1, 2, 2, 2, 2, 3, 2, 1, 1, 1, 2, 2, 3, 2, 2, 3, 3, 2, 3, 3, 3, 3, 3, 2, 3, 3, 3, 3, 3, 3, 2, 3, 4, 4, 3, 3, 2, 3, 3, 3, 3, 4, 4, 4, 2, 3, 2, 3, 3, 3 ], "alignment": [ "h5_title h0_title h2_title h4_title h3_title h1_title h6_title", "h4_full h2_full h5_full h0_full h3_full h6_full", "h0_full h2_title h1_title h4_title", "h4_full", "", "", "h2_title h1_full", "h2_full h1_full", "", "h3_full", "h6_full", "h6_title h4_title", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "h6_title h4_title", "h4_full", "h6_full", "" ] }
{ "question": [ "Why did the Obama Administration request $523.9 billion in FY2017?", "What is the OCO budget category?", "What is the remainder of the DOD budget?", "How did discussions about annual caps on base budget discretionary appropriations affect the FY2017 defense budget?", "How were these caps established?", "How are OCO appropriations factored into established spending limits?", "How did the 2015 BBA affect the defense budget?", "How did the Obama Administration's request measure against the BBA's caps?", "How did the Obama Administration's request affect the base budget?", "How do the House-passed bills measure up against the BBA spending amounts?", "How would the bills have changed the OCO-designated funding?", "How long could the supplemental OCO funding support OCO's operating costs?", "How did the defense budget bills measure up against the Obama Administration request?", "How large was the actualized budget?", "How did this funding compare to the administration's request?", "How was DOD's military construction budget funded?", "How did the resolution affect temporary funding?", "What legislation followed the first FY2017 CR?", "How did this legislation affect OCO-designated funds?", "How did H.J.Res. 99/P.L. 115-30 affect the pending bills?", "How was the final bill passed?", "How was Division C altered?", "To what extent are Title X amounts designated for OCO?", "What were the final DOD funding statistics?" ], "summary": [ "In February 2016, the Obama Administration requested $523.9 billion to cover the FY2017 discretionary base budget of the Department of Defense (DOD) and $58.8 billion in discretionary funding for Overseas Contingency Operations (OCO).", "The OCO budget category generally includes funding related to the incremental cost of operations such as those in Afghanistan, Iraq, Syria and certain DOD activities aimed at deterring Russian aggression in Europe.", "The balance of the DOD budget—that portion not designated as OCO—comprises what is often referred to as the base budget.", "Congressional deliberations on the FY2017 defense budget occurred in the context of broader budget discussions about the binding annual caps on base budget discretionary appropriations for defense and nondefense programs.", "These caps were established by the Budget Control Act of 2011 (BCA/P.L. 112-25) as last amended by the Bipartisan Budget Act of 2015 (BBA/P.L. 114-74).", "The BCA provides that amounts appropriated for OCO or emergencies are not counted against the established discretionary spending limits.", "In addition to raising the FY2017 discretionary defense spending cap on the base budget to $551 billion, the 2015 BBA set a nonbinding target of $58.8 billion for OCO-designated defense spending in FY2017.", "The Obama Administration's FY2017 budget request matched the base budget cap and the OCO target that were set by the BBA.", "Of note, the request allocated $5.1 billion of the $58.8 billion in OCO-designated funds for base budget purposes.", "In the House-passed versions of both the NDAA (H.R. 4909) and the initial defense appropriations bill (H.R. 5293) for FY2017, the total amounts for base and OCO conformed with the amounts specified by the BBA.", "However, both House bills would have increased the amount of OCO-designated funding to be used for base budget purposes: the authorization bill would have added $18.0 billion and the appropriations bill would have added $15.1 billion to the $5.1 billion so-designated in the Obama Administration's request.", "According to the House Armed Services Committee, the remaining OCO funds authorized by H.R. 4909 – amounting to $35.7 billion – would cover the cost of OCO through April 2017. By then, the committee said, the newly elected President could request a supplemental appropriation to cover OCO costs for the balance of FY2017.", "Neither the Senate-passed NDAA nor the version of the defense appropriations bill reported by the Senate Appropriations Committee (S. 3000) would have increased the amount of OCO-designated funding to be used for base budget purposes above the Obama Administration's request.", "The enacted version of the FY2017 NDAA (S. 2943/P.L. 114-328), authorized $543.4 billion for DOD base budget activities—$2 million less than was requested—and $67.8 billion designated as OCO funding.", "The OCO-designated funding totaled $3.2 billion more than the Administration's OCO request as amended in November and this additional funding was directed at base budget requirements.", "DOD's military construction budget for FY2017 was funded in the annual appropriations bill that also funded the Department of Veterans Affairs and certain other agencies (H.R. 5325/P.L. 114-223, enacted on September 29, 2016).", "That bill also incorporated a continuing resolution to provide temporary funding for federal agencies for which no FY2017 funds had been appropriated by the start of the fiscal year (October 1, 2016).", "This first FY2017 continuing resolution (CR) was succeeded by a second continuing resolution (H.R. 202/P.L. 114-254), enacted on December 10, 2016.", "Division B of this second FY2017 CR also appropriated a total of $5.8 billion for OCO-designated DOD funds for FY2017, including $1.45 billion requested in the Obama Administration's November 2016 budget amendment.", "A third CR (H.J.Res. 99/P.L. 115-30) was enacted April 28, 2017 to provide an extra week to finalize the bills.", "On May 3, 2017, the House passed a third version of the FY2017 defense appropriations bill as Division C of H.R. 244, the Consolidated Appropriations Act, 2017.", "Division C aligned with H.R. 1301 but included a new title (Title X) which provided $14.8 billion in response to the Trump Administration's request for additional appropriations.", "All of the amounts in Title X are designated OCO funding.", "In total, H.R. 244 provided $582.4 billion in funding for the DOD. The Senate passed H.R. 244 on May 5, 2017, and the bill was signed into law (P.L. 115-31) before the third FY2017 CR expired." ], "parent_pair_index": [ -1, -1, 1, -1, 0, -1, -1, 0, -1, -1, 0, -1, -1, 0, -1, -1, 0, -1, 2, -1, -1, -1, 2, -1 ], "summary_paragraph_index": [ 1, 1, 1, 5, 5, 5, 6, 6, 6, 7, 7, 7, 8, 8, 8, 9, 9, 9, 9, 11, 11, 11, 11, 11 ] }
CRS_R40534
{ "title": [ "", "An Overview of FDA Premarket Notification and Premarket Approval (PMA) of Medical Devices", "Premarket Notification (§510(k) Submissions)", "Premarket Approval (PMA)", "PMA Supplements", "Preemption", "Federal Preemption of State Law", "Arguments for Federal Preemption of State Law Tort Claims with Respect to Devices", "Arguments Against Federal Preemption of State Law Tort Claims with Respect to Devices", "The FDA's Position on Preemption in Medical Device Cases", "Riegel v. Medtronic, Inc.", "The U.S. Supreme Court Decision", "Justice Stevens's Concurrence", "Justice Ginsburg's Dissent", "Legal Implications", "Preemption Jurisprudence", "The FDA and Preemption Cases", "Procedural Implications", "Regulatory Implications", "Legislative Implications", "Legislative Proposals", "Creating a Victim's Compensation Fund", "Future Legislation Referencing a State's \"Requirements\" and State Common Law" ], "paragraphs": [ "In order to elucidate the Supreme Court's decision in Riegel v. Medtronic, Inc. , this report begins by providing background on the Food and Drug Administration's (FDA's) premarket regulation of medical devices and an overview of federal preemption of state law. The report discusses arguments for and against federal preemption of state law tort claims with respect to medical devices. Next, the report examines the FDA's shifting position on federal preemption in medical device cases. The report then explains the Supreme Court's decision in Riegel v. Medtronic, Inc. , as well as the concurring and dissenting opinions. Finally, the report analyzes the implications of the Court's decision in Riegel for Congress, consumers, medical device manufacturers, and preemption jurisprudence.\nThis report focuses on Class III medical devices because it is federal preemption of state law requirements that are \"different from, or in addition to\" federal requirements for Class III devices with premarket approval (PMA) that was at issue in Riegel .", "The Federal Food, Drug, and Cosmetic Act (FFDCA) sets forth a detailed set of statutory requirements designed to ensure that medical devices are safe and effective. As a result, medical devices must meet certain minimum requirements before they may be marketed in the United States. For example, the device cannot be adulterated or misbranded, and there are registration, good manufacturing practices, and labeling requirements. There are also more specific requirements that a device manufacturer must follow, which are determined by the level of risk that the device poses to patients from its use or misuse.\nMedical devices are classified according to risk—Class I (low risk), Class II (moderate risk), and Class III (high risk)—and there are certain requirements based on that risk. Class III devices, which are those \"purported or represented to be for a use in supporting or sustaining human life or for a use which is of substantial importance in preventing impairment of human health\" or those that \"present[] a potential unreasonable risk of illness or injury,\" are generally subject to premarket approval (PMA). Examples of Class III devices include replacement heart valves, silicone gel-filled breast implants, and pacemaker pulse generators.\nAll new devices are automatically designated as Class III, and therefore must receive PMA, unless the device meets one of three exceptions: (1) the \"grandfather\" provision for devices on the market prior to the passage of the Medical Device Amendments of 1976 (MDA), (2) a device on the market after the passage of the MDA that has been classified as Class I or Class II or reclassified as Class I or Class II by the FDA after the manufacturer files a petition for reclassification, or (3) the device is \"substantially equivalent\" to either a grandfathered device or a Class I or Class II device. A device is \"substantially equivalent\" if the FDA makes such a determination based on a comparison of the new device with a predicate device. A predicate device could have been marketed either before or after 1976. The device seeking the \"substantially equivalent\" determination must either have (1) the same intended use and the same technological characteristics as the predicate device, or (2) the same intended use, different technological characteristics, and information and data that demonstrate safety and effectiveness, and cannot \"raise different questions of safety and effectiveness than the predicate device.\" The manufacturer decides which predicate device to use for the comparison with the new device. However, the FDA has discretion in determining whether the comparison is appropriate.", "Premarket notification is known as a Section 510(k) submission, after the section of the FFDCA that requires it. Class III devices generally require a premarket notification as well as PMA. However, some Class III devices may be marketed only with a Section 510(k) submission—if the device was introduced after the passage of the MDA in 1976 and is substantially equivalent to a pre-1976 device, but there is no regulation requiring PMA. The majority of new Class III medical devices reach the marketplace after a Section 510k submission, as opposed to the receipt of FDA PMA.\nPremarket notification applies to new devices that are not substantially equivalent to pre-1976 devices, devices introduced after passage of the MDA in 1976 that have been reclassified as Class I or Class II, and devices that may have been or currently are on the market, but that have been significantly modified. At least 90 days before a manufacturer may market one of these new devices, the manufacturer must submit a notification to the FDA. After the FDA reviews a premarket notification under Section 510(k), the agency may find that the device either is or is not substantially equivalent to a predicate device, request more information, withhold a decision pending the submission of certain information, or advise the submitter that the device does not require premarket notification.", "As noted above, a PMA application is required for most Class III devices, with three exceptions. In the PMA process, the FDA determines if these devices have a \"reasonable assurance of ... safety and effectiveness.\" A PMA application must include, among other facts, information regarding proposed labeling; reports of information \"concerning investigations which have been made to show whether or not such device is safe and effective;\" a description of the manufacturing and processing methods; samples of the device and its components; and information regarding the components, ingredients, and operating principles of the device. A PMA application will be denied approval if \"there is a lack of a showing of reasonable assurance that such device is safe [and effective] under the conditions of use\" in the proposed labeling; if the methods of manufacturing, processing, packing, or installing the device do not conform to good manufacturing practices; if the proposed labeling is false or misleading; or if the device does not meet performance standards. The FDA cannot disclose the existence of a PMA application file before issuing an approval order to the applicant \"unless it previously has been publicly disclosed or acknowledged.\"", "Once a device has been approved through the PMA process, the manufacturer can market the device only for its intended use. For example, a device, such as a stent, approved to treat coronary artery disease may not be marketed for treatment of blocked biliary ducts unless the manufacturer files a PMA supplement for FDA review and approval. The FDA must approve the PMA supplement before the manufacturer may make a \"change affecting the safety or effectiveness of the device for which the applicant has an approved PMA,\" such as changes to the labeling, packaging, sterilization procedures, and new indications for use of the device (as in the stent example). However, in certain cases, a change to a device with PMA \"that enhances the safety of the device or the safety in the use of the device may be placed into effect by the applicant prior to the receipt ... of a written FDA order approving the PMA supplement.\"", "This section will first provide an overview of federal preemption of state law. It will then discuss arguments for and against preemption of state law tort claims with respect to medical devices. Finally, this section will discuss the change in the FDA's position on preemption in medical device cases.", "The preemption doctrine is derived from the Supremacy Clause of the U.S. Constitution, which establishes that the laws of the United States \"shall be the supreme law of the land; and the judges in every state shall be bound thereby, any thing in the Constitution or laws of any State to the contrary notwithstanding.\" In applying this constitutional mandate, courts have recognized both express and implied forms of preemption, which are \"compelled whether Congress' command is explicitly stated in the statute's language, or implicitly contained in its structure and purpose.\" Both types of preemption may apply to state legislation, regulations, and common law. As the Supreme Court held in Gade v. National Solid Wastes Management Association , \"the question whether a certain state action is pre-empted by a federal law is one of congressional intent. The purpose of Congress is the ultimate touchstone. To discern Congress' intent we examine the explicit statutory language and the structure and purpose of the statute.\"\nIn the express preemption context, a federal statute will be deemed to supplant existing state law to the extent that it contains an explicit provision to that effect, the scope of which is determined by interpreting the language of the provision and analyzing the legislative history as necessary. Where express preemption provisions are not present, federal law may preempt state law implicitly. There are several different ways to conceptualize the doctrine of implied preemption, but it is often subdivided into three general categories for purposes of analysis: (1) federal occupation of the entire field of regulation; (2) actual conflict between federal and state requirements; and (3) state requirements that frustrate congressional purpose.\nCourts, however, often encounter difficulty when federal law is silent as to the preemptive effect. The Supreme Court traditionally begins its analysis in this context with a presumption against preemption, an \"assumption that the historic police powers of the States were not to be superseded by [a federal law] unless that was the clear and manifest purpose of Congress.\" Several decisions by the Court have strengthened this presumption, including Maryland v. Louisiana , which stated that \"[c]onsideration under the Supremacy clause starts with the basic assumption that Congress did not intend to displace state law,\" and Chicago & North Western Transportation Co. v. Kalo Brick & Tile Co. , which held that \"[p]reemption of state law by federal statute or regulation is not favored 'in the absence of persuasive reasons either that the nature of the regulated subject matter permits no other conclusion, or that the Congress has unmistakably ordained.'\" Additionally, in the Supreme Court case Medtronic, Inc. v. Lohr , which also addressed preemption of state tort claims under the MDA, the plurality opinion noted:\nThroughout our history the several States have exercised their police powers to protect the health and safety of their citizens. Because these are \"primarily, and historically, ... matter[s] of local concern,\" Hillsborough County v. Automated Medical Laboratories, Inc. , 471 U.S. 707, 719 (1985), the \"States traditionally have had great latitude under their police powers to legislate as to the protection of the lives, limbs, health, comfort, and quiet of all persons.\" Metropolitan Life Ins. Co. v. Massachusetts , 471 U.S. 724, 756 (1985) (internal quotation marks omitted).\nThese standards, however, are highly case specific in their application. Indeed, the Supreme Court itself has noted that \"none of these expressions provide an infallible constitutional test or an exclusive constitutional yardstick. In the final analysis, there can be no crystal clear distinctly marked formula.\" Thus, cases involving federal preemption of state law often hinge on the particular factual circumstances of a given case.", "There are policy arguments for and against the merits of preemption in the medical device context. Arguments for federal preemption of common law in the medical device context focus on (1) uniform national standards, (2) the rigor of the PMA process, (3) the FDA's expertise in this field, and (4) the potential for delay in the development of new products. Businesses tend to favor preemption, as regulated industries \"generally prefer uniform, national regulation over varying state regulation.\"\nThose in favor of preemption, including the Pharmaceutical Research and Manufacturers of America (PhRMA) and trade groups for medical device makers such as the Advanced Medical Technology Association (AdvaMed), equate jury verdicts under state common law with the imposition of a state law \"requirement\" in addition to \"requirements\" that are imposed for devices under the FFDCA and FDA regulations. For example, medical device manufacturers have argued that in light of the rigor of the FDA's PMA process and its resulting \"device-specific design, manufacturing, and labeling requirements,\" separate jury verdicts would also produce \"requirements\" as a practical matter with regard to a device's design, manufacture, or label. One court of appeals case explained the effect of a jury verdict this way:\nThe effect of a jury finding of negligent failure to warn would be that state law would require [the manufacturer] to change the label and package insert for [the medical device], but [the manufacturer] may not unilaterally make such changes under federal law. A device may not be labeled in a manner inconsistent with any conditions specified in its PMA. 21 C.F.R. § 814.80 (2000). A manufacturer must submit a Supplemental PMA for any proposed labeling changes that affect the safety of the device. Id. at § 814.39(a).\nOthers in favor of preemption, such as the George W. Bush Administration, similarly have pointed to the FDA as an agency composed of expert scientists vested with authority to undertake matters such as PMA, which should not be overruled by potentially inconsistent state juries. They argue that juries lack the FDA's expertise to engage in a balancing of the benefits and risks that products may pose. Finally, preemption advocates argue that to decide differently may delay or discourage development and marketing of products with beneficial or even life-saving potential, and that recalls of medical devices are \"rare.\" They also respond to the argument that preemption does not give the manufacturer the incentive to update and improve its devices by saying that market pressures will force companies to change their products.", "In contrast, arguments against federal preemption of common law in the medical device field focus on (1) congressional intent and legislative history; (2) protections for consumers, who may otherwise be left without a remedy; (3) the change in the FDA's view with regard to preemption, as well as the general presumption against preemption; (4) viewing FDA approval as a preliminary step—a \"floor\" rather than a \"ceiling\"—that does not hold manufacturers accountable for safety concerns; and (5) questioning the agency's capabilities in terms of resources and its reliance on industry.\nWith regard to congressional intent, some commentators have noted that \"Congress did not directly address tort suits in the MDA, despite decades of lawsuits against drug manufacturers.\" Opponents of federal preemption of state common law claims in the device area, such as Senator Kennedy and Representative Waxman, have argued that Congress's silence on the issue evidences \"its intent not to preempt the suits,\" or alternately, that the discussions in the legislative history do not provide evidence of such intent. In Riegel , discussed below, the plaintiffs' attorney also questioned whether Congress would \"have really intended to protect the manufacturer from liability,\" since the passage of the MDA occurred in the wake of the Dalkon Shield cases, in which an intrauterine device \"was linked to serious infections and several deaths, not to mention a large number of pregnancies.\"\nSome who are against preemption view tort law as an \"important and necessary adjunct to the regulatory process\" and cite the FDA's view prior to 2004 that federal law did not preempt product liability lawsuits. While proponents of preemption see it as a way to protect orderly business functions, others assert that \"industry has been pushing to expand federal pre-emption for the past 25 years as a wholesale, get-out-of-jail-free card.\" The Riegels' counsel and others have argued that FDA PMA should be seen as \"a preliminary judgment of safety and effectiveness that did not relieve a manufacturer of an obligation to make a device better and safer.\"\nMoreover, as the Justices explored at oral argument in Riegel , preemption could shield manufacturers who discover a risk or problem with their FDA-approved device, if the FDA has not yet learned of the problem or has not taken action as a result of the risk. It could be argued that the FDA is dependent on manufacturers to provide information regarding devices, that \"[t]here is no opportunity for public comment or for any public challenge to the information presented to the FDA by the device manufacturer\" in the PMA application, and to allow the common law tort claims to go forward may reveal information in the discovery process that manufacturers withheld from the FDA in the PMA process. This view sees the state tort law system as a backstop, as safety concerns may \"have been uncovered not by the agency but during the course of litigation.\" Concerns have been raised that companies may also not \"respond to safety concerns that arise after a product is on the market,\" if federal law preempts state tort claims, or even attempt to manufacture new devices that are safer or better because suits related to marketing previously approved devices would be preempted. Those who view the agency as overburdened may also similarly view the agency's PMA process as inadequate to protect patients.", "Over the years, the FDA's position on preemption of state tort law claims in medical device cases has shifted. This section will discuss the express preemption provision, as well as the FDA's positions since the provision was first enacted in 1976.\nThe FFDCA contains an express preemption provision with respect to medical devices. This provision was included as part of the MDA, which was enacted in 1976. The statute, 21 U.S.C. Section 360k(a), which was at issue in Riegel , provides:\nExcept as provided in subsection (b) of this section, no State or political subdivision of a State may establish or continue in effect with respect to a device intended for human use any requirement—\n(1) which is different from or in addition to, any requirement applicable under [federal law] to the device, and\n(2) which relates to the safety or effectiveness of the device or to any other matter included in a requirement applicable to the device under [relevant federal law].\nHowever, the agency may exempt state requirements that are \"more stringent\" and state requirements \"required by compelling local conditions\" if \"compliance with the requirement would not cause the device to be in violation of any applicable requirement under\" the FFDCA.\nThe FDA subsequently issued regulations interpreting this preemption provision in 1978, which were amended after the Supreme Court issued its decision in Medtronic, Inc. v. Lohr . In that case, the Court concluded that state common law negligence actions against manufacturers of devices found by the FDA to be \"substantially equivalent\" under the Section 510(k) process were not preempted. In the agency's post- Lohr 1996 final rule amending the regulations, the FDA noted that \"the new quality system regulation does not preempt State tort and common law remedies.\" The regulations presently provide:\nState or local requirements are preempted only when the Food and Drug Administration has established specific counterpart regulations or there are other specific requirements applicable to a particular device under the act, thereby making any existing divergent State or local requirements applicable to the device different from or in addition to, the specific Food and Drug Administration requirements.\n…\nSection 521(a) [21 U.S.C. § 360k(a)] does not preempt State or local requirements of general applicability where the purpose of the requirement relates either to other products in addition to devices ... or to unfair trade practices in which the requirements are not limited to devices.\nAs indicated by these regulations, the FDA's position, prior to the early 2000s, was of a \"long-standing presumption against preemption in implementing section 521\" of the FFDCA (21 U.S.C. §360k). The agency's outlook with regard to the scope of the preemption provision was that it \"should be interpreted narrowly, with a presumption against preemption.\" With regard to whether the preemption provision applied to state tort claims, the \"FDA did not have occasion to address the precise issue of whether [21 U.S.C. § 360k] preempts state tort claims before that issue was litigated in private lawsuits.\" In 1997, the then-Chief Counsel of the FDA argued that \"although the agency had not formally expressed its position on the precise issue, it is clear from the views it expressed in many other contexts [such as a 1984 advisory opinion, a response to a 1980 request from California for an exemption from preemption, and a response to \"a congressional request for an opinion on the preemptive status of another California statute\"] that it did not believe that state tort claims were preempted under\" 21 U.S.C. §360k. She referred to the statute's legislative history, the exemption procedure, and the lack of congressional mention of its intent to preempt state common law claims when noting the agency's \"belie[f] that Congress intended to restrict preemption to positive enactments (for example, legislation or regulations) that apply to the marketing of medical devices within a state.\"\nMeanwhile, in Lohr , the agency had argued in an amicus brief that \"state tort claims generally are not preempted under\" 21 U.S.C. §360k. After the Supreme Court's decision in Lohr , the then-Chief Counsel for the FDA, Margaret J. Porter, stated:\nFDA regulation of a device cannot anticipate and protect against all safety risks to individual consumers. Even the most thorough regulation of a product such as a critical medical device may fail to identify potential problems presented by the product. Regulation cannot protect against all possible injuries that might result from use of a device over time. Preemption of all such claims would result in the loss of a significant layer of consumer protection, leaving consumers without a remedy for injuries caused by defective medical devices. Moreover, FDA's regulation of devices would have been accorded an entirely different weight in private tort litigation than its counterpart regulation of drugs and biologics. This disparity is neither justified nor appropriate, nor does the agency believe it was intended by Congress when section 521 [21 U.S.C. § 360k] was enacted.\nThe FDA's view on preemption in medical device cases appeared to shift in 2004, when the agency filed an appellate brief in Horn v. Thoratec Corp. , in which the plaintiff sued the medical device manufacturer alleging negligence, defective design, defective manufacture, and failure to warn. In Horn , the FDA submitted an amicus curiae letter brief to the court, which the court referenced, in which the agency \"unequivocally expressed the opinion that state common law claims such as those made by Horn against a PMA-approved device are preempted.\"\nHowever, the shift may have occurred earlier. As the court in Horn noted, the FDA argued in a 2003 statement of interest in a Tennessee circuit court case that PMA \"triggers preemption of a wide array of requirements imposed under state tort law.\" Others have argued that the agency's support of preemption began even prior to the change of presidential Administrations from Bill Clinton to George W. Bush, although this assertion was not limited to medical device cases. One scholar has characterized preemption \"as a fundamentally political issue.\"\nIn its 2004 amicus brief in Horn , the agency specifically acknowledged that it was disclaiming its previous view that 21 U.S.C. Section 360k \"does not preempt a state tort law claim concerning an FDA-approved device,\" which the agency had articulated in a 1997 amicus brief. The agency gave several reasons for its change in position. The FDA previously asserted that its approval of a manufacturer's design did not \"convert the features of that design into federal requirements,\" but now stated that such a \"proposition does not adequately account for the highly detailed ... nature of the PMA process.\" The agency also noted that its past position viewed the PMA process as a minimum standard, which \"should not displace state common law that may provide additional protection to consumers,\" but said in its 2004 amicus brief that PMA \"sets a ceiling as well as a floor.\" Finally, the FDA noted that its position change \"reflects in part the decisions applying Lohr issued by the federal courts\" since the Supreme Court issued that opinion.\nThe agency's view under the George W. Bush Administration was that state common law tort claims, such as those at issue in Horn and Riegel , are preempted under 21 U.S.C. Section 360k because the FDA granted PMA, which imposes specific federal requirements on the Class III medical device at issue, and the state common law claims \"would impose a requirement different from, or in addition to, the requirements imposed by FDA in granting pre-market approval.\" The agency previously stated that even though it does not issue specific federal regulations for a device, \"the agency's approval of this device through the PMA process does impose specific requirements for the product, including requirements for its design, manufacturing, performance, labeling, and use,\" which are based on the manufacturer's PMA application. Additionally, the agency asserted that five Justices in Lohr \"concluded that a state common law tort judgment is a 'requirement' under Section 360k(a).\" Therefore, under the agency's view of preemption during the Bush Administration, \"any finding of liability based upon [a device manufacturer's] failure to satisfy a standard different from those approved by the FDA in the PMA process would necessarily rest upon an implicit requirement that this device be designed, manufactured, or marketed in a way that differs from the way approved by FDA.\"\nThough the Riegel decision was issued before the start of the Obama Administration, the President announced his policy on preemption in a 2009 memorandum, which stated that \"preemption of State law by executive departments and agencies should be undertaken only with full consideration of the legitimate prerogatives of the States and with a sufficient legal basis for preemption.\" The memorandum explicitly addressed the inclusion of preemption statements in regulatory preambles and said such statements should not be included unless the preemption provision is included in the regulation itself. Additionally, such provisions should not be included in the regulation unless they were \"justified under legal principles governing preemption,\" including those in President Clinton's Executive Order 13132 on federalism. That executive order requires agencies to \"construe … a Federal statute to preempt State law only where the statute contains an express preemption provision or there is some other clear evidence that the Congress intended preemption of State law, or where the exercise of State authority conflicts with the exercise of Federal authority under the Federal statute.\" When addressing preemption in terms of federal requirements in recent regulations, the FDA has cited President Clinton's executive order on federalism as well as the Supreme Court's holding in Riegel .\nThe Obama memorandum also called upon agencies to review regulations issued in the previous 10 years that included statements in the preamble or the regulation itself with regard to preemption of state law. A 2008 Associated Press article noted that 51 regulations proposed or adopted since 2005 had placed limits on lawsuits and that a combined 41 of those 51 came from the FDA and the National Highway Traffic Safety Administration. In 2011, the FDA issued its preemption review. The FDA concluded that its position on preemption that had been articulated in the preamble to a rule on supplemental applications for labeling changes for prescription drugs, biologics, and devices—a position also referenced in rules on nonprescription drugs and food labeling—could not \"be justified under legal principles governing preemption.\" These legal principles included the Supreme Court's decision in Wyeth v. Levine , which explicitly addressed the FDA's preemption position in that labeling rule.", "This section will discuss the Supreme Court's 2008 decision in Riegel , as well as the concurrence and the dissent. The Riegel case involved preemption of state common law tort suits regarding medical devices that have been FDA-approved under the PMA process.", "The Riegel case involved a catheter that had received PMA from the FDA to be marketed by Medtronic, Inc. as a Class III device. The \"device's labeling stated that use was contraindicated for patients with ... calcified stenoses,\" in other words, narrowed or constricted passages. The patient, Charles Riegel, had a \"diffusely diseased and heavily calcified\" right coronary artery. Riegel's doctor inflated the \"catheter five times, to a pressure of 10 atmospheres,\" although the device's labeling \"warned that the catheter should not be inflated beyond its rated burst pressure of eight atmospheres.\" The catheter burst on the fifth inflation, and \"Riegel developed a heart block, was placed on life support, and underwent emergency coronary bypass surgery.\" The patient and his wife raised New York state common law claims of \"strict liability; breach of implied warranty; and negligence in the design, testing, inspection, distribution, labeling, marketing, and sale of the catheter.\"\nThe Supreme Court found that the Medical Device Amendments of 1976 (MDA) preempted state tort law claims because the common law negligence and strict liability claims fell into the category of \"any requirement\" in the bolded language below. Section 360k(a) of Title 21, United States Code (FFDCA §521) reads:\nExcept as provided in subsection (b) of this section, no State or political subdivision of a State may establish or continue in effect with respect to a device intended for human use any requirement —\n(1) which is different from or in addition to , any requirement applicable under [federal law] to the device, and\n(2) which relates to the safety or effectiveness of the device or to any other matter included in a requirement applicable to the device under [relevant federal law].\nIn other words, the Court held that the federal government had established requirements in the PMA process for medical devices in the MDA. The Court said that the New York state common law claims were \"different from or in addition to\" the federal MDA requirements because \"reference to a State's 'requirements' includes its common-law duties.\"\nTo reach its holding, the Court addressed two questions: (1) Has the federal government established requirements applicable to the medical device? and (2) If the answer to the first question is yes, are the plaintiffs' common law claims (such as negligence in the design, labeling, and marketing of the catheter) based on state requirements that are \"different from, or in addition to\" the federal requirements, \"and that relate to safety and effectiveness\"?\nFirst, the Court held that the federal government had \"established requirements applicable to\" the device at issue, Medtronic's catheter, and that PMA \"imposes 'requirements' under the MDA.\" In making its determination, the Court distinguished its earlier decision in Medtronic, Inc. v. Lohr , which held that \"federal manufacturing and labeling requirements\" do not preempt common law claims of negligence and strict liability in instances where (1) any federal requirements are not specific to the device at issue; and (2) the FDA finds that a device \"is 'substantially equivalent' to another device exempt from premarket approval,\" because this constituted an exemption, not a \"requirement.\" The Court found that, unlike the substantial equivalence process, PMA is device-specific and is not an exemption, but rather a \"requirement.\" The Court differentiated from Lohr by reasoning that PMA is focused on safety, rather than equivalence; that PMA is a formal FDA review, as opposed to the lack of formal review that the device subject to premarket notification in Lohr received; and that devices that receive PMA may not deviate from the FDA-approved specifications in the PMA application.\nSecond, the Court held that \"New York's tort duties constitute 'requirements' under the MDA\" and that these \"requirements\" were \"different from, or in addition to\" the federal requirements. The Court began by noting that five Justices in Lohr \"concluded that common-law causes of action for negligence and strict liability do impose 'requirement[s]' and would be pre-empted by federal requirements specific to a medical device.\" The Lohr Court had said that it did \"not believe that [the MDA's] statutory and regulatory language necessarily precludes ... 'general' state requirements from ever being pre-empted.\" In other words, the MDA could potentially preempt general state \"requirements,\" or general state common law under circumstances such as strict liability, negligence, and implied warranty claims.\nThe Court also addressed the Riegels' argument that general common law duties are not \"requirements\" specific to medical devices, and therefore should not be preempted. This argument depended on the FDA regulation 21 C.F.R. Section 808.1(d)(1), which states \"that MDA pre-emption does not extend to '[s]tate or local requirement of general applicability [whose] purpose ... relates either to other products in addition to devices.'\" However, the regulation also \"states that the MDA sets forth a 'general rule' pre-empting state duties 'having the force and effect of law (whether established by statute, ordinance, regulation, or court decision).'\" It was this subsection of the regulation that prompted the Court to note that only common law duties are established by court decision.\nAdditionally, the Court undertook a discussion of the statutory text and informed Congress of the meaning that \"this Court will assign to terms regularly used\" in congressional enactments: \"Absent other indication, reference to a State's 'requirements' includes its common-law duties.\" The Court then remarked that \"[i]n the present case, there is nothing to contradict the normal meaning\" that the term \"requirements\" will include state common-law duties. The Court then indicated that state tort law was perhaps \"less deserving of preservation\" than state statutes or state regulations, as one state jury could potentially \"set state standards 'different from, or in addition to' federal standards.\"\nThe Court held that New York's common law causes of action were preempted by the MDA \"only to the extent that they are 'different from, or in addition to' the requirements imposed by federal law.\" To the extent that the lawsuit raises claims that \"'parallel' rather than add to, federal requirements,\" such as a state \"damages remedy for claims premised on a violation of FDA regulations,\" it does not appear that such suits would be preempted.", "Justice Stevens agreed with the dissent's \"description of the actual history and principal purpose of the pre-emption provision at issue\" and observed that the text of the provision \"cover[s] territory not actually envisioned by its authors.\" He also dispensed with congressional intent in this case: \"we have frequently concluded that 'it is ultimately the provisions of our laws rather than the principal concerns of our legislators by which we are governed.'\" However, he agreed with the majority that New York common law duties \"constitute requirements with respect to the device at issue that differ from federal requirements relating to safety and effectiveness.\" He found that the preemption provision's language \"encompasses other types of 'requirements'\" and that \"common-law rules administered by judges ... create and define legal obligations, [therefore] some of them unquestionably qualify as 'requirements.'\"", "Justice Ginsburg's dissent focused on the intent of Congress in enacting the MDA, as well as previous Supreme Court cases emphasizing congressional intent as the \"ultimate touchstone of pre-emption analysis.\" The dissent tracks the Court's presumption against preemption analysis outlined earlier in this report and stated that \"[w]here the text of a preemption clause is open to more than one plausible reading, courts ordinarily 'accept the reading that disfavors pre-emption.'\"\nBeginning with the majority's holding that \"[a]bsent other indication, reference to a State's 'requirements' includes its common law duties,\" she stated that \"other indication[s]\" exist in the MDA and its legislative history that preclude the Court's conclusion that the MDA preempts state common law claims. Justice Ginsburg noted the act's consumer-oriented purpose, as well as congressional awareness of over 500 lawsuits related to the Dalkon Shield medical device: \"I find informative the absence of any sign of a legislative design to preempt state common-law tort actions.\" She pointed to the absence of a federal compensation scheme for consumers injured by FDA-approved medical devices as evidence that Congress did not intend to preempt state common law suits. Furthermore, she referenced the Court's plurality in Lohr , which stated: \"[N]othing in the hearings, the Committee reports, or the debates ... suggest[ed] that any proponent of the legislation intended a sweeping pre-emption of traditional common-law remedies against manufacturers and distributors of defective devices.\" Justice Ginsburg also cited remedies provided by the MDA—such as the FDA's ability to order a device manufacturer to repair or recall the device—and a provision stating that compliance with an FDA order to recall or repair a device \"shall not relieve any person from liability under Federal or State law,\" as evidence that Congress did not intend to preempt state common law suits.\nWith regard to the FDA's shift in its position on preemption, she took note of the FDA's pre-2003 view, as described by a former FDA counsel, that \"FDA product approval and state tort liability usually operate independently, each providing a significant, yet distinct, layer of consumer protection ... [as] [e]ven the most thorough regulation of a product ... may fail to identify potential problems.\" The dissent then addressed the deference that should be granted to the FDA's new position on preemption, finding that the agency's announcement of its position shift in an amicus brief would be entitled to little deference when compared with the FDA's previous view, the presumption against preemption, and the MDA itself.\nThe dissent next examined the history of federal regulation of medical devices, and in part, federal regulation of drugs and additives. Justice Ginsburg noted that, prior to the enactment of the MDA in 1976, the defense of state common law claims for defective design or drug labeling either did not involve preemption or, if preemption was asserted as a defense, it was unsuccessful. She argues that Congress included the preemption provision 21 U.S.C. Section 360k \"to empower the FDA to exercise control over state premarket approval systems installed at a time when there was no preclearance at the federal level,\" such as the California PMA system. Moreover, unlike devices, states had not developed PMA processes for drugs or additives.\nThe dissent also quotes the FDA's former counsel as observing the disparity that would arguably arise if preemption of state common law suits existed for devices with PMA, but not drugs or biologics: \"This disparity is neither justified nor appropriate, nor does the agency believe it was intended by Congress.\" Medtronic had argued that \"Congress would not have wanted state juries to second-guess the FDA's finding that a medical device is safe and effective when used as directed,\" however the dissent noted that the PMA process for drugs is \"at least as rigorous\" as that for devices, and that courts \"have overwhelmingly held that FDA approval of a new drug application does not preempt state tort suits.\" The decades in which state product liability suits for drugs and FDA approval coexisted may also be seen as an indication of congressional intent not to preempt such claims, according to the dissent.\nFinally, Justice Ginsburg notes that device manufacturers may have two defenses to state common law suits: implied preemption under the actual conflict theory (in other words a conflict between FDA PMA of a device and the plaintiff's case theory), and \"a regulatory compliance defense based on the FDA's approval of the premarket application.\" FDA approval could be used as \"evidence that [the manufacturer] used due care in the design and labeling of the product.\"", "This section addresses the types of cases that may be affected by the Court's decision in Riegel , identifies areas that would not be affected by this opinion, and discusses similar cases that the Riegel Court noted may arise in the future. The Riegel Court held that state common law tort claims \"premised on a violation of FDA regulations,\" such as claims that a medical device was not manufactured according to the FDA specifications or safety processes, were not preempted by 21 U.S.C. Section 360k since \"the state duties in such a case 'parallel,' rather than add to, federal requirements.\" For example, individuals would be able to bring suits alleging that a device manufacturer failed to comply with FDA requirements and that there manufacturer was negligent in designing, labeling, or manufacturing the device because the manufacturer did not follow what the FDA had approved.\nRiegel did not alter the Court's holding in Lohr that the FDA's determination that a device was substantially equivalent to one on the market did not preempt state common law claims regarding defective or negligent design or damages remedies \"for violations of common-law duties when those duties parallel federal requirements.\" The Court did not address preemption in the investigational device exemption context. Nor did the Court discuss preemption in the context of PMA supplements, which are applications \"required for any change to a device subject to an approved application under [21 U.S.C. § 360e] that affects safety or effectiveness, unless such a change is a modification in a manufacturing procedure or method of manufacturing and the holder of the approved application submits a written notice\" detailing the change.\nJustice Ginsburg noted that \"[t]he Court's holding does not reach an important issue outside the bounds of this case: the preemptive effect of § 360k(a) where evidence of a medical device's defect comes to light only after the device receives premarket approval.\" This issue was also mentioned by Chief Justice Roberts and Justices Kennedy, Stevens, and Souter at oral argument: \"[There could be a newly discovered risk that the FDA never knew about. And, nevertheless, the claim would be preemptive.\" Justice Ginsburg also argued that manufacturers may lack the incentive to make their devices safer once they receive PMA because they \"have permission to market this product as is.\" Medtronic's counsel responded by arguing that the FDA could withdraw approval of a device already on the market if there was a safer device in existence or allow both the newer and safer device to coexist on the market with the older device that may have more risks for some patients. Congressional critics argue that the FDA's initiation of withdrawal proceedings \"can be a time consuming process,\" as the FDA \"must establish that the product no longer meets the statute's safety and efficacy requirements.\" Relatedly, these Members note that medical device clinical trials \"will not identify all of the significant risks involved in the use of the device,\" and that rare risks \"will emerge only when a device is released into a larger and more heterogeneous population.\"", "One preemption scholar, who commented that litigants and scholars alike see preemption jurisprudence as \"a muddle, a mess,\" saw the ruling as part of a \"framework for pre-emption jurisprudence\" that the Supreme Court may be attempting to create. An appellate and Supreme Court practice attorney also indicated that Riegel and similar cases \"raise recurring issues, such as whether there is a presumption against pre-emption and, if so, when it applies and how strong it is, and how much deference courts should give to the federal agency's position.\" Although the majority opinion in Riegel did not address the presumption against federal preemption of state law, the Court had addressed the presumption against preemption in Lohr :\nAlthough our analysis of the scope of the pre-emption statute must begin with its text ... our interpretation of that language does not occur in a contextual vacuum. Rather that interpretation is informed by two presumptions about the nature of pre-emption.... First, because the States are independent sovereigns in our federal system, we have long presumed that Congress does not cavalierly pre-empt state-law causes of action.... Second, our analysis of the scope of the statute's pre-emption is guided by our oft-repeated comment ... that 'the purpose of Congress is the ultimate touch-stone' in every pre-emption case.\nGiven that the Riegel Court did not address this traditional presumption against preemption, it could be argued that the presumption may not be as strong as previously considered. However, it is important to note that the Court did not explicitly repudiate this presumption.\nThe Riegels had argued \"that the justices have relied repeatedly on the presumption that a federal statute does not pre-empt the historic police powers of the state absent a finding of Congress' 'clear and manifest intent' to do so,\" and that the statutory language did not contain such intent. However, \"a review of the Supreme Court's various preemption holdings demonstrates that the presumption is not applied in 'all pre-emption cases,' ... and that congressional intent is certainly not the 'ultimate touchstone' in every preemption case.\"", "This section will examine the type of deference that the agency's shifting position on preemption would likely receive if addressed by a reviewing court. The Court looked to the text of the statute when considering the FDA's own interpretation of the statute's meaning. Initially, commentators on the case predicted that the amount of deference that the Court would give to the agency's position, given the FDA's reversal in favor of preemption circa 2003-2004, would be a key question, as an agency interpretation \"which conflicts with the agency's earlier interpretation is 'entitled to considerably less deference than a consistently held agency view.'\" However, jurists may use various tools of interpretation, and the Supreme Court appeared to circumvent this question by finding clear congressional intent in favor of preemption. The Court \"found it unnecessary to rely upon th[e] agency view [in support of preemption] because we think the statute itself speaks clearly to the point at issue.\" Thus, the FDA regulation did not appear to affect how the Court chose to interpret the statute.\nHowever, the Court noted (and the dissent agreed with the type of deference that would be given) that if it \"had found the statue ambiguous, and had accorded the agency's current position deference ... Skidmore deference would seemingly be at issue.\" Under Skidmore v. Swift & Co. , \"the weight of [an administrative agency's interpretation] will depend upon the thoroughness evident in its consideration, the validity of its reasoning, its consistency with earlier and later pronouncements, and all those factors which give it power to persuade, if lacking power to control.\" The agency's lack of consistency in this area may have been a potential cause for concern, because while the FDA under the Bush Administration supported the concept of preemption, under previous Administrations the agency had taken the opposite view.\nAdditionally, as noted above, since the Court's decision in Riegel was issued, the Obama Administration has directed executive departments and agencies to avoid including statements regarding intent to preempt state law through regulations or preambles to regulations. It seems likely that courts will continue to address the scope of preemption with regard to FDA statutes and regulations. In two 2011 cases, the Supreme Court addressed deference to agency interpretations generally, although preemption was not at issue in these cases.", "In the wake of the Riegel decision, cases involving medical devices that received PMA from the agency have been dismissed for failure to state a \"legally cognizable claim\" that would \"overcome[] a preemption defense.\" These post- Riegel cases appear to have been affected by two other Supreme Court cases that address pleadings standards— Bell Atlantic Corp. v. Twombly , which was decided a few months prior to Riegel , and Ashcroft v. Iqbal , which was decided after Riegel . These two cases have been hailed by attorneys for defendant manufacturers and bemoaned by plaintiffs' attorneys for raising the plausibility requirements for pleadings. Courts have found that plaintiffs with parallel state law claims did not \"plead enough facts to 'state a claim that is plausible on its face'\" and survive a motion to dismiss. According to one circuit judge from the United States Court of Appeals for the Eighth Circuit, \"[t]he combination of the rigid application of Twombly and the now-articulated parallel claim exception to § 360k preemption have, in these cases, led to the dismissal of over two hundred potentially meritorious lawsuits on a technicality.\" The significance of the pleading requirements in the context of medical device PMA preemption cases decided after Riegel has led one pro-plaintiff law professor to argue that Congress should amend the MDA to address \"what is required for proper pleading\" and Twombly 's \"effect on plaintiff's claims.\" Additionally, if a case survives a motion to dismiss, medical device manufacturers have argued that they should receive summary judgment from the courts under Riegel .\nIn terms of the frequency of preemption post- Riegel , one law review article examined 75 post- Riegel lower court cases involving medical devices with FDA PMA. The author defined rulings that \"maintain[ed] a cause of action\" as findings of no preemption, while preemption rulings were defined as (1) those that \"dismiss[ed] all claims arising from the design, manufacture, and labeling of a medical device\" and (2) dismissals of cases with claims that were \"insufficiently pled\" in terms of the necessary factual showings. According to this study, courts found preemption in 77.3% of the cases.\nIn terms of the types of claims that have survived post- Riegel , according to the article, in the 17 cases in which the courts did not find preemption, the courts considered three types of claims as \"sufficiently parallel and not preempted\": (1) \"complaints arising from injuries suffered because of a design change without FDA approval\"; (2) \"claims that the manufacturer made express warranties to the consumer\"; and (3) \"claims of manufacturing defect.\" While these types of claims were successful in some lower courts, they were not successful in others. The author found that the first type of claim was an \"infrequent factual occurrence\" and that most plaintiffs would not be able to use this claim. The second type of claim is based on contractual theories and may involve statements made by the manufacturer. The \"largest number of unpreempted parallel cases\" were cases based on the third type of claim, such as those in which courts \"determine[d] that the device at issue was not manufactured in conformance with the FDA's Current Good Manufacturing Practice and Quality System Regulation.\" However, at least one federal appellate court found that such claims were preempted.\nThe types of parallel claims that may survive in the lower courts may differ from circuit to circuit. The United States Court of Appeals for the Eighth Circuit has stated that \"the contours of the parallel claim exception were not addressed in Riegel and are as-yet ill-defined.\" However, there may be some commonalities, and as more courts issue decisions on parallel claims post- Riegel , it may be easier to predict the types of parallel claims that courts will allow. According to one law review article, in five of the federal circuit courts, \"in order for a parallel cause of action to be properly alleged, the claims must be premised on a violation of federal law or deviation from federal standard. Essentially, the circuit courts conclude the common law claims must go beyond alleging violation of federal statute, and the pleadings should contain sufficient detail of how the federal regulations were violated.\"", "The Court's decision in Riegel has potential implications for the agency's responsibilities, regulatory authorities, and reliance on industry-provided information. The FDA's responsibilities have increased over the years, not only in the device area, but in other regulatory areas as well, including food, drugs, and tobacco. At the same time, the agency has been identified as strapped for resources and under strain because of the large amounts of responsibility it possesses. While the Riegel decision does not grant the FDA greater responsibilities or authorities per se, it provides the FDA with more complete control over medical devices in the sense that the FDA's approval and regulatory requirements carry greater weight than state law requirements. The Court's finding that the MDA preempts state common law claims related to devices that receive FDA PMA could conceivably pressure the FDA to more stringently examine devices undergoing the PMA process. However, the FDA is not required to alter its considerations of devices undergoing the PMA process due to the effect that its approval would have in terms of preempting later consumer lawsuits, such as those with regard to defectively designed devices.\nThe agency's reliance on industry-provided information in the medical device area has led some to argue that consumers are more vulnerable post- Riegel . The agency may decide to address the issue of notification from manufacturers who have discovered problems with their devices after receiving PMA. One former FDA Commissioner argues that once an FDA-approved product such as a drug has a wider distribution than in controlled clinical trials, it \"may have a thousand times as many users,\" which can lead to increased numbers of adverse events such as illness or death, necessitating new warning labels or the withdrawal of the product from the market. At oral argument, Justice Kennedy discussed the possibility of a notification requirement, along the lines of an adverse event reporting requirement, for device manufacturers who have discovered safer alternatives: \"If the manufacturer finds just from its own laboratory experiments and not because of any data it's [sic] received from doctors and patients that there's a better way to do this, does it have the obligation to notify the FDA? Mr. Olson: I don't think so, Justice Kennedy. I think that there may be marketplace incentives.\"", "Three potential legislative implications stem from the Riegel case. First, some Members of Congress introduced legislation in the 111 th Congress to overturn the Court's decision. Second, if Congress decided not to nullify the effect of the Riegel decision through legislation, one congressional approach to offer a remedy to those injured by a medical device that has received FDA PMA would be to create a victim's compensation fund. Third, future legislation that references a state's \"requirements\" and state common law may be affected by the Court's statements in Riegel .", "In the 111 th Congress, bills were introduced that would have overturned the Court's decision in Riegel by modifying the statute at issue: H.R. 1346 , H.R. 4816 , and S. 540 . The House Energy and Commerce Committee's Subcommittee on Health held a hearing on H.R. 1346 in the 111 th Congress. Similar legislation has not been introduced in the 112 th Congress.\nIn response to the Supreme Court's decision in Riegel , Representative Pallone and Senator Kennedy introduced H.R. 1346 / S. 540 , the Medical Device Safety Act of 2009. The bill would have effectively overturned the Court's decision in Riegel . The bill would have modified 21 U.S.C. Section 360k by adding a provision stating that \"[n]othing in this section shall be construed to modify or otherwise affect any action for damages or the liability of any person under the law of any State.\" The addition of that clause stated that the bill would \"take effect as if included in the enactment of the [MDA],\" and would \"apply to any civil action pending or filed on or after the date of enactment of\" the legislation, if passed. The language in H.R. 1346 / S. 540 was incorporated in H.R. 4816 , the Food and Drug Administration Improvement Act of 2010, in the 111 th Congress, which was referred to committee but did not see further action.\nThe AARP, the American Association for Justice, the National Conference of State Legislatures, Public Citizen, state attorneys general, consumer groups, and several Members of Congress either supported the Riegels' case and/or support overturning the Court's decision, which some have argued impacts patients and states with strong consumer protection laws. A former FDA chief counsel and the American Tort Reform Association opposed the legislation, and the latter reportedly called the bill \"little more than an economic stimulus for personal injury lawyers.\"", "If Congress does not overturn the Riegel decision, but is interested in providing a remedy for injured medical device consumers, one approach would be to establish a compensation fund. In Riegel , the dissent argued that Congress would not have, \"'without comment, remove[d] all means of judicial recourse' for consumers injured by FDA-approved devices.\" The majority opinion responded by stating:\nIt is not our job to speculate upon congressional motives. If we were to do so, however, the only indication available—the text of the statute—suggests that the solicitude for those injured by FDA-approved devices, which the dissent finds controlling, was overcome in Congress's estimation by solicitude for those who would suffer without new medical devices if juries were allowed to apply the tort law of 50 States to all innovations. (emphasis added)\nIt could be argued that if Congress had intended to preempt state common law claims, it may have considered a victims' compensation fund of some sort.\nIn the past, Congress has created compensation schemes when it has removed an individual's ability to sue. For example, the National Vaccine Injury Compensation Program prohibits suits under state tort law against manufacturers and administrators of specified vaccines unless the claimant first files a claim for limited no-fault compensation with the National Vaccine Injury Compensation Program. Congress also created the September 11 th Victim Compensation Fund of 2001, under which a victim or a victim's estate could seek no-fault compensation from the program or bring a tort action against an airline or any other party, but could not do both, except to sue \"any person who is a knowing participant in any conspiracy to hijack an aircraft or commit any terrorist act.\"", "The Riegel Court held that \"[a]bsent other indication, reference to a State's 'requirements' includes its common law duties.\" It appears that the Supreme Court arrived at this conclusion based on previous Supreme Court decisions addressing the term \"requirements\" in the state common law context, without relying on congressional intent, the FDA's own regulation, or the agency's change in its position regarding preemption, which could be a motivation for congressional legislative action. Senator Kennedy and Representative Waxman argued in their amicus brief that the use of the term \"requirement\" in one statute—the Public Health Cigarette Smoking Act of 1969, which was at issue in the 1992 Supreme Court case Cipollone v. Liggett Group , Inc ., and was interpreted by the Supreme Court to include common law tort claims—\"does not mandate a conclusion that use of the same term in a very different statute with different goals means the same thing,\" as the MDA \"was enacted by a different Congress at a different time.\"\nBased on this statement by the Riegel Court however, it appears that Congress and its legislative counsel should be aware of the use of the term \"requirements\" in existing statutes and proposed legislation. This would appear to hold true regardless of congressional intent or when the statute was enacted, as the MDA was enacted approximately 16 years prior to the Court's analysis of the term \"requirements\" in Cipollone . It appears that Congress may have already recognized post- Cipollone that the use of the term \"requirement\" in a preemption provision could preempt product liability claims. Thus, if Congress does not want to preempt state common law claims, it may be advisable to provide a specific exemption for such claims when it uses the term \"requirements\" in the preemption context. Congress could consider inserting savings clauses to preserve state common law claims, such as those discussed in Geier v. American Honda Motor Co . and Sprietsma v. Mercury Marine ." ], "depth": [ 0, 1, 2, 2, 3, 1, 2, 2, 2, 2, 1, 2, 3, 3, 2, 3, 3, 2, 2, 2, 3, 3, 3 ], "alignment": [ "h0_title h2_title h1_title", "", "", "", "", "h0_title h2_full h1_title", "", "", "", "h0_full h1_full", "h0_title h2_full h1_title", "h0_full", "", "", "h1_title", "", "h1_full", "h0_full", "", "h2_full h1_title", "h1_full", "", "" ] }
{ "question": [ "What was the effect of Riegel v. Medtronic, Inc.?", "How does FDA PMA limit suits against manufacturers?", "How restrictive is the MDA's express preemption provisions?", "Why is this specific case different?", "How uniform are the lower courts conclusions as to state law claims?", "Why is there concern regarding the Supreme Court's decision?", "Which stakeholders agree with the ruling?", "What are the effects of this ruling?", "How have critics attempted to bypass the Court's decision?", "What does this report cover?", "To what extent will this report analyze specific laws?", "How does the report discus the implications of its findings?" ], "summary": [ "In Riegel v. Medtronic, Inc., the United States Supreme Court held in an 8 to 1 decision that if the Food and Drug Administration (FDA) grants premarket approval (PMA) to a medical device, the device manufacturer is immune from certain suits under state tort law, due to an express preemption provision in the Medical Device Amendments of 1976 (MDA).", "This holding establishes that FDA PMA preempts claims such as strict liability, breach of implied warranty, and negligence in design, testing, manufacturing, labeling, distribution, sale, inspection, or marketing of the device to the extent that such state law claims are \"different from, or in addition to\" federal PMA requirements.", "However, the Supreme Court held that the MDA's express preemption provision did not prohibit state \"claims premised on a violation of FDA regulation.\"", "The Court stated that such claims \"'parallel,' rather than add to, federal requirements.\"", "Post-Riegel, the lower courts have come to differing conclusions when determining whether particular state law claims, such as manufacturing defect claims, \"parallel\" federal requirements, and thus are not preempted, or rather are state requirements \"different from, or in addition to\" federal requirements, and thus are preempted under Riegel.", "The Supreme Court's decision has been a cause for concern for some Members of Congress who disagree with the ruling, as well as trial lawyers and patients.", "However, advocates of more limited tort liability, including the previous Administration, agree with the ruling.", "The decision has broad implications for consumers of Class III medical devices, who are prevented from suing device manufacturers on most state common law claims, as well as manufacturers, who are shielded from many suits if their device receives FDA PMA.", "In the 111th Congress, bills were introduced—H.R. 1346, H.R. 4816, and S. 540—that would have overturned the Court's decision in Riegel by modifying the statute at issue. As of the date of this report, similar legislation has not been introduced in the 112th Congress.", "This report will provide a brief overview of federal premarket regulation of medical devices.", "The report then provides an overview of federal preemption of state law, as well as arguments for and against federal preemption of state law tort claims with respect to medical devices. The report explains the Supreme Court's decision in Riegel and examines the concurring and dissenting opinions.", "Finally, the report analyzes the legal, procedural, policy, and legislative implications for Congress, consumers, and medical device manufacturers." ], "parent_pair_index": [ -1, 0, -1, 2, -1, -1, 0, -1, -1, -1, 0, 0 ], "summary_paragraph_index": [ 0, 0, 0, 0, 0, 1, 1, 1, 1, 2, 2, 2 ] }
CRS_R40750
{ "title": [ "", "Introduction", "Background and Structure", "Objectives", "The Committee on the Elimination of Discrimination Against Women", "Optional Protocol", "U.S. Actions", "Obama Administration Position", "Previous Administration Positions", "Clinton Administration", "George W. Bush Administration", "Senate Actions", "Issues and Policy Options for the Senate", "Possible Impact on U.S. Sovereignty", "Effectiveness of the Convention", "CEDAW as an Instrument of U.S. Foreign Policy", "Family Structure and Parental Rights", "Abortion", "CEDAW Committee Recommendations Related to Abortion", "The U.S. \"Helms Understanding\" on Abortion (2002)", "Family Planning", "Consideration of Other Treaties", "Options for Treaties Already Submitted to the Senate", "Other Issues in the Ratification Debate", "Decriminalization of Prostitution", "Definition of Discrimination", "Equal Access to Education", "Same-Sex Marriage" ], "paragraphs": [ "", "U.S. policymakers and members of the public have contentiously debated U.S. ratification of the United Nations (U.N.) Convention on the Elimination of All Forms of Discrimination Against Women (CEDAW, or the Convention) since it was drafted in 1979. CEDAW is the only international human rights treaty that specifically focuses on the rights of women. As of July 22, 2015, 189 countries have ratified or acceded to the Convention. The United States is the only nation to have signed but not ratified CEDAW. President Jimmy Carter signed the Convention and submitted it to the Senate in 1980. The Senate Foreign Relations Committee (SFRC) held hearings on CEDAW in 1988, 1990, 1994, and 2002, and reported it favorably in 1994 and 2002. To date, the treaty has not been considered for advice and consent to ratification by the full Senate. Other countries that are not parties to CEDAW include Iran, Palau, Somalia, Sudan, and Tonga.\nThe Senate may consider providing advice and consent to U.S. ratification of CEDAW during the 114 th Congress. The Barack Obama Administration has expressed support for the Convention, calling it \"an important priority.\" In a May 2009 letter to the SFRC, the Obama Administration identified CEDAW as a human rights treaty on which it \"supports Senate action at this time.\" Most recently, Secretary of State John Kerry stated that he supported U.S. ratification of the Convention.\nU.S. policymakers generally agree with CEDAW's overall objective of eliminating discrimination against women around the world. Many, however, question whether the Convention is an appropriate or effective mechanism for achieving this goal. Opponents are concerned that U.S. ratification would undermine national sovereignty and require the federal government or, worse, the United Nations to interfere in the private conduct of citizens. They argue that the Convention is ineffective, and emphasize that countries with reportedly poor women's rights records—including China and Saudi Arabia—have ratified CEDAW. Supporters, however, contend that the Convention is a valuable mechanism for fighting women's discrimination worldwide. They argue that U.S. ratification will give CEDAW additional legitimacy and empower women who aim to eliminate discrimination in their own countries.\nThis report addresses CEDAW's background, objectives, and structure and provides an overview of U.S. policy toward the Convention. It examines issues that have been raised in the U.S. ratification debate, including the treaty's impact on U.S. sovereignty, the effectiveness of the Convention, and its possible use as an instrument of U.S. foreign policy. It also describes controversial provisions and CEDAW Committee recommendations addressing the role of women in society and women's equal access to education and healthcare.", "U.N. member states adopted several treaties addressing aspects of women's rights prior to adoption of CEDAW in 1979, including the Convention on the Political Rights of Women (1952) and the Convention on the Consent to Marriage (1957). In 1967, after two years of negotiations, the U.N. General Assembly adopted the Declaration on the Elimination of Discrimination Against Women, a nonbinding document that laid the groundwork for CEDAW. Subsequently, the U.N. Commission on the Status of Women drafted CEDAW, which the General Assembly adopted on December 18, 1979. The Convention entered into force on September 3, 1981, after receiving the required 20 ratifications.", "CEDAW calls on States Parties to take all appropriate measures to eliminate discrimination against women in all areas of life. This includes equality in legal status, political participation, employment, education, healthcare, and the family structure. Article 2 of the Convention specifies that States Parties should undertake to \"embody the principle of equality of men and women in their national constitutions or other appropriate legislation ... to ensure, through law and other appropriate means, the practical realization of this principle.\" The Convention defines discrimination against women as\nany distinction, exclusion or restriction made on the basis of sex which has the effect or purpose of impairing or nullifying the recognition, enjoyment or exercise by women irrespective of their marital status, on a basis of equality of men and women, of human rights and fundamental freedoms in the political, economic, social, cultural, civil, or any other field.\nIt specifically calls for equal pay with men, more attention to the equality of rural women, the freedom to choose a marriage partner, and the suppression of trafficking in women and girls.", "The Committee on the Elimination of Discrimination Against Women (the Committee) was established in 1982, under Article 17 of CEDAW, as a mechanism to monitor the progress of the Convention's implementation. It is composed of 23 independent experts who are elected at a meeting of States Parties to the Convention by secret ballot, with consideration given to the principle of equitable geographic distribution. Each State Party may nominate one expert, and if elected, the expert serves a four-year term. The majority of the Committee members are women who, according to the Convention, should have \"high moral standing and competence\" and \"represent different forms of civilization as well as principal legal systems.\" The Committee is led by a Chairperson, three Vice Chairpersons, and a rapporteur, which are elected by Committee members. The Chairperson directs the discussion and decision-making process of the Committee and represents the Convention at international conferences and events. The Committee reports annually on its activities to the U.N. General Assembly through the U.N. Economic and Social Council and meets twice a year at the U.N. Office in Geneva. As one of seven U.N. human rights treaty bodies, the Committee is financed from the U.N. regular budget. It was previously supported by the U.N. Division for the Advancement of Women, but since January 2008 it has been serviced by the U.N. Office of the High Commissioner for Human Rights.\nThe Committee is responsible for reviewing the reports on national CEDAW implementation submitted by States Parties. Countries are required to submit an initial report within the first year of ratification or accession, followed by a report every four years. The reports identify areas of progress as well as concerns or difficulties with implementation. The Committee engages in an open dialogue and exchange of ideas with the reporting country and compiles recommendations and conclusions based on its findings, which include general recommendations on cross-cutting issues of concern. The general recommendations are nonbinding, and there is no mechanism for their enforcement. The Committee has made over 30 general recommendations since 1986 covering a wide range of issues affecting women, such as improvement in education and public information programs, elimination of female circumcision, equality in marriage and family relations, and preventing violence against women.", "On October 6, 1999, the U.N. General Assembly adopted an Optional Protocol to strengthen the Convention. The Protocol entered into force in December 2000, and has been ratified by 106 countries. It is a stand-alone treaty that can be signed or ratified by countries that are not party to the main treaty. It includes a \"communications procedure\" that permits groups or individuals to file complaints with the CEDAW Committee. It also incorporates an \"inquiry procedure\" that allows the Committee to explore potential abuses of women's rights in States Parties to CEDAW.", "Successive U.S. Administrations and Members of Congress have supported the Convention's overall objective of eliminating discrimination against women. They have disagreed, however, as to whether the Convention is an effective or appropriate means of achieving this goal.", "The Obama Administration has expressed support for the Convention. On January 15, 2009, Susan Rice, U.S. Permanent Representative to the United Nations, stated at her Senate confirmation hearing that CEDAW \"will be an important priority\" for the Administration. In May of the same year, the Obama Administration identified CEDAW as a human rights treaty on which it \"supports Senate action at this time,\" prompting some to speculate that the Administration may transmit the treaty to the Senate Foreign Relations Committee (SFRC) for its advice and consent. In March 2010, Secretary of State Hillary Clinton announced that the Administration \"will continue to work for the ratification of CEDAW.\"\nAt a November 2010 Subcommittee on Human Rights and the Law hearing, then- Ambassador-at-Large for Global Women's Issues Melanne Verveer supported U.S. ratification of CEDAW, noting that it is critical to U.S. efforts to \"promote and defend the rights of women\" worldwide. At the same hearing, a representative from the Department of Justice Civil Rights Division expressed support for CEDAW ratification to \"express more forcefully our [the United States'] commitment to the rights of women in the United States and to further opportunities for girls and women around the world.\" Secretary of State John Kerry also expressed his support for U.S. ratification of CEDAW at his January 2013 nomination hearing before SFRC. Most recently, in a February 2015 report to the U.N. Human Rights Council, the Administration reaffirmed its support for the Convention, stating that \"the principles endorsed in CEDAW are consistent with our domestic and foreign policy objectives and are strongly supported in federal and state law.\"", "President Carter signed the Convention on July 17, 1980, and submitted it to the Senate for advice and consent on November 12 of the same year. The Reagan and first Bush Administrations did not support ratification, and the Convention remained pending in the SFRC.", "The Clinton Administration supported CEDAW ratification and in 1994 sent a treaty package to the Senate for advice and consent to ratification. The package included nine proposed reservations, understandings, and declarations (RUDs) to the Convention. (RUDs often accompany U.S. ratification of a treaty. See text box.) The SFRC reported the Convention favorably, but it never came to vote in the full Senate because of opposition from several Senators. The reservations recommended by the Clinton Administration addressed the following issues:\n\"private conduct,\" which made clear that the United States \"does not accept any obligation under the Convention to regulate private conduct except as mandated by the Constitution and U.S. law\"; \"combat assignments,\" which stated that the United States \"does not accept an obligation under the Convention to put women in all combat positions\"; \"comparable worth,\" which made clear that the United States would not accept the doctrine of comparable worth based on the Convention's broad description; and \"paid maternity leave,\" which stated that the United States could not guarantee paid maternity leave as the Convention stipulates because it is not a requirement under federal or state law.\nThe three understandings submitted by the Clinton Administration stated that (1) the United States will fulfill its obligations under the Convention in a \"manner consistent with its federal role,\" recognizing that issues such as education are the responsibility of state and local governments; (2) the United States will not accept Convention obligations that restrict freedom of speech or expression; and (3) the United States and other States Parties may decide the nature of the health and family planning services referred to in the Convention, and may determine whether they are \"necessary\" and \"appropriate.\" The Clinton Administration's proposed declarations included a \"non-self-executing\" provision, which stated that no new laws would be created as a result of CEDAW, and a \"dispute settlement\" provision, which stated that the United States was not bound by Convention Article 29(1) that refers unresolved disputes to the International Court of Justice.", "The Bush Administration stated that it supported the Convention's goal of eradicating discrimination against women on a global scale but had several concerns with the Convention. These concerns were outlined in 2002, when the SFRC held hearings on potential CEDAW ratification. Then-Secretary of State Colin Powell wrote a letter to the SFRC stating that the Convention was under the State and Justice Departments' review because of concerns regarding \"the vagueness of the text of CEDAW and the record of the official U.N. body [the CEDAW Committee] that reviews and comments on the implementation.\" In particular, the Administration cited \"controversial interpretations\" of the CEDAW Committee's recommendations to States Parties. Powell's letter specifically noted a Committee report on Belarus that \"questioned the celebration of Mother's Day,\" and a report on China that \"called for legalized prostitution.\" These positions, Powell argued, were \"contrary to American law and sensibilities.\"\nThe Bush Administration further maintained that the vagueness of the CEDAW text opened the door for broad interpretation by international and domestic entities and that the 1994 RUDs proposed by the Clinton Administration did not address these interpretation issues. It also emphasized the importance of ensuring the Convention would not conflict with U.S. constitutional and statutory laws in areas typically controlled by the states. In light of these concerns, the Administration urged the SFRC not to vote on the Convention until a full legal review was complete. The review began in mid-April 2002. On February 7, 2007, the Administration transmitted a letter to the Senate stating that it did not support the Senate taking action on the Convention at that time.", "CEDAW has been pending in the SFRC for over 30 years. The committee held hearings in 1988 and 1990 but did not vote to recommend the Convention for advice and consent of the full Senate. With support from the Clinton Administration, the SFRC held another round of ratification hearings in June 1994. The committee reported the Convention favorably with a vote of 13 to 5 in September 1994, but the 103 rd Congress adjourned before it could be brought to vote in the full Senate. The Republican Party was elected as the majority in the 104 th Congress, and the incoming chairman of the Foreign Relations Committee, Senator Jesse Helms, did not allow further consideration of CEDAW because of his concerns regarding its possible impact on U.S. sovereignty and U.S. laws, including those related to abortion and family planning.\nIn June 2002, the debate over U.S. ratification of CEDAW gained momentum as the SFRC again held hearings on ratification of the Convention. On July 30, 2002, the committee reported the Convention favorably by a vote of 12 to 7, subject to four reservations, five understandings, and two declarations. These included the nine RUDs recommended by the Clinton Administration in 1994, plus two additional understandings. The first additional understanding included a proposal from Senator Jesse Helms, who was then the ranking minority Member, which stated that \"nothing in this Convention shall be construed to reflect or create any right to abortion and in no case should abortion be promoted as a method of family planning.\" The second additional understanding addressed the impact of the CEDAW Committee on U.S. law, stating, \"the CEDAW Committee has no authority to compel parties to follow its recommendations.\" The 107 th Congress adjourned before the Senate could vote on the Convention. (See Appendix B for a timeline of SFRC consideration of CEDAW.)\nOn November 18, 2010, the Senate Judiciary Committee's Subcommittee on Human Rights and the Law held a public hearing, \"Women's Rights Are Human Rights: U.S. Ratification of the Convention on the Elimination of All Forms of Discrimination Against Women (CEDAW),\" representing the first Senate hearing on CEDAW in eight years.\nThough it has no direct role in providing advice and consent to ratification of treaties, the House of Representatives has demonstrated a continued interest in CEDAW. In March 2015, Representative Carolyn Maloney introduced H.Res. 145 expressing the sense of the House of Representatives that the Senate should ratify the Convention. Similar House resolutions were introduced in the 106 th through 113 th Congresses.", "Some policy decisions and issues may continue to play a role in the debate if the Senate considers providing its advice and consent to ratification during the 114 th Congress.", "For many policymakers, the question of U.S. ratification of CEDAW touches on the broader issue of national sovereignty. The minority views in the 2002 SFRC report on the Convention, for instance, state that CEDAW represents \"a disturbing international trend\" of favoring international law over U.S. constitutional law and self-government, thereby undermining U.S. sovereignty. Opponents are particularly concerned that if the United States ratifies the Convention, the CEDAW Committee would have authority over the actions of the U.S. government and private citizens regarding discrimination against women. Many critics, for example, have taken issue with the Committee's recommendations regarding abortion, Mother's Day, and prostitution.\nCEDAW advocates maintain that U.S. ratification would not affect national sovereignty. During Senate debate in 2002, for instance, proponents argued that the Convention would impose a \"minimal burden\" on the United States given that the Constitution and other existing federal and state laws already meet the obligations of the Convention. Supporters also emphasize that the United States would likely file several reservations, understandings, and declarations (RUDs) to the Convention, including a non-self-executing declaration that would require Congress to enact implementing legislation to bring CEDAW's provisions into use—thereby addressing any potential conflicts with existing U.S. laws. Advocates further contend that the actions of the CEDAW Committee would not affect domestic laws or the private lives of U.S. citizens. They maintain that the Committee relies primarily on individual countries to fulfill their obligations under the Convention and that it has no established rules for enforcing its recommendations or addressing treaty noncompliance. In order to alleviate ongoing concerns regarding the Committee's role, during the 2002 Senate ratification debate then-SFRC Chairman Senator Joseph Biden proposed an understanding stating the CEDAW Committee does not have the authority to compel States Parties to follow its recommendations.", "A major point of contention among supporters and opponents of U.S. ratification is whether CEDAW is an effective mechanism for addressing women's rights internationally. Opponents generally recognize that global discrimination against women is a problem that should be eliminated, but they do not view the Convention as an effective way to achieve this goal. They emphasize that many countries widely believed to have poor women's rights records ratified the Convention. Some also contend that the Convention hurts rather than helps women struggling to achieve human rights internationally—arguing that CEDAW serves as a \"facade for continuing atrocities\" in countries that have ratified it.\nSupporters of U.S. ratification maintain that CEDAW is an effective mechanism for improving women's rights globally. They contend that the Convention is a formal mechanism through which to draw attention to women's issues on both a national and international level, particularly in developing countries. To support this position, they cite studies and research conducted on CEDAW's implementation. The U.N. Development Fund for Women (UNIFEM) (now UN Women), for example, found that some countries, including Brazil and Colombia, incorporated language into their national constitutions to reflect CEDAW provisions or objectives. In June 2000, York University and the International Women's Rights Project (IWRP) conducted the First CEDAW Impact Study, which highlighted evidence of CEDAW's effectiveness at the national level and identified circumstances that contributed to successful implementation of the Convention. The study found that in Turkey CEDAW was cited in numerous court cases regarding discrimination against women; while in Nepal, the Ministry of Women and Social Welfare formed a taskforce to review all laws that were inconsistent with the Convention. In addition, a 2010 study by the International Center for Research on Women found that\nin Saudi Arabia , CEDAW is being used to draft a new law that allows women lawyers to try family cases in court (under current law they cannot do so); in the Philippines in 2009, the government introduced the Magna Carta of Women (Republic Act No. 9710), a comprehensive women's rights law that relies heavily on CEDAW provisions and definitions; in Costa Rica in 2003, the Constitutional Chamber of the Supreme Court ruled that the Legislative Assembly President had not named a proportionate number of women to the Assembly's permanent committees, which was inconsistent with the Costa Rican constitution and Article 7 of CEDAW; and in Zambia in 1997, the High Court ruled in Longwe v. Intercontinental Hotels that the Intercontinental Hotel discriminated against women under the Zambian constitution and Articles 1, 2, and 3 of CEDAW because it refused to allow women to enter the premises unaccompanied by a male companion.\nDespite such progress, supporters have acknowledged that much work needs to be done to achieve full implementation of CEDAW. In particular, the IWRP impact study identified several barriers to the Convention's implementation, including (1) the alienation of national governments from civil society, (2) lack of support from governments, (3) difficulty in implementing gender-integrated policies, and (4) lack of public awareness. Similarly, UNIFEM acknowledged that CEDAW's effectiveness is \"largely dependent on the political will of governments.\"\nBoth supporters and opponents of U.S. ratification have expressed concern with some of the RUDs filed by States Parties that appear to undermine the intent and effectiveness of the treaty. For instance, several countries—including Egypt, Iraq, Malaysia, and Syria—submitted reservations stating that certain provisions would not apply if they are deemed incompatible with Islamic Shari'a law or values. Similarly, Niger filed a reservation to a provision calling on States Parties to modify social and cultural patterns related to the conduct of men and women, while North Korea filed a reservation to a provision that calls on States Parties to modify or abolish existing laws that constitute discrimination against women. When filing their own reservations, other States Parties—including Canada, France, and the United Kingdom—formally objected to the inclusion of these reservations, stating that they conflict with Article 28(2) of CEDAW, which states that a reservation incompatible with the object and purpose of the Convention shall not be permitted.\nMany CEDAW proponents acknowledge the concerns regarding RUDs; however, they maintain that the benefits of the Convention's almost universal ratification outweighs the drawbacks of conditions imposed by some States Parties. Supporters also emphasize that a number of governments have decided to withdraw or modify RUDs because their national laws, policies, or priorities have changed. Examples of countries that have withdrawn reservations include the Bahamas, France, Germany, and Ireland.", "CEDAW proponents contend that U.S. ratification will increase the credibility of the United States abroad and enhance its ability to champion women's rights in other countries. They argue that U.S. nonratification leads other governments to question the U.S. commitment to combating discrimination against women, thereby hindering its ability to advocate women's rights internationally. For example, at a 2010 hearing before the Senate Subcommittee on Human Rights and the Law, then-Ambassador Verveer stated that CEDAW nonratification \"deprives us [the United States] of a powerful tool to combat discrimination against women ... because as a non-party, it makes it more difficult for us to press other parties to live up to their commitments under the treaty.\" At the same hearing, Wazhma Frogh, a women's rights activist from Afghanistan, stated that U.S. failure to ratify CEDAW \"is of huge international significance,\" and noted that conservative elements in Afghanistan \"use American's failure to ratify CEDAW to attack [Afghan] women's rights defenders.\"\nSupporters also maintain that the United States might be viewed as hypocritical because it expects countries to adhere to international standards that it does not itself follow. In support of this position, some point to U.S. statutes that require foreign assistance to be based on a recipient country's compliance with \"internationally recognized human rights.\" Many also hold that U.S. ratification would give the United States additional fora in which to combat discrimination against women, particularly if a U.S. citizen were elected to the CEDAW Committee. Serving on the Committee, supporters argue, would provide the United States with an opportunity to share its expertise and experience in combating discrimination against women with other countries.\nCritics contend that the United States is already an international leader in promoting and protecting women's rights and that CEDAW ratification would not affect its ability to advocate such issues internationally. They argue that current U.S. laws and policies regarding gender discrimination serve as an example of the United States' commitment to women's equality. In addition, many assert that CEDAW and, more broadly, other human rights treaties, are meant for countries with lesser human rights records than the United States. Some critics have also voiced reluctance to bring the question of U.S. obligations under international human rights treaties to other countries, particularly those with poor human rights records. Many opponents are also concerned that the CEDAW Committee could be used as a platform for unfounded political criticisms of the United States. Moreover, they contend that U.S. ratification would not affect the laws and policies addressing discrimination against women in other countries. They further emphasize that improvements in the status of women in nations such as China and Sudan can be made only by the governments of these countries.", "Many opponents of CEDAW are concerned that U.S. ratification would undermine U.S. privacy laws and policies—particularly those relating to family structure and the rights and responsibilities of parents. Some, for example, have taken issue with provisions that they believe could be interpreted to undermine traditional family roles. Article 5(a), for instance, calls on States Parties to take all appropriate measures\n(a) To modify the social and cultural patterns of conduct of men and women, with a view to achieving the elimination of prejudices ... which are based on ... the idea of the inferiority or the superiority of either of the sexes or on stereotyped roles for men and women;\n(b) To ensure that family education includes ... recognition of the common responsibility of men and women in the upbringing and development of their children, it being understood that the interest of the children is the primordial consideration in all cases.\nSuch language has prompted critics to contend that CEDAW obligates governments, families, and individuals to adhere to a predetermined or artificial set of values, regardless of whether they align with national law, family traditions, or personal convictions. Specifically, some argue that the Convention dismisses \"established moral and ethical principles\" that are based on human nature and experience, and discriminates against the \"traditional\" family and a \"diversity of cultures and religious beliefs.\"\nCEDAW proponents counter that the Convention does not obligate States Parties to redefine or regulate gender roles or family structures. They note that Article 5 calls on States Parties to take \"all appropriate measures\" [emphasis added], thereby leaving it to governments to determine what actions are appropriate based on their domestic laws and policies. Some further argue that Article 5 addresses gender stereotypes in the context of their possible link to violence against women. To support this position, they point to the CEDAW Committee General Recommendations on Violence Against Women. Recommendation 19, for instance, relates \"traditional attitudes by which women are regarded as subordinate to men or as having stereotyped roles\" to \"practices involving violence or coercion.\" Consequently, some contend, Article 5(b) addressing family planning education primarily refers to public education, grant, or information programs that aim to combat violence against women.\nAnother area of concern is CEDAW's possible impact on the role of women as mothers and caregivers. Many opponents are particularly critical of the CEDAW Committee's recommendation to Belarus in 2000 that expressed concern regarding the \"continuing prevalence of sex-role stereotypes and by the reintroduction of such symbols as a Mother's Day ... which it sees as encouraging women's traditional roles.\" Some point to this statement as evidence of CEDAW redefining the family and the role of women in society. In response to such concerns, supporters argue that the Committee was not criticizing Mother's Day; rather, it was responding to Belarus's celebration of the holiday as the only response to the obstacles women face in that country. Proponents further emphasize that the Committee has reviewed the reports of many other countries that celebrate Mother's Day and made no similar comments.\nA number of critics also contend that U.S. ratification of CEDAW may undermine parental rights. Opponents have taken issue with Article 16(d), which says that States Parties shall take all appropriate measures to ensure that women receive \"the same rights and responsibilities as parents ... in matters relating to their children; in all cases the interest of the children shall be paramount.\" Opponents are concerned that such language could be interpreted to give the CEDAW Committee authority to determine what is in the best interest of U.S. children, thereby undermining the rights and responsibilities of parents. Proponents, however, contend that CEDAW supports the role of parents in child-rearing, emphasizing that it calls for the \"common responsibility of men and women in the upbringing and development of their children.\" Furthermore, they argue that CEDAW would not affect parental rights because the U.S. Constitution limits government interference in private matters, including parenting.\nRecognizing the concerns of many CEDAW opponents regarding the Convention's possible impact on the private lives of U.S. citizens—particularly relating to family and parenting—in 1994 the Clinton Administration proposed a \"private conduct\" reservation to the Convention. It stated that the United States \"does not accept any obligation under the Convention to regulate private conduct except as mandated by the Constitution and U.S. law.\" Some CEDAW supporters object to the inclusion of the proposed reservation, arguing that the United States should strive to adhere to the treaty's provisions regarding gender stereotypes. They contend that a private conduct reservation implies a \"lack of political commitment\" by the United States and indicates that it views CEDAW as \"applicable only in other countries.\"", "A significant issue in the CEDAW ratification debate centers on whether the Convention takes a position on abortion or is \"abortion neutral.\" Many who support U.S. ratification hold that the treaty is abortion neutral because the word \"abortion\" is never mentioned in the Convention's text. This point of view was shared by the Clinton Administration, which declared the treaty abortion neutral in 1994. Supporters also emphasize that many countries where abortion is regulated or illegal, including Burkina Faso, Colombia, and Ireland, ratified the Convention without associated reservations, understandings, or declarations (RUDs), and regularly report to the CEDAW Committee.\nMany opponents of U.S. ratification argue that while CEDAW does not include the word \"abortion,\" parts of the Convention text could be interpreted to undermine current U.S. abortion law. Specifically, some have taken issue with Article 12(1), which states that countries \"shall take all appropriate measures to eliminate discrimination against women in the field of health care in order to ensure ... access to health care services, including those related to family planning.\" Critics have also expressed concern regarding Article 16(1)(e), which requires that States Parties take all appropriate measures to ensure that women have the right to \"decide freely and responsibly on the number and spacing of their children.\" Opponents suggest that such language could lead to the abolishment of state parental notification laws, require federal funding for abortions, or obligate the U.S. government to promote and provide access to abortion. Two States Parties to the Convention—Malta and Monaco—explicitly stated in their reservations to CEDAW that they do not interpret Article 16(1)(e) as imposing or forcing the legalization of abortion in their respective countries.\nCEDAW supporters counter such criticisms by emphasizing that Articles 12 and 16 call on States Parties to take all \" appropriate measures\" [emphasis added], thereby leaving it up to States Parties to determine what actions are appropriate based on their domestic laws and policies. To support this view, some have cited the negotiating history of CEDAW, which appears to demonstrate the intent of some countries to keep the Convention's text intentionally ambiguous so that the treaty could be ratified by countries with a wide range of domestic laws and policies.", "The CEDAW Committee's recommendations to States Parties regarding abortion are a particularly controversial aspect of the U.S. ratification debate. Many opponents of CEDAW, particularly pro-life advocates, are strongly critical of the Committee because, in their view, it calls on States Parties to support and encourage abortion despite the fact that it is never mentioned in the CEDAW text. As evidence of this, critics point to the Committee's General Recommendation 24, which elaborates on CEDAW Article 12(1) addressing women's equal access to health care, including family planning services. The Committee recommends that \"when possible, legislation criminalizing abortion could be amended to remove punitive provisions imposed on women who undergo abortion.\" Opponents also criticize Committee recommendations to individual countries that appear to encourage the decriminalization or legalization of abortion and oppose conscientious objector policies. In 1998, for example, the Committee recommended to Mexico that \"all states ... should review their legislation so that, where necessary, women are granted access to rapid and easy abortion.\" More recently, in 2007, the Committee urged Poland \"to ensure that women seeking legal abortion have access to it, and that their access is not limited by the use of the conscientious objection clause.\" In addition, opponents have suggested that the Committee's interpretation of CEDAW could be used as a basis for challenging abortion laws in the United States and other countries. In particular, some critics have expressed concern with a May 2006 decision by the Constitutional Court of Colombia, which cited CEDAW when it determined that abortion should not be considered a crime in all circumstances (such as rape or incest and when the life of the mother is in danger).\nAs mentioned previously, many CEDAW supporters emphasize that the purpose of the Committee is to consider the progress of States Parties' implementation of the Convention. They point out that CEDAW has no established mechanism for noncompliance and that it relies primarily on States Parties to fulfill their treaty obligations. Further, proponents contend that many of the Committee recommendations to States Parties demonstrate its overall opposition to abortion as a method of family planning. In 2006, for example, the Committee expressed concern that in the Former Yugoslav Republic of Macedonia \"abortion continues to be used as a method of birth control.\" Similarly, in 2007 the Committee noted with concern that in Greece \"due to inadequate access to family planning and contraceptive methods, abortion is often used by women and adolescent girls as a method of birth control.\" Moreover, supporters maintain that the overall goal of the Committee is to encourage States Parties to reduce abortion rates through education and family planning. Consequently, some argue, the Committee makes recommendations regarding abortion only in very specific circumstances, such as when (1) a nation demonstrates a high rate of abortion, indicating that voluntary family planning education and resources are needed to reduce the abortion rate; (2) a country appears to rely on abortion as a method of family planning; or (3) a country reports that unsafe and illegal abortions contributed to high mortality rates.", "In June 2002, under the chairmanship of former Senator Joseph Biden, the SFRC held hearings on CEDAW ratification. On July 30, 2002, the committee reported the Convention favorably by a vote of 12 to 7, subject to several RUDs. One of the understandings was a proposal from Ranking Member Senator Jesse Helms that stated \"nothing in this Convention shall be construed to reflect or create any right to abortion and in no case should abortion be promoted as a method of family planning.\" This \"Helms understanding\" was included as a compromise to alleviate the concerns of pro-life advocates who were concerned that CEDAW ratification could affect U.S. abortion laws.\nThough some pro-choice women's groups favoring U.S. ratification questioned whether the understanding was necessary or appropriate, they recognized that its inclusion could increase the chances of U.S. ratification—which they believed would improve the lives of women both domestically and abroad. Conversely, other women's groups that supported U.S. ratification opposed the inclusion of the Helms understanding because, in their view, it would encourage countries that have ratified CEDAW to view it as abortion neutral. They argued that such an interpretation could add legitimacy to efforts of other governments that prohibit abortion and infringe on women's reproductive rights.\nSome pro-life opponents of U.S. ratification were satisfied that the Helms understanding would address their concerns regarding the Convention's impact on U.S. abortion laws. Many, however, believed that it would fail to ensure that domestic abortion laws would not be affected by U.S. ratification. In particular, they argued that abortion should be addressed as a \"reservation\" to the Convention instead of as an \"understanding.\" (An understanding is an interpretive statement that is generally considered to have less authority than a reservation under international law.) Some also suggested that the inclusion of the Helms understanding would have no impact on the recommendations of the CEDAW Committee. They further argued that the understanding would most likely not prevent pro-choice organizations from advocating for fewer abortion restrictions in the United States.", "A number of CEDAW opponents are concerned with specific references to family planning in the Convention text, including the following:\nArticle 10(h), addressing education, calls on States Parties to take all appropriate measures to ensure \"access to specific educational information to help and ensure the health and well-being of families, including information and advice on family planning.\" Many fear that this could lead to mandatory sex education in both public and private U.S. schools. Article 12(1), addressing healthcare, calls on States Parties to take all appropriate measures to \"eliminate discrimination against women in the field of health care in order to ensure, on a basis of equality of men and women, access to health care services, including those related to family planning.\" Many are concerned that such language could require the U.S. government to distribute family planning materials or contraceptives at schools or in public. Some also assert that CEDAW's references to access to family planning could be interpreted to include abortion. Article (12)(2) calls on States Parties to \"ensure to women appropriate services in connection with pregnancy, confinement and the post-natal period, granting free services where necessary, as well as adequate nutrition during pregnancy and lactation.\" Some interpret this to mean that the U.S. government could be required to pay for family planning services, including abortion. Article 14(2)(b), addressing problems faced by rural women, calls on States Parties to take all appropriate measures to \"have access to adequate health care facilities, including information, counseling and services in family planning.\" The concerns regarding this provision are similar to those expressed regarding Article 12(1).\nCEDAW supporters counter these concerns by emphasizing that the Convention calls on States Parties to take \"all appropriate measures\" [emphasis added], thereby leaving it to governments to determine what constitutes access to family planning. In support of this, they point to the negotiating history of the Convention that indicates that the text was left intentionally ambiguous to allow for states with different family planning policies to ratify the Convention. To address the concerns of some Convention opponents, in 1994 the Clinton Administration proposed an understanding to CEDAW that said that the United States\nunderstands that Article 12 permits States Parties to determine which health care services are appropriate in connection with family planning, pregnancy, confinement, and the post-natal period, as well as when the provision of free services is necessary, and does not mandate the provision of particular services on a cost-free basis.\nProponents argue that such an understanding allows for the United States to provide its own interpretation of family planning; however, others counter that its inclusion is \"superfluous\" because the CEDAW text already provides for such interpretations through its use of the terms \"appropriate\" and \"necessary.\"", "The Senate may consider providing its advice and consent to other treaties during the 114 th Congress—including the U.N. Convention on the Law of the Sea, the U.N. Convention on the Rights of the Child (CRC), and the U.N. Convention on the Rights of Persons with Disabilities (CRPD). These treaties, like CEDAW, have generated considerable debate because of concerns that they might undermine U.S. sovereignty and affect current U.S. laws and policies. In particular, the debate over U.S. ratification of CRC, which aims to protect the rights of children, includes many issues similar to CEDAW—including the Convention's possible effect on education, parental rights, and healthcare. Unlike CEDAW, however, CRC has not been submitted to the Senate by the President. Consequently, the Senate cannot yet consider providing its advice and consent to ratification.", "The Senate Foreign Relations Committee (SFRC) or the full Senate could consider providing its advice and consent to ratification of the Convention at any time because the treaty has already been submitted to the Senate. In practice, however, presidential support, sometimes accompanied by executive branch suggestions for conditions on ratification, has preceded Senate action. For example, the Senate considered the Convention on the Prevention and Punishment of the Crime of Genocide, the Convention Against Torture and Other Cruel, Inhuman or Degrading Treatment or Punishment, and the International Covenant on Civil and Political Rights after being strongly urged to do so by Presidents Reagan (with respect to Genocide and Torture) and George H. W. Bush (with respect to Torture and Civil and Political Rights).\nOptions for the Senate include the following:\nThe SFRC continuing to take no action on CEDAW. The treaty may be left as it currently stands, as pending SFRC business, with the Senate neither giving nor rejecting advice and consent to ratification. The Senate giving its advice and consent to ratification without recommending any reservations, understandings, and declarations (RUDs). The Senate giving its advice and consent subject to the RUDs proposed by previous Administrations (Presidents Carter and Clinton) and/or by the current Administration. The Senate giving its approval for advice and consent, with RUDs proposed by the SFRC or by Members on the Senate floor. The Senate rejecting the treaty if more than one-third of the Senators present vote against U.S. ratification. The Senate requesting, by resolution, that the Convention be withdrawn and sent back to the President without any action.", "A number of other issues may arise in the CEDAW ratification debate if the Senate considers providing its advice and consent to ratification during the 114 th Congress. These issues involve the effect of the Convention on the private conduct of citizens, as well as its impact on current U.S. laws and policies.", "Article 6 of CEDAW says that States Parties shall take all appropriate measures, including legislation, to \"suppress all forms of traffic of women and exploitation of prostitution of women.\" Some critics contend that the CEDAW Committee has made recommendations that contradict the intent of this provision and could obligate States Parties to decriminalize or legalize prostitution. Specifically, in 1999 the Committee expressed its concern in a report on China that prostitution \"which is often a result of poverty and economic deprivation, is illegal,\" and recommended that it be decriminalized by the Chinese government. Supporters, however, assert that the Convention does not support prostitution, and emphasize that the Committee made the recommendation in an effort to reduce high levels of prostitution in China. They argue that regulating prostitution might make it easier for prostitutes who are victims of violence to come forward without fear of retaliation or shame, undergo treatment for sexually transmitted diseases, or receive access to education.", "CEDAW opponents argue that the Convention's definition of discrimination against women is too broad and that it could apply to private organizations and areas of personal conduct not covered by U.S. law. A primary point of contention is the use of the phrase \"any other field,\" which some interpret to mean that CEDAW could interfere in the private lives of individuals—including family life or religious practices. Critics have also expressed concern that such a broad definition could lead to an increase in \"frivolous\" lawsuits. Supporters, however, hold that the CEDAW definition of violence against women would not undermine U.S. laws regarding discrimination, particularly if the Senate files a non-self-executing declaration stating that no new laws would be created as a result of the treaty's ratification. They also emphasize that U.S. ratification of the International Convention on the Elimination of All Forms of Racial Discrimination (CERD), which includes a definition of racism, did not lead to an increase in the number of lawsuits. Still others maintain that applying the CEDAW definition to U.S. law would improve domestic discrimination laws; however, they acknowledge that to do so would likely require separate action by Congress or the Administration.", "Some opponents have taken issue with CEDAW provisions addressing equal access to education. Specifically, Article 10(b) calls on States Parties to take all appropriate measures to ensure that men and women receive \"access to the same curricula ... examinations, teaching staff with qualifications of the same standard and school premises and equipment of the same quality.\" Some contend that this provision could require U.S. parents to send their children to public schools instead of single-sex schools, private schools, or home schools. Some have also expressed concern with Article 10(d), which calls on States Parties to ensure \"the elimination of any stereotyped concept of the roles of men and women at all levels and in all forms of education ... by the revision of textbooks and school programs and the adaptation of teaching methods.\" Some critics hold that implementation of this provision might lead to \"gender re-education\" in U.S. schools that could include re-writing curricula to reflect gender neutrality. CEDAW supporters argue that the intent of the text is to ensure that girls and boys have equal access to education services, facilities, and curricula, regardless of whether they attend a single or mixed-sex school. They also note that CEDAW does not specifically mention single-sex schools.", "Some CEDAW opponents who oppose same-sex marriage hold that Article 1, which defines discrimination against women as \"any distinction, exclusion or restriction made on the basis of sex,\" could obligate the United States to legalize same-sex marriage because not allowing a woman to marry another woman could be viewed as a form of discrimination. Others, however, maintain that CEDAW's aim is to address discrimination against women rather than men. Consequently, they argue, a same-sex marriage claim in the context of CEDAW would be ineffective because the treaty applies only to women.\nAppendix A. States Parties to the Convention on the Elimination of All Forms of Discrimination Against Women\nAppendix B. Senate Committee on Foreign Relations Consideration of CEDAW: Timeline and Documentation\nNovember 12, 1980 —Convention on the Elimination of All Forms of Discrimination Against Women, adopted by the U.N. General Assembly on December 18, 1979, and signed on behalf of the United States of America on July 17, 1980. Ex. R, 96-2. (Treaty Doc. 96-53.) December 5, 1988 —Public hearing. (S. Hrg. 100-1039.) August 2, 1990 —Public hearing. (S. Hrg. 101-1119.) September 27, 1994 —Public hearing. (S. Hrg. 103-892.) September 29, 1994 —Ordered reported, 13 in favor, 5 against. October 3, 1994 —Reported, with four reservations, four understandings, and two declarations, and with minority views. (Exec. Rept. 103-38.)\n(Automatically re-referred under Paragraph 2 of Rule XXX of the Standing Rules of the Senate.)\nJune 13, 2002 —Public hearing. (S. Hrg. 107-530.) July 25, 2002 —Discussion during business meeting. July 30, 2002 —Ordered reported, 12 in favor, 7 against. September 6, 2002 —Reported with four reservations, five understandings and two declarations. (Exec. Rept. 107-9.)\n(Automatically re-referred under paragraph 2 of Rule XXX of the Standing Rules of the Senate.)\nSources: Senate Committee on Foreign Relations, CRS.\nNotes: Due to Senate computerization of Executive Clerk records, all treaties must conform to the same numbering system. In the case of treaties prior to the 97 th Congress, the new treaty number is denoted in parentheses. All votes are by voice unless otherwise indicated." ], "depth": [ 0, 1, 1, 2, 2, 2, 1, 2, 2, 3, 3, 2, 1, 2, 2, 2, 2, 2, 3, 3, 2, 2, 2, 2, 3, 3, 3, 3 ], "alignment": [ "h0_title h2_title h1_title", "h0_full h2_full h1_full", "h0_title", "h0_full", "", "", "h1_title", "h1_full", "", "", "", "", "h2_title", "", "h2_full", "h2_full", "h2_full", "", "", "", "", "", "", "", "", "", "", "" ] }
{ "question": [ "How will the Senate consider the CEDAW?", "Why is CEDAW unique?", "How does CEDAW address the rights of women?", "How widespread is support for CEDAW?", "Why was attention on US ratification renewed?", "How did Obama's election affect the US position on CEDAW?", "How do Administration officials view the potential ratification?", "Why is CEDAW important?", "Why is the U.S. ratification of CEDAW important?", "Why do critics oppose CEDAW?", "Why do critics condemn the (potential) U.S. ratification of CEDAW?" ], "summary": [ "The Senate may consider providing its advice and consent to U.S. ratification of the United Nations (U.N.) Convention on the Elimination of All Forms of Discrimination Against Women (CEDAW, or the Convention) during the 114th Congress.", "CEDAW is the only international human rights treaty that specifically addresses the rights of women.", "It calls on States Parties to take measures to eliminate discrimination against women in all areas of life, including political participation, employment, education, healthcare, and family structure.", "CEDAW has been ratified or acceded to by 189 States Parties. The United States is the only country to have signed but not ratified the Convention. Other governments that have not ratified the treaty include Iran, Palau, Somalia, Sudan, and Tonga.", "The election of President Barack Obama focused renewed attention on the possibility of U.S. ratification of CEDAW.", "The Administration called the Convention an \"important priority,\" and in May 2009 identified it as a treaty on which it \"supports Senate action at this time.\" At a November 2010 hearing on CEDAW held by the Senate Judiciary Committee's Subcommittee on Human Rights and the Law, Administration officials expressed further support for U.S. ratification.", "Then-Ambassador-at-Large for Global Women's Issues Melanne Verveer stated that ratification is critical to U.S. efforts to promote and defend women's rights worldwide. Secretary of State John Kerry has also expressed support for U.S. ratification of CEDAW.", "CEDAW supporters hold that the Convention is a valuable and effective mechanism for fighting women's discrimination worldwide.", "They argue that U.S. ratification would give the United States additional legitimacy when it advocates women's rights internationally, and that it might empower women who fight discrimination in specific countries.", "CEDAW opponents maintain that the treaty is not an effective mechanism for addressing discrimination against women internationally, emphasizing that countries widely believed to have poor women's rights records have ratified the Convention.", "Critics also contend that U.S. ratification could undermine U.S. sovereignty and impact the private conduct of U.S. citizens." ], "parent_pair_index": [ -1, -1, 1, -1, -1, 0, -1, -1, 0, -1, 2 ], "summary_paragraph_index": [ 0, 0, 0, 0, 3, 3, 3, 7, 7, 7, 7 ] }
CRS_RL32721
{ "title": [ "", "Introduction", "A Look at the Historic Data", "2005 and 1990 Emissions Data (without accounting for land use and forestry emission effects)", "Longer-Term Historical Data (1850-2005)", "Impact of Land Use", "Implications of Focusing on Emissions Levels for International Actions", "Alternative Perspectives", "Per Capita Emissions", "Greenhouse Gas Intensity of Economy", "Discussion" ], "paragraphs": [ "", "Climate change is a global issue; however, greenhouse gas emissions data on a global basis are incomplete. Some developing countries have no institutions for monitoring greenhouse gas emissions and have never reported such emissions to the United Nations Framework Convention on Climate Change (UNFCCC). In a similar vein, data on individual greenhouse gases, sources, and land-use patterns vary greatly in quality. Despite shortcomings in the data, the emerging picture of emissions has implications for considering alternative policies for controlling emissions. First, the picture outlines the estimated contributions of individual countries. Second, evaluating those emissions in terms of socio-economic characteristics (e.g., population and economic activity) provides insights on the potentially divergent interests of differing groups of nations—especially concerning developed nations versus developing ones.\nThe World Resources Institute (WRI) has compiled greenhouse gas emissions and related data from a variety of sources into a database that is available for analysis. Covering 185 nations (plus a separate entry combining the members of the European Union), the database includes total emissions, per capita emissions, and greenhouse gas (or carbon) intensity; selected socio-economic indicators; and other measures. Emissions data for all six greenhouse gases identified by the UNFCCC are available for 1990, 1995, 2000, and 2005 for both developed and non-Annex I nations. Data for carbon dioxide (CO 2 ) are available back to 1850 and up to 2006 for both developed and non-Annex I nations. Data on the effects of land use change and forestry on CO 2 emissions are only available from 1990 to 2005, and only for a subset of nations.\nThis report uses the data compiled by WRI to examine a pivotal and long-running issue surrounding U.S. climate change policy: the appropriate roles of developed and developing countries in addressing climate change.\nThe UNFCCC states as its first principle in Article 3:\nThe Parties should protect the climate system for the benefit of present and future generations of humankind, on the basis of equity and in accordance with their common but differentiated responsibilities and respective capabilities. Accordingly, the developed country Parties should take the lead in combating climate change and the adverse effects thereof.\nU.S. policymakers have struggled with the \"common but differentiated responsibilities\" of all nations and with the pledge for the developed countries to \"take the lead in combating climate change.\" Under the UNFCCC and the subsequent Kyoto Protocol, common actions include the responsibility to monitor and report emissions; differentiated actions include the commitment to reduce emissions for designated developed nations (including the United States), listed on Annex I to the UNFCCC (and hence known as Annex I nations).\nThe original UNFCC commitment was voluntary, and many Annex I nations, notably including the United States, failed to meet the objective of reducing 2000 emissions to a 1990 baseline. Thus the Kyoto Protocol made mandatory individual Annex I nations' commitments of percentage reductions for 2008-2012, but meeting them has proved difficult—and the United States refused to join the commitment. Under both the UNFCCC and the Kyoto Protocol, non-Annex I nations would be exempt from these specified control requirements—although they could voluntarily join in. This split in responsibilities—with the consequent lack of greenhouse gas control requirements for major emitting non-Annex I countries—played a key role in the United States' refusal to agree to the Kyoto Protocol.\nTwo key issues emerged from the UNFCC and Kyoto commitments to reduce emissions by developed nations: first, meeting the commitments is proving to be both technically and politically difficult; and second, it has become increasing evident that any reductions achieved by Annex I nations could be nullified by increases in emissions from non-Annex I nations like China and India that have been undergoing rapid economic growth and emitting increasingly large amounts of greenhouse gases—such that by 2005 China passed the United States to become the number one emitter of greenhouse gases in the world.\nJustifications for the differential treatment of the developed, Annex I nations compared to the developing nations are both environmentally and economically based.\nEnvironmentally, the developed, Annex I nations have dominated emissions. Cumulatively, from 1850 to 2006, Annex I nations had emitted approximately 74% of energy-related CO 2 , while non-Annex I nations had contributed 24%. In 1990, when the UNFCCC was being conceived, Annex I nations accounted for 60% of emissions of all six greenhouse gases, while the non-Annex I nations accounted for 40%. By 2005, however, non-Annex I nations dominated, accounting for 51% of total emissions, while Annex I nations accounting for approximately 47%. Thus, while Annex I nations still dominate cumulative emissions, the fact that non-Annex I nations are now contributing more than half the emissions confounds the assignment of future obligations. Economically, as the UNFCCC explicitly recognizes, the economic development being pursued by the non-Annex I nations depends importantly on expanded use of energy, including fossil fuels, which are the main source of carbon dioxide, the dominant greenhouse gas. From this perspective, a logic for the differing treatment of the two groups is that the developed, Annex I countries can afford to control emissions because they have achieved a relatively high standard of living, while the developing nations have the right and should have the opportunity to expand energy use as necessary for their economic development.\nThis distinguishing of the responsibilities of the Annex I and non-Annex I nations generates crucial and interrelated tensions:\nFirst, this approach means that Annex I nations bear the preponderance of the direct economic costs for addressing global climate change; Second, non-Annex I nations retain the opportunity to develop their economies using least-cost energy regardless of greenhouse gas emissions; this in turn means that from the perspective of the Annex I nations, at least some developing nations—which may be competing in certain economic sectors—appear to be getting a free ride; And third, despite investments in controls and resulting tensions between competing economies, actual global emissions will continue to rise if the increase in emissions from non-Annex I nations exceeds any decrease in emissions achieved by Annex I ones.\nThe crux of the Copenhagen Conference, to plot a post-Kyoto course for addressing climate change, was how to engage the two largest emitters, the United States and China—the former having rejected Kyoto in part because developing nations were not obligated to curtail emissions; and the latter having become the world's largest emitter of greenhouse gases. Politically, while George W. Bush administration had been a reluctant partner in the UNFCC process, including early negotiations pointing toward Copenhagen, President Obama has been a vigorous proponent of engagement. At the Copenhagen Conference, he met twice with Chinese Premier Wen Jiabao in an effort to move the negotiations forward.\nThe Copenhagen outcome showed both some progress in bridging the gap between the developed and developing nations, and continuing difficulties in finding common ground on how to reduce greenhouse gas emissions. The accord did not mandate specific reductions, but set a goal of reducing global emissions \"so as to hold the increase in global temperature below 2 degrees C, and take action to meet this objective consistent with science and on the basis of equity.\" Annex I nations commit to implement \"quantified economy-wide emissions targets for 2020\" and non-Annex I nations commit to implement \"mitigation actions.\" Both sets of nations commit to reporting and verification procedures \"in accordance with guidelines adopted by the Conference of the Parties.\" (Monitoring, reporting, and verification were a key demand of the United States of developing nations.) Also, the accord contained the promise of $100 billion a year by 2020 \"to address the needs of developing countries.\"\nTo clarify how nations' emissions levels intersect with social and economic contexts, this paper focuses on the 20 individual nations that emitted the most greenhouse gases in 2005 (see Appendix A , Appendix B , and Appendix C ). In 2005, not taking into account emissions implications of land use and forestry, the top 20 represented about 75% of global greenhouse gas emissions—up slightly from about 73% in 1990 (latest available data from CAIT for all six greenhouse gases). In addition, data for the 27-member European Union are included, as the Kyoto Protocol allows the EU to address its greenhouse gas emission obligations collectively. In 2005, the 27-nation EU was the third-largest emitter of greenhouse gases, after China and the United States.", "", "A compelling fact to emerge from the database is that a few countries account for most of the emissions. Appendix A , Appendix B , and Appendix C present data concerning the top 20 greenhouse gas-emitting nations in 2005. They accounted for 75.3% of global emissions. Excluding land use data, by CAIT's accounting, China led in emitting greenhouse gases (1,974 million metric tons of carbon equivalent, MMTCE) at 19.1% of the total, followed by the United States (1,892 MMTCE) at 18.3%. No other country reached 6% of total emissions (although the collective 27-member EU accounted for 13.4%); overall, only eight countries emitted 2% or more. These top eight emitters accounted for 58.3% of global emissions and the next 13 top emitters accounted for another 17% of emissions.\nThus one implication of these data is that greenhouse gas control in the short term depends mainly on the actions of a relatively few nations; if the top 20 emitters (or even the top eight) all acted effectively, the actions of the remaining 160-plus nations would be of relatively little import, at least for years.\nA second compelling fact about those top emitters is that they are highly diverse and represent very different situations. The top 20 nations include:\nDeveloped (Annex I) nations whose emissions grew between 1990 and 2005: the United States, Japan, Canada, Italy, Australia, France, Spain, and Turkey (ranked 2, 5, 8, 13, 14, 16, 18, and 20, respectively). These eight nations accounted for 30.5% of global greenhouse gas emissions in 2005. Developed (Annex I) nations whose emissions declined between 1990 and 2005, largely as a result of the collapse of the Eastern European and USSR socialist economies during the 1990s: Russian Federation, Germany, and Ukraine, (ranked 3, 7, and 17, respectively). These three nations accounted for 9.0% of global greenhouse gas emissions in 2005. Developed (Annex I) nations with free-market economies whose emissions declined between 1990 and 2005, largely because of a combination of low population growth, modest economic growth, and the displacement of high-emitting fuels (coal) with alternatives: the United Kingdom (ranked 9), is the only member of this category. It accounted for 1.7% of global greenhouse gas emissions in 2005. Developing (non-Annex I) nations, all of whose emissions rose during the period: China, India, Brazil, Mexico, Indonesia, South Korea, Iran, and South Africa (ranked 1, 4, 6, 10, 11, 12, 15, and 19, respectively). These eight nations accounted for 34.1% of global greenhouse gas emissions in 2000.\nFor the year 2005, then, 12 of the top 20 countries were Annex I countries, including 6 of the top 10 emitters. In 2005, the top 20 Annex I countries accounted for about 55% of the top 20 group's greenhouse emissions, compared with 45% for the developing, non-Annex I countries; in 1990, the relative shares were 69% and 31%, respectively, so the developing countries have been proportionately increasing their share.\nHighlighting the tension between Annex I and non-Annex I perspectives, the number-one emitters of each group were the top two emitters overall: At the top were the leading developing, non-Annex I country, China; and the leading developed, free-market economy, the United States. Combined, these two countries alone accounted for 37.4% of total global emissions.", "The impact of emissions on climate change is believed to be cumulative over decades and even centuries. Thus a longer-term examination of data provides an important perspective, and is one reason for the differing treatments of the Annex I and non-Annex I nations. Available data give emissions estimates of energy-related CO 2 emissions back from1850 to 2006 (see Appendix A and Appendix C ).\nThis longer-term view of emissions underscores the contribution of the Annex I nations:\nFor all nations, excluding land use changes and forestry practices, Annex I countries' share of energy-related CO 2 emissions over the period 1850-2005 is 74%; non-Annex I countries' share is 24% (see also Table 1 ). The relative rankings of several developing countries, including Brazil, South Korea, Indonesia, and Iran, drop substantially using a longer historical baseline for emissions: from the 2005 rank to the 1850-2005 cumulative rank for CO 2 , from 6 th to 21 st , 15 th to 20 th , 11 th to 25 th , and 12 th to 23 rd , respectively.\nGreenhouse gas emissions, particularly energy-related emissions, are closely tied to industrialization. As \"developed\" is considered by many to be synonymous with \"industrialized,\" it is not surprising that the developed countries dominate cumulative emissions, while developing ones are increasing their current annual share.", "Changes in land use can significantly affect net levels of emissions. In general, deforestation increases CO 2 emissions and afforestation decreases them. Certain agricultural practices can increase emissions of methane or nitrous oxide; other agricultural processes can sequester carbon. However, data on the effects on emissions of land use changes and forestry practices, and their conversion into equivalent units of greenhouse gas emissions, are both less available and less robust than data on emissions. Therefore, this discussion is at best illustrative (see Appendix A and Appendix C ; note that numerous countries lack data on land use and forestry).\nIncluding land use in the calculations for 2005 focuses discussion on certain developing countries.\nLand use changes and forestry practices in certain developing countries, notably Brazil and Indonesia, are having the effect of substantially upping their relative emissions ranks. Counting land use, Brazil's emissions in 2005 rise from 276 MMTCE to 776 MMTCE (+181%), and Indonesia's rise from 159 to 557 (+250%). This ups their rankings of total emissions in 2005 from 6 th to 3 rd , and 11 th to 4 th , respectively. Compared to Brazil and Indonesia, the impact of accounting for land use on other top 20 emitters is much less. The next biggest adjustment is for Mexico, whose emissions rise 6% when land use is accounted for. For the United States, net emissions drop by 32 MMTCE (-1.7%); its relative rank (as number 2 in 2005) does not change when land use is taken into account.\nHistoric land use and forestry data are not available. Evaluating the impact of land use and forestry at any one time directs attention to those few countries undergoing particular points in the development cycle. For many countries, land-clearing and agricultural development occurred long ago: the Western developed nations and China and India, for example, have long-established agricultural practices; in contrast, Brazil and Indonesia have over the past few decades been clearing large regions of forest and jungle for timber and/or conversion to agriculture, releasing greenhouse gases (or removing sinks). In terms of the UNFCCC and the Kyoto Protocol, and potentially the Copenhagen Accord, including land use in the equation for controlling emissions disadvantages certain countries whose exploitation of resources and development of agriculture are occurring at a particular moment in history, while for other countries the effects of past changes in land use and forestry practices are embedded in their baseline emissions.", "The data on greenhouse gas emissions highlight issues of both effectiveness and fairness in the effort to address global climate change. Differentiating responsibilities between Annex I and non-Annex I nations, as the UNFCCC has, does not focus efforts on all of the largest emitters. As Table 1 shows, the emissions dominance of Annex I nations that existed in 1990 has ended: in 2005 non-Annex I nations' global greenhouse gas emissions definitively surpass those of Annex I nations, by a margin of 15% when taking land use and forestry into account. On the other hand, on the basis of energy-related CO 2 emissions, cumulative from 1850-2006, Annex I nations still dominate by margin of 3 to 1.\nMoreover, contradictory issues of fairness arise. For Annex I countries, the present scheme of controlling greenhouse gases requires them to bear essentially all the direct economic costs. For non-Annex I countries, to the extent that development is linked to increasing greenhouse gas emissions, imposing controls on them could slow their development and hold down their standards of living vis-a-vis the developed nations.\nFinally, the focus on emissions levels at specific times (e.g., a baseline of 1990) has differential and arbitrary impacts on individual nations.\nLooking at the industrialization process, to the extent that fossil fuel use is a necessary ingredient of economic development, as acknowledged by the UNFCCC, the emergence of the global climate change issue at this time effectively determines the distinction between the developed, Annex I nations and the developing, non-Annex I nations. For Annex I nations, that energy exploitation has been incorporated into their economies and is part of their baseline for considering any controls on greenhouse gases. For developing, non-Annex I nations, however, economic development will require expanded energy use, of which fossil fuels can be the least costly. Thus imposing limits on fossil energy use at this time could result in developing countries being relegated to a lower standard of living than those nations that developed earlier. Similarly, certain land-use activities, such as clearing land for agriculture and exploiting timber, affect net greenhouse gas emissions. Nations that are currently exploiting their resource endowments, such as Brazil and Indonesia, could find themselves singled out as targets for controls. Yet developed nations, like the United States and most European countries, which exploited such resources in the past, have those greenhouse gas implications embedded in their baselines. Also, the focus on 1990 as a baseline means that the Eastern European and former Soviet Union nations have the advantage of reductions in emissions from their subsequent economic contractions, which will allow them room for growth. Likewise, the discovery and exploitation of North Sea gas has allowed Great Britain to back out coal and thereby reduce emissions since the baseline.\nIn all these cases, the time frame adopted for defining the climate change issue and for taking actions to address greenhouse gas emissions has differential impacts on individual nations, as a result of their individual resource endowments and stage of economic development. The differential impacts give rise to perceived inequities. Thus the effort to find a metric for addressing greenhouse gas emissions baselines and targets that will be perceived as equitable is challenging.", "The problems raised above prompt the question: What alternatives to controls derived from historically based emissions levels are available? Alternative metrics for taking into account greenhouse gas emissions and economic development include per capita emissions and economic intensity of emissions.", "The socioeconomic differences between the developed, Annex I nations and the developing nations lead to considerations about emissions other than simply their absolute amounts. One alternative is to consider per capita emissions: All else equal, populous nations would emit more greenhouse gases than less populated ones. On this basis, the difference between developed, Annex I countries and non-Annex I ones is apparent.\nAppendix A and Appendix B show that of the top 20 emitters in 2005, the highest ranked by per capita greenhouse gas emissions are developed countries (Australia, United States, and Canada, ranked 6, 9, and 10, respectively). Their per capita emissions (7.5, 6.4, and 6.2 tons per person, respectively) are nearly double the emissions of the highest-ranked developing country in the top 20 (South Korea, at 3.2), and over four times that of China (1.5). The rankings for the non-Annex I countries in the top 20 emitters range from 29 (South Korea) to 148 (India), with China ranked 81. In contrast, Annex I countries range from 6 (Australia) to 51 (France), with the United States at 9. Reasons the United States, Australia, and Canada are so high on this measure include their dependence on energy-intensive transport to move people and goods around countries of large size and relatively low population density, the use of coal for power generation, and the energy requirements for resource extraction industries.\nThus, if one were considering how to control greenhouse gas emissions, one way of trying to bridge the different interests of the developed, Annex I nations and the developing ones would be to focus on per capita emissions as a way of giving each nation an equitable share of energy use. For the United States compared to the developing world, this metric could imply constraints, depending on the compliance time frame and future technological advancements. Likewise, this approach could permit most less-developed countries to increase their emissions to accommodate expanding economies.", "Another alternative for evaluating a nation's contribution to greenhouse gas emissions is to consider how efficiently that nation uses energy (and conducts other greenhouse gas-emitting activities) in producing goods and services. This concept is captured by greenhouse gas intensity—or carbon intensity —measured as the amount of greenhouse gases emitted per million dollars of gross domestic product, measured in international dollars (parity purchasing power) (see Appendix A and Appendix C ). Carbon intensity as a greenhouse gas indicator has received considerable attention since President Bush decided to use it as a benchmark for his voluntary climate change program. Also, the World Resources Institute has advocated its use as an appropriate index for developing, non-Annex I nations.\nA nation's greenhouse gas intensity reflects both its resource endowment and the energy-intensiveness of its economy. In terms of energy resources, countries with rich resources in coal would tend to be higher emitters, while countries with rich resources in hydropower or natural gas would tend to be lower emitters. In terms of economic activity, countries with major heavy industry, major extractive industries, and extensive transportation systems tend to be higher emitters, while countries without these and/or dominated by service industries would tend to be lower emitters. As noted in terms of emissions, taking into account land use sharply increases the greenhouse gas intensity of Brazil and Indonesia.\nThe top 20 emitters in 2005 (see Appendix A and Appendix C ) range widely in greenhouse gas intensity: from 512 tons per million international $GDP (Ukraine, which relies heavily on coal) to 80 tons/million international $GDP (France, which relies heavily on nuclear power for generating electricity). (The larger the intensity number, the more GHGs emitted per dollar of GDP: from a climate change perspective, the lower the intensity the better.) These are both Annex I nations; non-Annex I nations have a narrower range, from the 136 tons/million international $GDP (Mexico) to 372 tons/million international $GDP (China). Taking into account land use, however, would dramatically raise the intensity of Brazil and Indonesia: in 2005 it jumped Brazil by 182%, to 490 tons/million international $GDP and Indonesia by 250%, to 790 tons/million international $GDP; the next largest increase from land use change was Mexico at 6%.\nAs a metric for considering how to control greenhouse gas emissions, intensity has an inherent political appeal: for most nations, intensity is declining. For the world, greenhouse gas intensity declined at a rate of -1.6% annually from 1990 to 2005. Causes of this decline in intensity are cost efficiencies that focus attention on the efficient use of energy, policies promoting the use of alternatives to fossil fuels generally and to coal in particular, and substitutions for perfluoro- and hydrofluorocarbons. A consequence of focusing on intensity, however, is that even with declining intensity, actual emissions can rise as a result of population growth and economic growth.\nFor greenhouse gas intensity, in 2005 the United States ranked number 122 in the world, making this a more favorable metric than absolute emissions (the United States ranked number 2 in the world) and per capita emissions (the United States ranked number 9). Of the indicators examined here, the United States gets the most favorable results from this one. Nevertheless, in absolute terms, the United States is relatively less efficient with respect to intensity compared with Western European countries (the EU-27 would have ranked 154) and Japan ranked 166. In addition, the United States is less efficient than non-Annex I emitters South Korea and Mexico, but it is more efficient than China, India, Brazil, South Africa, Indonesia, and Iran.\nIn its positioning for the Copenhagen meeting, China pledged that it would cut its carbon intensity 40-45% by 2020 from a 2005 baseline. China's greenhouse gas intensity in 2005 ranked 34, indicating that its economy was comparatively GHG-inefficient, and suggesting that intensity reductions should be relatively easy to achieve. But in fact, based on CAIT data, this commitment simply reflects China's historical trend for intensity: for the 15-year period 1990 to 2005, China's carbon intensity, based on CO 2 emissions only, declined by 43% (its carbon-equivalent intensity, based on all six greenhouse gases, declined by 53%).", "As stated above, the data on greenhouse gas emissions highlight issues of both effectiveness and fairness with respect to current efforts to address global climate change. Differentiating responsibilities between Annex I and non-Annex I countries fails to focus efforts on all the largest emitters. In addition, contradictory issues of fairness arise, as Annex I countries bear essentially all the direct economic costs of reducing emissions, and non-Annex I countries are granted the right to increase emissions to meet developmental needs. Finally, the focus on historical emissions as a baseline for regulation has differential and arbitrary impacts on individual nations.\nThe result of the UNFCCC and Kyoto Protocol's setting emissions targets for only developed nations and focusing on returning their emissions to a specific baseline is twofold: (1) the current regime has had little effect on global emissions, and will have little effect in the near future; and (2) the largest emitters, the United States and China, have not found it in their interests to join in the international effort to a significant degree. Indeed, the United States pulled completely out of the Kyoto process under the George W. Bush administration. This process has continued to be difficult, as the recent Copenhagen meetings illustrate.\nThis history of the UNFCCC and the Kyoto Protocol raises serious questions about how to develop greenhouse gas targets, time frames, and implementation strategies. With respect to targets, the UNFCCC recognized the right of developing countries to develop and the responsibility of all countries to protect the global climate. These goals of the UNFCCC suggest that if there is to be any permanent response to climate change that involves controlling greenhouse gases, then a regime that combines some measure reflecting the right of developing countries to develop, such as per capita emissions, and some measure reflecting the need to be efficient, such as carbon intensity, may be necessary to move the world toward a workable and effective climate change framework.\nAs shown above a global target focused on per capita emissions generally rewards developing nations, providing them room for economic growth; the target's balance between limiting emissions and permitting growth determines the individual winners and losers. For example, based on Appendix B , a target of 3 tons carbon per person would allow all the developing nations in the top 20 emitters except South Korea growth room (South Korea is at 3.1 tons per capita), while five developed nations (United States, Russian Federation, Germany, Canada, and Australia) would have to make cuts. In contrast, a target focused on greenhouse gas intensity would have more diverse implications for developing nations. Several major developing nations produce considerably higher greenhouse gas emissions per million dollars of GDP than some developed nations. For example, in 2005 China's carbon intensity (372 tons/million international $GDP) was about four times that of the United Kingdom's (91) and Italy's (93). Thus a greenhouse gas intensity goal could be a counterforce to the economic development process for some countries, meaning that the winners and losers of a regime combining per capita and carbon intensity measures could be highly dynamic and contentious. Adding land-use implications would further complicate the regime, and selectively affect certain nations, especially those just now at the point of exploiting forests (notably Indonesia and Brazil).\nFor the United States, a regime containing some mix of per capita and greenhouse gas intensity measures would likely imply a need to constrain emissions over some time frame. The U.S. greenhouse gas intensity is declining, as is the case with most nations, but the decrease currently does not completely offset increased emissions resulting from the growth of population and of the economy. The extent to which targets could translate into economic costs would depend on the other two features of the regulatory scheme: (1) time frame (specifically, whether it would accommodate technological advances in less-carbon-intensive technology or accelerated commercialization of existing low-carbon technologies such as nuclear power); (2) implementation strategy (specifically, whether it encourages least-cost solutions and development of advanced technologies).\nWith respect to time frame, the data indicate two things: (1) most countries that achieved a significant reduction during the 1990s did so as a result of either an economic downturn or a substantial realignment in energy policy; (2) many countries have not been able to stabilize their emissions despite the UNFCCC's voluntary goal, much less reduce them. That failure was the impetus for the Kyoto Agreement's prescribed reductions and of the Copenhagen meeting. Using economic contraction as an emission reduction strategy can scarcely be considered an option. Instead, the substantial development and/or deployment of less-carbon-intensive technology, improved land-management strategies, and other actions would be necessary to achieve stabilized emissions. As noted above, greenhouse gas emissions are closely tied to industrialization—a synonym for \"developed.\" With few exceptions, improvement in efficiency has been gradual. A permanent transformation of the global economy necessary to ensure a long-term stabilization of greenhouse gas emissions may involve a multi-stage, long-term time frame.\nThe difficulty in implementing the UNFCCC suggests implementation and compliance are still an open issue. The United States submitted climate action plans during the 1990s indicating it would achieve the UNFCCC goal of returning emissions to 1990 levels. It did not. There were no sanctions. Likewise, some Kyoto signatories may not achieve their reduction targets in 2008-2012. The sanctions are unclear. Now, for the Copenhagen Accord, nations are asked to voluntarily commit to reductions. Given the wide range of situations illustrated by the data, a flexible strategy that permits each country to play to its strengths may make it easier for diverse countries like the United States and China to reach some acceptable agreement.\nThe extent of flexibility would depend on the balance between emission reductions and economic cost designed into the targets, time frame, and implementation strategy. Market-based mechanisms to reduce emissions focus on specifying either the acceptable emissions level (quantity), or compliance costs (price), and allowing the marketplace to determine the economically efficient solution for the other variable. For example, a tradeable permit program sets the amount of emissions allowable under the program (i.e., the number of permits available caps allowable emissions), while permitting the marketplace to determine what each permit will be worth. Conversely, a carbon tax sets the maximum unit (per ton of CO 2 ) cost that one should pay for reducing emissions, while the marketplace determines how much actually gets reduced.\nHence, a major implementation question is whether one is more concerned about the possible economic cost of the program and therefore willing to accept some uncertainty about the amount of reduction received (i.e., carbon taxes), or one is more concerned about achieving a specific emission reduction level with costs handled efficiently, but not capped (i.e., tradeable permits). Of course, combinations of these approaches are possible, depending on the flexibility desired. The data presented here portray a very wide range of situations and conditions among the 20 top countries that represent over 70% of total emissions. Significant flexibility may not only be desirable but necessary for them to reach any significant agreement.\nAppendix A. Relative Ranking of 20 Top Emitters (Plus EU-27) of Greenhouse Gases Based on 2005 Greenhouse Gas Emissions\nAppendix B. Greenhouse Gas Emissions and Other Climate Change-Related Indicators for 2005 Top 20 Emitting Countries (Excludes Land Use Change & Forestry)\nAppendix C. Additional Emissions and Other Climate Change-Related Indicators for 2005 Top 20 Emitters" ], "depth": [ 0, 1, 1, 2, 2, 2, 1, 1, 2, 2, 1 ], "alignment": [ "h0_title h1_title", "h0_full h1_full", "", "", "", "", "", "h0_full", "", "", "h0_full h1_full" ] }
{ "question": [ "What does this report address?", "What is the first issue that it examines?", "How important is this issue to U.S. policy?", "What else does this report examine?", "What are alternative measures for addressing climate change?", "What is a flaw in differentiating responsibilities between developed and developing nations?", "To what extent has the UNFCCC been successful?", "How could the differentiation strategy be made more efficient?", "What is an example of the difficulty in finding a common strategy?" ], "summary": [ "Using the World Resources Institute (WRI) database on greenhouse gas emissions and related data, this report examines two issues.", "The first issue is the separate treatment of developed and developing nations under the United Nations Framework Convention on Climate Change (UNFCCC), the Kyoto Protocol, and the Copenhagen Accord.", "This distinction has been a pivotal issue affecting U.S. climate change policy.", "The second issue is the difficulty of addressing climate change through limiting greenhouse gas emissions to a specified percentage of baseline emissions (typically 1990).", "The data permit examination of alternative approaches, such as focusing on per capita emissions or the greenhouse gas emission intensity (measured as emissions per unit of economic activity).", "Differentiating responsibilities between developed and developing nations—as the UNFCCC does—has failed to engage some of the largest emitters effectively.", "Moreover, many developed countries have not achieved stabilization of their emissions despite the UNFCCC.", "Given the wide range of situations illustrated by the data, a flexible strategy that allows each country to play to its strengths may be necessary if diverse countries like the United States and China are ever to reach agreement.", "The difficulty in finding a common strategy was evidenced by the outcome of the Copenhagen meeting, which set a climate change objective of holding global warming to less than 2 degrees C but then left up to each country the choice of how to address emissions." ], "parent_pair_index": [ -1, 0, 1, 0, 3, -1, 0, 0, 2 ], "summary_paragraph_index": [ 0, 0, 0, 0, 0, 2, 2, 2, 2 ] }
GAO_GAO-19-389
{ "title": [ "Background", "Administration and Oversight of the School Meals Programs", "Meal Counting and Claiming", "Oversight", "Estimation of Improper Payments in the School Meals Programs", "Fraud Risk Management Standards and Guidance", "USDA Has Reported Taking Various Steps to Reduce Improper Payment Error Rates, but Redefined What It Considers to Be an Improper Payment in Fiscal Year 2018", "USDA Reported Taking Steps to Reduce School Meals Improper Payment Error Rates", "Reported Error Rates for Fiscal Year 2018 Are Not Comparable to Prior Years Because of a Change in Definition", "Limited Risk Assessment Hinders USDA’s Ability to Better Ensure Oversight Practices Address Fraud Risks", "Conclusions", "Recommendation for Executive Action", "Agency Comments and Our Evaluation", "Appendix I: GAO Contact and Staff Acknowledgments", "GAO Contact", "Staff Acknowledgments" ], "paragraphs": [ "", "The Food and Nutrition Service at USDA is responsible for overseeing the school meals programs at the federal level, which includes issuing regulations and guidance. The school meals programs are administered at the state level by a designated state agency—generally an education or agriculture agency—that issues guidance to school districts providing the meals. School districts are responsible for certifying students as eligible for free or reduced-price meals, providing children with nutritionally balanced meals each school day, and counting and claiming eligible meals for federal reimbursement, among other things. USDA and state agencies also conduct oversight of the school meals programs. Figure 1 summarizes the responsibilities of the different entities within the school meals programs.\nAll students in schools operating the school meals programs may participate in the programs, and eligible students may be certified to receive free or reduced-price meals. Individual students can be certified into the school meals programs either through household application or direct certification.\nHousehold application. A household can submit an application that lists all sources of household income and the names of all household members, among other information. School districts compare this information to income-eligibility guidelines to determine whether the student is eligible for free or reduced-price meals. Alternatively, the household can indicate on the application that it participates in certain public-assistance programs—such as the Supplemental Nutrition Assistance Program (SNAP)—or that the student meets an approved designation, which confers categorical (automatic) eligibility for free meals. No documentation to support income listings—such as tax returns or pay stubs—is required at the time of application.\nDirect certification. Under the direct certification method, data matching is used to identify and certify students who are categorically eligible for free meals. State agencies are required by statute to match student enrollment records against SNAP records and may also match against records for other public-assistance programs or approved designations. Students who are directly certified into the school meals programs are eligible for free meals without a household application.\nAlternatively, schools can use certain program provisions to serve meals at no charge to all students (i.e., eligibility is not determined for each student individually on an annual basis).\nCommunity eligibility provision. Schools and school districts may apply for community eligibility if their percentage of students identified as eligible for free meals without an application—known as the identified student percentage—is at or above 40 percent. Meals served at schools using the community eligibility provision are reimbursed using a formula based on the identified student percentage.\nOther special provisions. Under these special provisions, schools generally use standard procedures to certify free and reduced-price eligible students and count meals by eligibility category to establish a base year. Following the base year, schools serve free meals to all students and are reimbursed based on the information collected in the base year.", "USDA reimburses state agencies, which in turn reimburse school districts, for qualifying meals through the process of meal counting and claiming. A meal is reimbursable if it meets federal nutrition requirements and is not reimbursable if it is missing a required food component or fails to meet the meal pattern requirements. Meals are recorded at the point of sale in a school. Generally, individual meals are recorded as either free, reduced price, or paid based on the student’s certification status, unless the school is operating under community eligibility or a special provision.\nReimbursable meals are tallied at each school. School districts aggregate meal tallies from each school and then report to the respective state agencies on a monthly basis. State agencies then aggregate the reports from each district and submit tallies of free, reduced-price, and paid meals to USDA. USDA then reimburses states for the amount reported. Meals in each category (free, reduced-price, and paid) are reimbursed at different rates.", "Given that the school meals programs are administered on a daily basis at schools across the country, USDA officials stated that the agency relies on two key oversight practices—management evaluations and administrative reviews—to monitor these programs.\nManagement evaluations. USDA conducts management evaluations of state agencies’ administration of the school meals programs. USDA uses risk-based criteria, such as the level of turnover in state agency staff, to select the state agencies to review each year. According to USDA officials, starting in fiscal year 2019, USDA will automatically select a state agency for review if it has not been reviewed in the past 3 years. According to USDA guidance, examples of operations it reviews during management evaluations include (1) state oversight of certification and verification of students into the school meals programs, (2) administrative reviews of school districts conducted by state agencies, (3) claims for reimbursement, and (4) state oversight of compliance with federal meal pattern requirements, among other areas. According to USDA officials, if USDA considers state agencies reviewed in one year as high risk for program noncompliance, those agencies may receive an additional management evaluation in the following year focused on technical assistance.\nAdministrative reviews. USDA develops guidance for administrative reviews in which state agencies review school districts’ administration of the school meals programs. State agencies are required to conduct administrative reviews of each of their school districts at least once in a 3-year review cycle. USDA guidance states that the objectives of administrative reviews include identifying noncompliance, providing technical assistance, and assessing fiscal actions. Among other things, state agency staff are to review a school district’s certification records and its meal counting and claiming data for the most recent month for which a claim for reimbursement was submitted. State agency staff are also to review school meals served while the staff are on-site to determine whether the meals contain the required food components. State agency staff are to record any identified noncompliance and also provide technical assistance to school district staff.", "The Improper Payments Information Act of 2002 (IPIA), as amended, requires agencies to identify, estimate, and report their improper payment amounts and to develop and implement improper payment reduction plans, among other things. USDA estimates improper payments for the school meals programs through a model based on its APEC study, which is conducted by contractors. The most recent APEC study (APEC II) was released in May 2015 and covered activity during the 2012–2013 school year. USDA conducts an APEC study about every 5 years, with APEC III expected to be released in 2020.\nConducting the APEC study involves multiple sampling and data analysis efforts, including the following examples from APEC II.\nIn-person surveys. Contractors conducted in-person surveys of over 3,000 sampled households to collect information on each household’s circumstances at the time of application, including income, household size, and receipt of other public-assistance benefits. Using this information, contractors determined a sampled student’s eligibility status and compared it to the school district’s master benefit list and application or direct certification documentation.\nData matching. Contractors assessed the accuracy of the identified student percentage—the figure used to determine reimbursement for schools using the community eligibility provision—for over 100 sampled schools. To do so, contactors used an iterative process to match sampled students to SNAP and Temporary Assistance for Needy Families records, as well as additional data sources if necessary.\nObservation of meal service. Contractors observed approximately 25,000 lunch transactions and 23,000 breakfast transactions at over 400 sampled schools to identify the food items in each meal at the point of sale, whether the meal was served to a student or nonstudent, and whether the meal was recorded as reimbursable.\nUSDA determined that conducting the APEC study annually would not be feasible. Instead, the APEC study includes a model that allows USDA to use program participation data to report estimated improper payment error rates on an annual basis. Changes in program participation data result in small changes to the estimated improper payment error rates USDA reports during years between APEC studies.", "According to federal standards and guidance, executive-branch agency managers are responsible for managing fraud risks and implementing practices for combating those risks. Federal internal control standards call for agency management officials to assess the internal and external risks their entities face as they seek to achieve their objectives. The standards state that as part of this overall assessment, management should consider the potential for fraud when identifying, analyzing, and responding to risks.\nIn July 2015, GAO issued the Fraud Risk Framework, which provides a comprehensive set of key components and leading practices that serve as a guide for agency managers to use when developing efforts to combat fraud in a strategic, risk-based way. The Fraud Risk Framework describes leading practices in four components, as shown in figure 2.\nThe Fraud Reduction and Data Analytics Act of 2015, enacted in June 2016, requires the Office of Management and Budget (OMB) to establish guidelines for federal agencies to create controls to identify and assess fraud risks and design and implement antifraud control activities. The act further requires OMB to incorporate the leading practices from the Fraud Risk Framework in the guidelines. In July 2016, OMB published guidance about enterprise risk management and internal controls in federal executive departments and agencies. Among other things, this guidance affirms that managers should adhere to the leading practices identified in the Fraud Risk Framework. Further, the act requires federal agencies to submit to Congress a progress report each year for 3 consecutive years on the implementation of controls established under OMB guidance, among other things.\nIt is important to note that fraud and “fraud risk” are distinct concepts. Fraud is challenging to detect because of its deceptive nature. Additionally, once suspected fraud is identified, alleged fraud cases may be prosecuted. If the court determines that fraud took place, then fraudulent spending may be recovered. Fraud risk exists when individuals have an opportunity to engage in fraudulent activity, have an incentive or are under pressure to commit fraud, or are able to rationalize committing fraud. When fraud risks can be identified and mitigated, fraud may be less likely to occur.\nAlthough the occurrence of fraud indicates there is a fraud risk, a fraud risk can exist even if fraud has not yet been identified or occurred. For example, suspicious billing patterns or complexities in program design may indicate a risk of fraud. Information to help identify potential fraud risks may come from various sources, including whistleblowers, agency officials, contractors, law-enforcement agencies, or beneficiaries.", "", "USDA has reported various actions aimed at lowering the school meals improper payment error rates in its agency financial reports. These actions—including onetime actions and longer-term efforts—cover multiple aspects of the programs. The actions USDA reported included the creation of a new household application prototype intended to reduce applicant errors and the development of training for food service workers to address administrative errors. USDA also reported on mechanisms to collect information on program errors to support agency analysis and monitoring efforts. Examples of the reported actions are illustrated in figure 3 below.\nBecause the study used to develop improper payment error rates in school meals programs—APEC—is conducted about once every 5 years, the effect of these actions is currently unknown. Estimated improper payment error rates reported in years between APEC studies will generally not reflect the effect of most actions until the next study is released. Currently, the next APEC study is expected to be released in 2020.", "USDA changed what it considers to be an improper payment in the school meals programs for fiscal year 2018 reporting, resulting in improper payment error rates that are not comparable to those of prior years. Specifically, USDA determined that meal claiming errors do not meet the definition of an improper payment. According to USDA, meal claiming errors occur when meals are incorrectly categorized as reimbursable or nonreimbursable at the point of sale. For example, a meal claiming error occurs when a meal that is missing a required meal component (e.g., the required quantity of a vegetable) is counted as reimbursable.\nUSDA officials reported that the rationale for the change in what constitutes an improper payment is that meal claiming error does not result in the payment of federal funds for services that were not provided or that were provided to ineligible recipients. Agency officials also stated that the remedy for meal claiming error is to add the missing food component to the meal, so correcting the error would not reduce program payments. Although the errors will not be considered in determining the reported estimated improper payment error rates, USDA officials stated that the agency is committed to reducing meal claiming error and will continue to measure it as part of its periodic APEC studies.\nPrior to fiscal year 2018 reporting, meal claiming errors were considered improper payments. As a result, this change contributed to a significant decrease in the estimated improper payment error rates for the school meals programs reported for fiscal year 2018, as shown in figure 4. Accordingly, the results shown for 2015 through 2018 in figure 4 are not comparable.", "Although USDA considers certain program integrity risks through specific processes, it has not assessed fraud risks in the school meals programs. As a result, USDA cannot determine whether its key oversight processes—extensive efforts designed for broad monitoring purposes— address areas at risk for fraud. The assess component of the Fraud Risk Framework calls for federal managers to plan regular fraud risk assessments and to assess risks to determine a fraud risk profile. Furthermore, federal internal control standards state that management should consider the potential for fraud when identifying, analyzing, and responding to risks.\nAccording to USDA officials, fraud in the school meals programs would look the same as nonfraudulent errors. For example, income listed on an application may be misreported intentionally or unintentionally. Consequently, agency officials stated that they have not established a process to plan or conduct a specific fraud risk assessment for these programs. Instead, fraud risks are considered through the agency’s efforts to assess overall program integrity risk in the programs. We have previously reported that integrating fraud risk management into a larger program integrity approach could limit the amount of resources and attention focused specifically on fraud prevention, detection, and response. The deceptive nature of fraud makes it harder to detect than nonfraudulent errors, potentially requiring control activities that are specifically designed to prevent and detect criminal intent.\nAccording to agency officials, USDA’s efforts to assess overall program integrity risks in the school meals programs include researching, monitoring, and reporting activities designed to identify areas of program operations susceptible to improper payments and program error. Specifically, agency officials stated that these efforts include research projects—the APEC study used to estimate improper payment error rates and other smaller-scale, informal projects—and a consideration of specific risks when annually determining which states USDA will review through management evaluations.\nThese efforts to assess overall program integrity risk serve specific purposes and are not designed to identify or address fraud risks in the school meals programs. For example, the purpose of one research project mentioned by USDA officials was to identify challenges related to alternative service models for the School Breakfast Program, which include serving breakfast in locations other than a cafeteria and at a later time in the morning. USDA has not developed a process to consider these disparate efforts to comprehensively assess fraud risks. As a result, USDA’s efforts do not align with the overarching concepts of planning and conducting fraud risk assessments in the Fraud Risk Framework.\nThe Fraud Risk Framework identifies leading practices for planning fraud risk assessments. Specifically, the leading practices include tailoring the fraud risk assessment to the program and planning to conduct the assessment at regular intervals and when there are changes to the program or operating environment. The leading practices also include identifying the tools, methods, and sources for gathering information about fraud risks and involving relevant stakeholders in the assessment process. Information to help identify potential fraud risks may come from various sources, including whistleblowers, agency officials, contractors, law-enforcement agencies, or beneficiaries. Existing oversight efforts— such as USDA’s management evaluations and administrative reviews— may also be a useful source, as information on errors and noncompliance may highlight areas at risk for fraud.\nThe Fraud Risk Framework also identifies leading practices for conducting fraud risk assessments, as illustrated in figure 5.\nWithout a process to plan and conduct regular assessments, USDA cannot identify and assess fraud risks facing the school meals programs. Such information is necessary to appropriately design and implement an antifraud strategy—including specific controls like USDA’s key oversight processes—and evaluate and adapt its strategy and controls to improve fraud risk management in these programs.", "Historically, the school meals programs have reported high estimated improper payment error rates. USDA has reported various steps to reduce the error rates, though a change in what USDA considers an improper payment in the school meals programs resulted in error rates for fiscal year 2018 that are not comparable to those of prior years. Although the two concepts are different, high improper payment error rates may suggest that the school meals programs may also be inherently vulnerable to fraud. However, USDA has not established a process to plan and conduct regular fraud risk assessments for the school meals programs, and existing efforts to assess specific risks in the school meals programs do not comprehensively consider fraud risks. According to leading practices, such an assessment is a pivotal step in managing fraud risks, helping to ensure that USDA’s key oversight efforts are targeted at areas at greatest risk for fraud in these programs, and helping safeguard the government’s substantial investment in them.", "The Administrator of the Food and Nutrition Service should establish a process to plan and conduct regular fraud risk assessments for the school meals programs that align with the leading practices in the Fraud Risk Framework. (Recommendation 1)", "We provided a draft of this report to USDA for review and comment. On April 29, 2019, the Director of the Office of Program Integrity for Child Nutrition provided us with the agency’s oral comments on the draft report. FNS officials generally agreed with the recommendation in the draft report. FNS officials noted that the agency does not currently conduct a formal fraud risk assessment, but they explained that the agency considers fraud risks through multiple existing efforts. These efforts include APEC and other studies, as well as key oversight processes. For example, FNS noted that the APEC study aims to identify the factors that contribute to errors in the school meals programs. Officials explained that this study includes an interview of sampled households, in part to determine whether these households underreported income on their applications and whether such underreporting suggests anything about the applicants’ intent. As noted in our report, we agree that these efforts may be a useful source of information on areas at risk for fraud. However, we continue to believe that additional action is necessary to comprehensively assess fraud risks in the school meals programs, consistent with the Fraud Risk Framework. USDA also provided technical comments, which we incorporated into the report, as appropriate.\nAs agreed with your offices, unless you publicly announce the contents of this report earlier, we plan no further distribution until 30 days from the report date. At that time, we will send copies to the appropriate congressional committees, the Secretary of Agriculture, the FNS Administrator, and other interested parties. In addition, the report will be available at no charge on the GAO website at http://www.gao.gov.\nIf you or your staff have any questions about this report, please contact me at (202) 512-6722 or [email protected]. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix I.", "", "", "In addition to the contact named above, the following staff members made key contributions to this report: Gabrielle M. Fagan, Assistant Director; James M. Healy, Analyst in Charge; and Matthew L. McKnight. Also contributing to this report were Rachel Frisk, Maria McMullen, Jean McSween, and Sabrina Streagle." ], "depth": [ 1, 2, 3, 3, 2, 2, 1, 2, 2, 1, 1, 1, 1, 1, 2, 2 ], "alignment": [ "h0_title h2_title", "h2_title", "", "h2_full", "h0_full", "h2_full", "h0_title", "h0_full", "h0_full", "h1_full", "h2_full", "", "h2_full", "", "", "" ] }
{ "question": [ "What programs is the USDA targeting in its effort to lower improper payment error rates?", "What actions can help the USDA accomplish its goal?", "How does the USDA estimate improper payments?", "How have estimates changed since FY2018?", "Why is the lack of fraud risk assessment harmful for oversight?", "How does this differ from the Fraud Risk Framwork?", "How does the USDA currently consider fraud risks?", "How well do these efforts consider fraud risks?", "How can regular fraud risk assessments (following best practices) help the USDA?", "What sources did GAO obtain data from?", "How did GAO make use of agency documentation to augment its report?", "In what context did GAO assess these practices?", "How did GAO supplement its raw data?" ], "summary": [ "The Department of Agriculture (USDA) has reported various actions aimed at lowering estimated improper payment error rates in the National School Lunch Program and School Breakfast Program (school meals programs).", "Examples include a new application prototype intended to reduce applicant errors and training for food service workers to reduce administrative errors.", "USDA uses a model based on a periodic study to estimate improper payments, and reported error rates will generally not reflect the effect of most actions until USDA's next study is released, likely in 2020.", "However, in fiscal year 2018, USDA redefined what it considers an improper payment. Specifically, meal claiming errors—for example, meals that are missing a required nutritional component but that are counted as reimbursable—are no longer considered improper payments, resulting in error rates for fiscal year 2018 that are not comparable to prior years.", "USDA has not assessed fraud risks in the school meals programs, which hinders its ability to ensure that its key oversight practices—extensive processes designed for broad monitoring purposes—address areas at risk for fraud.", "The assess component of A Framework for Managing Fraud Risks in Federal Programs (Fraud Risk Framework) calls for managers to plan regular fraud risk assessments and to assess risks to determine a fraud risk profile.", "USDA officials stated that the agency considers fraud risks through efforts to assess overall program integrity risk in the programs, which include research projects and consideration of specific risks when allocating monitoring resources.", "However, GAO found that USDA's efforts to assess risk do not comprehensively consider fraud risks. As a result, these efforts are not aligned with the overarching concepts of planning and conducting fraud risk assessments in the Fraud Risk Framework.", "Establishing a process to plan and conduct regular fraud risk assessments that align with the leading practices in the Fraud Risk Framework—including those in the figure below—will help USDA design and implement an antifraud strategy, as well as evaluate and adapt its strategy to improve fraud risk management in the school meals programs.", "GAO reviewed the results of the most recent study USDA uses to estimate improper payments in the school meals programs, as well as the error rates and actions to reduce them reported in USDA's agency financial reports from fiscal years 2015 through 2018.", "Further, GAO analyzed guidance for key oversight practices and documentation regarding USDA's risk assessment processes.", "GAO examined these processes against the leading practices in the Fraud Risk Framework for assessing fraud risks.", "GAO also interviewed agency officials." ], "parent_pair_index": [ -1, 0, 0, 0, -1, 0, -1, 2, -1, -1, 0, 0, 0 ], "summary_paragraph_index": [ 3, 3, 3, 3, 4, 4, 4, 4, 4, 2, 2, 2, 2 ] }
GAO_GAO-16-327
{ "title": [ "Background", "National Defense Strategy and Defense Planning Guidance", "Army End Strength", "Army Force Development and Total Army Analysis Processes", "The Army Prioritized Retaining Combat Units and Plans to Reduce a Greater Proportion of Enabler Units to Make End Strength Reductions", "Army Prioritized Retaining Combat Units", "The Army Plans to Reduce a Greater Proportion of Enabler Units", "The Army Did Not Comprehensively Assess Mission Risk Associated with Its Planned Force Structure", "Army Assessed Mission Risk for Its Combat Forces", "Army Assessed Risk to the Force for Enabler Units, but Did Not Assess Mission Risk", "TAA Does Not Routinely Assess Mission Risk for Both Combat and Enabler Force Structure", "Conclusions", "Recommendations for Executive Action", "Agency Comments and Our Evaluation", "Appendix I: Comments from the Department of Defense", "Appendix II: GAO Contact and Staff Acknowledgments", "GAO Contact", "Staff Acknowledgments" ], "paragraphs": [ "", "The National Defense Strategy is the foundation for DOD’s direction to the military services on planning their respective force structures. This strategy calls for the U.S. armed forces to be able to simultaneously defend the homeland; conduct sustained, distributed counterterrorist operations; and deter aggression and assure allies in multiple regions through forward presence and engagement. If deterrence fails, U.S. forces should be able to defeat a regional adversary in a large-scale multi-phased campaign, and deny the objectives of—or impose unacceptable costs on—a second aggressor in another region. According to the Army’s force development regulation, the Army seeks to develop a balanced and affordable force structure that can meet the requirements of the National Military Strategy and defense planning guidance tasks.\nThe Defense Planning Guidance operationalizes the National Defense Strategy and provides guidance to the services on their use of approved scenarios, among other things, which serve as their starting point for making force structure decisions and assessing risk. These classified scenarios are used to illustrate the missions articulated in the National Defense Strategy, including the need to defeat one regional adversary while deterring a second adversary in another region, homeland defense, and forward presence. Drawing from the scenarios approved in the Defense Planning Guidance for 2017 through 2021, the Army derived a set of planning scenarios, arrayed across a timeline, that reflect these missions.", "Congress authorizes the number of personnel the Army is able to have in its active, Army National Guard, and Army Reserve components respectively. The Secretary of the Army—in consultation with the Director of the Army National Guard and the Chief of the Army Reserve— approves how the Army will allocate that end strength within each of the Army’s components. Between fiscal year 2011 and fiscal year 2018, the Army’s planned end strength is projected to decline by 132,000 positions (12 percent), from about 1.11 million soldiers in fiscal year 2011 to 980,000 soldiers in fiscal year 2018, as shown in figure 1. By fiscal year 2018, the individual components expect to be at the following projected end strengths: active (450,000), Army National Guard (335,000), and Army Reserve (195,000). As a result, the reserve component—which includes both the Army National Guard and the U.S. Army Reserve—will make up 54 percent of the Army’s planned end strength starting in fiscal year 2018; a proportion that is comparable to the size and allocation of Army forces across its components prior to the September 11, 2001, terrorist attacks.", "The Army implements its force development processes to make decisions about how to allocate end strength that has been authorized for each of its components, among other things. Taking into account resource constraints, the five-phase process entails determining organizational and materiel requirements and translating those requirements into a planned force structure of units and associated personnel, as illustrated in figure 2. During the fourth phase—the determination of organizational authorizations—the Army undertakes its annual Total Army Analysis (TAA) process, during which it determines how it will allocate its end strength among its units and manage risk.\nThe TAA process is envisioned to help the Army allocate its end strength among its enabler units—those units that deploy to support combat forces—after initial decisions about the size of combat forces, other types of Army formations, and key enablers are made. The Army’s TAA regulation states that the Army will use force guidance, such as the defense planning guidance, to identify the combat unit structure that will be used as an input to TAA’s analysis of the Army’s enabler unit requirements. The Army also uses the results from its most recently concluded TAA as the starting point for the next TAA. For example, Army officials stated that the planned force structure documented in its October 2015 Army Structure Memorandum was an input for the Army’s ongoing TAA, examining force structure for fiscal years 2019 through 2023. The Army Structure Memorandum documents the force structure approved by the Secretary of the Army for resourcing and is an output of the Army’s TAA process. Army officials said that the Army concluded the quantitative analysis phase for this TAA in December 2015 and they expect that the Army will complete the qualitative analysis phase by June 2016.\nArmy officials said that they have modified the TAA process substantially since the Army last issued its regulation and that an updated regulation that will cover TAA is pending final approval. Last updated in 1995, the Army’s TAA regulation describes the objectives and procedures of the TAA process, which includes documenting the Army’s total planned force structure and any unresourced unit requirements. Army officials said that the Army no longer documents unresourced unit requirements because senior leadership at the time the Army stopped tracking these requirements determined that it was not useful for force planning purposes. Additionally, the Army has expanded the inputs to its TAA process beyond those specified in its regulation to include other segments of its force structure and some enabler units that were not eligible for reduction or reallocation. For example, the Army has identified a minimum number of positions for its generating force—which includes units that enable the Army to train and safeguard the health of its soldiers—and during recent TAAs did not evaluate some types of enabler units for reduction or reallocation that were considered to be in high demand (such as its Patriot Battalions) and units that are considered to be critical to early phases of a major contingency (such as those that provide port opening capabilities).", "The Army prioritized retaining combat units, as well as other segments of its force structure, when planning to reduce its end strength to 980,000 soldiers and as a result will take proportionately more position reductions from its enabler units.", "are responsible for fighting enemy forces in a contested environment and include the Army’s Brigade Combat Teams (Armored, Infantry, and Stryker) and combat aviation brigades. to the Army’s combat units when they are deployed. They often provide critical support in early deployment (such as port opening), as well as for long-term sustainment (such as those that transport supplies or establish bases from which combat units can operate). Combat units are dependent on enabler units for long-term sustainment in theater and the Army generally deploys both types of units to meet operational demands.\nThe Army prioritized retaining combat units and incorporated other considerations when planning to reduce its end strength to 980,000 soldiers. Army officials said that the Army used its force planning process to evaluate how it can best implement planned end strength reductions. This process—which is intended to link strategy to force structure requirements given available resources—included robust modeling and incorporated senior leaders’ professional military judgement. The Army incorporated its priorities at the beginning of this process, which influenced the planned force structure that the Secretary of the Army ultimately approved. Foremost, the Army sought to retain as many combat units as possible so that it could better meet the missions specified in DOD’s defense planning guidance and the Army’s classified scenarios as well as to account for near-term uncertainty. Additionally, the Army determined it needed to maintain a minimum number of positions in its generating force and its transients, trainees, holdees, and students accounts, based on separate analyses. Lastly, the Army sought to minimize the disruption to Army National Guard capabilities and reserve component unit readiness that resulted from reductions.\nGenerating Force: Army organizations whose primary mission is to generate and sustain the operating force, including the Army’s Training and Doctrine Command—which oversees the Army’s recruiting, training, and capability development efforts—and Army Medical Command—which provides health and medical care for Army personnel. Trainees, Transients, Holdees, and Students: Active component soldiers not assigned to units are counted as part of the Army’s end strength, separately from its operating force and generating force. Soldiers in these accounts include soldiers in training, cadets attending military academies, injured soldiers, or soldiers en route to a new permanent duty station.\nRetaining combat units. According to Army officials responsible for TAA, Army leaders determined that it was important that the Army retain as many combat units as possible when assessing how to implement end strength reductions. In 2013, the Secretary of Defense announced the conclusion of the department-wide Strategic Choices and Management Review. As part of this review, DOD examined ways to obtain cost savings by altering the Army’s future force structure. According to Army officials, the Secretary of Defense’s review had, at one point, considered whether the Army could reduce its end strength to 855,000, which would correspond with a force structure of 36 BCTs, including 18 in the regular Army and 18 in the reserve component. Army leaders, reacting to what they considered to be unacceptable reductions, commissioned analyses to determine the end strength and number of BCTs the Army needed to execute the missions specified in defense planning guidance. The analysis determined that the Army should retain a minimum of 52 BCTs, including 30 in the active component, in order to best meet the missions specified in defense planning guidance. Ultimately, Army senior leaders decided to retain 56 BCTs based in part on these analyses as well as their assessment of global events and the potential for increased demand for BCTs.\nIn retaining 56 BCTs in its force structure, the Army took additional steps to redesign its force, reflecting its priority to retain combat capacity. Specifically, the Army plans to eliminate 17 BCTs from its force structure relative to its fiscal year 2011 force (a 23 percent reduction in the number of BCTs). However, because the Army decided to redesign its BCTs by increasing its composition from a two maneuver battalion to three battalion formation, the Army estimates that it will be able to retain 170 maneuver battalions in its force structure—a net reduction of 3 battalions compared to fiscal year 2011 (less than 2 percent), as shown in table 1.\nMaintain minimum number of positions in generating force units and the trainees, transients, holdees, and students accounts. According to Army officials responsible for TAA, the Army needs to maintain a minimum number of positions in the Army’s generating force (in order to provide medical support and training to Army personnel) and its trainees, transients, holdees, and students accounts (in order to account for personnel that are not assigned to units). Specifically, the Army tasked the two largest organizations in its generating force (U.S. Army Medical Command and TRADOC) with evaluating their position requirements and concluded that the Army needs a minimum of 87,400 active component soldiers in the generating force for an end strength of 980,000 soldiers. Additionally, Army officials said that based on a review of historical levels, the Army assumed that 58,500 regular Army positions (13 percent of a 450,000 active component force) would be filled by trainees, transients, holdees, and students.\nMinimize the disruption to Army National Guard capabilities and reserve component unit readiness resulting from reductions. According to Army officials, the Army sought to minimize disruption to Army National Guard capabilities needed for state missions and reserve component unit readiness when implementing end strength reductions by relying on the components to develop recommendations for making those reductions. Army officials also told us that the reserve components have better visibility into their ability to recruit personnel into specific positions, or the potential impact that reductions would have on the Army National Guard’s domestic missions. The Army plans to eliminate approximately 34,000 positions from its reserve component—of which nearly 27,000 will be from its non-combat formations. Army National Guard and Army Reserve officials agreed with the Army’s assessment and said that they have developed their own processes for assessing where they can best reduce or reallocate positions within their respective components and still meet Army mission requirements.", "Given the focus on retaining combat units and the constraints senior leaders placed on changing the Army’s generating force; its trainees, transients, holdees, and students accounts; and its reserve components, the Army will take proportionately more positions from its enabler units than from its combat units as it reduces end strength to 980,000 soldiers. Specifically, in fiscal year 2011 enabler unit positions constituted 42 percent of the Army’s planned end strength (470,000 positions), but the Army intends for 44 percent of its reductions (58,000 positions) to come from its enablers. In contrast, the Army’s combat units constitute 29 percent of the Army’s end strength (319,000 positions), but will account for 22 percent of the planned reductions (29,000 positions). When evaluating enabler unit requirements, the Army focused its attention on those capabilities that were less utilized across a 13-year timeline covered by the Army’s planning scenarios. The Army did not consider reductions for capabilities it determined were critical, such as its Patriot and field artillery units, and reduced the size of or eliminated enabler units that were judged less critical, such as military police, transportation, chemical, and explosive ordnance disposal units.\nDetermining the appropriate amount of enabler capacity has been a persistent problem for the Army. We issued several reports during the 2000s reviewing Army plans and efforts to redesign its combat force, an effort known as “modularity.” In those reports, we found that the Army persistently experienced shortfalls for both key enabler equipment and personnel as it restructured its combat units into brigade combat teams. Between 2005 and 2008 we made 20 recommendations addressing the Army’s challenges in creating a results-oriented plan as it transformed its force, developing realistic cost estimates, and completing a comprehensive assessment of the force as it was being implemented. For example, in 2006, we made 2 recommendations that the Army develop a plan to identify authorized and projected personnel and equipment levels and that it assess the risks associated with any shortfalls. The Army generally agreed with both recommendations but ultimately did not implement them. In our 2014 report, we found that the Army’s report to Congress assessing its implementation of modularity did not fully identify the risks of enabler shortfalls or report its mitigation strategies for those risks.\nArmy officials told us that, based on senior leaders’ professional military judgment, concentrating reductions in enabler units is more acceptable than further reducing the Army’s combat units because combat unit shortfalls are more challenging to resolve than enabler unit shortfalls. Prior Army analysis showed that it would take a minimum of 32 months to build an Armored BCT and Army officials said that the Army cannot contract for combat capabilities in the event of a shortfall in BCTs. In contrast, officials said that some types of enabler units could be built in as few as 9 months. Additionally, a senior Army leader stated that the Army has successfully contracted for enabler capabilities during recent conflicts.", "The Army did not comprehensively assess mission risk (risk to the missions in DOD’s defense planning guidance) associated with its planned force structure because it did not assess mission risk for its enabler units. As a result, the Army was not well positioned to develop and evaluate mitigation strategies for unit shortfalls.", "In assessing its requirements for aviation brigades and BCTs, the Army determined where combat units in its planned force structure would be unable to meet mission requirements given current Army practices in deploying forces to meet mission demands. Notably, the analysis assumed that sufficient enabler capability would be available. Using the Army’s scenarios derived from defense planning guidance, the Army estimated how well different numbers of each type of unit would meet projected demands over time, which allowed it to compare how different aviation and BCT force structures would perform. As we reported in 2015, the Army analyzed the risk of its aviation brigades to meeting requirements based on the timing, scope and scale of missed demands, and made key decisions to reshape its aviation force structure based in part on this mission risk analysis.\nRisk Within the Context of Force Development Mission risk: mission risk is the ability of the Army to meet the demands of the National Defense Strategy as operationalized in DOD’s defense planning guidance. Generally, mission risk can be measured by sufficiency (the ability of supply to meet demand) and effectiveness (the availability of the best unit to accomplish a mission). Risk to the force: risk to the health of the force caused by issues such as increased frequency of deployment with less time at home, or early and extended deployments. It is related but not equivalent to mission risk because it can impact morale and unit effectiveness.\nThe Army used the same type of analysis to compare different quantities of BCTs. The Army analyzed how many, and what types, of BCTs would be needed to meet the mission demands of certain scenarios within the defense planning guidance. The Army’s analysis focused on four different BCT levels, including a high of 60 BCTs at 1.045 million soldiers and the low Army officials said was considered by the Strategic Choices and Management Review of 36 BCTs at 855,000 soldiers. As it did when analyzing aviation requirements the Army assessed the timing, scope and scale of missed demands, given current DOD policies and practices governing the length and frequency of military deployments. The Army also assessed how it could mitigate risk to a major combat operation through strategies such as by changing the deployment schedule, or by temporarily reassigning units away from other non-contingency missions in near-east Asia, the Middle East, or elsewhere. According to Army officials, the Army’s analysis enabled senior leaders to assess risks and tradeoffs for this portion of the force in meeting these demands. The Army did not complete a risk to force assessment for its combat units because officials prioritized retention of these combat units and as a result the Army’s analysis was intended to determine the number and types of these units needed to meet mission requirements.", "In contrast to the mission risk assessment the Army conducted for its combat units (risk to the Army’s ability to meet the missions in DOD’s defense planning guidance), the Army assessed risk to the force for its enabler units in its most recent TAA (risk to the health of the Army’s enabler units). Assessing risk to the force entails determining how frequently and for how long individual types of enabler units would need to deploy to meet the maximum amount of demands possible, given the previously identified combat force structure, and does not entail identifying missed mission demands or documenting unresourced unit requirements. The Army then determined the length of time at home for each type of enabler assessed, and compared the result with that for the Army as a whole, in order to determine the level of stress (“risk”) on that type of unit. The Army’s analysis necessitates making key assumptions about how enablers would be used, some of which contrasted from current DOD deployment practices. For example, the Army assumed active component enabler units could be deployed indefinitely, which may overstate their availability unless the Secretary of Defense authorizes indefinite operational deployment. Similarly, the Army assumed that it could deploy its reserve component enabler units more frequently than DOD’s current policy allows.\nArmy officials told us that assessing risk to the force for its enablers is useful because the Army can identify the units it would use the most and those that it would use least. Based on its analyses of the frequency and length of deployments for each type of enabler unit assessed, the Army developed and prioritized options to mitigate risk to the enabler force. These options included adding structure to more utilized units and taking reductions from or divesting less-utilized enabler units. For example, the Army’s analyses showed that one type of engineer unit spent far less time at home than the Army’s other units during a contingency, and so the Army added an additional engineer unit to its structure to mitigate this stress. In contrast, the Army determined that it had excess support maintenance companies in its force structure and decided to eliminate 6 of these units.\nAdditionally, the Army analyzed its enabler units to identify which units would be needed during the first 75 days of a conflict. Army officials used war plans to identify the minimum number of each type of enabler unit that would be needed to execute the war plan and then compared that requirement to the number of those units that would be available to meet those requirements. Army officials told us that assessing early deployment requirements is useful because the Army can assess whether it needs to move units from its reserve component to its active component in order to ensure that early deployment requirements can be met.\nAssessing risk to the force and early deployment requirements does not identify potential mission shortfalls in the enabler inventory, however, and these shortfalls could lead to missed mission demands. When the Army has conducted mission risk assessments for its enabler units outside of TAA it has been able to identify and mitigate risk. In May 2014, the TRADOC Analysis Center completed mission risk assessments for certain types of artillery units, air and missile defense, and truck units, among other units. These analyses showed that some types of units were unable to meet projected mission demands and provided information needed for the Army to develop mitigation strategies. For example, the Army’s assessment of artillery units identified unmitigated mission risk and determined that these units could meet only about 88 percent of demands during a major contingency. To address this risk, Army officials said that they recommended a change to the Army’s deployment practices for these units to allow one type of unit to be substituted for another. This change would enable these units to meet approximately 94 percent of mission demands during a major contingency. Similarly, in another example, the Army’s assessment of its truck units found that planned reductions could limit the Army’s ability to transport troops around the battlefield, among other risks. The Army intends to add 4 medium truck companies to its force structure by the end of fiscal year 2019 in part to address this risk.\nIn its January 2016 report, the National Commission on the Future of the Army identified enabler capabilities that in its view needed further risk assessment and risk mitigation. As previously discussed, Army leaders decided to reduce enabler units they judged less critical, such as military police, transportation, chemical, and explosive ordnance disposal units, in part to preserve the Army’s combat force structure. However, the National Commission on the Future of the Army identified some of these same units as having shortfalls—including units that provide transportation, military police, and chemical capabilities. The Commission recommended that the Army complete a risk assessment and assess plans and associated costs of reducing or eliminating these shortfalls.", "Army guidance indicates that the Army’s TAA process should assess mission risk for its combat and enabler force structure, but the Army did not complete a mission risk assessment during its most recent TAA. In addition, its TAA process is not being implemented in a manner that would routinely prepare such an assessment. According to the Army’s force development regulation, the Army’s TAA process is intended to determine the requirements for both the Army’s combat and enabler force structure to meet the missions specified in defense planning guidance, document unresourced requirements, and analyze risk given resource constraints. When assessing risk, the Army’s risk management guidance states that the Army should identify conditions that create the potential for harmful events and analyze how such conditions could cause mission failure. Within this context, Army officials told us that the TAA process should assess mission risk by assessing how the Army’s combat and enabler force structure could lead to a failure to meet the missions specified in defense planning guidance. According to the Army’s risk management guidance, once the Army identifies mission risk, it then should analyze and prioritize strategies to mitigate identified risk.\nIn the near term, although the Army’s guidance and risk management framework indicate the Army should complete a mission risk assessment for its combat and enabler force structure, the Army did not do so during its most recent TAA for its enabler units, instead assessing the risk to the force and early deployment requirements for these units. Army officials stated that they did not complete this assessment because the Army assessed how ongoing demands affected the health of the Army’s force and not the mission risk associated with shortfalls. However, our review found that the Army’s guidance does not require that the Army complete an assessment of the risk to force.\nArmy officials are currently revising the Army regulation that documents its force development processes, but the draft does not currently include a requirement that the TAA process assess mission risk for the Army’s combat and enabler force structure. Without an assessment of the mission risk associated with the planned enabler force structure documented in the Army’s October 2015 Army Structure Memorandum, the Army has an incomplete understanding of the risks that may arise from the potential shortfalls in its enabler inventory. Accordingly, the Army is not well positioned to develop strategies to mitigate these risks. Army officials told us the next opportunity to complete this mission risk assessment and develop mitigation strategies would be as part of its ongoing TAA for fiscal years 2019 through 2023.\nFurthermore, the Army is required to complete TAA every year and as currently implemented its TAA process does not include the modeling and analyses needed to routinely prepare a mission risk assessment for its combat and enabler force structure. Army officials told us that they recognize a need to expand TAA to include mission risk assessments for a set of the Army’s enabler units, consider potential strategies to mitigate this risk, and implement such strategies; but have not revised TAA to include these elements. Without expanding the TAA process to routinely require a mission risk assessment for the Army’s combat and enabler force structure as part of future iterations of TAA, the Army will continue to not be well positioned to identify mission risk and develop mitigation strategies when making future force structure decisions.", "Facing end strength reductions, the Army made a decision to retain combat capabilities to provide maximum warfighting capability and flexibility. However, the Army’s planned force structure is based on an incomplete assessment of mission risk across its combat and enabler force structure because it did not assess this type of risk for its enabler units. As a result the Army did not comprehensively assess whether its force structure will be able to meet the missions specified in defense planning guidance and, in the absence of that risk assessment, was not well positioned to assess mitigation options when making recent force structure decisions. The Army has an opportunity to more fully assess its recommended force structure’s ability to meet mission demands, identify capability shortfalls, and develop mitigation strategies to address identified shortfalls before it implements its planned force structure.\nUnless the Army completes this type of assessment, it will lack reasonable assurance that it has identified and mitigated risk that will prevent it from executing the missions specified in defense planning guidance. Additionally, by completing a mission risk assessment for its planned force before completing its ongoing TAA for fiscal years 2019 through 2023, the Army will be better positioned to identify improvements to its TAA process so that it can complete such assessments on a recurring basis moving forward. Unless the Army changes its approach to routinely complete this type of risk assessment as part of its TAA process, it may not be able to identify and mitigate risk associated with changes to its force structure in the future.", "To identify and mitigate risk associated with the Army’s planned force structure and improve future decision making, we recommend that the Secretary of Defense direct the Secretary of the Army to take the following two actions: 1. Conduct a mission risk assessment of the Army’s planned enabler force structure and assess mitigation strategies for identified mission risk before Total Army Analysis for Fiscal Years 2019 through 2023 is concluded and implement those mitigation strategies as needed. 2. Expand the Army’s Total Army Analysis process to routinely require a mission risk assessment for the Army’s combat and enabler force structure and an assessment of mitigation strategies for identified risk prior to finalizing future force structure decisions.", "In written comments on a draft of this report, DOD concurred with both of our recommendations and identified the steps it plans to take to address them. DOD’s comments are printed in their entirety in appendix I. DOD also provided technical comments, which we incorporated into the report as appropriate.\nIn response to our first recommendation that the Army conduct a mission risk assessment and assess mitigation strategies for its planned enabler force structure before Total Army Analysis for Fiscal Years 2019 through 2023 is concluded, the Army stated that it recognizes the need to conduct these types of assessments and that it has modified its Total Army Analysis process to include them. As we stated in our report, at the time of our review the Army had not yet incorporated these assessments into its TAA process. Should the Army complete these assessments prior to finalizing its ongoing TAA, it would be better positioned to identify and mitigate the risk associated with its planned enabler force structure and it will have taken the steps needed to satisfy our recommendation.\nWith respect to our second recommendation that the Army expand its TAA process to routinely require a mission risk assessment and an assessment of mitigation strategies for its combat and enabler force structure, the Army stated that it recognizes the need to routinely conduct these types of assessments. The Army stated that it intends to formalize inclusion of these types of assessments in its process by publishing a Department of the Army pamphlet that is currently under development. Should the Army modify its guidance to require these assessments, and implement its TAA process in accordance with its revised guidance, the Army would be better positioned to identify mission risk and develop mitigation strategies when making force structure decisions.\nWe are sending copies of this report to the appropriate congressional committees, the Secretary of Defense, and the Secretary of the Army. In addition, the report is available at no charge on the GAO website at http://www.gao.gov.\nIf you or your staff have any questions about this report, please contact me at (202) 512-3489 or [email protected]. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made major contributions to this report are listed in appendix II.", "", "", "John H. Pendleton, (202) 512-3489 or [email protected].", "In addition to the contact named above, Kevin O’Neill, Assistant Director; Tracy Barnes; Katherine Blair; Erin Butkowski; Martin De Alteriis; Amie Lesser; Ricardo A. Marquez; Erik Wilkins-McKee; and Alex Winograd made key contributions to this report." ], "depth": [ 1, 2, 2, 2, 1, 2, 2, 1, 2, 2, 2, 1, 1, 1, 1, 1, 2, 2 ], "alignment": [ "h2_title h3_title", "", "h2_full", "h3_full", "h2_title", "h2_full", "", "h0_title h2_title h1_full", "h0_full", "h2_full h1_full", "", "", "h3_full", "", "", "", "", "" ] }
{ "question": [ "What did the Army's analysis of BCT requirements entail?", "What assumptions did the Army make in this analysis?", "What conclusions were drawn from this analysis?", "What was the implication of the Army's analysis of its enabler units?", "Why does the Army find this analysis useful?", "What shortcomings did the analysis have?", "How will the army change its numbers of active and reserve soldiers by 2018?", "What will this reduction require?", "What would be the implications of reducing numbers further?", "What did GAO examine in relation to the Army?", "What does GAO's report cover?", "In creating the report, what groups did GAO interview?" ], "summary": [ "Combat Forces: The Army's analysis of BCT requirements entailed an assessment of mission risk—risk resulting from units being unable to meet the missions specified in Department of Defense (DOD) planning guidance.", "The mission risk assessment used current Army deployment practices and assumed that sufficient enabler forces would be available to sustain combat units over a multi-year scenario.", "The result of this analysis, and a similar analysis of the Army's aviation brigades, showed that the Army's proposed combat force structure would be sufficient to meet most mission demands.", "Enabler Forces: The Army's analysis of its enabler units entailed an assessment of risk to the force—how frequently and for how long units need to deploy to meet as many demands as possible.", "Army officials said this analysis is useful because it enables the Army to identify the units it would use the most.", "However, the analysis overstated the availability of the Army's enabler units because it assumed they could deploy more frequently and for longer duration than DOD's policies allow. The Army did not identify enabler unit shortfalls, or the risk those shortfalls pose to meeting mission requirements.", "The Army plans to reduce its end strength to 980,000 active and reserve soldiers by fiscal year 2018, a reduction of nearly 12 percent since fiscal year 2011.", "According to the Army, this reduction will require reductions of both combat and supporting units.", "Army leaders reported that reducing the Army to such levels creates significant but manageable risk to executing the U.S. military strategy and that further reductions would result in unacceptable risk.", "The Senate report accompanying a bill for the National Defense Authorization Act for Fiscal Year 2015 included a provision that GAO examine the factors that the Army considers and uses when it determines the size and structure of its forces.", "This report (1) describes the Army's priorities and planned force structure reductions and (2) evaluates the extent to which the Army comprehensively assessed mission risk associated with its planned combat and enabler force structure.", "GAO examined the Army's force development regulations and process, DOD and Army guidance, and Army analysis and conclusions; and interviewed DOD and Army officials." ], "parent_pair_index": [ -1, 0, 0, -1, 0, 0, -1, 0, 0, -1, 0, 0 ], "summary_paragraph_index": [ 4, 4, 4, 5, 5, 5, 0, 0, 0, 1, 1, 1 ] }
GAO_GAO-13-24
{ "title": [ "Background", "NHTSA’s Changes to Its Collection of Data on Unsecured Loads Will Take Time to Implement", "NHTSA Plans to Collect Better Data on Unsecured Loads in Response to Congressional Direction", "Identifying Unsecured- Load Crashes Can Be Difficult, and Data Improvements Will Take Some Time to Implement", "All 50 States and the District of Columbia Have Laws That Pertain to Non- Commercial Unsecured Loads, but Exemptions, Fines, and Penalties Vary", "All States Have Laws Pertaining to Commercial Unsecured Loads That also Apply to Non-Commercial Vehicles, but Certain Commercial Activities Are Frequently Exempted", "Some States Have Programs for Educating the Public about Unsecured Loads", "Agency Comments", "Appendix I: Objectives, Scope, and Methodology", "Appendix II: Survey Questions", "Appendix III: Current FARS and NASS GES Data Category Definitions and Planned 2013 Changes", "Data category How data category is defined currently Data categories that apply to objects set in motion, striking another vehicle, person, or property No Change.* Motor Vehicle In-Transport Strikes or is Struck by Cargo or Objects Set-in- Motion from/by Another Motor Vehicle In-Transport", "*Although NHTSA will continue to code both scenarios A and B in the above data category, it will now distinguish between the two scenarios, using the additional data categories described below. Cargo/Vehicle Parts Set-In-Motion", "Data categories that apply to vehicles striking objects already in the road that may or may not have come from another vehicle Motor Vehicle in Transport Strikes an Object That Is Not Fixed", "How data category is defined currently Not a current data category.", "Appendix IV: Non-Commercial Unsecured- Load Laws, Exemptions, and Fines or Penalties or Both", "Unsecured-load law Ala. Code 32-5-76", "Unsecured-load law K.S.A. § 8-1906", "State Texas", "Appendix V: “Secure Your Load” Educational Materials for Non-Commercial Vehicles", "Appendix VI: GAO Contact and Staff Acknowledgments", "GAO Contact", "Staff Acknowledgments" ], "paragraphs": [ "Unsecured cargo or other debris falling from a moving vehicle can pose a serious hazard to other motorists and can lead to property damage, injuries, or fatalities (see fig. 1). Examples of unsecured-load debris that often ends up on roadways include objects such as mattresses or box springs, ladders, and furniture items.\nNHTSA’s mission is to prevent motor vehicle crashes and reduce injuries, fatalities, and economic losses associated with these crashes. To carry out this mission, the agency conducts a range of activities, including setting vehicle safety standards; conducting research on a variety of safety issues; administering grant programs authorized by Congress; providing guidance and other assistance to states to help them address key safety issues, such as drunken driving and distracted driving; and collecting and analyzing data on crashes. NHTSA analyzes crash data to determine the extent of a problem and to determine what steps it should take to develop countermeasures. Regarding unsecured loads, NHTSA collects some data regarding whether a crash involved an unsecured load.\nDetermining the number of crashes involving unsecured loads can be a challenge because data are limited. NHTSA does track the number of crashes involving road debris. However, as mentioned previously, these data include all types of road debris, including debris resulting from human error (e.g., unsecured load) and debris that is from natural elements (e.g., a fallen tree branch). Based on available NHTSA data, such crashes comprise a small percentage of total police-reported crashes. For example, in 2010, out of a total of about 5,419,000 crashes, about 1 percent— 51,000 crashes—involved a vehicle striking an object that came off another vehicle or a non-fixed object lying in the roadway. Of these 51,000 crashes, there were almost 10,000 people injured and 440 fatalities—about 1 percent of the total number of fatalities from motor vehicle crashes in that year (32,855).\nStates determine what laws, if any, to apply to non-commercial vehicles carrying unsecured loads and whether to develop prevention programs geared towards reducing crashes of non-commercial vehicles carrying unsecured loads. State and local law enforcement agencies are responsible for enforcing these laws.", "While NHTSA currently collects limited information on crashes involving unsecured loads, the agency intends to make changes to its data systems to follow Congress’s direction to distinguish road obstructions resulting from human error from those involving natural elements. NHTSA’s changes to its data systems will allow the agency to better track crashes involving unsecured loads, but NHTSA will still face challenges with collecting this information because the determination as to whether a crash involved an unsecured load is made by state law enforcement officials and can be difficult to make. Further, there are some limitations with respect to the state data collected in police crash reports, and data improvements will take time to implement.", "NHTSA collects data on crashes and fatalities that may involve both commercial and non-commercial vehicles carrying unsecured loads in two data systems—FARS and NASS GES. (see table 1). The FARS provides a census of police-reported traffic crashes nationwide in which at least one fatality occurred. The NASS GES provides national estimates of crash statistics based on a sample of police-reported crashes. For both data systems, police crash reports, which are unique to each state, are a key source of data. NHTSA gathers this information from states and recodes it into a uniform format.\nCurrently, there are three data categories in these systems that track data on crashes involving road debris. However, as noted previously, these data categories do not currently distinguish between different types of roadway debris (i.e., debris resulting from natural/environmental sources versus debris resulting from human error). As a result, NHTSA cannot currently identify how many crashes involve vehicles carrying unsecured loads.\nIn response to the congressional direction to improve its data on unsecured-load crashes, NHTSA officials stated that they are currently making changes to the FARS and the NASS GES to collect better information and better track crashes involving unsecured loads. Specifically, NHTSA has developed changes to both systems to (1) revise two existing data categories on road debris and (2) add two new data categories. The revised and new categories will provide more specific information on unsecured-load crashes. (See appendix III for current FARS and NASS GES data category definitions and planned 2013 changes.) For example, NHTSA will now be able to distinguish between the following two types of crash scenarios that involve an object being set in motion by one vehicle and striking another vehicle, a person, or property, causing injury or damage:\nCargo, such as a mattress, being transported by one motor vehicle becomes dislodged and strikes another vehicle, a person, or property.\nAn object in the road, such as a tree branch, is struck by a motor vehicle and then strikes another vehicle, a person, or property.\nNHTSA will also be able to distinguish between two types of crash scenarios that involve a vehicle striking an object already in the road (without striking another vehicle, a person, or property):\nA motor vehicle strikes a non-fixed object already at rest in the roadway, such as a mattress, and the object is known to have been cargo from an unsecured load.\nA motor vehicle strikes a non-fixed object already at rest in the roadway, such as a tree branch, and the object is known to have not come from a motor vehicle, or it is unknown if it came from a motor vehicle.\nNHTSA officials stated that they intend to analyze this data in the future to determine whether actions are needed to address this problem. They explained that in deciding when to take actions regarding a traffic safety issue, NHTSA first tries to determine the extent of the problem by looking at counts or trends. The agency then may conduct research to better understand the problem and work toward developing countermeasures.\nAccording to NHTSA officials, these changes will be effective in the FARS and NASS GES during the 2013 data collection year, which begins January 2013. To implement these changes, NHTSA plans to develop a 2013 coding manual between mid-August 2012 and December 5, 2012, and develop data-entry specifications by November 2012. NHTSA officials stated that they plan to train FARS analysts at the state level and NASS GES data coders on how to use the new and revised data elements in early December 2012. Public users will first have access to the 2013 data in 2014 after data collection and quality control checks are completed.", "While NHTSA’s changes to the FARS and NASS GES data systems will allow the agency to better track crashes involving unsecured loads, it still faces challenges collecting data on these crashes. Two primary factors affect NHTSA’s ability to collect this information: (1) law enforcement officials face difficulties in determining whether a crash involved an unsecured load and (2) states do not collect uniform data on unsecured loads in their police crash reports. Even with the changes that NHTSA is making in its data collection processes and procedures, the resulting data will be imprecise because it relies on state reporting of crashes and data improvements will take time to implement as acknowledged by NHTSA. NHTSA officials stated that they will make every effort to capture the data available in the source documents to provide the most accurate assessment of this safety issue.\nEven though NHTSA is improving its data systems, determining whether a crash is a result of an unsecured load will remain a challenge. Several law enforcement officials we spoke with indicated that classifying a crash involving an unsecured load is difficult in some cases, because it is unclear whether the object on the road was as a result of an unsecured load or another factor. One law enforcement official explained that if an object falls from a moving vehicle and immediately hits a vehicle or a person, the crash is generally classified as an unsecured-load crash. However, if an object falls from a moving vehicle onto the road and remains on the road for some time before another vehicle subsequently strikes the object, then the crash will generally not be classified as an unsecured-load crash unless there is a witness available to report that the object originally fell off of another vehicle (see fig. 2). The official explained that identifying the first incident as an unsecured-load crash is generally easier because of a higher likelihood of witnesses at the scene who saw the crash occur and saw the unsecured-load fall from the vehicle. In the second scenario, where debris remains on the road for some time, there may be no information to explain how the object on the road ended up there. According to this official, it is up to the reporting officer to determine how to classify or describe the crash in the police report. Under NHTSA’s planned data system changes, the agency will be able to specify in their data systems crashes that involve unsecured loads if all pertinent information is available to the reporting officer. However, if the incident is not identified by the reporting officer as an unsecured-load crash in the first place, it may not be flagged as such in NHTSA’s data systems. NHTSA officials acknowledged that it can be difficult in some cases to determine if something in the road fell off a vehicle if there is no evidence available.\nStates do not uniformly define and report data on unsecured loads in police crash reports. NHTSA uses information from police crash reports to determine whether a crash is an unsecured-load incident or another type of incident. Some state crash reports contain a field where officers can check off a box indicating whether “unsecured loads” were a contributing factor in a crash while others rely on the officer to explain in the narrative section of the report whether the incident involving an unsecured load or other factor. NHTSA uses information from both sections of the report in developing their data. However, in some cases, information about whether a crash involved an unsecured load may not be included in the narrative portion of the police reports. According to NHTSA officials, reports on fatal crashes are more likely to have this information; however, the level of information that is included in the narrative report could vary from officer to officer. If a police crash report does not contain information indicating that a crash involved an unsecured load, then NHTSA cannot classify the crash as such.\nOn a voluntary basis, most states have begun collecting a similar minimum core of information in their police crash reports. These core elements are outlined in the Model Minimum Uniform Crash Criteria (MMUCC), voluntary guidelines for the implementation of uniform crash data elements.guidelines to varying degrees. One avenue for ensuring that all states collect consistent information on unsecured loads in their police crash reports would be to include unsecured-load data as a core data element in the next edition of the guidelines. NHTSA does not have independent authority to seek changes in state police reports; however, NHTSA officials stated that they will likely recommend changes to MMUCC guidelines. In order for a new data element to be added, it must be approved by the MMUCC Expert Panel, which includes representatives from NHTSA, FMCSA, the Federal Highway Administration, the National Transportation Safety Board, the Governors Highway Safety Association, Insurance Institute for Highway Safety, Ford Motor Company, Emergency Medical System agencies, and local and state police agencies. Recommended changes to the guidelines can be submitted by any agency represented on the MMUCC expert panel.\nAccording to NHTSA officials, most states follow these Any changes to the guidelines cannot be made for quite some time as MMUCC operates on a 5-year cycle. MMUCC released its revised guidelines in July 2012, and the next update is not expected until 2017. NHTSA officials explained that they would be unable to recommend changes to the guidelines until 2016, when MMUCC begins the process updating the guidelines. If changes are made to the guidelines, these changes would not go into effect until after 2017. NHTSA officials also noted that making changes to police crash reports in response to changes in the guidelines can take from 12 to 18 months. Some police agencies now use electronic police crash reports, and as a result, changes to the police crash reports could require information technology infrastructure investments to update their electronic systems. Moreover, additional training of police officers regarding how to use the new data elements would be required. NHTSA officials stated that in the interim, state FARS analysts and NASS GES data coders will communicate to law enforcement officials that information on unsecured-load crashes should be included in the narrative portion of police crash reports.", "All fifty states and the District of Columbia have statutes regarding unsecured loads that pertain to non-commercial vehicles. While nine states reported having no exemptions related to their statute, a majority of states and the District of Columbia reported exempting vehicles from unsecured-load statutes most commonly for roadway maintenance or agriculture activities, but these exemptions are primarily related to commercial activities. All fifty states and the District of Columbia reported having fines or penalties for violating unsecured-load statutes ranging from $10 to $5,000; fifteen of these states add the possibility of imprisonment. (See appendix IV for summary of all fifty states and the District of Columbia’s laws, exemptions, and penalties/fines.) Ten states reported having a safety or education program related to unsecured loads.", "All fifty states and the District of Columbia have statutes regarding unsecured loads that pertain to non-commercial vehicles. While the statutes vary widely, many use a common construction similar to: “No vehicle shall be driven or moved on any highway unless such vehicle is so constructed or loaded as to prevent any of its load from dropping, shifting, leaking, or otherwise escaping there from,” a statement that is oftentimes followed by exemptions as discussed below. However, a few states such as Mississippi have short statutes that contain a shortened form of this common language. Other states such as Oklahoma set forth more specific instructions in the statute directing, for example, the covering of loads to be “securely fastened so as to prevent said covering or load from becoming loose, detached or in any manner a hazard to other users of the highway.”\nThe state statutes on unsecured loads differ more frequently in their description of exemptions. According to our survey, 41 states and the District of Columbia have exemptions from unsecured-load laws in their statutes (see fig. 3). These exemptions most commonly applied to roadwork and agriculture. For example, the most common roadway exemption includes “vehicles applying salt or sand to gain traction” or “vehicles dropping water for cleaning or maintaining the highway.” Exemptions for commercial activities range from general wording such as “applies to all motor vehicles except those carrying agricultural loads,” to industry-specific exemptions such as “applies to all motor vehicles except logging trucks or those carrying wood, lumber, or sawmill wastes.”\nNine states reported having no exemptions to their unsecured-load statute, including Delaware, Kentucky, Missouri, Nebraska, New York, South Dakota, Texas, Vermont, and Wisconsin.\nAll states have some level of fines or penalties for violations of unsecured-load statutes. Most states have specific penalties ranging from as little as $10 to as much as $5,000; fifteen states include possible jail time. (See fig. 4.)\nTwo states—Nevada and New Hampshire—reported the fine as unknown, because it is imposed at the local court level and could vary widely.\nTwenty states and the District of Columbia reported maximum fines of $10 to less than $500 and only two of those states—Tennessee and Colorado—add possible jail time in addition to the fine. Eight of these states have maximum fines between $10 and $100 for the first offense.\nTwenty-eight states reported more severe maximum fines of $500 to $5,000 for violating unsecured-load laws and thirteen of those states—Florida, Georgia, Illinois, Louisiana, Michigan, Mississippi, New York, Oklahoma, South Dakota, Virginia, Washington, West Virginia, and Wyoming—include possible jail time in addition to a fine.\nThe states of Illinois, Virginia, and Washington have the highest maximum fines: $2,500 for Illinois and Virginia, and $5,000 for Washington. In addition, the law enforcement officials in all of the seven states we selected for interviews stated that additional criminal charges could be brought in their state against individuals who injured or killed a person as a result of negligently securing their load in addition to the specific penalties stated in unsecured-load statutes.\nEnforcement officials in some states told us that it is often difficult to write citations for unsecured-load violations. In five of the seven states, officials we interviewed noted that statutory language can be ambiguous, or require law enforcement officials either to witness the unsecured load falling or have the load actually fall to the ground to be considered a statutory violation. This language makes law enforcement respond reactively rather than proactively. All seven enforcement officials we interviewed told us they were not aware how anyone could distinguish between citations written for commercial vehicles (i.e., used for business purposes) and non-commercial vehicles (i.e., private vehicles used to move personal belongings or take trash to the local landfill for example) as written in their states. Therefore, counting violations of their states’ unsecure load laws specifically for non-commercial vehicles is not currently possible.", "Ten of the 50 states and the District of Columbia reported they have a safety or education program that pertains to unsecured loads on non- commercial vehicles. Those states include California, Illinois, Maine, North Carolina, North Dakota, South Carolina, South Dakota, Texas, Washington, and Wisconsin. Enforcement officials in all of the seven states we selected for interviews stated that in their experience, education—teaching drivers about the importance of properly securing the load in any vehicle or trailer before driving—is the key component to reducing unsecured-load incidents. See appendix V for examples of safety education materials from North Carolina and Washington.", "We provided a draft of this report to NHTSA for review and comment. NHTSA provided technical comments that were incorporated as appropriate.\nWe are sending copies of this report to the Administrator of NHTSA, the Secretary of the Department of Transportation, and interested Congressional Committees. In addition, the report will be available at no charge on the GAO website at http://www.gao.gov. If you or your staff has any questions about this report, please contact me at (202) 512-2834 or [email protected]. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made major contributions to this report are listed in appendix VI.", "This report examines (1) efforts the National Highway Traffic Safety Administration (NHTSA) has undertaken to monitor crashes involving vehicles carrying unsecured loads and (2) existing state laws, exemptions, and punitive measures regarding non-commercial vehicles carrying unsecured loads. For the purposes of our review, we defined unsecured load to include a load or part of a load in transit that is not properly restrained, tied down, or secured with tarps, nets, or ropes to reasonably prevent a portion from falling off. We defined non-commercial vehicles to include passenger vehicles (cars or light trucks) transported for non-commercial purposes, and the towing of loads in an open trailer behind the passenger vehicle. Light trucks included trucks of 10,000 pounds gross vehicle weight rating or less, including pickups, vans, truck- based station wagons, and utility vehicles. Open trailers included trailers that can be obtained from personal or commercial sources, such as U- Haul, but used for non-commercial purposes. NHTSA collects data on crashes involving non-commercial and commercial crashes. We obtained NHTSA’s input in developing these definitions.\nTo identify efforts NHTSA has undertaken to monitor crashes involving vehicles carrying unsecured loads, we obtained documents from and conducted interviews with NHTSA officials to obtain information on NHTSA’s current policies, procedures, and practices for monitoring crashes involving vehicles carrying unsecured loads. Specifically, we obtained information about what data on unsecured loads NHTSA currently collects; how NHTSA coordinates with state agencies on its data collection efforts; actions NHTSA has taken to date or plans to take to improve its data collection processes in response to its mandate; and challenges, if any, that NHTSA faces in improving its data on vehicles carrying unsecured loads. In addition, we conducted a literature search to identify and review relevant studies, reports, and available data on crashes involving vehicles carrying unsecured loads and to gain a better understanding of the magnitude of the problem. Finally, we analyzed NHTSA’s crash data from the Fatality Analysis Reporting System (FARS) and the National Automotive Sampling System General Estimates System (NASS GES) to identify the number of crashes in 2010 in which a vehicle struck falling or shifting cargo or an object lying in the roadway. We assessed the reliability of these data sources by, among other things, interviewing NHTSA officials and reviewing NHTSA policies and procedures for maintaining the data and verifying their accuracy. Based on this information, we determined that the data provided to us were sufficiently reliable for our reporting purposes.\nTo identify existing state laws, exemptions, and punitive measures regarding non-commercial vehicles carrying unsecured loads, we conducted a literature review of and legal research on state(s) laws, penalties, and exemptions regarding properly securing loads on non- commercial vehicles. In addition, we conducted a survey of all 50 states and the District of Columbia to supplement, verify, and corroborate data obtained from our legal research and to obtain additional information on penalties, enforcement actions and education and prevention efforts in each state. (The survey is reproduced in appendix II.) The survey was completed primarily by law enforcement officers in each state’s Department of Public Safety. We selected three states in which to conduct pretests: Iowa, New Mexico, and Washington. In each pretest, we provided the state police official with a copy of our draft survey, asked this individual to complete it, and then conducted an interview to discuss the clarity of each question. On the basis of the feedback from the three pretests we conducted, we made changes to the content and format of the survey questions as appropriate. We launched our survey on June 20, 2012. We received completed responses from the 51 survey respondents for a response rate of 100 percent. We reviewed survey responses for inaccuracies or omissions, analyzed the data, and have presented the key findings in this report.\nWe also conducted interviews with state police officials in seven states to collect information on enforcement actions and education and prevention efforts related to properly securing loads carried by non-commercial vehicles. We selected states that were (1) geographically diverse, (2) of varying sizes, and (3) varied in the types of laws related to non- commercial vehicles carrying unsecured loads. Using these criteria, we interviewed state police officials in California, Colorado, Maryland, New York, Texas, Washington, and Wisconsin. In addition, we also conducted interviews with associations and individuals active in highway safety issues, to obtain additional information on issues related to unsecured loads and efforts by states to deal with these issues. Interviewees included the American Automobile Association Foundation for Traffic Safety and one of the co-authors of a 2004 study for this foundation examining the safety impacts of vehicle-related road debris;Governor’s Highway Safety Association; and the Transportation Cargo the Safety Organization. We also requested interviews with the International Association of Chiefs of Police, American Association of State Highway and Transportation Officials, and the American Association of Motor Vehicle Administrators; these organizations replied that they did not have information on unsecured-loads issues.\nWe conducted this performance audit from March 2012 to November 2012 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient and appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives.", "", "", "Used when cargo on or parts from a motor vehicle are set in motion or an object in the road is struck by a motor vehicle and set in motion. In both cases, the cargo, parts, or object then strike another motor vehicle. Scenario A: A mattress transported by, or a hubcap from, vehicle 1 becomes dislodged and is set in motion. The mattress or hubcap flies into and strikes vehicle 2. Scenario B: Vehicle 1 hits a tree branch or a hubcap from an unknown source in the roadway, and sets it in motion striking vehicle 2.", "Used for all set-in-motion crashes described above.\nRevised: Will now be used only for scenario A (crashes where the object set in motion was originally cargo on, or parts from, a moving motor vehicle and this object strikes another vehicle, person or property causing injury or damage).\nNot a current category.\nNew: Will be used for scenario B (crashes where the object set in motion was not originally cargo on or parts from a moving motor vehicle or it is unknown whether the object was the cargo or a part of an in- transport motor vehicle. In either case, the object strikes another motor vehicle, person or property causing injury or damage).", "Used for crashes wherein a motor vehicle strikes any non-fixed object, such as a mattress or a tree branch, lying in the roadway. Scenario C: Vehicle hits a tree branch already in the roadway. Scenario D: Vehicle hits a mattress already in the roadway.\nRevised: Will be used only for scenario C (when a motor vehicle strikes a non-fixed object already at rest in the roadway but known to have not come from a motor vehicle, or unknown if it came from a motor vehicle).", "How data category will be defined starting in 2013 New: Will be used for scenario D (when a motor vehicle strikes a non-fixed object already at rest in the road but known to have been the cargo or part of another motor vehicle in-transport).", "", "Unsecured-load law exemptions Motor vehicles carrying agricultural loads. Not more than $500.\nUnsecured-load violation fines/penalties (& separate penalty statute if not contained in unsecured-load law)\nMotor vehicles carrying agricultural, mining, and timber, vehicles applying salt or sand to gain traction, or public vehicles cleaning or maintaining the highway.\nNot more than $1000 and litter pickup.\nMotor vehicles carrying agricultural loads, cleaning or maintaining the highway or dropping sand for traction, minor pieces of agricultural materials such as leaves and stems from agricultural loads. $250–$1000.\nMotor vehicles depositing sand for traction or water for cleaning or maintaining the highway. $100 Arkansas Code Annotated §5-4- 201.\nMotor vehicles carrying clear water or live bird feathers. $211 ($146 fine plus $30 security fee and $35 conviction assessment) California Rules of Court; Rule 4.102, January 2010 Edition.\nMotor vehicles dropping material for traction or for cleaning or maintaining the roadway. Vehicles operating entirely in a marked construction zone, vehicles involved in maintenance of public roads during snow or ice removal operations, vehicles involved in emergency operations when requested by a law enforcement agency or an emergency response authority. $150–$300 and/or 10-90 days imprisonment. C.R.S. 42-4-1701.\nConn. Gen. Stat. § 14-271 Farming vehicles, motor vehicles dropping $117–$158. sand for traction or water for maintaining roadway.\nNone.\nFirst offense not less than $10 and no more than $28.75 and for each subsequent offense, no less than $28.75 and no more than $100. $150–$250.\nMotor vehicles dropping sand for the purpose of securing traction, or water or other substance sprinkled on the roadway in cleaning or maintaining the roadway.\nUnsecured-load law exemptions Farming vehicles traveling locally or vehicles dropping sand for traction or water for cleaning or maintaining the road.\nUnsecured-load violation fines/penalties (& separate penalty statute if not contained in unsecured-load law) $200 Fla. Stat. § 318.18, license suspension with second offense. Any person who willfully violates the provisions of this section which offense results in serious bodily injury or death to an individual within the confines of statute is also subject to fines of no more than $500 and prison for not more than 60 days; § 775.082 and § 775.083.\nMotor vehicles carrying agricultural, vehicles transporting agriculture or farm products.\nUp to $1000 and/or jail time not to exceed 1 year. O.C.G.A. § 17-10-3.\nAgricultural vehicles, vehicles carrying birds with feathers, and vehicles carrying rocks, sand, or gravel. $250 - $1000 + suspension of license (dependent on number of offenses).\nVehicles that are government, quasi- government, their agents or employees or contractors thereof, in performance of maintenance or construction of a highway; vehicles owned by canal companies, irrigation districts, drainage districts or their boards of control, lateral ditch associations, water districts or other irrigation water delivery or management entities, or operated by any employee or agent of such an entity, performing construction, operation or maintenance of facilities; and vehicles transporting agricultural products.. $67.\nMotor vehicles dropping sand for traction or water for cleaning the highway, or agricultural vehicles.\nFor 109: $120, Class A Misdemeanor, Illinois Supreme Court Rules, Rule 526. A conviction for this could result in a determinate sentence of imprisonment of less than one year or a fine not to exceed $2,500 for each offense or the amount specified in the offense, whichever is greater, may be imposed. Illinois Unified Code of Corrections (730 ILCS 5/5-4.5-55). For 109.1: Not to exceed $250.\nMotor vehicles transporting poultry or spreading sand/de-icing (removing ice).\nUp to $500 Indiana Code § 34-28-5-4.\nMotor vehicles carrying hay or stover (stalks and leaves, of corn); or sand for traction or water for maintaining roadway. $200 Iowa Code § 805.8A.", "Unsecured-load law exemptions Motor vehicles hauling livestock or spreading substances in highway maintenance or construction.\nUnsecured-load violation fines/penalties (& separate penalty statute if not contained in unsecured-load law) Not to exceed $500 K.S.A. § 8-1901.\nNone.\nMotor vehicles dropping sand to secure traction, or dropping a liquid substance on a highway to clean or maintain. $500 and/or 6 months jail time.\nMotor vehicles carrying hay, straw, vines, cornstalks, or grain. $150–$500.\nMotor vehicles carrying agricultural products and those dropping materials to provide traction or clean the highway. $500.\nMotor vehicles dropping sand for the purpose of securing traction, or sprinkling of water or other substance on such a way in cleaning or maintaining the same. $50–$200.\nHighway maintenance vehicles engaged in ice or snow removal. Agricultural and horticultural vehicles.\nNot more than $500 and/or 90 days jail time.\nMotor vehicles carrying agricultural products such as small grains, shelled corn, soybeans, or other farm produce, or vehicles dropping material for traction or cleaning.\nNot more than $300 Minn. Stat. § 169.89.\nMotor vehicles dropping material for traction or for cleaning or maintaining the highway.\nNot more than $500 and not more than 6 months imprisonment or both. Miss. Code Ann. § 63-5-7, 63-9-11.\nNone.\nNot to exceed $300 R.S.Mo. § 560.016.\nCommercial motor vehicles in compliance with state and federal laws; agricultural vehicles; vehicles performing road maintenance or in a marked construction zone.\nNo more than $500 Mont. Code Anno., § 61-8-711.\nNone. $100 - $500 R.R.S. Neb. § 28-106.\nMotor vehicles dropping materials for traction or cleaning the highway.\nFines are addressed and set by individual courts, for example in Reno it’s $403.\nLocal farmers, transportation of heavy scrap or crushed vehicles, or construction vehicles in a construction zone, vehicles driving at less than 30 mph.\nFines are addressed and set by individual courts.\nAgricultural vehicles.\nNot more than $500 for each violation.\nUnsecured-load law exemptions Agricultural vehicles or those dropping sand for traction or water for cleaning the roadway.\nUnsecured-load violation fines/penalties (& separate penalty statute if not contained in unsecured-load law) $100 N.M. Stat. Ann. § 66-7-401; § 66- 8-116.\nNone. $100 - $750 and/or imprisonment up to 30 days.\nN.C. Gen. Stat. § 20-116 Motor vehicles dropping material for $100 N.C. Gen. Stat. §20-176. traction or cleaning the highway.\nMotor vehicles dropping sand for traction or water for highway maintenance. $20.\nAgricultural and garbage vehicles or those dropping sand for traction or water for cleaning the roadway. $150 - $1000 ORC Ann. 2929.28; ORC Ann. 4513.99.\nAgricultural vehicles or those dropping sand for traction or water for cleaning the roadway. $5 - $500 or imprisonment for up to 6 months, or both. 47 Okl. St. § 17-101.\nORS § 818.300; 818.310 No exemptions for vehicles, just for certain roads, private thoroughfares. $260 ORS § 818.300(4) and ORS § 153.019. Additionally, owners or drivers are liable for all damage done as a result of the violation if it occurs on certain roadways. ORS § 818.410.\nLogging and garbage trucks, the shedding or dropping of feathers or other matter from vehicles hauling live or slaughtered birds or animals, and spreading of any substance in highway maintenance or construction operations. $300–$1000.\nLogging trucks or those carrying wood, lumber, or sawmill wastes. Motor vehicles dropping sand for traction or water for highway maintenance. $85, R.I. Gen. Laws § 31-41.1-4; $100 to not more than $500, R.I. Gen. Laws § 31-25-10.\nMotor vehicles dropping sand for traction or water for highway maintenance. Agricultural and timber-related vehicles. $100.\nNone. $500 or 30 days in prison or both, S.D. Codified Laws § 22-6-2.\nVehicles carrying farm produce to the market. Vehicles which transport crushed stone, fill dirt and rock, soil, bulk sand, coal, phosphate muck, asphalt, concrete, other building materials, forest products, unfinished lumber, agricultural lime. Motor vehicles dropping sand for traction or water for highway maintenance.\nNo more than $50 or not more than 30 days in prison or both. Tenn. Code Ann. § 40-35-111.", "Unsecured-load law exemptions None.\nUnsecured-load violation fines/penalties (& separate penalty statute if not contained in unsecured-load law) $25–$500 Tex. Transp. Code § 725.003.\nVehicles carrying dirt, sand, gravel, rock fragments, pebbles, crushed base, aggregate, any other similar material, or scrap metal. Certain agricultural loads and vehicles spreading any substance connected with highway maintenance, construction, securing traction or snow removal. $100–$250.\nNone. $99 –$156 § 1454.\nMotor vehicles dropping material for traction or for cleaning or maintaining the highway. § 10.1-1424. Motor vehicles used exclusively for agricultural purposes, or transporting forest products, poultry, or livestock. § 46.2-1156.\nNot more than $2,500 or not more than 12 months in jail for violating § 10.1- 1424, and a fine of not more than $250 for violating § 46.2-1156. Va. Code Ann. § 18.2-11.\nVehicles carrying gravel, sand, and dirt if 6 inches of freeboard is maintained within the bed. Motor vehicles dropping sand for traction.\nUp to $5000 or up to a year in jail or both. Rev. Code Wash. (ARCW) § 9A.20.021.\nMotor vehicles dropping material for traction or for cleaning or maintaining the highway.\nUp to $500 fine or 6 months imprisonment or both. W. Va. Code § 17C-18-1.\nNone. $10–$200 Wis. Stat. § 348.11.\nMotor vehicles spreading substance for maintaining or constructing the highway.\nUp to $500 fine or 6 months imprisonment or both. Wyo. Stat. § 31- 5-1201.", "", "", "", "In addition to the contact named above, Judy Guilliams-Tapia (Assistant Director), Margaret Bartlett, David Hooper, Maren McAvoy, Maria Mercado, Amy Rosewarne, Beverly Ross, Kelly Rubin, and Andrew Stavisky made key contributions to this report." ], "depth": [ 1, 1, 2, 2, 1, 2, 2, 1, 1, 1, 1, 2, 2, 2, 2, 1, 2, 2, 2, 1, 1, 2, 2 ], "alignment": [ "h1_full", "h0_full h2_full", "h0_full", "h0_full h2_full", "", "", "", "", "h0_full h2_full h1_full", "", "", "", "", "", "", "", "", "", "", "", "", "", "" ] }
{ "question": [ "What data does NHTSA currently collect regarding crashes involving vehicles with unsecured loads?", "How is this information limited in its usefulness?", "What is the result of this limitation?", "How does the NHTSA plan to alter their data collection system?", "What does the NHTSA face in implementing a more rigorous data collection system?", "How might altering the MMUCC help the data collection process?", "What challenges will persist in the data improvement process?", "What concerns are there related to vehicles carrying improperly secured objects?", "How does NHTSA data support the validity of these concerns?", "What are the limitations of this statistic?", "What did the GAO report on, per Congress's request, about the NHTSA?", "What does GAO's report concern?", "In the making of the report, what did GAO review?" ], "summary": [ "The National Highway Traffic Safety Administration (NHTSA) collects limited information on crashes involving vehicles carrying unsecured loads but plans to make changes to collect better information. Currently, NHTSA collects some data in the Fatality Analysis Reporting System and the National Automotive Sampling System General Estimates System.", "However, the systems do not currently have a data category to distinguish between debris resulting from natural sources (such as a tree branch) and debris resulting from human error (such as an unsecured load).", "As a result, NHTSA cannot currently identify how many crashes involve vehicles carrying unsecured loads.", "NHTSA intends to make changes to both its systems to better identify crashes involving unsecured loads. These changes will go into effect in 2013.", "However, NHTSA may still face challenges collecting this data because 1) law enforcement officials face difficulties in determining whether a crash involved an unsecured load and 2) states do not collect uniform data on unsecured loads in their police crash reports.", "NHTSA officials stated that they would likely recommend changes to the Model Minimum Uniform Crash Criteria (MMUCC)—voluntary guidelines intended to create uniform data in police crash reports; however, the revised guidelines will not be released until 2017 because of MMUCC’s 5-year cycle of updates.", "NHTSA officials acknowledged that even with the changes in its data systems, data improvements will take time to implement and data on unsecured-load crashes will likely continue to be imprecise.", "Vehicles carrying objects that are not properly secured pose a safety risk on our nation's roadways. Debris that falls from a vehicle can collide with other vehicles or pedestrians, causing serious injuries or fatalities.", "According to data collected by NHTSA, there were about 440 fatalities caused by roadway debris in 2010.", "However, the exact number of incidents resulting from vehicles carrying unsecured loads is unknown.", "Congress, through the Conference Report for the Consolidated and Further Continuing Appropriations Act, (2012), directed NHTSA to improve its data on unsecured-load incidents and directed GAO to report on state laws and related exemptions, and punitive measures regarding unsecured loads on non-commercial vehicles, such as cars and light trucks used for non-commercial purposes.", "This report examines NHTSA’s data collection efforts as well as states’ laws related to unsecured loads.", "GAO reviewed NHTSA documents and interviewed officials from NHTSA, as well as representatives of highway safety associations and state police agencies. GAO also conducted a survey of all 50 states and the District of Columbia, with a response rate of 100 percent, and researched the laws, punitive measures, and education efforts in each state." ], "parent_pair_index": [ -1, 0, 1, 0, 0, 0, 0, -1, 0, 1, -1, 0, 0 ], "summary_paragraph_index": [ 3, 3, 3, 3, 3, 3, 3, 0, 0, 0, 1, 1, 1 ] }
CRS_R44488
{ "title": [ "", "Introduction", "The Basics of Commercial (Depository) Banking", "Commercial Bank Market Structure and Asset Distribution", "An Overview of Capital (Equity) Regulation", "Recovery from the 2007-2009 Recession", "Post-Recession Lending Activity", "Revenue Composition by Bank Size", "Conclusion" ], "paragraphs": [ "", "A commercial or depository bank is typically a corporation that obtains either a federal or state charter to accept federally insured deposits and pay interest to depositors. Commercial banks also make residential and commercial mortgage loans, consumer loans, provide check cashing and clearing services, and may underwrite securities, including U.S. Treasuries, municipal bonds, Fannie Mae and Freddie Mac issuances, and commercial paper (unsecured short-term loans to cover short-term liquid ity needs). The permissible activities of depository banks are defined by statute, namely the Glass-Steagall Act. By contrast, investment banks (or brokerage firms) are not allowed to accept federally insured deposits, and they do not make loans (i.e., a debt obligation owed to a single lending source). Instead, investment banks receive commissions to facilitate corporate mergers and corporate issuances of securities, such as corporate stocks and bonds (i.e., borrowing from the public).\nCongressional interest in the financial conditions of depository banks, also referred to as the commercial banking system, has increased following challenging economic conditions and changes in the regulatory environment. Specifically, the recession that began in December 2007 and ended in 2009 is frequently referred to as the Great Recession in part due to the financial crisis that unfolded. Both large and small banking institutions experienced losses related to the declining asset values (of mortgage-related assets), resulting in a substantial increase in bank failures.\nConsequently, higher prudential requirements for U.S. banking institutions were implemented. The Basel Committee on Banking Supervision, which provides an international consensus framework to promote internationally consistent bank prudential regulatory standards, adopted the third Basel Accord that was subsequently adopted by U.S. federal banking regulators. In addition, Congress passed the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 ( P.L. 111-203 , 124 Stat. 1376), which also contained enhanced prudential regulatory requirements for financial institutions. Hence, the challenge for the banking industry is to determine the sustainable amount of financial (lending) risk-taking while simultaneously facing higher costs associated with greater financial risk-taking (i.e., compliance with prudential regulations designed to minimize the severity of financial distress under deteriorating macroeconomic conditions).\nThis report begins with a general overview of the banking industry. It describes how banks facilitate the financial intermediation process as well as the associated financial risks. It also explains the market structure of the banking industry, referring primarily to the asset distribution. Next, this report summarizes profitability and lending activity levels in the banking industry. Particular attention is paid to metrics related to capitalization levels, asset performance, and earnings of depository banks.", "Financial intermediation is the process of matching savers, who are willing to lend funds to earn a future rate of return, with borrowers, who are in need of funds to make transactions. It is expensive for savers to locate, underwrite, and monitor repayment behavior of borrowers. Similarly, it is expensive for borrowers to locate a sufficient amount of savers with funds and favorable lending terms. Hence, banks develop expertise in intermediation , or facilitating the transfer of funds from savers to borrowers.\nThe typical intermediation transaction made by commercial banks provides loans to borrowers at higher rates than the cost to borrow the funds from savers, who provide loanable funds in the form of bank deposits. Generally speaking, banks (as well as numerous lenders or financial institution types) profit from the spread between the rates they receive from borrowers and the rates they pay to depositors.\nFinancial intermediation, however, involves risk. Banks face the risk that borrowers will default on their loans, making it more difficult to repay depositors. In addition, banks face funding or liquidity risk stemming from more frequent movements in short-term interest rates. Banks must have access to an uninterrupted source of short-term funding (deposits) until their long-term loans are fully repaid. Consequently, greater variability in short rates may translate into variable profit spreads. Furthermore, depositors could suddenly and simultaneously decide to withdraw their deposits, perhaps due to a sudden change in economic conditions or even speculation about deteriorating economic conditions, resulting in financial distress for one bank or several banks. Hence, bank profitability and financial risk are inextricably linked.\nIn addition to default and funding risks, financial intermediation increases borrowers' vulnerability to economic downturns. During business cycle booms, lenders may grow optimistic and increase credit availability as if the ideal economic and financial market conditions will persist. The trade-off (or costs) associated with greater lending is a greater likelihood of severe financial distress if macroeconomic conditions were to deteriorate. In other words, recessions that occur when individuals have more loan repayment obligations (or are more leveraged financially) are likely to be more arduous, in particular if these borrowers suddenly face lower income prospects (via job losses or pay cuts).", "Assets in the banking industry are not evenly distributed, meaning that banking firms are not identical and, for some metrics, must be analyzed separately to get a more accurate assessment of financial conditions. Using data from the Federal Deposit Insurance Corporation (FDIC), Figure 1 shows the number of U.S. banks since 2000 by size categories of bank asset holdings: less than $100 million, $100 million-$1 billion, $1 billion-$10 billion, and greater than $10 billion. Community banks have traditionally been considered institutions with total assets at or below $1 billion; however, some institutions with $10 billion in total assets may be considered community banks. At the other extreme are the large financial institutions that have $10 billion or more in assets. The number of banks with more than $10 billion in assets has remained relatively constant, ranging from 101 to 107 institutions between year-end 2000 and 2015.\nAs of 2015, the FDIC reports that total industry assets were $15,967.92 billion. For several decades, bank assets have increased while the number of banking institutions has decreased. The smallest of the community banks, those with less than $100 million in assets, have accounted for most of the industry consolidation even prior to the 2007-2009 recession.\nFigure 2 shows the same bank asset categories by asset size rather than by number of institutions. Banking institutions with less than $100 million in assets collectively hold approximately 1% of all industry assets. In contrast, banks with more than $10 billion in assets collectively hold approximately 80% of all industry assets. With this in mind, it can be challenging for industry analysts to determine whether the banking industry should be viewed as one competitive industry or as numerous firms with characteristics similar to monopolists. Even though banks generally accept deposits and take loans, it is unclear the extent that small banks compete with large banks and for what types of financial services; small banks compete with each other because of their focus on specialized lending and geographical limitations; or large banks compete with each other or maintain focus on specialized financial services.", "Banking regulators (i.e., the Office of the Comptroller of the Currency, the Federal Reserve, the FDIC, and state banking regulators) require U.S. banking institutions that accept federally insured deposits to comply with safety and soundness regulations, which are designed to monitor and buffer against the types of financial intermediation risks that can result in financial distress for banks and the broader economy. Asset (loan) defaults are less likely to result in the inability of a bank to repay its shorter-term obligations to its creditors (and especially its insured depositors) if sufficient capital is maintained to absorb the losses. If a bank's capital falls below minimum regulatory threshold levels, it would be considered undercapitalized and faces the prospect of being shut down by its regulator, which appoints the FDIC as the receiver of the insolvent institution. Hence, compliance with regulatory capital requirements implies that capital reserves must grow proportionately with bank asset (lending) portfolios.\nThe abatement of financial risk, however, may curb lending activity. As previously mentioned, recessions are likely to be milder when fewer loan repayment obligations are outstanding; but the trade-off may be fewer loans, translating into fewer transactions that could possibly spur more robust expansions. Consequently, determining the optimal amount of financial intermediation risk for the banking system to take while simultaneously trying not to undermine economically stimulative lending activity is often a regulatory challenge.", "After 2007, the banking system saw unusually high numbers of distressed institutions, with failures at rates not seen since the savings and loan crisis that began in the 1980s and lasted through the early 1990s. The number of banks that failed, or fell substantially below their minimum capital reserve requirements, increased as the financial crisis of 2008 unfolded. No banks failed in 2005 and 2006, and three bank failures occurred in 2007. In contrast, the FDIC administered 489 bank failures over the 2008-2013 period.\nThe FDIC maintains a problem bank list, which lists banks at risk of failure because their capital reserves have fallen below regulatory minimum levels (but perhaps not yet far enough below to be shut down). The number of depository institutions on the FDIC's problem list spiked beginning in 2008 and peaked at 888 in the first quarter of 2011. Figure 3 shows the number of problem banks and the total assets of those banks relative to the total assets of the entire banking system. The chart suggests that problem banks were primarily small institutions because of the small share of total banking assets they held.\nThe industry has returned to profitability since the recession. Return on assets (RoA) and return on equity (RoE) are commonly used metrics to gauge bank profitability. RoA is computed with net revenue (i.e., total revenue minus total expenses) in the numerator and average total assets in the denominator. The RoA measures the financial return of a bank's average assets or lending activities. Because the banking industry relies heavily upon borrowed liabilities to fund assets, the ratio's numerator would be significantly smaller than the denominator; therefore, a RoA of approximately 1% is considered profitable. RoE is computed with net income in the numerator and the total amount of common shareholder equity in the denominator. The RoE is a measure of financial return for shareholders. Unlike RoA, RoE does not have a barometer of \"acceptable\" performance because it can increase due to either asset profitability or depleting capital positions, making it difficult to establish a benchmark standard. Nonetheless, double-digit RoE returns such as those prior to the recession tend to be more acceptable for shareholders.\nThe FDIC reported industry declines in both RoA and RoE during the 2007-2009 recession as the numerators of both ratios fell even faster than their denominators. The negative returns coincided with the wave of loan defaults that also occurred during the recession, which led to the deterioration of capital, increases in the number of banks on the FDIC's problem list, and increases in bank failures. The RoA and RoE measures, which are illustrated in Figure 4 , have exhibited a reversal in course since the recession.\nFigure 5 shows the increase in noncurrent assets (i.e., loans or bonds) and charge-offs after 2007. Non-current assets are loans or bonds that borrowers do not repay as scheduled. The allowance for loan and lease losses (ALLL) is a component of regulatory bank capital set aside for anticipated (or estimated) loan losses. Loan loss provisioning refers to increasing the amount of ALLL when loan default risks increase; decreases are referred to as charge-offs or deductions from ALLL when lenders determine that noncurrent assets will not be repaid. RoA and RoE movements are essentially related to loan and bond repayment problems.\nBank regulators require banking organizations to hold capital for both anticipated and unanticipated default risks. Capital requirements pertaining to the maintenance of equity shareholder levels are designed to buffer against unanticipated losses and generally do not vary. In contrast, ALLL requirements change more frequently (quarterly) or when expected credit losses may have increased. Hence, a bank may have sufficient capital to meet unanticipated defaults, which may be associated with unforeseen events (such as a sudden increase in the unemployment rate), but it may still need to increase ALLL provisions should a borrower begin showing signs of repayment difficulties that may result in default. If banks can absorb anticipated loan losses using current income earnings, their capital will be left intact for unanticipated losses.\nThe ratio of aggregate ALLL provisioning to total bank assets, also shown in Figure 5 , is an ALLL proxy. Loan loss provisioning matched and often exceeded the anticipated percentage of problem assets prior to 2007, which are composed of net charge-offs and noncurrent assets. The ALLL indicator suggests that the amount of loan loss provisioning since the recession covers net charge-offs. The percentage of noncurrent loans, however, must decline even more relative to the current level of ALLL provisioning (or ALLL provisioning must increase more) before the industry can fully cover its anticipated default risks.\nAlthough the ALLL indicator was constructed for illustrative purposes, the amount of loan loss allowance of noncurrent loans and leases, also referred to as the coverage ratio , is a more commonly used metric to assess the ability to absorb losses from nonperforming assets (as shown in Figure 5 ). A coverage ratio below 100% indicates that there is insufficient provisioning to cover weak loans that could go into further distress. Since the recession, regulators have required banks to increase loan-loss provisioning (as well as other components of regulatory capital) levels to better match the levels of problem loans.", "The asset (lending) growth rate of the banking industry is computed using two methodologies (illustrated in Figure 6 ). For both methodologies, the total assets per quarter were initially averaged for each year, arguably adjusting for seasonal movements in lending activity over the year. The asset growth rate (represented by the more volatile striped bars) is computed by simply calculating the percentage change of the average total assets from year to year. The asset growth rate (represented by the solid bars) is computed using a moving average smoothing technique that reduces short-term volatility in data. Some economists prefer analyzing smoothed data series to curtail overstating observed activity or directional change. Hence, the asset growth rate using the moving average or smoothing methodology fell below negative 2% beginning in the first quarter of 2009, which had not occurred since the 1990-1991 recession; the second and fourth quarters of 2009 also saw negative asset growth. Given the magnitude of loan repayment problems, banks grew more cautious about lending (or allowing their asset portfolios to grow) to avoid the risk of further weakening their ALLL and capital reserve positions. The bank lending rate has increased since the 2007-2009 recession. Except for the 2001 recession, the more recent growth rates are below the pre-recessionary levels.\nFigure 7 illustrates some of the more common types of asset holdings in the aggregate banking portfolio. Since the 2007-2009 recession, the banking system holds larger shares of cash and smaller shares of residential mortgages, which is computed in Figure 7 using 1-4 family residential mortgages and home equity lines of credit. The share of cash holdings has more than doubled since 2000 to approximately 12% of aggregate portfolio holdings. The increase in cash holdings would be consistent with the increase in regulatory capital requirements for banks as shareholders purchase bank stocks with cash. Conversely, the share of residential mortgage credit, which peaked to almost 24% in 2005, has since steadily declined (by more than 33%) to approximately 15%. The share of commercial and industrial (C&I) lending has seen a decrease of approximately 24% since 2000, but it appears to be rising since the 2007-2009 recession. As of 2015, the total asset shares represented by commercial real estate lending, consumer loans (e.g., credit cards, installment loans), and securities (e.g., state and municipal bonds, U.S. Treasury securities) approximate pre-recession levels. Lastly, a trading account holds assets that the bank would like to sell or trade. Although banks wanted to sell more assets during the recession, the share of assets for sale has returned to and has fallen below pre-recessionary levels.", "As previously stated, banks typically borrow funds from depositors for shorter periods of time relative to their originated loans. Banks must continuously renew their short-term borrowings until longer-term loans have been fully repaid. For example, suppose a bank originates a consumer loan that is expected to be repaid in full over two years. Over the two years that the loan is being repaid, the bank will simultaneously \"fund the loan,\" meaning that it will treat its depositors' funds as a sequence of quarterly (for a total of eight quarters) or monthly (for a total of 24 months) short-term loans and make periodic interest payments to depositors. The spread or difference between lending long and borrowing short is known as the net interest margin .\nTypically, smaller banks engage in \"relationship banking,\" meaning that they develop close familiarity with their respective customer bases and provide financial services within a circumscribed geographical area. Relationship banking allows these institutions to capture lending risks that are unique, infrequent, and localized. These institutions, which rely heavily on commercial (real estate and retail) lending and funding with deposits, typically have higher net interest margins than large banks. Funding loans with deposits is cheaper than accessing the short-term financial markets, particularly for small institutions that do not have the transaction volume or size to justify the higher costs.\nIn contrast, large institutions typically engage in \"transactional banking\" or high-volume lending that employs automated underwriting methodologies that often cannot capture atypical lending risks. Large banks are not as dependent upon deposits to fund their lending activities because of their greater ability to access short-term money markets. Large banks typically have lower spreads because their large-scale activities generate large amounts of fee income from a wide range of activities, which can be used to cover the costs of borrowing in the short-term money markets. Revenues are earned by originating and selling large amounts of loans to nonbank institutions, such as government-sponsored enterprises (Fannie Mae and Freddie Mac) and non-depository institutions that hold financial assets (e.g., insurance companies, hedge funds). A large share of fees are still generated from traditional banking activities (e.g., safe deposit, payroll processing, trust services, payment services) and from facilitating daily purchase and payment transactions, in which service fees may be collected from checking, money orders, and electronic payment card (debit and credit) transactions. Hence, transactional or high-volume banking activities allow large banks to generate fee income and engage in financial transactions characterized by minimum deal size or institutional size requirements, which simultaneously act as a participation barrier for community banks.\nBecause of the differences in the composition of bank revenue streams, the net interest margins and fee income streams are illustrated by asset size categories. Figure 8 presents the net interest margins (or spreads) by bank size. By 2009, the net interest margins had declined for small banks, but they still remained higher over time than the margins for larger banks. The net interest margins for large banks increased over the recession period as they experienced a large influx of deposits during the recession, perhaps due to uncertainty in the money market; this \"flight to safety\" influx resulted in a substantial drop in their funding costs. In other words, large banks were able to rely relatively less on short-term financial markets and could, instead, take advantage of cheaper funding from deposits. Although net interest margins may appear to be returning to pre-recession trends, the future performance of this spread would still be affected by a shift in the composition of asset holdings. For example, the spread may be affected by an increase in liquid asset holdings (e.g., securities backed by the U.S. federal government), perhaps due to weaker demand for more illiquid loans (e.g., mortgages, commercial loans) or lower capital requirements associated with holding more liquid loans. Banks may alter the composition of their asset portfolios, attempting to seek higher yielding lending opportunities (e.g., holding less mortgages and more credit card loans) to help maintain spreads above 3%. Bank spreads may also be affected by the amount of deposits that remain or flow out of the banking system as the economy strengthens. Hence, it has become more challenging to predict future profitability arising from more traditional lending activities.\nFigure 9 presents noninterest income as a percentage of assets by bank size. The overall trend of fee-generating activities has rebounded since the recession, but there appears to be more volatility in fee-income revenues of smaller institutions. Although greater reliance upon fee income as a percentage of (large) bank income suggests a reduction in exposure to credit and funding risks, it may not necessarily translate into greater stability of earnings streams. For example, banks no longer generate as much fee income by selling (mortgage) loans to private-label securitization markets, particularly those largely abandoned by investors at the beginning of the financial crisis. In other words, high-volume fee-generating transactions are still dependent upon fluctuations in investor demand for securities created from securitized (structured finance) deals, which adds variability to income. In addition, regulatory costs may reduce fee income. Recent regulation of fees that large institutions may collect from debit transactions would affect the earnings streams. Banks might respond by seeking new opportunities to provide financial services to generate new fee revenues. Hence, future fee-generating activities are still affected by financial market uncertainty.", "Since the 2007-2009 financial crisis, the banking industry has exhibited profitability. Net interest margins and fee income as a percentage of assets are less volatile now than when the U.S. economy was in recession, but they are still lower in comparison to 2000. The industry is still accumulating sufficient reserves to cover noncurrent assets. These factors may be influencing the asset growth rate, which has been positive since 2011, but remains below the average rate of growth observed over the past two decades.\nProfitability in the banking industry should not be interpreted as evidence of a return to previous lending patterns. The industry is adapting its business models to the post-recession regulatory environment in which higher overall capital requirements would be expected to increase funding costs and the choice of financial assets held in portfolios. Because large banks may be less dependent upon traditional lending activities than smaller banks, large institutions might be able to generate sufficient fee income from a wide range of other financial activities to remain profitable even if lending activity does not resemble pre-recessionary levels. Hence, profitability trends may differ for banks by size." ], "depth": [ 0, 1, 1, 2, 2, 1, 1, 1, 1 ], "alignment": [ "h0_title h2_title h1_title", "h0_full h2_full", "", "", "", "h2_full h1_full", "", "", "h1_full" ] }
{ "question": [ "What is a commercial bank?", "With a charter, what else can a bank do?", "How are commercial banks restricted?", "How has the health of the banking system changed in the last decade?", "What measures indicate this improvement?", "How have the RoA and RoE changed since the financial crisis?", "What problems exist with using these percentages?", "Why did the banking system increase its capital reserves?", "What other types of reserves does the banking system have?", "For what specific situation does the system still need to rebuild its loan-loss capacity?", "What are the implications of this current state?" ], "summary": [ "A commercial bank is an institution that obtains either a federal or state charter that allows it to accept federally insured deposits and pay interest to depositors.", "In addition, the charter allows banks to make residential and commercial mortgage loans; to provide check cashing and clearing services; to underwrite securities that include U.S. Treasuries, municipal bonds, commercial paper, and Fannie Mae and Freddie Mac issuances; and to conduct other activities as defined by statute, namely the National Banking Act.", "Commercial banks are limited in what they can do. For example, the Glass-Steagall Act separates commercial banking (i.e., activities that are permissible for depository institutions with a bank charter) from investment banking (i.e., activities that are permissible for brokerage firms, which do not include taking deposits or providing loans).", "Generally speaking, by most measures, the health of the banking system has improved since 2009.", "There are fewer problem banks since the peak in 2011, as well as fewer bank failures in comparison to the peak amount of failures in 2010.", "The return on assets (RoA) and return on equity (RoE) for the banking industry, expressed as percentages, have rebounded since the financial crisis.", "Although RoA and RoE have not returned to pre-recessionary levels, the range of percentages that should be associated with optimal performance of the banking system is subjective.", "The banking system currently has increased its capital reserves that have been designated to buffer against unforeseen macroeconomic and financial shocks.", "The banking system also has loan-loss reserves to sufficiently cover losses expected to be uncollectible.", "For loans that are noncurrent (delinquent) but have not yet gone into default, however, the banking system still needs to rebuild this loan-loss capacity if such loans do become uncollectible.", "Hence, news of industry profitability should be tempered by the news that aggregate loan-loss provisions still must increase to sufficiently buffer against noncurrent loans." ], "parent_pair_index": [ -1, 0, 0, -1, 0, 0, 2, -1, 0, 0, 2 ], "summary_paragraph_index": [ 0, 0, 0, 3, 3, 3, 3, 4, 4, 4, 4 ] }
GAO_GAO-13-244
{ "title": [ "Background", "FDA Received More than 6,000 AERs Over 4 Years, but Consumers and Others May Not Be Voluntarily Reporting All Adverse Events to FDA", "FDA Received 6,307 AERs from 2008 through 2011, Primarily from Industry, and Mostly for Combination Products or Unclassified Products", "FDA Has Increased Its Compliance Monitoring of Firms and Taken Some Advisory and Regulatory Actions", "FDA Has Increased its Monitoring of Firms through Inspections Since 2008", "FDA Took a Total of 19 Advisory and Regulatory Actions Related to AER Noncompliance from January 2008 through December 2011", "FDA Has Used AERs for Some Actions but May Have Opportunities to Expand its Use of AERs", "FDA Has Used AERs to Initiate or Support Some Consumer Protection Actions", "More Information on How FDA Uses AERs May Help FDA Expand Their Use", "Providing Information to the Public on Dietary Supplement AERs May Improve Consumer Understanding", "FDA Has Partially Implemented All of Our 2009 Recommendations", "Conclusions", "Recommendations for Executive Action", "Agency Comments", "Appendix I: Objectives, Scope, and Methodology", "Appendix II: Data on FDA’s Consumer Protection Actions Related to Dietary Supplements", "Data on FDA’s Surveillance Actions Related to Dietary Supplements", "Appendix III: Comments from the Department of Health and Human Services", "Appendix IV: GAO Contact and Staff Acknowledgments", "GAO Contact", "Staff Acknowledgments" ], "paragraphs": [ "Responsibility for dietary supplement oversight is shared among several offices at FDA:\nFDA’s Center for Food Safety and Applied Nutrition (CFSAN) manages the CFSAN Adverse Event Reporting System (CAERS), which collects and stores AERs related to foods and dietary supplements. CFSAN also houses the Division of Dietary Supplement Programs, within its Office of Nutrition, Labeling and Dietary Supplements, which is responsible for developing guidance, providing scientific and technical expertise, and directing dietary supplement priorities across the agency. Additionally, CFSAN’s Office of Compliance has primary responsibility for compliance and enforcement of FDA regulations and federal laws within FDA’s jurisdiction with respect to foods—such as dietary supplements— including coordinating compliance and regulatory actions within the center and with other FDA components. Among other responsibilities, the Office of Compliance reviews incoming investigational findings and recommendations to determine if a proposed action or remedy is supported by the documented observations and other evidence; assesses the integrity and relevance of the evidence; and obtains necessary scientific verification from appropriate subject matter experts.\nFDA’s Office of Regulatory Affairs is responsible for managing the agency’s field operations in 25 regional and district offices for each of FDA’s centers, including CFSAN. Among other responsibilities, the Office of Regulatory Affairs supports FDA centers by performing inspections and import operations. The Office of Regulatory Affairs also takes advisory and regulatory actions for dietary supplements, but generally these actions are coordinated with CFSAN’s Office of Compliance.\nFDA’s Center for Drug Evaluation and Research is responsible for oversight of over-the-counter and prescription drugs, including generic drugs and some biological therapeutics. Center for Drug Evaluation and Research officials work with other FDA offices to identify products that are marketed as dietary supplements but that have been deliberately adulterated with active ingredients in FDA-approved drugs or their analogues. Once identified, FDA alerts the public and takes action to protect the public through a variety of consumer protection actions, such as working with firms on voluntary product recalls. Table 2 provides examples of consumer protection actions FDA may take in response to identified safety concerns.\nAccording to FDA officials, the estimated resources for all dietary supplement activities across FDA grew slightly from $14.6 million in fiscal year 2009 to a projected $18.9 million in fiscal year 2012. These activities include regulatory and technical review, policy and guidance development, research, education and outreach, compliance and inspection activities, and associated administrative support activities, including infrastructure costs.\nThere are three different paths consumers, health care practitioners, or others can follow for reporting any serious, moderate, or mild health problem related to a dietary supplement to FDA. First, consumers, health care practitioners, or others can complete an electronic voluntary AER form at FDA’s MedWatch webpage—FDA’s agencywide safety information and adverse event reporting program—and submit it to FDA. The information is then sent to CFSAN via fax. Second, consumers, health care practitioners, or others can report the health problem to the dietary supplement firm listed on the product label. The firm evaluates the problem and, if it determines it to be serious in accordance with the 2006 act, it is to complete a hard copy mandatory AER form and submit the form to FDA by mail, along with a copy of the product label. If the firm determines the problem is not serious, it can complete and submit a voluntary AER form at its discretion. Third, consumers, health care practitioners, or others can report the health problem to an FDA Consumer Complaint Coordinator. The coordinators are located in FDA district offices and document and follow up on a variety of health and nonhealth-related complaints about FDA-regulated products.\nCoordinators enter health problems reported by consumers into a database from which the health problems are later uploaded into the CAERS database as voluntary AERs, as shown in figure 1.\nAlternatively, consumers, health care practitioners, or others can call a poison center about a health problem. Poison centers are independently operated and provide free medical advice from health care professionals who are trained in the toxicological management of poison exposures and can address toxic exposure situations and adverse events. Poison exposures can result from a variety of circumstances and substances, including adverse reactions to dietary supplements under use as directed. Calls received at the 57 poison centers covering the United States and its territories are uploaded into a national database for analysis. However, the 57 poison centers are not an adverse event reporting system. Consequently, individual health problems involving dietary supplements and managed as poison exposure cases by poison centers are generally not sent to CFSAN.\nWhen reporting a health problem to FDA, individuals are asked to provide a short description of the reported health problem; a brief description of the affected person, such as age, gender, weight, and any preexisting medical conditions; and information about the dietary supplement, such as the product name and manufacturer, as well as dosage associated with the health problem. Firms submitting mandatory AERs are also asked to provide the above information. However, to avoid duplication in its database, FDA asks for the following five data elements at a minimum for mandatory AERs: (1) an identifiable patient, (2) an identifiable individual who is reporting the health problem to the firm, (3) identity and contact information for the responsible firm submitting the serious AER to FDA, (4) a suspect dietary supplement, and (5) a serious adverse event or fatal outcome.\nOnce FDA receives an AER for a serious, moderate, or mild health problem, contractors enter the information into the CAERS database, either electronically or manually, and record information by product, industry code, ingredient(s), medical symptom(s) and other information. CAERS staff review the AERs for accuracy and then distribute them to subject matter experts within CFSAN’s program offices, including the Division of Dietary Supplement Programs, for their review. These subject matter experts review the AERs to determine the extent of the relationship between the reported health problem and the product. In addition, CAERS data analysts use statistical tools to analyze relationships across all AERs to detect potential indicators of unsafe products, including patterns or relationships among health problems, products, and ingredients that are found to be significant, according to CFSAN officials. These officials said that, if CFSAN’s subject matter experts find that a product in an AER contains active ingredients in FDA- approved drugs or their analogues, the AER is shared with FDA’s Center for Drug Evaluation and Research, which shares oversight responsibility for supplement products that have been deliberately adulterated with active ingredients in FDA-approved drugs or their analogues. If an issue related to compliance with dietary supplement regulations is identified— such as CGMPs describing the conditions under which supplements must be manufactured, packed, and held—CFSAN’s subject matter experts pass the AER or cluster of AERs to CFSAN’s Office of Compliance, which works with FDA’s Office of Regulatory Affairs to determine if consumer protection actions are needed, as shown in figure 2.\nFDA uses other postmarket surveillance approaches in addition to AERs to identify potential safety concerns and conduct oversight related to dietary supplements. Examples of these approaches are listed in table 1.\nAccording to FDA officials, inspections of dietary supplement firms constitute the agency’s primary method for monitoring compliance with requirements to report adverse events. According to CFSAN guidance, FDA investigators take several steps during inspections to monitor compliance with AER requirements, including determining whether a firm has a process in place to report serious adverse events, determining whether the firm has any serious AERs that it did not submit to FDA, and reviewing labels to determine if the product has contact information for reporting AERs.\nAs table 2 shows, once FDA has identified a potential safety concern or a violation for dietary supplements, it has a range of consumer protection actions available, from advisory actions, such as issuing a warning letter, to regulatory actions, such as seizing adulterated dietary supplements.\nAccording to FDA officials, products or ingredients of greatest concern for public health are subject to regulatory actions. In addition, FDA may pursue a regulatory action against a firm if the firm does not correct violations in response to an advisory action, such as a warning letter.", "FDA received more than 6,000 AERs from 2008 through 2011, primarily from industry, and most of these AERs were for supplements containing a combination of different types of ingredients (e.g., vitamins and minerals) or supplements that were otherwise not classified into one of FDA’s existing product categories, according to our analysis of FDA data. However, FDA may not have received information on all adverse events that are associated with dietary supplements because consumers and others may not be voluntarily reporting them to FDA—either directly or through firms—although they may be contacting poison centers about some of these events. Specifically, poison centers received over 1,000 more reports of adverse events from 2008 through 2010 than FDA did.", "From 2008 through 2011, FDA received a total of 6,307 AERs related to dietary supplements; 71 percent of these AERs came from industry for serious health problems (i.e., based on consumer, health care practitioner, or others’ reports), and most of these AERs were linked with dietary supplements containing a combination of ingredients—such as products containing both vitamins and minerals or otherwise unclassified dietary supplements—according to our analysis of FDA data. Specifically, the total number of AERs FDA received annually more than doubled over the period, from 1,119 in 2008 to 2,480 in 2011. This rise in AERs was driven by a large increase in the number of mandatory industry AERs, according to our analysis. As shown in figure 3, mandatory AERs almost tripled from 2008 through 2011, from 689 in 2008 to 2,040 in 2011. During the same period, AERs submitted voluntarily by consumers, industry, health care practitioners, and others remained relatively stable, averaging 461 annually. All mandatory AERS from industry involved serious health problems, and FDA classified roughly 64 percent (1,179) of all voluntary AERs (1,844) as “serious as reported.” “Serious as reported” means that the adverse event met the criteria to be classified as serious as it was reported to FDA (based on the reporter’s responses to standard questions about it), whether or not FDA’s later medical review classified it as serious. Appendix II incorporates data on AERs from our 2009 report to provide information on AERs FDA received from January 1, 2003, through September 30, 2012.\nAccording to FDA officials, two factors are driving the increase in mandatory AERs. First, FDA has increased its enforcement efforts against AER noncompliance. For example, FDA has taken advisory actions, such as issuing warning letters, against firms that have not reported serious AERs or failed to include contact information to report an adverse event on the product label. Second, lawsuits have publicized the consequences of adverse events and a firm’s decision not to report these events. Specifically, a number of lawsuits have been filed against firms that produced and distributed Hydroxycut™—a weight loss supplement linked to serious liver damage—that cite FDA’s request for a recall because of AERs as evidence. In addition, in 2011, the Supreme Court ruled in favor of investors suing a publicly traded drug manufacturing firm for securities fraud, allowing shareholders to rely on the firm’s decision not to report, among other things, AERs as grounds for a claim in their suit. FDA officials stated that these lawsuits have raised firms’ sensitivity to the risk involved in noncompliance with AER requirements, leading to the increase in mandatory AERs.\nThe 6,307 AERs FDA received from 2008 to 2011 reported the following serious outcomes:\n53 percent (3,370) resulted in unspecified important medical events of\n29 percent (1,836) resulted in hospitalization,\n20 percent (1,272) resulted in serious injuries or illnesses,\n8 percent (512) resulted in a life-threatening condition, and\n2 percent (92) resulted in death.\nWhen interpreting AERs, FDA officials said that it is important to understand that an AER by itself does not demonstrate a causal relationship between the dietary supplement and the reported health problem. Rather, the officials said that there are several other factors that must be considered to determine causality, such as the role of other products consumed at the same time and preexisting health conditions. Some demographic information on the individuals affected by these and other outcomes in the AERs was available. Specifically, of the 6,307 AERs, 63 percent (3,980) affected females; however, the age of the individual affected was missing in about one-third (2,029) of the AERs. According to FDA officials, the absence of such information can hinder the agency’s ability to determine whether there is a causal relationship between the product and the reported health problem.\nAs shown in figure 4, the vast majority (5,248) of the supplements identified in the AERs were a combination of different types of dietary ingredients (e.g., vitamins and minerals) or supplements that were not otherwise classified by FDA into one of the agency’s existing supplement categories. Vitamins were the second most frequently reported supplement, included in 952 AERs, followed by minerals, included in 619 AERs. According to FDA officials, the predominance of combination and unclassified supplements in AERs reflects the growing number of complex supplements on the market. These officials said that these supplements are challenging for FDA because of limited scientific knowledge on how different supplement ingredients interact and their effect on consumers’ health. Although product names are not standardized within CAERs, we matched firm and product names across AERs data to estimate which types of products were associated with the most mandatory AERs. According to our analysis, 6 of the 10 supplements receiving the most mandatory AERs were multivitamins; 2 were weight-loss supplements; 1 was an energy supplement, and 1 was an herbal concentrate. Three supplements were associated with over roughly 100 AERs; 7 were associated with about 51 to 100 AERs; and 24 were associated with about 26 to 50 AERs. Most of the supplements identified in the mandatory AERs were associated with approximately one AER from 2008 to 2011.\nFDA relies on consumers, health care practitioners, and others to voluntarily report adverse events associated with dietary supplements to FDA and to firms and, in turn, FDA relies on firms to submit to it any serious AERs it receives from these individuals, as required by law. However, FDA may not receive information on all adverse events that are associated with dietary supplements because consumers and others may not be voluntarily reporting these AERs—either directly or through firms, as indicated by our analysis and interviews with FDA officials. We found several potential reasons for this underreporting based on our review of relevant studies and our prior work. For example, we and others have reported that consumers, health care practitioners, or others may not recognize the chronic or cumulative toxic effects of a dietary supplement, or they may broadly assume dietary supplements to be safe and not attribute negative effects to them. Additionally, in an October 2012 report, the HHS Office of Inspector General found that 20 percent of a judgmental sample of 127 weight loss and immune support dietary supplements did not have contact information that would enable consumers and health care practitioners to report adverse events. The HHS Inspector General study is not representative of the dietary supplement industry but indicates that some firms may not be providing consumers with the necessary information to report adverse events to firms, which could lead to underreporting if consumers do not report the adverse event directly to FDA. FDA officials said that they receive fewer AERs than they would expect to given the number of dietary supplements on the market and their widespread use. However, they said that, similar to other voluntary reporting systems, the extent of underreporting is unknown because the agency can only know about those adverse events that are reported to it.\nOne potential measure of underreporting is the number of dietary supplement-related health problems managed as poison exposure cases by poison centers. According to annual reports by the American Association of Poison Control Centers (AAPCC), poison centers received 145,775 calls from consumers or others related to dietary supplements from 2008 through 2010. These include cases in which the consumer took more than the directed amount of a product, accidentally ingested the product, or used the product as directed but experienced an adverse event. According to AAPCC reports, there were 4,863 cases of adverse events from 2008 to 2010, over 1,000 more than the 3,827 AERs FDA received during the same period. We could not estimate how much overlap, if any, occurred between cases reported to FDA and the poison centers or determine whether some of the cases managed by poison centers were serious and might have also been reported to firms. However, the greater number of calls received by poison centers suggests that consumers, health care practitioners, and others may have contacted poison centers without reporting the adverse event to FDA.\nFDA officials said that they are interested in reviewing the poison center data related to dietary supplements and have held discussions with AAPCC representatives. Specifically, CFSAN officials said that they want to review the raw poison center data on dietary supplements to understand what it includes and whether it would be useful for their analysis. However, these officials said that they were unable to review the raw dietary supplement data without purchasing it and said that FDA should have access to the data at no additional cost given the current level of federal support for poison centers. For example, a 2012 study commissioned by the AAPCC, federal funding accounted for an estimated 13 percent (about $17 million) of poison centers’ annual operating budget in 2011. An FDA official noted that, in a 2004 report, the Institute of Medicine recommended that poison center data become available to all appropriate local, state, and federal public health units on a real-time basis and at no additional cost. In this report, the Institute of Medicine also recommended that poison centers receive sufficient federal funding to cover core activities, which at the time were estimated to cost approximately $100 million annually. According to AAPCC representatives, AAPCC does not receive federal appropriations to cover cost of collecting, maintaining, and sharing poison center data at the national level and generally charges federal agencies to access the data.\nAAPCC representatives also said that they were willing to work with FDA on reduced pricing. Specifically, based on a May 2012 quote, accessing 4 years’ worth of AAPCC data of about 5,400 product codes would have cost almost $76 million prior to the AAPCC discount, and $800,000 after the discount. However, even with the significant AAPCC discount, access to the data remained more than twice the nearly $400,000 budgeted to process and perform surveillance of dietary supplement adverse events in fiscal year 2011. According to CFSAN officials, as of October 2012, negotiations with AAPCC had stalled at the CFSAN level. CFSAN officials said that the cost of accessing the data was a factor. They also said that, although negotiations had stalled at the CFSAN level, as of December, 2012, they were ongoing at the department level, but from their perspective, progress remained difficult.\nAccording to CFSAN officials, the greatest challenge for identifying potential safety concerns from AERs is the small number of AERs that FDA receives related to dietary supplements. Specifically, these officials said that it is difficult to establish a baseline of doses and responses to help the agency detect anomalies that might indicate a potential safety concern using such a small number of AERs. These officials also said that they could not determine whether the poison center data would be useful for such signal detection until they could access it. However, researchers and the HHS Inspector General have concluded that accessing poison center data may help FDA detect and monitor potential safety concerns. For example, a 2008 study performed in conjunction with CFSAN and the San Francisco Division of the California Poison Control System concluded that active surveillance of poison center reports of dietary supplement adverse events could enable rapid detection of potentially harmful products and may facilitate oversight. Additionally, under contract with the AAPCC, the Centers for Disease Control and Prevention (CDC)—like FDA, an HHS component—has used national poison center data to identify and track adverse events related to dietary supplements. For example, in March 2008, poison centers in three states (Florida, Georgia, and Tennessee), state health departments, and FDA began receiving voluntary AERs of muscle cramps, hair loss, and joint pain related to Total Body Formula and Total Body Mega Formula. On FDA’s behalf, CDC scientists used national poison center data to identify which states were reporting similar cases and to track the geographical extent of the outbreak. If FDA can access more information about dietary supplement-related adverse events that are reported to poison centers, FDA may be able to analyze the increased data on doses and responses to help it identify potential safety concerns.", "To help ensure firms are complying with AER requirements for submitting serious AERs, maintaining AER records, and including AER contact information on supplement labels, from 2008 through 2011, FDA increased its monitoring of firms through inspections and has taken some advisory and regulatory actions against noncompliant firms.", "FDA has increased its compliance monitoring of firms through inspections to help ensure that dietary supplement firms are complying with AER requirements for (1) reporting serious AERs within 15 business days, (2) maintaining AER records for 6 years, and (3) including domestic contact information on product labels for individuals to submit AERs, according to our analysis of FDA data. Specifically, in 2008, FDA inspected 120 dietary supplement firms, which represented at least 6 percent of FDA’s total inventory of dietary supplement firms at the beginning of 2008. In contrast, from January through September 2012, FDA inspected 410 dietary supplement firms, which represented at least 18 percent of FDA’s total inventory of dietary supplement firms at the beginning of 2012. FDA also increased the number of foreign firms it inspected over this period, from conducting no inspections in 2008 to conducting 35 from January through September 2012. Figure 5 shows the number of foreign and domestic inspections of dietary supplement firms FDA or its partners at the state level conducted annually from January 1, 2008 to September 30, 2012.\nAccording to FDA officials, the key factors underlying this increase in inspections were the full implementation of dietary supplement CGMP regulations in 2010 (i.e., describing the conditions under which supplements must be manufactured, packed, and held) and an increase in field investigators available to conduct inspections. The dietary supplement CGMP regulations established new quality control standards for dietary supplement firms and new compliance criteria for FDA investigators to use during dietary supplement inspections. The CGMPs were phased in by firm size starting in 2008, with full implementation completed in 2010. Additionally, an FDA official said that new field investigators became available to conduct inspections in 2010 and 2011. These investigators had been hired following higher appropriations for FDA in fiscal years 2008 and 2009, but they did not become available to conduct inspections until 2010 and 2011 because it takes 1 to 2 years of training before an investigator is ready to perform inspections, according to this official.\nAs the CGMPs were being phased in, FDA identified problems or concerns during inspections, such as a manufacturer not maintaining, cleaning, or sanitizing equipment. The percentage of inspections where FDA identified problems or concerns increased from 51 percent in 2008 to 73 percent in 2011, largely resulting from CGMP inspections, according to our analysis. See figure 6 for the proportion of dietary supplement inspections where FDA identified problems or concerns from 2008 to 2011.\nAccording to our analysis of FDA inspection results from fiscal years 2008 through 2012, FDA identified 20 problems related to AER requirements during inspections. In 3 of these instances, FDA found that the firm did not submit a mandatory AER within the required 15 days. In the 17 other instances, FDA found that a firm did not submit a mandatory AER. When FDA identifies a problem during an inspection, firms may decide to take voluntary corrective action, or FDA may choose to take an advisory or regulatory action against the firm for the observed violations.", "We identified a total of 19 advisory and regulatory actions that FDA initiated from 2008 to 2011 for noncompliance with AER requirements. Specifically, we found three warning letters (advisory actions), one injunction (regulatory action) to prevent the sale of a firm’s products, and 15 import refusals (regulatory actions). All three of the warning letters stated that the supplement label did not include domestic contact information so that individuals could report an adverse event. The injunction against the dietary supplement manufacturer cited noncompliance with several sections of the Federal Food, Drug and Cosmetic Act, including the failure to report serious adverse events as required by law. It prohibited the firm from producing and distributing over 400 products; this was the first time FDA had taken legal action against a large manufacturer for CGMP noncompliance, according to FDA documents. All of the 15 import refusals—spanning nine supplement companies—that we identified cited violations of supplement labeling requirements for domestic contact information so that individuals can report an adverse event. Table 3 provides more information on the 19 advisory and regulatory actions related to noncompliance with AER requirements that we identified.\nAccording to FDA officials, inspections are the primary way FDA identifies and develops direct evidence of noncompliance with AER requirements. However, FDA and others have identified noncompliant firms through other surveillance actions. Specifically, FDA can also identify and act on noncompliance with some AER requirements through Internet monitoring. For example, in March 2012, after reviewing a product label on a firm’s website, FDA sent a warning letter to the firm for failing to include domestic contact information to report an adverse event on the product label. In addition, in October 2012, the HHS Inspector General reported that 20 percent of a judgmental sample of 127 dietary supplement products purchased from retail stores or online lacked contact information to report adverse events. This study is not representative of the dietary supplement industry, but it indicates that compliance with AER requirements remains an issue for some firms. According to Inspector General officials, the Inspector General provided a list of the noncompliant firms to FDA for the agency’s review.\nFDA can estimate noncompliance to some extent using its known advisory and regulatory actions specific to AER requirements, but the actual number of noncompliant firms may not be fully reflected by these data. For example, an FDA official said that companies that deliberately adulterate supplement products with active pharmaceutical ingredients to increase their potency probably are also noncompliant with AER requirements, but FDA can only act on those violations for which it has direct evidence. Specifically, FDA may be able to identify a supplement adulterated with such ingredients from voluntary AERs submitted by consumers, health care practitioners, or others, but it would need to perform an inspection to determine noncompliance with most AER requirements. FDA may also have difficulty targeting such firms for inspections because they may not register with FDA as required by law. For example, in its October 2012 report, the HHS Inspector General found that 28 percent, or 22 of the 79 companies in its sample, had not registered with FDA as required. FDA officials believe that the rate of noncompliance is greater than the regulatory action data indicate, but these officials told us that they have not estimated what the noncompliance rate might be because they cannot make assumptions about the behavior of firms.", "FDA has used AERs for some consumer protection actions (i.e., surveillance, advisory, and regulatory actions), although the exact number is largely unknown. FDA officials said that most AERs do not initiate or support consumer protection actions because it is difficult to establish causality based on the limited information in an AER. However, FDA does not collect information on how it uses AERs for its consumer protection actions; FDA could draw on such information to assess whether AERs are being used to their fullest extent for consumer protection. FDA could also expand electronic reporting to firms for mandatory AERs, which could reduce data entry costs and make more program funds available for analysis. FDA is not required to provide information to the public about potential safety concerns from dietary supplement AERs as it is for drugs. Making such information public, if consistent with disclosure provisions in existing law, could expand FDA’s use of AERs and improve consumer awareness and understanding of potential health problems associated with supplements.", "FDA has used AERs to initiate or support some consumer protection actions, but the exact number of reports used and actions taken is largely unknown. According to FDA officials, FDA uses AERs to initiate or support certain consumer protection actions on a case-by-case basis, such as inspections, consumer alerts, and recalls. FDA officials said they also use AERs to provide data for general research on products and ingredients. However, it is difficult to identify the full extent to which FDA uses AERs to initiate or support consumer protection actions because FDA does not have mechanisms in place to systematically monitor the relationship between AERs and these actions.\nAccording to FDA officials, most AERs that are received by FDA do not initiate or support consumer protection actions because it is difficult to establish a causal link between supplements and reported health problems based on the limited information available within an individual AER. Specifically, AERs typically do not include details on the consumer’s medical history or other products, such as prescription drugs that the consumer may have consumed simultaneously. Details such as underlying medical conditions and allergies are requested as part of the reporting process, but FDA officials said that there is generally a lot of missing information in both voluntary and mandatory AERs. For example, age was not available in 32 percent of the dietary supplement AERs that FDA received, and pregnancy status was not available in 98 percent of the AERs involving females. Additionally, because AERs represent a reported association in time between a supplement and a health problem, FDA must first establish the likelihood that the supplement caused the health problem before considering it in the context of consumer protection actions. However, FDA officials told us that AERs may contain inconclusive and often inconsistent data from which it may be impossible to draw consistently strong inferences. For example, FDA was only able to establish a “certain” relationship between the supplement and reported health problem in 3 percent (212 of 6,307) of the AERs. For 67 percent (4,211 of 6,307) of the AERs, FDA could not determine whether the supplement caused the reported health problem because the AER contained insufficient information. Additionally, FDA officials told us that AERs may be complete but contain little evidence necessary for FDA to take action. For example, FDA needs to demonstrate a known effect from the timing and dosage of the supplement product in question.\nBecause FDA has the burden of proof to demonstrate that a product carries a significant or unreasonable risk of injury or illness for dietary supplement products on the market prior to 1994 under current law, the limited information available to FDA based on an individual AER does not usually provide enough evidence to take action. FDA officials said it is more common to identify potential problems after analyzing a cluster of AERs, along with evidence from other sources, such as published research. For example, a subject matter expert in the Division of Dietary Supplement Programs may track a cluster of AERs separately in a spreadsheet and then forward the information to CFSAN’s Office of Compliance if the expert believes that a regulatory compliance issue or potential health issue may be present. The Office of Compliance, in turn, may initiate an advisory or regulatory action, or coordinate with FDA’s Office of Regulatory Affairs to conduct additional surveillance, such as an inspection prior to taking an advisory or regulatory action. However, accumulating enough evidence to discern a clear relationship between a specific product or ingredient and a reported health problem may take receiving a number of AERs over a span of months or years. For example, because liver-related problems associated with Hydroxycut™ were reported infrequently, it took 7 years for FDA to establish a clear relationship between the Hydroxycut™ products and liver disease. After establishing a causal relationship in 2009, FDA discussed a voluntary recall with the manufacturer of Hydroxycut™ products and issued a consumer advisory against using these products.\nTo estimate the extent to which FDA uses AERs to initiate or support consumer protection actions, we compared firm and product names identified in both mandatory AERs and FDA actions to determine if an AER preceded a consumer protection action related to a dietary supplement. Out of the roughly 4,700 consumer protection actions related to dietary supplements that we reviewed, we found 61 actions (about 1 percent) where FDA received a mandatory AER for the same firm or product prior to taking action, as detailed in table 4, which supports FDA officials’ assessment that most AERs do not support consumer protection actions. However, we could not verify that all of the 61 actions we identified were necessarily initiated or supported by AERs because FDA does not systematically monitor this information, and officials could not verify a relationship between the AERs and the actions taken prior to the issuance of this report. Additionally, our analysis does not include situations where FDA used AERs to inform its decisions but did not take formal action.\nAccording to our analysis, we identified 47 inspections for firms also listed in an AER, representing 6 percent of all dietary supplement inspections from 2008 and 2011. Similarly, we found 3 advisory actions for firms also listed in an AER, which represent less than 1 percent of all such actions. Two of the advisory actions were warning letters for noncompliance with CGMP requirements, and another was a consumer alert on Hydroxycut™ products. We also identified 11 regulatory actions for firms also listed in an AER, representing less than 1 percent of all such actions. The regulatory actions included 8 import refusals and 3 product recalls, most of which were for Hydroxycut™ products. (See app. II for more information on consumer protection actions.) FDA officials told us they also use AERs to monitor the results of these actions. For example, if FDA issued a warning letter to a firm based on violations of CGMP requirements during an inspection, receipt of subsequent AERs may indicate that the firm has not rectified its practices. Similarly, if FDA receives an AER for a product that FDA has removed from the market by a regulatory action such as a recall, FDA’s receipt of AERs subsequent to the initial action indicates to FDA that further action may be needed.", "FDA has limited information on how it uses AERs to initiate and support its consumer protection actions; such information could improve FDA’s ability to assess whether the agency is using AERs to their fullest extent in this capacity and make improvements as needed. For example, prior work has shown that agencies can use data on performance to identify and mitigate problems, allocate resources, and improve effectiveness. Currently, FDA uses six separate data management systems to monitor the consumer protection actions we reviewed apart from AERs, as outlined in table 5.\nFDA can track each type of action in its respective data management system and tracks certain identifying information, such as firm name, across all the systems. However, FDA generally does not track AERs across these systems. Specifically, within the six data management systems we reviewed, we found that FDA only tracks the relationship between consumer complaints and AERs. Without having a mechanism to follow an AER through to other actions, FDA misses the opportunity to assess how frequently AERs initiate or support consumer protection actions and to identify ways to potentially broaden their use. For example, FDA internal guidance states that AERs can be used to demonstrate potential health risks associated with violative conditions found during other surveillance activities, such as inspections, and be part of the evidence gathered to support regulatory actions. Establishing the potential for harm is particularly important for dietary supplements because the burden of proof to demonstrate a significant or unreasonable risk of illness or injury prior to removing a product from the market through a regulatory action falls upon FDA. However, by not tracking the relationship between AERs and its other data management systems, FDA cannot systematically identify the extent to which AERS were used in this capacity. Having such information could improve FDA’s and policymakers’ abilities to make fully informed decisions about resource allocation and AERs’ future role in FDA’s consumer protection activities related to dietary supplements.\nFurthermore, unlike other FDA-regulated products, dietary supplement firms cannot submit mandatory AERs electronically. Rather, they must submit these AERs in hard copy by mail. FDA’s requirement that firms submit mandatory AERs in hard copy form by mail—which must be entered manually into the CAERS database by CAERS staff—may reduce the AER system’s effectiveness by diverting resources to data entry rather than analysis. According to CFSAN officials, FDA has plans to expand electronic reporting to mandatory AERs for dietary supplements in mid-2014 as part of its Safety Reporting Portal Program. However, FDA had similar plans at the time of our prior report in 2009 that have not been realized yet.", "Communicating effectively about risks related to dietary supplements is a key part of FDA’s mission to protect and promote public health, according to FDA’s strategic plan. Specifically, helping consumers better understand the risks and benefits of regulated products is a key part of FDA’s responsibilities, as described in the agency’s 2009 Strategic Plan for Risk Communication. This plan outlines a number of strategies to improve communication, including identifying and filling gaps in key areas of risk communication and improving the effectiveness of FDA’s website and web tools. In addition, guidance from the Office of Management and Budget and HHS, as well as our prior work, has emphasized providing greater transparency and participation of federal agencies in publishing government information online. However, unlike drugs and certain biologic products—where FDA is required to provide information about identified potential safety concerns by law—little information on potential safety concerns from dietary supplement AERs is publicly available and accessible to consumers, health care practitioners, and others. Specifically, for dietary supplement AERs, FDA generally provides information on its website on the number of mandatory AERs it received and the number of unique firm names from all mandatory AERs on a monthly basis. This aggregated information, which is located under FDA’s performance measures for CFSAN and is not directly linked with the dietary supplement web pages, does not provide any indication to consumers of potential risks associated with specific dietary supplements. In November 2012, FDA also posted information on its website about individual AERs the agency had received from January 2004 through October 2012 associated with four types of “energy drinks”—three of which were sold as dietary supplements, one as a conventional food. Individuals may also request information about adverse events related to dietary supplements by submitting a Freedom of Information Act request to FDA.\nAccording to FDA officials, there are certain disclosure provisions within the Federal Food, Drug, and Cosmetic Act that limit FDA’s ability to provide unredacted information on AERs related to dietary supplements. However, FDA provides detailed aggregated analysis, including a list of products with potential safety concerns, and raw disaggregated data on AERs related to drugs and certain biologic products on its website, even though some of the same and similar disclosure provisions may apply to such products. Specifically, in the disaggregated data on prescription drugs, FDA redacts names and other information that would identify the individual reporting the adverse event and, occasionally, information on any ongoing clinical studies or other pending actions, if applicable. The publicly available disaggregated data, including product names and health problems, are then used for health and medical research. For example, researchers have used data available from prescription drug AERs to study cardiovascular risk, bladder cancer, and tachycardia (accelerated heart rate). FDA officials told us that they use dietary supplement-related AERs to conduct safety-related research on dietary supplement ingredients, and other government researchers have used AERs in a similar capacity. According to agency officials, FDA already applies a redaction approach to prescription drug AERs that meets the nondisclosure provisions within the Federal Food, Drug, and Cosmetic Act that apply to dietary supplement AERs. An FDA official has stated publicly that the agency is exploring ways to expand the amount of publicly available information about AERs for dietary supplements. To the extent that FDA can do so under existing law—providing greater information about dietary supplement AERs to the public, such as potential safety concerns and redacted data on its website—could create opportunities for external researchers to use AERs and to improve consumer awareness and understanding of potential health problems associated with dietary supplements.", "FDA has partially implemented each of our four recommendations from our 2009 report on dietary supplements. Table 6 summarizes our 2009 recommendations and FDA or congressional action.\nFDA officials said that the agency is planning to issue final guidance and complete implementation for most of our recommendations, but they do not have a time frame for completion. Specifically, FDA officials said they plan to issue final NDI guidance, but they are still reviewing more than 7,000 distinct comments they received in response to the draft NDI guidance issued in July 2011. Furthermore, although FDA officials have indicated they intend to issue final guidance clarifying whether a liquid product may be labeled and marketed as a dietary supplement and possibly issuing similar guidance for non-liquid products, they have not indicated to us where they are in this process. Regarding our recommendation on consumer outreach, FDA officials said that assessing the effectiveness of its outreach efforts through the WebMD™ and other partnerships, consumer updates, and fact sheets on dietary supplement safety issues would require extensive consumer research, which would have to be considered in light of FDA’s limited resources and competing priorities.\nConsequently, regulatory uncertainty remains an issue for areas covered only by draft guidance. As we have previously reported, without final NDI guidance in place, firms may not notify FDA before marketing products with ingredients that have drastically different safety profiles than their historical use. In addition, “energy drinks”—some of which are marketed as beverages and others as dietary supplements—have raised concerns about potential health risks among consumer advocacy groups, academics, government agencies, and members of Congress. Specifically, concerns raised by these groups include the potential health risks associated with the level of caffeine in these products, the combination of caffeine and botanical ingredients with stimulant properties in these products, and their popularity with youth. Two of the four top-selling brands of energy drinks in 2012, as identified by a market research firm, were marketed as dietary supplements, while the others were marketed as beverages. As we noted in our 2009 report, this boundary matters because the safety standard for a certain ingredient in food is different than that for the same ingredient when it is used as a dietary ingredient in a dietary supplement. The differences in how products are regulated may lead to circumstances when an ingredient would not be allowed to be added to a product if it was labeled as a conventional food but would be allowed in the identical product if it was labeled as a dietary supplement. Even without final guidance to industry, the agency has issued warning letters to firms for violations related to NDI notifications and the distinction between liquid dietary supplements and conventional foods on a case-by-case basis. With clear guidance to industry about these issues, firms may have the information necessary to guide appropriate product development—including the development of safety information—and marketing, and FDA’s enforcement burden in these areas may be reduced as a result. Moreover, by assessing its outreach efforts, FDA would have information on whether its new approaches are effective, which could help FDA target future efforts, particularly in the area of increasing voluntary adverse event reporting.", "Because of an increase in mandatory AERs, the number of AERs FDA has received since 2008 for dietary supplements has more than doubled, and FDA has used AERs to initiate and support some consumer protection actions. However, consumers and others may not be voluntarily reporting information to FDA on all adverse events that occur, although they may be contacting poison centers about some of these events. FDA officials said that their greatest challenge to identifying potential safety concerns from AERs is the relatively small number of AERs the agency receives, and that—depending on its review of the poison center data—FDA may benefit from obtaining access to these data for analysis. According to FDA officials, negotiations to access the data are ongoing at the HHS level but, as of December 2012, the results of these negotiations were still pending.\nFurthermore, although FDA has used AERs for some consumer protection actions, FDA may have opportunities to expand its use of AERs. FDA does not systematically collect information on how it uses AERs; such information could improve FDA’s ability to assess whether the agency is using AERs to their fullest extent in consumer protection actions and make improvements as needed. For example, FDA guidance states that AERs can be used to demonstrate potential health risks associated with violations found during other surveillance activities, such as inspections, and be part of the evidence gathered to support regulatory actions. However, by not tracking the relationship between AERs and its other data management systems, FDA cannot identify the extent to which AERS were used in this capacity. Having such information may also improve FDA’s and policymakers’ abilities to make fully informed decisions about resource allocation and AERs’ future role in FDA’s consumer protection activities related to dietary supplements.\nIn addition, FDA’s process for collecting and managing mandatory AERs could be more efficient because dietary supplement firms, unlike other FDA-regulated products, cannot submit mandatory AERs electronically. Rather, they must submit these AERs in hard copy by mail. FDA officials said that they have plans to expand electronic reporting; however, FDA had similar plans in place at the time we issued our 2009 report that were never realized. To the extent that FDA can do so under existing law, providing greater information about dietary supplement AERs to the public—such as identified potential safety concerns and redacted data on its website—could create opportunities for external researchers to use AERs and to improve consumer awareness and understanding of potential health problems associated with dietary supplements.\nMoreover, regulatory uncertainty remains an issue in two key areas of dietary supplement regulation because FDA has not set a time frame for issuing final guidance for draft NDI notification guidance and draft guidance clarifying when liquid products may be marketed as dietary supplements or conventional foods with added ingredients or for issuing similar guidance for nonliquid products. With final guidance in these areas, firms may be able to make more informed marketing and product development decisions, including the development of safety information, and ultimately FDA’s enforcement burden in these areas may be reduced as a result.", "To enhance FDA’s ability to use AERs and to oversee dietary supplement products, we recommend that the Secretary of the Department of Health and Human Services direct the Commissioner of FDA to take the following five actions:\nContinue efforts to explore all possible options to obtain poison center data if the agency determines that the data could inform FDA’s ability to identify potential safety concerns from adverse event reports for dietary supplements.\nIncorporate a mechanism to collect information on when AERs are used to support and inform consumer protection actions (i.e., surveillance, advisory, and regulatory actions).\nImplement the agency’s efforts to facilitate industry reporting of mandatory AERs electronically.\nDetermine what additional information FDA can provide to the public about dietary supplement AERs consistent with existing law and make the information publicly available and readily accessible on its website.\nEstablish a time frame for issuing final guidance for the draft (1) NDI guidance and (2) guidance clarifying whether a liquid product may be labeled and marketed as a dietary supplement or as a conventional food with added ingredients.", "We provided the Secretary of Health and Human Services with a draft of this report for review and comment. We received a written response from the Assistant Secretary for Legislation that included comments from FDA and is reprinted in appendix III. FDA generally agreed with each of the report’s recommendations. HHS also sent us technical comments on behalf of FDA, which we incorporated as appropriate.\nWe are sending copies of this report to the Secretary of the Department of Health and Human Services, the appropriate congressional committees, and other interested parties. In addition, the report is available at no charge on the GAO website at http://www.gao.gov.\nIf you or your staff members have any questions about this report, please contact me at (202) 512-3841 or [email protected]. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix IV.", "Our objectives were to determine the (1) number of adverse event reports (AER) the Food and Drug Administration (FDA) has received since 2008, the source of these reports, and the types of products identified; (2) actions FDA has taken to ensure that firms are complying with new reporting requirements; (3) extent to which FDA is using AERs for its consumer protection actions; and (4) extent to which FDA has implemented GAO’s 2009 recommendations for enhancing FDA oversight of dietary supplements.\nFor this report, dietary supplement refers to a product intended for consumption as defined in the Dietary Supplement Health and Education Act of 1994 (DSHEA)—products that, among other things, are intended for ingestion to supplement the diet, labeled as a dietary supplement and not represented as a conventional food or as a sole item of a meal or diet. They must also contain one or more dietary ingredients. This definition covers supplements for human consumption. We did not examine FDA’s oversight of products that would otherwise meet the definition of a dietary supplement in DSHEA but are intended for veterinary use. We also did not examine FDA’s oversight of products that would otherwise meet the definition of a dietary supplement in DSHEA but are available only by prescription. We did include products that are marketed as dietary supplements but that have been deliberately adulterated (e.g., tainted with active ingredients in FDA-approved drugs or their analogues to increase their potency). Although such products may not meet the legal definition of a dietary supplement because they contain prescription drug ingredients, we included them in our review because these products are often marketed as dietary supplements and can cause serious health problems.\nTo determine the number of AERs that FDA received, the source of the reports, and the types of products identified, we obtained and analyzed FDA data on the number and type of AERs received since the reporting requirements went into effect in January 2008 through December 2011. Some of the data and analyses were provided by FDA in aggregate form, although FDA also provided us with disaggregate data on serious AERs. We supplemented our initial analysis with updated data on the number of AERs that FDA received between January 1 and September 30, 2012. To count the number of AERs associated with a unique firm or product, we sorted the data by firm name then manually reviewed the names to identify firms with similar or related names. We used the same approach for products, reasoning that products with similar formulations and active ingredients should be grouped together because they would cause similar reactions in consumers and may be manufactured in the same facility. In some cases, we performed additional Internet research to verify the accuracy of a match between a firm or product name. We also reviewed and analyzed data on calls about adverse events related to dietary supplements to poison centers from annual reports of the American Association of Poison Control Centers (AAPCC) from 2008 through 2010. Because poison centers classify certain dietary supplement products differently than FDA, such as including homeopathic agents as dietary supplements, we worked with AAPCC and FDA officials to make the appropriate adjustments to the data to make them comparable to FDA AERs. Similarly, because FDA officials told us that AERs are primarily associated with product use as directed, we adjusted the poison center data to include only those cases where an individual experienced an adverse reaction when using the product as directed and excluded reports resulting from misuse, abuse, or accidental ingestion. To assess the reliability of these data, we reviewed related documentation, reviewed internal controls, and worked with agency or AAPCC officials to identify any data problems. For the FDA data on serious AERs, which we received in disaggregate form, we examined the data to identify obvious errors or inconsistencies. We also reviewed FDA’s laws, rules, and regulations relevant to collecting and maintaining AERs. We determined the data to be sufficiently reliable for the purposes of this report.\nTo determine actions FDA has taken to ensure that firms are complying with new reporting requirements, we reviewed FDA’s procedures, planning documents, and guidance and obtained and analyzed data on FDA’s oversight activities, such as inspections, advisory, and regulatory actions, to identify which of these actions were related to monitoring or enforcing firms’ compliance. Specifically, we obtained aggregate data on the number of dietary supplement inspections from January 1, 2008, through September 30, 2012 and analyzed record-level data on the type and results of dietary supplement inspections FDA conducted from 2008 through 2011 from FDA’s Field Accomplishments and Compliance Tracking System. To determine the number of AER violations observed during inspections, we obtained and analyzed aggregate data from FDA’s Turbo EIR system on inspection observations from fiscal year 2008 through fiscal year 2012. To determine the number of advisory and regulatory actions related to AER violations from January 1, 2008 through December 31, 2011, we obtained and analyzed data and documents on warning letters, seizures, and injunctions from FDA’s Compliance Management System and FDA’s online warning letter database; Class I recalls from FDA’s Recall Enterprise System and other safety-related recalls identified from press releases on FDA’s Recalls - Health Fraud web page and Recalls, Market Withdrawals, and Safety Alerts web page; import refusals from FDA’s Operational and Administrative System for Import Support; and prosecutions with charges filed, convictions, or settlements reached in FDA’s Automated Investigative Management System. We also reviewed individual firm inspection reports for examples of specific observations found during dietary supplement inspections, and accompanied FDA investigators on an inspection of a dietary supplement manufacturing facility. To assess the reliability of data supporting this objective, we reviewed related documentation, internal controls, examined the data to identify obvious errors or inconsistencies, traced data back to source documents, and identified and removed data that were outside the scope of our review, such as data related to products for animal or prescription uses, or data that did not meet the definition of dietary supplement used for this report, as described above. We determined the data to be sufficiently reliable for the purposes of this report.\nTo determine the extent to which FDA is using AERs to initiate and support its consumer protection actions, we matched firm and product names from mandatory AERs against firm and product names in the following FDA consumer protection actions from January 2008 through December 2011: inspections, consumer alerts, industry advisories, warning letters, seizures and injunctions, import refusals, safety-related recalls, and prosecutions. The matching process was necessary because FDA does not track how it uses AERs to initiate or support consumer protection actions across its other data systems. Because CFSAN officials told us that product and firm names are not standardized within the CFSAN Adverse Event Reporting System (CAERS) or across FDA’s systems, we used statistical software to build wild-card searches to identify potential matches and then reviewed each potential match to confirm or reject potential matches. Specifically, we used an analytical software function that measures spelling differences between words to determine the likelihood that firm and product names from two data sets matched and to generate possible matches between AERs and actions. The statistical software returns a numeric value indicating how closely related the names are. After reviewing the initial results, we established a threshold for matching that gave us confidence we were capturing most of the potential matches and excluding those that were definitely not a match. The matches were then manually reviewed to confirm or reject potential matches. For matched records, we determined whether an AER was received prior to the consumer protection action, as an indicator that the AER may have contributed to FDA’s decision to take action. For matched records, we tabulated both the number of AERs that contributed to each action, and the number of actions that matched AERs. We verified the appropriateness of this approach with FDA officials prior to conducting the analysis and provided a list of matches to FDA for their verification. We also reviewed FDA’s guidance and procedures relevant to using AERs to initiate or support surveillance, advisory, and regulatory actions.\nTo determine the extent to which FDA has implemented GAO’s 2009 recommendations for enhancing FDA oversight of dietary supplements, we reviewed FDA’s laws, planning documents, and guidance. We reviewed proposed legislation to expand FDA’s oversight authority for dietary supplements. We also obtained data on the extent to which FDA’s web-based consumer outreach initiatives were distributed.\nIn addition, to address all of our objectives, we reviewed relevant studies related to dietary supplements, adverse event reporting, industry compliance, and using poison center data for public health surveillance, among others. We reviewed the methodology for each of these studies and assessed them for reasonableness in accordance with our objectives. We also interviewed officials from several FDA offices, including FDA’s Center for Food Safety and Applied Nutrition (CFSAN) who receive and analyze AERs, officials from FDA’s Division of Dietary Supplements Program, officials from the Office of Regulatory Affairs familiar with FDA’s field operations and regulatory actions related to dietary supplements, and officials from the Center for Drug Evaluation and Research. We interviewed a wide range of stakeholders, including officials from federal agencies, industry and trade organizations, and consumer advocacy groups. At the federal level outside of FDA, we met with officials from the Department of Health and Human Services’ (HHS) Centers for Disease Control and Prevention, the National Institutes of Health, and the Federal Trade Commission. At the industry level, we spoke with representatives from the American Herbal Products Association, the Council for Responsible Nutrition, and the Natural Products Association. At the consumer advocacy level, we met with representatives from the Center for Science in the Public Interest, Consumers Union, and Public Citizen. We also spoke with representatives from the American Association of Poison Control Centers.\nWe conducted this performance audit from December 2011 to March 2013 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 that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives.", "This appendix combines data collected during this review with data from our prior report to provide additional detail on FDA’s actions to identify and respond to safety concerns related to dietary supplements.", "FDA actions to identify safety concerns related to dietary supplements include receiving and analyzing adverse event reports and consumer complaints and conducting inspections.\nIncorporating data from our prior report, figure 7 shows the number of dietary supplement-related AERs entered into FDA’s database from January 1, 2003, through September 30, 2012. As shown in 2008, mandatory reporting had an immediate impact on the number of dietary supplement-related AERs FDA received.\nIncorporating data from our prior report, figure 8 shows the number of dietary supplement-related consumer complaints with adverse event results or reported symptoms FDA received from January 1, 2002, through December 31, 2011. Consumer complaints are not limited to adverse events. For example, consumers may report a complaint if one or more pills in a product are discolored.\nIncorporating data from our prior report, figure 9 shows the number of dietary supplement inspections conducted by FDA or its state partners and the proportion of these inspections where the investigator identified problems from January 1, 2002, through December 31, 2011. For our determination for whether FDA identified a problem during an inspection, we included all inspections where the district determined that: (1) official action is indicated, (2) voluntary action is indicated, and (3) the case should be referred to CFSAN’s Office of Compliance. We also included all cases where the investigator completed an inspectional observation form—a form used by FDA to document concerns observed during inspections. The items listed on these forms are preliminary and vary in severity. Each inspection was counted only once.\nFigure 10 shows the type of dietary supplement inspections conducted from January 1, 2008, through December 31, 2011. Complaint inspections are conducted to investigate consumer complaints about a firm. Follow-up inspections are conducted to assess a firm’s progress after an advisory or regulatory action such as a warning letter or recall. Compliance inspections are “for-cause” inspections to investigate specific compliance issues. Surveillance inspections are routine inspections that generally assess whether a firm is following dietary supplement good manufacturing practices, as applicable. An inspection may include product examinations, sampling and testing, as well as the inspection of the firm and facility involved with dietary supplements, according to FDA officials.\nFDA actions to respond to safety concerns related to dietary supplements include issuing warning letters to dietary supplement firms, working with firms on recalls, and refusing imports.\nIncorporating data from our prior report, figure 11 shows the number of warning letters related to dietary supplements FDA issued from January 1, 2002, through December 31, 2011. The relatively low number of letters issued in 2007 is in part due to the timing of the letters—if we calculated the number of letters issued by fiscal year, the number would be 43.\nFigure 12 shows the number of Class I, health fraud, and other safety- related voluntary recalls related to dietary supplements from January 1, 2008, through December 31, 2011. We focused on these three types of recalls because FDA determined they (1) are the most likely to cause a serious health problem, (2) could cause a serious health problem, or (3) considered them to be of sufficient concern to issue a safety alert press release.\nFigure 13 shows the number of import refusals by product type from January 1, 2008, through December 31, 2011.", "", "", "", "In addition to the individual named above, Anne K. Johnson, Assistant Director; Robin Ghertner; Cathy Hurley; Esther Toledo; and Lisa van Arsdale made key contributions to this report. Important contributions were also made by Kevin Bray, Michele Fejfar, Dan C. Royer, Carol Herrnstadt Shulman, and Kiki Theodoropoulos." ], "depth": [ 1, 1, 2, 1, 2, 2, 1, 2, 2, 2, 1, 1, 1, 1, 1, 1, 2, 1, 1, 2, 2 ], "alignment": [ "h4_full", "h0_title", "h0_full", "h4_title h1_full", "h4_full h1_full", "h1_full", "h2_full", "h2_full", "", "h2_full", "h3_full", "h0_full h3_full h2_full", "", "", "h3_full h4_full", "", "", "", "", "", "" ] }
{ "question": [ "What complaints regarding dietary supplements did FDA receive?", "Why may the real number of adverse events be even higher than the number reported?", "How did numbers of reports to poison centers compare to reports to the FDA?", "What is the current status of data sharing between FDA and poison control centers?", "What actions did the FDA take to help ensure firms are complying with AER requirements?", "As a result of these inspections, what actions did the FDA take?", "How did FDA inspection numbers in 2012 compare to those from 2008?", "How does the FDA currently use AERs for consumer protection actions?", "What is the main difficulty preventing FDA officials from using more AERs?", "To what extent does FDA collect information on AERS?", "To what extent does FDA make AER information public?", "What benefits could making such information public have?", "What recommendations from GAO has the FDA implemented?", "What was the extent of FDA's action?", "What have FDA officials stated about this gap?", "Why will this final guidance be important?", "How widespread are dietary supplements in the U.S.?", "How does FDA identify potential concerns with these supplements?", "How must firms respond to AERs?", "What did GAO determine regarding FDA's implementation of AER requirements?", "What does GAO's report address?" ], "summary": [ "From 2008 through 2011, the Department of Health and Human Services' Food and Drug Administration (FDA) received 6,307 reports of health problems--adverse event reports (AER)--for dietary supplements; 71 percent came from industry as serious adverse events as required by law, and most of these AERs were linked with supplements containing a combination of ingredients, such as vitamins and minerals or were otherwise not classified within FDA's product categories.", "However, FDA may not be receiving information on all adverse events because consumers and others may not be voluntarily reporting these events to FDA, although they may be contacting poison centers about some of these events.", "From 2008 to 2010, these centers received over 1,000 more reports of adverse events linked to dietary supplements than did FDA for the same period.", "FDA officials said that they are interested in determining whether the poison center data could be useful for their analysis and have held discussions with American Association of Poison Control Centers representatives, but cost is a factor.", "To help ensure firms are complying with AER requirements (i.e., submitting serious AERs, maintaining AER records, and including firms' contact information on product labels), FDA increased its inspections of supplement firms and took some actions against noncompliant firms.", "Over this period, FDA took the following actions: 3 warning letters, 1 injunction, and 15 import refusals related to AER violations, such as not including contact information on the product label or submitting a serious AER.", "Specifically, FDA increased firm inspections from 120 in 2008 to 410 from January 1 to September 30, 2012.", "FDA has used AERs for some consumer protection actions (e.g., inspections and warning letters) but may be able to expand their use.", "FDA officials said that most AERs do not initiate or support such actions because it is difficult to establish causality between the product and the health problem based on the limited information in an AER.", "However, FDA does not systematically collect information on how it uses AERs for consumer protection actions; by collecting this information, it may be able to assess whether AERs are being used to their fullest extent.", "In addition, FDA is not required to provide information to the public about potential safety concerns from supplement AERs as it does for drugs.", "Making such information public, if consistent with disclosure provisions in existing law, could expand FDA's use of AERs and improve consumer awareness and understanding of potential health events associated with dietary supplements.", "FDA has partially implemented all of GAO's 2009 recommendations, such as issuing guidance for new dietary ingredients, clarifying the boundary between dietary supplements and conventional foods, and expanding partnerships to improve consumer understanding.", "Specifically, FDA developed draft guidance in 2009, 2011, and 2012 to address three GAO recommendations about dietary supplement oversight and formed new partnerships to conduct consumer outreach. However, FDA has not issued final guidance in two cases.", "FDA officials said that they plan to complete implementation, but they have provided no time frame to do so.", "With final guidance in place, firms may be able to make more informed product development and marketing decisions, which could ultimately reduce FDA's enforcement burden in these areas.", "Dietary supplements, such as vitamins and botanical products, are a multibillion dollar industry; national data show that over half of all U.S. adults consume them.", "FDA regulates dietary supplements and generally relies on postmarket surveillance, such as monitoring AERs, to identify potential concerns.", "Since December 2007, firms receiving a serious AER have had to report on it to FDA within 15 days.", "GAO was asked to examine FDA's use of AERs in overseeing dietary supplements. In January 2009, GAO reported that FDA had taken several steps to implement AER requirements and had recommended actions to help FDA identify and act on safety concerns for dietary supplements.", "This report examines the (1) number of AERs FDA has received since 2008, their source, and types of products identified; (2) actions FDA has taken to ensure that firms are complying with AER requirements; (3) extent to which FDA is using AERs to initiate and support its consumer protection efforts; and (4) extent to which FDA has implemented GAO's 2009 recommendations. GAO analyzed FDA data, reviewed FDA guidance, and interviewed FDA officials." ], "parent_pair_index": [ -1, 0, 1, 2, -1, 0, 0, -1, 0, 0, 0, 3, -1, 0, 1, 1, -1, 0, 1, -1, 3 ], "summary_paragraph_index": [ 1, 1, 1, 1, 2, 2, 2, 3, 3, 3, 3, 3, 4, 4, 4, 4, 0, 0, 0, 0, 0 ] }
GAO_GAO-15-295
{ "title": [ "Background", "Overview of RTT", "Capacity to Implement RTT", "Role of the Department of Education", "RTT Spurred Reform amid Different Types of State and District Capacity Challenges", "RTT Both Accelerated Reforms Already Under Way and Spurred New Reform Efforts", "States and Districts Faced Moderate but Different Capacity Challenges Implementing RTT", "Most States and Districts Increased Capacity During the Grant Period but Anticipate Challenges Sustaining Their Efforts", "Rural Districts Faced Greater Capacity Challenges Than Urban and Suburban Districts in Many of the Reform Areas", "Many RTT States Found Education’s Technical Assistance the Most Helpful Resource", "States Found Technical Assistance Most Helpful in Building and Sustaining Capacity", "Education Established a New Office and Aims to Develop Policies that Reflect a Coordinated Approach to Providing Technical Assistance", "Experts Identified Lessons Learned to Help Sustain Reform and Made Observations to Consider in Future Efforts", "Key Lessons Learned from RTT May Be Critical to Sustaining Reform", "Observations from Experts May Help Education Address Capacity Concerns in Future Grant Competitions", "Conclusions", "Recommendations", "Agency Comments and Our Evaluation", "Appendix I: Objectives, Scope, and Methodology", "Surveys of RTT Grantees and Districts", "Expert Panel", "Review of Laws, Regulations, and Guidance and Interviews with Officials", "Appendix II: Race to the Top (RTT) Grant Awards by Phase", "Appendix III: Race to the Top State Selection Criteria", "Appendix IV: Capacity Challenges by Race to the Top Reform Area and Type of Capacity, as Reported by States and Estimated by Districts", "School Turnaround Organizational", "Appendix V: List of Participants on GAO’s Panel on Implications of Race to the Top Capacity Challenges", "Appendix VI: Comments from the U.S. Department of Education", "Appendix VII: GAO Contact and Staff Acknowledgments", "GAO Contact", "Staff Acknowledgments" ], "paragraphs": [ "", "The American Recovery and Reinvestment Act of 2009 (Recovery Act) required the Secretary of Education to provide grants to states that show promise in meeting the objectives of four broad education reform areas outlined in law. Education subsequently established the RTT grant fund to encourage states to reform their K-12 education systems and to reward states for improving certain student outcomes, such as making substantial gains in student achievement and improving high school graduation rates. The reforms contained in RTT were expected to help prepare students to graduate ready for college and career, and enable them to successfully compete with workers in other countries. Providing a high-quality education for every student is also vital to a strong U.S. economy.\nStates competed for RTT grant funds based on reforms across the following four core reform areas: 1. Standards and assessments: adopting standards and assessments that prepare students to succeed in college and the workplace and to compete in the global market; 2. Data systems: building data systems that measure student academic growth and success and inform teachers and principals about how they can improve instruction; 3. Effective teachers and leaders: recruiting, developing, rewarding, and retaining effective teachers and principals, especially where they are needed most; and 4. School turnaround: turning around the lowest-achieving schools.\nEducation awarded RTT grants to states in three phases, with award amounts ranging from approximately $17 million to $700 million (see appendix II for list of grantees and award amounts). States are generally required to sub-grant at least 50 percent of their RTT funds to school districts within their state that signed a Memorandum of Understanding stating their agreement to implement all or significant portions of the state’s RTT plan (participating districts). According to Education officials, providing a competitive grant with substantial funding to implement ambitious plans in the four core education reform areas was meant to encourage states to create the conditions for reform and achieve significant improvement in student outcomes (see fig. 1). The 4- year grant period began on the date funds were awarded to the state. Education officials stated that, of the Recovery Act funding used in 2010 for the first two phases of RTT, under federal law, any funds not obligated and liquidated by September 30, 2015, will no longer be available. Education made grants for the third phase of RTT from fiscal year 2011 funding, and officials told us that those funds must be liquidated by September 30, 2017.\nIn awarding the RTT grants, Education used a peer review process to evaluate applications. Capacity to implement, scale up, and sustain RTT reforms was one of 19 primary criteria Education used to guide the selection of RTT grantees (see appendix III for a list of these criteria). Education did not provide a definition of capacity, but it provided guidance to peer reviewers on how to assess the specific criterion related to capacity: building strong statewide capacity to implement, scale up, and sustain proposed plans. Peer reviewers evaluated states on the extent to which they demonstrated that they would: (1) provide strong leadership and dedicated teams to implement the reforms; (2) support participating districts in implementing the reforms through a variety of activities, such as identifying and disseminating promising practices; (3) provide efficient and effective operations and processes for grant administration and performance measurement, among other functions; (4) use RTT funds to accomplish the state’s plans; and (5) use fiscal, political, and human capital resources to continue successful grant-funded reforms after RTT funds are no longer available.", "The capacity of grantees is a key issue in grants management that can affect program success. Capacity involves both maintaining appropriate resources and the ability to effectively manage those resources. For the purposes of this report, we defined capacity as the ability to successfully support, oversee, and implement reform efforts. It includes the following types of capacity:\nOrganizational Capacity: degree of preparedness for grants management and implementation including having the appropriate leadership, management, and structure to efficiently and effectively implement the program and adapt as needed.\nHuman Capital Capacity: the extent to which an organization has sufficient staff, knowledge, and technical skills to effectively meet its program goals.\nFinancial Capacity: the extent to which an organization has sufficient financial resources to administer or implement the grant.\nStakeholder Capacity: the extent to which an organization has sufficient support from its stakeholders, including their authority and commitment to execute reform efforts.\nWe and other researchers have noted that capacity concerns may have important implications for competitive grants generally. For example, in 2011 and 2012, we reported on the School Improvement Grant program, another competitive grant awarded by Education, and found that human capital and stakeholder capacity issues influenced the implementation of In addition, a 2011 Journal of School Improvement Grant interventions. Federalism study demonstrated that applicant capacity is an important factor likely to influence how competitive grants are administered and that an applicant’s chances of winning competitive grants are strongly related to their capacity.capacity given relatively modest levels of investment in school improvement activities, as well as human resources, organization, and political challenges. In a January 2014 report, Education’s Inspector General identified common capacity-related causes for delays, such as changes in state leadership; staffing and organizational challenges at Other researchers also raised concerns about states’ state educational agencies; acquisitions issues; and stakeholder issues, particularly regarding the new evaluation systems.", "In 2011, Education established the Implementation and Support Unit, within the Office of the Deputy Secretary, to administer the RTT program. The purpose of the Implementation and Support Unit was to support the implementation of comprehensive reforms at the state level, pilot new approaches to strengthen and support state reforms, and act as a single point of contact for the Education programs that were housed in that office.of all aspects of RTT, including monitoring and technical assistance.\nThe office was responsible for fiscal and programmatic oversight The Implementation and Support Unit established a program review process to monitor RTT states’ progress toward meeting their RTT goals and to tailor support based on individual state needs. The program review process emphasized outcomes and the quality of RTT implementation by states rather than focusing solely on a compliance-driven approach. Program officials and other staff in the Implementation and Support Unit were to work directly with states to understand their RTT plans and objectives, observe benchmarks, and monitor the quality of implementation. Education considered each state’s progress toward its goals and timelines, risk factors and strategies for addressing them, and the state’s own assessment of its quality of implementation, among other factors. In October 2014, Education established a new Office of State Support, which replaced the Implementation and Support Unit in the administration and oversight of RTT.\nEducation provides technical assistance to RTT states via the Reform Support Network (RSN), which it established in 2010 through a 4-year, $43 million technical assistance contract with ICF International. The RSN is intended to work with RTT states to build capacity to implement and sustain reform efforts and achieve improvements in educational outcomes, identify and share promising and effective practices, as well as facilitate collaboration across states and among the many education stakeholders who implement and support state reform efforts. RSN is to provide RTT grantees one-on-one technical assistance that is tailored to the grantee’s RTT reform plans. RSN is to ensure that the state requesting individualized technical assistance receives the best available and relevant expertise by identifying specific experts that a state can contact for help.\nRSN also provides collective technical assistance to RTT states through communities of practice. Communities of practice use a variety of mechanisms to support states in meeting their RTT goals, including the use of working groups, publications, and various forms of direct technical assistance, such as webinars and individualized technical assistance. RSN established a capacity-building community of practice designed to strengthen the organizational capacity of RTT states and a working group to help states assess the sustainability of their reform initiatives and take action if needed.", "", "RTT accelerated reforms under way or spurred new reforms in all 19 states and in an estimated 81 percent of districts that were awarded RTT grants, according to states and districts we surveyed (see fig. 2 for district survey responses). For example, several state officials reported in their survey comments that their states began implementing reform activities— such as developing standards, longitudinal data systems, and new teacher evaluation systems—before they received RTT funds. In addition, 16 states reported that RTT provided the opportunity to accelerate or enhance existing reform plans or existing priorities. For example, one state official reported that RTT allowed their state to increase courses in science, technology, engineering, and math for students and teachers and provide professional development opportunities for pre-kindergarten teachers.\nIn addition, RTT may have helped promote reforms not only within the 19 states that received RTT grants, but also in the states that applied but did not receive RTT funding. A 2014 Education study found that although RTT states implemented more reform activities in the four core reform areas than non-RTT states, many non-RTT states also adopted similar reforms. Specifically, many of the 47 states that applied for the grant had aligned their educational policies and actions to RTT’s four core education reform areas to develop a competitive application. For example, 43 states had adopted Common Core State Standards (Common Core) in both math and reading/English language arts in the 2010-11 school year. Adopting college- and career-ready standards was one of the 19 criteria peer reviewers used to select RTT grantees. Similarly, our prior work on RTT found that four states that applied for but were not awarded a RTT grant reported enacting new state legislation or making formal executive branch policy changes to be more competitive for RTT. Further, our 2011 report found that sharing information with all states carrying out initiatives similar to RTT initiatives can accelerate the pace and scope of reform efforts. Education developed RTT resources and subsequently made them available to all states on its website.", "In our survey of states and districts that received RTT funds, we asked officials to identify capacity challenges they faced in implementing and sustaining RTT and the level of difficulty associated with each challenge identified. In general, capacity issues posed a somewhat moderate level of challenge to states and currently participating districts implementing RTT, according to our survey of states and districts that received RTT funds. However, some states and districts described particular aspects of the four types of capacity—organizational, human capital, financial and stakeholder—as very or extremely challenging.\nFor example, RTT states rated stakeholder capacity as the greatest challenge faced while implementing RTT reform initiatives. Overall, they rated this challenge as moderate; however, about one-quarter to one-third of RTT states reported that obtaining support from state legislatures, organizations that represent teachers and/or administrators, and district leaders was very or extremely challenging. Further, in implementing changes in two of the four core reform areas—standards and assessments and effective teachers and leaders—more than one-third of RTT states found stakeholder capacity to be very or extremely challenging. Although states were encouraged to show in their grant applications that they had garnered support for reforms from stakeholders, some states said that they had difficulty maintaining that support throughout the grant period. One state official told us that the state’s teachers’ union was seeking to reverse elements of their evaluation system linking teacher performance to student achievement, and the legislature was seeking to reverse the adoption of the Common Core—key elements of the state’s RTT application.\nRTT states rated organizational capacity as the second greatest challenge faced while implementing RTT. Although they rated this challenge as moderate overall, officials from 4 of the 19 states reported that consistency in leadership at the state educational agency was a specific aspect of organizational capacity that was very or extremely challenging. One state official we spoke with explained that frequent turnover at the superintendent level made implementing its teacher evaluation system difficult because they had to constantly educate new superintendents on how to use the evaluations to improve instruction.\nSchool districts reported facing different types of capacity challenges than did states. For example, school districts currently participating in RTT reforms reported that financial capacity was the most challenging. In each of the four core reform areas, about one-third of currently participating districts reported that financial capacity was very or extremely challenging to implementing RTT initiatives (see appendix IV). District officials we surveyed stated in their written comments that decreased state funding, the effects of the 2008 recession, and increasing enrollments affected their financial capacity to fund reform at the local level. While RTT grant funding to currently participating districts represented an estimated 1 to 2 percent of their budgets during each school year of the grant period, district officials told us that RTT funds were crucial to their ability to implement reforms.\nDistricts also reported particular difficulties with human capital capacity— the second greatest challenge they faced implementing RTT. currently participating in RTT reported the most challenging aspect of human capital capacity was recruiting staff through competitive compensation, with an estimated 45 percent of districts reporting that doing so was very or extremely challenging. An estimated one-third of currently participating districts also cited retaining staff and having the appropriate number of staff among the most challenging aspects of human capital capacity, as well as issues related to Common Core implementation, such as having staff prepared to develop and/or implement curricula meeting the new standards.\nHuman capital capacity is the extent to which an organization has sufficient staff, knowledge, and technical skills to effectively meet its program goals.", "States and districts reported taking various actions to build and increase their capacity overall throughout the grant period (see fig. 3). However, both indicated that human capital and financial capacity would be the most challenging to sustain after the RTT grant period ends. State and district officials we spoke with explained that these issues were inter- related; that is, staff shortages and skill gaps required continued funds for professional development.\nThroughout the grant period, more than half of the 19 states reported putting great or very great effort into building stakeholder capacity—the area that state officials cited as the most challenging—most frequently by consulting with organizations that represent teachers and/or administrators (17 states), consulting with district leadership (16 states), and building political relationships (15 states).\nSimilarly, most states reported building organizational capacity—another area that presented great challenges as they implemented reforms—by, for example, establishing an RTT point of contact or office (18 states) and establishing communication mechanisms for RTT staff, such as group email lists (17 states). To a lesser extent, states reported that reorganizing an existing office (12 states) and appointing new RTT leadership (13 states) were also helpful in building organizational capacity. According to one state official we spoke with, the state reorganized its entire state educational agency into departments aligned with its RTT reforms. The official noted that the RTT grant helped the state fund the reorganization which, in turn, helped them mitigate capacity challenges throughout implementation. Another state official explained that the state focused on reorganizing how staff conduct their work by fostering collaboration among program officers.\nSchool districts—whose second greatest capacity challenge related to human capital—reported making great or very great effort to build human capital capacity for RTT reform by training existing staff (80 percent), expanding the responsibilities of current staff (74 percent), and shifting responsibilities among staff (64 percent). Similarly, all three district officials we spoke with in our follow-up interviews noted that efforts to build human capital capacity focused on training and shifting the roles of their current staff. One district official explained that they avoided funding new staff positions that they might not be able to retain after RTT funds ended. To build financial capacity, an estimated 23 percent of currently participating districts reported receiving supplemental funding from their state general fund. Additionally, an estimated 7 percent of districts reported receiving funds from foundations to build capacity.\nDespite their efforts, state and district officials reported that capacity struggles would likely remain once the RTT grant period ends. For both states and districts, financial capacity and human capital capacity represented the greatest challenges to sustaining reforms (see fig. 4). However, states and districts also reported planning to take various actions to help sustain their capacity for reform. All 19 states, as well as an estimated 84 percent of currently participating districts, indicated that retaining staff with requisite knowledge and skills is part of their plan to sustain RTT reform efforts. For example, one district official explained that they used a large portion of their RTT funds on training for teachers and administrators. Using the RTT funds for this purpose—as opposed to hiring many new staff—helped them build capacity and institutional knowledge that would be easier to sustain once the RTT funding ends. Additionally, 17 states indicated that modifying existing staff roles and responsibilities was the second most planned action to sustain RTT reforms. An estimated 72 percent of districts indicated that building institutional knowledge was their second most planned action to sustain RTT reforms.", "Rural school districts reported facing significantly greater challenges than urban districts in the standards and assessments and data systems core reform areas when implementing RTT, according to our survey results (see fig. 5).\nThese survey results are consistent with our past work on the capacity challenges rural districts face. For example, in a 2013 report, we found that a rural district in New York faced unique difficulties implementing its teacher evaluation system because its small student population required some teachers to teach more than one subject, which made the evaluation process more complex and time-consuming. Similarly, our prior work on implementation of School Improvement Grants showed that rural districts faced difficulties because attracting and retaining high- quality teachers and implementing increased learning time requirements were difficult, in part due to higher transportation costs in rural areas.\nIn addition, in responding to our survey, rural districts reported anticipating more difficulty than urban districts in sustaining all four types of capacity after the RTT grant period ends; and anticipated more difficulty than suburban districts in sustaining three of the four capacity types. For example, according to our survey, an estimated 40 percent of rural districts anticipated that human capital capacity would be very or extremely challenging in sustaining RTT reform efforts compared to 26 percent for urban and suburban districts (see fig. 6). One expert participating on our panel agreed, noting that rural districts would also face challenges sustaining reforms because constrained budgets and a lack of human capital capacity are often particularly challenging for rural districts. In addition, a rural district official told us that they have a small number of employees, and attracting and retaining skilled employees who can perform multiple work functions can be more difficult for them. The official also noted that recruiting staff is a challenge because rural districts are often also among the poorer districts and do not have the resources to implement large-scale hiring efforts.\nAlthough states and districts across the country likely face capacity challenges and resource limitations to some degree, research suggests that some rural districts—and states that have many rural districts—may be less likely to have the skills, knowledge, or expertise to overcome these challenges. For example, one 2013 report recommended that states may have to play a much more direct role in guiding school improvement in smaller, rural districts, where capacity is lacking.addition, a 2014 Education Office of Inspector General report indicated In this approach may be effective in reducing project delays and provided an example of a state that planned to help districts build capacity in order to better support low-performing schools in rural areas.\nOur prior work and other research demonstrate that states with many rural districts need additional supports in this area. Given that rural districts reported that they faced challenges implementing and sustaining reforms that were statistically significantly greater than urban and suburban districts, a greater understanding of these challenges could help Education provide more targeted support to rural districts. According to Education’s Handbook for the Discretionary Grant Process, Education is to provide technical assistance to grantees to help them achieve successful project outcomes. also required to hold grantees accountable for meeting the commitments made in their approved RTT applications. Education has recognized and reported on challenges facing rural districts. In addition, Education officials stated that they have supported RTT grantees and their rural districts through a series of convenings, work groups, publications, webinars, and individual technical assistance, and provided examples of these activities. However, we reviewed RSN’s technical assistance documents and found that most of the activities were not provided in the manner that RTT states reported finding most helpful—as discussed later in this report—nor were they tailored to helping states address the unique capacity challenges that rural districts reported facing in the reform areas identified in our survey. Unless Education provides assistance specifically designed to help states support their rural districts in addressing their capacity challenges in implementing and sustaining high-quality reform, states may not be able to help the districts that need it the most.\nU.S. Department of Education, Handbook for the Discretionary Grant Process, Handbook OS-01 (Washington, D.C.: January 2009).", "", "According to our state survey, individualized technical assistance provided by Education program officers was the most helpful resource when building capacity to implement and sustain reform plans (see fig. 7). This was consistent with the views of officials we interviewed in four RTT states, who described very positive interactions with their Education program officer. For example, state officials explained that the program officers practiced collaborative problem-solving and provided a significant amount of support to the state as it implemented reform activities.\nThe next most helpful resources, according to our state survey, were technical assistance provided by other staff in the Implementation and Support Unit and RSN. One state official we spoke with noted that Implementation and Support Unit staff provided useful information on how other states were implementing their reform activities. An official from another state explained that the state is working closely with RSN to better understand how to work with its participating RTT districts to better leverage federal funding to improve student outcomes.\nAs shown in figure 7, RSN’s communities of practice ranked fourth in terms of helpfulness to build capacity to implement and sustain RTT reform. According to state officials and one expert participating on our panel, these communities of practice encouraged collaboration across states, which has helped them leverage knowledge, talent, and resources, as well as facilitate the sharing of promising practices. Education officials observed similar value in RSN’s communities of practice, noting that through them, states had a forum in which to learn from each other and discuss RTT implementation issues. It is worth noting that state officials we interviewed commented that communities of practice may have been more helpful to states that were in the early stages of implementing RTT reforms. For example, one official noted that their state was farther along in implementing its teacher and principal evaluation system and school turnaround efforts and therefore did not gain as much from those communities of practice.\nState officials ranked RSN’s capacity-building community of practice and web-based resources from Education and RSN among the least helpful to states. Education officials similarly noted that while webinars were an easy way to disseminate information, they are likely not as valuable as other RTT resources because they are not as tailored to a particular state’s needs. Two experts participating on our panel noted that although an abundance of school reform-related information exists on websites, little is known about the effectiveness of the information.\nIn December 2013, RSN published the results of an evaluation of its technical assistance activities that generally aligned with the results of our state survey. For example, according to RSN’s evaluation report, participants indicated they were satisfied with the quality of the support, the format and content of the technical assistance activities provided by RSN. Individualized technical assistance had the highest ratings because, according to the evaluation report, it was designed to address a state’s specific implementation challenges. In addition, participants in the RSN evaluation indicated that on average, technical assistance activities had a moderate effect on states’ ability to build capacity overall. The results of the RSN evaluation also showed that while webinars were useful for disseminating information to larger audiences and convening states on a regular basis, they received lower ratings than other forms of assistance. Our body of work on performance measures and evaluations has shown that successful organizations conduct periodic or ad hoc program evaluations to examine how well a program is working. These types of evaluations allow agencies to more closely examine aspects of program operations, factors in the program environment that may impede or contribute to its success, and the extent to which the program is operating as intended. Information from periodic reviews of RSN’s technical assistance efforts are an important factor in determining if adjustments are needed to help grantees meet their goals for education reform.\nState officials we surveyed also identified additional activities that Education could undertake that would better assist states with implementing RTT. Specifically, 10 of 19 states reported wanting ongoing professional development throughout the grant period, as opposed to during the early stages of the grant. Ten of 19 states reported wanting training to be provided in their respective states to make it more easily accessible, rather than having to travel to Washington, D.C. Further, 11 of 19 states reported wanting assistance identifying skilled contractors who could assist with reform efforts. Education officials stated that any assistance it provides to identify contractors cannot compromise the fairness and objectivity of the states’ procurement processes. Education officials also pointed out other legal challenges to identifying contractors, such as prohibitions against endorsements of private entities. However, Education officials stated they can assist grantees by, for example, helping them to develop objective criteria, analysis, or research regarding the qualifications of skilled contractors. They said they can also provide resource lists using objective criteria, as well as technical assistance in this area.", "In October 2014, Education created the Office of State Support to expand and sustain the collaborative approach to providing oversight and technical assistance that began under the Implementation and Support Unit. More specifically, the purpose of the Office of State Support is to design a coordinated approach across multiple Education programs to reduce redundancy and improve the efficiency and effectiveness of Education’s oversight efforts. The Office of State Support will provide states with one point of contact for multiple education programs that will provide support and technical assistance. The Office of State Support plans to establish advisory committees, involve staff from other education programs in decision making, and maintain close communication with staff from other education programs that have similar goals and activities as programs covered under the new office.\nOfficials from the Office of State Support stated that the lessons learned from the RTT monitoring and technical assistance processes will inform their work in the new office for programs they oversee—many of which are helping states to facilitate comprehensive education reforms similar to those started under RTT. However, officials stated that they will need to eventually transition to a longer-range plan for monitoring and reconsider how they provide technical assistance because Education’s contract with RSN ends on June 30, 2015. Education officials noted that it was unlikely that the department would receive such a large amount of funding ($43 million) for technical assistance again. They explained that the type and extent of technical assistance efforts to states after the end of the RSN contract will, in turn, be dependent upon the funding available for that purpose. Lastly, they said that they will look to leverage existing technical assistance funds, such as those provided for the Comprehensive Centers program, to help increase state capacity to assist districts and schools.\nEducation’s Handbook for the Discretionary Grant Process requires program offices to develop a monitoring and technical assistance plan for each grant program. In addition, according to Federal Standards for Internal Control, policies and procedures help ensure that necessary actions are taken to address risks to achieving the entity’s objectives. Education has a monitoring and technical assistance plan for RTT, which it has been using for the past four years and has continued to use during the transition from the Implementation and Support Unit to the Office of State Support. However, officials from the Office of State Support stated that they planned to establish coordinated technical assistance processes and procedures for all of the programs administered by the new office, while meeting the needs of the states and their particular initiatives. For example, they said they need to consider how to bring the various kinds of monitoring and technical assistance conducted by different program offices together to provide support for and make connections across programs, and be less burdensome for states. Officials stated that they formed a working group of staff from various Education program offices, including former Implementation and Support Unit staff, to help inform the new office’s coordinated technical assistance policies. However, officials noted that the working group was in the early stages of this process, and had not yet developed any draft policies or established a definitive deadline for accomplishing this task.\nGiven the valuable technical assistance that RSN provided to states, and that Education has not determined the type or amount of technical assistance to be provided, there could be a gap in the type of support that Education can provide to states when the contract expires. Until the Office of State Support develops and finalizes policies and procedures that include support activities states identified as most helpful, Education runs the risk of not providing the most effective assistance to its grantees to help them successfully implement and sustain reform efforts.", "", "Our analysis of our expert panel transcript revealed key lessons that could help states and districts address their greatest capacity challenges and help sustain reforms after the RTT grant period ends.\nTo address challenges with financial capacity, five of the 10 experts participating on our panel noted that federal formula grants are better suited than competitive grants for building and sustaining capacity because they provide a more stable funding source. Three experts stated that there are several ways that states and districts can leverage the funds they receive annually in formula grants to help sustain reforms. The Title I formula grant—designed to improve schools with high concentrations of students from low-income families—gives districts and schools flexibility to use federal funds to support instructional strategies and methods that best meet local needs. For example, schools where at least 40 percent of students are from low-income families may operate “school-wide” Title I programs, which allow schools to combine Title I funds with other federal, state, and local funds to improve the overall instructional program for all children in a school. In the 2012–2013 school year, approximately 40,632 schools, or 74 percent of all Title I schools, operated school-wide programs.\nDespite the large number of schools running a school-wide program, districts and schools may not be using the flexibilities to combine Title I funds with other federal funds to their fullest extent due, in part, to a lack of organizational capacity at the state and district levels. According to Education officials and two experts on our panel, states and districts are often uncertain about whether they are allowed to combine federal formula grants in new ways to support comprehensive reforms. For example, Education officials told us that historically, states and districts have used Title II funds—formula grants designed in part to increase student academic achievement through strategies such as improving teacher and principal quality—to reduce class size. However, according to Education’s guidance, states and districts could also choose to combine Title I and Title II funds to sustain reforms initiated under RTT, such as providing academic support coaches and financial incentives and rewards to attract and retain qualified and effective teachers to help low- performing schools. According to five experts on our panel, uncertainties about what is allowed may stem from lack of communication and coordination among the multiple federal education program and financial management offices, and because these offices are not always focused on helping states and districts better leverage their funds.\nGAO/AIMD-00-21.3.1. programs to support the four core reform areas. Further, in 2013, the Council of Chief State School Officers developed a toolkit for states to help clarify how districts and schools may spend K-12 federal formula grants. This toolkit encourages states to improve collaboration among offices supported by federal grants to help ensure they effectively leverage federal funds. Currently, Education is working with RSN to develop another toolkit for states and districts on ways to leverage federal formula grants to sustain educational reforms. Education officials could not provide definitive time frames for the release and dissemination of the toolkit, but noted that they are hoping to release it sometime in 2015. This toolkit, when finalized, may help states and districts better understand how to leverage their formula grants to sustain reform activities and help raise student achievement—a primary objective of education reform.\nEducation officials and one expert participating on our panel also said that states and districts do not use funding flexibilities to their fullest extent because they have concerns about compliance with state audit requirements. Education officials explained that states and auditors may believe that federal law prohibits certain activities, even when the law and its implementation rules do not. Education officials told us they tried to address these uncertainties by issuing guidance to clarify how states and districts can leverage federal funds to support reforms. According to this guidance, states may use Title I funds to provide technical assistance to low-achieving schools, and districts may consolidate Title I, Title II, and IDEA funds in schools under the school-wide program to support comprehensive reforms by, for example, extending the school day or school year. However, Education officials said that there is still confusion about this issue, particularly among the audit community, and that it needs to provide new guidance to help auditors better understand allowable spending within federal formula grants, especially with Title I funds. However, it does not have a definitive plan for developing and implementing this guidance. Such guidance—when developed and fully implemented—may help auditors better understand funding flexibilities in existing formula grants and help states and districts fully leverage these flexibilities.\nFurther, the pending reauthorization of ESEA also provides an opportunity to address these capacity issues. Education told us that it is exploring new options to help states and districts build capacity to implement comprehensive reforms, including increasing the portion of Title I grant funds that can be set aside for administrative purposes. Currently, two of the set-asides in the Title I program limit the maximum percentage of funds that can be set aside to support state administrative functions and districts’ school improvement activities. Specifically, ESEA requires that a state generally spend no more than 1 percent (or $400,000, whichever is greater) of its Title I funds on state administration and 4 percent on district school improvement activities.\nEducation told us that the current portion of funds under the ESEA Title I grant that may be used for administrative functions may be inadequate given the range and complexity of state-level work in supporting effective implementation of local Title I projects. In its fiscal year 2016 budget proposal, the Administration proposed increasing the funds a state can spend on administration from 1 percent to 3 percent. According to Education officials, the trade-off, particularly in a tight fiscal environment, is that larger set-asides may reduce the portion of available funds that would transfer to districts and schools to implement programs. In the current Congress, the Student Success Act, which was reported out of the House Committee on Education and the Workforce, would make changes to both of these set-asides.\nTo help address human capital and stakeholder capacity challenges, five experts on our panel noted the importance of fostering partnerships between a state and its districts, among districts within a state, and with non-governmental entities by, for example, convening groups of experts across the state to share expertise, solve problems, and share lessons learned to help leverage knowledge and talent. They further noted the potential for such a strategy to solve common challenges, such as how to develop effective strategies for evaluating teachers who teach subjects that are not assessed using standardized tests (e.g. foreign language or art). Universities with research and professional development institutes are another potential resource to help states and districts build and sustain human capital capacity. For example, one expert noted that strong relationships with higher education institutions and teacher unions are needed to revamp teacher, principal and superintendent training programs and teacher licensure requirements. Lastly, three panelists said that to maintain key stakeholder support for reforms, states need to show progress in meeting their established time frames for RTT reform, or increase student achievement.", "Three experts on our panel noted that competitive grants may be better suited than formula grants for spurring reforms and innovative approaches, but varying levels of capacity among states and districts raises concerns about their ability to win competitive grants and successfully implement large-scale education reforms. Research suggests that states’ capacity was an important variable in helping to predict who applied for RTT funds and which states scored well during the competition. In particular, a 2011 study found that states with quality standards and accountability procedures, and that had achieved overall student gains, were more likely to receive higher scores during the RTT grant competition. When making competitive grant awards in the future, Education officials told us they expect to look at demonstrated capacity as evidenced by a state’s performance under previous grants and may offer a competitive priority for previous success. To help states and districts that may be struggling in these areas, experts participating on our panel made four observations that they believe could be incorporated into the design of future competitive grants to help level the playing field between high- and low-capacity states and districts. Education has incorporated some of the observations into its competitive grant programs to varying degrees and pointed out some advantages and disadvantages of each.\nObservation 1: Allow joint applications so that states and districts with greater capacity can partner with those with less capacity. Education noted that it used this approach in recent grant competitions. Education encouraged states that opted to adopt a common set of college- and career-ready standards to form collaborative groups to apply for RTT assessment grants to develop assessments aligned with the new standards. A 2011 study proposed that such arrangements could help states with less capacity more easily benefit from the initiatives of ones with more capacity by helping them identify partners and providing them access to funds that may help valuable reforms gain traction. Education officials told us, however, that when they have allowed joint applications or consortia for some competitive grants, the complexity of implementing the grants increased because states have different procurement rules which take longer to navigate. Education officials also noted that these joint initiatives sometimes take longer to implement because states have to establish a framework for how they are going to coordinate.\nObservation 2: Staggering or “phasing” competitive grant funding to allow for varying capacity needs of grantees. Education officials told us that they have had mixed success using planning grants to allow grantees additional time to build capacity to implement plans. For example, Education used a two-phase strategy for awarding competitive grants under its Promise Neighborhoods grant program, including 1-year planning grants to organizations to enhance the grantees’ capacity and a separate competition for a 5- year implementation grant to organizations that demonstrated they were ready to implement their plans. However, we recently reported that Education did not communicate clearly to grantees about its expectations for the planning grants and the likelihood of receiving implementation grants. Education officials told us that they do not always have the authority to offer this feature, but they consider it where it is possible. Education officials told us that they are considering adding a planning year to the School Improvement Grant, which is federal money awarded to states that states, in turn, award to districts using a competitive process. Education officials told us that they believe that low-capacity districts could benefit from this approach, but noted that it will be important to emphasize their expectation that grantees use the planning year to build capacity to implement their reform plans.\nObservation 3: Allowing intermediary entities that often help coordinate or provide technical assistance to districts to apply for competitive grants. Education officials told us that they see a benefit to using partners such as nonprofit organizations to drive reform, noting, for example, that the Investing in Innovation program allows nonprofits to partner with school districts as part of the application process and throughout the grant period. Research supports such an approach as well. A 2011 RAND study examining the federal and state role in improving schools in 15 states found that although some states assumed primary responsibility for assisting low-performing schools, others relied on regional organizations, area education agencies, or intermediate school districts to fill this role.However, Education officials noted that applicant eligibility is generally defined in statute.\nObservation 4: Streamlining Education’s grant application processes to make it easier for states and districts with less capacity to apply. Education officials told us that one example of streamlining the grant process was allowing states that did not win an award in the first phase of a competition to revise the same application and resubmit for subsequent phases. Education adopted this strategy in the RTT grant competition. Another way to streamline the grant application process is by encouraging shorter applications. Education officials said it used this approach in a grant competition for the Investing in Innovation program. Education officials noted that, in general, one disadvantage to shorter applications is that there may not be sufficient detail in the applications to hold grantees accountable for implementing their plans.", "As Education’s technical assistance contract for RSN comes to a close, and it develops new processes for technical assistance under the new Office of State Support, it has an opportunity to apply the technical assistance that RTT states reported as most helpful, such as individualized technical assistance and professional development, to other grant programs that the office oversees. Such technical assistance could help states implement and sustain the comprehensive education reforms which will continue to be supported by other grant programs managed by the Office of State Support.\nIn addition, because rural districts face unique challenges implementing and sustaining RTT reforms, focusing efforts to enhance Education’s understanding of the types of additional supports they may need could help these districts successfully implement and sustain their reform efforts, and ultimately improve student achievement. Further, as the RTT grant period comes to an end, RTT states may need to better leverage their federal formula grants to continue to support comprehensive reform in the absence of RTT funds. Education officials and other experts have emphasized the importance of leveraging existing funding flexibilities in education formula grants to help states implement and sustain large-scale reform efforts. However, concerns about a lack of communication between states’ program and financial management offices, as well as concerns about non-compliance with state and federal requirements may be limiting states’ willingness to use the funding flexibilities present in current law to develop and implement strategies tailored to their unique local needs. By taking actions to address these issues, Education can help states and districts better use their federal funding in the most effective way to improve student achievement and to support comprehensive school reform.", "To help ensure that states are better able to sustain RTT reforms and that Education can effectively support other grant programs managed by the Office of State Support, we recommend that the Secretary of Education direct the Office of State Support to fully implement and incorporate into its coordinated technical assistance policies and procedures the types of support that would be useful in sustaining RTT reforms and providing effective support to grantees in other programs supporting education reform that the Office of State Support oversees. These could include: providing individualized technical assistance to states, such as that currently provided by Education program officers; facilitating communities of practice to promote opportunities for collaboration across states; providing professional development (or training) throughout the grant period, as opposed to only during the early stages of the grant; making training more easily accessible by conducting training locally in their respective states, when possible; and to the extent permissible in the context of federal and state requirements and restrictions, exploring the possibility of assisting states in identifying skilled contractors to help implement reform efforts.\nTo help states address capacity challenges as they sustain comprehensive education reforms similar to RTT, we recommend that the Secretary of Education direct the Office of State Support to take steps, such as: providing ongoing individualized technical assistance to states to help them target assistance to rural districts, particularly in the reform areas that were most challenging for rural districts; finalizing and disseminating guidance to be included in Education’s toolkit to help states leverage federal formula grants to sustain education reforms; and clarifying and improving understanding of how funding flexibilities in existing formula grants could be used to support education reform efforts to help states and the audit community address impediments to using formula grants in different ways.", "We provided a draft of this report to the Department of Education for comment. Education provided technical comments, which we incorporated into the report as appropriate. Education’s written comments are reproduced in appendix VI and summarized below. Education did not explicitly agree or disagree with our recommendations, but outlined steps to address many elements contained in them. It also provided additional information related to our findings and recommendations.\nIn response to our first recommendation, Education stated that it shares our interest in supporting states as they sustain RTT reforms and supporting other grant programs under the Office of State Support through performance management and technical assistance. To this end, Education described plans to build on its generally successful RTT monitoring strategy to develop a consolidated technical assistance strategy for all programs under the auspices of the Office of State Support. We have added clarifying language in the body of the report to better reflect existing elements of the RTT monitoring and technical assistance plan.\nEducation’s plan to provide coordinated policy development, performance management, technical assistance, and data analysis services through a structure intended to more effectively support the implementation of key reforms and provide individualized support is a positive step. These coordinated policies and procedures could continue to support RTT grantees as well as other grantees under other Office of State Support programs that have a role in helping states implement comprehensive education reforms. However, we continue to believe that until these policies are fully implemented, Education risks providing less effective support than it otherwise might. Further, as Education’s technical assistance contract for RSN comes to an end, we continue to believe that Education should take explicit steps to incorporate into its new consolidated assistance strategy for all programs under the Office of State Support the technical assistance activities that RTT grantees identified as being most helpful to them in sustaining their reforms. In addition, Education should incorporate those additional supports that states reported as desirable. We have clarified the intent of our recommendation accordingly.\nIn response to our second recommendation, Education agreed that it is important to identify ways to help states target assistance to rural districts. Education stated, however, that the draft report does not adequately recognize the actions it has taken to support RTT grantees in rural states and districts, and provided a list of 17 activities it has undertaken through RSN to support rural areas. We acknowledge Education’s efforts to provide support to rural areas and have incorporated additional information in the draft report, as appropriate, to reflect this. However, in further reviewing these 17 activities, we found significant limitations and believe our overall finding and corresponding recommendation is still warranted. Specifically:\nNearly all of the activities (16 of 17) were in the form of working groups, convenings, webinars, toolkits, and publications developed by the RSN, many of which were located on the RSN website. According to our survey of all 19 RTT states, web-based resources were among the least helpful to RTT states in building and sustaining the necessary capacity to implement reforms. Only one of the 17 activities provided individualized technical assistance which, according to our survey, was the most helpful form of assistance to RTT states. We realize that Education formed RSN to provide support in a variety of formats and agree that RSN has generally well supported RTT grantees. However, given the unique capacity challenges that rural districts face, we believe there is value in offering technical assistance tailored to the individual needs of rural areas.\nAccording to our generalizable survey of districts that received RTT funds, rural districts faced statistically significantly greater challenges than urban districts in implementing reforms in two areas: standards and assessments and data systems. However, 14 of the 17 RSN activities focused on the other two reform areas (school turnaround and effective teachers and leaders). RSN’s efforts to focus resources on assisting states in implementing RTT reforms are important ones, and we believe that many states and districts may have benefitted from these efforts. However, in order to best support states that are working to implement and sustain reforms in their rural districts, Education should target future support in the reform areas in which rural districts most struggled: standards and assessments and data systems. Accordingly, we modified our recommendation to clarify that Education should take steps to provide targeted assistance to states in those reform areas that we have identified as statistically significantly more challenging for rural districts.\nMany of the activities undertaken to support rural districts were conducted in 2012 and 2013 (6 of the 11 that included specific dates) when states and districts were fully engaged in implementing RTT reforms. However, our survey of districts that received RTT funds was deployed from June through September 2014, and the results indicated that rural districts continued to face challenges long after they would have availed themselves of these resources.\nSome of the activities (6 of 17) provided support that was not specifically tailored for rural districts; rather, it could be applied in rural, suburban, and urban school settings alike. We continue to believe that opportunities exist to help states better target support to rural districts. Without a better understanding of the unique capacity challenges that rural districts face, and a more focused approach to providing support, Education may not be able to help the states and districts that need it the most.\nFinally, Education recognized the importance of clarifying its guidance on the use of funding flexibilities and provided several examples of “Dear Colleague” letters it has provided to states. We referenced one of these letters in the draft of the report. We did not include the other two “Dear Colleague” letters (guidance related to leveraging federal funds to support school counselors and digital education) because they do not address the use of funding flexibilities in support of education reform initiatives, which was at the heart of our finding and corresponding recommendation. To address this apparent confusion we have clarified our recommendation accordingly. We noted in our report, and Education emphasized, that it is working with RSN to release new guidance in 2015 on ways to leverage federal grants to sustain educational reforms. However, as stated in our report, Education officials could not provide definitive time frames for the release and dissemination of the toolkit. We continue to believe that until this guidance is fully implemented, states and districts will continue to lack clarity on how to leverage their formula grants to sustain reform activities.\nWe are sending copies of this report to the appropriate congressional committees, the Secretary of Education, and other interested parties. In addition, the report will be available at no charge on GAO’s web site at http://www.gao.gov.\nIf you or your staff should have any questions about this report, please contact me at (617) 788-0580 or [email protected]. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix VII.", "We framed our study of capacity challenges faced by states and districts implementing Race to the Top (RTT) reforms around three objectives: (1) What effect did RTT have on education reform, and what capacity challenges did states and districts face in implementing and sustaining RTT initiatives?; (2) How helpful was the assistance the U.S. Department of Education provided to states to build capacity to implement and sustain RTT reforms?; and (3) What lessons have been learned from RTT that could inform future education reform efforts?\nIn addressing these objectives, we incorporated elements of “grounded foresight,” a methodological approach developed by GAO to examine future implications by identifying key trends, emerging challenges, and opportunities to inform government’s future role and responsibilities. According to GAO’s internal grounded foresight methodology paper, the heart of the proposed approach consists of three elements of grounding, designed to support GAO’s core values of integrity and reliability: (1) a strong factual-conceptual base, (2) one or more methods for discussing or anticipating the future, and (3) transparent communication of the outcomes. We developed a strong factual-conceptual base to assure that relevant trends and occurrences related to capacity issues and competitive grants are documented, recognized, and understood as part of the study. We reviewed and analyzed existing literature on capacity issues and competitive grants in K-12 education using GAO’s prospective We examined the features of RTT, and evaluation synthesis approach.reviewed findings from published reports to identify capacity challenges. We also deployed two web-based surveys of state educational agency and district officials; reviewed relevant federal laws, regulations, and guidance; and conducted interviews with a variety of federal, state, and local officials. We then convened a panel of experts who were knowledgeable about capacity issues and federal grants to obtain their views on the implications of capacity challenges on the sustainability of RTT reform efforts and potential future competitive grants. We made the results of the two web-based surveys publicly available to help ensure transparent communication of the capacity challenges states and districts reported facing.", "To obtain information on capacity challenges states faced in implementing and sustaining RTT reforms we conducted a web-based survey of RTT points of contact at each state educational agency in all 19 We conducted the survey from May through July 2014. In grantee states.the survey, we asked RTT states about their capacity to implement RTT efforts, the support received to do so, and efforts to build and sustain capacity for RTT reform, among other things. We received responses from all 19 RTT states for a 100 percent response rate. We reviewed state responses and followed up by telephone and e-mail with selected states for additional clarification and context. We also published survey responses in an e-publication supplemental to this report, RACE TO THE TOP: Survey of State Educational Agencies’ Capacity to Implement Reform (GAO-15-316SP, April 2015).\nTo obtain information on capacity challenges districts faced in implementing and sustaining RTT reform efforts we conducted a web- based survey of a sample of district officials whose districts received RTT funds. We selected a stratified random sample of 643 from 3,251 school districts that received RTT funds from a population of 18,541 school districts in the 19 RTT states (see table 1). Although the focus was on districts that currently receive RTT funds, we also included districts that initially were participating in RTT but later decided to formally withdraw.\nWe obtained data from Education’s National Center for Education Statistics, which maintains the Common Core of Data for public school districts, for the 2011-12 school year. Our sample allowed us to make estimates to all RTT districts and to subpopulations by urban status of the district.\nWe conducted the school district survey from June through September 2014 and had a 76.7 percent final weighted response rate. Because we followed a probability procedure based on random selections, our sample is only one of a large number of samples that we might have drawn. Since each sample could have provided different estimates, we expressed our confidence in the precision of our particular sample’s results as a 95 percent confidence interval (e.g., plus or minus 6 percentage points). This is the interval that would contain the actual population value for 95 percent of the samples we could have drawn. Unless otherwise noted, all percentage estimates in this report have confidence intervals within plus or minus 6 percentage points. For other estimates, the confidence intervals are presented along with the estimates themselves. In the survey, we asked questions about school districts’ capacity to implement RTT efforts, the support received to do so, and efforts to build and sustain capacity for RTT reform, among other things. We reviewed survey responses and followed up by telephone and e-mail with selected districts, as needed for additional clarification and to determine that their responses were complete, reasonable, and sufficiently reliable for the purposes of this report. We also published survey responses in an e-publication supplement to this report, RACE TO THE TOP: Survey of School Districts’ Capacity to Implement Reform (GAO-15-317SP, April 2015).\nThe quality of the state and district survey data can be affected by nonsampling error, which includes variations in how respondents interpret questions, respondents’ willingness to offer accurate responses, and data collection and processing errors. To minimize such error, we included the following steps in developing the survey and in collecting and analyzing survey data. We pretested draft versions of the instrument with state educational agency officials in three states and officials in four districts to check the clarity of the questions and the flow and layout of the survey. On the basis of the pretests, we made revisions to both surveys. We contacted respondents to clarify any questions or responses where appropriate. Further, using a web-based survey and allowing state and district officials to enter their responses into an electronic instrument created an automatic record for each state and district and eliminated the errors associated with a manual data entry process. In addition, the programs used to analyze the survey data were independently verified to ensure the accuracy of this work.", "To obtain information on lessons learned from RTT that could inform future education reform efforts, we convened a group of knowledgeable individuals for an expert panel. In identifying the experts, we compiled a preliminary list of 15 individuals with research or professional experience related to RTT reforms, state and district capacity, federal grant making, and state or federal education policy. These experts represented the following entities: state educational agencies, school districts, education associations, academia, and education think tanks. They also included a former Education official and a representative from Education’s Office of Inspector General. We identified a state educational agency official based on participation in RTT and the state’s proximity to Washington, D.C. where the panel was convened.\nTo obtain a different local perspective, we selected a school district official from a different state. In addition, we selected the school district based on proximity to Washington, D.C. and the extent to which the district had completed questions in our district survey. An external expert who conducted extensive research on K-12 education and federal policy vetted our initial list of panelists. We used feedback from this expert, along with biographical information about the experts, to determine which experts would be invited to participate.\nThe resulting 10 experts participated in a 1-day panel focused on capacity challenges and their implications for RTT reforms and future competitive grants (see appendix V for list of participants). Each panelist completed a questionnaire to document any conflicts of interest. This information was not used to determine the qualification of the expert for the panel, but to ensure that we were aware of circumstances that could be viewed by others as affecting the expert’s point of view on these topics. We developed discussion topics and questions for the panelists based on information gathered from the surveys, interviews, and academic literature. A contractor recorded the panel and transcribed the discussion. We performed a content analysis of the transcript of the panel discussion to develop common themes among the experts on lessons learned from RTT that could help sustain reform efforts, inform the design or implementation of future education competitive grants, and inform future education reform efforts. We tallied responses for each panelist who commented on those themes. This analysis was independently verified to ensure the accuracy of this work.", "For all three objectives, we reviewed relevant federal laws, regulations, and guidance—including federal internal control standards and Education’s Handbook for the Discretionary Grant Process—and interviewed federal, state, and district officials and other experts regarding capacity to implement and sustain RTT reforms. We reviewed RTT applications to identify commitments states made to build capacity to implement RTT initiatives. To identify actions taken to build capacity, we compared the states’ commitments to information provided in their progress reports for school year 2012-2013. We also reviewed information on Education’s efforts to assist states with building capacity, such as guidance, technical assistance, webinars, and other information on the RTT website. We interviewed federal officials from the Implementation and Support Unit in Education’s Office of the Deputy Secretary and staff from the newly established Office of State Support. In addition, we conducted interviews with a variety of interested parties, such as educational organizations, researchers, and university professors. For example, we met with representatives from the American Association of School Administrators, the Council of Chief State School Officers, and the Center on Reinventing Public Education, among others. We also conducted follow-up interviews with officials in four state educational agencies and three districts to obtain more detailed information and illustrative examples. We selected these state and district officials based on their responses to our surveys and representation across award phase.\nWe conducted this performance audit from November 2013 to April 2015 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 that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives.", "", "", "Appendix IV: Capacity Challenges by Race to the Top Reform Area and Type of Capacity, as Reported by States and Estimated by Districts STATES (Percent and Number)\nDISTRICTS (Estimated Percentage)\n11% (2) 17% (3) 11% (2) 39% (7) 24% (4) 18% (3)\nEffective Teachers and Leaders Organizational 24% (4) 24% (4) 22% (4) 11% (2) 22%(4)", "44% (8)\n22% 33% 16% 40% (6) 27% (4) 33% (5) 33% (5)", "", "", "", "", "In addition to the contact named above, Elizabeth Morrison (Assistant Director), Jamila Jones Kennedy (Analyst-in-Charge), Sheranda Campbell, Kathryn O’Dea Lamas, Amanda Parker, and Stacy Spence made significant contributions to this report. Assistance, expertise, and guidance were provided by David Chrisinger, Nancy Donovan, Alexander Galuten, Catherine Hurley, Jill Lacey, Jean McSween, Mark Ramage, Walter Vance, and Mimi Nguyen." ], "depth": [ 1, 2, 2, 2, 1, 2, 2, 2, 2, 1, 2, 2, 1, 2, 2, 1, 1, 1, 1, 2, 2, 2, 1, 1, 1, 2, 1, 1, 1, 2, 2 ], "alignment": [ "h3_title", "h3_full", "", "", "h0_title h3_title", "h0_full", "h0_full h3_full", "h0_full", "h0_full", "h0_title h1_title", "h0_full h1_full", "h1_full", "h2_title", "h2_full", "", "", "h1_full", "h3_full", "h0_full h2_title h3_title", "h0_full", "", "h3_full h2_full", "", "", "", "", "", "", "", "", "" ] }
{ "question": [ "How successful was the Race to the Top program?", "What did GAO's assessment of RTT determine?", "What challenges did states report?", "What did districts report as a main challenge?", "How did these challenges compare between rural and urban districts?", "How is Education expected to be involved with its grantees?", "To what extent did Education meet this expectation?", "How would improving in this area bolster Education's RTT effort?", "What type of assistance did most RTT states report was the most helpful from Education officials?", "In what other areas did states say they would benefit from more support?", "How has Education worked to increase their level of support?", "How do these efforts compare to federal internal control standards?", "Why should Education prioritize the assistance that states found most useful?", "What is the future of RTT's technical assistance contract?", "What did GAO's panel of RTT and grant experts identify?", "Why may districts and schools not be taking full advantage of these funding flexibilities?", "To what extent does Education's program match federal internal control standards?", "How would better guidance help states and districts?", "Under what act was RTT created?", "What was the purpose of the funding Education awarded?", "To what did the RTT states commit?", "What had GAO previously reported as a challenge to sustaining reforms?", "What was GAO asked to do regarding these challenges?" ], "summary": [ "The Department of Education's (Education) Race to the Top (RTT) program encouraged states to reform their K-12 educational systems, but states and districts faced various capacity challenges in implementing the reforms.", "RTT accelerated education reforms underway and spurred new reforms in all 19 RTT states and in an estimated 81 percent of districts, according to GAO's surveys of RTT grantees and districts that received RTT funds. At the same time, states and districts noted various challenges to their capacity to successfully support, oversee, and implement these reform efforts.", "For example, about one-quarter to one-third of RTT states reported that their greatest challenges involved obtaining support from stakeholders such as teacher organizations.", "In contrast, districts primarily reported that their greatest challenges involved financial and human capital capacity, especially with competitive compensation and standards and assessments.", "Additionally, rural districts reported facing greater challenges than urban and suburban districts.", "Education is to assist grantees in achieving successful project outcomes according to its grants handbook, while holding them accountable for their RTT reform plans.", "Yet, GAO found no specific activities tailored to rural needs in areas grantees identified as most challenging.", "A better understanding of the capacity challenges rural districts face could help Education better target its technical assistance to districts that need it the most.", "In response to GAO's survey, many RTT states reported that technical assistance from Education officials and its contractor was more helpful than other RTT resources, such as web-based materials.", "Ten states also reported they would benefit from additional support in areas such as training and professional development.", "Education created a new office to oversee and provide coordinated support to RTT and other programs, and intends to develop office-wide coordinated technical assistance policies.", ":Federal internal control standards note that adequate policies help ensure that actions are taken to address risks to achieving an agency's objectives. However, Education has not determined the type or amount of technical assistance to be provided and its policies are still being developed.", "Unless Education focuses on technical assistance activities that states found most useful, it risks providing ineffective assistance to programs supporting these education reforms.", "RTT's $43 million technical assistance contract ends in June 2015, which may create a gap in assistance to states.", "GAO's panel of RTT and grant experts identified key lessons learned, such as leveraging existing funding flexibilities under federal formula grants, to help address capacity needs and sustain reforms when RTT ends in September 2015.", "Districts and schools may not, however, be using these flexibilities to their fullest extent, in part because of uncertainty about what is allowed under federal requirements.", "Federal internal control standards state that information should be communicated in a form that enables an agency to achieve its objectives. Education lacks time frames for finalizing and disseminating new guidance for states to clarify federal formula grant flexibilities; and recognizes the need for, but has not developed guidance to help auditors better understand these flexibilities.", "Such guidance, when finalized, may help states and districts sustain education reforms, thereby raising student achievement – a primary objective of reform.", "Education created RTT under the American Recovery and Reinvestment Act of 2009.", "From 2010 through 2011, Education awarded $4 billion in competitive grant funds to 19 states to reform core areas of K-12 education.", "RTT states also committed to building capacity to implement and sustain reforms.", "GAO and others previously reported that capacity challenges had adversely affected RTT implementation and could hinder efforts to sustain the reforms.", "GAO was asked to further examine these challenges." ], "parent_pair_index": [ -1, 0, 1, 1, 3, 0, 5, 6, -1, 0, 0, 2, 2, 0, -1, 0, -1, 2, -1, 0, 0, 0, 3 ], "summary_paragraph_index": [ 3, 3, 3, 3, 3, 3, 3, 3, 4, 4, 4, 4, 4, 4, 5, 5, 5, 5, 0, 0, 0, 0, 0 ] }
CRS_R42512
{ "title": [ "", "Introduction", "Recent Access Negotiations", "Railroads: Public Purposes but Private Property", "The Rise of Regulation", "Public Interest", "Federal versus State Control", "Limits to Government Power", "Local Passenger Station Stoppage Laws", "Balancing the Needs of Travelers and Shippers", "Condemning Railroad Property for Other Public Uses", "Abandonments, Discontinuances, Profitability: Does It Provide a Basis for Passenger Access to Freight Tracks?", "Government Takeover of Passenger Service", "The Creation of Rights for Passenger Train Access", "Access via the \"Forced-Sale\" Provision", "Access via \"Adverse Abandonment\"", "Rail-Banking", "Amtrak Uses Its Eminent Domain Power", "The Common Carrier Obligation Fades", "Passenger Access in an Era of Tight Capacity", "Public Authorities Avoid Acquiring Common Carrier Status", "Passenger Access via the Track-Sharing Provision", "Congress Extinguishes Residual Local Regulation", "Options for Congress" ], "paragraphs": [ "", "Pressure is building for passenger train use of freight railroad rights of way. Congress has provided substantial federal funding for new high-speed and intercity passenger rail services, and many state and local governments are interested in expanding both intercity and commuter routes. In most cases, such proposed services would use trackage controlled by privately owned freight railroads or build new tracks within a freight railroad's right of way.\nAmtrak, the federally owned rail passenger operator, has eminent domain power over freight railroad facilities and can appeal to a federal adjudicator, the Surface Transportation Board (STB), to determine the terms of its access to freight railroad track. This is not the case for other current or potential passenger rail operators. Such operators, whether intercity or commuter, can use rail freight corridors only if they reach agreements with the freight railroads that own or lease the rights of way. Those agreements typically involve public funding to add track capacity and upgrade infrastructure for passenger trains, thereby facilitating freight operations as well. Changes in passenger operations, such as an increase in the number of trains or in train speeds, are likely to require additional negotiations. As passenger operators other than Amtrak have no statutory leverage when negotiating with freight railroads, they have little control over the price of access and may have no recourse if freight railroads reject their proposals.\nThe tension between commuter and freight use of track was highlighted during mark-up of the Passenger Rail Investment and Improvement Act of 2008 ( P.L. 110-432 ). During House committee mark-up, a provision (§401) to require binding arbitration when commuter rail authorities and freight railroads fail to reach agreement over access proved controversial. The committee chose instead to require non-binding arbitration, leaving the possibility that the public authority might be unable to implement a proposed commuter-rail project. In the 112 th Congress, the Senate-passed version of surface transportation reauthorization legislation ( S. 1813 ) calls for the U.S. Department of Transportation to evaluate the best means to enhance intercity passenger service in shared-use rail corridors and to survey processes for resolving disputes over passenger access.\nIf interest in passenger rail services continues to grow, Congress is likely to hear proposals to grant passenger interests greater bargaining power with freight railroads. Some commuter rail authorities and advocates of intercity passenger trains have suggested granting states or commuter authorities the same access rights Amtrak \"enjoys.\" Some Members of Congress have urged greater reliance on private companies to provide intercity rail services similar to those offered by Amtrak, but such private services may be difficult to develop so long as potential operators lack Amtrak's statutory right to compel freight railroads to allow passenger trains to use their tracks. Freight railroads can be expected to object to such initiatives as unfair \"takings\" of their private property.", "Recent examples illustrate the range of disputes that can arise in negotiations between freight and would-be passenger rail operators. Union Pacific Railroad has emphatically stated to the California High Speed Rail Authority that it has no room for proposed passenger trains on, over, or alongside its freight rights of way. Even building high-speed tracks alongside its right of way, Union Pacific states, would create a barrier to any future rail-served development on that side. In upstate New York, a project for higher speed intercity service between Albany and Buffalo has been delayed by disagreement with the host freight railroad over the amount of space needed between freight and passenger tracks for safe operation, as well as disagreement over the speed the passenger trains would be allowed to operate. The freight railroad's requirements would severely curtail passenger rail operations. The city of Denver at one time was contemplating building a light rail passenger line on city streets because a freight railroad objected, on safety grounds, to mixing lighter passenger rail cars with heavy freight rail cars over the same rail corridor. More recently, it was announced that the city may have to substitute bus rapid transit for commuter rail service over part of a route due, in part, to higher unanticipated costs associated with acquiring a freight line. City of Boston officials have been frustrated over decade-long negotiations with a freight railroad to purchase tracks to improve commuter rail service into the city. The city and railroad disagreed over the appropriate methodology for valuing the right of way land. The city of Orlando just recently reached agreement with a freight railroad over the purchase price for track to be used for new commuter rail service. As part of the agreement, the freight railroad is to invest the proceeds from the sale in freight facilities within Florida.", "Mandating passenger-train access to freight rights of way raises old but recurring arguments about the fundamental nature of privately owned railroads. A long line of court decisions holds that while railroads are not charities, neither are they completely like other businesses that are free to operate solely for profit maximization. Railroads are not free to leave the business at will or use their property for some other purpose. In other words, while railroad rights of way are private property, there is substantial case law that has infused them with a public interest or a public duty component. The remainder of this report provides historical context to the conflict between private and public interests in railroading. The arguments made over which of these competing interests should be preferred or how far one should be made subservient to the other are relevant, and inform the present policy debate.\nThe first railroads in the United States were built for the purpose of moving cargo. In the 1850s, the typical railroad received only a quarter to a third of its total revenue from passenger travel. Some railroads, typically shorter lines, ran \"mixed\" trains carrying both passengers and freight.\nCommuter service was first recognized by railroads as a no-cost means of additional revenue for those intercity passenger trains whose schedules happened to coincide with rush hour traffic. Railroads offered \"commuted\" (reduced) fares to these passengers, recognizing that the normal fare was too high for traveling twice a day, six days per week. In the largest cities, this service became popular and railroads began operating dedicated commuter trains. Commuter trains typically operated at a loss because trips were too short and business was too concentrated at rush hours; equipment and labor were idle the rest of the day. They also lacked one source of revenue that was significant for intercity passenger trains, mail delivery. The economic return for commuter trains came from suburban residential development on land controlled directly or indirectly by the railroads. An indication of how irrelevant commuter fares were to the railroads' investment in this service was a 1911 survey which found that some railroads had not raised fares for 15 to 30 years, and in a few instances for as long as 40 years.\nTypically, railroads were chartered by the states, a fact relevant to a later debate about federal versus state control. A requirement that a railroad provide passenger service was often stated in its charter, or could be stated in the state's constitution, or in state statute. In order not to compete with the Erie Canal, the charter for the Utica and Schenectady Railroad Co. forbade it from carrying anything but passengers. Other railroads chartered in upstate New York could only carry cargo in the winter when the canal was closed.\nUnlike other businesses, railroads were under a legal obligation to serve the public and could not discontinue operations without government approval. They were regarded as \"common carriers,\" a concept originating in English law in the middle ages (with precursors as far back as the Roman commercial code) that invoked duties of a public nature.\nIn their charters, the government often gave railroads eminent domain power. This authority signifies the quasi-public nature of railroads, because eminent domain powers were only granted to achieve a public purpose. An 1837 New York court ruling upholding a railroad's power of eminent domain described the dual nature of railroads. A private property owner had challenged a chartered upstate New York railroad's authority to acquire his land since the railroad would be operated for private profit. The court reasoned that the fact that the railroad was privately owned and was entitled to charge for its services did not alter the public nature of the enterprise. The court stated, \"Because the legislature permitted the company to remunerate itself for the expense of constructing the road, from those who should travel upon it, its private character is not established; it does not destroy the public nature of the road, or convert it from a public to a private use.\"\nThis court also supported the public nature of railroad rights of way by noting that the railroad could be prosecuted if it refused to transport a person or his property without a reasonable excuse and that the legislature had the power to regulate the prices charged by the railroad.", "During their golden age prior to World War I, when railroads had a near-monopoly on intercity transportation, states became concerned with monopoly abuses by the railroads. Railroads, not surprisingly, challenged the authority of state governments. These cases, which eventually went to the Supreme Court, addressed the fundamental issue of whether privately owned railroad rights of way were under railroads' exclusive control or whether their character made them quasi-public institutions in which the public has an interest. These cases are important to present-day concerns about public access to freight railroad rights of way because eventually they established three important principles:\nthe public does have a right to some amount of control over rights of way; this public control is vested predominantly in the federal government, not the states, because railroads are intrinsically an inter state means of commerce; this control does not give the public the right to confiscate.", "In Munn v. Illinois (1876), the Supreme Court upheld a state's authority to regulate those particular categories of business whose property was \"clothed with a public interest.\" The Court stated, \"When the owner of property devotes it to a use in which the public has an interest, he in effect grants to the public an interest in such use, and must to the extent of that interest, submit to be controlled by the public, for the common good, as long as he maintains the use.\"\nThe Court also reasoned that common carriers are held to \"exercise a sort of public office, and have public duties to perform.\"\nTwo judges dissenting in this case foreshadowed an argument that held sway in the next century when passenger trains became unprofitable and railroads petitioned to discontinue them. The dissenting judges argued that almost all private businesses could be considered as having an element of public interest and that for the legislature to regulate their prices was a taking of private property without due process. If a property owner \"is compelled to take as compensation for its use less than the expenses to which he is subjected by its ownership, he is, for all practical purposes, deprived of the property, as effectually as if the legislature had ordered his forcible dispossession.\"", "A decade later, the Supreme Court essentially overturned Munn v. Illinois , necessitating establishment of a federal role in regulating railroad rates and service. In Wabash, St. Louis and Pacific Railway Company v. Illinois (1886), a railroad challenged the authority of the Illinois state railroad commission to regulate the Illinois portion of a rate for shipments between points within Illinois and New York. The Court reasoned that this regulation by the state affected interstate commerce, which only the federal government had authority to regulate. The Court focused on the onerous conditions that would be imposed on railroads if each state provided rules applicable to its own passengers and freight regardless of the interests of others.\nIn response to the Wabash ruling, Congress created the Interstate Commerce Commission (ICC) in 1887, modeling it after state railroad commissions. (Numerous bills related to railroad regulation had been introduced in Congress since 1868.) In the ICC Act, Congress impressed the common carrier concept upon both freight and passenger railroad service: \"the provisions of this act shall apply to any common carrier or carriers engaged in the transportation of passengers or property wholly by railroad\" and further stated that \"Every common carrier subject to the provisions of this act shall, according to their respective powers, afford all reasonable, proper, and equal facilities ... for the receiving, forwarding and delivering of passengers and property.\"", "In 1890, the Supreme Court limited governments' power to regulate railroad rates, holding that rates cannot be made so unreasonably low as to deprive the railroad company of any chance of profit; the right to regulate, the court held, was not the right to confiscate. State legislators or regulators had tended to set low rates on local traffic, which had the effect of shifting the cost of providing railroad service to interstate shippers, undermining the national interest in a viable national railroad network. Subsequent court cases strengthened the ICC while narrowing the scope of state authority. A 1914 Supreme Court ruling upheld the ICC's authority over intra state rates that were found to be injurious to inter state commerce. There was also a practical limit to state governments' imposition of unremunerative rates, as some railroad companies closed down their operations to avoid being forced to \"pour their money into a hole in the ground.\"\nIn 1906, under the Hepburn Act, Congress granted the ICC additional powers, and placed certain railroad activities that may have been contracted out, such as express and sleeping car services, under the common carrier umbrella. The law further stated, \"it shall be the duty of every carrier subject to the provisions of the Act to provide and furnish such transportation upon reasonable request.\"", "One of the requirements for profitable railroad operation is traffic density. Railroads can achieve better economies by limiting stops to locations that offer a substantial customer base. Consequently, access to railroad rights of way by smaller communities, smaller shippers, and/or those seeking travel for relatively short distances has been a long-standing issue. These customers have relied on legal principles of \"fairness\" to gain access to the railroad network.\nAt the turn of the last century, the Supreme Court, in a series of cases, held that railroads were obligated to provide local service as long as this requirement was enforced in such a way that it did not impede interstate commerce. For instance, the Supreme Court struck down an Illinois law that required all passenger trains to stop at every county seat. The Court pronounced this an unconstitutional hindrance of commerce because the trains were also providing express mail delivery. A 1907 Missouri law requiring that all passenger trains stop at junction points with other railroads was struck down on similar grounds.\nOn the other hand, the Supreme Court upheld a Minnesota stoppage law because it distinguished between local passenger trains and interstate through trains. Gladstone v. Minnesota involved passenger train service between St. Paul and Duluth. The Minnesota law required intra state passenger trains to stop at every county seat on their course but expressly exempted the inter state through trains from this requirement. In upholding this law the Court referred to a state's \"police power\" as the basis for a state's authority to regulate intrastate trains.\nOne notable ruling on the obligations of railroads to provide local passenger service to less densely populated communities came in 1899, when a sharply divided Supreme Court upheld an Ohio law requiring railroads to stop at least three passenger trains daily (travelling in each direction) at villages with more than 3,000 inhabitants. The Court found that this was not an unreasonable burden on interstate trains because the railroads were free to schedule other trains on an express basis. The majority held that a state's police power, in addition to providing for the public health, public morals, and public safety of its citizens, also included providing for \"public convenience\":\n[The state of Ohio] was not compelled to look only to the convenience of those who desired to pass through the State without stopping. Any other view of the relations between the State and the corporation created by it [the railroad] would mean that the Directors of the corporation could manage its affairs solely with reference to the interests of stockholders and without taking into consideration the interests of the general public. It would mean not only that such directors were the exclusive judges of the manner in which the corporation should discharge the duties imposed upon it in the interest of the public, but that the corporation could so regulate the running of its interstate trains as to build up cities and towns at the ends of its line or at favored points, and by that means destroy or retard the growth and prosperity of those at intervening points.\nPolice power remains an important issue in the debate about the extent of local control over railroad operations. Over the past century, Congress has reduced but not eliminated the ability of state or local governments to control railroads operating in their jurisdictions, and the distinction between a reasonable exercise of local police power and an unreasonable interference with commerce continues to be contentious.", "One of the policy questions associated with granting states or localities a right to access railroad rights of way is whether they would give due consideration to both freight and passenger interests. Since freight does not vote, one might speculate that passenger interests would inevitably be favored. On the other hand, cities (especially port cities) recognize that convenient rail connections are important for attracting commerce.\nIn the current era, freight railroads have been moving many of their urban intermodal yards to the suburbs or exurbs, where they can have sufficient space for container storage and avoid the expense of constructing overhead clearances through the urban core for taller double-stack container trains. This shift can free up track for passenger use. In Boston, a city with a strong passenger rail tradition, CSX railroad has sold most of its rights of way to the Massachusetts Bay Transportation Authority for commuter-train operations, but container cargo must now be trucked over 40 miles between the port and the CSX terminal in Worcester, MA. In Chicago, where both freight and passenger rail have strong traditions, a major project is underway to build overpasses or underpasses to better accommodate freight trains through the city, reducing conflicts at numerous grade-crossings. One of the motivations for this project is to prevent additional freight yards (and rail jobs) from moving to the exurbs. These examples indicate that different states and cities might balance passenger and shipper interests differently.\nThe Supreme Court Justices in the 1899 Ohio stoppage law case disagreed whether local governments could adequately balance the needs of both passengers and shippers. Justices in the majority argued that local governments could manage the rights of way in their jurisdiction more wisely than a distant federal authority. Justices in the minority argued that local governments would discount the needs of national commerce. The majority opinion cited as precedent an 1882 case that involved balancing the needs of passengers and shippers in Chicago. A city ordinance had prescribed that drawbridges over the Chicago River not be opened during rush hours and not be opened for more than 10 minutes at a time during the rest of the day (Sundays excepted). A barge carrier sued. The Supreme Court upheld the Chicago ordinance as \"just and reasonable.\" But in a ruling that would be widely cited, it also made clear that the city's control over the bridges was not absolute:\nIllinois is more immediately affected by the bridges over the Chicago River and its branches than any other State, and is more directly concerned for the prosperity of the city of Chicago, for the convenience and comfort of its inhabitants, and the growth of its commerce. And nowhere could the power to control the bridges in that city, their construction, form, and strength, and the size of their draws, and the manner and times of using them, be better vested than with the State, or the authorities of the city upon whom it has devolved that duty. When its power is exercised, so as to unnecessarily obstruct the navigation of the river or its branches, Congress may interfere and remove the obstruction. If the power of the State and that of the Federal government come in conflict, the latter must control and the former yield.\nThe four Justices dissenting in the Ohio stoppage law case argued that the Ohio law discriminated against national interests in favor of local interests. The dissenting Justices quoted at length from the Wabash v. Illinois decision, arguing that the regulation of commerce must of necessity be of a national, not local, character. The dissenting judges argued,\nIt is fallacious ... to contend that the Ohio legislation in question was enacted to promote the public interest. That can only mean the public interest of the State of Ohio, and the reason why such legislation is pernicious and unsafe is because it is based upon a discrimination in favor of local interests, and is hostile to the larger public interest and convenience involved in interstate commerce. Practically there may be no real or considerable conflict between the public interest that is local and that which is general. But, as the state legislatures are controlled by those who represent local demands, their action frequently results in measures detrimental to the interests of the greater public, and hence it is that the people of the United States have, by their constitution and the acts of Congress, removed the control and regulation of interstate commerce from the state legislatures.\nIn another case, the Supreme Court recognized the competitive environment among railroads on intercity routes, and judged as unfair a local stoppage law that would hinder one railroad from competing with its rivals. Magnolia, MS, had petitioned to have intercity passenger trains traveling between New Orleans and Chicago stop in the town. The Court struck down this stoppage law, stating,\nCompetition between great trunk lines is fierce and at times bitter. Each line must do its best even to obtain its fair share of the transportation between States, both of passengers and freight. A wholly unnecessary, even though a small, obstacle ought not, in fairness, to be placed in the way of an interstate road, which may thus be unable to meet the competition of its rivals.\nThe ruling in the Mississippi case remains relevant today because most large cities have at least two trunk line (Class I) railroads in direct competition. Thus, if a state or municipality were to require one of the railroads to accommodate commuter or intercity passenger trains in its right of way, that requirement could affect the competitive situation between the two rivals.\nLocal station stoppage laws at the turn of the last century point to the conflict between interstate and local users of a railroad network that was rapidly becoming national in scope. Perhaps for this reason, an entirely separate railroad network was constructed to serve local travelers. Between 1890 and World War I, more than 18,000 miles of interurban electric railroads were built, mostly with a different gage than steam track to preclude access by freight trains. Interurban trains typically consisted of just one or two passenger cars making frequent stops. By 1933, more than half of this network had already been abandoned due to auto and bus travel.\nThe raison d´être of the interurban electric network raises a fundamental question: can today's railroad network, North American in scope, adequately serve both local and long-distance users? Even shortline freight railroads, typically hauling small amounts of cargo for short distances, complain today about difficulty accessing the transcontinental network. The Class I (transcontinental) freight railroads can better exploit their comparative advantage over other modes by moving entire train loads of the same cargo from one origin to one destination, rather than stopping to pick up or drop off single-carload shipments along the way. Use of their track for local purposes might therefore interfere with the Class I railroads' business strategies.", "Although railroads were delegated eminent domain power because they would be providing a public good, a series of cases also established that railroad property can be condemned for the purpose of providing a second public good. These cases describe the circumstances under which passenger operators might possibly condemn portions of railroad rights of way. In many situations, freight railroads are not using the entire widths of their rights of way, having taken advantage of advances in signal technology and other efficiencies to run single-track rather than double-track operations. For example, outside the Northeast Corridor, 70% of the freight-owned mileage over which Amtrak operates is single tracked. In addition, 6 of Amtrak's 12 shorter-distance corridor routes operate on rights of way that are at least 70% single tracked. The following cases suggest that demands to take unused land within railroad rights of way for passenger service might be subject to different legal standards than demands for use of existing track.\nCases involving telegraph lines strung along railroad rights of way established important precedents. The technologies were symbiotic in that the railroads used the telegraph to communicate train locations, and they were usually willing to allow telegraph companies to erect poles alongside tracks in exchange for providing free telegraph service to the railroad. Disagreements did arise, however, typically when more than one telegraph company sought to string wires on a railroad's right of way. Telegraph cases were cited in later cases allowing a second railroad to condemn certain property of an existing railroad in order to lay its own track alongside, even though the two railroads would be competing with one another.\nOne telegraph case established an important caveat to the rule that the public has an interest in railroad rights of way. Upon expiration of a contract agreement between a railroad and a telegraph company, the railroad decided to contract with a competing telegraph firm and to eject the incumbent telegraph company from the right of way, disposing of its poles and wires. The incumbent company argued that railroads were public highways and hence subject to occupation under an 1866 statute that gave telegraph companies the right to the \"public domain.\" The Supreme Court disagreed, stating, \"A railroad's right of way is property devoted to a public use and has often been called a highway, and as such is subject, to a certain extent, to state and Federal control but it is so far private property as to be entitled to the protection of the Constitution so that it can only be taken under the power of eminent domain ... or with the consent of the railroad.\"\nA second telegraph precedent relevant to passenger access to freight track turned on whether use of the right of way would interfere with the railroad's operations. The Illinois Supreme Court ruled that a railroad wishing to start its own telegraph service could not prevent the incumbent telegraph company from condemning its right of way and maintaining its poles and wires on railroad property, because stringing an additional wire between the existing telegraph poles would cause no additional interference with the railroad's operations.\nThe principle of no material interference established in the telegraph cases was also applied to unused, unimportant, or superfluous railroad property. During the boom years of railroad construction at the turn of the last century, available rights of way were lacking for subsequent railroads in some built-up areas. These railroads sought to condemn portions of existing rights of way. Citing the telegraph cases, the North Carolina Supreme Court allowed a competing railroad serving Charlotte to condemn a portion of another railroad's right of way for a few hundred feet through the city. A similar ruling was issued regarding two railroads in Danbury, CT, where the owning railroad had graded right of way wide enough for two parallel tracks but had only laid one track. Because this land was not being used, the court allowed it to be condemned by another railroad. The court noted the public's interest in having tracks not take up more land than necessary, as well as the economy of two railroads sharing the cost of maintaining a roadbed.\nIn Washington State, a railroad was able to condemn 28 feet of an existing railroad's 100-foot-wide right of way for a distance of several hundred feet because the owning railroad was not making use of a portion of its right of way. The state court cited a provision in the state's property law authorizing condemnation not only of roadbed but also of track, implying that in certain circumstances two railroads could be required to operate trains over the same track. The two rail carriers would share a common easement over the track.", "If the Surface Transportation Board were to be empowered as an arbitrator for passenger access to freight facilities, a related question is how the board could balance the needs of the competing interests. How could the public's need for passenger service be measured? Must it be vital or merely convenient? Could a freight railroad be forced to forego some amount of freight revenue in order to make room for passenger trains? If so, how much forgone revenue is tolerable? Should a prosperous railroad be required to forego more revenue than a financially weak railroad? The Interstate Commerce Commission, the STB, and the courts have usually addressed these questions in the context of permitting railroads to discontinue a service, but their responses may shed light on how the railroads' public service obligations might be weighed in the face of demands for an additional service.\nAfter World War I, passenger rail service went through a period of contraction followed by stagnation. Intercity bus and automobile travel began to attract passengers away from trains. The Great Depression made matters much worse; many major railroads entered bankruptcy. An ICC study conducted in the late 1950s cited 1930 as the first year that the industry ran an operating deficit from passenger service. This deficit increased year after year, except during World War II.\nBeginning with the Transportation Act of 1920 (P.L. 66-152, 41 Stat. 456), which returned the railroads to the private sector after nationalization during World War I, Congress demonstrated increasing concern with the financial health of the carriers. Congress recognized that the system was too large in scope and operated by too many carriers for optimal performance on a national scale. The 1920 act included a number of provisions aimed at consolidating the nation's railroads. One of these provisions allowed the railroads to petition the ICC to abandon unprofitable lines. Prior to the 1920 act, states had been an obstacle to abandonment, often requiring railroads to continue providing local services at a loss. The terms by which the ICC was to evaluate abandonments became the basis for it to evaluate proposed passenger service discontinuances after World War II: the law required the ICC to weigh \"public convenience and necessity\" and the financial health of the railroad. Between 1920 and 1963, the ICC permitted the abandonment of nearly 50,000 miles of railroad, approximately one-fifth of the total mileage that existed in 1920. It is not known how much of this mileage, if the right of way was still clear, would be useful today for passenger service.\nThe Transportation Act of 1920 addressed only total abandonment of a line, and did not give the ICC authority to regulate railroads' attempts to discontinue just the passenger trains over a line while continuing freight train service. This shortcoming was highlighted by a case in which a railroad appealed to the Wisconsin Public Service Commission to cancel passenger train service on a 27-mile line only during the winter months due to light traffic. The Wisconsin commission refused, and later denied the railroad's petition to replace rail service with bus service during the winter months. The railroad then filed an abandonment petition with the ICC. The ICC allowed the abandonment, which meant the discontinuance of freight service and summer passenger service as well. Thus, federal authority over abandonments had an \"all or nothing\" aspect to it.\nIn the Transportation Act of 1958 (P.L. 85-625, 72 Stat. 571), Congress granted the ICC authority to allow a railroad to discontinue passenger service over a line while continuing freight service. For intra state passenger service, a railroad was required to first petition its state government. If the state prohibited discontinuance, the railroad could then appeal to the ICC. For inter state passenger routes, a railroad could discontinue the service but it would be subject to a stay by the ICC. The ICC had four months to decide if it should stay (delay) the service discontinuance, which it could only do for one year.\nOne passenger train discontinuance case reached the Supreme Court in 1964. The Southern Railway sought to discontinue the last two passenger trains between Greensboro and Goldsboro, NC. The ICC granted the discontinuance on the grounds that the cost of providing the passenger service was three times the revenue it produced and that the need for the service was insubstantial. The federal district court overturned the ICC ruling, but the Supreme Court, with two Justices dissenting, reinstated it. The Supreme Court majority opinion held that where the demands of public convenience and necessity are slight, as in this case, it was proper for the ICC in determining the existence of a burden on interstate commerce to give little weight to the carrier's overall prosperity. In its argument, the majority also referred to the opposite situation, citing the example of unprofitable commuter trains. The majority stated that in cases involving \"vital commuter services in large metropolitan areas where the demands of public convenience and necessity are large, it is of course obvious that the Commission would err if it did not give great weight to the ability of the carrier to absorb even large deficits resulting from such services.\"\nThe two dissenting Justices asserted that if railroads were allowed to terminate service based solely on the availability of alternate modes of transportation and a finding of a \"net loss\" on the service, railroads would discontinue virtually all of their commuter trains. The dissenters cited a 1958 Supreme Court case that upheld the principle that a railroad that was prosperous overall could be required to provide particular services at a loss. The 1958 case involved the Chicago, Milwaukee, St. Paul & Pacific Railroad, which appealed to the Illinois Commerce Commission to raise commuter fares so as to avoid a yearly loss of over $300,000. The Illinois commission denied the fare raise. The railroad appealed to the ICC, which granted enough of a fare increase for the railroad to break even on the commuter service. However, the Supreme Court ruled against the ICC and in favor of the Illinois commission, criticizing the ICC for not giving due consideration to the overall profitability of the railroad's operations in Illinois.\nThe 1958 and 1964 Supreme Court cases suggest that where passenger service is deemed vital, a profitable railroad could in some circumstances be required to provide such service even at a loss. These precedents raise an important question regarding the terms of passenger access to freight track in the present day. Can a freight railroad be required to provide passenger operators access to its facilities at less than what it perceives as the full market value?\nWhen Congress directed the ICC to balance public convenience and necessity with the burden on interstate commerce in considering railroads' requests to abandon track or discontinue passenger service, it did not indicate how heavy a burden was acceptable. The ICC generally equated \"public convenience and necessity\" with passenger interests. However, in a 1965 case that allowed the Boston and Main Railroad to discontinue two passenger trains, the ICC defined the public interest to include the shipping customers of the railroad. The ICC concluded that in order to preserve the railroad for freight customers, passenger service must be permitted to end.", "The stakes became higher as the railroad industry's financial situation deteriorated in the 1960s. Railroads began approaching the ICC with wholesale requests to discontinue all of their passenger trains. For instance, in 1966 the trustees running the New York, New Haven, and Hartford Railroad filed to discontinue all of the railroad's 278 interstate passenger trains, including commuter trains for New York, Boston, and Providence, as well as intercity trains. These trains made 1,244 trips in a typical week and carried 76 million passengers in 1964. This railroad's passenger service was deemed as important, if not more so, than its freight service. The ICC blocked the discontinuance of all but a few of the passenger trains.\nIn 1970, Penn Central petitioned the ICC to discontinue 34 passenger trains, including all of the railroad's east-west intercity passenger service west of Buffalo, NY, and Harrisburg, PA. This petition, which would have ended passenger rail service between New York and Chicago, gave momentum to legislation creating a national passenger railroad corporation.\nThe discontinuance of privately provided commuter train service led to public ownership of these services. The Long Island Railroad, while the busiest commuter railroad in the country, nevertheless did not have sufficient freight traffic to cover its losses on passenger service. It was the first commuter line to fall into public ownership, in 1966.\nDiscontinuance of service also led to federal subsidization of commuter operations. The mayors of large cities with commuter operations were alarmed when railroads proposed their discontinuance and sought assistance from the federal government. Federal assistance began in the early 1960s and included assistance to private entities, but under the Urban Mass Transportation Act of 1964, federal funding for transit could only be granted to public entities, thus encouraging the public takeover of privately owned commuter services. For example, the Massachusetts Bay Transportation Authority was formed in 1964 to subsidize commuter lines, finally purchasing many lines from the railroads in the 1970s. The city of Philadelphia began subsidizing commuter service in 1958 and, with cooperation from surrounding counties, formed a regional authority in the 1960s to consolidate governance of commuter operations. New Jersey began subsidizing commuter trains in 1964, began buying new rolling stock for private operators in 1968, and eventually created New Jersey Transit in 1982.", "The petition of the Penn Central Railroad to discontinue intercity passenger service in the Northeast and Midwest gave momentum to passage of the Rail Passenger Service Act of 1970 (P.L. 91-518), the law that created Amtrak. Amtrak was established as a mixed corporation; it was set up as a private corporation but all its common stock was owned by U.S. taxpayers and its preferred stock would be owned by participating railroads. Amtrak was to take over intercity (but not commuter) passenger service from those railroads choosing to turn the service over to Amtrak. Each railroad was required to pay Amtrak an amount based on the railroad's losses from passenger service in 1969. If Amtrak was not able to reach an agreement with a railroad for use of its tracks or other facilities, the ICC was authorized to order the railroad to make its assets available to Amtrak and to set just and reasonable terms and compensation for their use.\nIn 1973, Congress amended the 1970 act to augment Amtrak's bargaining power with the freight railroads. It required freight railroads to give \"preference\" to Amtrak trains operating on their track (i.e., they are supposed to be given priority over freight trains when dispatching trains), authorized Amtrak to buy rights of way and stations or acquire them by eminent domain, set Amtrak's compensation to freight railroads for use of their track at incremental costs (thus not contributing to fixed and overhead costs), and allowed Amtrak to appeal to the U.S. Department of Transportation in the event that a freight railroad refused to allow higher-speed trains on its track. Since passage of the 1970 amendments, freight railroads have contended they subsidize Amtrak service because Amtrak pays only the freight railroads' additional cost of running Amtrak trains without contributing to fixed and overhead costs. Thus, some freight railroads continue to have a form of passenger service obligation by carrying Amtrak trains at what they view as a subsidized price.\nThe shrinkage of the rail network in the 1970s and 1980s provided, at least potentially, opportunities to use abandoned freight lines for passenger service, facilitated by important statutory and regulatory changes to the abandonment process discussed below. In 1972, the ICC attempted to simplify the abandonment process by adopting a rule that, with a rebuttable presumption, it would probably grant an automatic abandonment (without a hearing) if a line annually averaged less than 34 cars per mile. Between 1970 and 1976, 15,000 miles of railroads were abandoned.", "In 1980, with passage of the Staggers Act ( P.L. 96-448 ), Congress required that, if a responsible party came forward offering to buy or subsidize a line slated for abandonment, the line could not be abandoned and the ICC would set the terms and the conditions for purchase of the line. This so-called \"forced sale\" provision proved very useful for would-be passenger operators, particularly local authorities seeking to provide commuter rail or mass transit service, as a freight railroad was more likely to be flexible in bargaining knowing that if there were no agreement on a sale price, the ICC would set the price and terms of sale.\nThe \"forced-sale\" provision was used in 1981 by a commuter agency in the Chicago suburbs to acquire a 17-mile section of track that the Chicago and North Western (C&NW) Railroad had slated for abandonment. The price set by the ICC was much closer to the offer made by the commuter agency than the offer made by the C&NW Railroad. This illustrates why many commuter operators favor having Amtrak-like legal powers to negotiate access to freight railroads, as those powers reduce freight railroads' leverage in bargaining.", "Another important ICC case from the same period established the precedent of \"adverse abandonment.\" If another entity, such as a passenger rail authority or shipper group, wishes to restore rail service over a dormant rail line that the owning railroad is not planning to abandon, that party could appeal to the ICC to force abandonment by the owning railroad. This precedent was set by a Kansas City-area transit authority that sought to use a fallow rail corridor. The transit authority first tried to condemn the property, but the court disallowed the condemnation because the ICC had not issued an abandonment certificate, meaning that the line was still part of the national rail network and under the ICC's jurisdiction, preempting the condemnation proceeding. The transit authority then petitioned the ICC to issue an abandonment certificate over the owning railroad's objection. The ICC did so because the owning railroad had not provided rail service nor conducted any maintenance work on the line in over a decade and was making no efforts to solicit customers on the line.", "Congress's concern with the extent of abandonments led to passage in 1983 of amendments to the National Trails System Act ( P.L. 98-11 ). These amendments allowed railroad rights of way to be preserved for interim recreational trail use or for telecommunication facilities, retaining a railroad's right to reactivate a rail line if future needs dictated. Congress had expressed this intent also in the 1976 4-R Act (§809 of P.L. 94-210 ), but the language in that act had failed to produce the desired result. The process in the 4-R Act had included as an initial step before rail-banking that the line in question be officially granted an abandonment certificate. Upon this designation, however, abutting property owners claimed rights of ownership to the right of way land.", "In 1987, Amtrak discontinued its service to Montreal because a 49-mile section of track between Brattleboro and Windsor, VT, was not adequately maintained by the owning railroad. Amtrak believed a 1977 contract entitled it to operate its trains at 60 miles per hour, but the track condition only satisfied the host freight railroad's need for 25 mile-per-hour train speeds. When negotiations broke down, Amtrak turned to the nearby competitor of the host shortline railroad. The competitor and Amtrak entered into an agreement in which Amtrak would use its eminent domain power to acquire the segment of track (via an application to the ICC). Amtrak would immediately sell the track to the competitor, and would pay the competitor an agreed-upon price for track maintenance.\nIn a series of decisions, the ICC approved the condemnation, after which Amtrak and the competitor executed their agreements, the track was upgraded, and Amtrak resumed its service to Montreal in July 1989. The ICC chairman dissented from the majority decision, stating that it would be \"hard to imagine a more blatant misuse of the public's eminent domain power,\" and also argued that neither Amtrak nor the ICC had the power to restructure the competitive relationship between the two shortlines. The U.S. Court of Appeals for the D.C. Circuit overturned the ICC decision, holding that Amtrak did not have authority to condemn property for the purpose of selling it to another railroad. Congress then amended the statute specifically to authorize this type of condemnation. The D.C. Circuit denied a rehearing, but its original decision was reversed by the Supreme Court. This is the only case in which Amtrak has resorted to its eminent domain power when dealing with what it perceives to be an intransigent freight railroad.\nRunning passenger trains on a host freight railroad track inevitably involves cooperation on a daily basis. Negotiations are not over once the terms of access are agreed upon. Intervention by a federal regulator—responsibility for Amtrak's access to freight track now rests with the Surface Transportation Board—might poison the relationship between passenger operator and host railroad, inhibiting the cooperation necessary to provide good service. Indeed, several years later Amtrak faced resistance from the parent company of the same railroad in trying to increase speeds on a 78-mile section of track between Portland, ME, and Plaistow, NH, for its \"Downeaster\" service to Boston. Some commuter authorities have not sought government intervention in disputes out of concern that this would complicate future relations with host railroads.", "When it passed the Staggers Act of 1980 to deregulate the rail industry, Congress maintained railroads' common carrier obligation. The act allowed railroads and shippers, for the first time, to enter into confidential contracts with one another, but it specified that these contracts could not impair a railroad's ability to meet its common carrier obligations. However, the overall thrust of the Staggers Act was to allow railroads more leeway to make decisions based on their economic interests. An important development indicating the extent to which railroads are now able to act like any other business is the treatment of opportunity costs.\nOpportunity cost is the economic loss experienced by a carrier from foregoing a more profitable alternative use of its assets. In terms of potentially tipping the scale between private and public interests in railroads, opportunity cost is a weighty matter. The ICC struggled with whether it was appropriate to consider opportunity costs in rail line abandonment proceedings, and amended its balancing test in 1980 to allow a railroad to abandon a line if it could show that the resources tied up in owning and maintaining it could earn a higher return elsewhere.\nAllowing freight railroads to cite opportunity costs as a basis for limiting their public service obligations potentially establishes a high economic hurdle for passenger train operators demanding access to freight railroad facilities. A freight railroad could claim that resources (such as track capacity) it would have to devote to passenger trains could achieve a higher return if used to expand freight service. This argument may be particularly powerful if there is no spare capacity.", "Since railroad deregulation in 1980, the supply and demand for freight railroad facilities has come closer to equilibrium. What Congress set out to achieve in the Transportation Act of 1920, consolidation and the shedding of excess capacity, has been largely achieved. Since 2004, the Surface Transportation Board has required each railroad to submit a plan each year describing how it intends to avoid capacity shortages during the grain harvest season. Many railroads have been investing heavily to increase capacity, including, in some cases, restoring sections of double track in locations where the second track had been removed many years ago.\nThe disappearance of excess capacity was related to the decline of passenger service. Supporting passenger train operations had led many railroads to install multiple tracks, yard bypasses, and sophisticated signaling systems. This infrastructure generated additional capacity by allowing trains of varying speeds to use the same rights of way. Without passenger trains, the freight railroads could shed much of this capacity and could also economize by maintaining tracks for freight-train speeds rather than for the higher speeds needed for competitive passenger service.\nTighter supply of rail facilities has raised questions about the railroads' public obligations in such an environment. Under such conditions, what is a reasonable request for rail service? Does a railroad have an obligation to expand capacity in order to meet additional requests for service? As stated in one Supreme Court case, \"the common law of old in requiring the carrier to receive all goods and passengers recognized that 'if his coach be full' he was not liable for failing to transport more than he could carry.\" Without enough room to accommodate everyone, a carrier still must treat customers fairly, if not identically.\nWhat it means to treat customers fairly is complicated by the unique demands of passenger service. Passenger trains typically operate at higher speeds than freight trains, and railroads insist that a mix of speeds on the same track can actually reduce the number of trains that can be operated. Further, while some freight trains operate on tight schedules, many do not, and a passenger operator's insistence upon on-time performance may cause conflict with less time-sensitive freight operations.", "An earlier section discussed how public authorities could acquire railroad rights of way that had been officially abandoned. Upon issuing a certificate of abandonment, the ICC (now the STB) no longer has jurisdiction over the right of way. Thus, if a public authority were to acquire an officially abandoned line, the STB (the ICC's successor) would not have jurisdiction over the authority because it would not be deemed a \"rail carrier\" as defined in statute, nor would the \"common carrier obligation\" (potentially requiring the authority to provide freight rail service upon reasonable request) be attached to the authority. However, if a state or local agency wished to acquire a non-abandoned rail line from a freight railroad willing to sell, the agency would acquire the status of a common carrier along with the obligation that this status entails.\nIn 1991, the ICC issued a ruling that has allowed public rail authorities to acquire active freight lines without acquiring the common carrier status, which has greatly facilitated public takeover of lines for passenger use. The ICC ruling involved a 16-mile rail segment owned by the Maine Central Railroad which the state of Maine wanted to purchase for use in a new passenger rail service. The transaction was structured so that the freight railroad retained a permanent, exclusive easement to carry freight over the line. Thus, the freight railroad retained its common carrier obligation over the line, not encumbering the state of Maine with this obligation. This transaction has since served as precedent for numerous access transactions (more than 60 cases). It allows a state or local government to provide rail passenger service without acquiring the status of a common carrier.\nIn these transactions, the STB has attempted to facilitate passenger use of the right of way while at the same time protecting the common carrier obligation attached to the line. The STB has allowed operating agreements between freight railroads and passenger operators to restrict freight operations to specific parts of the day and has allowed passenger operators to assume responsibility for maintenance and dispatching over lines also used for freight. However, the STB has disapproved of transactions in which the passenger operator would have gained so much control over the line that it could have thwarted enforcement of the common carrier obligation.\nSeparating the physical assets from an operating easement over a railroad line raises an important but unresolved question. Could a public authority forcibly acquire a mere passenger easement or some other partial condemnation of a freight line for the purposes of providing passenger service over the line? A freight railroad right of way could be wide enough that condemning only a portion of the right of way for adding parallel track would not interfere with freight operations. Similarly, acquiring an easement for only certain times of the day may not interfere with freight operations. In so doing, it is possible that this partial condemnation would not be judged by the courts/STB to interfere with interstate commerce and therefore permissible.", "The Transportation Act of 1920 included a provision under which the ICC could require railroads to share terminal facilities including main-line track for a reasonable distance outside the terminal. This provision has survived as current law, in amended form but with no substantive changes. It is currently codified at 49 U.S.C. 11102(a):\nThe Board may require terminal facilities, including main-line tracks for a reasonable distance outside of a terminal, owned by a rail carrier providing transportation subject to the jurisdiction of the Board under this part, to be used by another rail carrier if the Board finds that use to be practicable and in the public interest without substantially impairing the ability of the rail carrier owning the facilities or entitled to use the facilities to handle its own business. The rail carriers are responsible for establishing the conditions and compensation for use of the facilities. However, if the rail carriers cannot agree, the Board may establish conditions and compensation for use of the facilities under the principle controlling compensation in condemnation proceedings. The compensation shall be paid or adequately secured before a rail carrier may begin to use the facilities of another rail carrier under this section.\nThis provision has been a focus of competitive access disputes between railroads and some of their \"singularly served\" customers, but was not considered in the context of passenger access to freight facilities until the 1990s. In 1991, a Southern California commuter rail authority, citing this provision, appealed to the ICC to break an impasse between it and a freight railroad over its use of freight track. In 1998, the provision was used again by commuter interests in the same region when unable to reach agreement with a freight railroad for use of its right of way. In both cases, the commuter authorities eventually reached agreements with the freight railroads without ICC/STB intervention, so the legality of using this provision for access by passenger operators has not been tested in court. One question is whether a public agency that is not yet engaged in rail transportation would qualify as \"another rail carrier,\" as required in the statute.", "Fifteen years after deregulating the transportation system, Congress abolished the ICC and replaced it with the STB in the ICC Termination Act of 1995 (ICCTA, P.L. 104-88 , 109 Stat. 830). ICCTA kept in place the deregulatory framework of the Staggers Act. One modification made in ICCTA, however, has had a profound impact on a state's or municipality's prospects for gaining access to freight rights of way—perhaps shutting the door on the possibility except on terms acceptable to the freight railroad.\nPrior to ICCTA, the federal government and the states had some concurrent jurisdiction over railroad rates, classifications, rules, and practices, and states and localities retained authority over the construction, acquisition, operation, abandonment, or discontinuance of spur, industrial, team, switching, or side tracks if the tracks were located, or intended to be located, entirely in one state. Under ICCTA, these aspects of rail regulation were placed under the exclusive jurisdiction of the STB. As stated in the House report, this change was made \"to reflect the direct and complete preemption of State economic regulation of railroads.\"\nThis change consolidating jurisdiction under the federal government has been cited by the STB and the courts when blocking state or local government attempts to condemn portions of railroad rights-of-way for other public purposes. As discussed above, prior to ICCTA it may have been possible for local governments to condemn railroad property for some other public use if the second use would not materially interfere with railroad operations. Court decisions in condemnation cases since ICCTA indicate this is no longer the case. For instance, a Wisconsin city, citing its authority under its police power, attempted to condemn a portion of a railroad's right of way used for passing track in order to straighten an unsafe curve in a road parallel to the railroad. The court ruled that the city could not condemn the railroad property because condemnation would be a form of rail regulation, preempted by ICCTA. Similarly, the city of Lincoln, NE was unable to condemn a 20-foot-wide strip of railroad right of way for a distance of five blocks for use as a pedestrian and bike trail. The railroad contended that it was using this property for loading and unloading lumber and that trail users would be too close to the tracks, creating a safety hazard. The STB sided with the railroad, finding the proposed taking would unduly interfere with interstate commerce. In another case, the city of St. Paul, MN, sought to condemn a 24-foot-wide strip of railroad right of way for about 2 miles for use as a bike trail. A federal court held that the issue of potential interference with railroad operations was not even relevant because the condemnation action in and of itself triggered the ICCTA preemption.\nThese cases, at the turn of this century, could be viewed as the other bookend to the station stoppage cases at the turn of the last century. Recall that the prevailing argument for upholding community stoppage laws back then was that local governments, rather than a \"distant authority,\" could \"more wisely\" and with \"deeper concern\" manage the rights of way in their jurisdictions.\nThe same ICCTA provision appears to block attempts by passenger carriers seeking to gain access to freight rights of way at a lower price through condemnation rather than paying a negotiated price. In 2006, the Chicago Transit Authority sought to condemn a 2.8 mile-long right of way over which it ran two tracks alongside the three tracks of the Union Pacific Railroad. The transit authority had leased the land from Union Pacific for 50 years. In negotiations over lease renewal, the parties were unable to reach an agreement on the rent, and when the freight railroad rejected the transit authority's proposal for a one-time payment, the transit authority began a condemnation proceeding. The court found that ICCTA preempted the condemnation proceeding, again because condemnation was a form of local regulation barred by the law.", "From a freight railroad's perspective, an important distinction is whether allowing passenger trains would absorb otherwise idle capacity or would displace revenue freight trains. Freight railroads expect commuter rail authorities to pay for freight revenues foregone due to use of capacity for passenger service, and there is often disagreement over how severely the passenger operations compromise the railroad's ability to run additional freight trains. Congress might consider whether the Federal Railroad Administration, experts in determining the infrastructure requirements for safe operation, could provide an independent assessment.\nTo passenger rail proponents, disputes over access to a limited track network are indicative of a lack of federal investment in this mode. Double tracking a rail network that is largely \"stuck in a one-track world\" would be one, albeit an expensive, option for reducing conflicts between freight and passenger use of track. The transcontinental freight railroads have, in recent years, been adding parallel tracks on their busiest routes. Shorter-haul intermodal, refrigerated, and parcel cargoes are an incentive for freight railroads to provide \"express\" services, perhaps requiring additional parallel track along segments of their networks. Yet, one of their largest express customers, UPS, has voiced frustration with the slow pace of their investment, including their slow pace in adopting new technology, like positive train control, that could increase capacity. Freight railroads and \"higher\"-speed intercity passenger operators (as opposed to \"high-speed\" trains operating on dedicated passenger track) could potentially share an interest in express track construction. One method that has been proposed as a public-private partnership in enhancing rail infrastructure is the creation of a federal rail trust fund, financed by taxes on the users of the system.\nUPS's rail service needs raise a fundamental question for Congress. Can the same rail network be expected to satisfy the needs of both shippers and passengers? UPS, like many shippers, requires a fluid rail network from coast to coast, with trains arriving reliably on time and in sync with its tightly \"choreographed\" logistics network. Is this possible if a transcontinental UPS train must be shunted to a siding every time it encounters an Amtrak train, or each time it approaches a city along the way during rush hour?\nGiven the increasing demands on urban rail corridors, Congress may wish to consider alternatives for managing them. The \"port authority\" model might help manage some of the competing uses. Similar to a seaport authority, a publicly owned \"rail port authority\" could purchase key rail corridors (many marine terminals were once owned by railroads) in order to rationalize, reconfigure, or otherwise improve a city's rail network for both passenger and freight use. While freight railroads can be expected to maximize use of their individual rights of way, as rivals they have little incentive to analyze an urban rail system as a whole or minimize conflicts with intersecting roadways. Similar to the municipal takeover of commuter services, publicly owned freight rail facilities would become eligible for a broader array of federal transportation funding programs. Public funding could help such authorities amass a level of capital that the private railroads are unable or unwilling to provide. Railroads using the facility would have to pay fees, which they may find agreeable because they avoid the need for large, upfront capital outlays.\nA similar model has been used by the Alameda Corridor Transportation Authority in Southern California, which purchased and modernized a freight rail line linking the ports with inland terminals. Grade separating this 20-mile rail corridor through the city increased freight train speeds, eliminated grade crossing conflicts, and freed up capacity on three other rail lines through the city. The freight railroads pay fees to the authority to run trains over the corridor. While the Alameda Corridor is not used for passenger service, this type of structure could address the concern that implementing passenger service on one railroad's corridor could disrupt the competitive balance between competing freight carriers.\nThe option of gaining access via purchase of freight rights of way by a public rail authority returns the discussion to the price of that access. Thus, the fundamental issue is whether freight railroads and prospective passenger rail authorities should negotiate over the price of railroad property just as any private parties would or whether an independent, but governmental, third party, such as the STB, should have some role in determining the terms of sale. Some railroad rights of way have been purchased by passenger rail operators through normal market negotiations, and thus one could conclude that the marketplace is capable of determining their relative value, in terms of passenger or freight use. However, two aspects of these transactions make them different than the typical private property sale. For one, there is only one potential buyer and only one potential seller. Second, public authorities are not seeking access to railroad rights of way to use them for some non-rail public purpose, merely to use them for their intended purpose. Neither are public authorities asking the freight railroads to absorb the losses of operating passenger trains, as they once were required to. The risk of losses remains with the public. Given that a public service obligation is still attached to railroads, albeit largely lifted with respect to passenger service, do freight railroads have the right to solely set the price for passenger access or should the public's convenience and necessity be given some consideration?\nA following question is who should be granted a legal right to insist upon use of freight track for passenger service? Congress might limit that right to Amtrak, as under present law, but could also extend it to agencies of state and local governments, such as transit authorities. Creating track access rights for potential private operators of rail service may be a particularly thorny issue. Congress has indicated a desire to promote private investment in intercity passenger rail service, but potential private competitors to Amtrak may expect the same privileged access to freight track that Amtrak enjoys." ], "depth": [ 0, 1, 1, 1, 2, 3, 3, 3, 2, 3, 2, 1, 2, 2, 3, 3, 3, 3, 2, 1, 2, 2, 1, 1 ], "alignment": [ "h0_title h2_title h1_title h3_title", "h0_full h1_full", "h0_full", "h2_full", "", "", "", "", "", "", "", "h0_full h2_full", "", "", "", "", "", "", "", "", "", "", "", "h0_full h3_full" ] }
{ "question": [ "What issue is currently at stake for passenger trains?", "Why is railroad right of way an issue?", "How have state or communter rail authorities dealt with this dynamic?", "How does this play out for differeing passenger rail oeprators?", "Because public authorities may not have as much leverage as Amtrak, what happens as a result?", "How has the issue of passenger rail right of way unfolded in Congress?", "What kind of arbitration did the committee choose to require?", "How were private companies invoked in this debate?", "How will freight railroad respond to such initiatives?", "How did the 112th Congress respond to this debate?", "What questions have been brought up in the discussion about passenger access to freight railroad tracks?", "In what ways are railroads a unique industry?", "How does legal precedent inform these questions?", "Why are railroads designated as public?", "In what way do railroads maintain private interest?", "How does this public-private tension dictate railroad actions?", "What is the issue at stake for Congress?", "What is the main question regarding freight railroads and passenger access?", "How will Congress consider urban rail corridors?" ], "summary": [ "Pressure is building for greater passenger use of freight railroad rights of way.", "Freight railroad rights of way are owned by private, for-profit corporations, and the routes potentially most useful for passenger service are typically the busiest with freight traffic.", "In many cases, states or commuter rail authorities have reached agreement with freight railroads to share either their track or right of way.", "However, unlike Amtrak, which has eminent domain power over freight facilities and can appeal to a federal agency to determine the terms of its access to freight track, other would-be passenger rail operators do not have any statutory leverage when negotiating with freight railroads.", "This likely increases the price public authorities pay for access and leaves them with no apparent recourse when freight railroads reject their offers.", "During House committee mark-up of the Passenger Rail Investment and Improvement Act of 2008 (P.L. 110-432), a provision to require binding arbitration when commuter rail authorities and freight railroads fail to reach agreement over access proved controversial.", "The committee chose instead to require non-binding arbitration.", "Some Members of Congress have urged greater reliance on private companies to provide intercity rail services similar to those offered by Amtrak, but such private services may be difficult to develop so long as potential operators lack Amtrak's statutory right to compel freight railroads to carry passenger trains.", "Freight railroads can be expected to object to such initiatives as unfair \"takings\" of their private property.", "In the 112th Congress, the version of surface transportation legislation passed by the Senate (S. 1813) calls for a federal study to evaluate passenger service in shared-use rail corridors and to survey processes for resolving disputes over passenger access.", "Passenger access to freight railroad track raises old but recurring questions about the fundamental nature of railroad rights of way.", "Railroads are not like other businesses that are free to decide how and where they allocate resources solely on the principle of maximizing shareholder returns.", "While railroad rights of way are private property, more than a century of case law has upheld a public duty on them.", "The public nature of railroads is evident from the fact that they were designated as \"common carriers,\" granted eminent domain power, and regulated by government.", "However, the private interest of railroads is protected by the limitation that the government's right to regulate does not mean the right to confiscate. Railroad rights of way, unlike highways, were not considered part of the \"public domain.\"", "When competition from other modes eroded passenger rail travel, it was confirmed that the public duty attached to railroads could obligate them to operate some trains at a loss, provided the railroad's overall operations were profitable.", "The issue for Congress is whether freight railroads and prospective passenger rail authorities should negotiate over the terms of use of railroad property just as any private parties would or if a governmental third party, such as the federal Surface Transportation Board (STB), should have some role in determining the terms.", "Given that a public service obligation is still attached to railroads, albeit largely lifted with respect to passenger service, do freight railroads have the right to set the price for passenger access unilaterally, or should the public's convenience and necessity be given some consideration? Granting track access rights to potential private operators of passenger service could be a particularly thorny issue.", "Given the increasing demands on urban rail corridors, Congress might examine alternative methods for managing them. A public \"rail port authority\" might have some advantages over private railroads in optimizing an urban rail network." ], "parent_pair_index": [ -1, 0, 1, 1, 3, -1, 0, 0, 2, 0, -1, 0, 0, 2, 2, 4, -1, 0, 0 ], "summary_paragraph_index": [ 0, 0, 0, 0, 0, 1, 1, 1, 1, 1, 2, 2, 2, 2, 2, 2, 3, 3, 3 ] }
GAO_GAO-16-350
{ "title": [ "Background", "Remote Attacks Involving Safety- Critical Vehicle Systems Could Have the Greatest Impact on Passenger Safety", "Cyberattacks through Direct and Remote Access Are Possible, but Remote Attacks Are of Most Concern to Stakeholders", "Cyberattacks through Direct Access", "Cyberattacks through Remote (Short- and Long-Range Wireless) Access", "Stakeholders Acknowledge That Remote Attacks Are Difficult to Execute, but Expressed Concern about the Future Potential for Such Attacks", "A Variety of Key Practices and Technologies Are Available to Mitigate Vehicle Cybersecurity Vulnerabilities and the Impacts of Potential Attacks", "Key Practices Used by Other Industries Are Available for Use in the Auto Industry", "Mitigation Technologies Can Be Incorporated at Multiple Vehicle Security Layers", "Stakeholders Face Challenges Related to Vehicle Cybersecurity, Some of Which May Be Addressed by Industry-Led Efforts", "Stakeholders Identified Several Challenges Facing the Industry Related to Vehicle Cybersecurity", "Several Industry-Led Efforts Are Under Way That Could Help Address Some Challenges Related to Vehicle Cybersecurity", "Automotive Information Sharing and Analysis Center", "Society of Automotive Engineers’ Vehicle Cybersecurity Guidelines", "Design and Engineering Process Standard for Cybersecurity", "AUTOSAR (Automotive Open System Architecture) Partnership", "DOT Has Made Progress in Addressing Vehicle Cybersecurity, but Has Not Yet Defined and Documented Its Roles and Responsibilities in Responding to a Vehicle Cyberattack", "NHTSA Has Established a Vehicle Cybersecurity Research Program", "NHTSA Is Developing Guidance to Help Ensure Consistent Responses to Vulnerabilities", "NHTSA Has Established a Vehicle Electronics Council and Is Assessing the Need for Vehicle Cybersecurity Standards and Regulations", "NHTSA Has Not Yet Defined and Documented Its Roles and Responsibilities in Responding to a Vehicle Cyberattack", "Conclusions", "Recommendation", "Agency Comments", "Appendix I: Objectives, Scope, and Methodology", "Appendix II: Comments from the Department of Transportation", "Appendix III: GAO Contact and Staff Acknowledgments", "GAO Contact", "Staff Acknowledgments:" ], "paragraphs": [ "The number of annual fatalities and injuries due to motor vehicle crashes has declined from 42,836 fatalities and 2.8 million injuries in 2004 to 32,675 fatalities and 2.3 million injuries in 2014, although, according to NHTSA, the rate of decline has leveled off in recent years. The decline in fatalities and injuries over this time period is due in part to vehicle safety features, such as airbags. Automakers have also been installing a growing number of advanced technology features into vehicles to further improve passenger safety as well as to enhance driver and passenger convenience. For example, all vehicles manufactured starting in model year 2012 contain an electronic stability control feature that uses on- board sensors to detect and reduce skidding and automatically takes limited control from the driver to prevent the vehicle from leaving the roadway. Similarly, some new vehicles offer forward collision warning and automatic emergency-braking systems that use on-board sensors and cameras to provide warnings to the driver and in some cases assist the driver to prevent a crash from occurring. As NHTSA attributed 94 percent of highway crashes to human error in 2013, such technologies could help continue the overall decline in motor vehicle fatalities over the past decade. Driver and passenger convenience technologies include built-in navigation systems, keyless entry and ignition systems, and wireless Bluetooth capabilities, among other features.\nTo support these and other advancements in technology, modern vehicles contain a number of electronic systems and components that have grown in number and complexity since they were first introduced into vehicles in the late 1970s. For example, a vehicle manufactured in the late 1970s contained basic electronic components to meet federal emissions regulations, and by the 1980s, the engines in most new vehicles were electronically controlled. Over time, these electronic systems have begun to replace or control many of the traditional mechanical systems in vehicles. In 2009, NHTSA reported that a typical vehicle had around 50 embedded electronic control units (ECU) responsible for executing both core vehicle functions such as steering, as well as convenience and entertainment functions. By 2014 the agency estimated that a typical vehicle contained between 70 and 100 ECUs. In addition, over time, ECUs have evolved from controlling a single vehicle function and operating in isolation from other components, to controlling multiple vehicle functions and operating in conjunction with one another.\nTo facilitate communication among multiple ECUs without the need for complicated and extensive wiring systems, automakers began locating ECUs on in-vehicle communication networks, commonly referred to as buses or bus systems. According to NHTSA, the controller area network (CAN), which was first developed in 1985, has become the most commonly used in-vehicle communication network or bus; however, other types of networks are used by some automakers. The CAN was designed to ensure that ECUs within the vehicle could reliably and expediently send messages to one another. The specific configuration of CAN and other in-vehicle communication networks can vary widely across automakers and even across different models produced by a single automaker, depending on the number and types of features within the vehicle. For example, automakers may locate all ECUs on a single in- vehicle network or include one network to support safety-critical vehicle functions, such as steering and braking, and another network to support convenience and entertainment systems. Figure 1 illustrates how in- vehicle communications networks reduce the need for wiring while facilitating communication among ECUs.\nWhile the shift from mechanical to electronically-controlled vehicle systems has helped improve the reliability and performance of certain vehicle features and allowed automakers to introduce new safety and “infotainment” features that are popular with consumers, it has also increased the potential for vehicles to be affected by cybersecurity breaches more commonly associated with the information technology (IT) and financial services industries. In particular, as the number of ECUs and electronic systems in vehicles has increased, the prevalence of software code in vehicles has also increased dramatically—and in some cases exponentially. DOT publications have indicated that a modern luxury vehicle could contain as much as 100 million lines of software code. In comparison, a Boeing 787 Dreamliner has about 6.5 million lines of software code (see fig. 2). According to researchers and others, the use of software in vehicles is likely to increase as more advanced vehicle technologies and connected vehicle technologies are incorporated. As the lines of software code in vehicles increases, so does the potential for software errors, such as coding errors, and related vulnerabilities.\nAccording to NHTSA, in the context of motor vehicles, cybersecurity is the protection of automotive electronic systems, communication networks, control algorithms, software, users, and underlying data from malicious attacks, damage, unauthorized access, or manipulation. Although no vehicle cyberattacks impacting passenger safety have been reported outside of the research environment, our previous work has shown that the sources of cyber-threats vary in terms of the types and capabilities of the actors, their willingness to act, and their motives. For example, hackers break into networks for the thrill of the challenge, bragging rights in the hacker community, and monetary gain, among other reasons, whereas botnet operators use a network of compromised, remotely- controlled systems to, among other things, coordinate attacks, such as denial-of-service attacks that prevent the authorized use of networks, systems, or applications by exhausting resources. Still others, such as nations may use cyber tools for information-gathering and espionage activities, while terrorists may seek to cause harm or damage public morale and confidence.\nResponsibility for ensuring the security of vehicle systems and components spans across the automotive supply chain and occurs throughout the vehicle development cycle. For example, automakers define core vehicle design requirements, including software system requirements, to automotive parts suppliers. In turn, automotive parts suppliers assemble vehicle systems and often rely on lower-level suppliers, such as chip manufacturers, to obtain the specific parts (i.e., hardware) for the vehicle systems. Each supplier is responsible for testing and validating its specific product and certifying that its product meets automaker specifications. Automakers may incorporate components from multiple suppliers to assemble the vehicle and are ultimately responsible for validating that safety-critical systems meet minimum performance requirements and operate as intended.\nWithin DOT, NHTSA is the primary agency responsible for vehicle safety. NHTSA’s mission is to save lives, prevent injuries, and reduce economic costs due to road traffic crashes. NHTSA developed Federal Motor Vehicle Safety Standards, which establish the minimum performance requirements for certain safety features, such as brakes and air bags, to which automakers must conform and certify compliance. NHTSA also conducts research in support of vehicle safety programs. The Office of Vehicle Safety Research conducts research in the areas of crashworthiness, crash avoidance, and electronic controls research. The electronic controls research—which includes research in the areas of electronics reliability, automated vehicles, and cybersecurity—is conducted by the Electronics Systems Safety Research Divisionand is also supported by VRTC, the agency’s in-house laboratory, in East Liberty, Ohio. In fiscal year 2015, the Office of Vehicle Safety Research had a budget of $29 million, of which $2.5 million was dedicated to electronics and vehicle cybersecurity research. According to NHTSA officials, as of July 2015, five full-time staff were dedicated to vehicle cybersecurity, automation, and electronics research. In addition, NHTSA has research under way related to cybersecurity for connected-vehicle technologies, which, as previously mentioned, are expected to provide safety benefits by deterring crashes.\nSeveral recent laws and legislative proposals have included provisions related to vehicle cybersecurity. For example, MAP-21—which was signed into law in July of 2012—directed NHTSA to, among other things, complete an examination of the need for safety standards with regard to electronic systems in passenger motor vehicles and to consider various topics, such as the security needs for those electronic components to prevent unauthorized access. The act also required NHTSA to seek public comment in conducting its examination and to issue a report to Congress on the highest priority areas for safety with regard to electronic systems. In addition, the Fixing America’s Surface Transportation Act (FAST Act), enacted in 2015, requires DOT to submit a report to Congress on the operations of the Council for Vehicle Electronics, Vehicle Software and Emerging Technologies (Electronics Council), which was established in MAP-21 to provide a forum for research, rulemaking, and enforcement officials to coordinate and share information internally on advanced vehicle electronics and new technologies. Legislative proposals related to ensuring vehicle cybersecurity have also been introduced by members of Congress. For example, if passed, the Security and Privacy in Your Car Act of 2015 would require NHTSA to establish a “cyber dashboard” that displays an evaluation of how well each automaker protects the security and privacy of vehicle owners and would require automakers to adhere to government standards for vehicle cybersecurity. The Security and Privacy in Your Car Study Act of 2015 would require NHTSA, along with some other federal agencies, to conduct a study to determine the appropriate standards for the regulation of vehicle cybersecurity.\nFinally, other federal agencies and foreign governments have also conducted cybersecurity research, particularly as it relates to connected- vehicle technologies, which are expected to increase the need for security protections. For example, the European Union sponsored two major projects examining the security of connected-vehicle technology communications. These projects resulted in guidelines for the various security elements needed for the deployment of connected-vehicle technologies, such as message integrity, privacy protection, and misbehavior detection.", "", "Based on our analysis of research and industry stakeholder views, modern vehicles contain multiple interfaces—connections between the vehicle and external networks—that if not properly secured, can become entry points—or attack paths—for cyber attackers. Some of these interfaces can only be accessed through direct contact with the vehicle, while others can be accessed remotely through short- and long-range wireless channels.", "Selected industry stakeholders we interviewed identified several vehicle interfaces that can be compromised through direct, physical access to a vehicle (see fig. 3). Of these potential direct interfaces, most of the selected industry stakeholders in our review (24 out of 32) expressed concerns about attacks exploiting cybersecurity vulnerabilities through the on-board diagnostics (OBD-II) port. This port is mandated in passenger vehicles by regulation for emissions-testing purposes and to facilitate diagnostic assessments by auto dealers, repair shops, and car owners. In addition to being prevalent in modern vehicles, this port also provides direct and largely unrestricted access to in-vehicle communication networks. Thus, it can provide an attacker with sufficient access to compromise the full range of a vehicle’s systems, including safety-critical systems, such as the brakes and steering wheel. However, because accessing the OBD-II port and other direct interfaces generally requires direct access to the vehicle, such attacks would require attackers to target one vehicle at a time, thereby limiting the impact of a successful attack.", "Selected industry stakeholders we interviewed identified several main interfaces that could be used to undertake a remote cyberattack through short- or long-range wireless channels, such as built-in Bluetooth and cellular-calling capabilities (see fig. 3). The majority of these industry stakeholders (23 out of 32) agreed that remote attacks are the most concerning for passenger safety. Such attacks could involve multiple vehicles and cause widespread impacts including passenger injuries or fatalities. For example, two stakeholders told us that through remote attacks, cyber attackers could theoretically achieve massive attacks of multiple vehicles simultaneously. Half of the selected industry stakeholders (16 out of 32) emphasized that long-range wireless interfaces, such as cellular connections on the telematics unit, are especially concerning. Through such interfaces, the cyber attacker could theoretically exploit vulnerabilities to access the target vehicles from anywhere in the world and take control over the vehicles’ safety-critical systems.\nResearchers have played a key role in publicly demonstrating that remote vehicle cyberattacks that impact safety are possible, because of vulnerabilities in modern vehicles. For example, in a hacking demonstration first reported in 2011, researchers from the University of Washington and University of California San Diego first demonstrated the ability to remotely attack multiple vehicles’ safety-critical systems through short- and long-range wireless channels without physical access to the target vehicles. In this demonstration, the researchers studied two General Motors (GM) vehicles, gaining an in-depth understanding of the vehicles’ systems, including the software code underlying various vehicle components and the CAN messages used to send commands between the ECUs that control the vehicle’s systems. After gaining access to a target vehicle’s CAN bus by exploiting software vulnerabilities in multiple wireless interfaces—including GM’s OnStar telematics system and the Bluetooth unit—the researchers were able to inject messages onto the vehicle’s CAN bus to take physical control over the vehicle, such as controlling the display on the speedometer, shutting off the engine, and controlling the brakes.\nThe researchers also showed that by exploiting vulnerabilities in the implementation of a telematics system—which connects participating vehicles via a cellular connection to a backend server maintained by the automaker—it would be possible to compromise multiple vehicles simultaneously. In this demonstration, the researchers exploited vulnerabilities in the communication protocols of GM’s OnStar system in order to send commands to the CAN buses of their two test vehicles. For safety reasons, the researchers only sent commands to take control of their test vehicles and only when these vehicles were in secured environments. However, if carried out by a cyber attacker, such an attack could have safety impacts on multiple vehicles. The researchers also demonstrated vulnerabilities in several other interfaces—including the Bluetooth unit—that could be exploited to send messages on the CAN bus and thereby take control over the vehicle’s safety-critical systems (see fig. 4 for an overview of the researchers’ hacking demonstration involving the Bluetooth unit).\nIn another example—the aforementioned Jeep Cherokee hacking demonstration reported in 2015—researchers exploited several vulnerabilities that allowed them to remotely disable a vehicle’s engine and in some cases control the brakes and steering. Similar to the 2011 GM demonstration, the researchers closely studied a test vehicle to understand its systems—including the characteristics of its software code and CAN messages—and showed it would be possible to remotely attack target vehicles with the same vulnerabilities as the test vehicle. Also, the researchers showed that it would be possible to exploit vulnerabilities in the implementation of a telematics system to target multiple vehicles participating in the telematics service. This demonstration involved multiple steps and identified a chain of vulnerabilities related to the vehicle’s network architecture, the telematics unit, and the cellular provider’s implementation of the vehicle’s telematics service (see fig.5 for an overview of this hacking demonstration).\nIn addition, researchers have demonstrated that wireless telematics devices that consumers can plug into OBD-II ports to provide vehicle data to third parties, such as insurance companies, contain vulnerabilities that can be exploited remotely. By using these devices—often referred to as “dongles”—consumers may qualify for decreased insurance rates. Also, these dongles can provide older vehicles lacking built-in wireless interfaces with connectivity, allowing consumers to access telematics features—such as long-range cellular connectivity—that would otherwise only be available through purchasing a modern vehicle with a built-in telematics unit. Since, as previously mentioned, the OBD-II port connects directly to the key in-vehicle systems, an attack on such dongles could enable an attacker to take control of safety-critical systems and turn what was formerly a direct attack path into a remote attack path. For example, a recent demonstration showed that a particular manufacturer’s dongles can be discovered online and then compromised by a remote attacker. The researchers were able to exploit vulnerabilities of the dongle, allowing them to send messages to the vehicle’s CAN buses, including messages to remotely apply and disable the brakes. Other demonstrations have shown similar vulnerabilities in other dongles.\nNotably, each of the above hacking demonstrations illustrate that some overarching characteristics of the CAN bus make it more likely that a vehicle cyberattack launched through any interface—including non- safety-critical systems, such as the telematics unit—could impact safety. Specifically, these hacking demonstrations highlight a major security weakness of CAN: it assumes that any message on the bus is sent from a trusted sender, so messages are not secured or restricted in any way. In other words, these demonstrations help illustrate that because of the CAN’s design, there is no way to know whether a given message on the CAN bus originates from a legitimate source or from a cyber attacker. As previously noted, the CAN was designed in 1985, which was long before vehicles were connected to external networks and vehicle cybersecurity was an issue facing the auto industry. Despite its inherent security weaknesses, CAN is the most commonly used bus system in the auto industry today.", "While the possibility that remote cyberattacks could occur outside the research environment is concerning, some of the selected industry stakeholders we spoke to (8 out of 32) have also pointed out that attacks comparable to the hacking demonstrations described above would be complex to execute. Specifically, most of these stakeholders noted that such attacks would likely require a high level of hacking sophistication, including specialized knowledge. For example, as previously mentioned, the researchers involved in the GM and Jeep hacking demonstrations had prolonged access to test vehicles, which they used to closely study the vehicles’ systems and key components. In another example, representatives from a cybersecurity firm noted that one very difficult step in such demonstrations is figuring out how to create authentic-looking messages that will be accepted and acted upon by the vehicle’s ECUs. In addition, one leading researcher predicted that those who would execute remote cyberattacks would be those with previous experience hacking into other computer systems; for someone with no such experience, hacking into a vehicle remotely would be very difficult.\nTo date, there have been no remote cyberattacks with safety impacts reported outside of the research environment. In addition, determining the risk that such a remote cyberattack will occur in the near future is challenging, especially because of the difficulty of predicting the actions of cyber attackers and since modern vehicles’ designs vary widely (with some vehicle makes and models more vulnerable than others to such an attack). However, most selected industry stakeholders we interviewed (26 out of 32) expressed concerns that real-world attacks with safety implications could occur in the near future, particularly as automakers begin deploying autonomous (i.e., self-driving) vehicles and connected- vehicle technologies. For instance, some stakeholders expressed concerns that as vehicles become increasingly autonomous–and assume control of more functions traditionally controlled by the driver such as steering and braking—it could become easier for remote cyberattacks to reach vehicles’ safety-critical systems. This is because autonomous vehicles’ systems will be tightly linked and highly responsive to inputs from external systems, such as sensors and the Global Positioning System, much more so than they currently are today. Also, DOT and the auto industry are planning to implement connected-vehicle technologies in coming years. These technologies are envisioned to further connect vehicles to one another and infrastructure, such as traffic signals, to increase safety overall. For example, vehicle-to-vehicle technologies would allow nearby vehicles to share data, such as information on vehicle speed and location, to warn drivers of and thereby help prevent imminent collisions. However, some stakeholders expressed concerns that cyber attackers could exploit vulnerabilities in the larger wireless networks used to facilitate these technologies to remotely cyberattack multiple vehicles simultaneously and take control over their safety-critical systems, which could result in accidents or other safety impacts.", "", "Selected industry stakeholders informed us that a range of key practices are available to identify and mitigate potential cybersecurity vulnerabilities in vehicles. For instance, stakeholders frequently cited key practices used by other industries with a longer history of cybersecurity concerns, such as the IT industry’s use of penetration testing and code reviews (see table 1). In addition, when NHTSA published A Summary of Cybersecurity Best Practices in 2014, it drew from existing practices used in other industries, including the IT, aviation, telecommunications, industrial control systems, energy, medical devices, and financial payments industries. Although the key practices identified by NHTSA were generally broader, higher-level practices than those identified by our selected industry stakeholders, there were some similarities. For example, both NHTSA and our selected industry stakeholders emphasized the importance of risk assessments in mitigating cybersecurity vulnerabilities.\nAccording to some stakeholders we interviewed, the auto industry’s adoption of cybersecurity key practices varies by company and some companies are farther along with respect to following key practices than others. Some stakeholders pointed to the relative newness of cybersecurity in the automotive realm to explain why some companies are still building up their organizational capacity to address cybersecurity issues and developing or refining cybersecurity practices. In addition, some stakeholders also opined that until very recently some companies— primarily automakers—have been reluctant to accept vehicle cyberattacks as a real threat and take the necessary steps in response.\nOne of the key practices mentioned most frequently—by 23 of the 32 selected industry stakeholders we interviewed—related to developing capabilities to conduct remote, over-the-air (OTA) updates of vehicle software and firmware (see table 1). Some of these stakeholders pointed to OTA updates as an essential piece of automakers’ response capabilities as they would allow automakers to quickly and effectively respond to cybersecurity incidents if and when they occur. However, based on our interviews, only a few automakers have OTA update capabilities, and only one—Tesla—can update all systems, including safety-critical and non-safety critical systems, on a fleet-wide basis remotely. Representatives from one automaker explained that their company does not yet conduct OTA updates because this capability involves hiring new staff and developing a whole new IT infrastructure to ensure that these updates do not become a new remote attack path into their vehicles.\nThe concept of domain separation was also identified as a key practice by the majority of selected industry stakeholders we spoke with (22 out of 32). Several automakers informed us that their companies have been following this key practice for 7 or more years. For example, one German automaker informed us that the company adopted this practice in the late 1990s as more functions in the vehicle became electronically controlled and infotainment systems and telematics units were introduced into vehicles; however, company representatives explained that the company’s initial motivation was to ensure system stability, not to mitigate vehicle cyberattacks. In addition, several stakeholders suggested that the FCA hacking demonstration might not have had such significant safety impacts if the Jeep model involved had exhibited a greater degree of domain separation. Despite general agreement that domain separation can be a very effective mitigation strategy, some stakeholders pointed out that complete isolation or segregation is often not possible or practical because some limited communication will likely need to occur between safety-critical and non-safety-critical systems. For example, in some vehicles the infotainment system needs to receive information regarding the vehicle’s speed to keep the volume at a consistent level.\nOther key practices that were mentioned by several selected industry stakeholders, but less frequently than those described in table 1, include having dedicated organizational resources specifically focused on cybersecurity, such as creating new cybersecurity divisions or high-level managerial positions, and developing responsible disclosure policies that facilitate communication and collaboration with researchers and other third parties who may identify vehicle cybersecurity vulnerabilities. For example, some stakeholders noted that responsible disclosure policies are used by large IT companies, such as Microsoft, to encourage researchers and others to report any software vulnerabilities that they identify in the company’s products.", "Selected industry stakeholders informed us of several technologies that can help automakers and parts suppliers mitigate vehicle cybersecurity vulnerabilities and the impacts of potential cyberattacks (see table 2). As noted above, these stakeholders identified “implementing a layered approach to security” as a key practice. In other words, they noted that vehicle cybersecurity is enhanced as mitigation technologies are added at more layers, including the ECU layer, the in-vehicle network layer (e.g., CAN bus), and the external interfaces layer (e.g., telematics unit). In addition, in its white paper NHTSA and Vehicle Cybersecurity, NHTSA states that a layered approach to vehicle cybersecurity reduces the probability of attack and mitigates the potential ramifications of a successful intrusion.\nNotably, most of the technologies identified by selected industry stakeholders we spoke with cannot be added on existing vehicles; rather, they must be incorporated into the vehicle design and production process, which as we describe later in this report, takes approximately 5 years to complete. The one exception is intrusion detection and prevention systems: several companies that are marketing these products for in- vehicle networks informed us that they have also developed aftermarket versions of their products that can be incorporated onto existing vehicles. In addition, most of the technologies identified by stakeholders serve to mitigate the inherent security weakness of CAN, which is that messages transmitted over a CAN bus are generally free flowing and not secured or restricted in any way. For example, a firewall placed between two in- vehicle networks can be set up to prevent the passage of any message that is not on a pre-determined list of approved messages (i.e., a “white list”). Figure 6 below depicts how firewalls and some of the other technologies listed in the table above can help mitigate vehicle cyberattacks.\nBased on our interviews with selected industry stakeholders, automakers are still determining whether and how to implement some technologies that can help identify and mitigate vehicle cybersecurity vulnerabilities and reduce the impacts of potential cyberattacks. For example, several stakeholders expressed skepticism about the usefulness and effectiveness of intrusion detection and prevention systems—especially detection-only systems—and stated that these systems merit further testing before they are widely deployed on in-vehicle networks. In addition, as noted above, CAN has become the most commonly used in- vehicle network that facilitates communication among ECUs. However, one mitigation option—message authentication and encryption—cannot be easily incorporated onto CAN buses, as CAN does not provide sufficient bandwidth to host these protections. Some stakeholders informed us that this option is more feasible for higher-bandwidth networks, such as Ethernet, but noted that these networks are currently less prevalent than CAN and likely to remain less prevalent for some time given the costs associated with vehicle re-designs.", "", "The most frequently cited set of challenges facing the industry in ensuring vehicle cybersecurity—mentioned by 15 of the 32 selected industry stakeholders we spoke with—was the lack of transparency, communication, and collaboration regarding vehicles’ cybersecurity among the various players in the automotive supply chain, as described in the following examples.\nSeveral parts suppliers informed us that the security requirements they receive from automakers often lack sufficient context about the broader component or system. For example, one supplier stated that, ideally, automakers should provide specific security requirements (e.g., “encrypt data X using encryption mechanism Y”), as well as their higher-level system functionality, security, and protection goals, such as “ensure data confidentiality of function Z.” Suppliers stated that with sufficient information, they could more readily identify potential cybersecurity issues and recommend alternative protections and enhancements.\nSome stakeholders also noted that it can be difficult for automakers to oversee and exert control over suppliers’ software code. They explained that because suppliers’ code is proprietary, the automakers do not have access to it and suppliers are reluctant to share it. One subject matter expert noted that as a result, all the automakers can really know about the code is how it performs when tested under certain conditions. In addition, one automaker noted that it can be especially challenging to exert control over third parties that manufacture dongles that plug into the OBD-II port for vehicle tracking and other purposes. They explained that while dongles have been shown to compromise vehicle cybersecurity, automakers are unable to set security requirements for these devices, as dongle manufacturers are not technically part of the automotive supply chain.\nHighlighting the lack of transparency and collaboration that exists among the players in the automotive supply chain, one leading researcher we spoke with stated that “the most important and interesting commonality” with respect to the vulnerabilities identified in his research was that the vulnerabilities were located precisely at the interfaces where software code written by different supply chain players has to interact.\nAnother set of challenges cited by 13 of the 32 selected industry stakeholders was the cost of incorporating cybersecurity protections into vehicles. Some stakeholders informed us that profit margins for passenger vehicles are relatively narrow; as a result, even seemingly small modifications to enhance cybersecurity—such as using hardware with added security protections—can potentially be cost prohibitive to some automakers. Yet, according to some stakeholders, some automakers will likely have to pursue larger-scale changes—such as redesigning their in-vehicle communication networks—to significantly enhance the cybersecurity of their vehicles. Although many stakeholders declined to provide specific cost estimates, there was general agreement that these larger-scale changes would comprise a major upfront expense, which ultimately contributes to automakers’ continued reliance on legacy systems with inherent security weaknesses, such as CAN. In addition, stakeholders noted that automakers may not be able to pass the costs of cybersecurity protections onto consumers as they can with other features, such as connectivity and convenience features. As a result, automakers will have to balance the cost of cybersecurity protections against the risks facing vehicles and consumers’ willingness to pay.\nSome stakeholders (13 of 32) also identified challenges related to the auto industry’s historical lack of cybersecurity expertise and companies’ efforts to build up their expertise in this area. According to stakeholders, the existing pool of candidates with the specific mix of knowledge and skills needed to design and validate secure vehicle systems is small. One automaker explained that due to the shortage of automotive cybersecurity professionals, the company often has to decide whether to hire hardware and software professionals and teach them cybersecurity or cybersecurity professionals and teach them hardware and software. In addition, one leading researcher mentioned that the lack of automotive cybersecurity professionals in particular—combined with a shortage of cybersecurity professionals more broadly—produces competition for top talent both within the industry and with major technology companies, such as Google. However, automakers are taking some steps to address these challenges. For example, several automakers informed us that they have begun partnering with colleges and universities to develop college curriculums that better meet their needs, and several U.S. and foreign automakers have opened technology and research and development centers in Silicon Valley, in part to be closer to the area’s high concentration of IT and cybersecurity professionals.\nFinally, 12 of the 32 selected industry stakeholders we spoke with informed us that the auto industry’s long product development cycle creates challenges related to ensuring vehicle cybersecurity. According to some of these stakeholders, vehicles are designed approximately 5 years before they roll off of the assembly line. As a result, to the extent that automakers incorporated cybersecurity protections in their 2015 model year vehicles, these protections would have been based on technology— as well as threat information—available in 2010. One stakeholder suggested that this lag can make it easier for cyber attackers to understand and breach vehicles’ cyber protections and more difficult for automakers to ensure their vehicles are protected against the latest known threats. Other challenges that were mentioned by several selected industry stakeholders, but less frequently than those cited above, include identifying and assessing vehicle cybersecurity threats and risks and measuring the performance and effectiveness of cybersecurity protections. For example, stakeholders noted that there are no widely accepted cybersecurity performance metrics, and it is difficult to prove that a vehicle with up to 100 million lines of code is secure. According to one stakeholder, testing every line of code in a vehicle would take several months, which is not feasible or practical.", "Auto industry stakeholders pointed to several industry-led efforts that could potentially improve automakers’ and parts suppliers’ ability to identify and mitigate vehicle cybersecurity vulnerabilities, as described below. As noted above, the adoption of key practices to identify and mitigate vehicle cybersecurity vulnerabilities currently varies significantly across the auto industry. As a result, several stakeholders told us that the main benefit of these and other industry efforts will be to help level the playing field across the industry. However, in some cases, stakeholders identified more specific benefits and goals associated with the various efforts that may help to address some of the key challenges facing the industry described above. For instance, stakeholders noted that efforts focused on incorporating cybersecurity into vehicle-design and engineering processes could help facilitate more productive conversations between automakers and their suppliers by creating shared expectations and a common language for discussing vehicle cybersecurity issues and requirements.", "The effort to establish an Information Sharing and Analysis Center (ISAC) for the auto industry is being led by two U.S. industry associations—the Alliance for Automobile Manufacturers and the Association of Global Automakers—and their members. Similar to ISACs created for other industries, such as the Financial Services ISAC, the Automotive ISAC is intended to serve as a central hub for intelligence collection and analysis and provide a forum for members to anonymously share threat and vulnerability information with one another. According to representatives from the Association of Global Automakers, the ISAC—a U.S. entity that supports members that operate globally—began operations at the end of 2015. They also informed us that the Automotive ISAC’s membership will initially be limited to automakers so that these companies, which are highly competitive, can acclimate to the new organization and establish and maintain the level of trust and cooperation necessary for a successful ISAC. However, the goal is to expand the ISAC’s membership to include other stakeholders, such as parts suppliers, as soon as practically possible.\nSelected industry stakeholders we spoke with, as well as DOT officials, generally expressed positive views regarding the potential effectiveness of an Automotive ISAC. However, some expressed skepticism regarding the ISAC’s potential effectiveness. For example, one stakeholder stated that the ISAC’s effectiveness could be limited given the sensitivity of the information that will need to be shared among competitors and the significant heterogeneity in vehicles’ electronic architectures, parts, and components.", "SAE (Society of Automotive Engineers) International—a standards development organization for the auto industry comprised of engineers and other technical professionals—established two taskforces led by representatives from the U.S. automakers that have been working since 2012 to develop recommended practice documents related to vehicle cybersecurity. According to SAE representatives, the taskforce focused on vehicle hardware security is still in the process of developing its draft product; however, the taskforce that is focused on identifying and addressing cybersecurity risks during the vehicle’s design process has recently completed its draft of SAE J3061: Cybersecurity Guidebook for Cyber-Physical Vehicle Systems. This guidebook, which was issued in January 2016, provides an overarching framework and basic guiding principles for incorporating cybersecurity protections into the design of vehicle systems, among other things. Selected industry stakeholders we spoke with were generally supportive of SAE’s efforts to develop recommended practice documents.", "In July 2015, German automakers informed us that they were working with the International Organization for Standardization (ISO) to develop a voluntary design and engineering process standard, similar to ISO 26262, that is focused on vehicle cybersecurity. One stakeholder involved in this effort told us that the standard would help automakers and parts suppliers speak a common language and ensure that all stakeholders are asking themselves similar questions when designing their systems and determining appropriate levels of cybersecurity protections. Another stakeholder told us that a critically important aspect of this standard is that it would allow for variation and flexibility with respect to the types and methods of cybersecurity protections, as it would not mandate the use of specific technologies. Many selected industry stakeholders we spoke with indicated that they would support the development of this type of voluntary design and engineering process standard. Two German companies said that they have already incorporated elements of this proposed standard into their existing processes.\nIn November 2015, one German automaker involved in the ISO effort informed us that—given the similarities between the intent of SAE’s Cybersecurity Guidebook for Cyber-Physical Vehicle Systems and the proposed ISO standard—SAE and ISO have agreed to jointly develop a robust, international standard for cybersecurity that will build upon the work already completed by SAE. Despite widespread support for both the SAE and ISO efforts, some stakeholders mentioned that the standards development process can be slow and that it can often take several years to achieve consensus and finalize a standard.", "Since 2003 companies involved in the AUTOSAR (Automotive Open System Architecture) partnership—which was founded by German automotive companies and now includes 7 of the 8 automakers and 6 of the 8 parts suppliers we interviewed—have been working on a set of specifications to manage the growing complexities associated with the development of vehicle software. More specifically, the partnership aims to standardize the basic software functionality of automotive ECUs and increase the transferability and reuse of vehicle software across manufacturers and product lines, among other things. Although AUTOSAR’s goals are broader than ensuring vehicle cybersecurity, representatives informed us that the partnership has developed some specifications related to vehicle cybersecurity. For instance, AUTOSAR has several specifications that pertain to the use of message encryption and authentication techniques and recently issued a specification aimed at protecting the integrity of ECU messages transmitted across in-vehicle communication networks. According to AUTOSAR representatives, one of the main benefits of the partnership for automakers and parts suppliers is the reduction in costs associated with software development and testing. Other benefits of the partnership include the assurance that all applicable standards and requirements—including any future cybersecurity standards and requirements—have and will be incorporated into AUTOSAR specifications and the increase in product quality due to the use of standard specifications.", "", "According to NHTSA officials, efforts to specifically consider vehicle cybersecurity have been under way over the last 5 years. Specifically, the agency modified its Vehicle Safety Research organization in recognition that vehicle cybersecurity represents a safety concern. In January 2012, NHTSA created a new Electronic Systems Safety Research division— which conducts research on electronics reliability, automated vehicles, and cybersecurity—within the Vehicle Safety Research’s Office of Vehicle Crash Avoidance. Within this new division, NHTSA established a cybersecurity research program in 2012 and set goals for it, including: developing tools to enable applied research in this area, fostering industry’s development of new solutions, and gathering facts to inform potential future federal policy and regulatory decisions. Cybersecurity research has become one of NHTSA’s highest safety research priorities and falls into four main areas, as summarized in table 3. Some of this research is conducted by NHTSA’s staff. For example, its VRTC conducts NHTSA’s sensitive and quick turn-around cybersecurity research projects, according to officials. Other research is conducted through contracts with DOT’s Volpe Center and other research institutions. NHTSA officials informed us that the agency has used the results of its completed research to inform industry about its efforts and to form the basis for additional research currently under way or planned. The officials expect more reports to be issued in 2016 as additional research projects are completed.\nMost selected industry stakeholders we spoke to (25 out of 32) were aware that NHTSA is conducting vehicle cybersecurity research, but their opinions differed about whether NHTSA is appropriately focusing and prioritizing its research. Of those stakeholders who discussed NHTSA’s research in this area, the majority (10 out of 18) told us that its research focus and prioritization are appropriate. For example, according to some stakeholders in our review, the research reports NHTSA issued in 2014 provide helpful background on the issue of vehicle cybersecurity. Specifically, representatives from one automaker told us that they use the report on characterizing vehicle cybersecurity threats to make their own determinations about how to respond to identified vulnerabilities. However, six selected industry stakeholders told us that NHTSA could improve its research prioritization in this area. For example, two stakeholders noted that NHTSA has not dedicated enough resources to this important issue. In another example, two other stakeholders stated that NHTSA’s efforts to recreate the Jeep Cherokee hacking demonstration are not useful since such efforts are more reactive than proactive. However, VRTC staff told us that recreating this hacking demonstration allowed them to determine that the initial steps that FCA took to mitigate the vulnerabilities were not successful and additional steps needed to be taken.\nNHTSA officials told us that their ability to conduct additional research is in part dependent on funding and resources the agency receives for vehicle cybersecurity and other priority research areas. In recent years, the agency has requested an increase in funding to support additional staff in the Office of Vehicle Safety Research, in part to conduct additional cybersecurity research, but actual funding received was lower than requested. For example, in fiscal year 2015, NHTSA requested $36.8 million for the Office of Vehicle Safety Research but received $29 million; this sum was about a $4 million decrease from the $32.5 million the Office received for fiscal year 2014. NHTSA officials told us that due to the 2015’s funding being lower than requested, they had to make difficult decisions and forgo other planned projects in order to carve out the $2.5 million that was ultimately dedicated to electronics and vehicle cybersecurity research in fiscal year 2015. This amount was still a decrease from the $2.7 million dedicated to this area in fiscal year 2014. Despite lower funding levels, officials told us they have been able to leverage resources from other programs, such as by using test vehicles for the New Car Assessment Program for cybersecurity research. To build on its ongoing research, the agency’s fiscal year 2016 budget requested $1 million for additional space and new equipment at VRTC, as well as $4.1 million to enhance a program on vehicle electronics and emerging technologies. In addition to the applied research it conducts, officials also told us that they attend cybersecurity conferences where researchers present findings on vehicle cybersecurity vulnerabilities and participate in various working groups, such as serving as a liaison on SAE International committees, to enhance their understanding of vehicle cybersecurity issues. Finally, NHTSA collaborates in relevant research efforts led by other federal agencies. For example, it participates in two ongoing efforts by DHS: one effort involving seven major automakers which is focused on researching intrusion detection systems and secure over-the-air updates for vehicles, among other issues, and another effort focused on ensuring the cybersecurity of government-owned vehicles.", "In November 2015, NHTSA officials informed us that they were developing guidance to help automakers understand the agency’s determinations—and to assist automakers in making their own determinations—regarding the types of vehicle cybersecurity vulnerabilities that would constitute a safety defect and, therefore, merit a recall. According to NHTSA officials, the differing conclusions reached by NHTSA and FCA regarding the need for a recall in the aftermath of the Jeep Cherokee hacking demonstration, underscored the need for this guidance. While the guidance is not yet complete, NHTSA officials informed us that they intend to create a document that provides a framework and educates the industry on the methodology NHTSA uses and the factors it considers when assessing risks associated with cybersecurity vulnerabilities in order to make safety defect and recall determinations. According to NHTSA officials, factors such as the number of affected vehicles, frequency of occurrence, likelihood of exploitation, and the resulting hazard level (i.e., impacts to safety-critical systems) can be important when assessing risk and making safety defect determinations; these and other factors will be explained in the guidance. For example, the officials noted that NHTSA would be particularly concerned with identified vulnerabilities that would enable a cyber attacker to manipulate the safety-critical systems of multiple vehicles. In January 2016, NHTSA officials informed us that they expect the guidance to be issued by March 31, 2016.\nSeveral industry stakeholders we spoke with—including automakers and industry associations—told us that this type of guidance would be helpful and is needed. For example, representatives from one industry association told us that absent guidance, automakers could monitor NHTSA’s actions and recall decisions over time to get clarity on what factors NHTSA considers important in making safety defect determinations; however, conducting such monitoring of NHTSA’s actions is not efficient. In addition to being helpful to the industry, such guidance could also help NHTSA respond to identified vulnerabilities more consistently. For example, several stakeholders noted that while NHTSA requested that FCA conduct a recall in response to the 2015 Jeep Cherokee hacking demonstration, it did not request a recall in response to the GM hacking demonstration in 2011, despite the fact that both demonstrations revealed similar vulnerabilities that allowed researchers to remotely control the vehicle’s safety-critical functions. NHTSA officials informed us that due to staffing changes that have occurred since 2011, they could not confirm why the two similar hacking demonstrations were handled differently. However, they noted that the Jeep Cherokee researchers planned to publicly report more details about the identified vulnerabilities than the GM researchers had reported; and that the release of such details could have allowed cyber attackers to replicate the Jeep Cherokee demonstration.", "NHTSA is taking steps in response to the requirements set forth in MAP- 21, including establishing an Electronics Council and assessing the need for vehicle cybersecurity standards and regulations. As directed by MAP-21, NHTSA established an Electronics Council in 2012 to coordinate and share information on a broad array of topics related to vehicle electronics and emerging technologies, including cybersecurity. More specifically, NHTSA officials informed us that the Council’s mission is to broaden, leverage, and expand the agency’s expertise in vehicle electronics to continue ensuring that these technologies enhance vehicle safety. NHTSA officials told us that the Council’s membership includes staff from NHTSA’s Office of Vehicle Safety Research and other offices responsible for the agency’s vehicle safety work. However, NHTSA’s Chief Counsel was also designated as a member to ensure that the agency fully understands its rulemaking and oversight authority regarding electronics-related issues. According to NHTSA officials, the Council holds bimonthly meetings, which NHTSA Associate Administrators attend; the Council also periodically briefs NHTSA’s Administrator. NHTSA officials also informed us that the Council’s meetings can serve as a forum for collaboration between the agency and industry stakeholders. For example, they said that the Council sometimes invites outside subject matter experts to share information with NHTSA during its bimonthly meetings, or recommends other training by such experts that would be helpful for NHTSA staff to attend.\nAlthough NHTSA has taken some steps to examine the need for safety standards for electronic control systems as required by MAP-21, which could include government standards related to vehicle cybersecurity, officials informed us the agency’s examination is still ongoing. As part of its examination, NHTSA is considering establishing process standards, which would prescribe specific processes for developing vehicle electronic systems. This step would be a departure from NHTSA’s current approach of developing performance standards, such as the Federal Motor Vehicle Safety Standards, which set a specific level of performance but do not prescribe specific methods that must be used to meet a given standard. In October 2014, NHTSA issued a request for public comment to help inform its examination of the need for safety standards for electronic control systems, including the need for cybersecurity standards. Among other things, NHTSA requested comments on available performance standards and process standards, such as ISO 26262, that could potentially be adapted and incorporated into government standards to address vehicle cybersecurity. In January 2016, NHTSA issued a report that summarized its analysis of the public comments it received, including industry stakeholders’ thoughts on the need for voluntary industry standards as well as government standards pertaining to vehicle cybersecurity. In this report, NHTSA noted that most of the 40 stakeholders that submitted comments agreed that vehicle cybersecurity is a dynamic, complex problem that may not be effectively addressed with the use of “static” or “prescriptive” government standards.\nHalf of the selected industry stakeholders we spoke with (16 out of 32) also expressed doubts about the effectiveness of “static” or “prescriptive” government standards to address vehicle cybersecurity, since threats are constantly changing and such standards could become outdated quickly. In addition, some stakeholders expressed concerns that regulations could result in unintended negative consequences for cybersecurity, similar to several existing laws and regulations. For example, as noted above, the OBD-II port—which many stakeholders identified as a key entry point for vehicle cyberattacks—is mandated by regulation for diagnostic and testing purposes. As a result, several automakers told us that they have limited ability to restrict access to in-vehicle networks and systems provided by the port; however, one informed us that it was exploring what types of OBD-II port restrictions and protections would be legally allowed. Two automakers also expressed concerns about potential negative impacts for vehicle cybersecurity that could stem from recent changes to regulations implementing the Digital Millennium Copyright Act. In general, this act prohibits access to and circumvention of protections associated with digital copyrighted materials; however, in 2015, the act’s regulations were amended to include exemptions for vehicle software accessed for diagnostic and repair purposes and “good faith” research. For example, one industry association that opposed the change stated that increasing access to vehicle software will make it harder for automakers to develop effective protections for their vehicles’ cyber systems. However, two leading researchers we interviewed opined that these changes will help mitigate cybersecurity vulnerabilities, as they will allow more researchers to identify vulnerabilities without fear of legal action.\nOn the other hand, some selected industry stakeholders (13 out of 32) told us that voluntary industry standards alone would be insufficient for ensuring vehicle cybersecurity and that thus some government standards and federal oversight will be needed. For example, one subject matter expert suggested that—contrary to current self-certification practices that are common in the auto industry—NHTSA should establish an oversight body to evaluate automakers’ compliance with any cybersecurity-related standards it issues and verify that these standards are being met. In addition, another expert noted that this kind of oversight process could help promote the use of best practices while also providing NHTSA with additional assurance that the automotive supply chain is secure. Both experts noted that as part of this process, NHTSA could turn to qualified independent third parties to assess whether automakers are taking the proper steps for vehicle cybersecurity.\nAccording to NHTSA officials and the agency’s Priority Plan for Vehicle Safety and Fuel Economy, 2015-2017, the agency plans to complete its initial research on vehicle cybersecurity in 2016 and also announce an agency decision about next steps pertaining to vehicle cybersecurity and other issues related to electronic control systems. The decision could be to conduct more research, initiate a rulemaking, issue guidance, or some combination thereof. As of July 2015, officials estimated that the agency was about 3 years away from making a final determination about the need for additional government standards or regulation in this area; thus, such a final determination is not expected until at least 2018. NHTSA officials explained that this time frame is necessary in part, because they expect several research projects that are planned and under way to help inform their decision. In addition, NHTSA officials informed us that as they determine the need for regulations, they want to better understand alternative steps such as the development of voluntary industry standards that could be taken to address this issue.", "In its whitepaper NHTSA and Vehicle Cybersecurity, NHTSA states that its goal is to “be ahead of potential vehicle cybersecurity challenges, and seek ways to address or avoid them altogether.” As described above, NHTSA has made progress in many areas in an effort to proactively address potential cybersecurity threats to vehicle safety-critical systems; however, NHTSA has not yet formally defined and documented the agency’s role and responsibilities in the event of a real-world vehicle cyberattack and how the agency’s response actions would be coordinated with other federal agencies. Given that NHTSA and selected industry stakeholders we spoke with generally agreed that the threat of a vehicle cyberattack will increase as autonomous and connected-vehicle technologies are deployed in the coming years, such a response plan may be particularly important for NHTSA to develop proactively, before the threat environment significantly changes. Until such a plan is developed, NHTSA’s response efforts—regardless of the threat environment in which an attack is carried out—could be slowed as agency staff and other stakeholders may not be able to quickly identify the appropriate actions that NHTSA should take. In addition, the lack of such a response plan is inconsistent with federal standards for internal control, which—among other things—are intended to help agencies in managing change associated with shifting environments and evolving demands and priorities. Under these federal standards, agencies are required to appropriately and clearly document their internal controls, which include the policies, plans, methods, and procedures used to meet agency missions, goals, and objectives; and assess risks.\nNHTSA officials offered several roles and responsibilities they believe the agency would have in response to a vehicle cyberattack involving safety- critical systems, including quickly contacting the appropriate industry personnel and determining what actions need to be taken, such as regulatory or enforcement action, a Direct Final Rule, or other action. In addition, NHTSA officials told us that the agency would also validate the feasibility of the cybersecurity threat or event at its VRTC and take steps to ensure that any new information regarding threats and vulnerabilities is reflected in NHTSA’s research program. However, NHTSA officials told us that these roles have not been outlined in a formal response plan yet, in part because the agency currently lacks clarity regarding other roles and responsibilities it may have to fulfill in the event of an attack. For example, according to NHTSA officials, it is currently unclear whether NHTSA or DHS would be “the responsible agency” in charge of the government’s response if a large-scale vehicle cyberattack on safety- critical systems were to occur.\nAccording to NHTSA officials, the agency is working with other federal agencies, such as DHS, to clarify the roles and responsibilities of the various agencies that would be involved in responding to a vehicle cyberattack. NHTSA officials informed us that these interagency discussions are still ongoing and could not provide a time frame as to when they expect the discussions—and subsequently, a plan outlining NHTSA’s roles and responsibilities in the event of an attack—to be completed. However, NHTSA officials stated that obtaining clarification on its roles and responsibilities in the event of a cyberattack on safety-critical vehicle systems is a priority for the agency, and in their view, a response plan would be a useful tool for the agency to develop.", "In recent years, researchers have played an instrumental role in demonstrating that remote vehicle cyberattacks with safety implications are possible and increasing overall awareness about vehicle cybersecurity issues among consumers, the media, and the general public. Despite awareness of risks related to vehicle cybersecurity since at least 2011, the auto industry and NHTSA have only recently sharpened their focus on this issue. As this report describes, NHTSA has taken several important steps since 2012 to address vehicle cybersecurity, including establishing a vehicle-cybersecurity research program and soliciting industry input on the need for government and voluntary industry standards. However, NHTSA does not anticipate making a final determination on the need for government standards until 2018 when additional cybersecurity research is expected to be completed. In addition, several industry efforts to address vehicle cybersecurity—such as the development of an Automotive ISAC and a voluntary design and engineering process standard for cybersecurity—are still in their early stages. As such, some of these government and industry efforts to address vehicle cybersecurity are unlikely to provide many benefits for vehicles already operating on the roads today or those currently in the design and production stages.\nGiven that NHTSA and industry stakeholders expect the threat of a vehicle cyberattack to increase in the coming years as autonomous and connected-vehicle technologies are deployed, it will be important for NHTSA to continue to take proactive steps in the interim to ensure that it is meeting the agency’s goal of being ahead of vehicle cybersecurity challenges. The agency’s planned guidance outlining when cybersecurity vulnerabilities constitute safety defects should help ensure consistent responses when cybersecurity vulnerabilities are identified. However, until NHTSA defines and documents the agency’s role and responsibilities in the event of a real-world vehicle cyberattack affecting safety-critical systems, it may not be in a position to quickly and effectively respond should a threat materialize.", "To enhance the agency’s ability to effectively respond in the event of a real-world vehicle cyberattack, the Secretary of Transportation should direct NHTSA to: work expeditiously to finish defining and then to document the agency’s roles and responsibilities in response to a vehicle cyberattack involving safety-critical systems, including how NHTSA would coordinate with other federal agencies and stakeholders involved in the response.", "We provided a draft of this report to the Departments of Transportation (DOT), Homeland Security, Defense, and Commerce for review and comment. We received written comments from DOT, which are reprinted in appendix II.\nDOT concurred with our recommendation to define and document NHTSA’s roles and responsibilities in response to a vehicle cyberattack involving safety-critical systems. DOT also noted that the agency has been actively involved in research and collaborative efforts to address vehicle cybersecurity issues. DOT cited some recent actions by NHTSA to address vehicle cybersecurity vulnerabilities, including convening a public roundtable on vehicle cybersecurity and finalizing the Proactive Safety Principles agreement in January 2016. Through this agreement, NHTSA and 18 automakers committed to work together to develop a collaborative, data-driven process to advance safety objectives, including mitigating cybersecurity threats.\nThe Departments of Homeland Security, Defense, and Commerce reviewed our report, but did not have any comments.\nAs agreed with your offices, unless you publicly announce the contents of this report earlier, we plan no further distribution until 30 days from the report date. At that time, we will send copies to the Secretaries of Transportation, Homeland Security, Defense, and Commerce, and other interested parties. In addition, the report will be available at no charge on the GAO website at http://www.gao.gov.\nIf you or your staff have any questions about this report, please contact me at (202) 512-2834 or [email protected]. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix III.", "The objectives of this report were to examine: (1) available information about the key cybersecurity vulnerabilities in modern vehicles that could impact passenger safety; (2) key practices and technologies, if any, available to mitigate vehicle cybersecurity vulnerabilities and the impacts of potential attacks; (3) views of selected stakeholders on the challenges they face related to vehicle cybersecurity and industry-led efforts to address vehicle cybersecurity; and (4) the Department of Transportation’s (DOT) efforts to address vehicle cybersecurity.\nTo address all of our objectives, we reviewed technical papers, reports, and other documentation relevant to the cybersecurity of modern vehicles published by DOT’s National Highway Traffic Safety Administration (NHTSA). For example, we reviewed a series of reports on vehicle cybersecurity published by NHTSA in October 2014. We also interviewed officials from several NHTSA offices, including the Office of Vehicle Safety Research and Office of Enforcement and the Volpe National Transportation Systems Center. In addition, we reviewed previous GAO reports related to connected-vehicle technologies, information technology (IT), and cybersecurity, and identified and reviewed relevant research papers and publications. The reviewed citations were located through searches in bibliographic databases, including Transport Research International Documentation and SciSearch, or relevant industry conferences. We used three research papers to inform our findings regarding the potential for remote vehicle cyberattacks to impact passenger safety. We reviewed and summarized these research papers to identify the main steps of the hacking demonstrations and discussed them with the researchers to obtain additional information and clarification about the demonstrations.\nIn addition, we conducted semi-structured interviews with 32 selected industry stakeholders, including 8 automakers, 8 automotive parts suppliers, 3 automotive cybersecurity firms offering vehicle cybersecurity products, and 13 subject matter experts, including 7 leading researchers (see table 4). These interviews informed all four of our objectives. Automakers were selected to ensure we had representation from each of the 3 major auto-producing regions of the world (the U.S., Europe, and Asia) and the two U.S. industry associations (the Alliance of Automobile Manufacturers and the Association of Global Automakers) that were jointly pursuing several efforts related to vehicle cybersecurity, such as the formation of an Automotive Information Sharing and Analysis Center (ISAC). We also sought to include automakers that were considered leaders in vehicle cybersecurity as well as those that had been the subjects of cybersecurity hacking demonstrations. We selected the top 5 automotive parts suppliers based on global sales in 2013 and other suppliers based on stakeholder recommendations. We also interviewed 3 automotive cybersecurity firms that are offering vehicle cybersecurity products for new and existing vehicles based on stakeholder recommendations. The subject matter experts were identified through our literature search, relevant industry conferences, stakeholder recommendations, and our prior work on connected-vehicle technologies, and were considered subject matter experts based on their job titles and experience, technical papers and publications, contributions to relevant industry conferences (e.g., speeches, presentations, and organizing roles), and other significant contributions related to vehicle cybersecurity (e.g., contracted to conduct vehicle cybersecurity research for federal agencies). We identified leading researchers from the group of subject matter experts as those with extensive applied research experience in vehicle cybersecurity. After conducting our interviews with selected industry stakeholders, we summarized and analyzed their responses to identify themes relevant to each of our research objectives, such as themes regarding the main vehicle interfaces that could be used to undertake vehicle cyberattacks. The viewpoints gathered through our interviews with selected industry stakeholders represent the viewpoints of the individuals interviewed and cannot be generalized to a broader population.\nTo identify the key vehicle cybersecurity vulnerabilities in modern vehicles that could impact passenger safety and key practices and technologies that could mitigate these vulnerabilities, we interviewed officials from other federal agencies involved in vehicle cybersecurity research or cybersecurity efforts more broadly. These agencies included: the National Institute of Standards and Technology (NIST) within the Department of Commerce, the Department of Homeland Security’s Science and Technology Directorate, and the Defense Advanced Research Projects Agency within the Department of Defense. We also reviewed documents published by NIST, such as its Framework for Improving Critical Infrastructure Cybersecurity, and based on stakeholder recommendations, interviewed representatives from several IT and telecommunication firms to identify key mitigation practices and technologies. To address our objective on challenges and industry-led efforts related to vehicle cybersecurity, we also interviewed representatives from entities involved in those efforts, including representatives from the Alliance of Automobile Manufacturers, the Association of Global Automakers, AUTOSAR, the National Council of ISACs, and Society of Automotive Engineers International.\nTo assess DOT’s efforts to address vehicle cybersecurity, we reviewed applicable federal laws and regulations—such as the Moving Ahead for Progress in the 21st Century Act (MAP-21) and the Fixing America’s Surface Transportation Act (FAST Act)—including their requirements for NHTSA pertaining to vehicle electronics and cybersecurity. We also reviewed GAO’s Standards for Internal Control in the Federal Government and NHTSA documents regarding the agency’s strategic planning and vehicle cybersecurity research priorities, including its Priority Plan for Vehicle Safety and Fuel Economy 2015-2017; request for public comment on automotive electronic control systems safety and security issued in response to MAP-21 requirements; and mandated report to Congress that summarized and analyzed the public comments it received, among other things. We also visited NHTSA’s Vehicle Research and Test Center (VRTC) in East Liberty, Ohio, to tour NHTSA’s research facilities and observe ongoing vehicle cybersecurity research and equipment demonstrations. In addition to our VRTC site visit, we conducted the stakeholder interviews described in this appendix, in part, during site visits in 2015 to Detroit, Michigan, to meet with U.S. automakers, among other stakeholders; Silicon Valley, California, to meet with Tesla, technology firms, and parts suppliers; and Brussels, Belgium, and various locations within Germany to obtain international perspectives on vehicle cybersecurity from a variety of stakeholders—including automakers, parts suppliers, government officials, and subject matter experts.\nWe conducted this performance audit from February 2015 to March 2016 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 that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives.", "", "", "", "In addition to the contact named above, the following individuals made important contributions to this report: Nabajyoti Barkakati and Gregory C. Wilshusen (Directors); Nancy Lueke (Assistant Director); Jessica Bryant- Bertail; West Coile; Pamela Davidson; Charlotte Hinkle; David Hooper; Thomas Johnson; Jaclyn Nidoh; Josh Ormond; Malika Rice; and Amy Rosewarne." ], "depth": [ 1, 1, 2, 3, 3, 2, 1, 2, 2, 1, 2, 2, 3, 3, 3, 3, 1, 2, 2, 2, 2, 1, 1, 1, 1, 1, 1, 2, 2 ], "alignment": [ "", "h0_title", "h0_full", "h0_full", "h0_full", "h0_full", "h2_title h1_title", "h1_full", "h2_full h1_full", "h2_title", "h2_full", "h2_full", "h2_full", "", "", "", "h3_title", "", "h3_full", "h3_full", "h3_full", "", "", "h3_full", "", "", "", "", "" ] }
{ "question": [ "How do the interfaces of modern vehicles leave them vulnerable?", "If not properly secured, how can these interfaces be exploited?", "How can Bluetooth units be a target of attack?", "What other interface is a main source of concern for stakeholders?", "What sort of attack do industry stakeholders fear could pose the largest risk to passenger safety?", "Why is the threat of wireless attacks so acute?", "To what extent are such attacks reason for immediate concern?", "What did stakeholders tell GAO about this issue?", "What practice could help mitigate vulnerabilities?", "What could make \"domain separation\" difficult?", "What other practices did stakeholders suggest?", "What are the limitations of such solutions?", "What have stakeholders identified regarding to vehicle cybersecurity?", "What challenges were most frequently cited?", "How could industry-led efforts help mitigate these challenges?", "What specific actions have industry associations taken?", "How is the potential of an Automotive ISAC regarded by most stakeholders and DOT officials?", "How has the DOT's NHTSA attempted to address cybersecurity issues in vehicles?", "What specific steps has NHTSA taken?", "What is the timeline for these actions?", "Why is the development of such a plan important?" ], "summary": [ "Modern vehicles contain multiple interfaces—connections between the vehicle and external networks—that leave vehicle systems, including safety-critical systems, such as braking and steering, vulnerable to cyberattacks.", "Researchers have shown that these interfaces—if not properly secured—can be exploited through direct, physical access to a vehicle, as well as remotely through short-range and long-range wireless channels.", "For example, researchers have shown that attackers could compromise vulnerabilities in the short-range wireless connections to vehicles' Bluetooth units—which enable hands-free cell phone use—to gain access to in-vehicle networks, to take control over safety-critical functions such as the brakes.", "Among the interfaces that can be exploited through direct access, most stakeholders we spoke with expressed concerns about the statutorily mandated on-board diagnostics port, which provides access to a broad range of vehicle systems for emissions and diagnostic testing purposes.", "However, the majority of selected industry stakeholders we spoke with (23 out of 32) agreed that wireless attacks, such as those exploiting vulnerabilities in vehicles' built-in cellular-calling capabilities, would pose the largest risk to passenger safety.", "Such attacks could potentially impact a large number of vehicles and allow an attacker to access targeted vehicles from anywhere in the world.", "Despite these concerns, some stakeholders pointed out that such attacks remain difficult because of the time and expertise needed to carry them out and thus far have not been reported outside of the research environment.", "Selected industry stakeholders, both in the United States and Europe, informed GAO that a range of key practices is available to identify and mitigate potential vehicle-cybersecurity vulnerabilities.", "For instance, the majority of selected industry stakeholders we spoke with (22 out of 32) indicated that—to the extent possible—automakers should locate safety-critical systems and non-safety-critical systems on separate in-vehicle networks and limit communication between the two types of systems, a concept referred to as “domain separation.”", "However, some of these stakeholders also pointed out that complete separation is often not possible or practical because some limited communication will likely need to occur between safety-critical and other vehicle systems.", "In addition, selected industry stakeholders we spoke to identified technological solutions that can be incorporated into the vehicle to make it more secure.", "However, according to stakeholders, many of these technologies—such as message encryption and authentication, which can be used to secure and verify the legitimacy of communications occurring along in-vehicle networks—cannot be incorporated into existing vehicles. Rather, such technologies must be incorporated during the vehicle design and production process, which according to stakeholders, takes approximately 5 years to complete.", "Selected industry stakeholders identified several challenges they face related to vehicle cybersecurity.", "For instance, the lack of transparency, communication, and collaboration regarding vehicles' cybersecurity among the various levels of the automotive supply chain and the cost of incorporating cybersecurity protections into vehicles were the two most frequently cited challenges—mentioned by 15 and 13 of the 32 selected industry stakeholders, respectively.", "However, several industry-led efforts are planned and under way that, according to stakeholders, could potentially help automakers and parts suppliers identify and mitigate vehicle cybersecurity vulnerabilities and address some of the challenges that industry stakeholders face.", "For example, two U.S. industry associations have been leading the effort to establish an Automotive Information Sharing and Analysis Center (ISAC) to collect and analyze intelligence information and provide a forum for members to anonymously share threat and vulnerability information with one another.", "Selected industry stakeholders we spoke to, as well as DOT officials, generally expressed positive views regarding the potential effectiveness of an Automotive ISAC.", "The Department of Transportation's (DOT) National Highway Traffic Safety Administration (NHTSA) has taken steps to address vehicle cybersecurity issues but has not determined the role it would have in responding to a real-world vehicle cyberattack.", "For example, NHTSA added more research capabilities in this area and is developing guidance to help the industry determine when cybersecurity vulnerabilities should be considered a safety defect, and thus merit a recall; it expects to issue this guidance by March 31, 2016. Further, pursuant to a statutory mandate, NHTSA is examining the need for government standards or regulations regarding vehicle cybersecurity.", "However, officials estimated that the agency will not make a final determination on this need until at least 2018. Although NHTSA's stated goal is to stay ahead of potential vehicle-cybersecurity challenges, NHTSA has not yet formally defined and documented its roles and responsibilities in the event of a real-world cyberattack.", "Until it develops such a plan, in the event of a cyberattack, the agency's response efforts could be slowed as agency staff may not be able to quickly identify the appropriate actions to take." ], "parent_pair_index": [ -1, 0, 0, 0, 0, 4, 4, -1, 0, 1, 0, 3, -1, 0, 1, 2, 3, -1, 0, 1, 2 ], "summary_paragraph_index": [ 3, 3, 3, 3, 3, 3, 3, 6, 6, 6, 6, 6, 7, 7, 7, 7, 7, 8, 8, 8, 8 ] }
GAO_GAO-18-546
{ "title": [ "Background", "Sources of Data on USAspending.gov", "OIG Methodology and Reporting Guidance for Assessing Agencies’ DATA Act Submissions", "Prior GAO Reports Related to the DATA Act and Data Quality", "OIG Reviews of Agencies’ DATA Act Submissions Varied in Scope and Type of Standards Used", "OIG Reports Show Variations in Agencies’ Use of Data Standards and Quality of Data, and Most OIGs Made Recommendations to Address Identified Deficiencies", "OIG Reports Show About Half of the Agencies Met Requirements for Implementation and Use of Data Standards", "OIG Reports and Survey Responses Show Most Agencies Did Not Submit Complete, Timely, Accurate, or Quality Data", "DATA Act Broker-Related Issues Caused Certain Government-wide Data Reporting Errors", "OIGs Identified Agency- Specific Control Deficiencies That May Have Contributed to Data Errors", "Most OIGs Made Recommendations to Agencies to Improve Data Quality and Controls", "OMB Staff and Treasury Officials Said They Use OIG Reports to Identify and Resolve Issues and Determine the Need for Additional Guidance", "Agency Comments", "Appendix I: Objectives, Scope, and Methodology", "Appendix II: Offices of Inspector General Digital Accountability and Transparency Act of 2014 Testing Results", "Appendix III: Comments from the Council of the Inspectors General on Integrity and Efficiency", "Appendix IV: GAO Contact and Staff Acknowledgments", "GAO Contact", "Staff Acknowledgments", "Related GAO Products" ], "paragraphs": [ "The DATA Act was enacted May 9, 2014, for purposes that include expanding on previous federal transparency legislation by requiring the disclosure of federal agency expenditures and linking agency spending information to federal program activities, so that both policymakers and the public can more effectively track federal spending. The act also calls for improving the quality of data submitted to USAspending.gov by holding federal agencies accountable for the completeness and accuracy of the data submitted. The Federal Funding Accountability and Transparency Act of 2006 (FFATA), as amended by the DATA Act, identifies OMB and Treasury as the two agencies responsible for leading government-wide implementation. For example, the DATA Act requires OMB and Treasury to establish government-wide financial data standards that shall, to the extent reasonable and practicable, provide consistent, reliable, and searchable spending data for any federal funds made available to or expended by federal agencies. These standards specify the data elements to be reported under the DATA Act and define and describe what is to be included in each data element, with the aim of ensuring that information will be consistent and comparable. The DATA Act also requires OMB and Treasury to ensure that the standards are applied to the data made available on USAspending.gov.", "USAspending.gov has many sources of data. For example, agencies submit data from their financial management systems, and other data are extracted from government-wide federal financial award reporting systems populated by federal agencies and external award recipients. A key component of the reporting framework is Treasury’s DATA Act broker (broker)—a system that collects and validates agency-submitted data to create linkages between the financial and award data prior to their publication on the USAspending.gov website.\nAccording to Treasury guidance documents, agencies are expected to submit three data files with specific details and data elements to the broker from their financial management systems.\nFile A: Appropriations account. This includes summary information such as the fiscal year cumulative federal appropriations account balances and includes data elements such as the agency identifier, main account code, budget authority appropriated amount, gross outlay amount, and unobligated balance.\nFile B: Object class and program activity. This includes summary data such as the names of specific activities or projects as listed in the program and financing schedules of the annual budget of the U.S. government.\nFile C: Award financial. This includes award transaction data such as the obligation amounts for each federal financial award made or modified during the reporting quarter (e.g., January 1, 2017, through March 31, 2017).\nThe broker also extracts spending information from government-wide award reporting systems that supply award data (e.g., federal grants, loans, and contracts) to USAspending.gov. These systems—including the Federal Procurement Data System-Next Generation (FPDS-NG), System for Award Management (SAM), Financial Assistance Broker Submission (FABS), and the FFATA Subaward Reporting System (FSRS)—compile information that agencies and external federal award recipients submit to report, among other things, procurement and financial assistance award information required under FFATA. The four files produced with information extracted by the broker from the four systems are as follows:\nFile D1: Procurement. This includes award and awardee attribute information (extracted from FPDS-NG) on procurement (contract) awards and contains elements such as the total dollars obligated, current total value of award, potential total value of award, period of performance start date, and other information to identify the procurement award.\nFile D2: Financial assistance. This includes award and awardee attribute information (extracted from FABS) on financial assistance awards and contains elements such as the federal award identification number, the total funding amount, the amount of principal to be repaid for the direct loan or loan guarantee, the funding agency name, and other information to identify the financial assistance award.\nFile E: Additional awardee attributes. This includes additional information (extracted from SAM) on the award recipients and contains elements such as the awardee or recipient unique identifier; the awardee or recipient legal entity name; and information on the award recipient’s five most highly compensated officers, managing partners, or other employees in management positions.\nFile F: Subaward attributes. This includes information (extracted from FSRS) on awards made to subrecipients under a prime award and contains elements such as the subaward number, the subcontract award amount, total funding amount, the award description, and other information to facilitate the tracking of subawards.\nThe key components of the broker and how the broker operated when the agencies submitted their data for the second quarter fiscal year 2017 are shown in figure 1.\nAfter agencies submit the three files to the DATA Act broker, it runs a series of validations and produces warnings and error reports for agencies to review. After passing validations for these three files, the agencies are to generate Files D1 and D2, the files containing details on procurement and assistance awards. Before the data are displayed on USAspending.gov, agency senior accountable officials are required to certify the data submissions in accordance with OMB guidance. Certification is intended to assure alignment among Files A, B, C, D1, D2, E, and F, and to provide assurance that the data are valid and reliable. According to Treasury officials, once the certification is submitted a sequence of computer program instructions or scripts are issued to transfer and map the data from broker data tables to tables set up in a database used as a source for the information on the website. Certified data are then displayed on USAspending.gov along with certain historical information from other sources, including Monthly Treasury Statements.", "The DATA Act requires each OIG to issue three reports on its assessment of the quality of the agency’s data submission and compliance with the DATA Act. The first report was due November 8, 2016; however, agencies were not required to submit spending data in compliance with the DATA Act until May 2017. Therefore, the Council of the Inspectors General on Integrity and Efficiency (CIGIE) developed an approach to address what it described as a reporting date anomaly; encouraged interim OIG readiness reviews and related reports on agencies’ implementation efforts; and delayed issuance of the mandated reports to November 2017, with subsequent reports following a 2-year cycle and due November 2019 and 2021.\nCIGIE established the Federal Audit Executive Council (FAEC) to discuss and coordinate issues affecting the federal audit community, with special emphasis on audit policy and operations of common interest to FAEC members. FAEC formed the FAEC DATA Act Working Group to assist the OIG community in understanding and meeting its DATA Act oversight requirements by (1) serving as a working-level liaison with Treasury, (2) consulting with GAO, (3) developing a common approach and methodology for conducting the readiness reviews and mandated reviews, and (4) coordinating key communications with other stakeholders. To assist the OIG community, the FAEC DATA Act Working Group developed a common methodology and published the Inspectors General Guide to Compliance Under the DATA Act (IG Guide) for use in conducting mandated reviews.\nThe IG Guide includes procedures to test data in agencies’ Files A and B by reconciling these data to the information that agencies report in their quarterly SF 133, Report on Budget Execution and Budgetary Resources. The IG Guide also instructs OIGs to select a statistically valid sample of spending data from the agencies’ available award-level transactions in File C, and among other procedures, to confirm whether these data are also included in the agencies’ Files D1 and D2. The OIGs are also to confirm whether the transactions in the sample were linked to the award and awardee attributes in Files E and F. The data in Files E and F are reported by award recipients in two external government-wide systems, and are outside the direct control of the federal agencies, except for the General Services Administration, which manages these external systems. Based on additional guidance from the FAEC DATA Act Working Group, OIGs are not required to assess the quality of the award recipient-entered data that the broker extracted from the two external government-wide systems used to create Files E and F.\nAccording to the IG Guide, the sampled spending data and testing results are to be evaluated using the following definitions for the requirements being assessed:\nCompleteness is measured in two ways: (1) all transactions that should have been recorded are recorded in the proper reporting period, and (2) as the percentage of transactions containing all applicable data elements required by the DATA Act.\nTimeliness is measured as the percentage of transactions reported within 30 days of the end of the quarter.\nAccuracy is measured as the percentage of transactions that are complete and agree with the systems of record or other authoritative sources.\nQuality is defined in OMB guidance as a combination of utility, objectivity, and integrity. Utility refers to the usefulness of the information to the intended users. Objectivity refers to whether the disseminated information is being presented in an accurate, clear, complete, and unbiased manner. Integrity refers to the protection of information from unauthorized access or revision.\nThe IG Guide also states that OIGs should assess agencies’ implementation and use of the data standards, including evaluating each agency’s process for reviewing the 57 required data elements and associated definitions that OMB and Treasury established and documenting any variances.", "In November 2017, we issued our first report on data quality as required by the DATA Act, which identified issues with the completeness and accuracy of the data that agencies submitted for the second quarter of fiscal year 2017, use of data elements, and presentation of the data on Beta.USAspending.gov. Among other things, we recommended that Treasury disclose known data quality issues and limitations on the new USAspending.gov website. Treasury agreed with that recommendation and stated that it would develop a plan to better disclose known data quality issues. Since the DATA Act’s enactment in 2014, we have issued a series of interim reports on our ongoing monitoring of the implementation of the DATA Act and made recommendations intended to help ensure effective government-wide implementation. However, many of those recommendations still remain open.\nThese reports identified a number of challenges related to OMB’s and Treasury’s efforts to facilitate agency reporting of federal spending, as well as internal control weaknesses and challenges related to agency financial management systems that we and agency auditors reported that present risks to agencies’ ability to submit quality data as required under the act. For example, our prior work has identified issues with agency source systems that could affect the quality of spending data made available to the public. In April 2017, we reported a number of weaknesses and issues previously identified by agencies’ auditors and OIGs that affect agencies’ financial reporting and may affect the quality of the information reported under the DATA Act. We also reported on findings and recommendations from prior reports with issues on the four key award systems—FPDS-NG, SAM, the Award Submission Portal (ASP), and FSRS—which increase the risk that the data submitted to USAspending.gov may not be complete, accurate, and timely.", "Based on our review of the 53 OIG reports, the scope of all of the OIG reviews covered their agencies’ submission of spending data for the second quarter of fiscal year 2017 (i.e., January through March 2017). However, the files that the OIGs included in their scope to select and review sample transactions and the type of audit standards used—such as attestation examination engagement or performance audit—varied among the OIGs.\nAccording to the IG Guide, the OIGs were to select and review a statistically valid sample of transactions, preferably from the agencies’ File C certified data submissions; if File C was unavailable or did not contain data, they were to select their sample test items from Files D1 and D2. Based on their survey responses, we found that most OIGs tested data from File C, File D1, File D2, or some combination of these agency file submissions. We also found that some OIGs tested a statistical sample of transactions in these files, while others tested all the transactions in the files because of the small population size. Further, we found that some OIGs used different files when testing for completeness, timeliness, or accuracy. For example, one OIG used File C when testing for completeness, File D1 when testing for timeliness, and File D2 when testing for accuracy. Overall, as shown in figure 2, the source files that 47 of the 53 OIGs used for testing accuracy were as follows.\nTwenty-eight OIGs selected items for testing accuracy from File C.\nTwelve OIGs selected items for testing accuracy from Files D1, D2, or both.\nSeven OIGs selected items for testing accuracy from a combination of Files C, D1, and D2.\nThe IG Guide also states that OIGs should conduct either attestation examination engagements or performance audits in accordance with generally accepted government auditing standards (GAGAS). Performance audits are audits that provide findings or conclusions based on an evaluation of sufficient, appropriate evidence against criteria. Attestation examination engagements involve obtaining sufficient, appropriate evidence with which to express an opinion stating whether the subject matter is in conformity with the identified criteria. In contrast to these two types of engagements that provide conclusions or opinions, agreed-upon procedures attestation engagements do not result in opinions or conclusions, but instead involve auditors performing specific procedures on the subject matter and issuing a report of findings.\nAll 53 OIGs reported that they performed their engagements in accordance with GAGAS; 47 OIGs reported that they conducted a performance audit, 5 reported that they performed an attestation examination engagement, and 1 reported that it performed an agreed- upon procedures attestation engagement. Twenty-one CFO Act agency OIGs and 26 non-CFO Act agency OIGs conducted performance audits, 3 CFO Act agency OIGs and 2 non-CFO Act agency OIGs conducted attestation examination engagements, and 1 non-CFO Act agency OIG conducted an agreed-upon procedures attestation engagement.", "According to the OIG reports, about half of the agencies met the OMB and Treasury requirements for implementation and use of data standards. However, almost three-fourths of OIGs determined that their respective agencies’ submissions were not complete, timely, accurate, or of quality. Based on their reports and survey responses, certain OIGs also found data errors related to problems with how Treasury’s DATA Act broker extracted information from external award reporting systems. The FAEC DATA Act Working Group considered these data errors to be a government-wide issue. Other errors that the OIGs identified may have been caused by agency-specific internal control deficiencies. Most of the OIGs made recommendations to agencies to help address the concerns they identified in their reports.", "Based on our review of the 53 OIG reports, we found that 27 OIGs determined that their agencies met OMB and Treasury requirements for implementation and use of the data standards, whereas 23 OIGs determined that their agencies did not meet these requirements. In addition, 3 CFO Act agency OIGs did not include an assessment of their agencies’ implementation and use of the data standards in their reports.\nThe OIG reports described reasons why the 23 agencies did not meet the implementation and use of data standards requirements, including data submissions that did not include required data elements or included data elements that did not conform with the established data standards. For example, one OIG reported that 74 percent of transactions it tested did not contain program activity names or codes aligned with the President’s Budget, and as a result, 39 percent of total obligations and 57 percent of total expenditures from that agency’s data submission could not be aligned with established programs. Another OIG reported that because of inconsistent application of data standards and definitions across award systems, the agency’s spending data were not complete, timely, or accurate.\nIn their survey responses, certain OIGs identified additional concerns about their agencies’ implementation and use of data standards and related data elements. Specifically, six OIGs identified differences between their agencies’ definitions of the data standards and OMB guidance. For example, two OIGs noted differences between definitions in OMB guidance and their agencies’ definitions of “primary place of performance address.” One of these OIGs noted that its agency submitted the wrong data, providing the address of the legal entity receiving the award instead of the address of the primary place where performance of the award will be accomplished or take place. In our November 2017 report, we also noted that OMB guidance for this data element was unclear and recommended that OMB clarify and align existing guidance regarding the appropriate definitions agencies should use to collect and report on primary place of performance and establish monitoring mechanisms to foster consistent application and compliance.\nIn addition, based on their survey responses, 21 OIGs reported error rates over 50 percent for 25 data elements. This includes 10 data elements that were reported by multiple OIGs and 15 data elements only reported by one OIG, as shown in table 1. There were five other data elements with error rates over 50 percent that the FAEC DATA Act Working Group determined to be government-wide broker-related data reporting issues, as discussed later in this report. The OIGs’ survey responses did not indicate whether the data elements with errors were the result of issues related to the agencies’ implementation or use of required data standards.", "Based on the OIG reports, we found that 15 of the 53 OIGs determined that their agencies’ data were generally complete, timely, accurate, or of quality, comprising 6 CFO Act agency OIGs and 9 non-CFO Act agency OIGs (see fig. 3). Conversely, 38 of 53 OIGs determined that their agencies’ data were not complete, timely, accurate, or of quality, comprising 18 CFO Act agency OIGs and 20 non-CFO Act agency OIGs. OIG reports did not always include separate assessments for completeness, timeliness, and accuracy, but gave an overall assessment of the quality of the data.\nAs part of our OIG survey, we requested the overall error rates, agency- specific error rates, and broker error rates for each requirement— completeness, timeliness, and accuracy—used to evaluate the quality of data tested to help provide more insights on the nature and extent of errors that the OIGs identified. For the purposes of our survey, based on guidance from the FAEC DATA Act Working Group and in the IG Guide, these error rates were defined as follows:\nOverall error rate is the percentage of transactions tested that were not in accordance with policy, and includes errors due to the agency, broker, and external award reporting systems.\nAgency error rate is the percentage of transactions tested that were not in accordance with policy, and includes only errors that were within the agency’s control.\nBroker error rate is the percentage of transactions tested that were not in accordance with policy, and includes only errors due to the broker and external award reporting systems.\nWith regard to overall error rates and the tests conducted, 40 OIGs reported that they tested a statistical sample of transactions, 9 OIGs reported that they tested all transactions in the populations of data, and 4 OIGs reported that they did not test any transactions or were unable to complete their testing. As shown in figure 4, our survey results show that the 40 OIGs that tested a statistical sample of transactions generally reported higher (projected) overall error rates for the accuracy and completeness of data than for the timeliness of data. We found similar results based on our tests to assess the completeness, timeliness, and accuracy of government-wide spending data that we tested for the same time period, as described in our November 2017 report. More than half of the 40 OIGs reported projected overall error rates of 25 percent or greater for accuracy, including 8 OIGs reporting projected accuracy error rates of over 75 percent. In contrast, more than three-fourths of the OIGs projected overall error rates of less than 25 percent for completeness and timeliness of their agencies’ data.\nSee appendix II for more details on the 53 OIGs’ individual agency testing results, including the actual overall error rates for those OIGs that tested the full population of transactions included in their agencies’ data submissions and the estimated range of projected overall error rates for OIGs that conducted a statistical sample.\nThe OIG survey responses that included agency-specific error rates showed that the agency-specific error rates were similar to the overall error rates, with accuracy of data having higher error rates than those for completeness and timeliness. Fourteen OIGs provided agency-specific error rates for accuracy, 13 OIGs provided agency-specific error rates for completeness, and 12 OIGs provided agency-specific error rates for timeliness of the data sampled.\nIn addition, nine OIGs reported error rates for broker-related errors that, similar to the overall and agency-specific error rates, had higher error rates for accuracy of data than for completeness and timeliness. The FAEC DATA Act Working Group determined that the broker-related errors had a government-wide impact, as discussed further below. In October 2017—1 month before the mandated reports were to be issued—the working group provided guidance to the OIGs suggesting that they determine and report these additional broker error rates separately because they were not within the agencies’ control. Some OIGs may not have reported separate agency-specific and broker error rates as their work was already substantially completed.\nOf the nine OIGs that reported they tested all transactions in the populations of their agencies’ data, five OIGs reported actual overall error rates and found that overall error rates for accuracy were higher than the error rates for completeness or timeliness. Of the four OIGs that reported agency-specific error rates, only one OIG reported an error rate for accuracy, and it was greater than 75 percent. One OIG reported a broker error rate, and it was higher for accuracy than for completeness or timeliness.\nIn addition to using different testing methodologies (e.g., statistical sampling or testing the full population of transactions) and source files, as previously discussed, the OIGs also used different assumptions and sampling criteria to design and select sample items for testing. As a result, the overall error rates are not comparable and a government-wide error rate cannot be projected.", "Based on discussions with OIGs, the FAEC DATA Act Working Group identified certain data errors caused by broker-related issues that it determined to be government-wide data reporting issues. Also, because the broker is maintained by Treasury, these issues were beyond the control of the affected agencies. According to the working group, these issues involve inconsistencies in data the broker extracted from government-wide federal financial award reporting systems, as described in table 2. To help provide consistency in reporting these issues, the working group developed standard report language used by OIGs in their reports to describe the errors caused by the broker. The standard reporting language stated that because agencies do not have responsibility for how the broker extracts data, the working group did not expect agency OIGs to evaluate the reasonableness of Treasury’s planned corrective actions.\nIn April 2018, a Treasury official told us that the issues causing these problems have been resolved. To address these issues, the Treasury official stated that, among other things, Treasury implemented the DATA Act Information Model Schema version 1.1, loaded previously missing historical procurement data to USAspending.gov, updated how information from FPDS-NG is mapped to File D1, and replaced ASP with FABS. However, we plan to follow up on these efforts as a part of our ongoing monitoring efforts.", "In their survey responses and OIG reports, 43 OIGs reported agency- specific control deficiencies that may have contributed to or increased the risk of data errors. Of these 43 OIGs, 37 OIGs identified deficiencies affecting accuracy, 32 OIGs identified deficiencies affecting completeness, and 14 OIGs identified deficiencies affecting timeliness. A few OIGs reported that they leveraged their financial statement audit results, which found deficiencies in certain financial reporting controls, in conducting their DATA Act reviews. We categorized the OIGs’ reported control deficiencies and found that the categories with the most frequently reported deficiencies related to their agencies’ lack of effective procedures or controls, such as conducting reviews and reconciliations of data submissions to source systems, and information technology system deficiencies, as shown in figure 5. In their survey responses, OIGs provided additional information about whether their agencies’ controls over agency source systems and controls over the DATA Act submission processes were properly designed, implemented, and operating effectively to achieve their objectives. For both CFO Act and non-CFO Act agencies, OIGs generally reported that agencies’ internal controls over source systems and the DATA Act submission process were designed effectively but were not implemented or operating effectively as designed.\nSome examples of agency-specific control deficiencies reported by the OIGs are as follows.\nLack of effective procedures or controls. Deficiencies where agency procedures for reviewing and reconciling data and files to different sources were not performed, or were performed ineffectively, or standard operating procedures for data submissions had not been designed and implemented. For example, some of these deficiencies related to agencies’ lack of review or reconciliation of data in Files A and B to data in Files D1 and D2. Further, two OIGs found that their agencies did not perform any sort of quality review of their data until after they were submitted to the broker. Another OIG found that its agency did not ensure that its components developed objectives for accomplishing its data submissions, assessed the risks to achieving those objectives, or established corresponding controls to address them. As a result, the agency’s DATA Act submissions included errors.\nInformation technology system deficiencies. Deficiencies related to the lack of effective automated systems controls necessary to ensure proper system user access or automated quality control procedures and the accuracy and completeness of data, as well as systems that are not compliant with federal financial management system requirements. For example, one OIG noted that its agency experienced issues related to segregation of duties and access controls that affected the agency’s ability to ensure completeness and accuracy of data in its financial, procurement, and grant processing systems. Another OIG found that its agency did not complete necessary system updates to ensure that all data were certified prior to submission. Further, an OIG reported that its agency’s information system was unable to combine transactions with the same unique identifiers, resulting in over 12,000 transactions being removed because of broker warnings.\nInsufficient documentation. Deficiencies related to agencies’ production and retention of documentary evidence supporting their DATA Act submissions. For example, three OIGs found that their agencies were unable to provide supporting documentation for various portions of their DATA Act submissions. Another OIG reported that one of its agency’s components did not take effective steps to ensure that procurement and grant personnel understood the specific documentation that should be maintained to support data entered in grant and contract files. Further, another OIG found that its agency did not document the process for compiling the agency’s DATA Act submission files.\nInappropriate application of data standards and data elements. Deficiencies related to the inappropriate use of data definition standards or the misapplication of data elements. For example, one OIG found that its agency did not identify the prior year funding activity names or codes for all transactions included in its spending data submission. Another OIG found that its agency did not consistently apply standardized object class codes in compliance with OMB guidance, as well as standardized U.S. Standard General Ledger account codes as outlined in Treasury guidance. Similarly, an OIG reported instances where agency users of certain award systems were not knowledgeable about how required DATA Act elements were reported in their procurement system.\nData entry errors or incomplete data. Deficiencies related to controls over data entry and errors or incomplete data in agency or government- wide external systems. For example, an OIG found that its agency did not include purchase card transactions greater than $3,500, which represented about 1 percent of the agency’s data submission. Another OIG reported that its agency’s service provider did not enter miscellaneous obligations in the data submission file because it expected the agency to enter such transactions in the federal procurement data system.\nTiming errors. Deficiencies related to delays in reporting information to external government-wide systems that result in errors in the data submitted. For example, one OIG reported that its agency did not take effective steps to ensure that contracting officers timely report required DATA Act award attribute information in FPDS-NG. Another OIG reported that a bureau in its agency consistently submitted certain payment files 2 months late, resulting in incomplete Files C and D2 in the agency’s data submission.\nInaccurate broker uploads. Deficiencies related to agencies uploading data to the broker. For example, one OIG found a lack of effective internal controls over data reporting from its agency’s source systems to the DATA Act broker for ensuring that the data reported are complete, timely, accurate, and of quality. Specifically, certain components were not able to consolidate data from multiple source systems and upload accurate data to the broker for File C. Another OIG reported that the broker could not identify and separate an individual component’s award data from agency- wide award data. Specifically, the broker recognized only agency-wide award data and did not include award data from its agency’s individual components. As a result, the OIG reported that the component did not comply with the DATA Act requirements because its submission did not include all of the agency’s required award data.\nReliance on manual processes. Deficiencies that cause agencies to rely on manual processes and work-arounds. For example, one OIG found that in the absence of system patches to map data elements directly from feeder award systems to financial systems, its agency developed an interim solution that relied heavily on manual processes to collect data from multiple owners and systems and increased the risk for data quality to be compromised. Another OIG reported that its agency’s financial management systems are outdated and unable to meet DATA Act requirements without extensive manual efforts, resulting in inefficiencies in preparing data submissions.\nOther. Other deficiencies including, among other things, instances where an agency’s senior accountable official did not submit a statement of assurance certifying the reliability and validity of the agency account-level and award-level data submitted to the DATA Act broker, an agency did not provide adequate training and cross-training of personnel on the various DATA Act roles, and certain components of one agency were not included in the agency’s DATA Act executive governance structure.", "To help address control deficiencies and other issues that resulted in data errors, 48 of the 53 OIGs (23 CFO Act agency OIGs and 25 non-CFO Act agency OIGs) included recommendations in their reports. As shown in figure 6, the most common recommendations OIGs made to their agencies related to the need for agencies to develop controls over their data submissions, develop procedures to address errors, and finalize or implement procedures or guidance.\nSome examples of OIG recommendations made to agencies to improve data quality and controls are as follows.\nDevelop controls over submission process. Recommendations related to controls or processes to resolve issues in submitting agency financial system data to the broker. For example, one OIG recommended that its agency develop and implement a formal process to appropriately address significant items on broker warning reports, which could indicate systemic issues.\nDevelop procedures to address errors. Recommendations related to procedures to address data errors in the agency’s internal systems. For example, one OIG recommended that its agency correct queries to extract the correct information and ensure that all reportable procurements are included in its DATA Act submissions.\nFinalize or implement procedures or guidance. Recommendations related to establishing and documenting an agency’s DATA Act-related standard operating procedures or agency guidance, including the roles and responsibilities of agency stakeholders. For example, one OIG recommended that its agency update its guidance on what address to use for primary place of performance to be consistent with OMB and Treasury guidance.\nMaintain documentation. Recommendations related to establishing or maintaining documentation of the agency’s procedures, controls, and related roles and responsibilities for performing them. For example, one OIG recommended that its agency develop a central repository for grant award documentation and maintain documentation to support its DATA Act submissions.\nProvide training. Recommendations related to developing, implementing, and documenting training for an agency’s DATA Act stakeholders. For example, one OIG recommended that its agency provide mandatory training to all contracting officers and grant program staff to ensure their understanding of DATA Act requirements.\nWork with Treasury, OMB, and other external stakeholders. Recommendations for the agency to work with Treasury, OMB, or other stakeholders external to the agency to resolve government-wide issues. For example, one OIG recommended that its agency work closely with its federal shared service provider to address timing and coding errors that the service provider caused for future DATA Act submissions.\nImplement systems controls or modify systems. Recommendations related to developing and implementing automated systems and controls. For example, one OIG recommended that its agency complete the implementation of system interfaces and new procedures that are designed to improve collection of certain data that were not reported timely to FPDS-NG and improve linkages of certain financial transactions and procurement awards using a unique procurement instrument identifier.\nIncrease resources. Recommendations related to increasing the staff, resources, or both necessary to fully implement DATA Act requirements. For example, one OIG recommended that its agency allocate the resources to ensure that reconciliations are performed when consolidating source system data to the DATA Act submission files.\nManagement for 36 agencies stated that they concurred or generally concurred with the recommendations of their OIGs (see fig. 7). Management at many of these agencies stated that they continued to improve their processes and controls for subsequent data submissions. In addition, management for seven agencies stated that they partially concurred with the recommendations that their OIGs made. Management for two agencies did not concur with their OIGs’ recommendations. Management for one agency that did not concur with the recommendations stated that they should not be held responsible for data discrepancies that other agencies caused, and management for the other agency stated that they followed authoritative guidance that OMB and Treasury issued related to warnings and error messages.", "OMB staff told us that they reviewed the OIG reports—focusing on the 24 CFO Act agencies—to better understand issues that the OIGs identified and to determine whether additional guidance is needed to help agencies improve the completeness, timeliness, accuracy, and quality of their DATA Act submissions. OMB staff explained to us how they have or are planning to address OIG-identified issues. OMB staff told us that in April 2017 the CFO Council’s DATA Act Audit Collaboration working group was formed, which includes officials from OMB, Treasury, and the Chief Financial Officers (CFO) Council to foster collaboration and understanding of the risks that were being identified as agencies prepared and submitted their data. The working group also consults with CIGIE, which is not a member of the working group, but its representatives attend meetings to help the group members better understand issues involving the OIG reviews and the IG guide. According to OMB staff, the working group is the focal point to identify government- wide issues and identify guidance that can be clarified. They also told us that OMB continues to meet with this working group to determine what new guidance is needed to meet the DATA Act requirement to ensure that the standards are applied to the data available on the website. In June 2018, OMB issued new guidance requiring agencies to develop data quality plans intended to achieve the objectives of the DATA Act. According to OMB staff, OMB is committed to ensuring integrity and providing technical assistance to ensure data quality.\nTreasury officials told us that they reviewed OIG reports that were publicly available on Oversight.gov and are collaborating with OMB and the CFO Council to identify and resolve government-wide issues, including issues related to the broker, so that agencies can focus on resolving their agency-specific issues. In February 2018, the working group documented certain topics identified for improving data quality and value.\nOMB staff and Treasury officials also told us that OMB and Treasury have taken steps to address issues we previously reported related to their oversight of agencies’ implementation of the DATA Act. For example, we recommended in April 2017 that OMB and Treasury take appropriate actions to establish mechanisms to assess the results of independent audits and reviews of agencies’ compliance with the DATA Act requirements. The DATA Act Audit Collaboration working group is one of the mechanisms OMB and Treasury use to assess and discuss the results of independent audits and to address identified issues.\nIn November 2017, we also recommended, among other things, that Treasury (1) reasonably assure that ongoing monitoring controls to help ensure the completeness and accuracy of agency submissions are designed, implemented, and operating as designed, and (2) disclose known data quality issues and limitations on the new USAspending.gov. Treasury has taken some steps and is continuing to take steps to address these recommendations. For example, under the data quality section of the About page on USAspending.gov, Treasury disclosed the requirement for each agency OIG to report on its agency’s compliance with the DATA Act and noted the availability of the reports at Oversight.gov.", "We provided a draft of this report to OMB, Treasury, and CIGIE for comment. We received written comments from CIGIE that are reproduced in appendix III and summarized below. In addition, OMB, Treasury, and CIGIE provided technical comments, which we incorporated as appropriate.\nIn its written comments, CIGIE noted that the report provides useful information on OIG efforts to meet oversight and reporting responsibilities under the DATA Act. CIGIE further stated that it believes that the report will contribute to a greater understanding of the oversight work that the OIG community performs and of agency efforts to report and track government-wide spending more effectively.\nWe are sending copies of this report to the Director of the Office of Management and Budget, the Secretary of the Treasury, the Chairperson and Vice Chairperson of the Council of the Inspectors General on Integrity and Efficiency, as well as interested congressional committees and other interested parties. In addition, the report is available at no charge on the GAO website at http://www.gao.gov.\nIf you or your staffs have any questions about this report, please contact me at (202) 512-9816 or [email protected]. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix IV.", "The Digital Accountability and Transparency Act of 2014 (DATA Act) includes provisions requiring us to review the Offices of Inspector Generals’ (OIG) mandated reports and issue our own reports assessing and comparing the completeness, timeliness, accuracy, and quality of the data that federal agencies submit under the act and the federal agencies’ implementation and use of data standards. We issued our first report on data quality in November 2017, as required. This report includes our review of the OIGs’ mandated reports, which were also issued primarily in November 2017. Our reporting objectives were to describe 1. the reported scope of work covered and type of audit standards OIGs used in their reviews of agencies’ DATA Act spending data; 2. any variations in the reported implementation and use of data standards and quality of agencies’ data, and any common issues and recommendations reported by the OIGs; and 3. the actions, if any, that the Office of Management and Budget (OMB) and the Department of the Treasury (Treasury) have reported taking or planning to take to use the results of OIG reviews to help monitor agencies’ implementation of the act.\nTo address our first and second objectives, we obtained and reviewed 53 OIG reports that were issued on or before January 31, 2018, including reports related to 24 Chief Financial Officers Act of 1990 (CFO Act) agencies and 29 non-CFO Act agencies. Of 91 entities for which second quarter fiscal year 2017 spending data were submitted, we did not obtain and review OIG DATA Act reports for 38 entities with obligations totaling at least $1.2 billion (as displayed on USAspending.gov on May 23, 2018) because no reports for those entities were publicly available by our January 31, 2018, cutoff date.\nTable 3 lists the 53 agencies for which we obtained and reviewed the OIG reports on the quality of data that agencies submitted in accordance with DATA Act requirements.\nWe also developed and conducted a survey of OIGs to provide further details on the design and results of their efforts to conduct statistical samples to select and test agencies’ data submissions and reviews of internal controls. In November 2017, we sent the survey to those OIGs whose agencies originally submitted DATA Act data to Treasury’s DATA Act broker. We received and reviewed responses from the 53 OIGs that we obtained reports from, with 9 OIGs including the completed surveys in their published reports and the others providing us their completed survey responses separately. We analyzed 53 OIG reports and survey responses, following up with OIGs for clarification when necessary.\nWe reviewed each of the 53 OIG reports we obtained and identified the reported scope of work covered (e.g., the quarter of data reviewed) and the type of audit standards OIGs used to conduct their reviews (e.g., performance audit or attestation examination engagement). We also developed and used a data collection instrument to compile and summarize the conclusions and opinions included in the OIG reports on the completeness, timeliness, accuracy, and quality of agencies’ data submissions and their implementation and use of data standards. During this process, GAO analysts worked in teams of three to reach a consensus on how these OIG conclusions and opinions were categorized. For OIG reports that did not specifically state whether the agencies met the DATA Act requirements, we considered the reported results in conjunction with the more detailed information provided in the OIG responses to our survey and made conclusions about the OIGs’ assessments based on our professional judgment.\nWe also reviewed the OIG reports and survey responses and used two data collection instruments to compile, analyze, and categorize common issues or agency-specific control deficiencies the OIGs identified in their reviews and recommendations they made to address them. During this process, GAO analysts worked in teams of three to obtain a consensus in how these issues and deficiencies were categorized.\nTo address our third objective, we interviewed OMB staff and Treasury officials about how they used or planned to use the results of the OIG DATA Act reviews to assist them in their monitoring of agencies’ implementation of the act.\nWe conducted this performance audit from September 2017 to July 2018 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 that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives.", "In their survey responses, Offices of Inspector General (OIG) for 45 agencies reported actual overall error rates or estimated error rates and estimated ranges of errors associated with the spending data transactions they tested for accuracy, completeness, or timeliness (see table 4). These results include OIGs that tested a statistical sample of transactions, tested the full population, and conducted an assessment of internal controls without additional substantive testing. OIGs that tested a sample responded that they used different sampling criteria, and the sources of files they used to select their statistical samples varied based on the files that were available. Regardless of whether the OIG tested a sample or the full population, some of the OIGs selected items for testing from File C, File D1, File D2, or some combination thereof. As a result, the overall error rates the OIGs reported are not from the same data submission files and are not fully comparable, but are intended to provide additional information on the individual results of the completeness, timeliness, and accuracy of the data each agency OIG tested.", "", "", "", "In addition to the contact named above, Michael LaForge (Assistant Director), Diane Morris (Auditor in Charge), Umesh Basnet, Thomas Hackney, and Laura Pacheco made major contributions to this report. Other key contributors include Dave Ballard, Carl Barden, Maria Belaval, Jenny Chanley, Patrick Frey, Ricky Harrison, Jason Kelly, Jason Kirwan, Quang Nguyen, Samuel Portnow, Carl Ramirez, Anne Rhodes-Kline, and Dacia Stewart.", "DATA Act: OMB, Treasury, and Agencies Need to Improve Completeness and Accuracy of Spending Data and Disclose Limitations. GAO-18-138. Washington, D.C.: November 8, 2017.\nDATA Act: As Reporting Deadline Nears, Challenges Remain That Will Affect Data Quality. GAO-17-496. Washington, D.C.: April 28, 2017.\nDATA Act: Office of Inspector General Reports Help Identify Agencies’ Implementation Challenges. GAO-17-460. Washington, D.C.: April 26, 2017.\nDATA Act: Implementation Progresses but Challenges Remain. GAO-17- 282T. Washington, D.C.: December 8, 2016.\nDATA Act: OMB and Treasury Have Issued Additional Guidance and Have Improved Pilot Design but Implementation Challenges Remain. GAO-17-156. Washington, D.C.: December 8, 2016.\nDATA Act: Initial Observations on Technical Implementation. GAO-16- 824R. Washington, D.C.: August 3, 2016.\nDATA Act: Improvements Needed in Reviewing Agency Implementation Plans and Monitoring Progress. GAO-16-698. Washington, D.C.: July 29, 2016.\nDATA Act: Progress Made but Significant Challenges Must Be Addressed to Ensure Full and Effective Implementation. GAO-16-556T. Washington, D.C.: April 19, 2016.\nDATA Act: Data Standards Established, but More Complete and Timely Guidance Is Needed to Ensure Effective Implementation. GAO-16-261. Washington, D.C.: January 29, 2016.\nDATA Act: Progress Made in Initial Implementation but Challenges Must be Addressed as Efforts Proceed. GAO-15-752T. Washington, D.C.: July 29, 2015." ], "depth": [ 1, 2, 2, 2, 1, 1, 2, 2, 2, 2, 2, 1, 1, 1, 1, 1, 1, 2, 2, 1 ], "alignment": [ "", "", "", "", "h0_full", "h0_title h1_full", "", "h0_full h1_full", "", "h1_full", "", "h2_full", "", "h0_full", "", "", "", "", "", "" ] }
{ "question": [ "How does the DATA Act affect OIGs?", "How was the scope of the OIG reviews determined?", "How did OIG reports vary?", "How did this variation affect reported error rates?", "What were the results of the OIG survey?", "What types of errors were reported?", "How did OIGs respond to the survey results?", "Why did OMB staff and Treasury officials review the OIG reports?", "What guidance did OMB issue?", "What actions did Treasury take?" ], "summary": [ "The Digital Accountability and Transparency Act of 2014 (DATA Act) requires agencies' Offices of Inspector General (OIG) to issue reports on their assessments of the quality of the agencies' spending data submissions and compliance with the DATA Act.", "The scope of all OIG reviews covered their agencies' second quarter fiscal year 2017 submissions. The files the OIGs used to select and review sample transactions varied based on data availability, and OIGs performed different types of reviews under generally accepted government auditing standards.", "Some OIGs reported testing a statistical sample of transactions that their agencies submitted and other OIGs reported testing the full population of submitted transactions.", "Because of these variations, the overall error rates reported by the OIGs are not fully comparable and a government-wide error rate cannot be projected.", "OIG survey responses show that OIGs generally reported higher (projected) overall error rates for the accuracy of data than for completeness and timeliness.", "OIGs reported certain errors that involve inconsistencies in how the Treasury broker (system that collects and validates agency-submitted data) extracted data from certain federal award systems that resulted in government-wide issues outside the agencies' control, while other errors may have been caused by agency-specific control deficiencies. For example, OIGs reported deficiencies related to agencies' lack of effective procedures or controls and systems issues.", "Most OIGs made recommendations to agencies to address identified concerns.", "OMB staff and Treasury officials told GAO that they reviewed the OIG reports to better understand issues identified by the OIGs.", "OMB issued new guidance in June 2018 requiring agencies to develop data quality plans intended to achieve the objectives of the DATA Act.", "Treasury officials told GAO that they are collaborating with OMB and the Chief Financial Officers Council DATA Act Audit Collaboration working group to identify and resolve government-wide issues." ], "parent_pair_index": [ -1, 0, 0, 2, -1, 0, 0, -1, 0, 0 ], "summary_paragraph_index": [ 3, 3, 3, 3, 5, 5, 5, 6, 6, 6 ] }
GAO_GAO-18-303
{ "title": [ "Background", "WSFR Program Awards and Monitors Five Competitive Grant Programs", "Grant Award Process Involves Announcing Grant Opportunity, Reviewing Applications, and Making Award Decisions and Is Generally Consistent with Regulations", "Award Process Involves Announcing Opportunities, Reviewing Applications, and Making Award Decisions, and Third Parties Play a Role in this Process for Some Grant Programs", "Award Process Is Generally Consistent with Federal Grant Regulations", "WSFR Monitors Grants in a Manner Consistent with Federal Grant Regulations, but Performance Reports Were Sometimes Missing Required Information WSFR Monitors Grants through Review of Financial and Performance Reports", "Actions to Monitor Grants Are Consistent with Federal Grant Regulations, but Some Performance Reports Were Missing Required Information", "Conclusions", "Recommendation for Executive Action", "Agency Comments", "Appendix I: Objectives, Scope, and Methodology", "Appendix II: Information on the Boating Infrastructure Tier 2 Grant Program", "Appendix III: Information on the Clean Vessel Act Grant Program", "Appendix IV: Information on the Competitive State Wildlife Grant Program", "Appendix V: Information on the Multistate Conservation Grant Program", "Appendix VI: Information on the National Coastal Wetlands Conservation Grant Program", "Appendix VII: Comments from the Department of the Interior", "Appendix VIII: GAO Contact and Staff Acknowledgments", "GAO Contact", "Staff Acknowledgments" ], "paragraphs": [ "FWS provides grants to a variety of recipients, including state agencies, tribal governments, and nongovernmental organizations. In fiscal year 2016, FWS awarded $1.5 billion in grants, which was about 50 percent of the agency’s total $2.9 billion budget authority. Within FWS, WSFR is responsible for awarding most of the grant funding available from FWS, and in fiscal year 2016, WSFR awarded $1.2 billion in grants.\nAs we have previously reported, most federal grant-making agencies generally follow a grants management process that includes awarding grant funds and monitoring grant projects. The award process generally involves announcing the grant opportunities, reviewing applications, and making award decisions. During the monitoring process, the agency oversees the implementation of the grant project and periodically reviews financial and performance reports from grant recipients. In our past reports, we have found that it is important for federal agencies to employ a fair and transparent process to make award selections for competitive grant programs and to monitor federal grant funds to ensure that they are used properly and effectively to achieve program goals.\nIn general, WSFR awards two types of grants: formula and competitive grants.\nFormula grants: WSFR awards these grants to recipients in amounts based on required formulas. The two largest formula grant programs WSFR manages are the Wildlife Restoration Program and Sport Fish Restoration Program, which provided $699 million and $356 million, respectively, in grants to states in fiscal year 2016. According to WSFR documents and officials, these grants are often used by states to help their fish and wildlife agencies restore, enhance, and manage wildlife and sport fish resources and provide public access to those resources. Each state’s use of certain funds and each state’s wildlife and sport fish activities are to be audited every 5 years, and these audits have generally been conducted by Interior’s Office of Inspector General (OIG). According to Interior OIG officials, these audits have been conducted since 2002, and each state has been audited three times over the past 15 years.\nCompetitive grants: WSFR awards these grants to eligible applicants for specific projects based on a competitive process in which grant applications are scored against certain criteria. Competitive grants comprise a much smaller portion of the grant funding that WSFR awards; in fiscal year 2016, WSFR awarded about $54 million in competitive grants. Competitive grants, unlike the formula grants, are not required under their program-specific statutes to be regularly audited. According to the Interior OIG and WSFR officials, the OIG has conducted few audits of these programs.\nFunding for most of WSFR’s grant programs comes from two sources: the Wildlife Restoration Account and the Sport Fish Restoration and Boating Trust Fund. These accounts are generally funded by industries paying excise taxes and import duties on certain equipment and gear manufactured for purchase by hunters, anglers, boaters, archers, and recreational shooters, including pistols, bows and arrows, and fishing rods and reels, among other items. Federal taxes on fuel for motorboats and small engines are also a source of funding.\nIn administering grant programs, WSFR adheres to federal laws and regulations, as well as agency policies and guidance.\nFederal laws: The 1937 Pittman-Robertson Wildlife Restoration Act and the 1950 Dingell-Johnson Sport Fish Restoration Act established the Wildlife Restoration Program and the Sport Fish Restoration Program, respectively. The Pittman-Robertson and Dingell-Johnson Acts have been amended to, among other things, establish additional grant programs, many of which are competitive programs. For example, the Clean Vessel Act of 1992 amended the Dingell-Johnson Act and created the Clean Vessel Act Grant Program. In addition, in 1998, the Sportfishing and Boating Safety Act amended the Dingell- Johnson Act and established the Boating Infrastructure Grant Program.\nFederal government-wide grant regulations: The Uniform Guidance, issued by OMB and adopted by federal grant-making agencies, includes requirements for several aspects of the federal grants management process, including the award and monitoring processes. For example, sections 327 and 328 lay out general requirements for financial and performance reporting by grant recipients.\nAgency regulations: Some of the WSFR grant programs have specific regulations that, among other things, define eligible activities, application procedures, and the conditions for using grant funding. For example, the Boating Infrastructure Grant Program, the Clean Vessel Act Grant Program, and the National Coastal Wetlands Conservation Grant Program have program-specific regulations that govern aspects of the grant process, such as the eligible uses of grant funding.\nAgency policies and guidance: WSFR also has agency guidance found in the FWS Service Manual, along with other guidance on grants. The manual describes the structure and functions of FWS’s organization and contains policies and procedures that govern administrative activities and program operations. For example, the FWS Service Manual contains a chapter focused on the Multistate Conservation Grant Program that reiterates or clarifies requirements, including program-specific statutory requirements as well as those found in the Uniform Guidance. In addition to the FWS Service Manual, the FWS, and WSFR within it, is subject to grant management guidance issued by the Department of the Interior. For example, in December 2014, Interior’s Office of Acquisition and Property Management issued a memorandum that required (1) maximum competition in grant awards through a fair and impartial competitive process, and (2) a comprehensive, impartial, and objective grant application review process based on criteria contained in the grant award announcement.", "WSFR awards and monitors five competitive grant programs, according to agency documents and officials we interviewed. These five grant programs are (1) the Boating Infrastructure Tier 2 Grant Program, (2) the Clean Vessel Act Grant Program, (3) the Competitive State Wildlife Grant Program, (4) the Multistate Conservation Grant Program, and (5) the National Coastal Wetlands Conservation Grant Program. While these grant programs support different types of projects, they generally are funded from the Sport Fish Restoration and Boating Trust Fund, and most require non-federal matching funds from the grant recipient based on statute. The exceptions to this are the Multistate Conservation Grant Program, which also receives funds from the Wildlife Restoration Account and does not require matching funds, and the Competitive State Wildlife Grant Program, which receives funding from annual appropriations. Table 1 provides summary information on these five competitive grant programs.\nAcross the five competitive grant programs, the number of grants and the funding awarded varied by program. In fiscal years 2012 through 2016, the largest amount of federal grant funding was awarded through the National Coastal Wetlands Conservation Grant Program—about $94 million total—while the least amount of grant funding was awarded through the Competitive State Wildlife Grant Program—about $24 million total, as shown in table 2.\nBased on our review of competitive grant award documentation for fiscal years 2012 through 2016, the percentage of projects selected from the applications received ranged from 63 percent for the Competitive State Wildlife Grant Program to 100 percent for the Clean Vessel Act Grant Program. While all Clean Vessel Act grant applicants received funding, they did not all receive the total amount of funding requested; rather, the amount of funding was based on the total amount of funding available and the score the application received. The same applies for other grant programs, as the agency sometimes provides less funding to a recipient than was requested depending on various factors, such as the total amount of funding available. For more information on the number of applications received and awards for each grant program, see appendixes II through VI.\nIn fiscal year 2016, the five WSFR competitive grant programs funded a variety of projects according to our review of the list of awarded projects.\nBoating Infrastructure Tier 2 Grant Program. Grants were awarded to states for projects focused on improving facilities for recreational boaters. These projects included installing docks, installing boat slips, and constructing restroom and shower facilities for boaters. For more information on this grant program, see appendix II.\nClean Vessel Act Grant Program. Grants were awarded to states for projects focused on constructing and maintaining facilities to accept sewage from recreational boats, including sewage pumpout stations and floating restrooms. In addition, some of the grants were to be used for public education materials on the importance of properly disposing sewage from boats. For more information on this grant program, see appendix III.\nCompetitive State Wildlife Grant Program. Grants were awarded to states and a nongovernmental organization for projects focused on state-identified species of greatest conservation need, which may include endangered or threatened species. These projects included conducting research on these species along with creating and enhancing habitat for these species. For more information on this grant program, see appendix IV.\nMultistate Conservation Grant Program. Grants were awarded to nongovernmental organizations and federal agencies for a variety of projects that were national or regional in scope, such as providing training to state fish and wildlife officials. Over half of the grants awarded (11 of 18) were awarded to the Association of Fish and Wildlife Agencies (AFWA), but most of the funding went towards the administration of the National Survey of Fishing, Hunting and Wildlife- Associated Recreation ($6.4 million of the $7.7 million). According to AFWA and WSFR officials, the reason many grants are awarded to AFWA is because this organization is in a unique position to carry out projects that benefit multiple states as required by law. For more information on this grant program, see appendix V.\nNational Coastal Wetlands Conservation Grant Program. Grants were awarded to states for projects focused on acquiring and restoring wetlands. Many of these projects focused on acquiring wetlands that benefit wildlife. For more information on this grant program, see appendix VI.\nUnder these five grant programs, state agencies often partner with subgrantees to carry out grant projects. According to WSFR officials, subgrants are common in the Boating Infrastructure Tier 2, Clean Vessel Act, and Competitive State Wildlife grant programs. For example, states are the recipients of Boating Infrastructure Tier 2 grants, but they can subgrant the money to marina operators to oversee the construction of dock facilities.", "The award process WSFR uses for the five competitive grant programs generally involves announcing the grant opportunity and reviewing applications to make award decisions, and in some cases federal agencies or third parties are involved in these activities. The award process used for the five competitive WSFR grant programs is generally consistent with federal grant regulations in the Uniform Guidance.", "The award process WSFR uses for the five competitive grant programs we reviewed involves announcing the grant opportunity and reviewing applications to make award decisions, and third parties are involved in these activities for some grant programs. Based on our review of agency guidance and interviews with WSFR officials, announcing a grant opportunity begins with developing a Notice of Funding Opportunity (NOFO). The NOFO contains information for applicants to consider when deciding whether to apply, including the amount of funding available, the types of applicants that are eligible, the process to apply, and the criteria that will be used to score applications. NOFOs are available publicly at www.grants.gov. Interested parties then submit grant applications, which WSFR reviews for eligibility by examining the project’s goals, budget, and environmental impact, among other things. A review panel comprised of WSFR staff, and in some cases other FWS staff or a third party organization, reviews and scores the applications based on criteria in the NOFO and develops a list of recommended projects and funding amounts for these projects. This list is forwarded to the Director of FWS for review and approval and if approved, FWS then awards the grant.\nFor all of the grant programs except for the Competitive State Wildlife Grant Program, other federal agencies or third party organizations are involved in some aspects of the award process (as shown in table 3). In general, these entities are more involved in reviewing grant applications than in developing the NOFOs for the grant programs.\nAFWA, a third party, has the largest involvement in the award process for the Multistate Conservation Grant Program, and implements most aspects of the award process. Specifically, the Wildlife and Sport Fish Restoration Programs Improvement Act of 2000, which established this grant program, requires that FWS only fund grant projects that are on a priority list established by AFWA. To develop this list, AFWA has developed a process to review and score applications, and the highest-scoring applications are put on a priority list. This list is presented to all AFWA members at their annual meeting and if approved by the membership, AFWA forwards the priority project list to the Director of the U.S. Fish and Wildlife Service for review and approval. The Multistate Conservation program leader at WSFR said he also reviews grant applications to determine whether the project’s budget is reasonable and whether the project is eligible for funding.\nOther federal agencies and third party organizations are also involved in the award process for other WSFR competitive grants programs as follows:\nBoating Infrastructure Tier 2 Grant Program: The Sport Fishing and Boating Partnership Council reviews and scores each grant application and provides these scores to WSFR. The scores from the Council are averaged with WSFR’s scores to develop a final ranked list of grant projects. Officials from the Council said that they provide expertise to the review process since Council members are often engineers or members of boating organizations.\nClean Vessel Act Grant Program: Program regulations state that WSFR will convene a review panel to include representatives from WSFR, the U.S. Environmental Protection Agency (EPA), the U.S. Coast Guard, and the National Oceanic and Atmospheric Administration (NOAA). WSFR provides the grant applications and WSFR’s proposed list of recommended projects to these agencies for review. According to WSFR officials, they have received limited input from these agencies, due in part to staff turnover at these agencies in recent years. For example, in fiscal year 2016, EPA indicated in an email to WSFR that it agreed with the proposed funding decisions for the program, and NOAA sent a letter to WSFR indicating that it had not reviewed all of the applications but it supported the program and did not object to the agency’s scoring of the applications.\nNational Coastal Wetlands Conservation Grant Program: Staff from FWS’ Coastal Program partner with WSFR in developing the NOFO, reviewing applications, and scoring applications. For example, the review panel for fiscal year 2016 included seven staff from the Coastal Program and four staff from WSFR.", "The five competitive WSFR grant programs we reviewed follow an award process that is generally consistent with federal grant regulations found in the Uniform Guidance. Specifically, the Uniform Guidance requires that grant funding opportunities be publicly announced and that the NOFO contains certain information, including the criteria and process used to evaluate applications. In reviewing the five NOFOs used for the fiscal year 2016 grant cycle for the five competitive grant programs, we found that all five NOFOs were made publicly available on the website www.grants.gov, and the NOFOs contained the information required by the Uniform Guidance. These NOFOs contained criteria for scoring applications that matched the criteria in program-specific regulations for the grant programs that have them. For example, the regulations for the National Coastal Wetlands Conservation Grant Program contain 13 different scoring criteria, which were listed in the NOFO for that program.\nThe Uniform Guidance also contains provisions regarding a review process for grant applications. Specifically, the Uniform Guidance requires that, unless prohibited by federal statute, the agencies must design and execute a merit review process for competitive grant applications, and that this process must be described in the NOFO. In accordance with the Uniform Guidance, Interior issued guidance on implementing a merit review process in December 2014. This guidance requires that the “competitive process be fair and impartial” and that all applicants be evaluated based on the criteria in the funding announcement. In reviewing the five competitive grant programs, we found that there was a merit review process and that this process was described in the five NOFOs for fiscal year 2016 that we reviewed. As part of the merit review process, four of the competitive grant programs convened review panels attended by those that scored applications for the fiscal year 2016 grant cycle, and these panels developed a recommended list of projects, according to our review of award documents. The exception was the Clean Vessel Act Grant Program, where an in-person review panel meeting was not held but rather projects were scored separately within each region, and regional officials submitted their scores to WSFR headquarters. These two sets of scores were combined and the WSFR program leader developed a recommended list of projects, according to WSFR officials.\nThe Uniform Guidance also requires that federal agencies must establish conflict of interest policies for federal awards. As a result, in December 2014, Interior established a policy requiring agency officials who evaluate grant applications as part of a review panel to sign a conflict of interest certificate. In our review of the award documents for the fiscal year 2016 grant cycle, we generally found signed copies of these certificates for members of the review panels, except for the Multistate Conservation Grant Program. This program did not have certificates for the fiscal year 2016 grant cycle because AFWA, which oversees the scoring of applications, did not require these forms until the fiscal year 2017 grant cycle. We reviewed these forms for the fiscal year 2017 grant cycle and found that each member of the AFWA review panel had submitted a form. AFWA officials said that the organization had previously required a general conflict of interest form to be signed by its members, and they started requiring a specific form for review panel members in fiscal year 2017 to align with Interior’s policy.", "WSFR monitors its competitive grants primarily by reviewing annual financial and performance reports submitted by grant recipients, which is consistent with federal regulations. We found in our review of these reports for a sample of grant projects awarded funds in fiscal year 2015 that grant recipients generally submitted them on time, but that some performance reports were missing required information.\nAccording to WSFR officials, their primary method for monitoring projects funded by competitive grants is to review financial and performance reports submitted by grant recipients. Grant recipients submit these reports to WSFR staff in FWS regional offices. According to regional WSFR officials, regional staff who specialize in financial matters review the financial reports to ensure they are filled out correctly. Staff do this by comparing financial information on the amount of federal funding reported by recipients with amounts found in Interior’s Financial and Business Management System, which is used to track grants. In addition, WSFR grant specialists review the performance reports to ensure they contain required information, such as an update on the progress of meeting the specified goals of a grant project. If WSFR staff identify discrepancies in the financial reports or deficiencies in the performance reports, WSFR regional staff work with the grant recipients to resolve them. WSFR regional staff occasionally perform site visits to grant projects to verify grant activities described in the performance reports. WSFR regional staff said they perform site visits as funding and time allow and that recently they have had to limit site visits due to budget and staffing constraints.", "The Uniform Guidance contains requirements for financial and performance reports for monitoring federal grants. Specifically, the Uniform Guidance requires federal agencies to collect financial information from grant recipients at least annually. The Uniform Guidance also requires grant recipients to submit performance reports at least annually, and these reports are to include certain information, such as a comparison of the actual accomplishments of a grant with its goals and the reasons why goals were not met, if appropriate. To further guide FWS staff in implementing these requirements, the FWS Service Manual provides additional information on the agency’s expectations for these reports, including the required content. For example, the Service Manual states that recipients should submit financial information, including the amount of federal and matching funds spent and remaining on a grant. The Service Manual also identifies the standard federal form that should be used for this report. For performance reports, the FWS Service Manual states that FWS must require certain information from grant recipients, including a comparison of actual accomplishments to the goals of the grant projects, and if the goals were not met, the reasons why.\nIn our review of the agency’s monitoring process for selected grants awarded in fiscal year 2015, we found that WSFR required both financial and performance reports at least annually, as required by the Uniform Guidance. In addition, the number and due dates of these reports were specified in the letters provided to grant recipients when they were awarded the grant. These award letters also specified the amount of federal funding for the grant along with any required non-federal matching funds. We reviewed 53 financial reports and 51 performance reports for a sample of 32 grants awarded in fiscal year 2015 and found that most reports were submitted by their due date or within 2 weeks of this date, as table 4 shows.\nIn addition, the majority of the reports we reviewed met the content requirements found in the Uniform Guidance and the FWS Service Manual. Specifically, all 53 financial reports were submitted on the standard form prescribed by the Service Manual. In addition, the financial information on the amount of the grant and non-federal matching funds aligned with the amounts specified in the award letter for nearly all the financial reports we reviewed. In our review of performance reports, we found that most contained information required by the Uniform Guidance on the grant project’s goals, progress toward those goals, and an explanation for why the goals had not been met, if applicable. However, in our sample, nine performance reports submitted for six awarded grants were missing some of this information. For example, one performance report stated that “no activities had occurred” under the grant, but it did not specify what the goals of the grant were or why no progress had been made, as required by the Uniform Guidance. Additionally, two annual performance reports for another grant described the goals of the grant and said they had not been met, but did not provide information as to why. Officials from one state fish and wildlife agency said that there was not a template to follow when preparing performance reports. Officials from another state agency said that while the requirements for performance reporting were laid out clearly in most NOFOs, they could be interpreted differently by different state officials, and these officials needed to ask for clarification from WSFR officials.\nThe format and content of the performance reports is generally left for grant recipients to choose, according to WSFR officials, because neither the Uniform Guidance nor internal FWS guidance recommends a specific template for the performance reports. However, the program leader for the Multistate Conservation Grant Program provides grant recipients with a suggested template to follow when preparing performance reports. The template contains areas in which to describe the goals and objectives of the grant along with progress made towards these. The seven performance reports we reviewed for the Multistate Conservation Grant Program followed this template and, as a result, all contained the information required by the Uniform Guidance. We also found that Region 8 developed a suggested template for performance reports, but the template did not explicitly ask for grant recipients to explain why the goals of a grant had not been met. The lack of a clear performance report template may have contributed to 2 of the 10 performance reports from region 8 we reviewed not including clear explanations of why the goals of the grant had not been met, as required by the Uniform Guidance. According to WSFR officials, the agency is planning to develop a more standardized reporting process for performance reports but the timeline for completion of this has not been formally established and remains uncertain.\nAccording to Standards for Internal Control in the Federal Government, management should design control activities to achieve objectives and respond to risks. This includes designing mechanisms to help monitor performance to ensure the objectives of the program are being achieved. As noted previously, the Uniform Guidance specifies that grant performance reports contain a comparison of actual accomplishments to the goals of the project, and the reasons why the goals were not met, as appropriate. The absence of a clear format for these reports may have contributed to some reports not containing all the information needed to comply with federal grant requirements. Without a template or some other standardized method for performance reporting across competitive grant programs, WSFR grant recipients may continue to submit performance reports to WSFR that do not meet all of the content requirements of the Uniform Guidance and do not convey all the information needed for FWS to oversee its competitive grant programs.", "WSFR awards and monitors five competitive grant programs and, in general, WSFR’s process for awarding and monitoring these grants is consistent with regulations for federal grants established in OMB’s Uniform Guidance. However, there were instances in which the performance reports submitted by grant recipients did not include a comparison of actual accomplishments to the goals of the project, as required by the Uniform Guidance. WSFR does not have a template for performance reporting for four of the five competitive grant programs we reviewed, and the template used by one region does not clearly ask for all required information. Without a template or standardized method that facilitates the collection of performance information, WSFR grant recipients may continue to submit performance reports to WSFR that do not contain the information required by the Uniform Guidance and do not convey all the needed information for FWS to oversee its competitive grant programs.", "The Director of the U.S. Fish and Wildlife Service should direct WSFR to develop a template or other standardized method to facilitate collection of all required information for grant performance reports. (Recommendation 1)", "We provided a draft of this report to the Department of the Interior for review and comment. In its written comments, reproduced in appendix VII, the Department of the Interior agreed with our recommendation and described actions it plans to take.\nWe are sending copies of this report to the appropriate congressional committees, the Secretary of the Interior, and other interested parties. In addition, the report is available at no charge on the GAO website at http://www.gao.gov.\nIf you or your staff members have any questions about this report, please contact me at (202) 512-3841 or [email protected]. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made major contributions to this report are listed in appendix VIII.", "Our objectives were to (1) identify and describe the competitive grant programs that the Wildlife and Sport Fish Restoration (WSFR) program awards and monitors; (2) examine how WSFR awards grants under these programs and the extent to which this is consistent with relevant federal regulations; and (3) examine how WSFR monitors grants under these programs and the extent to which this is consistent with relevant federal regulations.\nTo identify the competitive grant programs that WSFR both awards and monitors, we reviewed federal laws and regulations related to WSFR grant programs. In particular, we reviewed the 1937 Pittman-Robertson Wildlife Restoration Act and the 1950 Dingell-Johnson Sportfish Restoration Act and amendments to these laws, along with associated regulations for these laws. We also reviewed OMB’s Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance) for federal grant awards. In addition, we reviewed agency guidance and information on grant programs; agency budget documents; and grant program descriptions in the Catalog of Federal Domestic Assistance, a compilation of federal assistance programs that includes grants. Based on our review of these materials, we developed an initial list of grant programs that WSFR had a role in managing, and we spoke with WSFR officials to gather information on which competitive grant programs met the criteria of WSFR being responsible for both awarding and monitoring grants. We corroborated this list of grant programs with WSFR officials. We analyzed data on the competitive grant programs we identified from Interior’s Financial and Business Management System for fiscal years 2012 through 2016, the most recent five-year period for when the award process had been completed. To determine the reliability of these data, we interviewed agency officials and conducted electronic testing of the data, and we determined the data were sufficiently reliable for our purposes.\nTo examine the process WSFR uses to award competitive grants and the extent to which this is consistent with relevant federal regulations, we reviewed relevant agency regulations and guidance along with relevant sections of the Uniform Guidance. To assess the extent to which the award process is consistent with relevant regulations, we compared the process WSFR uses to award grants with OMB’s Uniform Guidance. In addition, we reviewed award documents for grants awarded in fiscal year 2016 for the competitive grant programs we identified. We selected fiscal year 2016 because it was the most recently completed award cycle. These documents included the Notice of Funding Opportunity, which described the funding opportunity to applicants; documentation of the scoring of applications; and memos that documented the results of the scoring process. We also reviewed the entire grant files for eight grants awarded in fiscal year 2016 to determine what documents were contained in these files. In selecting this non-probability sample of files, we selected at least one file for each of the grant programs we examined and at least one file from each of the FWS regional offices that had a grant awarded in fiscal year 2016. However, one of these files was misclassified under an incorrect grant program, so we excluded it from our review. As a result, we did not examine an entire file from the FWS Region 8 office. We reviewed the award documents and files using a standard document review tool to examine specific parts of these documents, such as the descriptions of the process used to review and score applications. To ensure that this review tool was filled out correctly, two GAO staff members reviewed the documents: one filled out the data collection instrument and the other verified this work. In addition to looking at award documents for fiscal year 2016, we also examined memos that documented the results of the grant scoring process for fiscal years 2012 through 2015 for the grant programs we identified. We reviewed the grant scoring memos from fiscal years 2012 through 2016 grants cycles because they comprise the most recent five-year period for when the award process had been completed.\nTo examine the process WSFR uses to monitor competitive grants and the extent to which those processes are consistent with relevant federal regulations, we reviewed relevant agency regulations and guidance along with relevant sections of the Uniform Guidance. To assess the extent to which the monitoring process is consistent with relevant regulations, we compared the process WSFR uses to monitor grants with OMB’s Uniform Guidance. We used a standard document review tool to review financial and performance reports for 32 of 129 grants that were awarded in fiscal year 2015 to determine the extent to which these reports contained information required by the Uniform Guidance. We selected fiscal year 2015 to ensure that enough time had elapsed under these grants for financial and performance reports to have been required and submitted. In selecting this non-probability sample of files, we ensured that we had at least one file for each of the grant programs and at least one file from each of the eight FWS regional offices. For financial reports, we determined whether reported financial information on the grant award and matching funds aligned with the dollar amounts in their award letters, whether the reports were submitted by their due dates, and whether they were submitted on the correct form. For performance reports, we determined whether they were submitted by their due dates and whether they contained information on the grant project’s goals, progress toward those goals, and an explanation why the goals had not been met, if applicable. The Uniform Guidance requires this information to be in performance reports. The results from our analysis of these documents are not generalizable to all monitoring documents for grants awarded in fiscal year 2015, but allowed us to examine how WSFR monitored selected grants.\nFor all three objectives, we interviewed WSFR staff responsible for managing WSFR grant programs. These included WSFR program leaders at headquarters and WSFR staff in each of the eight FWS regional offices that are responsible for the five competitive grant programs we reviewed. We asked these officials about the role they played in awarding and monitoring competitive grants. In addition, we interviewed other FWS officials that were involved with managing grants and officials from select third party organizations that played a role in awarding grants, including the Association of Fish and Wildlife Agencies and the Sport Fishing and Boating Partnership Council. We also interviewed grant applicants, including state fish and wildlife agency officials and nongovernmental organizations to learn about their experiences during the award and monitoring process for WSFR grants. We selected applicants that had various experiences with the grant programs in fiscal year 2016, including those that applied and did not receive funding and those that applied and received funding. The results of the interviews with grant applicants cannot be generalized to other applicants, but were used to obtain perspectives on the grant award and monitoring processes.\nWe conducted this performance audit from March 2017 to February 2018 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 that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives.", "Below is summary information on the Boating Infrastructure Tier 2 Grant Program that we compiled from reviewing relevant laws and regulations, reviewing agency documents, and interviewing agency officials.\nEstablishment and goals of the program:\nThe program was established by the Sportfishing and Boating Safety Act of 1998, which amended the Dingell-Johnson Sport Fish Restoration Act.\nThe program provides grants to be used for constructing, renovating, or maintaining docking or mooring facilities for transient, nontrailerable recreational vessels that are 26 feet or greater in length. These facilities generally must allow public access, and examples of facilities that can be built with these funds include boat slips, piers, buoys, fuel stations, restrooms, bulkheads, dredging, or laundry facilities. Grants can also be awarded to produce information and education materials specific to the program or projects funded by the program.\nGovernor-designated agencies in a state of the United States, the District of Columbia, American Samoa, Guam, the Northern Mariana Islands, Puerto Rico, or the U.S. Virgin Islands are eligible for this grant program. The designated agency is often a state natural resource or fish and wildlife agency.\nSubgrants to other entities are allowed. According to Wildlife and Sport Fish Restoration (WSFR) officials, subgrants under this program are common.\nAbout 2 percent of the Sport Fish Restoration and Boating Trust Fund is devoted to the grant program. In fiscal year 2016, there was $8.6 million in federal funds available for the Tier 2 program.\nThe maximum grant award is $1.5 million per project, and recipients generally must provide matching funds worth at least 25 percent of the total cost of projects.\nFunds not obligated within three fiscal years shall be transferred to the Coast Guard and expended for state recreational boating safety programs.\nHighlights from the award process used in fiscal year 2016:\nThe Notice of Funding Opportunity for fiscal year 2016 was posted on www.grants.gov on June 22, 2015, and applications were due by September 18, 2015.\nThirteen states submitted a total of 22 applications for projects.\nRegional staff for the Wildlife and Sport Fish Restoration Program and members from the Sport Fishing and Boating Partnership Council scored the applications and recommended that 10 projects be fully funded and one be partially funded. The Deputy Director of the U.S. Fish and Wildlife Service approved the list of recommended projects on March 11, 2016.\nThe U.S. Fish and Wildlife Service announced the selected projects on March 17, 2016.\nInformation on past applications and selected projects: Table 5 shows the number of applications received and selected projects under the Boating Infrastructure Tier 2 Grant Program in fiscal years 2012 through 2016.", "Below is summary information on the Clean Vessel Act Grant Program that we compiled from reviewing relevant laws and regulations, reviewing agency documents, and interviewing agency officials.\nEstablishment and goals of the program:\nThe program was established by the Clean Vessel Act of 1992, which amended the Dingell-Johnson Sport Fish Restoration Act.\nThis program funds grants to coastal states for certain activities, such as constructing and renovating pumpout stations and waste reception facilities and conducting a program to educate recreational boaters about the problem of human body waste discharges from vessels and inform them of the locations of pumpout stations and waste reception facilities. The program also funds grants to inland states meeting certain criteria. Under program regulations, facilities need to be open to the public in order to be eligible for a grant.\nSince the program was established, over 6,000 dump or pumpout facilities have been built and over 3,700 of these facilities have been operated or maintained using grant funds.\nGovernor-designated agencies in a state of the United States, the District of Columbia, American Samoa, Guam, the Northern Mariana Islands, Puerto Rico, or the U.S. Virgin Islands are eligible for this grant program. The designated agency is often a state natural resource or fish and wildlife agency.\nSubgrants to other entities are allowed. According to Wildlife and Sport Fish Restoration (WSFR) officials, subgrants under this program are common.\nAbout 2 percent of the Sport Fish Restoration and Boating Trust Fund is devoted to the grant program. In fiscal year 2016, there was $13.7 million in federal funds available for the program.\nThe maximum award amount is generally $1.5 million, and recipients generally must provide matching funds worth at least 25 percent of the total cost of projects.\nFunds not obligated within three fiscal years shall be transferred to the U.S. Coast Guard and expended for state recreational boating safety programs.\nHighlights from the award process used in fiscal year 2016:\nThe Notice of Funding Opportunity (NOFO) for fiscal year 2016 was posted on www.grants.gov on August 12, 2015, and applications were due by December 2, 2015.\nA total of 21 states and the District of Columbia submitted 33 applications. WSFR staff from the U.S. Fish and Wildlife Service regions scored applications in their regions; then, these scores were averaged with scores from the WSFR program leader for the Clean Vessel Act grant program, who scored all of the applications. WSFR provided copies of grant applications to the U.S. Environmental Protection Agency (EPA), U.S. Coast Guard, and National Oceanic and Atmospheric Administration (NOAA) for them to review and score the applications. WSFR also provided its scores on the applications to these agencies. EPA informed WSFR in an email that it agreed with the proposed funding decisions for the program. According to WSFR, the Coast Guard did not provide comments on the proposed scores. NOAA sent a letter to WSFR indicating that it had not reviewed all of the applications but it supported the program and did not object to the agency’s scoring of the applications. The Deputy Director of the U.S.\nFish and Wildlife Service approved the list of recommended projects on April 28, 2016.\nThe U.S. Fish and Wildlife Service announced the winning grant awards on May 11, 2016.\nAccording to the fiscal year 2016 NOFO, this program attempts to provide support to as many eligible projects as possible. In practice, all eligible applications have been awarded funds from fiscal year 2012 through fiscal year 2016. If funding requests exceed available funds, WSFR applies a formula to allocate funding based on the score the application receives.\nInformation on past applications and selected projects: Table 6 shows the number of applications received and selected projects under the Clean Vessel Act Grant Program in fiscal years 2012 through 2016.", "Below is summary information on the Competitive State Wildlife Grant Program that we compiled from reviewing relevant laws and regulations, reviewing agency documents, and interviewing agency officials.\nEstablishment and goals of the program:\nThe State Wildlife Grant Program provides grants for the development and implementation of programs for the benefit of wildlife and their habitats, including species that are not hunted or fished. Eligible activities include planning and conservation implementation.\nThe competitive portion of the State Wildlife Grant Program was established by the Consolidated Appropriations Act, 2008.\nFish and wildlife agencies in a state of the United States, the District of Columbia, American Samoa, Guam, the Northern Mariana Islands, Puerto Rico, or the U.S. Virgin Islands and at the discretion of affected states, the regional Association of Fish and Wildlife Agencies are eligible for this grant program. According to the Notice of Funding Opportunity (NOFO) for this program, for each of the 48 contiguous United States and the District of Columbia, at least two states must be active participants in proposed conservation actions.\nApplicants are also encouraged to engage with other partners on projects. Potential partners include tribes, federal agencies, other state agencies, local governments, nongovernmental organizations, academic institutions, private landowners, industry groups, and international partners.\nThe program is governed and funded through annual appropriations acts. In fiscal year 2016, there was about $5.6 million available for the program.\nFor most applicants proposing a multi-state project, the maximum award is $500,000 and the minimum award is $50,000. Applicants must provide matching funds worth at least 25 percent of the total cost of projects.\nPast appropriations for these grants have been appropriated to remain available until expended. The appropriations acts governing the program have generally provided that any amount apportioned in one fiscal year that remains unobligated by the end of the next fiscal year are to be reapportioned in the following fiscal year.\nHighlights from the award process used in fiscal year 2016:\nThe NOFO for fiscal year 2016 was posted on www.grants.gov on November 20, 2015, and applications were due by February 19, 2016.\nThe Wildlife and Sport Fish Restoration Program (WSFR) received 21 eligible applications. Applications were reviewed by a panel consisting of WSFR staff from each region of the U.S. Fish and Wildlife Service (FWS). The panel recommended fully funding 14 projects and partially funding 1 project, for a total of $5.6 million, with $2.9 million in non- federal matching funds. The Deputy Director of the U.S. Fish and Wildlife Service approved the list of recommended projects on May 19, 2016.\nFWS announced the selected projects on May 20, 2016.\nInformation on past applications and selected projects: Table 7 shows the number of applications received and selected projects under the Competitive State Wildlife Grant Program in fiscal years 2012 through 2016.", "Below is summary information on the Multistate Conservation Grant Program that we compiled from reviewing relevant laws and regulations, reviewing agency documents, and interviewing agency officials.\nEstablishment and goals of the program:\nThe program was established by the Wildlife and Sport Fish Restoration Programs Improvement Act of 2000, which amended the Pittman-Roberts Wildlife Restoration Act and the Dingell-Johnson Sport Fish Restoration Act.\nThe program focuses on funding multistate conservation projects that benefit a certain number of states or a regional association of state fish and game departments.\nFish and wildlife agencies in a state of the United States, the District of Columbia, American Samoa, Guam, the Northern Mariana Islands, Puerto Rico, or the U.S. Virgin Islands are eligible for this grant program. The U.S. Fish and Wildlife Service (FWS) is also an eligible applicant for the purpose of carrying out the National Survey of Fishing, Hunting, and Wildlife-Associated Recreation, which is conducted every five years. Nongovernmental organizations are also eligible, provided that they submit a certification that they will not use the grant funds to fund, in whole or in part, any activity of the organization that promotes or encourages opposition to the regulated hunting or trapping of wildlife or the regulated taking of fish.\nGrant projects shall not be eligible unless they will benefit at least 26 states, a majority of states in a FWS region, or a regional association of state fish and wildlife agencies.\nBy statute, FWS may only make grants for projects identified on a priority list prepared by the Association of Fish and Wildlife Agencies (AFWA), a nongovernmental organization that represents state fish and wildlife agencies on conservation and land management issues, after following certain procedures.\nUp to $6 million annually is authorized to fund grants, with no more than $3 million from the Wildlife Restoration Account and $3 million from the Sport Fish Restoration Trust Fund. In practice, some of the grant funds are carried over to future years to fund certain multi-year projects, such as the National Survey of Fishing, Hunting, and Wildlife-Associated Recreation.\nThis program does not have a matching funds requirement.\nFunds not obligated within two fiscal years revert back to the Wildlife Restoration and Sport Fish Restoration programs for apportionment to the states.\nHighlights from the award process used in fiscal year 2016:\nThe Notice of Funding Opportunity for fiscal year 2016 was posted on www.grants.gov on April 13, 2015, and the deadline for submitting letters of intent to AFWA was May 11, 2015. These letters of intent provide a summary of the grant project, and they were scored by AFWA’s national grants committee. The highest-scoring applicants were invited to submit a full grant application to AFWA by August 14, 2015. The national grants committee scored these applications and presented these scores to AFWA members at its annual meeting in September 2015. Members voted to approve the priority list at this meeting.\nAFWA provided the priority list containing 18 projects to FWS. The Deputy Director of Program Management and Policy of the U.S. Fish and Wildlife Service approved the list of recommended projects on December 7, 2015.\nDuring the award process, Wildlife and Sport Fish Restoration staff also reviewed the grant applications.\nFWS announced the selected projects on February 11, 2016.\nInformation on past applications and selected projects: Table 8 shows the number of applications received and selected projects under the Multistate Conservation Grant Program in fiscal years 2012 through 2016.", "Below is summary information on the National Coastal Wetlands Conservation Grant Program that we compiled from reviewing relevant laws and regulations, reviewing agency documents, and interviewing agency officials.\nEstablishment and goals of the program:\nThe program was established by the Coastal Wetlands Planning, Protection and Restoration Act.\nThis program’s primary goal is the long-term conservation of coastal wetlands’ ecosystems. It accomplishes this by helping states protect, restore, and enhance their coastal habitats through a competitive grants program.\nSince 1992, the U.S. Fish and Wildlife Service (FWS) has awarded over $377 million through these grants.\nGovernor-designated agencies of an eligible coastal state are eligible for this grant program. The designated agency is often a state natural resource or fish and wildlife agency.\nSubgrants are allowed, are relatively common, and can be awarded to local governments and nonprofit organizations.\nAbout 3 percent of the Sport Fish Restoration and Boating Trust Fund is devoted to the grant program. In fiscal year 2016, there was about $20.3 million in federal funds available for the program.\nThe maximum award amount is $1 million, and states generally must provide 50 percent of the total cost of the project. However, states that have established and are using a state fund for the purpose of acquiring coastal wetlands must provide a minimum of 25 percent of the total cost of projects.\nProjects are generally funded through annual proposals. Funds must be obligated by December 31st of the year after funds were allocated, meaning that, for example, fiscal year 2015 funds must be obligated by December 31, 2016. Funds not obligated during the specified time frame return to the FWS program account.\nHighlights from the award process used in fiscal year 2016:\nThe Notice of Funding Opportunity for fiscal year 2016 was posted on www.grants.gov on February 5, 2015, and applications were due by June 24, 2015.\nThe FWS Wildlife Sport Fish Restoration Program (WSFR) received 32 applications. A panel of WSFR and FWS Coastal Program regional officials scored and ranked the applications, and recommended 28 projects for funding. The Deputy Director of the U.S. Fish and Wildlife Service approved the list of recommended projects on January 13, 2016.\nWSFR awarded $20 million in grant funding, which was supplemented by $20.5 million in non-federal matching funds.\nFWS announced the selected projects on February 2, 2016.\nInformation on past applications and selected projects: Table 9 shows the number of applications received and selected projects under the National Coastal Wetlands Conservation Grant Program in fiscal years 2012 through 2016.", "", "", "", "In addition to the individual named above Elizabeth Erdmann (Assistant Director), Steven Bagley, and Scott Heacock made key contributions to this report. Additional contributions were made by Thomas M. James, Ying Long, Kim McGatlin, Patricia Moye, Anne Rhodes-Kline, and Sheryl Stein." ], "depth": [ 1, 1, 1, 2, 2, 1, 2, 1, 1, 1, 1, 1, 1, 1, 1, 1, 1, 1, 2, 2 ], "alignment": [ "h3_full", "h0_full", "h1_title", "h1_full", "", "h2_full", "h2_full", "h2_full", "", "", "h4_full h1_full", "h0_full", "", "", "", "h0_full", "", "", "", "" ] }
{ "question": [ "What grants does the Wildlife and Sport Fish Restoration program administer?", "What types of projects do the grants fund?", "What were GAO's findings regarding the grants?", "How does WSFR's grant award process work?", "How does WSFR review applications?", "Who approves the recommended projects?", "What were GAO's findings regarding the WSFR grant process?", "How does WSFR monitor its grants?", "How does WSFR's grant oversight process compare to oversight regulations?", "Why were these performance reviews incomplete?", "How does WSFR plan to address its lack of a complete template?", "How is management expected to achieve objectives and respond to risks?", "How might the lack of a complete template affect the WSFR grant program in the future?", "What role do grants play in FWS's budget?", "How do different FWS grant types differ from one another?", "How do WSFR grant programs fit into the structure of FWS grants?", "Why did GAO conduct this review?", "What is the purpose of this report?", "How did GAO conduct this review?" ], "summary": [ "The U.S. Fish and Wildlife Service's (FWS) Wildlife and Sport Fish Restoration (WSFR) program, within the Department of the Interior, awards and monitors five competitive grant programs.", "These grant programs fund different types of projects ranging from building docks to acquiring wetlands.", "GAO found that the number of grants and funding awarded varied by grant program from fiscal years 2012 through 2016.", "The award process WSFR uses for the five competitive grant programs generally involves publicly announcing the grant opportunity through a Notice of Funding Opportunity, which contains information applicants need to consider when applying, such as available funding and criteria that will be used to score applications.", "A panel comprised of WSFR staff, and in some cases other FWS staff or a third party organization, reviews and scores the applications based on the criteria in the Notice of Funding Opportunity and develops a list of recommended projects and funding amounts.", "The list is forwarded to the Director of FWS for review and approval.", "GAO found that WSFR's grant award process is consistent with federal regulations for awarding federal grants.", "WSFR monitors its competitive grants by reviewing financial and performance reports submitted by grant recipients.", "In general, this process is consistent with relevant regulations, but some of the performance reports were missing required information. Specifically, for fiscal year 2015 grants GAO reviewed, financial and performance reports were generally submitted on time by grant recipients, but several performance reports (9 of 51) did not include a comparison of actual accomplishments to the goals of the grant, as required by regulations.", "WSFR does not have a template for grant recipients to follow in preparing these reports for most of the grant programs, and the template used by one region does not clearly ask for all required information.", "WSFR officials have said the agency plans to develop a more standardized reporting process but no timeline has been established.", "According to Standards for Internal Control in the Federal Government , management should design control activities to achieve objectives and respond to risks, including designing mechanisms to help monitor performance.", "Without a template or standardized method that facilitates the collection of performance information, WSFR grant recipients may continue to submit performance reports that are missing information needed by FWS to monitor its competitive grant programs.", "FWS awarded $1.5 billion in grants in fiscal year 2016, which represented about half of the agency's budget.", "In general, FWS awards two types of grants: (1) formula grants, which are distributed to recipients based on a required formula, and (2) competitive grants, where potential recipients submit an application for funding that is reviewed and scored against criteria.", "Within FWS, WSFR manages several grant programs.", "GAO was asked to review WSFR's management of its competitive grant programs.", "This report (1) identifies and describes competitive grant programs that WSFR awards and monitors; (2) examines how WSFR awards grants under these programs and the extent to which this is consistent with relevant regulations; and (3) examines how WSFR monitors grants under these programs and the extent to which this is consistent with relevant regulations.", "GAO reviewed relevant federal laws, regulations, and FWS guidance; analyzed agency data for fiscal years 2012-2016; reviewed award documents for fiscal year 2016 and a sample of monitoring documents for grants awarded in fiscal year 2015 (selected to ensure sufficient time for required reports to be submitted) and compared these with requirements from relevant regulations; interviewed WSFR headquarters and regional officials and grant recipients." ], "parent_pair_index": [ -1, 0, -1, -1, 0, 0, -1, -1, 0, 1, 2, 2, 1, -1, -1, 1, -1, 0, 0 ], "summary_paragraph_index": [ 2, 2, 2, 4, 4, 4, 4, 5, 5, 5, 5, 5, 5, 0, 0, 0, 1, 1, 1 ] }
CRS_R43429
{ "title": [ "", "Introduction", "Federal Estate Ownership", "CRS Products", "Agencies Managing Federal Lands", "CRS Products", "Agency Acquisition and Disposal Authorities", "CRS Product", "Funding Issues", "CRS Products", "Land and Water Conservation Fund", "CRS Products", "Federal Payment and Revenue-Sharing Programs", "CRS Products", "Deferred Maintenance", "CRS Products", "Climate Policy and Federal Land Management", "CRS Products", "Energy and Mineral Resources", "Onshore Resources", "Oil and Natural Gas", "CRS Products", "Coal", "CRS Products", "Renewable Energy on Federal Land", "Locatable Minerals", "Offshore Resources", "Offshore Oil and Gas Leases", "Offshore Renewable Energy Sources", "CRS Products", "Forest Management", "CRS Products", "Range Management", "Livestock Grazing", "Wild Horses and Burros", "CRS Products", "Recreation", "CRS Products", "Other Land Designations", "CRS Products", "National Monuments and the Antiquities Act", "CRS Products", "Wilderness and Roadless Areas", "CRS Products", "The National Wild and Scenic Rivers System and the National Trails System", "CRS Products", "National Marine Sanctuaries and Marine National Monuments", "Species Management", "Endangered Species", "CRS Products", "Invasive Species", "CRS Product", "Wildfire Management", "CRS Products" ], "paragraphs": [ "", "Federal land management decisions influence the U.S. economy, environment, and social welfare. These decisions determine how the nation's federal lands will be acquired or disposed of, developed, managed, and protected. Their impact may be local, regional, or national. This report discusses selected federal land policy issues that the 116 th Congress may consider through oversight, authorizations, or appropriations. The report also identifies CRS products that provide more detailed information.\nThe federal government manages roughly 640 million acres of surface land, approximately 28% of the 2.27 billion acres of land in the United States. Four agencies (referred to in this report as the federal land management agencies, or FLMAs) administer a total of 608 million acres (~95%) of these federal lands: the Forest Service (FS) in the Department of Agriculture (USDA), and the Bureau of Land Management (BLM), U.S. Fish and Wildlife Service (FWS), and National Park Service (NPS), all in the Department of the Interior (DOI). Most of these lands are in the West and Alaska, where the percentage of federal ownership is significantly higher than elsewhere in the nation (see Figure 1 ). In addition, the Department of Defense administers approximately 11 million acres in military bases, training ranges, and more; and numerous other agencies administer the remaining federal acreage.\nThe federal estate also extends to energy and mineral resources located below ground and offshore. BLM manages the federal onshore subsurface mineral estate. The Bureau of Ocean and Energy Management (BOEM), also in DOI, manages access to about 1.7 billion offshore acres located beyond state coastal waters, referred to as U.S. offshore areas or the outer continental shelf (OCS). Not all of these acres can be expected to contain extractable mineral and energy resources, however.\nFederal land policy and management issues generally fall into several broad thematic questions: Should federal land be managed to produce national or local benefits? How should current uses be balanced with future resources and opportunities? Should current uses, management, and protection programs be replaced with alternatives? Who decides how federal land resources should be managed, and how are the decisions made?\nSome stakeholders seek to maintain or enhance the federal estate, while others seek to divest the federal estate to state or private ownership. Some issues, such as forest management and fire protection, involve both federal and nonfederal (state, local, or privately owned) land. In many cases, policy positions on federal land issues do not divide along clear party lines. Instead, they may be split along the lines of rural-urban, eastern-western, and coastal-interior interests.\nSeveral committees in the House and Senate have jurisdiction over federal land issues. For example, issues involving the management of the national forests cross multiple committee jurisdictions, including the Committee on Agriculture and the Committee on Natural Resources in the House, and the Committee on Agriculture, Nutrition and Forestry and Committee on Energy and Natural Resources in the Senate. In addition, federal land issues are often addressed during consideration of annual appropriations for the FLMAs' programs and activities. These agencies and programs typically receive appropriations through annual Interior, Environment, and Related Agencies appropriations laws.\nThis report introduces selected federal land issues, many of which are complex and interrelated. The discussions are broad and aim to introduce the range of issues regarding federal land management, while providing references to more detailed and specific CRS products. The issues are grouped into these broad categories\nFederal Estate Ownership, Funding Issues Related to Federal Lands, Climate Policy and Federal Land Management, Energy and Minerals Resources, Forest Management, Range Management, Recreation, Other Land Designations, Species Management, and Wildfire Management.\nThis report generally contains the most recent available data and estimates.", "Federal land ownership began when the original 13 states ceded title of some of their land to the newly formed central government. The early federal policy was to dispose of federal land to generate revenue and encourage western settlement and development. However, Congress began to withdraw, reserve, and protect federal land through the creation of national parks and forest reserves starting in the late 1800s. This \"reservation era\" laid the foundation for the current federal agencies, whose primary purpose is to manage natural resources on federal lands. The four FLMAs and BOEM were created at different times, with different missions and purposes, as discussed below.\nThe ownership and use of federal lands has generated controversy since the late 1800s. One key area of debate is the extent of the federal estate, or, in other words, how much land the federal government should own. This debate includes questions about whether some federal lands should be disposed to state or private ownership, or whether additional land should be acquired for recreation, conservation, open space, or other purposes. For lands retained in federal ownership, discussion has focused on whether to curtail or expand certain land designations (e.g., national monuments proclaimed by the President or wilderness areas designated by Congress) and whether current management procedures should be changed (e.g., to allow a greater role for state and local governments or to expand economic considerations in decisionmaking). A separate issue is how to ensure the security of international borders while protecting the federal lands and resources along the border, which are managed by multiple agencies with their own missions.\nIn recent years, some states have initiated efforts to assume title to the federal lands within their borders, echoing efforts of the \"Sagebrush Rebellion\" during the 1980s. These efforts generally are in response to concerns about the amount of federal land within the state, as well as concerns about how the land is managed, fiscally and otherwise. Debates about federal land ownership—including efforts to divest federal lands—often hinge on constitutional principles such as the Property Clause and the Supremacy Clause. The Property Clause grants Congress authority over the lands, territories, or other property of the United States: \"the Congress shall have Power to dispose of and make all needful Rules and Regulations respecting the Territory or other Property belonging to the United States.\" The Supremacy Clause establishes federal preemption over state law, meaning that where a state law conflicts with federal law, the federal law will prevail. Through these constitutional principles, the U.S. Supreme Court has described Congress's power over federal lands as \"without limitations.\" For instance, Congress could choose to transfer to states or other entities the ownership of areas of federal land, among other options.", "CRS Report R42346, Federal Land Ownership: Overview and Data , by Carol Hardy Vincent, Laura A. Hanson, and Carla N. Argueta.\nCRS Report R44267, State Management of Federal Lands: Frequently Asked Questions , by Carol Hardy Vincent.", "The four FLMAs and BOEM manage most federal lands (onshore and offshore, surface and subsurface)\nForest Service (FS) , in the Department of Agriculture, manages the 193 million acre National Forest System under a multiple-use mission, including livestock grazing, energy and mineral development, recreation, timber production, watershed protection, and wildlife and fish habitat. Balancing the multiple uses across the national forest system has sometimes led to a lack of consensus regarding management decisions and practices. Bureau of Land Management (BLM) , in the Department of the Interior (DOI), manages 246 million acres of public lands, also under a multiple-use mission of livestock grazing, energy and mineral development, recreation, timber production, watershed protection, and wildlife and fish habitat. Differences of opinion sometimes arise among and between users and land managers as a result of the multiple use opportunities on BLM lands. U.S. Fish and Wildlife Service (FWS) , in DOI, manages 89 million acres as part of the National Wildlife Refuge System (NWRS) as well as additional surface, submerged, and offshore areas. FWS manages the NWRS through a dominant-use mission—to conserve plants and animals and associated habitats for the benefit of present and future generations. In addition, FWS administers each unit of the NWRS pursuant to any additional purposes specified for that unit. Other uses are permitted only to the extent that they are compatible with the conservation mission of the NWRS and any purposes identified for individual units. Determining compatibility can be challenging, but the FWS's stated mission generally has been seen to have helped reduce disagreements over refuge management and use. National Park Service (NPS) , in DOI, manages 80 million acres in the National Park System. The NPS has a dual mission—to preserve unique resources and to provide for their enjoyment by the public. NPS laws, regulations, and policies emphasize the conservation of park resources in conservation/use conflicts. Tension between providing recreation and preserving resources has produced management challenges for NPS. Bureau of Ocean Management (BOEM) , also in DOI, manages energy resources in areas of the outer continental shelf (OCS) covering approximately 1.7 billion acres located beyond state waters. These areas are defined in the Submerged Lands Act and the Outer Continental Shelf Lands Act (OCSLA). BOEM's mission is to balance energy independence, environmental protection, and economic development through responsible, science-based management of offshore conventional and renewable energy resources. BOEM schedules and conducts OCS oil and gas lease sales, administers existing oil and gas leases, and issues easements and leases for deploying renewable energy technologies, among other responsibilities.", "CRS In Focus IF10585, The Federal Land Management Agencies , by Katie Hoover.\nCRS Report R42656, Federal Land Management Agencies and Programs: CRS Experts , by R. Eliot Crafton.\nCRS Report R45340, Federal Land Designations: A Brief Guide , coordinated by Laura B. Comay.\nCRS In Focus IF10832, Federal and Indian Lands on the U.S.-Mexico Border , by Carol Hardy Vincent and James C. Uzel.\nCRS Report R45265, U.S. Fish and Wildlife Service: An Overview , by R. Eliot Crafton.\nCRS Report RS20158, National Park System: Establishing New Units , by Laura B. Comay.\nCRS Report R43872, National Forest System Management: Overview, Appropriations, and Issues for Congress , by Katie Hoover.", "Congress has granted the FLMAs various authorities to acquire and dispose of land. The extent of this authority differs considerably among the agencies. The BLM has relatively broad authority for both acquisitions and disposals under the Federal Land Policy and Management Act of 1976 (FLPMA). By contrast, NPS has no general authority to acquire land to create new park units or to dispose of park lands without congressional action. The FS authority to acquire lands is limited mostly to lands within or contiguous to the boundaries of a national forest, including the authority to acquire access corridors to national forests across nonfederal lands. The agency has various authorities to dispose of land, but they are relatively constrained and infrequently used. FWS has various authorities to acquire lands, but no general authority to dispose of its lands. For example, the Migratory Bird Conservation Act of 1929 grants FWS authority to acquire land for the National Wildlife Refuge System—using funds from sources that include the sale of hunting and conservation stamps—after state consultation and agreement.\nThe current acquisition and disposal authorities form the backdrop for consideration of measures to establish, modify, or eliminate authorities, or to provide for the acquisition or disposal of particular lands. Congress also addresses acquisition and disposal policy in the context of debates on the role and goals of the federal government in owning and managing land generally.", "CRS Report RL34273, Federal Land Ownership: Acquisition and Disposal Authorities , by Carol Hardy Vincent et al.", "Funding for federal land and FLMA natural resource programs presents an array of issues for Congress. The FLMAs receive their discretionary appropriations through Interior, Environment, and Related Agencies appropriations laws. In addition to other questions related directly to appropriations, some funding questions relate to the Land and Water Conservation Fund (LWCF). Congress appropriates funds from the LWCF for land acquisition by federal agencies, outdoor recreation needs of states, and other purposes. Under debate are the levels, sources, and uses of funding and whether some funding should be continued as discretionary. A second set of questions relates to the compensation of states or counties for the presence of nontaxable federal lands and resources, including whether to revise or maintain existing payment programs. A third set of issues relates to the maintenance of assets by the agencies, particularly how to address their backlog of maintenance projects while achieving other government priorities.", "CRS Report R44934, Interior, Environment, and Related Agencies: Overview of FY2019 Appropriations , by Carol Hardy Vincent.\nCRS Report R43822, Federal Land Management Agencies: Appropriations and Revenues , coordinated by Carol Hardy Vincent.\nCRS In Focus IF10381, Bureau of Land Management: FY2019 Appropriations , by Carol Hardy Vincent.\nCRS In Focus IF10846, U.S. Fish and Wildlife Service: FY2019 Appropriations , by R. Eliot Crafton.\nCRS In Focus IF10900, National Park Service: FY2019 Appropriations , by Laura B. Comay.\nCRS In Focus IF11178, National Park Service: FY2020 Appropriations , by Laura B. Comay.\nCRS In Focus IF11169, Forest Service: FY2019 Appropriations and FY2020 Request , by Katie Hoover.", "The Land and Water Conservation Fund Act of 1965 was enacted to help preserve, develop, and assure access to outdoor recreation facilities to strengthen the health of U.S. citizens. The law created the Land and Water Conservation Fund in the U.S. Treasury as a funding source to implement its outdoor recreation purposes. The LWCF has been the principal source of monies for land acquisition for outdoor recreation by the four FLMAs. The LWCF also has funded a matching grant program to assist states with outdoor recreational needs and other federal programs with purposes related to lands and resources.\nThe provisions of the LWCF Act that provide for $900 million in specified revenues to be deposited in the fund annually have been permanently extended. Nearly all of the revenues are derived from oil and gas leasing in the OCS. Congress determines the level of discretionary appropriations each year, and yearly appropriations have fluctuated widely since the origin of the program. In addition to any discretionary appropriations, the state grant program receives (mandatory) permanent appropriations.\nThere is a difference of opinion as to how funds in the LWCF should be allocated. Current congressional issues include deciding the amount to appropriate for land acquisition, the state grant program, and other purposes. Several other issues have been under debate, including whether to provide the fund with additional permanent appropriations; direct revenues from other activities to the LWCF; limit the use of funds for particular purposes, such as federal land acquisition; and require some of the funds to be used for certain purposes, such as facility maintenance. Another area of focus is the state grant program, with issues including the impact of anticipated increases in mandatory funding, the way in which funds are apportioned among the states, and the extent to which the grants should be competitive.", "CRS In Focus IF10323, Land and Water Conservation Fund (LWCF): Frequently Asked Questions Related to Provisions Scheduled to Expire on September 30, 2018 , by Carol Hardy Vincent and Bill Heniff Jr.\nCRS Report RL33531, Land and Water Conservation Fund: Overview, Funding History, and Issues , by Carol Hardy Vincent.\nCRS Report R44121, Land and Water Conservation Fund: Appropriations for \"Other Purposes , \" by Carol Hardy Vincent.", "As a condition of statehood, most states forever waived the right to tax federal lands within their borders. However, some assert that states or counties should be compensated for services related to the presence of federal lands, such as fire protection, police cooperation, or longer roads to skirt the federal property. Under federal law, state and local governments receive payments through various programs due to the presence of federally owned land. Some of these programs are run by specific agencies and apply only to that agency's land. Many of the payment programs are based on revenue generated from specific land uses and activities, while other payment programs are based on acreage of federal land and other factors. The adequacy, coverage, equity, and sources of the payments for all of these programs are recurring issues for Congress.\nThe most widely applicable onshore program, administered by DOI, applies to many types of federally owned land and is called Payments in Lieu of Taxes (PILT). Each eligible county's PILT payment is calculated using a complex formula based on five factors, including federal acreage and population. Most counties containing the lands administered by the four FLMAs are eligible for PILT payments. Counties with NPS lands receive payments primarily under PILT. Counties containing certain FWS lands are eligible to receive PILT payments, and FWS also has an additional payment program for certain refuge lands, known as the Refuge Revenue Sharing program. In addition to PILT payments, counties containing FS and BLM lands also receive payments based primarily on receipts from revenue-producing activities on their lands. Some of the payments from these other programs will be offset in the county's PILT payment in the following year. One program (Secure Rural Schools, or SRS) compensated counties with FS lands or certain BLM lands in Oregon for declining timber harvests. The authorization for the SRS program expired after FY2018, and the last authorized payments are to be disbursed in FY2019.\nThe federal government shares the revenue from mineral and energy development, both onshore and offshore. Revenue collected (rents, bonuses, and royalties) from onshore mineral and energy development is shared 50% with the states, under the Mineral Leasing Act of 1920 (less administrative costs). Alaska, however, receives 90% of all revenues collected on federal onshore leases (less administrative costs).\nRevenue collected from offshore mineral and energy development on the outer continental shelf (OCS) is shared with the coastal states, albeit at a lower rate. The OCSLA allocates 27% of the revenue generated from certain federal offshore leases to the coastal states. Separately, the Gulf of Mexico Energy Security Act of 2006 (GOMESA; P.L. 109-432 ) provided for revenue sharing at a rate of 37.5% for four coastal states, up to a collective cap. Some coastal states have advocated for a greater share of the OCS revenues based on the impacts oil and gas projects have on coastal infrastructure and the environment, while other states and stakeholders have contended that more of the revenue should go to the general fund of the Treasury or to other federal programs.", "CRS Report RL31392, PILT (Payments in Lieu of Taxes): Somewhat Simplified , by Katie Hoover.\nCRS Report R41303, Reauthorizing the Secure Rural Schools and Community Self-Determination Act of 2000 , by Katie Hoover.\nCRS Report R42404, Fish and Wildlife Service: Compensation to Local Governments , by R. Eliot Crafton.\nCRS Report R42951, The Oregon and California Railroad Lands (O&C Lands): Issues for Congress , by Katie Hoover.\nCRS Report R43891, Mineral Royalties on Federal Lands: Issues for Congress , by Marc Humphries.\nCRS Report R42439, Compensating State and Local Governments for the Tax-Exempt Status of Federal Lands: What Is Fair and Consistent? , by Katie Hoover.", "The FLMAs have maintenance responsibility for their buildings, roads and trails, recreation sites, and other infrastructure. Congress continues to focus on the agencies' deferred maintenance and repairs , defined as \"maintenance and repairs that were not performed when they should have been or were scheduled to be and which are put off or delayed for a future period.\" The agencies assert that continuing to defer maintenance of facilities accelerates their rate of deterioration, increases their repair costs, and decreases their value and safety.\nCongressional and administrative attention has centered on the NPS backlog, which has continued to increase from an FY1999 estimate of $4.25 billion in nominal dollars. Currently, DOI estimates deferred maintenance for NPS for FY2017 at $11.2 billion. Nearly three-fifths of the backlogged maintenance is for roads, bridges, and trails. The other FLMAs also have maintenance backlogs. DOI estimates that deferred maintenance for FY2017 for FWS is $1.4 billion and the BLM backlog is $0.8 billion. FS estimated its backlog for FY2017 at $5.0 billion, with approximately 70% for roads, bridges, and trails. Thus, the four agencies together had a combined FY2017 backlog estimated at $18.5 billion.\nThe backlogs have been attributed to decades of funding shortfalls to address capital improvement projects. However, it is not always clear how much total funding has been provided for deferred maintenance each year because some annual presidential budget requests and appropriations documents did not identify and aggregate all funds for deferred maintenance. Currently, there is debate over the appropriate level of funds to maintain infrastructure, whether to use funds from other discretionary or mandatory programs or sources, how to balance maintenance of the existing infrastructure with the acquisition of new assets, and the priority of maintaining infrastructure relative to other government functions.", "CRS Report R43997, Deferred Maintenance of Federal Land Management Agencies: FY2007-FY2016 Estimates and Issues , by Carol Hardy Vincent.\nCRS Report R44924, The National Park Service's Maintenance Backlog: Frequently Asked Questions , by Laura B. Comay.\nCRS In Focus IF10987, Legislative Proposals for a National Park Service Deferred Maintenance Fund , by Laura B. Comay.", "Scientific evidence shows that the United States' climate has been changing in recent decades. This poses several interrelated and complex issues for the management of federal lands and their resources, in terms of mitigation, adaptation, and resiliency. Overall, climate change is introducing uncertainty about conditions previously considered relatively stable and predictable. Given the diversity of federal land and resources, concerns are wide-ranging and include invasive species, sea-level rise, wildlife habitat changes, and increased vulnerability to extreme weather events, as well as uncertainty about the effects of these changes on tourism and recreation. Some specific observed effects of climate change include a fire season that begins earlier and lasts longer in some locations, warmer winter temperatures that allow for a longer tourism season but also for various insect and disease infestations to persist in some areas, and habitat shifts that affect the status of sensitive species but may also increase forest productivity. Another concern is how climate change may affect some iconic federal lands, such as the diminishing size of the glaciers at Glacier National Park in Montana and several parks in Alaska, or the flooding of some wildlife refuges.\nThe role of the FLMAs in responding to climate change is an area under debate. Some stakeholders are concerned that a focus on climate change adaptation may divert resources and attention from other agency activities and near-term challenges. Others see future climate conditions as representing an increased risk to the effective performance of agency missions and roles.\nA related debate concerns the impact of energy production on federal lands. Both traditional sources of energy (nonrenewable fossil fuels such as oil, gas, and coal) and alternative sources of energy (renewable fuels such as solar, wind, and geothermal) are available on some federal lands. A 2018 report from the U.S. Geological Survey estimated that greenhouse gas emissions resulting from the extraction and use of fossil fuels produced on federal lands account for, on average, approximately 24% of national emissions for carbon dioxide, 7% for methane, and 1.5% for nitrous oxide. In addition, the report estimated that carbon sequestration on federal lands offset approximately 15% of those carbon dioxide emissions over the study period, 2005 through 2014. This, along with other factors, has contributed to questions among observers about the extent to which the agencies should provide access to and promote different sources of energy production on federal lands based on the effects on climate from that production. Since fossil fuel emissions contribute to climate change, some stakeholders concerned about climate change assert that the agencies should prioritize renewable energy production on federal lands over traditional energy sources. Others assert that, even with renewable energy growth, conventional sources will continue to be needed in the foreseeable future, and that the United States should pursue a robust traditional energy program to ensure U.S. energy security and remain competitive with other nations, including continuing to make fossil fuel production available on federal lands.\nSpecific legislative issues for Congress may include the extent to which the FLMAs manage in furtherance of long-term climate policy goals, and proposals to restructure or improve collaboration among the FLMAs regarding climate change activities and reporting.", "CRS Report R43915, Climate Change Adaptation by Federal Agencies: An Analysis of Plans and Issues for Congress , coordinated by Jane A. Leggett.", "Much of the onshore federal estate is open to energy and mineral exploration and development, including BLM and many FS lands. However, many NPS lands and designated wilderness areas, as well as certain other federal lands, have been specifically withdrawn from exploration and development. Most offshore federal acres on the U.S. outer continental shelf are also available for exploration and development, although BOEM has not scheduled lease sales in all available areas. Energy production on federal lands contributes to total U.S. energy production. For example, in 2017, as a percentage of total U.S. production, approximately 24% of crude oil and 13% of natural gas production came from federal lands. Coal production from federal lands has consistently accounted for about 40% of annual U.S. coal production over the past decade.\nFederal lands also are available for renewable energy projects. Geothermal capacity on federal lands represents 40% of U.S. total geothermal electric generating capacity. Solar and wind energy potential on federal lands is growing and, based on BLM-approved projects, there is potential for 3,300 megawatts (MW) of wind and 6,300 MW of solar energy on federal lands. The first U.S. offshore wind farm began regular operations in 2016, and BOEM has issued 13 wind energy leases off the coasts of eight East Coast states.\nThe 116 th Congress may continue debate over issues related to access to and availability of onshore and offshore federal lands for energy and mineral development. This discussion includes how to balance energy and mineral development with environmental protection, postproduction remediation, and other uses for those federal lands. Some would like to open more federal lands for energy development, whereas others have sought to retain or increase restrictions and withdrawals for certain areas they consider too sensitive or inappropriate for traditional and/or renewable energy development. Congress also continues to focus on the energy and mineral permitting processes, the timeline for energy and mineral development, and issues related to royalty collections. Other issues may include the federal management of split estates, which occur when the surface and subsurface rights are held by different entities.", "", "Onshore oil and natural gas produced on federal lands in 2017 accounted for 5% and 9% of total U.S. oil and gas production, respectively. Development of oil, gas, and coal on federal lands is governed primarily by the Mineral Leasing Act of 1920 (MLA). The MLA authorizes the Secretary of the Interior—through BLM—to lease the subsurface rights to most BLM and FS lands that contain fossil fuel deposits, with the federal government retaining title to the lands. Leases include an annual rental fee and a royalty payment generally determined by a percentage of the value or amount of the resource removed or sold from the federal land. Congress has at times debated raising the onshore royalty rate for federal oil and gas leases, which has remained at the statutory minimum of 12.5% since the enactment of the MLA in 1920.\nAccess to federal lands for energy and mineral development has been controversial. The oil and gas industry contends that entry into currently unavailable areas is necessary to ensure future domestic oil and gas supplies. Opponents maintain that the restricted lands are unique or environmentally sensitive and that the United States could realize equivalent energy gains through conservation and increased exploration on current leases or elsewhere. Another controversial issue is the permitting process and timeline, which the Energy Policy Act of 2005 (EPAct05) revised for oil and gas permits. An additional contested issue has been whether to pursue oil and gas development in the Arctic National Wildlife Refuge in northeastern Alaska. P.L. 115-97 , enacted in December 2017, provided for the establishment of an oil and gas program in the refuge.", "CRS In Focus IF10127, Energy and Mineral Development on Federal Land , by Marc Humphries.\nCRS Report R42432, U.S. Crude Oil and Natural Gas Production in Federal and Nonfederal Areas , by Marc Humphries.\nCRS Report RL33872, Arctic National Wildlife Refuge (ANWR): An Overview , by Laura B. Comay, Michael Ratner, and R. Eliot Crafton.\nCRS Report R43891, Mineral Royalties on Federal Lands: Issues for Congress , by Marc Humphries.", "Congress debates several issues regarding coal production on federal lands, including how to balance coal production against other resource values and the potential effects of coal production on issues related to climate change. Other concerns include how to assess the value of the coal resource, what is the fair market value for the coal, and what should be the government's royalty. A 2013 GAO analysis found inconsistencies in how BLM evaluated and documented federal coal leases. In addition, a 2013 DOI Inspector General report found that BLM may have violated MLA provisions by accepting below-cost bids for federal coal leases. The Obama Administration issued a new rule for the valuation of coal, which reaffirmed that the value for royalty purposes is at or near the mine site and that gross proceeds from arm's-length contracts are the best indication of market value. This rule was repealed by the Trump Administration on August 7, 2017 (to comply with Executive Order (E.O.) 13783), returning to the previous valuation rules in place. E.O. 13783 also lifted \"any and all\" moratoria on federal coal leasing put in place by the Obama Administration.", "CRS Report R44922, The U.S. Coal Industry: Historical Trends and Recent Developments , by Marc Humphries.", "Both BLM and FS manage land that is considered suitable for renewable energy generation and as such have authorized projects for geothermal, wind, solar, and biomass energy production. BLM manages the solar and wind energy programs on about 20 million acres for each program and about 800 geothermal leases on federal lands. Interest in renewable energy production comes in part from concern over the impact of emissions from fossil fuel-fired power plants and the related adoption of statewide renewable portfolio standards that require electricity producers to supply a certain minimum share (which varies by state) of electricity from renewable sources. Congressional interest in renewable energy resources on onshore federal lands has focused on whether to expand the leasing program for wind and solar projects versus maintaining the current right-of-way authorization process, and how to balance environmental concerns with the development and production of these resources.\nGeothermal Energy . Geothermal energy is produced from heat stored under the surface of the earth. Geothermal leasing on federal lands is conducted under the authority of the Geothermal Steam Act of 1970, as amended, and is managed by BLM, in consultation with FS. Wind and Solar Energy . Development of solar and wind energy sources on BLM and FS lands is governed primarily by right-of-way authorities under Title V of FLPMA. The potential wildlife impacts from wind turbines and water supply requirements from some solar energy infrastructure remain controversial. Issues for Congress include how to manage the leasing process and whether or how to balance such projects against other land uses identified by statute. Woody Biomass. Removing woody biomass from federal lands for energy production has received special attention because of biomass's widespread availability. Proponents assert that removing biomass density on NFS and BLM lands also provides landscape benefits (e.g., improved forest resiliency, reduced risk of catastrophic wildfires). Opponents, however, identify that incentives to use wood and wood waste might increase land disturbances on federal lands, and they are concerned about related wildlife, landscape, and ecosystem impacts. Other issues include the role of the federal government in developing and supporting emerging markets for woody biomass energy production, and whether to include biomass removed from federal lands in the Renewable Fuel Standard.", "Locatable minerals include metallic minerals (e.g., gold, silver, copper), nonmetallic minerals (e.g., mica, gypsum), and other minerals generally found in the subsurface. Developing these minerals on federal lands is guided by the General Mining Law of 1872. The law, largely unchanged since enactment, grants free access to individuals and corporations to prospect for minerals in public domain lands, and allows them, upon making a discovery, to stake (or \"locate\") a claim on the deposit. A claim gives the holder the right to develop the minerals and apply for a patent to obtain full title of the land and minerals. Congress has imposed a moratorium on mining claim patents in the annual Interior appropriations laws since FY1995, but has not restricted the right to stake claims or extract minerals.\nThe mining industry supports the claim-patent system, which offers the right to enter federal lands and prospect for and develop minerals. Critics consider the claim-patent system to not properly value publicly owned resources because royalty payments are not required and the amounts paid to maintain a claim and to obtain a patent are small. New mining claim location and annual claim maintenance fees are currently $37 and $155 per claim, respectively.", "The federal government is responsible for managing energy resources in approximately 1.7 billion acres of offshore areas belonging to the United States (see Figure 1 ). These offshore resources are governed by the Outer Continental Shelf Lands Act of 1953 (OCSLA), as amended, and management involves balancing domestic energy demands with protection of the environment and other factors. Policymakers have debated access to ocean areas for offshore drilling, weighing factors such as regional economic needs, U.S. energy security, the vulnerability of oceans and shoreline communities to oil-spill risks, and the contribution of oil and gas drilling to climate change. Some support banning drilling in certain regions or throughout the OCS, through congressional moratoria, presidential withdrawals, and other measures. Others contend that increasing offshore oil and gas development will strengthen and diversify the nation's domestic energy portfolio and that drilling can be done in a safe manner that protects marine and coastal areas.", "The Bureau of Ocean Energy Management administers approximately 2,600 active oil and gas leases on nearly 14 million acres on the OCS. Under the OCSLA, BOEM prepares forward-looking, five-year leasing programs to govern oil and gas lease sales. BOEM released its final leasing program for 2017-2022 in November 2016, under the Obama Administration. The program schedules 10 lease sales in the Gulf of Mexico region and 1 in the Alaska region, with no sales in the Atlantic or Pacific regions. In January 2018, under the Trump Administration, BOEM released a draft proposed program for 2019-2024, which would replace the final years of the Obama Administration program. The program proposes 12 lease sales in the Gulf of Mexico region, 19 sales in the Alaska region, 9 lease sales in the Atlantic region, and 7 lease sales in the Pacific region. The proposed sales would cover all U.S. offshore areas not prohibited from oil and gas development, including areas with both high and low levels of estimated resources. The draft proposal is the first of three program versions; under the OCSLA process, subsequent versions could remove proposed lease sales but could not add new sales.\nUnder the OCSLA, the President may withdraw unleased lands on the OCS from leasing disposition. President Obama indefinitely withdrew from leasing disposition large portions of the Arctic OCS as well as certain areas in the Atlantic region, but these withdrawals were modified by President Trump. Congress also has established leasing moratoria; for example, the GOMESA established a moratorium on preleasing, leasing, and related activity in the eastern Gulf of Mexico through June 2022.\nThe 116 th Congress may consider multiple issues related to offshore oil and gas exploration, including questions about allowing or prohibiting access to ocean areas and how such changes may impact domestic energy markets and affect the risk of oil spills. Other issues concern the use of OCS revenues and the extent to which they should be shared with coastal states (see \" Federal Payment and Revenue-Sharing Programs \" section).", "BOEM also is responsible for managing leases, easements, and rights-of-way to support development of energy from renewable ocean energy resources, including offshore wind, thermal power, and kinetic forces from ocean tides and waves. As of January 2019, BOEM had issued 13 offshore wind energy leases in areas off the coasts of Massachusetts, Rhode Island, Delaware, Maryland, Virginia, New York, New Jersey, and North Carolina. In December 2016, the first U.S. offshore wind farm, off the coast of Rhode Island, began regular operations. Issues for Congress include whether to take steps to facilitate the development of offshore wind and other renewables, such as through research and development, project loan guarantees, extension of federal tax credits for renewable energy production, or oversight of regulatory issues for these emerging industries.", "CRS Report R44504, The Bureau of Ocean Energy Management's Five-Year Program for Offshore Oil and Gas Leasing: History and Final Program for 2017-2022 , by Laura B. Comay, Marc Humphries, and Adam Vann.\nCRS Report R44692, Five-Year Program for Federal Offshore Oil and Gas Leasing: Status and Issues in Brief , by Laura B. Comay.\nCRS Report RL33404, Offshore Oil and Gas Development: Legal Framework , by Adam Vann.", "Management of federal forests presents several policy questions for Congress. For instance, there are questions about the appropriate level of timber harvesting on federal forest lands, particularly FS and BLM lands, and how to balance timber harvesting against the other statutory uses and values for these federal lands. Further, Congress may debate whether or how the agencies use timber harvesting or other active forest management techniques to achieve other resource-management objectives, such as improving wildlife habitat or improving a forest's resistance and resilience to disturbance events (e.g., wildfire, ice storm).\nFS manages 145 million acres of forests and woodlands in the National Forest System (NFS). In FY2018, approximately 2.8 billion board feet of timber and other forest products were harvested from NFS lands, at a value of $188.8 million. BLM manages approximately 38 million acres of forest and woodlands. The vast majority are public domain forests, managed under the principles of multiple use and sustained yield as established by FLPMA. The 2.6 million acres of Oregon & California (O&C) Railroad Lands in western Oregon, however, are managed under a statutory direction for permanent forest production, as well as watershed protection, recreation, and contributing to the economic stability of local communities and industries. In FY2018, approximately 177.8 million board feet of timber and other forest products were harvested from BLM lands, at a value of $41.3 million. The NPS and FWS have limited authorities to cut, sell, or dispose of timber from their lands and have established policies to do so only in certain cases, such as controlling for insect and disease outbreaks.\nIn the past few years, the ecological condition of the federal forests has been one focus of discussion. Many believe that federal forests are ecologically degraded, contending that decades of wildfire suppression and other forest-management decisions have created overgrown forests overstocked with biomass (fuels) that are susceptible to insect and disease outbreaks and can serve to increase the spread or intensity of wildfires. These observers advocate rapid action to improve forest conditions, including activities such as prescribed burning, forest thinning, salvaging dead and dying trees, and increased commercial timber production. Critics counter that authorities to reduce fuel levels are adequate, treatments that remove commercial timber degrade other ecosystem conditions and waste taxpayer dollars, and expedited processes for treatments may reduce public oversight of commercial timber harvesting. The 115 th Congress enacted several provisions intended to expedite specific forest management projects on federal land and encourage forest restoration projects across larger areas, including projects which involve nonfederal landowners.", "CRS Report R45696, Forest Management Provisions Enacted in the 115th Congress , by Katie Hoover et al.\nCRS Report R45688, Timber Harvesting on Federal Lands , by Anne A. Riddle.\nCRS Report R43872, National Forest System Management: Overview, Appropriations, and Issues for Congress , by Katie Hoover.\nCRS Report R42951, The Oregon and California Railroad Lands (O&C Lands): Issues for Congress , by Katie Hoover.", "", "Management of federal rangelands, particularly by BLM and FS, presents an array of policy matters for Congress. Several issues pertain to livestock grazing. There is debate about the appropriate fee that should be charged for grazing private livestock on BLM and FS lands, including what criteria should prevail in setting the fee. Today, these federal agencies charge fees under a formula established by law in 1978, then continued indefinitely through an executive order issued by President Reagan in 1986. The BLM and FS are generally charging a 2019 grazing fee of $1.35 per animal unit month (AUM) for grazing on their lands. Conservation groups, among others, generally seek increased fees to recover program costs or approximate market value, whereas livestock producers who use federal lands want to keep fees low to sustain ranching and rural economies.\nThe BLM and FS issue to ranchers permits and/or leases that specify the terms and conditions for grazing on agency lands. Permits and leases generally cover a 10-year period and may be renewed. Congress has considered whether to extend the permit/lease length (e.g., to 20 years) to strengthen the predictability and continuity of operations. Longer permit terms have been opposed because they potentially reduce the opportunities to analyze the impact of grazing on lands and resources.\nThe effect of livestock grazing on rangelands has been part of an ongoing debate on the health and productivity of rangelands. Due to concerns about the impact of grazing on rangelands, some recent measures would restrict or eliminate grazing, for instance, through voluntary retirement of permits and leases and subsequent closure of the allotments to grazing. These efforts are opposed by those who assert that ranching can benefit rangelands and who support ranching on federal lands for not only environmental but lifestyle and economic reasons. Another focus of the discussion on range health and productivity is the spread of invasive and noxious weeds. (See \" Invasive Species \" section, below.)", "There is continued congressional interest in management of wild horses and burros, which are protected on BLM and FS lands under the Wild Free-Roaming Horses and Burros Act of 1971. Under the act, the agencies inventory horse and burro populations on their lands to determine appropriate management levels (AMLs). Most of the animals are on BLM lands, although both BLM and FS have populations exceeding their national AMLs. BLM estimates the maximum AML at 26,690 wild horses and burros, and it estimates population on the range at 81,951. Furthermore, off the range, BLM provides funds to care for 50,864 additional wild horses and burros in short-term corrals, long-term (pasture) holding facilities, and eco-sanctuaries. The Forest Service estimates population on lands managed by the agency at 9,300 wild horses and burros.\nThe agencies are statutorily authorized to remove excess animals from the range and use a variety of methods to meet AML. This includes programs to adopt and sell animals, to care for animals off-range, to administer fertility control, and to establish ecosanctuaries. Questions for Congress include the sufficiency of these authorities and programs for managing wild horses and burros. Another controversial question is whether the agencies should humanely destroy excess animals, as required under the 1971 law, or whether Congress should continue to prohibit the BLM from using funds to slaughter healthy animals. Additional topics of discussion center on the costs of management, particularly the relatively high cost of caring for animals off-range. Other options focus on keeping animals on the range, such as by expanding areas for herds and/or changing the method for determining AML.", "CRS Report RS21232, Grazing Fees: Overview and Issues , by Carol Hardy Vincent.\nCRS In Focus IF11060, Wild Horse and Burro Management: Overview of Costs , by Carol Hardy Vincent.", "The abundance and diversity of recreational uses of federal lands and waters has increased the challenge of balancing different types of recreation with each other and with other land uses. One issue is how—or whether—fees should be collected for recreational activities on federal lands. The Federal Lands Recreation Enhancement Act (FLREA) established a recreation fee program for the four FLMAs and the Bureau of Reclamation. The authorization ends on September 30, 2020. FLREA authorizes the agencies to charge, collect, and spend fees for recreation on their lands, with most of the money remaining at the collecting site. The 116 th Congress faces issues including whether to let lapse, extend, make permanent, or amend the program. Current oversight issues for Congress relate to various aspects of agency implementation of the fee program, including the determination of fee changes, use of collected revenue, and pace of obligation of fee collections. Supporters of the program contend that it sets fair and similar fees among agencies and keeps most fees on-site for improvements that visitors desire. Some support new or increased fees or full extension of the program to other agencies, especially the U.S. Army Corps of Engineers. Among critics, some oppose recreation fees in general. Others assert that fees are appropriate for fewer agencies or types of lands, that the fee structure should be simplified, or that more of the fees should be used to reduce agency maintenance backlogs.\nAnother contentious issue is the use of off-highway vehicles (OHVs)—all-terrain vehicles, snowmobiles, personal watercraft, and others—on federal lands and waters. OHV use is a popular recreational activity on BLM and FS land, while NPS and FWS have fewer lands allowing them. OHV supporters contend that the vehicles facilitate visitor access to hard-to-reach natural areas and bring economic benefits to communities serving riders. Critics raise concerns about disturbance of nonmotorized recreation and potential damage to wildlife habitat and ecosystems. Issues for Congress include broad questions of OHV access and management, as well as OHV use at individual parks, forests, conservation areas, and other federal sites.\nAccess to opportunities on federal lands for hunting, fishing, and recreational shooting (e.g., at shooting ranges) is of perennial interest to Congress. Hunting and fishing are allowed on the majority of federal lands, but some contend they are unnecessarily restricted by protective designations, barriers to physical access, and agency planning processes. Others question whether opening more FLMA lands to hunting, fishing, and recreational shooting is fully consistent with good game management, public safety, other recreational uses, resource management, and the statutory purposes of the lands. Issues for Congress include questions of whether or how to balance hunting and fishing against other uses, as well as management of equipment used for hunting and fishing activities, including types of firearms and composition of ammunition and fishing tackle.", "CRS In Focus IF10151, Federal Lands Recreation Enhancement Act: Overview and Issues , by Carol Hardy Vincent.\nCRS Report R45103, Hunting and Fishing on Federal Lands and Waters: Overview and Issues for Congress , by R. Eliot Crafton.\nCRS In Focus IF10746, Hunting, Fishing, and Related Issues in the 115th Congress , by R. Eliot Crafton.", "Congress, the President, and some executive branch officials may establish individual designations on federal lands. Although many designations are unique, some have been more commonly applied, such as national recreation area, national scenic area, and national monument. Congress has conferred designations on some nonfederal lands, such as national heritage areas, to commemorate, conserve, and promote important natural, scenic, historical, cultural, and recreational resources. Congress and previous Administrations also have designated certain offshore areas as marine national monuments or sanctuaries. Controversial issues involve the types, locations, and management of such designations, and the extent to which some designations should be altered, expanded, or reduced.\nIn addition, Congress has created three cross-cutting systems of federal land designations to preserve or emphasize particular values or resources, or to protect the natural conditions for biological, recreation, or scenic purposes. These systems are the National Wilderness Preservation System, the National Wild and Scenic Rivers System, and the National Trails System. The units of these systems can be on one or more agencies' lands, and the agencies manage them within parameters set in statute.", "CRS Report R45340, Federal Land Designations: A Brief Guide , coordinated by Laura B. Comay.\nCRS Report RL33462, Heritage Areas: Background, Proposals, and Current Issues , by Laura B. Comay and Carol Hardy Vincent.\nCRS Report R41285, Congressionally Designated Special Management Areas in the National Forest System , by Katie Hoover.", "The Antiquities Act of 1906 authorizes the President to proclaim national monuments on federal lands that contain historic landmarks, historic and prehistoric structures, or other objects of natural, historic, or scientific interest. The President is to reserve \"the smallest area compatible with the proper care and management of the objects to be protected.\" Seventeen of the 20 Presidents since 1906, including President Trump, have used this authority to establish, enlarge, diminish, or make other changes to proclaimed national monuments. Congress has modified many of these proclamations, abolished some monuments, and created monuments under its own authority.\nSince the enactment of the Antiquities Act, presidential establishment of monuments sometimes has been contentious. Most recently, the Trump Administration has reviewed and recommended changes to some proclaimed national monuments, and President Trump has modified and established some monuments.\nCongress continues to address the role of the President in proclaiming monuments. Some seek to impose restrictions on the President's authority to proclaim monuments. Among the bills considered in recent Congresses are those to block monuments from being declared in particular states; limit the size or duration of withdrawals; require the approval of Congress, the pertinent state legislature, or the pertinent governor before a monument could be proclaimed; or require the President to follow certain procedures prior to proclaiming a new monument.\nOthers promote the President's authority to act promptly to protect valuable resources on federal lands that may be vulnerable, and they note that Presidents of both parties have used the authority for over a century. They favor the Antiquities Act in its present form, asserting that the courts have upheld monument designations and that large segments of the public support monument designations for the recreational, preservation, and economic benefits that such designations can bring.", "CRS Report R41330, National Monuments and the Antiquities Act , by Carol Hardy Vincent.\nCRS Report R44988, Executive Order for Review of National Monuments: Background and Data , by Carol Hardy Vincent and Laura A. Hanson.\nCRS Report R44886, Monument Proclamations Under Executive Order Review: Comparison of Selected Provisions , by Carol Hardy Vincent and Laura A. Hanson.", "In 1964, the Wilderness Act created the National Wilderness Preservation System, with statutory protections that emphasize preserving certain areas in their natural states. Units of the system can be designated only by Congress. Many bills to designate wilderness areas have been introduced in each Congress. As of March 1, 2019, there were 802 wilderness areas, totaling over 111 million acres in 44 states (and Puerto Rico) and managed by all four of the FLMAs. A wilderness designation generally prohibits commercial activities, motorized access, and human infrastructure from wilderness areas, subject to valid existing rights. Advocates propose wilderness designations to preserve the generally undeveloped conditions of the areas. Opponents see such designations as preventing certain uses and potential economic development in rural areas where such opportunities are relatively limited.\nDesignation of new wilderness areas can be controversial, and questions persist over the management of areas being considered for wilderness designation. FS reviews the wilderness potential of NFS lands during the forest planning process and recommends any identified potential wilderness areas for congressional consideration. Management activities or uses that may reduce the wilderness potential of a recommended wilderness area may be restricted.\nQuestions also persist over BLM wilderness study areas (WSAs). These WSAs are the areas BLM studied as potential wilderness and made subsequent recommendations to Congress regarding their suitability for designation as wilderness. BLM is required by FLPMA to protect the wilderness characteristics of WSAs, meaning that many uses in these areas are restricted or prohibited. Congress has designated some WSAs as wilderness, and has also included legislative language releasing BLM from the requirement to protect the wilderness characteristics of other WSAs.\nFS also manages approximately 58 million acres of lands identified as \"inventoried roadless areas.\" These lands are not part of the National Wilderness Preservation System, but certain activities—such as road construction or timber harvesting—are restricted on these lands, with some exceptions. The Clinton and George W. Bush Administrations each promulgated different roadless area regulations. Both were heavily litigated; however, the Clinton policy to prohibit many activities on roadless areas remains intact after the Supreme Court refused to review a lower court's 2012 decision striking down the Bush rule. In 2018, the Forest Service initiated a rulemaking process to develop a new roadless rule specific to the national forests in the state of Alaska.", "CRS Report RL31447, Wilderness: Overview, Management, and Statistics , by Katie Hoover.\nCRS Report R41610, Wilderness: Issues and Legislation , by Katie Hoover and Sandra L. Johnson.", "Congress established the National Wild and Scenic Rivers System with the passage of the Wild and Scenic Rivers Act of 1968. The act established a policy of preserving designated free-flowing rivers for the benefit and enjoyment of present and future generations. River units designated as part of the system are classified and administered as wild, scenic, or recreational rivers, based on the condition of the river, the amount of development in the river or on the shorelines, and the degree of accessibility by road or trail at the time of designation. The system contains both federal and nonfederal river segments. Typically, rivers are added to the system by an act of Congress, but may also be added by state nomination with the approval of the Secretary of the Interior. As of March 1, 2019, there are more than 200 river units with roughly 13,300 miles in 40 states and Puerto Rico, administered by all four FLMAs, or by state, local, or tribal governments.\nDesignation and management of lands within river corridors has been controversial in some cases. Issues include concerns about private property rights and water rights within designated river corridors. Controversies have arisen over state or federal projects prohibited within a corridor, such as construction of major highway crossings, bridges, or other activities that may affect the flow or character of the designated river segment. The extent of local input in developing river management plans is another recurring issue.\nThe National Trails System Act of 1968 authorized a national system of trails, across federal and nonfederal lands, to provide additional outdoor recreation opportunities and to promote access to the outdoor areas and historic resources of the nation. The system today consists of four types of trails and can be found in all 50 states, the District of Columbia, and Puerto Rico. This includes 11 national scenic trails and 19 national historic trails that covers roughly 55,000 miles. In addition, almost 1,300 national recreation trails and 7 connecting-and-side trails have been established administratively as part of the system. National trails are administered by NPS, FS, and BLM, in cooperation with appropriate state and local authorities. Most recreation uses are permitted, as are other uses or facilities that do not substantially interfere with the nature and purposes of the trail. However, motorized vehicles are prohibited on many trails.\nOngoing issues for Congress include whether to designate additional trails, whether or how to balance trail designation with other potential land uses, what activities should be permitted on trails, and what portion of trail funding should be from federal versus nonfederal sources. Some Members have expressed interest in new types of trails for the system, such as \"national discovery trails,\" which would be interstate trails connecting representative examples of metropolitan, urban, rural, and backcountry regions.", "CRS Report R42614, The National Wild and Scenic Rivers System: A Brief Overview , by Sandra L. Johnson and Laura B. Comay.\nCRS Report R43868, The National Trails System: A Brief Overview , by Sandra L. Johnson and Laura B. Comay.", "The National Marine Sanctuaries Act (NMSA) authorizes the National Oceanic and Atmospheric Administration (NOAA) to designate specific areas for protection of their ecological, aesthetic, historical, cultural, scientific, or educational qualities. The NOAA Office of National Marine Sanctuaries serves as the trustee for the 13 national marine sanctuaries (NMSs) designated under NMSA. Sanctuaries are located in marine areas and waters under state or federal jurisdiction. Sites are designated for specific reasons, such as protecting cultural artifacts (e.g., sunken vessels), particular species (e.g., humpback whales), or unique areas and entire ecosystems (e.g., Monterey Bay). Two areas currently under consideration for designation are Mallows Bay, Potomac River, MD, and Lake Michigan, WI.\nThe NMSA requires the development and implementation of management plans for each sanctuary, which provide the basis for managing or limiting incompatible activities. For most NMSs, questions related to developing or amending management plans have focused on identifying and limiting incompatible activities.\nFive large marine national monuments have been designated by the President under the Antiquities Act, the most recent being the Northeast Canyons and Seamounts Marine National Monument in 2016, the first designated in the Atlantic Ocean. Within the monuments, the removing, taking, harvesting, possessing, injuring, or damaging of monument resources is prohibited except as provided under regulated activities. For example, some exceptions have been provided for recreational fishing and subsistence use within certain marine national monuments. All five marine national monuments are managed cooperatively by the Department of the Interior (FWS) and Department of Commerce (NOAA).\nOne of the main differences between national marine sanctuaries and marine national monuments is their designation process. While monuments are designated by presidential proclamation or through congressional legislation, the NMS designation process is an administrative action, requiring nomination, public scoping, public comment, and congressional and state review prior to the Secretary of Commerce's approval of the designation. Some stakeholders from extractive industries, such as the fishing industry, have voiced concerns that the national monument designation process does not provide opportunities to examine the tradeoffs between resource protection and resource use. On the other hand, some environmentalists have voiced concerns with the low number of NMS designations and what they see as inadequate protection of some sanctuary resources, such as fish populations. Some observers question whether the overriding purpose of the NMSA is to preserve and protect marine areas or to create multiple use management areas. Most agree that the designation and management of national marine sanctuaries and marine national monuments will continue to inspire debate over the role of marine protected areas. The Trump Administration has reviewed and recommended changes to the size and management of some marine national monuments.", "Each FLMA has a responsibility to manage the plant and animal resources under its purview. An agency's responsibilities may be based on widely applicable statutes or directives, including the Endangered Species Act, the Migratory Bird Treaty Act, the Fish and Wildlife Coordination Act, executive orders, and other regulations. Species management could also be based on authorities specific to each FLMA. In addition, each FLMA must work closely with state authorities to address species management issues.\nIn the case of the National Wildlife Refuge System (administered by FWS), the conservation of plants and animals is the mission of the system, and other uses are allowed to the extent they are compatible with that mission and any specific purposes of an individual system unit. While most refuges are open for public enjoyment, some refuges or parts of refuges (such as island seabird colonies) might be closed to visitors to preserve natural resources. For the National Park System, resource conservation (including wildlife resources) is part of the National Park Service's dual mission, shared with the other goal of public enjoyment. The FS and BLM have multiple use missions, with species management being one of several agency responsibilities.\nThe federal land management agencies do not exercise their wildlife authorities alone. Often, Congress has directed federal agencies to share management of their wildlife resources with state agencies. For example, where game species are found on federal land and hunting is generally allowed on that land, federal agencies work with states on wildlife censuses and require appropriate state licenses to hunt on the federal lands. In addition, federal agencies often cooperate with states to enhance wildlife habitat for the benefit of both jurisdictions.\nThe four FLMAs do not each maintain specific data on how many acres of land are open to hunting, fishing, and recreational shooting. However, both BLM and FS are required to open lands under their administration to hunting, fishing, and recreational shooting, subject to any existing and applicable law, unless the respective Secretary specifically closes an area. Both agencies estimate that nearly all of their lands are open to these activities. FWS is required to report the number of refuges open to hunting and fishing as well as the acreage available for hunting on an annual basis. As of FY2017, there were 277 refuges open to fishing and 336 refuges open to hunting, providing access to 86 million acres for hunting. Congress frequently considers species management issues, such as balancing land and resources use, providing access to hunting and fishing on federal lands, and implementing endangered species protections.", "The protection of endangered and threatened species—under the 1973 Endangered Species Act (ESA) —can be controversial due to balancing the needs for natural resources use and development and species protection. Under the ESA, all federal agencies must \"utilize their authorities in furtherance of the purposes of this Act by carrying out programs for the conservation of endangered species and threatened species listed pursuant to ... this Act.\" As a result, the FLMAs consider species listed as threatened or endangered in their land management plans, timber sales, energy or mineral leasing plans, and all other relevant aspects of their activities that might affect listed species. They consult with FWS (or NMFS, for most marine species and for anadromous fish such as salmon) about those effects. The majority of these consultations result in little or no change in the actions of the land managers.\nCongress has considered altering ESA implementation in various ways. For example, bills were introduced in the 115 th Congress that would have redefined the process for listing a species, defined the types of data used to evaluate species, and changed the types of species that can be listed under ESA, among others. Debate has also centered on certain species, particularly where conservation of species generates conflict over resources in various habitats. Examples of these species include sage grouse (energy and other resources in sage brush habitat), grey wolves (ranching), and polar bears (energy development in northern Alaska), among others. Proposals resulting from issues regarding certain species include granting greater authority to states over whether a species may be listed, changing the listing status of a species, and creating special conditions for the treatment of a listed species.", "CRS Report RL31654, The Endangered Species Act: A Primer , by Pervaze A. Sheikh.\nCRS Report RL32992, The Endangered Species Act and \"Sound Science , \" by Pervaze A. Sheikh.\nCRS Report R40787, Endangered Species Act (ESA): The Exemption Process , by Pervaze A. Sheikh.", "While habitat loss is a major factor in the decline of species, invasive species have long been considered the second-most-important factor. Invasive species—nonnative or alien species that cause or are likely to cause harm to the environment, the economy, or human health upon introduction, establishment, and spread—have the potential to affect habitats and people across the United States and U.S. territories, including on federal lands and waters. For example, gypsy moths have been a pest in many eastern national forests as well as Shenandoah National Park. A fungus causing white-nose syndrome has caused widespread mortality in bat populations in the central and eastern states, including those in caves on national park and national forest lands. Burmese pythons prey on native species of birds, mammals, and reptiles in south Florida, including in the Everglades National Park. Many stakeholders believe the most effective way to deal with invasive species is to prevent their introduction and spread. For species already introduced, finding effective management approaches is important, though potentially difficult or controversial. Control efforts can be complex and expensive, and may require collaboration and coordination between multiple stakeholders.\nAddressing invasive species is a responsibility shared by several federal agencies, in addition to the FLMAs. These agencies are required to plan and carry out control activities and to develop strategic plans to implement such activities. Control activities are required to manage invasive populations, prevent or inhibit the introduction and spread invasive species, and to restore impacted areas. Further, agencies must consider both ecological and economic aspects in developing their strategic plans and implementing control activities, and they must coordinate with state, local, and tribal representatives. Legislation to address the introduction and spread of invasive species as well as the impacts that arise from these species is of perennial interest to Congress.", "CRS Report R43258, Invasive Species: Major Laws and the Role of Selected Federal Agencies , by Renée Johnson, R. Eliot Crafton, and Harold F. Upton.\nCRS In Focus IF11011, Invasive Species: A Brief Overview , by R. Eliot Crafton and Sahar Angadjivand.", "Wildfire is a concern because it can lead to loss of human life, damage communities and timber resources, and affect soils, watersheds, water quality, and wildlife. Management of wildfire—an unplanned and unwanted wildland fire—includes preparedness, suppression, fuel reduction, site rehabilitation, and more. A record-setting 10.1 million acres burned in 2015 due to wildfire, and 10.0 million acres burned two years later in 2017. In 2018, 8.8 million acres burned.\nThe federal government is responsible for managing wildfires that begin on federal land. FS and DOI have overseen wildfire management, with FS receiving approximately two-thirds of federal funding. Wildfire management funding—including supplemental appropriations—has averaged $3.8 billion annually over the last 10 years (FY2009 through FY2018), ranging from a low of $2.7 billion in FY2012 to a high of $4.9 billion in both FY2016 and FY2018.\nCongressional activity regarding wildfire management typically peaks during the fire season, and during the early part of the budget process. Legislative issues for Congress include oversight of the agencies' fire management activities and other wildland management practices that have altered fuel loads over time, and consideration of programs and processes for reducing fuel loads. Funding also is a perennial concern, particularly for suppression purposes, an activity for which costs are generally rising but vary annually and are difficult to predict. The 115 th Congress enacted a new adjustment to the discretionary spending limits for wildfire suppression operations, starting in FY2020. This means that Congress can appropriate some wildfire suppression funds—subject to certain criteria—effectively outside of the discretionary spending limits. There is also congressional interest in the federal roles and responsibilities for wildfire protection, response, and damages, including activities such as air tanker readiness and efficacy and liability issues. Other issues include the use of new technologies for wildfire detection and response, such as unmanned aircrafts. Another issue is the impact of the expanding wildland-urban interface (WUI), which is the area where structures (usually homes) are intermingled with or adjacent to vegetated wildlands (forests or rangelands). The proximity to vegetated landscapes puts these areas at a potential risk of experiencing wildfires and associated damage. Approximately 10% of all land within the lower 48 states is classified as WUI.", "CRS In Focus IF10244, Wildfire Statistics , by Katie Hoover.\nCRS In Focus IF10732, Federal Assistance for Wildfire Response and Recovery , by Katie Hoover.\nCRS Report R44966, Wildfire Suppression Spending: Background, Issues, and Legislation in the 115th Congress , by Katie Hoover and Bruce R. Lindsay.\nCRS Report R45005, Wildfire Management Funding: Background, Issues, and FY2018 Appropriations , by Katie Hoover, Wildfire Management Funding: Background, Issues, and FY2018 Appropriations, by Katie Hoover." ], "depth": [ 0, 1, 1, 2, 2, 3, 2, 3, 1, 2, 2, 3, 2, 3, 2, 3, 1, 2, 1, 2, 3, 4, 3, 4, 2, 2, 2, 3, 3, 4, 1, 2, 1, 2, 2, 3, 1, 2, 1, 2, 2, 3, 2, 3, 2, 3, 2, 1, 2, 3, 2, 3, 1, 2 ], "alignment": [ "h0_title h2_title h1_title h3_title", "h0_full h3_full h2_full h1_full", "h0_full h3_full h2_title", "", "h3_full", "", "h2_full", "", "", "", "", "", "", "", "", "", "h3_full", "", "h0_full", "", "", "", "", "", "", "", "", "", "", "", "h0_full h3_full", "", "", "", "", "", "", "", "h2_title", "", "", "", "", "", "h2_full", "", "", "h3_full", "", "", "", "", "", "" ] }
{ "question": [ "How does Article IV of the US Constitution regard federal property?", "What kinds of issues does Congress face regarding federal land?", "What concerns do these issues cover?", "What is the scope of these issues?", "What federal land exists in the US?", "How are federal lands administered?", "What other parts do federal lands include?", "How does BLM administer these extensive parts of federal estate?", "How are these other resources distributed in federal lands?", "What topics does this report address?", "What are common concerns about federal estate?", "How does congress address such questions?", "What protections does Congress consider for federal estate?", "How are federal land uses questioned?", "What use labels do federal lands have?", "What is a dominant use land?", "How can dominant uses be hard to define?", "How does this situation cause conflict?", "How does Congress address federal land use?" ], "summary": [ "The Property Clause in the U.S. Constitution (Article IV, §3, clause 2) grants Congress the authority to acquire, dispose of, and manage federal property.", "The 116th Congress faces multiple policy issues related to federal lands and natural resources.", "These issues include how much and which land the government should own and how lands and resources should be used and managed.", "These issues affect local communities, industries, ecosystems, and the nation.", "There are approximately 640 million surface acres of federally owned land in the United States.", "Four agencies (referred to in this report as the federal land management agencies, or FLMAs) administer approximately 608 million surface acres (~95%) of federal lands: the Forest Service (FS) in the Department of Agriculture (USDA), and the Bureau of Land Management (BLM), U.S. Fish and Wildlife Service (FWS), and National Park Service (NPS), all in the Department of the Interior (DOI).", "The federal estate also extends to energy and mineral resources located below ground and offshore.", "BLM manages the onshore subsurface mineral estate and the Bureau of Ocean Energy Management, also in DOI, manages access to approximately 1.7 billion offshore acres in federal waters on the U.S. outer continental shelf.", "However, not all of these onshore or offshore acres can be expected to contain extractable mineral and energy resources.", "This report introduces some of the broad themes and issues Congress has considered when addressing federal land policy and resource management.", "These include questions about the extent and location of the federal estate.", "For example, typically Congress considers both measures to authorize and fund the acquisition of additional lands and measures to convey some land out of federal ownership or management.", "Other issues for Congress include whether certain lands or resources should have additional protections, for example, through designation as wilderness or national monuments, or protection of endangered species and their habitat.", "Other policy questions involve how federal land should be used.", "Certain federal lands are considered primary- or dominant-use lands as specified in statute by Congress.", "For example, the dominant-use mission of the National Wildlife Refuge System is the conservation of fish, wildlife, and plant resources and associated habitats for the benefit of current and future Americans, and the dual-use mission of the National Park System is to conserve unique resources and provide for their use and enjoyment by the public.", "BLM and FS lands, however, have a statutory mission to balance multiple uses: recreation, grazing, timber, habitat and watershed protection, and energy production, among others.", "Conflicts arise as users and land managers attempt to balance these uses. Congress often addresses bills to clarify, prioritize, and alter land uses, including timber harvesting, livestock grazing, and recreation (motorized and nonmotorized).", "Congress often addresses bills to clarify, prioritize, and alter land uses, including timber harvesting, livestock grazing, and recreation (motorized and nonmotorized). With respect to energy uses, in addition to questions about balancing energy production against other uses, other questions include how to balance traditional and alternative energy production on federal lands." ], "parent_pair_index": [ -1, -1, 1, 1, -1, -1, -1, 2, 2, -1, -1, 1, -1, -1, -1, 1, 1, 3, -1 ], "summary_paragraph_index": [ 0, 0, 0, 0, 1, 1, 1, 1, 1, 2, 2, 2, 2, 3, 3, 3, 3, 3, 3 ] }
CRS_R42386
{ "title": [ "", "Introduction", "Background", "What Is a Mandatory Minimum?", "Constitutional Considerations", "Legislative Authority", "Cruel and Unusual Punishment", "Separation of Powers", "Equal Protection", "Recidivism, Ex Post Facto and Double Jeopardy", "Federal Enclaves and Prisons", "Chapter 109A Offenses", "Definitions", "Aggravated Sexual Abuse", "Sexual Abuse", "Abusive Sexual Contact", "Repeated Sex Offenses Against Children", "Restitution", "Supervised Release", "Travel and Commerce", "Chapter 117", "Coercion and Enticement", "Transportation of a Minor", "Travel to Sexually Abuse a Child", "Commercial Sex Trafficking of a Child or by Force", "Murder in the Course of Certain Sexual Offenses", "Restitution and Supervised Release", "Child Pornography", "Production of Child Pornography", "Subsection 2251(a): Use of a Child to Produce", "Subsection 2251(b): Permitting the Use of a Child to Produce", "Subsection 2251(c): Overseas Production", "Subsection 2251(d): Advertising", "Selling or Buying Children for Pornographic Purposes", "Certain Activities Involving Child Pornography (Real Child)", "Transporting", "Receipt or Distribution", "Sale or Possession With Intent to Sell", "Recidivist Possession", "Certain Activities Involving Child Pornography (Real and Virtual)", "Transporting", "Receipt or Distribution", "Reproduction or Promotion", "Sale or Intent to Sell", "Offering Child Pornography to a Child", "Recidivist Possession", "Child Molesting Enterprises", "Restitution and Supervised Release" ], "paragraphs": [ "", "A mandatory minimum sentencing statute is a law that requires a judge to impose a statutorily prescribed sentence. It is most commonly understood to mean a statute that requires imposition of a specific minimum term of imprisonment. The statutes that outlaw most federal crimes do not call for a mandatory minimum sentence. Several statutes that outlaw federal sex offenses insist upon a minimum term of imprisonment. This is a brief overview of those provisions.", "Mandatory minimum sentences have been with us since the dawn of the Republic. The First Congress made mandatory capital offenses of treason, murder in a federal enclave, piracy, forgery, and counterfeiting. A few years later, the Sedition and Logan Acts arrived with six- month mandatory minimum terms of imprisonment. Congress made rape committed within the maritime jurisdiction of the United States a mandatory capital offense in 1825. So the punishment remained until the 1948 recodification of federal criminal law, when rape became punishable by death or imprisonment for any term of years or for life.\nCongress increased the number of federal sex offenses and their attendant mandatory minimum sentences beginning in 1978 with the enactment of the first federal child pornography statutes: 18 U.S.C. 2251, 2252. It filled out the complement of federal sex offenses with mandatory minimum sentences of imprisonment at fairly regular intervals thereafter.\nIn United States Sentencing Commission survey which addressed mandatory minimum sentences in child pornography cases but not other sex offense cases, a majority of the judges responding to a United States Sentencing Commission survey thought that the mandatory minimum sentences for production and distribution of child pornography and other child exploitation offenses were generally appropriate. Well over two-thirds, however, considered those for receipt of child pornography too high.\nThe Commission's report on mandatory minimum sentencing statutes noted that its \"review of available sentencing data [relating to sex offenses] indicates that further study of these penalties is needed before it can offer specific recommendations in this area.\" It concluded preliminarily, however, that \"the mandatory minimum penalties for certain non-contact child pornography offenses may be excessively severe and as a result are being applied inconsistently.\"", "There may be reasonable disagreement over what constitutes a mandatory minimum sentencing statute. Even when limited to statutes that require a minimum term of imprisonment, questions may arise with respect to: (1) statutes like 18 U.S.C. 2241(c) (sexual abuse of a child) that requires offenders to be imprisoned for not less than 30 years or for life; (2) statutes like 18 U.S.C. 2242 (sexual abuse of an incapacitated victim) that requires offenders to be fined and imprisoned for any term of years or for life; and (3) statutes like 18 U.S.C. 2241(a)(aggravated sexual abuse) that requires offenders to be fined, imprisoned for any term of years or life, or both.\nSubsection 2241(c) certainly appears to require a mandatory minimum sentence (\"imprisoned not less than 30 years\"). Section 2242 also appears to require a mandatory minimum sentence, absent the dubious conclusion that the phrase, \"imprisonment for any term of years\" authorizes a court to impose a sentence of imprisonment for some particular number of years with the permissible choices ranging from zero to infinity.\nThe mandatory minimum status of subsection 2241(a)(\"fine [or] imprisonment for any term of years\") seems more debatable. The subsection can hardly be said to require a mandatory minimum sentence of imprisonment, if a court is free to impose a fine instead. Moreover, in another context, the courts have concluded that in the face of such language a court is free to impose a fine instead of a term of imprisonment. Nevertheless, it is treated as requiring a mandatory minimum sentence here, because as a practical matter a court is virtually required to impose a sentence of imprisonment following conviction for a crime as serious as a violation of subsection 2241(a).", "Defendants sentenced to mandatory minimum terms of imprisonment have challenged them on a number of constitutional grounds ranging from Congress's legislative authority, to cruel and unusual punishment, through ex post facto and double jeopardy, to equal protection and due process. Each constitutional provision defines the outer boundaries that a federal criminal statute must be crafted to honor. Most statutes and the penalties they impose have survived scrutiny.", "The federal government is a creature of the Constitution. It enjoys only such powers as can be traced to the Constitution. All other powers are reserved to the states or to the people. The Constitution grants Congress authority to enact legislation \"necessary and proper\" to the execution of those powers which it vests in Congress or in any officer or department of the federal government. Among the powers which the Constitution bestows upon Congress are the powers to define and punish felonies committed upon the high seas, to exercise exclusive legislative authority over certain federal territories and facilities, to make rules governing the armed forces, and to regulate interstate and foreign commerce, and to enact legislation necessary and proper for the execution of those and other constitutionally granted powers.\nMany of the existing federal sex offenses with mandatory minimum sentencing requirements were enacted pursuant to Congress's legislative authority over crimes occurring on the high seas or within federal enclaves, or to its power to regulate commerce.\nThe Supreme Court has explained that under the commerce clause: \"Congress may regulate the use of the channels of interstate commerce. Second, Congress is empowered to regulate and protect the instrumentalities of interstate commerce, or persons or things in interstate commerce, even though the threat may come only from intrastate activities. Finally, Congress' commerce authority includes the power to regulate those activities having a substantial relation to interstate commerce.\" When a statute falls for want of legislative authority, the penalties it would impose fall with it. This has yet to occur in the area of mandatory minimum sentences.", "The Eighth Amendment bars mandatory capital punishment statutes. And although the case law is somewhat uncertain, it seems the Amendment condemns any punishment that is \"grossly disproportionate\" to the misconduct for which it is imposed. A sentence imposed under a mandatory minimum federal sex offense statute might be \"grossly disproportionate\" to the offense under extreme circumstances, but the sentences in most cases are not.", "While \"it remains a basic principle of our constitutional scheme that one branch of the Government may not intrude upon the central prerogatives of another,\" the Supreme Court has observed that \"Congress has the power to define criminal punishments without giving the courts any sentencing discretion.\" Thus, the lower federal courts have regularly upheld mandatory minimum statutes when challenged on separation of powers grounds, and the Supreme Court found no separation of powers infirmity in the federal sentencing guideline system, a system which might have been thought to produce its own form of mandatory minimums.", "The Fifth Amendment due process clause embodies an equal protection component that cabins federal action in the manner that the Fourteenth Amendment equal protection clause cabins state action. Equal protection precludes punishing a defendant more severely than others similarly situated, when the distinction is based on some constitutionally suspect classification such as race or alternatively when the distinction has no rational basis. However, a defendant convicted of a federal sex crime has no equal protection claim, simply because he might have been less severely punished under state law or because he might have been charged with a less serious federal offense.\nEqual protection also prohibits punishment, under a facially neutral statute, that is intended to have an adverse impact on a constitutionally protected class. Yet, the presence of a rational basis for a classification will belie an intent to adversely impact. Thus, Native Americans, who may be more likely to come within the reach of federal criminal laws applicable on federal lands, have no equal protection claim as long as Congress had a rational basis for enacting such laws.", "Defendants whose prior convictions trigger a mandatory minimum sentencing requirement have occasionally objected on double jeopardy or ex post facto grounds. Double jeopardy bans trying or punishing a defendant twice for the same offense. Ex post facto bars retroactive criminal statutes. More precisely, the double jeopardy clause \"protects against successive prosecutions for the same offense after acquittal or conviction and against multiple criminal punishments for the same offense.\" The ex post facto clauses, on the other hand, preclude laws that \"retroactively alter the definition of crimes or [retroactively] increase the punishment for criminal acts.\"\nAs the Supreme Court explained when it rejected the double jeopardy challenge to the California \"three strikes\" statute:\nHistorically, we have found double jeopardy protections inapplicable to sentencing proceedings, because the determinations at issue do not place a defendant in jeopardy for an \"offense,\" see e.g., Nichols v. United States , 511 U.S. 738, 747 (1994)(noting that repeat-offender laws \"penaliz[e] only the last offense committed by the defendant\"). Nor have sentence enhancements been construed as additional punishment for the previous offense; rather, they act to increase a sentence \"because of the manner in which [the defendant] committed the crime of conviction.\" An enhanced sentence imposed on a persistent offender thus \"is not to be viewed as either a new jeopardy or additional penalty for the earlier crimes\" but as \"a stiffened penalty for the latest crime which is considered to be an aggravated offense because a repetitive one.\" Monge v. California , 524 U.S. at 728 (some citations omitted).\nCourts confronted with ex post facto challenges to recidivist statutes have similarly focused upon the \"latest crime\" and not upon the first.", "Most of the mandatory minimum penalties for federal sex offenses appear in one of three chapters of title 18 of the United States Code. Chapter 109A outlaws rape and other forms of sexual abuse and sexual contact when committed in federal enclaves or federal prisons. Chapter 110 outlaws child pornography. Chapter 117 outlaws sexual activities that have travel or commercial attributes.\nChapter 109A reaches a relatively wide range of sexual misconduct under relatively narrow jurisdiction circumstances. It applies in the special maritime and territorial jurisdiction of the United States. It applies as well in federal prisons and other institutions where individuals are held in federal custody by contract or agreement with federal authorities, regardless of whether they are located within the territorial jurisdiction of the United States.\nWithin the United States, the \"territorial jurisdiction of the United States\" refers to those areas over which Congress enjoys state-like legislative jurisdiction. It includes some, or parts of some, military installations, Indian reservations, national parks, and national forests. Outside of the United States, it includes overseas federal facilities and residences with respect to offenses committed by or against U.S. nationals. Felonies proscribed when committed within the territorial jurisdiction of the United States are also proscribed when committed outside the United States by members of the Armed Forces, or employees of the Armed Forces, or those accompanying the Armed Forces.\nThe \"maritime jurisdiction of the United States\" includes vessels of U.S. registry, vessels owned by Americans, and vessels scheduled to arrive in, or depart from, the United States with respect to crimes committed by or against a U.S. national.\nProsecution of the mandatory minimum offenses of chapter 109A and each of the other mandatory minimum federal sex offenses may begin at anytime. There is no applicable statute of limitations, although in rare instances due process may preclude prosecution of a stale complaint.", "Chapter 109A violations trigger mandatory minimum sentencing provisions when:\nthe offender commits or attempts to commit a sexual act by force or threat or by rendering the victim unconscious or intoxicated (aggravated sexual abuse); a sexual act is committed against a minor under the age of 12, or under the age of 16, if is there is disparity of 4 years or more between the age of the victim and the age of the offender (aggravated sexual abuse of a child); the offender commits or attempts to commit a sexual act by threat or when the victim is incapacitated (sexual abuse); had the sexual contact been a sexual act, it would have been punishable as sexual abuse or aggravated sexual abuse (abusive sexual contact); or the offense is a federal sex offense, including an offense subject to a mandatory minimum sentence, committed against a minor by an offender with a prior state or federal conviction for a sex offense committed against a minor (repeated sexual offense).", "Chapter 109A offenses each involve some form of \"sexual act\" or \"sexual contact.\" The term \"sexual act\" includes oral sexual activity as well as sexual penetration by sex organ, foreign object, or digitally. It also covers touching the genitalia of a child under the age of 16 for purposes of humiliation or sexual gratification. The term \"sexual contact\" includes touching any of the sexually sensitive areas of the body of another for purposes of humiliation or sexual gratification.", "Section 2241 of chapter 109A proscribes two types of aggravated sexual abuse, each punishable by a mandatory minimum term of imprisonment. First, under the prison and territorial conditions noted above, subsections 2241(a) and (b) outlaw causing, or attempting to cause, another person to engage in a sexual act, when it is accomplished by force, threat, rendering the victim unconscious, or by substantially incapacitating the victim using drugs or intoxicants. Such misconduct is punishable by fine, or by imprisonment for any term of years or for life, or by both a fine and imprisonment, regardless of the age of the victim.\nSecond, under prison and territorial conditions or when the offender crosses a state border with intent to commit the offense, subsection 2241(c) criminalizes engaging or attempting to engage in a sexual act with a child under 12 years of age (or under 16 years of age, if the offender is 4 years or more the victim's senior). The offense is punishable by imprisonment for not less than 30 years or for life. The mandatory minimum sentencing requirement cannot be overcome by the general sentencing instruction in 18 U.S.C. 3553(a) that a sentence imposed should be no greater than necessary to serve the sentencing purposes identified in that section. The offense is punishable by life imprisonment, if the offender has a prior comparable federal or state conviction.\nA defendant may be guilty of an attempted violation of subsection 2241(a), (b), or (c), when he intends to commit the offense and takes a substantial step towards its completion. The prosecution under subsection 2241(c) need not show that the defendant knew that the victim was under 12 years of age, and the greater protection afforded victims under the age of 12 offends neither the equal protection nor due process clauses of the Constitution. The courts have held that a 30-year mandatory minimum sentence for violation of subsection 2241(c) is not so disproportionate as to constitute unconstitutional cruel and unusual punishment, nor does its imposition upon Native Americans violate the equal protection clause. Although abusive sexual contact is a lesser included offense of aggravated sexual abuse, both may be prosecuted without offending the double jeopardy clause, when they involve distinct criminal acts, even if occurring in the same criminal episode.", "Section 2242 makes sexual abuse a federal crime when comparable jurisdiction conditions exist, that is, when it is committed within the special maritime and territorial jurisdiction of the United States or equivalent overseas locations or in a federal prison or other federal custodial institution. Sexual abuse is punishable by a fine and a mandatory minimum term of imprisonment for any term of years or for life, regardless of the age of the victim. The offense may be committed by using or attempting to use threats to cause another to engage in a sexual act or by engaging or attempting to engage in a sexual act with an incapacitated victim. A victim who is asleep or incapacitated by intoxication is considered incapacitated for purposes of sexual abuse. A victim with reduced mental capacity may also be considered more susceptible to threats.", "Section 2244 proscribes abusive sexual contact, that is, engaging in sexual contact (touching) under circumstances (threats, force, etc.) that would constitute abuse under section 2241 or 2242 had the contact been a sexual act (penetration). Abusive sexual contact is punishable by a fine and a mandatory term of imprisonment for any term of years or for life when engaging in a sexual act under similar circumstances would have violated subsection 2241(c)(victim under 12 or under 16 if the offender is more than 4 years the victim's senior). Abusive sexual contact is not otherwise punishable by a mandatory minimum term of imprisonment.", "A defendant, guilty of a \"federal sex offense\" against a child and previously convicted of a federal or state felonious sex offense committed against a child, must be sentenced to life imprisonment under 18 U.S.C. 3559(e). A child for purposes of subsection 3559(e) is a minor under the age of 17. The federal predicate offenses for purposes of the subsection include both violations of chapter 109A and similar federal and state offenses, that is, violations of \"section 1591 (relating to sex trafficking of children), 2241 (relating to aggravated sexual abuse), 2242 (relating to sexual abuse), 2244(a)(1) (relating to abusive sexual contact), 2245 (relating to sexual abuse resulting in death), 2251 (relating to sexual exploitation of children), 2251A (relating to selling or buying of children), 2422(b) (relating to coercion and enticement of a minor into prostitution), 2423(a) (relating to transportation of minors);\" or any state equivalent felony.\nThe defendant must also have been convicted and sentenced prior to the commission of the second offense. An equivalent state offense qualifies as a subsection 3559(e) predicate when it consists of conduct that would be a federal offense should it occur under one of two jurisdictional circumstances—(1) the offense involves use of the mails or interstate commerce, or (2) the offense occurs on a federal enclave, prison, or facility, or in Indian country. Although the predicate state offense must be committed against a child, the victim's status as a child need not be an element of the state offense. Moreover, the state predicate offense need have no federal nexus at the time of commission; it is enough that it would have been a federal offense under the designated jurisdictional circumstances.\nA qualified defendant must be sentenced under subsection 3559(e), notwithstanding the fact that he might otherwise have been sentenced under the less severe recidivist provisions of 18 U.S.C. 2551(e).\nSubsection 3559(e) provides defendants with a narrow affirmative defense when either the offense of conviction or the predicate offense arises under subsection 2422(b)(relating to inducing another to engage in prostitution) or under subsection 2423(a)(relating to transportation of a child for illicit sexual purposes). To claim the benefits of the defense, an accused must show by clear and convincing evidence that \"(A) the sexual act or activity was consensual and not for the purpose of commercial or pecuniary gain; (B) the sexual act or activity would not be punishable by more than one year in prison under the law of the State in which it occurred; or (C) no sexual act or activity occurred.\"", "The victims of the sexual abuse and sexual contact offenses punishable by mandatory minimum terms of imprisonment under chapter 109A are entitled to restitution. As a general rule, federal courts may not order restitution absent express statutory authority. Congress, however, has authorized the courts to order restitution for the victims of a wide range of federal crimes. Moreover, section 2248 of chapter 109A demands that victims be compensated for \"full amount\" of the losses attributed to the offense, including an even more extensive array of expenses than might be available under the general provisions. When the victim is a child, coverage extends to costs incurred by a child's parents \"acting in their capacity as [such and] incurred as a result of [the] offense.\"", "Federal courts may impose a term of supervised release at the time of sentencing. They will do so in most serious sex offense cases. Supervised release is not unlike parole, except that supervision is imposed in addition to, rather than in lieu of, time served in prison. For most federal crimes, the maximum term of supervised release is no more than 5 years. For the mandatory minimum sentencing offenses of chapter 109A and other serious federal sex offenses, the term of supervised release is \"any term of years not less than 5, or life.\" The court may sentence the offender to an additional term of imprisonment for failure to comply with the terms imposed as a condition of supervised release.\nIf the court elects to issue a supervised release order, the order must require offenders to (1) refrain from criminal activity; (2) comply with sex offender registration requirements; (3) cooperate with authorized collection of DNA samples; and (4) submit to periodic drug tests. The court also enjoys the discretion to impose any condition that is reasonably related to the statutory sentencing factors; that \"involves no greater deprivation of liberty than is reasonably necessary\"; and that is consistent with the Sentencing Commission's policy statements. The courts regularly select conditions from among the Sentencing Guidelines' collection of close to 30 \"standard,\" \"special,\" or \"additional\" discretionary conditions in U.S.S.G. §5D1.3.\nThe Sentencing Guidelines note that in sex offense cases \"a condition[,] limiting the use of a computer or an interactive computer service in cases in which the defendant used such items,\" may be appropriate. Nevertheless, the courts are divided over the extent to which a defendant's Internet use may be restricted in light of his conviction or past history.\nSentencing courts may impose other supervisory release conditions as long as they satisfy the same criteria as those listed in the Sentencing Guidelines' collection: relatedness to statutory sentencing factors; no greater deprivation of liberty than necessary; and consistency with the Sentencing Guidelines' policy statements. In case of sex offense convictions, the courts often limit the defendant's access to children following his release from prison. Some conditions restrict access to children generally; some to areas frequented by children; and some to occupations that involve frequent contact with children. Whether these conditions survive review depends upon whether they are sufficiently related to the circumstances of the offense or the offender; whether they are drawn with sufficient precision to avoid undue restrictions on the defendant's liberty; and whether they are compatible with the policies of the Sentencing Guidelines.", "Several mandatory minimum sentencing statutes punish sexual misconduct based on Congress's legislative authority to regulate interstate and foreign commerce. Most are found in chapter 117 (relating to transportation for illegal sexual activity), but a few others appear in either chapter 109A (relating to sexual abuse) or chapter 77 (relating to peonage, slavery, and human trafficking).", "Generally known as the Mann Act or the White Slave Act or the White Slave Traffic Act, chapter 117 has five sections that proscribe travel or the use of the facilities of interstate or foreign commerce when they relate to sexual misconduct: (1) 18 U.S.C. 2421 that outlaws transporting or attempting to transport another in interstate or foreign commerce for purpose of prostitution or other illicit sexual activity; (2) 18 U.S.C. 2422 that outlaws either (a) enticing or attempting to entice another to engage such travel for such a purpose or (b) using or attempting to use the facilities of interstate commerce for such enticement of a minor for such purpose; (3) 18 U.S.C. 2423 that outlaws travel under various circumstances for illegal purposes; (4) 18 U.S.C. 2424 that outlaws false or incomplete filings relating to foreign nationals maintained in a house of prostitution; and (5) 18 U.S.C. 2425 that outlaws the use of the facilities of interstate commerce to communicate information relating to a juvenile for illicit sexual purposes. Sections 2422 and 2423 contain mandatory minimum sentencing provisions; the others do not.", "Subsection 2422(b) requires imposition of a fine and a mandatory minimum term of imprisonment of 10 years for using the facilities of interstate commerce to coerce or entice a child under 18 years of age to engage in prostitution or other illicit sexual activity. Subsection 2422(a) punishes such misconduct involving an adult victim with imprisonment for not more than 20 years with no minimum sentence required.\nCoercion or enticement in violation of subsection 2422(b) consists of \"(1) use of a facility of interstate commerce (2) to knowingly persuade, induce, entire, or coerce (3) an individual under the age of 18 (4) to engage in illegal sexual activity.\" The subsection also proscribes any attempt to engage in such conduct. Conviction for attempt requires proof of an intent to violate the subsection and of a substantial step beyond mere preparation towards accomplishment of that intent. The intent required is the intent to entice or coerce—not the intent to engage in the illicit sexual act. The effort to entice need not be addressed to a child directly; culpability may result from efforts to entice through an adult intermediary. An offender who is misled as to the existence of an actual child victim is no less culpable.\nConvictions under subsection 2422(b) have withstood a number of constitutional challenges. Defendants have generally been unable establish that they have been exposed to grossly disproportionate sentences in violation of the Eighth Amendment; or suffered a Fifth Amendment deprivation of due process in the form of entrapment, the loss of judicial sentencing discretion, or the denial of equal protection; or lost First Amendment freedom by exposure to vague and overbroad laws; or fallen victim to an constitutional violation of separation of powers.", "Section 2423 establishes four sex-related travel offenses and condemns attempts or conspiracies to commit them as well. Subsection 2423(a), which bans interstate or foreign transportation a child under 18 years of age for criminal sexual purposes, carries a mandatory minimum sentence of imprisonment of 10 years; the same mandatory minimum applies to attempts or conspiracies to violate the subsection. The other three subsections—travel for illicit sexual purposes; travel and illicit sexual conduct overseas; and facilitation of travel for illicit sexual purposes—punish violations by imprisonment for not more than 30 years, with no minimum term of imprisonment required.\n\"To obtain a conviction under §2423(a), the government must prove beyond a reasonable doubt that the defendant: (1) knowingly transported a minor across state lines, (2) with the intent to engage in sexual activity with the minor, and (3) that the minor was under eighteen at the time of the offense.\" The government need not show that the defendant knew the minor was underage. Nor must it show that illicit sexual activity was the sole purpose or even the dominant purpose for the travel, as long as it constituted a significant consideration.", "The Mann Act's prohibitions on an offender's travel for illicit sexual purposes carry no mandatory minimum penalties. However, chapter 109A, which ordinarily deals with prison and territorial offenses, provides for such a penalty. As noted earlier, subsection 2241(c) establishes a mandatory minimum sentence of imprisonment of not less than 30 years for \"[w]hoever crosses a State line with intent to engage in a sexual act with a person who has not attained the age of 12 years ... or attempts to do so.\" Recidivists face a mandatory term of life imprisonment. Subsection 2241(d) provides that the government need not establish that the defendant knew that the victim was underage.", "Section 1591 of chapter 77 establishes a pair of mandatory minimum sentencing provisions when commercial sex trafficking occurs in or affecting interstate or foreign commerce or within the special maritime or territorial jurisdiction of the United States. One outlaws sex trafficking; the other profiting from it. In either case, violations are punishable by a fine and imprisonment for not less than 10 years, if the child is between the ages of 14 and 18 and no force or coercion is involved. Otherwise, violations are punishable by a fine and imprisonment for not less than 15 years.\nParsed to their elements the two offenses provide:\nI.\n(1) Whoever\n(2)(A) in or affecting interstate or foreign commerce, or\n(B) within the special maritime and territorial jurisdiction of the United States,\n(3) knowingly\n(4)(A) recruits,\n(B) entices,\n(C) harbors,\n(D) transports,\n(E) provides,\n(F) obtains, or\n(G) maintains by any means\n(5) a person;\n(6)(A) knowing, or\n(B)in reckless disregard of the fact,\n(7) that (A) means of force,\n(B) threats of force,\n(C) fraud,\n(D) coercion, or\n(E) any combination of such means\n(8)(A) will be used to cause the person to engage in a commercial sex act, or\n(B)(i) that the person has not attained the age of 18 years and\n(ii) will be caused to engage in a commercial sex act....\nII.\n(1) Whoever\n(2) knowingly\n(3) benefits\n(A) financially or\n(B) by receiving anything of value,\n(4) from participation in a venture in which\n(A) a person was\n(B)(i) recruited,\n(ii) enticed,\n(iii) harbored,\n(iv) transported,\n(v) provided,\n(vi) obtained, or\n(vii) maintained by any means\n(C)(i) in or affecting interstate or foreign commerce, or\n(ii) within the special maritime and territorial jurisdiction of the United States,\n(5)(A) knowing, or\n(B)in reckless disregard of the fact,\n(6) that (A) means of force,\n(B) threats of force,\n(C) fraud,\n(D) coercion, or\n(E) any combination of such means\n(7)(A) will be used to cause the person to engage in a commercial sex act, or\n(B)(i) that the person has not attained the age of 18 years and\n(ii) will be caused to engage in a commercial sex act....\nThe courts have held that the interstate commerce prong of the two offenses comes within the reach of Congress's authority to regulate interstate and foreign commerce. To pass muster, the defendant's misconduct must have at least some minimal effect on interstate or foreign commerce. The prosecution, however, need not prove that the defendant knew that his activities were occurring in or affecting commerce. Moreover, while as a general rule, the defendant must be shown to have known that his juvenile victim was underage, the statute relieves the government of the obligation, if the defendant has had sufficient opportunity to observe the victim and thus presumably to discern the victim's age.", "Section 2245 establishes a mandatory minimum sentence of imprisonment for any term of years for murder committed during the course of a violation of sex trafficking (18 U.S.C. 1591), child pornography (18 U.S.C. 2251, 2251A, 2260), or Mann Act violations (18 U.S.C. 18 U.S.C. 2421, 2422, 2423, 2425), regardless of the age of the victim. Other sections of the Code establish a mandatory minimum term of life imprisonment for murder in the course of the other federal sex offenses, that is, those committed while in federal custody or within the special maritime or territorial jurisdiction of the United States. Section 2251 establishes a 30-year mandatory minimum term of imprisonment when the production of, attempted production of, or conspiracy to produce, child pornography results in a death.", "Victims of sex trafficking are entitled to restitution under a specifically tailored provision available for the benefit of any victim of a violation of chapter 77. The provision, section 1593, is comparable in some respects to section 2248 that applies in enclave cases. It too incorporates the compatible general restitution procedures. It uses essentially the same \"legal guardian\" language. Thus, coverage presumably extends to parental costs incurred on behalf of a victimized child. It calls for restitution in the full amount of the victim's losses. It references a similar list of specific qualifying expenses, but adds to the list the right to recover the value of the services of the trafficked victim.\nThe Mann Act contains no explicit restitution provision. Some offenders may also be guilty of sex trafficking or some sex offense that triggers a crime-specific restitution requirement. If not, the court must order offenders to pay victim restitution under the general restitution provisions of 18 U.S.C. 3663A.\nAs in the case of chapter 109A, offenders convicted of Mann Act violations or sex trafficking must be sentenced to a term of supervised release for \"any term of years not less than 5, or life.\" The mandatory conditions for supervised release demand that the defendant: (1) comply with sex offender registration requirements; (2) submit to collection of DNA samples; (3) agree to periodic drug testing; and (4) refrain from engaging in criminal activity. The court may impose any discretionary conditions that relate to the statutory sentencing factors concerning the offense or the offender; that are consistent with Sentencing Guidelines policies; and that do not unduly restrict the defendant's liberty. As noted earlier, the courts often condition a sex offender's supervised release on restricted use of the Internet and limited contact with children.", "Four federal child pornography sections establish mandatory minimum terms of imprisonment for violations: 18 U.S.C. 2251 (relating to sexual exploitation of children), 18 U.S.C. 2251A (relating to selling or buying children), 18 U.S.C. 2252 (relating to certain activities relating to material involving sexual exploitation of children), and 18 U.S.C. 2252A (relating to certain activities relating to material constituting or containing child pornography).", "Section 2251 creates a series of mandatory minimum terms of imprisonment for the production of, attempted production of, and conspiracy to produce, child pornography or related misconduct under various jurisdictional circumstances. First time offenders are punishable by a fine and imprisonment for not less than 15 years; offenders with a prior conviction face a fine and imprisonment for not less than 25 years; and offenders with 2 or more prior convictions must be fined and sentenced to imprisonment for at least 35 years. Should a death result from the commission of such offense, the offender must be imprisoned for at least 30 years.\nSection 2251 outlaws four substantive offenses: the use of a child to produce child pornography, subsection 2251(a); the participation of a parent or other custodian of a child in such production, subsection 2251(b); the overseas production of such material, subsection 2251(c); and the advertising of such material, subsection 2251(d). Subsection 2251(e) applies the same penalties to attempts or conspiracies to commit any of the four substantive offenses.\nThe elements common to all four are a child under 18 years of age and at least the goal of creating a visual depiction of sexually explicit conduct of the child. A majority of courts have held that neither the statute nor the Constitution requires the prosecution to show that the defendant knew the child was underage and that mistake of age constitutes no defense.\n\"Visual depiction\" includes photographs, video, and computer disks. \"Sexually explicit conduct\" is defined to encompass various sexual acts as well as \"lascivious exhibition[s]\" of an individual's pubic area. The lower federal appellate courts have endorsed the so-call Dost factors as a guide to determine when the otherwise lawful depiction of nudity has become a lascivious exhibition.", "Subsection 2251(a) outlaws employment, use, or inducement of a child to produce a visual depiction of sexually explicit conduct under a range of jurisdictional circumstances, or by virtue of subsection (e) attempting or conspiring to do so. The jurisdictional circumstances include interstate or territorial transportation of the child, anticipated or actual transmission or transportation of the depiction in or affecting interstate commerce, and use of materials transported in interstate commerce. The courts have held that subsection 2251(a) constitutes a valid exercise of Congress's legislative power under the commerce clause. Moreover, they have concluded that its mandatory minimum term of imprisonment does not offend the Eighth Amendment's prohibition against cruel and unusual punishments.", "Subsection 2251(b) applies the mandatory minimums of subsection 2251(e) to a parent, or other custodian of a child under 18 years of age, who permits, attempts to permit, or conspires to permit a child to be used for the visual depiction of sexually explicit conduct under jurisdictional circumstances comparable to those that apply to subsection 2251(a). A related provision with a more substantial mandatory minimum sentence of imprison appears in 18 U.S.C. 2251A and differs primarily in its requirement of a transfer of custody or control.", "Subsection 2251(c) applies the mandatory minimums of subsection 2251(e) to the overseas use, attempted use, or conspiracy to use, a child in the visual depiction of sexually explicit conduct with the intent to transport, or the transportation of, the depiction into the United States.", "Subsection 2251(d) applies the mandatory minimums of subsection 2251(e) to anyone who \"knowingly makes, prints, or publishes, or causes to be made, printed, published any notice or advertisement seeking or offering child pornography\" or to anyone seeking or offering to participate in the production of child pornography under various jurisdictional circumstances. Federal jurisdiction exists if the notice or advertisement is transported or transmitted using the facilities of interstate commerce or the defendant anticipates that it will be. The notice or advertisement need not \"specifically state that it offers or seeks a visual depiction to violate §2251(c)(1)(A);\" all that is required is that its implications are clear.", "Section 2251A demands a mandatory minimum sentence of imprisonment of 30 years for those convicted of relinquishing or acquiring custody or control of a child under 18 years of age knowing or intending that the child will be used to produce visual depictions of sexually explicit conduct, under certain jurisdictional circumstances.\n\"Custody or control\" is statutorily defined to \"include[] temporary supervision over or responsibility for a minor whether legally or illegally obtained.\" \"The statute does not require transfer of full parental authority; something less than the control a parent exercises—including ... limitations on time and scope—suffices to violate the law.\" Moreover, \"the terms contained in the title of §2251A(b)—buying and selling—do not exclusively define the statute's reach.\" The statute's reach extends as well to instances where the defendant acquires custody or control of the child by paying the victim herself.\nFederal jurisdiction over the offense exists if it occurred within the territorial jurisdiction of the United States, if it involved travel in or affecting interstate commerce, or if the offer was transported or transmitted through the facilities in or affecting interstate commerce.", "Three of the four offenses created in 18 U.S.C. 2252 require imposition of a sentence of imprisonment for not less than 5 years: transportation, receipt, or possession with intent to sell, of visual depictions of sexually explicit conduct involving a child under 18 years of age—under various jurisdictional circumstances. Attempts or conspiracies to commit those offenses carry the same mandatory minimum penalties. Simple possession by a first time offender is not punishable by a mandatory minimum term of imprisonment. Defendants charged with any of the four offenses, who have a prior similar conviction, face increased mandatory minimum sentences of imprisonment.", "The mandatory minimum sentences of subsection 2252(b)(1) apply to those convicted of violating subsection 2252(a)(1) which outlaws the transportation or transmission of child pornography in or affecting interstate commerce or by using the facilities of interstate commerce. The mandatory minimum sentences apply as well to those convicted of attempting or conspiring to violate the subsection.\n\"Under Section 2252(a)(1), the government must prove that: (1) the defendant knowingly transported or shipped, (2) in interstate or foreign commerce, (3) any visual depiction involving the use of a minor engaging in sexually explicit conduct.\" The government must also prove that the visual depiction was of an actual child not a mere computer simulation, and that the defendant knew the child was underage.\nMoreover, simply because the statute indicates that transportation may take the form of computer transmission \"does not mean that use of a computer is a required element of the crime.\"\nFor purposes of subsection 2252(a)(1), \"interstate commerce\" includes commerce to and from the possessions and the territories of the United States, and \"foreign commerce\" includes travel between foreign nations by way of the United States. The government, however, need not prove that the defendants know of the interstate or foreign commercial nature of the transportation or shipment.\nWhen the government seeks the 15-year recidivist mandatory minimum sentence and the \"state law [upon which the prior conviction was based] covers conduct some of which is within, and the rest of which is outside, the scope of a recidivist statute, the federal court may examine the [state] charging papers (and any guilty-plea colloquy) to classify the conviction.\"", "The same mandatory minimum terms of imprisonment apply when the defendant is convicted of receipt or distribution of, attempted receipt or distribution of, or conspiracy to receive or distribute, child pornography, under the same jurisdictional circumstances—not less than 15 years with a prior conviction; not less than 5 years otherwise.\n\"The elements of receipt under 18 U.S.C. 2252(a)(2) require the defendant to knowingly receive an item of child pornography, and the item to be transported in interstate or foreign commerce\" or otherwise satisfy the subsection's jurisdictional requirements.\nTo be sure, the exact contours of the crime of \"knowingly receiving\" electronic child pornography in a constantly shifting technological background are murky. Part of the problem is that computers connected to the internet store vast quantities of data about which many users know nothing. As a user browses the internet, the computer stores images and text and other kinds of data in its temporary memory the way a ship passing through the ocean collects barnacles that cling to its hull. Thus, there is some risk that the computer of an internet user not intending to access child pornography may be infected with child pornography. Understandably, our sister circuits have struggled with whether to impute knowledge from the presence of illicit files found in such temporary storage.\nUltimately, the facts of a given case will determine whether the defendant is the unwitting victim of technology or knowingly received child pornography. The government's burden includes proving that the defendant knew that child depicted was real and underage.\nFor purposes of the jurisdictional element, \"the government prove[s] images traveled interstate when it introduce[s] evidence that the defendant received images that were transmitted over the Internet.\"\nTo be guilty of attempted violation of subsection 2252(b)(2), the defendant must have intended to receive or distribute child pornography and taken a substantial step towards the achievement of that goal.\nWhen a court faces the question of whether a defendant must be sentenced to the mandatory minimum 15-year term of imprisonment reserved for recidivists in a case where the prior conviction occurred under a statute proscribing both qualifying and non-qualifying offenses, the court \"may refer to the charging document, the terms of a plea agreement, the transcript of the colloquy, jury instructions, and other comparable judicial records.\"", "Subsection 2252(a)(3), which prohibits the sale of, or possession with intent to sell, child pornography under various jurisdiction circumstances, requires imposition of a 5-year mandatory minimum term of imprisonment as well (a minimum of 15 years for recidivists). The same penalties must be assessed upon conviction of an attempt or conspiracy to violate the subsection. Jurisdiction exists if the offense occurs within the special maritime and territorial jurisdiction of the United States, on a federal facility or Indian reservation. It also exists if interstate commerce is implicated in the offense.", "Recidivists in possession of child pornography must be sentenced to 10-year minimum term of imprisonment under subsection 2252(a)(4), as must a recidivist convicted of attempting or conspiring to violate the subsection. The necessary jurisdictional circumstances are the same as those which apply in the case of the sale offense under subsection 2252(a)(3).\nQualifying prior convictions may include convictions under either state or federal law. The offender's prior state conviction must be \"related to\" one of the statutorily described offenses and involve a minor, but the statute of conviction need not list a minor victim as an element of the offense. \"[T]he sentencing court looks to the fact of conviction and the statutory definition of the prior offense and determines whether the full range of conduct encompassed by the statute qualifies to enhance the sentence.\" In this exercise, \"[i]f the statute [of prior conviction] criminalizes both conduct that would qualify a defendant for an enhancement, as well as conduct that would not do so, the court may refer to the charging document, the terms of a plea agreement, the transcript of the colloquy, jury instructions, and the comparable judicial records to determine the basis for the guilty plea or verdict [in the prior case].\"\nSubsection 2252(a)(4) has two distinctive features. First, offenders are not subject to a mandatory minimum term of imprisonment, unless the recidivist provisions are tripped. Second, subsection 2252(c) provides a narrow explicit statutory defense, available when possession is minimal and the individual destroys the material or reveals it to authorities.", "Sections 2252 and 2252A were almost identical at one point. Section 2252 covered only visual depictions of sexual activity involving an actual child. Section 2252A covered visual depictions of sexual activity involving a digitally created child as well. Other changes have occurred over the years, but that essential distinction remains. So too do the mandatory minimum terms of imprisonment that attend comparable violations of either section.\nAt least a 5-year term of imprisonment must be imposed for a violation, attempt to violate, or conspiracy to violate any of five child pornography-related offenses found in subsection 2252A: transportation; receiving or distributing; reproducing or promoting; selling or possession with intent to sell; or providing to a child. Recidivists must be sentenced to imprisonment for not less than 15 years (not less than 10 years for a recidivist guilty of simple possession). As discussed below, a 20-year mandatory term of imprisonment attends conviction for a child exploitation enterprise offense involving multiple violations of subsection 2252A(a) and related child abuse offenses that involve several children and several collaborators.", "A 5-year mandatory term of imprisonment must be imposed on \"[a]ny person who - (1) knowingly mails, or transports or ships using any means or facility of interstate or foreign commerce or in or affecting interstate or foreign commerce by any means, including by computer, any child pornography.\" A mandatory 15-year term of imprisonment awaits recidivists.\nThe subsection's recently expanded jurisdictional statement (\"using any means ... affecting ... commerce\") eliminates the split among the lower federal appellate courts over whether the earlier version of the statute covered any Internet use, or use where actual interstate transportation can be shown. On the other hand, the use of a computer is not an element of the offense; the offense may be committed with or without the use of computer.\nDefendants accused of violating the transportation prohibition of subsection 2252A(a)(1) enjoy a relatively narrow affirmative defense. The defense is available, if, after giving the required pre-trial notice, the defendant establishes that the alleged child pornography did not involve the use of a real child or the image of a real child.", "Section 2252A punishes the knowing receipt or distribution of child pornography, committed under certain jurisdictional circumstances, with imprisonment for not less than 5 years. It punishes attempt and conspiracy in the same manner. It imposes a minimum 15-year term of imprisonment upon recidivists. The offense must be committed knowingly; inadvertent receipt is not a violation. Knowing violation occurs, for instance, when the defendant \"intentionally views, acquires, or accepts child pornography on a computer from an outside source.\"\nAttempted violation requires evidence of an intent to commit the offense and a substantial step beyond mere preparation towards that goal. Factual impossibility, such as the absence of a real child in a sting situation, poses no obstacle to conviction for attempt.\nPossession of child pornography under subsection 2252A(a)(5) is a lesser included offense to the crime of receipt of child pornography under subsection 2252A(a)(2). The Constitution's double jeopardy clause thus precludes punishment under both subsections for the same misconduct. Punishment under both subsections is permissible, however, when each addresses a different violation. The double jeopardy clause may also bar punishment for receipt of child pornography under both subsection 2252(a)(2) and 2252A(a)(2), unless the offenses involve different violations; for example, the 2252A(a)(2) offense involves a digital image and the other involves a real child.", "Knowingly reproducing or promoting child pornography carries the same 5-year mandatory minimum term of imprisonment (15 years for recidivists). Reproduction and the promotion offenses are distinct. Both offenses, however, rest on a broad claim of federal jurisdiction: utilization of a means or facility \"affecting interstate or foreign commerce\" by any manner \"including by computer.\"\nThe Supreme Court in Williams held that neither the reproduction nor promotion proscription violates either First Amendment over breadth restrictions or Fifth Amendment due process vagueness limitations. The Court dissected several of subsection 2252A(a)(3)'s features in the course of its analysis.\nFirst, it observed that the knowledge requirement applies to both the reproduction and promotion offenses. Second, it said that the action elements of the promotion offense—\"advertises, promotes, presents, distributes, or solicits\"—bespeaks a transaction, although not necessarily a commercial transaction. \"That is to say, the statute penalizes speech that accompanies or seeks to induce a transfer of child pornography—via production or physical delivery—from one person to another.\"\nFor the promotion offense, the advertisement, promotion, or presentation must be advanced with one of two intents: either \"in a manner that reflects belief\" that child pornography is being offered, or in a manner that is calculated to induce another to believe child pornography is being offered. As for the first, the manner of advertisement, promotion, or presentation \"must objectively manifest a belief that the material is child pornography; a mere belief, without an accompanying statement or action that would lead a reasonable person to understand that the defendant holds that belief, is insufficient.\" As for the second, \"the defendant must 'intend' that the listener believe the material to be child pornography, and must select a manner of 'advertising, promoting, presenting, distributing, or soliciting' the material that he thinks will engender the belief—whether or not a reasonable person would think the same.\"\nDefendants charged with the reproduction offense may invoke the narrow affirmative defense covering pornography that involves only adults; defendants charged with the promotion offense may not.", "The same 5- and 15-year mandatory minimum terms of imprisonment follow conviction for selling or possession with intent to sell child pornography if committed under a wide range of jurisdictional circumstances, or for attempting or conspiring to do so. Jurisdiction exists if the offense occurs on federal enclaves or facilities or in Indian country. It also exists if the offense involves transportation using a means or facility in or affecting interstate or foreign commerce. The affirmative defense available when children have not been used in the pornography may be claimed by defendants charged with selling or intent to sell child pornography.", "Section 2252A requires a fine and a minimum term of imprisonment of 5 years for offering child pornography to a child with the intent to induce the child to engage in illegal activity, or attempting or conspiring to do so. It requires a fine and a minimum term of 15 years for recidivists. The offense is punishable if the offer, the pornography, or the material used to produce the pornography, was transported using a means or facility in or affecting interstate or foreign commerce. The defendants charged under the offering offense of subsection 2252A(a)(6) may not claim the affirmative defense available elsewhere for when the pornography involves only adults.", "There is no mandatory minimum term of imprisonment for conviction of simple possession of child pornography. However, there is a 10-year mandatory minimum term of imprisonment for conviction of possession by a recidivist. The possession which triggers the minimum sentence may occur in Indian country or on federal enclaves or facilities. Interstate commerce may also provide a basis for jurisdiction. Defendants charged with possession may assert the affirmative, adults-only pornography defense, if they do so in a timely fashion.", "Subsection 2252A(g) outlaws \"child exploitation enterprises,\" a crime punishable by a fine and imprisonment \"for any term of years not less than 20 or for life.\" The crime's federal predicate felony offenses include not only pornography, but sex trafficking, kidnaping a child, sex abuse of a child, and Mann Act violations involving a child. More precisely, the penalty applies to:\n(1) Whoever\n(2) in concert with three or more other persons\n(3) commits a series of predicate offenses\n(4) constituting three or more separate incidents\n(5) involving more than one victim\n(6) when the predicate offenses involve felony violations of:\n18 U.S.C. 1591 (relating to sex trafficking of a child or by force)\n18 U.S.C. 1201 (relating to kidnaping of a child)\n18 U.S.C. ch. 109A (relating to sexual abuse of a child)\n18 U.S.C. ch. 110 (relating to pornography but not including record-keeping violations), or\n18 U.S.C. ch. 117 (relating to sex offenses involving travel).\nEach predicate offense need not involve more than one victim nor be committed in concert with three other offenders; it is enough that the series of predicate offenses, taken in total involve more than one victim and three or more other offenders. The Constitution's double jeopardy clause bars punishment for both a violation of subsection 2252A(g) and for conspiracy to violate the underlying predicate offenses.", "Child pornography offenses come with their own mandatory restitution provisions, not unlike those covering sex trafficking and sex abuse in federal enclaves. The provision, section 2259, is much like section 2248 that applies in enclave cases. It adopts the procedures generally applicable in restitution cases. Its definition of the term the \"victim\" suggests that parents must be awarded restitution for expenses incurred on behalf of a victimized child. The examples of qualifying expenses are the same as those used for the victims of sexual abuse in federal enclaves under section 2248. It references a similar list of specific qualifying expenses, but adds to the list the right to recover the value of the services of the trafficked victim.\nOffenders convicted of a mandatory minimum pornography offense must be sentenced to a term of supervised release for \"any term of years not less than 5, or life.\" A defendant sentenced to a term of supervised release must (1) avoid further criminal activity; (2) submit to drug testing and the collection of DNA samples; and (3) obey sex offender registration requirements. In addition, Internet use and child contact restrictions are particularly common conditions of supervised release in pornography cases. Here too, however, the discretionary conditions of supervised release must be consistent the policies of the Sentencing Guidelines, must be related to the statutory sentencing factors concerning the circumstances of the offense and the offender, and must not unduly deprive the defendant of his liberty." ], "depth": [ 0, 1, 1, 2, 1, 2, 2, 2, 2, 2, 1, 2, 3, 3, 3, 3, 3, 3, 3, 1, 2, 3, 3, 2, 2, 2, 2, 1, 2, 2, 2, 2, 2, 2, 2, 3, 3, 3, 3, 2, 3, 3, 3, 3, 3, 3, 3, 2 ], "alignment": [ "h0_title h2_title h1_title", "", "h1_full", "", "h2_title", "h2_full", "", "", "h2_full", "", "h0_full h2_title", "h2_title", "", "", "", "", "", "", "h2_full", "", "", "", "", "", "", "", "", "h0_title", "", "", "", "", "", "", "h0_title", "", "h0_full", "", "", "", "", "", "", "", "", "", "", "" ] }
{ "question": [ "How are sex offenses measured?", "How would a sex offense be a federal concern?", "How is mandatory minimum apply to federal sex crimes?", "How was a survey on penalty for child pornography answered?", "What did it imply about judges' perceptions of child pornography sentencing?", "How should the mandatory minimum sentencing in sex offenses be addressed?", "How is the power of mandatory minimums limited?", "What enacts this limitation?", "What is the success rate of challenging a mandatory minimum?" ], "summary": [ "Sex offenses are usually state crimes.", "Federal law, however, outlaws sex offenses when they occur on federal lands or in federal prisons, when they involve interstate or foreign travel, or when they involve child pornography whose production or distribution is associated in some way with interstate or foreign commerce.", "Mandatory minimum terms of imprisonment attend conviction for any of several of these federal sex crimes.", "Two-thirds of the federal trial judges responding to a U.S. Sentencing Commission survey questioned the severity of the mandatory minimum penalties required for receipt of child pornography (5 years; 15 years for repeat offenders).", "The Commission's report suggested that the perception may lead to inconsistent sentencing in child pornography cases.", "It explained that more study would be required before it could make any specific recommendations concerning mandatory minimum sentencing in sex offenses.", "The constitutional authority to enact federal sex offense punishable by mandatory minimum terms of imprisonment is not unlimited.", "The ex post facto and double jeopardy clauses; the Fifth Amendment's equal protection component; the Eighth Amendment's cruel and unusual punishment clause; the separation of powers and the reservation of powers principles—all establish boundaries that must be honored.", "Nevertheless, few defendants have successfully challenged the constitutionality of a mandatory minimum term of imprisonment imposed following their conviction for a federal sex offense." ], "parent_pair_index": [ -1, 0, -1, -1, 0, -1, -1, 0, -1 ], "summary_paragraph_index": [ 0, 0, 0, 2, 2, 2, 3, 3, 3 ] }
CRS_RL33834
{ "title": [ "", "Introduction", "Purpose and Scope", "Legislative Activity, H.R. 5013", "Air Force Contract Augmentation Program", "Logistics Civil Augmentation Program", "LOGCAP Contracts (1992-2010)", "Latest Update on LOGCAP III Contract", "LOGCAP IV Contract Awards", "The Planning Contract Was Awarded to Serco", "ASC Selected the Performance Contractors", "Protests", "Contract Details", "Performance Task Orders", "Congressional Interest", "The Defense Base Act (DBA) and LOGCAP", "Background", "Awarding of Defense Contracts", "Full and Open Competition", "Emergency Contracting Authorities", "Contingency Contracting", "Rapid Acquisition Methods", "Audits, Investigations, and Reports", "Role of Federal Agencies", "Special Inspector General for Iraq Reconstruction (SIGIR)", "Special Inspector General for Iraq Reconstruction (SIGIR) LOGCAP Reviews", "Quarterly Report to Congress", "Reviews of Task Orders 130 and 151", "DOD Inspector General", "Government Accountability Office (GAO)", "Potential Oversight Issues", "Contract Oversight", "Contract Administration", "DOD Contracting Officials", "Development of Contract Requirements", "Use of Indefinite-Delivery/Indefinite-Quantity Contracts102", "Costs and the Use of No-Bid and Sole-Source Contracts", "Cost-reimbursement Contracts", "Use of Overhead Fees", "Transparency", "Acquisition Workforce", "The Gansler Commission", "Independent Panel to Examine the Defense Contract Audit Agency", "Potential Options for Congress", "Option 1: Implementing the Gansler Commission Recommendations", "Option 2: Expanding the SIGIR's Jurisdiction", "Option 3: Convening a Study of the Federal Employee and Contractor Workforce", "Option 4: Requiring More Detail for Better Oversight", "Option 5: Establishing a Dedicated Office to Conduct Audits and Investigation of DOD Contracts" ], "paragraphs": [ "", "", "This report will examine logistical support contracts for troop support services (also known as service contracts ) in Iraq and Afghanistan, primarily administered through a smaller program, the United States Air Force Contract Augmentation Program (AFCAP) and a larger program, the United States Army's Logistics Civil Augmentation Program (LOGCAP). This report will focus primarily on contracts involving Department of Defense (DOD) appropriated funds, although some projects involve a blending of funds from other agencies.", "This section of the report will provide some background on proposed legislative initiatives which seek to improve the acquisition, management, and oversight of defense service contracts such as LOGCAP.\nIn March 2009, the House Armed Services Committee (HASC) appointed a Panel on Defense Acquisition Reform to conduct a systematic review of the defense acquisition system. On March 23, 2010, the panel issued its final report, and provided the HASC its findings and recommendations. On March 23, 2010, the House Armed Services Committee's Defense Acquisition Reform Panel issued its final report, and provided its findings and recommendations to the House Armed Services Committee. Largely due to the recommendations of the panel, a new set of legislative initiatives have been introduced to address the ongoing and systemic problems with DOD's acquisition of goods and services. They are described below.\nH.R. 5013 , the Implementing Management for Performance and Related Reforms to Obtain Value in Every Acquisition Act (IMPROVE) of 2010, was introduced on April 14, 2010, by Representative Robert Andrews. The proposed bill is largely a result of the recommendations of the House Armed Services Committee's Panel on Defense Acquisition Reform, a yearlong effort to study the defense acquisition system with the goal of identifying systemic failures that impact DOD's acquisition of goods and services. H.R. 5013 appears to represent a significant overhaul of Department of Defense (DOD) acquisition policy and one of the first attempts to address the oversight and management of defense service contracts. Some estimates are that DOD's annual spending for goods and services comprise some 60% to 80% of DOD's total annual spending, including spending for logistical support contracts.\nH.R. 5013 is divided into four major areas of reform: Title I, the Defense Acquisition System; Title II, the Defense Acquisition Workforce; Title III, the Financial Management System; and Title IV, the Industrial Base. Selected highlights from each section of the bill appear below.\nTitle 1—Defense Acquisition System. Title I amends Title 10 of the United States Code (U.S.C) to insert a new chapter, Chapter 149—Performance Management of the Defense Acquisition System. Title I would require the Secretary of Defense to regularly assess the performance of the defense acquisition system designed to \"ensure that all elements of the defense acquisition system are subject to regular performance assessments – (A) to determine the extent to which such elements deliver appropriate value to the Department of Defense; and (B) to enable senior officials of the Department of Defense to manage the elements of the defense acquisition to maximize their value to the Department.\"\nHighlights of Title I include the following provisions:\nThe development of system-wide categories of metrics to ensure that there is sufficient uniformity in performance assessments across the defense acquisition system; The conduct of periodic audits to determine the accuracy and reliability of the performance assessments; The establishment of linkages between the performance assessments, the management of personnel, and the criteria for promotion, awards, and other workforce incentives; The establishment of a process for generating requirements for the acquisition of services that includes commanders of unified combatant commands and other designated officers, to provide input on joint requirements for the acquisition of services; The revision of the Federal Acquisition Regulation (FAR) to provide appropriate references to service contracting that are in addition to those references in FAR Part 37; and The amendment of Title 10, Chapter 141 by adding a section on the acquisition of certain \"military purpose, nondevelopmental items.\"\nTitle II—Defense Acquisition Workforce. Title II amends Title 10, Chapter 87, by adding a new section on the management of the acquisition workforce. Title II focuses on workforce improvements designed to develop and maintain a highly skilled and professionally trained acquisition workforce.\nHighlights of Title II include the following provisions:\nThe requirement for the Secretary of Defense to use the full authorities granted in Title 5, Section 9902, to manage the defense acquisition workforce in a way that complements and reinforces the performance management of the defense acquisition system; The hiring and training of managers, and the development of performance plans for individual members of the acquisition workforce; The incorporation of best practices adopted from the acquisition demonstration project carried out under Section 1762 of this title; The full use of the Defense Civilian Leadership Program established under Section 1112 of P.L. 111-84 , the National Defense Authorization Act for FY2010; The full use of authorities under Title 5, Section 9903 to hire highly qualified experts and skilled acquisition professionals; The revision of the acquisition workforce demonstration project by the addition of Section 1762, \"Demonstration Project Relating to certain Acquisition Personnel Management Policies and Procurements;\" The revision of Title 10, Chapter 87 by the addition of Section 1763, \"Incentive Programs for Civilian and Military Personnel in the Acquisition Workforce;\" The revision of Title 10, Chapter 87 by the addition of Section 1722b. \"Special Requirements for Civilian Employees in the Acquisition Field\", including educational, recertification, training, and career advancement requirements; The development of guidance and standards for acquisition workforce training; The amendment of Title 10, Chapter 87, Subchapter II, by requiring the Secretary of Defense to develop and carry out a plan to strengthen the segment of the workforce that specializes in information technology acquisition; The requirement for a review of the curriculum offered by the Defense Acquisition University, \"to ensure that it adequately supports the training and education requirements of acquisition professionals, particularly in service contracting, long term sustainment strategies, information technology, and rapid acquisition;\" and The requirement for the Secretary of Defense to develop internship and scholarship programs in cost estimating \"to underscore the importance of cost estimating as a core acquisition function to the acquisition process.\"\nTitle III—Financial Management. Title III provides DOD with a new structure for increased accountability for financial management.\nHighlights of Title III include the following provisions:\nThe offering of incentives and other inducements to encourage DOD to produce financial statements validated and ready for audit, earlier than September 30, 2017; The development of penalties and other inducements in the event that a DOD component fails to take corrective measures (to address the failure to achieve a financial statement validated as ready for audit by September 30, 2017); The requirement for the DOD Chief Management Officer, in coordination with the Chief Management Officers for each military service, to review and update policies and instructions regarding obligation and expenditure benchmarks to ensure best value for the federal government; within 180 days of enactment of this act; and The requirement for the DOD Chief Management Officer, in coordination with the Chief Management Officer for each military service, the Director of the Office of Performance Assessment and Root Cause Analysis, the Under Secretary of Defense (Comptroller), and the Comptrollers of the military services, to conduct a comprehensive review of the \"use and value of obligation and expenditure benchmarks, and propose new benchmarks or processes for tracking financial performance.\"\nTitle IV—Industrial Base. Title IV requires the Secretary of Defense to \"establish a program designed to expand the industrial base and to increase the Department's access to innovation and the benefits of competition.\"\nHighlights of Title IV include the following provisions:\nThe establishment of a program to identify and communicate with \"nontraditional suppliers\" and \"markets of importance to the Department of Defense.\" The requirement for the Secretary of Defense to develop and implement procedures for a price trend analysis for certain categories of commercial items; The requirement for contractors and grantees to disclose any delinquent Federal tax debts; The amendment of Title 10, Chapter 8, Subchapter II to authorize the appointment of a General Counsel for the Defense Contract Audit Agency; The amendment of Title 10, Subtitle A, Part 4, Chapter 131 to require the Secretary of Defense to adhere to guidelines governing the conduct of contractor business system reviews; The requirement for the Secretary of Defense to establish a panel \"consisting of owners of large and small businesses that are not traditional defense suppliers, for purposes of creating a set of recommendations on eliminating barriers to contracting with the Department of Defense and its defense supply centers;\" and The revision of Title 10, Section 2500 to expand the National Technology and Industrial Base to include the providers of services and information technology.", "The U.S. Air Force has a smaller contingency contracting support program for services in Iraq. The Air Force Contract Augmentation Program (AFCAP) administers logistical support service contracts in Iraq. AFCAP is the largest contingency support contract awarded by the Air Force. AFCAP is an \"umbrella\" contract, similar to the U.S. Army's LOGCAP. It was designed to provide an on-call capability for troop sustainment and support. The program was established in 1997 for a wide-range of non-combatant, civil engineering services during wartime, contingency operation, and humanitarian efforts. AFCAP provides for contractor support to relieve active duty and air reserve personnel in the areas of food service, lodging, carpentry, plumbing, electrical, mechanical, air conditioning, laundry plant operations, fire protection emergency management, and project and program management.\nInitially, AFCAP began as a five-year, $475 million program; now it is a 10-year, $10 billion program. AFCAP is managed by the Air Force Civil Engineer Support Agency at Tyndall Air Force Base and the Air Force Services Agency in San Antonio, TX. The first AFCAP contract was awarded as a result of a competitive bidding process. Readiness Management Support LC (RMS) was awarded the contract in February 1997. The cost-reimbursement plus award fee contract was valued up to $452,600,000 for one base year plus four option years. RMS was again awarded the contract when the contract was rebidded in February 2002. The new contract (AFCAP II) calls for one base year and seven option years, and the contract is in effect until February 2010. RMS is supported by its parent company, Johnson Controls, Inc., and eight other subcontractors on the AFCAP team.\nThe Air Force Civil Engineer Agency describes the AFCAP program elements in this way:\nAFCAP consists of five key players; 1) the customer, 2) MAJCOM Civil Engineer or Director of Services, 3) AFCAP program managers located at HQ AFCESA/CEK, 4) AFCAP contracting officers (AETC Contracting Detachment at AFCESA), and 5) the six AFCAP contractors (Bechtel, CH2M Hill, DynCorp, Readiness Management Support, URS & Washington Group). The customer is responsible for providing on-site contract administration, quality assurance and task order surveillance. The MAJCOM Civil Engineer/Director of Services (or delegated individual) provides resource advocacy, appropriate programming and guidance on execution method to complete tasks. The AFCESA AFCAP program managers work as an interface between customers and the AFCAP contracting officers to solidify requirements available under this contract.", "LOGCAP was established by the U.S. Army on December 6, 1985, with the publication of Army Regulation 700-137. LOGCAP is an initiative to manage the use of civilian contractors who perform services in support of DOD missions during times of war and other military mobilizations. The use of LOGCAP contracts augments combat support and combat service support to military forces.\nIn September 2006 the Army Sustainment Command (ASC) was created to serve as the \"logistics integrator\" for the contingency contracting and sustainment needs of the military worldwide. ASC oversees about 65,000 contractors and manages about $25 billion in contracts. The Defense Contract Management Agency (DCMA) manages the task orders issued under the LOGCAP contract.\nIn a May 2009 hearing before the Senate Commission on Wartime Contracting, the Executive Director for the U.S. Army Contracting Command, Army Material Command, testified on the status of the LOGCAP IV contract. Excerpts of his remarks appear below:\nEight task orders have been awarded to date, including five task orders for performance and three task orders for project management offices (one for each contractor). Services are transitioned from LOGCAP III to LOGCAP IV as task orders are awarded. In addition to protests against the award of the basic contracts, nearly all the task orders issued or awarded to date under LOGCAP IV have been protested.\nIn testimony before the Senate Homeland Security and Governmental Affairs Subcommittee, U.S. Army officials discussed the status of combat support operations under the LOGCAP program, as described in excerpts taken from the hearing transcript:\nAll LOGCAP requirements in Kuwait have successfully transitioned from LOGCAP III to LOGCAP IV and LOGCAP requirements are in the process of transitioning in Afghanistan. The current LOGCAP III contractor supports the responsible drawdown in Iraq through base closure and de-scoping of LOGCAP services which began in May 2009 and continues through August 2010. The two contractors that were awarded the LOGCAP IV Afghanistan task orders, Fluor and DynCorp will increase their support as troops transition to the Afghanistan theater. The competitively bid pricing matrixes for the Afghanistan task orders will be used to adjust the cost estimate for the increased support associated with the President's decision.\nWe are currently conducting a fair opportunity competition for Transportation and Corps Logistics Support Services requirements in Iraq that will result in requirements transitioning from LOGCAP III to LOGCAP IV. The next anticipated action involves Base Life Support. We are in the presolicitation phase for that acquisition with a draft Request for Proposal issued the week of December 7, 2009.\nThe Army anticipates that the LOGCAP III contractor will provide logistics services in support of the Iraq drawdown with theater transportation assets, augmentation of maintenance services, and support for the supply support activities in the retrograde of supplies and equipment from theater. The LOGCAP III contractor also possesses other capabilities in support of the responsible drawdown of forces, such as packaging, blocking, bracing, and crating of equipment for shipment, wash rack operations, and cleaning of equipment for agriculture and customs. These services are available to the supported unit upon request. We expect the LOGCAP IV contractor to provide the same level of services in support of the responsible drawdown but only for those bases that will remain after August 2010.\nAs of March 29, 2010, 12 task orders have been awarded under LOGCAP IV, as revealed in recent testimony before the Senate Commission on Wartime Contracting in Iraq and Afghanistan:\nTwelve task orders have been awarded to date, including nine task orders for performance and three task orders for project management offices (one for each contractor.) To date, $1.8 billion has been obligated under the LOGCAP IV contracts. With inclusion of the core logistics support, theater transportation, and postal operations services (CPT), 76 percent of LOGCAP work has been competitively awarded under LOGCAP IV. Services are transitioned from LOGCAP III to LOGCAP IV as task orders are awarded.", "The first LOGCAP contract (LOGCAP I) for combat support services in Iraq was awarded on August 3, 1992, to Brown and Root Services of Houston, TX (also referred to as KBR). Reportedly, the contract was competitively awarded and consisted of a cost-plus-award-fee contract for one year followed by four option years. The Army Corp of Engineers reportedly held a competition to award the second LOGCAP contract (LOGCAP II). The contract, a cost-plus award fee contract for one base year followed by four option years was awarded to Dyncorp on January 1, 1997. The third LOGCAP contract (LOGCAP III) was awarded in 2001 to Halliburton/KBR.\nLOGCAP III, a 10-year contract (one base year followed by nine option years), was awarded to Halliburton/KBR to perform a variety of tasks. Initial press reports indicated that the 2001 LOGCAP III contract would be for the development of a contingency plan for extinguishing oil well fires in Iraq; however, subsequent press reports indicate that the contract included such tasks as providing housing for troops, preparing food, supplying water, and collecting trash. This contract was awarded under a cost-plus-award-fee, Indefinite-Delivery/Indefinite-Quantity (ID/IQ) contract. The 2001 contract was based on specific task orders which are issued individually and only for those services that DOD felt were necessary to support the mission in the near term. During 2003, LOGCAP III contract rose to more than $3.5 billion. According to one press account, Halliburton/KBR reportedly earned a fixed 1% profit above costs on LOGCAP III, with the possibility of an additional 2% incentive bonus, while another press account reported that the Halliburton/KBR LOGCAP III contract was a cost-plus, award fee contract that earned a 2% fixed fee with the potential for an extra 5% incentive fee.\nThe fourth LOGCAP contract (LOGCAP IV) was executed with a different acquisition strategy. According to the Army, the LOGCAP IV contract award as based on a full and open competition. Instead of using a single contractor, the contract called for multiple contractors. Competitions were held and the contracts were awarded based on what represented the best value to the government. In best value source selections, the government may make tradeoffs to make awards based on factors other than costs or technical superiority. The use of multiple LOGCAP contractors is reportedly intended to reduce the government's risk. Under the new strategy, the three performance contractors may compete for individual LOGCAP task orders, creating a competitive environment meant to control costs and enhance quality.", "In May 2010, the U.S. Army announced that it would not hold a new competition for contract support services in Iraq. Rather, the Army would continue to use KBR to execute the LOGCAP III contract to provide support services until the scheduled withdrawal of all troops in December 2011. Reportedly, the Army will extend the task orders until LOGCAP III through the end of 2011. Estimates are that KBR stands to earn approximately $568 million in additional work on the contract, which would bring KBR's total value until LOGCAP III to approximately $35.7 billion.\nPrevious to this announcement, the Army had maintained that the LOGCAP III contract would be cancelled and that all services would be transferred to the LOGCAP IV contract. However, the Army has reportedly completed a business case analysis and concluded that keeping the LOGCAP III contract would be of greater benefit to the federal government. Some Members of Congress have questioned this decision and asked the Secretary of Defense to reconsider, particularly in light of the Justice Department's decision to bring civil action against the LOGCAP III contractor.", "", "In August 2006 the Army held a competition to select a logistical planning and program support contractor for LOGCAP IV. Two proposals were received and in February 2007 the ASC selected Serco, Inc., of Vienna, VA. This contract will have a minimum value of $613,677 with a contract period of one base year followed by up to four one-year options with a maximum annual contract value of $45 million and a maximum contract value of $225 million.\nThe ASC news release announcing the initial award selection described the range of logistical and program services provided under the contract. They appear on ASC's website.\nAugmenting the Army's capability to develop and update worldwide management and staffing plans for contingencies; working with LOGCAP IV performance contractors to assure that they understand these plans; helping theater planners integrate LOGCAP into their plans; assisting planners in incorporating a broad range of contracted logistics support; developing scopes of work officially referred to as procurement work statements; preparing independent government cost estimates which are compared against the contractor's bids to assure valid costs for task orders; conducting analysis of how performance contractors will do the work outlined in the task orders' scopes of work; analyzing performance contractors' costs; working with the Army to measure LOGCAP IV contractor performance; and recommending process improvements in the above actions.", "The Army conducted a competition to select up to three performance contractors for services similar to those rendered under LOGCAP III. Solicitations were issued in October 2006 and six proposals were received. In June 2007 the ASC selected three companies to serve as performance contractors—DynCorp International LLC, Fort Worth, TX; Fluor Intercontinental, Inc, Greenville, SC; and KBR, Houston, TX.", "On June 27, 2007 the losing companies filed protests with GAO over the LOGCAP IV award decision. GAO sustained the protests on October 5, 2007. The Army reopened the competition. Five companies submitted bids. On April 17, 2008, the Army announced that it would re-award the LOGCAP IV contract to the three companies previously awarded contracts under LOGCAP IV.", "The LOGCAP IV contract will cover a range of services:\nsupply operations, including food, water, fuel, spare parts, and other items; field operations, including food, laundry, housing, sanitation, waste management, postal services, and morale, welfare and recreation activities; and other operations, including engineering and construction; support to the communication networks; transportation and cargo services; and facilities and repair.\nLOGCAP IV contracts were awarded as ID/IQ contracts with one base year followed by nine option years. Each company will compete for task orders. Each of the three contracts will have a maximum value of $5 billion per year, with a collective annual maximum value of $15 billion and lifetime maximum value of $150 billion for LOGCAP IV.", "The U.S. Army Sustainment Command announced the award of the first performance task order under LOGCAP IV, on September 25, 2008, to Fluor Intercontinental, Inc. The purpose of the task order is to provide logistical support services in Afghanistan to personnel (both U.S. personnel and coalition forces) in the field. The performance period is from September 25, 2008, through September 24, 2009, and the task order is valued at $68 million.\nEach company has been awarded task orders under LOGCAP IV. The latest task order on LOGCAP IV was awarded to KBR, representing KBR's first task order under LOGCAP IV.", "Policymakers continue to express concern over the oversight of Iraq contracts for several reasons—including the expense and difficulty of managing logistical support contracts; allegations and reported instances of contract waste, fraud, abuse, and financial mismanagement; and questions regarding DOD's ability and capacity to manage such contracts. Some policymakers have raised questions as to whether DOD has the right mix of acquisition workforce personnel trained and equipped to oversee these large-scale contracts. Due to these and other concerns, Congress extended the tenure of the Office of the Special Inspector General for Iraq Reconstruction (SIGIR) from March 2004 through September 2009. SIGIR conducts audits and investigations and presents recommendations for improving the management of Iraq reconstruction and relief activities. The SIGIR has identified at least two ongoing investigations into LOGCAP activities, as reported in the SIGIR's latest quarterly report to Congress.\nRecent assessments from GAO, DOD's IG, and the SIGIR reveal a lack of federal oversight, management, and accountability for funds spent for Iraq contracting. According to Charles Williams, Director, Defense Contract Management Agency, there are vacancies for more than 600 oversight positions in Iraq and Afghanistan. An audit conducted by the DOD IG revealed that the federal government failed to substantiate the disbursement of at least $7.8 billion of $8.2 billion dollars spent for goods and services in Iraq. In a May 22, 2008, congressional hearing before the House Oversight and Government Reform Committee, DOD officials revealed estimates that the Army disbursed $1.4 billion in commercial payments that lacked the minimum supporting justification and documentation for a valid payment—such as certified vouchers and invoices. In one reported instance, a $320 million payment in cash was made without justification beyond a signature.\nThe FY2009 National Defense Authorization Act ( P.L. 110-417 ) contains provisions that impact federal contracting. Some key highlights are provided here:\nSection 832 offers a \"Sense of Congress\" provision that security operations in \"uncontrolled or unpredictable high-threat environments\" should ordinarily be performed by the military forces; that private security contractors should not perform inherently governmental functions in the area of combat operations, but that it should be in the \"sole discretion of the commander of the relevant combatant command\" to determine whether such activities should be delegated to individuals not in the chain of command; Section 833 amends 10 U.S.C. 1705 by designating an expedited hiring authority for the DOD acquisition workforce; Section 834 sets certain acquisition personnel requirements for military personnel in the acquisition field; Section 841 establishes a policy to address personal conflicts of interest by employees of federal government contractors; Section 842 requires the Secretary of Defense to ensure that DOD contractors inform their employees, in writing, of employee whistleblower rights and protections under 10 U.S.C. 2409, as implemented by Subpart 3.9, Part I, Title 48, Code of Federal Regulations; Section 844 requires the Comptroller General to provide a report to the House and Senate Armed Services Committees on the use of off-shore subsidiaries by DOD contractors; Section 845 sets requirements for the Secretary of Defense in the area of defense industrial security; Section 851 clarifies the pay and annuities of certain Members and staff related to the Commission on Wartime Contracting in Iraq and Afghanistan; Section 852 calls for the Army Audit Agency, the Navy Audit Services, and the Air Force Audit Agency to each conduct a comprehensive audit of spare parts purchases and depot maintenance and repair equipment activities for operations in Iraq and Afghanistan, the purpose of which is to identify potential waste, fraud, and abuse in the performance of DOD contracts, subcontracts, and task and delivery orders, and make such audits available to the Commission on Wartime Contracting in Iraq and Afghanistan; Section 853 sets additional reporting requirements for contractors that perform security functions in areas of combat operations and are involved in the discharge of a weapon or other active, non-lethal countermeasures; and Section 854 sets additional reporting requirements for contractors related to alleged crimes by or against contractor personnel in Iraq and Afghanistan.\nFinally, P.L. 110-417 contains Subtitle G – Government Wide Acquisition Improvement, which includes provisions that affect all federal contracts. These provisions are known as the Clean Contracting Act of 2008. Key highlights are provided here:\nSection 862 limits the length of certain federal executive agency and DOD contracts (for any contract in an amount greater than the simplified acquisition threshold) by certain conditions: (1) the contract may not exceed the time necessary to meet the \"unusual and compelling requirements\" of the work to be performed; (2) the contract may not exceed the time necessary for the executive agency to enter into a competition for a new contract; and (3) the contract may not exceed one year unless the head of the executive agency determines that exceptional circumstances apply. Section 863 amends the Federal Acquisition Regulation (FAR) to require competition for the procurement of property and services, in excess of the simplified acquisition threshold, that is made under a multiple award contract, unless the contracting officer waives the requirement on the basis of certain determinations, and justifies the determination in writing. Section 864 requires a revision of the FAR to address the use of cost-reimbursement contracts, including guidance when they are to be used; under what circumstances; justification; and what appropriate workforce resources are necessary to award and manage cost-reimbursement contracts. This provision also requires that the Inspector General for certain federal executive agencies review the agency's use of cost-reimbursement contracts for compliance with such regulations, and that the Director of the Office of Management and Budget (OMB) submit an annual report by March 1 of each year on each agency's use of cost-reimbursement contracts, and submit such a report to certain congressional committees (House Oversight and Government Reform, Senate Homeland Security and Governmental Affairs, House and Senate Appropriations, and the House and Senate Armed Services Committees). Section 865 requires that the OMB Director submit a comprehensive report on the use of interagency contracts, and include guidelines to improve the management of such contracts. Section 866 amends the FAR to minimize the excessive use of contracts by contractors, subcontractors, or tiers of subcontractors, that add none or negligibly no value to the work. This practice is sometimes referred to as \"pass-through charges or fees.\" This provision would eliminate a contractor, subcontractor, or tiers of subcontractors, from receiving indirect costs or profit on work performed by a lower-tier contractor, to which the higher tier adds no value or negligible value to the work. This section of the provision applies to any cost-reimbursement contract type, contract, or task or delivery order in an amount greater than the simplified acquisition threshold. DOD will continue to be subject to guidance pursuant to Section 852 of the John Warner National Defense Authorization Act for Fiscal Year 2007 ( P.L. 109-364 ). Section 867 amends the FAR to provide federal executive agencies (excluding DOD) with guidance on the appropriate use of award and incentive fees in federal acquisition programs. DOD will continue to be subject to guidance pursuant to Section 852 of the John Warner National Defense Authorization Act for Fiscal Year 2007 ( P.L. 109-364 ). Section 868 amends the FAR to clarify the procurement of items from (and minimize the abuse of) the commercial services inventory. Section 869 authorizes the preparation and completion of the Acquisition Workforce Development Strategic Plan for federal agencies (except DOD) to develop \"a specific and actionable 5-year plan to increase the size of the acquisition workforce,\" and to operate a government wide, acquisition intern program for such federal agencies. The plan is to be completed within one year of the enactment of this act and \"in a fashion that allows for immediate implementation of its recommendations and guidelines.\" Section 870 amends the Office of Federal Procurement Policy Act to establish a Government Wide Contingency Contracting Corps. The Corps is under the authority of the Administrator of General Services. Members of the Corps shall be available for deployment in responding to an emergency or major disaster, or contingency operation, both within and outside the continental United States.\nLegislation passed in the FY2008 National Defense Authorization Act ( P.L. 110-181 ) required increased oversight and accountability for DOD contracting during combat operations. Overall these provisions sought to enhance competition; reduce sole-source contracts; improve the acquisition workforce; address waste, fraud, and mismanagement; and provide mechanisms for greater oversight and transparency. A group of 24 provisions included in the bill known as the Clean Contracting Act of 2008 were introduced in the 109 th Congress and enacted in the 110 th Congress.", "Congress is also interested in costs under the Defense Base Act (DBA). The DBA requires that many federal government contractors and subcontractors provide workers' compensation insurance for their employees who work outside of the United States. The U.S. Army's LOGCAP covers costs for DBA insurance and includes significant overheard and other costs beyond the costs of the actual insurance claims. In testimony before the Commission on Wartime Contracting in Iraq and Afghanistan, the Director of the Defense Contract Audit Agency stated that from 2003 to 2007 KBR incurred $592 million in costs for DBA insurance premiums.\nThe Duncan Hunter National Defense Authorization Act of 2009 ( P.L. 110-417 ) includes a provision that requires the Secretary of Defense to adopt an acquisition strategy to acquire insurance under the Defense Base Act; such a strategy should minimize overhead and coverage costs, provide a low level of risk to DOD, and present a competitive marketplace strategy. A report is due to congressional committees within 270 days of the date of the act's enactment into law.\nIn September 2007, the U.S. Army Audit Agency (USAAA) released its audit report of DBA costs under LOGCAP and uncovered rising program costs and wide fluctuations in insurance rates. In early 2007, an audit of the DBA program was initiated by the U.S. Army Audit Agency (USAAA) due to several factors, including the growing complexity of the DBA program, rising program costs, and wide fluctuations in insurance rates. The audit report stated that the costs of DBA insurance charges were paid through the Army's LOGCAP contract with KBR. Chairman Waxman offered the following testimony on the DBA financial transactions under the LOGCAP contract:\nOn September 28, 2007, the Army Audit Agency issued a report examining DBA payments under the single largest contract in Iraq, KBR's $27 billion contract to provide meals, housing, laundry, and other logistical support to the troops, also known as the Logistics Civil Augmentation Program (LOGCAP). The findings in this audit provide an illustration of the waste in the DBA program.\nIn its audit, the Army Audit Agency reported that the Army had reimbursed KBR for DBA charges of $284 million made by its insurance company AIG through fiscal year 2005. Of this amount, the auditors reported that AIG would be required to pay out only $73 million in actual claims. The auditors observed that \"the cost of DBA insurance substantially exceeded the losses experienced by the LOGCAP contractor.\"\nThe data the Committee received from AIG indicate that expenses in providing DBA insurance are typically 40% of premiums. Using this estimate, AIG's expenses under the LOGCAP contract would be $114 million, and its underwriting profit would be $97 million. The Army Audit Agency concluded that AIG's rates appear \"unreasonably high\" and \"excessive,\" warning of an \"increased risk that the Army could be overcharged.\" The audit report found that there is \"a high risk that the contractor may have been paying more than necessary for this insurance\" and that \"significant annual increases insurance companies made to DBA insurance rates don't appear to be consistent with the risk.\" Army auditors also raised concerns about the cost-plus nature of these charges.\nAs the auditors stated, \"because the LOGCAP contract is primarily a cost-reimbursable contract, the cost of this insurance is ultimately passed on to the government. As a result, there is little incentive for KBR to control its costs for DBA insurance. To the contrary, under the LOGCAP contract, KBR itself is paid its fee as a percentage of these DBA costs, ranging from 1% to 3%, meaning that KBR may have received between $2.8 million and $8.4 million on top of AIG's profits. Although the Army auditors found that \"Army personnel at all levels appear to be aware of, and concerned with, the high cost of DBA insurance,\" they concluded that \"sufficient action hadn't been taken to scrutinize these costs.\" The auditors also warned that \"we believe similar problems could exist on other contracts outside the LOGCAP arena.\"", "", "In most cases, federal government contracts are awarded under \"full and open competition.\" However, there are exceptions, particularly during situations involving national security.", "The foundation for the awarding of federal government contracts is in the Competition in Contracting Act of 1984 (CICA), which explicitly states that the federal government \"shall obtain full and open competition through use of the competitive procedures in accordance with the requirements of the CICA and the FAR.\" The Competition in Contracting Act, FAR, and the Defense Federal Acquisition Regulation Supplement (DFARS) outline at least seven exceptions to the use of other than full and open competition in the awarding of contracts.", "Title 41 USC Section 428a grants special emergency procurement authority to heads of executive agencies where it is determined that a procurement is to be used in support of a contingency operation, or to facilitate defense against or recovery from nuclear, biological, chemical, or radiological attack.", "Contingency contracting differs from emergency contracting—the first usually describes situations where urgent requirements are necessitated by disasters, while the second usually describes military, humanitarian, or peacekeeping operations. DOD has developed initiatives to strengthen DOD contracting operations, particularly in contingency contracting situations. Section 817 of the National Defense Authorization Act for Fiscal Year (FY) 2006 directs the Secretary of Defense, in consultation with the Chairman of the Joint Chiefs of Staff, to develop a joint policy for contingency contracting during combat operations and post-conflict operations no later than one year from the bill's enactment. Sections 815 and 854 of the John Warner National Defense Authorization Act for FY2007 required DOD to report to Congress on contingency contracting requirements and program management, and to develop instructions to implement a contingency contracting program. The report was issued in October 2007.", "Section 811 of the FY2005 National Defense Authorization Act grants the Secretary of Defense limited rapid acquisition authority to acquire goods and services during combat emergencies. Also, Title 10, Section 2304 outlines the use of ID/IQ task orders, sealed bidding, certain contract actions, and set-aside procurement under section 8(a) of the Small Business Act as examples of ways to expedite the delivery of goods and services during combat operations or post-conflict operations.", "", "No one federal agency has the sole mission to audit, investigate, or oversee DOD-appropriated funds for troop support services under LOGCAP. Multiple agencies share responsibility, among them the Defense Contract Audit Agency (DCAA), the Defense Contract Management Agency (DCMA), the Army Audit Agency (AAA), and the DOD Inspector General.", "Media reports suggests that a perceived lack of transparency in the earliest Iraq contracts led to the appointment of the Special Inspector General for the Coalition Provisional Authority (now SIGIR). SIGIR Stuart Bowen has audited and investigated contracts for Iraq reconstruction and relief funds, although some projects have involved a blending of IRRF funds with DOD appropriated funds. The SIGIR's additional investigations into LOGCAP contracts have largely described LOGCAP contracts as lacking transparency, oversight, and financial accountability, and his investigations have documented some cases of waste, fraud, abuse, and financial mismanagement. According to the Congressional Budget Office, the SIGIR has produced more than 150 reports, audits, or investigations of reconstruction-related activities. Estimates have been made that the SIGIR's work has resulted in significant benefits to the federal government.\nIn June 2007 the SIGIR released a report based on its partial audit of Task Order 130, awarded to KBR on April 27, 2006, to provide support services to officials at the U.S. Embassy in Iraq as well as other Iraq sites. This report found substantial deficiencies in both KBR's ability to provide enough data for the SIGIR to perform an adequate audit and investigation of (what appeared to be) gross overcharges for fuel and food services. Additionally, the report found that the government's oversight and management of the contract was inadequate and contributed to the SIGIR's inability to completely audit and investigate the contract—including an evaluation of the government's ability to provide oversight and management.\nOverall, the SIGIR has recommended that the federal government \"generally avoid the use of sole-source and limited-competition contracting actions.\" The report concludes that the use of sole-source and limited competition contracting in Iraq should have ended sooner, and that contracts issued previously under limited or sole-source competition should have been subject to re-competition.", "", "The SIGIR's July 30, 2010, Quarterly Report to Congress discussed two LOGCAP-related activities, as described here:\n(1) The Department of State (DOS) has requested permission to use the existing LOGCAP program to continue to with essential services, including meals, mail delivery and laundry, to the five Enduring Presence Posts (EPPs).\n(2) According to DOS, if State is unable to use the LOGCAP contract, DOS does not have a plan to meet its support and requirements.", "The SIGIR LOGCAP review of Task Order 130 is a continuation of a past review (awarded on April 27, 2006, with an estimated value of $283 million) and a new review of LOGCAP Task Order 151 (awarded on June 6, 2007, with an estimated value of $200 million). Both task orders were awarded to KBR for support services to the Chief of Mission and Multi-National Force-Iraq staffs (located at the U.S. Embassy-Iraq) and for services at other Chief of Mission sites within Iraq (located in Baghdad, Basra, Al Hillah and Kirkuk.) SIGIR conducted its review at KBR sites in Baghdad and involved interviews with personnel responsible for the administration and oversight from DCMA, DCAA, and DOS; personnel with the Joint Area Support Group-Central appointed as the Contracting Officer's Technical Representatives (COTR); the LOGCAP Task Order 151 Support Officer; personnel at the Army's Logistic and Budget Offices, and KBR managers and operational personnel. From the report, here is an excerpt which described the costs:\nBecause these task orders provided support to both the Department of Defense (DOD) and Department of State (DOS) missions in Iraq, DOD and DOS agreed that the reimbursement of costs associated with these task orders would be shared 60% by DOS and 40% by DOD. The total cost of these four task orders is approximately $1.5 billion.\nOverall, the SIGIR's audit and investigation found that the federal government and KBR had improved its oversight and management of Task Orders 130 and 151. However, the report identified areas where the government should make specific improvements in both oversight and management.", "Thomas F. Gimble, Principal Deputy Inspector General for the Department of Defense, testified at the September 20, 2007, hearing before the House Armed Services Committee on \"Accountability During Contingency Operations: Preventing and Fighting Corruption in Contracting and Establishing and Maintaining Appropriate Controls on Materiel.\" In his testimony he described DOD's past and present efforts to provide oversight for contracting during contingency operations:\nTo date, over $550 billion has been appropriated to the Department of Defense in support of the men and women of our Armed Forces in Southwest Asia and the fight against terrorism. To provide oversight, we have over 225 personnel working on 29 audits and 90 investigations that address a wide variety of matters to include contracting, accountability, and required documentation. Additionally, we are working with other DoD organizations, such as the Army Audit Agency, the Army Criminal Investigation Command, and the Defense Finance and Accounting Service, to evaluate and provide recommendations for actions addressing these critical mission support areas.\nHe also described the formation of a new partnership to combine the efforts of multiple federal agencies to combat both waste, fraud, abuse, and mismanagement of Iraq reconstruction contracts:\nMore recently, as a result of the magnitude of alleged criminal activities within the Iraqi theater, a group of Federal agencies has formalized a partnership to combine resources to investigate and prosecute cases of contract fraud and public corruption related to U.S. Government spending for Iraq reconstruction. The participating agencies in the International Contract Corruption Task Force (ICCTF) are DCIS; Army CIDs Major Procurement Fraud Unit; the Office of the Inspector General, Department of State; the FBI; the Special Inspector General for Iraq Reconstruction; and the Office of the Inspector General, Agency for International Development.\nThe ICCTF has established a Joint Operations Center which is a case coordination cell and criminal intelligence element aimed at achieving maximum interagency cooperation to successfully prosecute fraud and corruption cases in support of the war effort in Iraq. The mission and objectives of the ICCTF are a shared responsibility of the participating agencies. Case information and criminal intelligence are shared without reservation and statistical accomplishments will be reported jointly.\nAs a result of closed and ongoing investigations, five Federal criminal indictments and ten Federal criminal information have been issued, and two Article 32 hearings under the Uniform Code of Military Justice have been conducted. As a result of the investigations, nine U.S. persons and one foreign person have been convicted of felonies, resulting in a total of approximately fifteen years of confinement and eleven years of probation. Four individuals and one company were debarred from contracting with the U.S. Government; nineteen companies and persons were suspended from contracting; and two contractors signed settlement agreements with the U.S. Government. In all, $9.84 million was paid to the U.S. in restitution; $323,525 was levied in fines and penalties; $3,500 was forfeited; and $61,953 was seized.", "GAO has identified DOD contract management as a high-risk area and monitors DOD's performance with periodic progress updates. GAO has conducted numerous studies of Iraq contracting including several studies of logistical support contracts. Since 2003 GAO has issued a number of Iraq-related reports and testimonies to Congress.\nThe Comptroller General David Walker appeared in July 2007 before the Senate Homeland Security and Governmental Affairs Committee to discuss four specific challenges facing federal agencies in the oversight and management of contracts. There he made several important observations:\nManaging risks when requirements are in transition requires effective oversight. DOD lacked the capacity to provide sufficient numbers of contracting, logistics, and other personnel, thereby hindering oversight efforts. The challenges faced in Iraq are a symbol of systematic challenges facing DOD. DOD cannot develop a complete picture of the extent to which it relies on contractors to support its operations. Information on the number of contractor employees, and the services they provide, is not aggregated within DOD or its components. DOD recently established an office to address contractor support issues, but the office's specific roles and responsibilities are under study. DOD and its contractors need to clearly understand DOD's objectives and needs. To produce desired outcomes with available funding and within required time frames, they need to know the goods or services required, the level of performance or quality desired, the schedule, and the cost.", "Potential contract oversight issues that Congress may choose to examine include various aspects of contract administration, such as contract costs; development of contract requirements; costs-reimbursement and sole-source contracts; transparency; and the size, shape, and skill diversity of the acquisition workforce.", "One rationale often cited for the outsourcing of program management to industry is that DOD no longer has the in-house expertise needed to manage such complicated acquisition programs. Some Members of Congress may want DOD to develop a long-term plan to restore in-house expertise to make the government a smarter customer. Because of several cases in which high-profile weapons acquisition programs have been affected by escalating costs and technical shortcomings, Congress may choose to review the management of individual programs and the evolution of DOD's acquisition management processes with an eye toward using the FY2008 funding bills to strengthen the government's hand in dealing with industry. As an example, Secretary of the Navy Donald C. Winter and Chief of Naval Operations Adm. Michael G. Mullen have reported that the Navy intends to reclaim some of the authority over ship design it has ceded to industry. Congress may also choose to study the Army's Future Combat System (FCS) and may question the amount of managerial discretion the Army has vested in the Lead System Integrator (LSI).", "Contract administration includes contract management and contract oversight. FAR Part 37 states that \"agencies shall ensure that sufficiently trained and experienced professionals are available to manage contracts.\" The burden rests with the federal government to ensure that enough appropriately trained professionals are available to manage contracts. This is essential, particularly before the requirements generation process, when the government determines the scope of work to be completed. Contract management is also described in the Office of Federal Procurement Policy's (OFPP) \"Guide To Best Practices for Contract Administration\" where it states that \"the technical administration of government contracts is an essential activity ... [it is] absolutely essential that those entrusted with the duty ensure that the government gets all that it bargains for ... and they must be competent in the practice of contractor administration.\"\nOver the past few years the size, shape, and complexity of logistical support service contracts have grown with the technical requirements. However, the size of the federal contractor workforce has decreased. There is now an imbalance—there are fewer federal contracting officials to manage the large-scale contracts and in some cases the government has sought to hire contractors to do the job that federal employees use to perform. For example, GAO reported that military officials utilizing LOGCAP had little understanding of LOGCAP or their contract management responsibilities. Additionally, some logistical support units intended to assist military commanders had no prior LOGCAP or contracting experience.\nTwo former OFPP administrators, Steven Kelman and Allan Burman, stated that the current contracting situation creates a crisis. Here they offer their assessment:\nHiring contracting officials is hardly the way to dress for political success—who wants to bring in more \"bureaucrats?\"—but there can't be well-managed contracts without people to manage them. The current situation creates a vicious circle: Overstretched people make mistakes, producing demands for more rules, creating additional burdens, giving people even less time to plan effective procurement and manage performance.\nIt is important that both civilian and military procurement sectors have qualified and experienced contract professionals. In the case of service contracts, having professionally trained contracting personnel could be even more critical than contracts for tangible goods. With tangible goods, there is an identifiable product. In the absence of a product, it becomes even more important that DOD and the contractor both exercise good stewardship of federally appropriated dollars.", "Contracting officials are expected to make tough decisions. As an example, Ms. Bunnatine Greenhouse, formerly the highest-ranking civilian at the U.S. Army Corps of Engineers (USACE), raised important questions on the rationale for the awarding of one KBR contract: first, in her opinion, because the awarding of the contract lacked an appropriate level of competition; and second, because in her view there existed an organizational conflict of interest. She objected to the awarding of one contract award as well as the five-year contract term. The basis for her refusal to approve the proposed five-year, sole-source contract between KBR and the U.S. Army [for the Restore Iraqi Oil (RIO) contract] was because (1) KBR had been paid $1.9 million to draft a contingency plan to design the \"guts\" of the contract, including the process, budget, and other details; and (2) selecting KBR for the five-year contract would violate procurement protocol, as (reportedly, Ms. Greenhouse stated) contractors who draw up a contingency plan cannot be allowed to bid on the job to execute the same plan. She stated that bidding on the contract would give KBR an unfair advantage over any competitors. When pressured to sign the KBR contract, Ms. Greenhouse added the following contract language: \"I caution that extending this sole source effort beyond a one-year period could convey an invalid perception that there is not strong intent for a limited competition.\" The contract was later investigated by the SIGIR. Various media reports suggested that in the case of Bunnatine Greenhouse, a trained and experienced senior DOD contract management official was eventually demoted and later fired for doing her job.\nAnother senior DOD civilian testified that he made a decision to award KBR a task order under the LOGCAP contract without conducting any competition. Michael Mobbs, then-Special Assistant to the Under Secretary of Defense for Policy, testified that he made the decision to award KBR the contingency planning contract over the objections of an attorney with the Army Materiel Command. The attorney had determined that the oil-related task order was outside of the scope of the LOGCAP troop support contract. Later, GAO concluded that the lawyer's position was the correct one and that the work \"should have been awarded using competitive procedures.\"", "LOGCAP contracts have often bypassed the process to define realistic funding, appropriate time frames, and other important requirements through the use of \"undefinitized\" contract actions. Undefinitized contract actions do not require that the DOD contracting official write a completed performance work statement before the work is performed. Some proponents of undefinitized task orders have stated that they give the contractor more flexibility in getting work started sooner. However, recent DCAA audits have found that these undefinitized task orders have given KBR a significant cost advantage. Auditors have found that DOD contracting officials were more willing to rely on KBR's costs estimates, estimates later found to be greatly inflated. According to DCAA auditors, DOD contracting officials rarely challenged these cost estimates. The estimates became the baseline from which KBR established their costs upon which to bill the government, which later increased their overall profit.\nIn testimony before the Senate Armed Services Committee, the SIGIR stated that contracting personnel must be provided with an adequate description of a customer's needs. The inability to properly define and prepare requirements appeared to be a significant oversight challenge in the Iraq contracting process.", "FAR Subpart 16.5 defines Indefinite-Delivery/Indefinite-Quantity (ID/IQ) contracts. In the case of ID/IQ contracts, task and delivery orders are issued; these orders do not define a firm quantity of goods or services. While task and delivery orders under ID/IQ contracts are not subject to the Competition in Contracting Act (CICA), they are subject to competition-type requirements under other provisions of law. Task orders are the \"to do\" portion of the contract, the contractor's action list. LOGCAP contracts allow task orders to be approved as needed without being subject to competition among multiple contractors. Task orders are not contracts but can potentially allow significant amounts of work to be performed on a non-competitive basis. Task Order 59 was one of the largest single task orders on the LOGCAP III contract. It was issued in May 2003 and includes various discrete functions, supporting up to 130,000 U.S. troops, and has reportedly resulted in estimates of charges to the government of about $5.2 billion dollars from June 2003 through June 2004.", "Much has been written in the media about the use of sole-source contracting in Iraq. In general, most authorities believe that government contract costs are influenced significantly by the degree of competition; that having several competitors will reduce overall cost. However, questions have been raised as to whether contract costs in a war zone are inherently uncontrollable. DOD has argued that Iraq contracting costs are expensive because of the uncertainty of war-related requirements for goods and services. Government contingency contracting in times of war has often favored using programs such as LOGCAP because it enables contracting officials to move quickly to secure contractors, who in turn can be deployed quickly into the combat theater.\nWhile full and open competition is the standard for government contracting, full and open competition has not been the standard for contracting for troop support services under LOGCAP. One report stated that of the $145 billion in non-competitive contracts awarded by the federal government in 2005, $97.8 billion was awarded in \"no-bid\" contracts. Of that $97.8 billion in contracts, $63.4 billion was awarded under the rationale that only one contractor could supply the needed goods or services. The remaining $34.4 billion was awarded in no-bid contracts under a variety of other exceptions to full and open competition. $8.7 billion was awarded for emergency situations, and $2.9 billion was awarded for circumstances where a statute authorizes or requires restricted competition. Finally, $47.2 billion in contracts was awarded in cases where the competitive range was limited to a small group of companies.\nThe Special Investigations Division of the House Government Reform Committee has issued a report titled Dollars , not Sense: Government Contracting Under the Bush Administration . According to this report, in 2000 the federal government awarded $67.5 billion in non-competitive contracts; that figure rose to $145 billion in 2005, an increase of 115%. While the contracts awarded were larger, the value of contracts overseen by the average government procurement official rose by 83% (between 2000-2005).", "Cost-reimbursement contracts can be (1) cost-plus award fee; (2) cost-plus incentive fee; or (3) cost-plus fixed fee. In 2000, the federal government spent $62 billion on cost-plus contracts; in 2005, that figure increased to $110 billion. Nearly half of all costs-plus contracts ($52 billion) were costs-plus award fee contracts. LOGCAP was the single largest cost-plus award fee contract, and at one time was valued at about $16.4 billion.", "The SIGIR's past investigations into reconstruction contracts revealed that, in some contracts, overhead expenses accounted for more than half of the costs that Kellogg, Brown, and Root (KBR) billed the federal government. A recent audit report, \"Review of Administrative Task Orders for Iraq Reconstruction Contracts,\" found that relatively high overhead costs were charged, and that these costs were significantly higher than work performed by other companies in Iraq. For these contracts, overhead costs ranged from 11% to 55% of projected contract budgets. For example, the SIGIR found that in five KBR projects, administrative costs outdistanced the costs of the projects alone. For example, the report cites a project where administrative costs totaled about $52.7 million, while the actual project costs were about $13.4 million. In another case, the combined administrative costs for five contractors totaled about $62 million, while the direct construction costs totaled $26.7 million. The SIGIR found that overhead expenses accounted for more than half of the costs KBR billed the federal government.\nOverhead fees can also result as a part of fees passed from one contractor to another. One such example is the case of Blackwater Security Firm's contract for private security services in Iraq. Blackwater's contract paid workers who guarded food trucks a salary of $600 a day. The company added overhead costs and a 36% markup to its bill, then forwarded the bill to a Kuwaiti company. The Kuwaiti company then added costs and profit, then sent the bill to the food company. The food company did the same, and finally sent the bill to KBR. KBR passed its cost to DOD. Yet the U.S. Army stated in a congressional committee hearing that it had never authorized KBR to enter into a subcontracting relationship with Blackwater. The matter remains pending.", "Transparency allows the federal government to better administer contracts and oversee contractors. For example, the federal government has had difficulty getting certain contractors to provide important information on their invoices and billing statements. The SIGIR released a series of audit and investigative reports which drew attention to barriers that hampered the government's efforts. In one report, SIGIR Bowen reported that it was difficult to complete the investigation into the KBR contracts because KBR \"routinely and inappropriately marked their data as proprietary.\"\nAnother problem with a lack of transparency is the relationship between the federal government, the prime contractor, and the subcontractors. The federal government has a contractual relationship with the prime contractor, not with subcontractors. Thus the government may be somewhat limited in providing full accountability for tax-payer dollars. While the prime contractor-subcontractor relationship is between private sector companies, the monies are from public funds.", "Secretary Gates has announced a move to significantly increase the size of the defense acquisition workforce, primarily achieved by converting about 10,000 private-sector contractor positions to full-time government positions, and hiring an additional 10,000 defense acquisition workforce employees by 2015. According to DOD officials, the long-term goal is to increase the size of the organic defense acquisition workforce to its 1998 levels of approximately 147,000 employees. At the same time, statements issued by President Obama have signaled his intention to reduce defense contracting spending by reviewing DOD's acquisition processes prior to the commencement of the next Quadrennial Defense Review. President Obama has reportedly announced that he may perform a line-by-line review of the federal budget, eliminate government programs that are not performing, reduce federal spending on contractors by at least 10%, and require each federal agency to justify the use of cost-reimbursement (also known as costs-plus) and sole-source (also known as non-competitive) contracts with possible implications for DOD acquisition policy.\nAccording to DOD, its acquisition workforce has been reduced by more than 50% between 1994 and 2005. In future years, between 2006-2010, half of the federal acquisition workforce will be eligible to retire. It has been reported that DOD does not have sufficient numbers of contractor oversight personnel, particularly at deployed locations. This limits DOD's ability to assure that taxpayer dollars are being used in a judicious manner. For example, in recent testimony before Congress, a GAO official reported that if adequate staffing had been in place, the Army could have realized substantial savings on LOGCAP contracts in Iraq. The GAO official also stated that one DCMA official, who is responsible for overseeing the LOGCAP contractor's performance at 27 locations, reported that he was \"unable to visit all of those locations during his six-month tour to determine the extent to which the contractor was meeting the contract's requirements.\"\nEarlier mandates to reduce the size of the DOD acquisition workforce reflected Congress' view that the workforce had not been downsized enough—that reductions continued to lag in proportion to the decline in the size of the overall defense budget, in general, and to the acquisition portion of the defense budget, in particular. At that time, Congress and DOD were at odds over the need for further reductions in the defense acquisition workforce. Reducing the defense acquisition workforce had been viewed by the Congress, in the past, as a necessary requirement for eliminating wasteful spending, and providing DOD with increased funding for other priorities.\nStaffing shortages in the defense contracting personnel to oversee Iraq contracts have become part of a larger, systemic problem within DOD. In reducing the size and shape of the federal acquisition workforce, an unanticipated result has been the increase in the growth of the private sector service contracts. With the growth in service contracting; the increase in the number of complex, billion dollar contracts; and the decline in the number of federal acquisition workforce employees, some officials have asserted that there are not enough DOD contracting officials, onsite in Iraq, who are available and experienced enough to manage the complexities of the new acquisition programs, or oversee private sector contractors.\nIt appears to some that DOD has downsized the federal acquisition workforce, particularly those that oversee large-scale contracts like LOGCAP, to dangerously low levels. They note that the past downsizing of the defense acquisition workforce has resulted in the loss of technical personnel and a talent drain on DOD's ability to meet its mission and objectives. There are concerns over potential deficits and imbalances in the skills and experience levels of personnel who manage large-scale weapon acquisition programs and defense contracts.", "The Secretary of the Army commissioned a study headed by former Deputy Secretary of Defense Jacques Gansler to analyze \"structural weaknesses and organizational deficiencies in the Army's acquisition and contracting system used to support expeditionary operations.\" Dr. Gansler has recently presented the commission's findings and recommendations before Congress. Here is an excerpt of the commission's analysis of the acquisition workforce:\nThe expeditionary environment requires more trained and experienced military officers and non-commissioned officers (NCOs). Yet, only 3 percent of Army contracting personnel are active duty military and there are no longer any Army contracting career General Officer (GO) positions. The Army's acquisition workforce is not adequately staffed, trained, structured, or empowered to meet the Army needs of the 21 st Century deployed war fighters. Only 56 percent of the military officers and 53 percent of the civilians in the contracting career field are certified for their current positions. Notwithstanding a seven-fold workload increase and greater complexity of contracting, the Institutional Army is not supporting this key capability. Notwithstanding there being almost as many contractor personnel in the Kuwait/Iraq/Afghanistan theater as there are U.S. military, the Operational Army does not yet recognize the impact of contracting and contractors in expeditionary operations and on mission success. What should be a core competence—contracting (from requirements definition, through contract management, to contract closeout)—is treated as an operational and institutional side issue.\nThe commission's report recommends that the Army makes systemic and fundamental changes in the way it conducts business, and has divided its recommendations into four major areas as described here:\nIncrease the stature, quantity, and career development of military and civilian contracting personnel (especially for expeditionary operations); Restructure the organization and restore responsibility to facilitate contracting and contract management in expeditionary and CONUS operations; Provide training and tools for overall contracting activities in expeditionary operations; and Obtain legislative, regulatory, and policy assistance to enable contracting effectiveness in expeditionary operations.", "DOD has asked the Defense Business Board to examine the performance of the Defense Contract Audit Agency (DCAA) and report their findings within 60 days. DCAA has come under increased scrutiny, in part, because of a July 2008 GAO report which investigated certain complaints it received from the FraudNet hotline alleging questionable and improper auditing irregularities. GAO found that the allegations were substantiated; the report concluded with the following observations, as stated below:\nIn the cases we investigated, pressure from the contracting community and buying commands for favorable opinions to support contract negotiations impaired the independence of three audits involving two of the five largest government contractors. In addition, DCAA management pressure to (1) complete audit work on time in order to meet performance metrics and (2) report favorable opinions so that work could be reduced on future audits and contractors could be approved for direct-billing privileges led the three DCAA personnel to take inappropriate short cuts—ultimately resulting in noncompliance with GAAS and internal DCAA CAM guidance. Although it is important for DCAA to issue products in a timely manner, the only way for auditors to determine whether \"prices paid by the government for needed goods and services are fair and reasonable\" is by performing sufficient audit work to determine the adequacy of contractor systems and related controls, and contractors compliance with laws, regulations, CAS, and contract terms. Further, it is important that managers and supervisory auditors at the three locations we investigated work with their audit staff to foster a productive, professional relationship and ensure that auditors have the appropriate training, knowledge, and experience.", "Congress may choose to consider the following options when examining DOD contracts for troop support: (1) implementing of the Gansler Commission's recommendations; (2) broadening of the jurisdiction of the SIGIR to include DOD contracts for troop support services (like LOGCAP contracts); (3) convening of a study of the federal employee and contractor workforce; (4) requiring more detail to give Congress better information to perform its oversight role; and (5) establishing a dedicated office to conduct audits and investigation of DOD contracts.", "Perhaps the most significant recommendation of the Gansler Commission is that the Army address some institutional and cultural issues that may provide an obstacle to moving forward. The commission interviewed a number of knowledgeable Army officials and concluded with the following observations about the challenges that the Army will face in making significant improvements in its business operations, as described here in the report:\nThose charged with getting the job done have provided valuable insight into the doctrine, policies, tools, and resources needed for success. Clearly, the Army must address the repeated and alarming testimony that detailed the failure of the institution (both the Institutional Army and the Department of Defense) to anticipate, plan for, adapt, and adjust acquisition and program management to the needs of the Operational Army as it has been transformed, since the end of the Cold War, into an expeditionary force. The Institutional Army has not adjusted to the challenges of providing timely, efficient, and effective contracting support to the force in Operation Iraqi Freedom (more than half of which is contractor personnel). Essentially, the Army sent a skeleton contracting force into theater without the tools or resources necessary to adequately support our war fighters. The personnel placed in that untenable position focused on getting the job done, as best they could under the circumstances—where support is needed in a matter of hours, or, at best, days. They used their knowledge, skill, limited resources, and extraordinary dedication to get contracts awarded. Alarmingly, most of the institutional deficiencies remain four-and-a-half-years after the world's best Army rolled triumphantly into Baghdad.", "Another option is to give the SIGIR the authority to audit and investigate DOD logistical support contracts in Iraq. The SIGIR has already established a presence in Iraq, and has issued more than 150 reports, including audits and investigations. His efforts have largely resulted in the arrest of five people, and the convictions of four of them, with more than $17 million in assets seized. The SIGIR has made several recommendations related to his audit and investigation of contracts under his jurisdiction. His observations and insights may be relevant and appropriate for the contract administration and oversight of DOD contracts for troop support services.", "Congress may want to convene a study of the federal employee and contractor workforce. The study could examine three important questions: (1) Is there an appropriate balance of federal employee and contractor roles? (2) Is there an appropriate federal role and presence in the oversight area? and (3) Is the federal government attracting the right types of acquisition professionals?\nCongress could require a separate report, from each military service, on the size, scope, costs, and structure of its acquisition workforce (including military, civilian, and contractor personnel).", "Congress could require DOD to provide more details for better congressional oversight. There are five questions that Congress could consider: (1) Should DOD move to limit sole-source or limited competition for Iraq contracts? (2) Should DOD use more fixed-priced contracting in Iraq? (3) Should task and delivery orders have certain dollar constraints? (4) Should task orders be subject to public notice? and (5) Should larger contracts be divided into smaller contracts, with better-defined, discrete tasks?\nTo create more transparency and openness in defense acquisitions regarding contract administration, costs, and performance, Congress could require a separate report from each military service. Each report could include data on the size, scope, costs, and structure of all contracts, particularly no-bid, sole-source, and costs-reimbursement contracts.\nCongress also could require that specific criteria be met before certain contract arrangements can be approved by DOD or by Congress. In addition, Congress could require a periodic re-competition of certain types of contracts, like LOGCAP, that have the potential of spanning for many years. Congress could also require, for example, that task orders beyond a certain size be treated as a separate contract, and thus subject to competition among multiple contractors.\nAnd finally, Congress could require that large defense contracts be subject to competition and that a minimum of three contractors be selected for contracts beyond a certain size. Some have suggested based on available press accounts that some contracts for services in Iraq might have been segregated (into smaller contracts) and opened for competitive bidding. Financial oversight might be more manageable in administering smaller contracts. Small businesses may have more of an ability to compete for contracts.", "One of the recommendations of the SIGIR is to \"designate a single, unified contracting entity to coordinate all contracting in theater.\" One way to accomplish this is to establish a Contingency Contracting Corp (a DOD initiative currently underway is studying the issue) that will deploy to Iraq and establish a standing presence. However, what additional resources might be necessary in order to provide better contract management and oversight of DOD-appropriated funds?\nGiven that the mission of the DOD Inspector General's office is to promote \"integrity, accountability, and improvement of Department of Defense personnel, programs and operations to support the Department's mission and to serve the public interest\", should the DOD Inspector General have a stronger presence in Iraq? Given the many problems associated with LOGCAP contracts, oversight agencies like the DOD IG could have a pivotal role in preventing future contractor waste, fraud, or mismanagement.\nCongress may want to consider creating a singularly dedicated office for the audit and investigation of DOD contracts for troop support services.\nAppendix A. Selected Reports\nDuring the last four years, the Congressional Research Service, General Accounting Office, Department of Defense Inspector General, Army Audit Agency, Air Force Audit Agency, and the Special Inspector General for Iraq Reconstruction have issued numerous reports on Iraq contracting issues, including those listed below.\nCongress\nDollars, Not Sense: Government Contracting Under the Bush Administration . Prepared by the Special Investigations Division, Committee on Government Reform-Minority Staff, U.S. House of Representatives, June 2006.\nCongressional Research Service\nCRS Report RS22923, Department of Defense Fuel Costs in Iraq , by [author name scrubbed] and [author name scrubbed].\nCRS Report RL34026, Defense Acquisitions: How DOD Acquires Weapon Systems and Recent Efforts to Reform the Process , by [author name scrubbed].\nCRS Report RL33110, The Cost of Iraq, Afghanistan, and Other Global War on Terror Operations Since 9/11 , by [author name scrubbed].\nCRS Report RL32419, Private Security Contractors in Iraq: Background, Legal Status, and Other Issues , by [author name scrubbed], [author name scrubbed], and [author name scrubbed].\nCRS Report RS21555, Iraq Reconstruction: Frequently Asked Questions Concerning the Application of Federal Procurement Statutes , by [author name scrubbed].\nCRS Report RL31833, Iraq: Reconstruction Assistance , by [author name scrubbed].\nCRS Report RL32229, Iraq: Frequently Asked Questions About Contracting , by [author name scrubbed] et al.\nCongressional Budget Office\nContractor's Support of U.S. Operations in Iraq , Congressional Budget Office, August 2008.\nGovernment Accountability Office\nGAO-08-857. DCAA Audits: Allegations That Certain Audits at Three Locations Did Not Meet Professional Standards Were Substantiated. Report to Congressional Addressees, July 2008.\nGAO-07-1098T. Federal Acquisitions and Contracting. Systemic Challenges Need Attention. Statement of David M. Walker, Comptroller General of the United States, July 17, 2007.\nGAO-07-359T. Defense Acquisitions: DOD Needs to Exert Management and Oversight to Better Control Acquisition of Services. Statement of Katherine V. Schinasi, Managing Director, Acquisition and Sourcing Management. Testimony Before the Subcommittee on Readiness and Management Support, Committee on Armed Services, U.S. Senate, January 17, 2007.\nGAO-07-145. Military Operations: High-Level DOD Action Needed to Address Long-standing Problems with Management and Oversight of Contractors Supporting Deployed Forces, December 16, 2006.\nGAO-06-800T. DOD Acquisitions: Contracting for Better Outcomes. September 7, 2006.\nGAO-06-838R. Contract Management: DOD Vulnerabilities to Contracting Fraud, Waste, and Abuse, GAO-06-838R, July 7, 2006.\nGAO-05-274. Contract Management: Opportunities to Improve Surveillance on Department of Defense Service Contracts, March 17, 2005.\nGAO-05-207. GAO, High Risk Series: An Update, January 2005.\nGAO-04-854. Military Operations: DOD's Extensive Use of Logistics Support Contracts Requires Strengthened Oversight, July 19, 2004.\nSpecial Inspector General for Iraq Reconstruction\nDepartment of Defense Inspector General, Quarterly Report to Congress, April 30, 2008\nSemi-Annual Report to Congress. October 1, 2006-March 31, 2007.\nSemi-Annual Report to Congress. April 1, 2006-September 30, 2006.\nSemi-Annual Report to Congress. October 1, 2005-March 31, 2006.\nSemi-Annual Report to Congress. April 1, 2005-September 30, 2005.\nSemi-Annual Report to Congress. October 1, 2004-March 31, 2005.\nArmy Audit Agency\n(The website is restricted to military domains (.mil) and to the Government Accountability Office)\nReport Number A-2005-0043-ALE Logistics Civil Augmentation Program in Kuwait, U.S. Army Field Support Command, November 24, 2004.\nGansler Commission\nU.S. Army. Urgent Attention Required: Army Expeditionary Contracting, Report of the Commission on Army Acquisition and Program Management, at http://www.army.mil/docs/Gansler_Commission_Report_Final_071031.pdf . Published November 2007.\nAppendix B. Selected Legislative Initiatives on Iraq Contracting\nSelected Legislation Introduced in the 110 th Congress\nThe House has approved the following bills, as noted below.\nH.R. 5658 , National Defense Authorization Act for FY2009\nPassed House, May 22, 2008; placed on Senate Legislative Calendar, June 3, 2008.\nH.R. 3033 , Contractors and Federal Spending Accountability Act of 2008\nThis provision would require the Administrator of General Services to establish and maintain a database on defense contractors containing updated information on criminal, civil, or debarment and suspension proceedings as well as establish the Interagency Committee on Debarment and Suspension. Congress would require a report within 180 days of the act's enactment.\nH.R. 5712 , Close the Contractor Fraud Loophole Act\nThis provision would require federal contractors to report violations of federal criminal law and over-payments on contracts valued greater than $5 million.\nH.R. 3928 , Government Contractor Accountability Act of 2007\nThis provision would require \"covered\" government contractors to submit certification and other financial disclosure requirements in cases where the contractor receives 80% or less of its annual gross revenue from federal contracts. Contractors covered by this provision are those receiving more than $25 million in annual gross revenues from federal contracts, but are not publicly traded companies required to file reports with the Security and Exchange Commission.\nH.R. 4881 , Contracting and Tax Accountability Act of 2008\nThis provision would require tax compliance as a prerequisite for receiving federal contracts, and would prohibit contract awards to certain delinquent federal tax debtors.\nSeveral other bills have been introduced during the 110 th Congress. Each could potentially impact DOD contracting in Iraq, as described below.\nH.R. 4102 / S. 2398 , Stop Outsourcing Security Act\nThis provision would require that only U.S. federal government personnel provide security to personnel at U.S. diplomatic or consular mission in Iraq by six months after enactment, and require the President to report to Congress s on \"the status of planning for the transition away from the use of private contractors for mission critical or emergency essential functions by January 1, 2009, in all conflict zones in which Congress has authorized the use of force.\"\nS. 2147 , Security Contractor Accountability Act of 2007\nThis provision would expand the coverage of the Military Extraterritorial Jurisdiction Act (MEJA) to include all persons \"while employed under a contract (or subcontract at any tier) awarded by any department or agency of the United States, where the work under such contract is carried out in a region outside the United States in which the Armed Forces are conducting a contingency operation.\"\nH.R. 528 , Iraq Contracting Fraud Review of 2007\nThis provision would require the Secretary of Defense, acting through the Defense Contract Audit Agency, to review all Iraq defense contracts for reconstruction or troop support involving any contractors, subcontractors, or federal officers or employees indicted or convicted for contracting improprieties.\nH.R. 663 , New Direction for Iraq Act of 2007\nThese bill contains provisions addressing war profiteering, the recovery of funds from terminated contracts, and other issues. A select number of additional legislative initiatives, proposed during the 110 th Congress, that may impact defense contracting will follow.\nH.R. 4102 , Stop Outsourcing Security Act\nThis provision would require that only U.S. federal government personnel provide security to personnel at U.S. diplomatic or consular mission in Iraq within six months after bill enactment, and would require that the President report to specified congressional committees on \"the status of planning for the transition away from the use of private contractors for mission critical or emergency essential functions by January 1, 2009, in all conflict zones in which Congress has authorized the use of force.\"\nS. 2147 , Security Contractor Accountability Act of 2007\nThis provision would broaden the Military Extraterritorial Jurisdiction Act (MEJA) to include all persons \"while employed under a contract (or subcontract at any tier) awarded by any department or agency of the United States, where the work under such contract is carried out in a region outside the United Sates in which the Armed Forces are conducting a contingency operation.\"\nH.R. 897 , Iraq and Afghanistan Contractor Sunshine Act\nThis provision would require the Secretaries of Defense, State, Interior, and the Administrator of the U.S. Agency for International Development to provide Congress with copies and descriptions of all contracts and task orders valued at over $5 million.\nH.R. 3695 , Freeze Private Contractors in Iraq Act\nThis provision would prohibit an increase in the number of private security contractors employed by DOD, State, and USAID that perform certain security functions in Iraq.\nSelected Legislation Passed in the 110 th Congress\nP.L. 110-181 , the FY2008 National Defense Authorization Act, H.R. 4986 (formerly H.R. 1585 )\nSeveral provisions contained in H.R. 4986 focus on the management and oversight of DOD contracts. Key provisions are listed below:\nSection 802 prohibits future contracts for the use of new Lead System Integrators; Section 813 requires the Comptroller General to report to Congress on potential modifications to the organization and structure of DOD Major Defense Acquisition Programs; Section 816 directs the Under Secretary of Defense for Acquisition, Technology, and Logistics to conduct an annual review on the systematic deficiencies in Major Defense Acquisition Programs; Section 830 directs the Comptroller General to report to Congress on DOD's use of noncompetitive awards; Section 841 establishes a commission to study federal contracting in Iraq and Afghanistan, called the \"Commission on Wartime Contracting;\" Section 842 requires the DOD Inspector General, the SIGIR for Iraq Reconstruction, and the SIGIR for Afghanistan Reconstruction to collaborate on the development of comprehensive plans to perform a series of audits on DOD contracts, subcontracts, and task and delivery orders for the performance of logistical support activities of coalition forces in Iraq and Afghanistan, as well as audits for federal agency contracts, subcontracts, and task and delivery orders for the performance of security and reconstruction functions in Iraq and Afghanistan; Section 851, which would require that the Secretary of Defense (as part of the Strategic Human Capital Plan for 2008) include a separate section of the report focused on the military and civilian acquisition workforce; Section 852 establishes a Defense Acquisition Workforce Development Fund; Section 861 requires coordination between the DOD, the Department of State, and the United States Agency for International Development through the creation of a Memorandum of Understanding between the three agency heads on matters relating to contracting in Iraq and Afghanistan; Section 862 requires that the Secretary of Defense prescribe, within 120 days of enactment, regulations on the selection, training, equipping, and conduct of personnel performing private security functions under a covered contract or covered subcontract in a combat area. These regulations would include processes for registering, processing, and accounting for such personnel; and authorizing and accounting for weapons, and investigating the death and injury of such personnel, their discharge of weapons, and incidents of alleged misconduct. The regulations would also provide guidance to combatant commanders on orders, directives, and instructions to contractors and subcontractors performing private security functions relating to force protection, security, health, safety, relations and interaction with locals, and rules of engagement; Section 863 requires the Comptroller General to review annually all contracts in Iraq and Afghanistan and report to Congress on the total number of contracts and task orders, total number of active contracts and task orders, total value of all contracts and task orders, the degree to which DOD has awarded noncompetitive contracts, the total number of contractor personnel (including the total number of contractor personnel performing security functions and the total number of contractor personnel killed or wounded); also, Section 863 would require the Secretaries of Defense and State to provide the Comptroller General full accesses to the database as described in Section 861; Section 871 establishes a Defense Materiel Readiness Board; Section 872 grants authority to the Secretary of Defense to designate critical readiness shortfalls; and Section 941 requires the Secretary of Defense to conduct a comprehensive assessment of the roles and missions of the military forces, known as a quadrennial roles and missions review." ], "depth": [ 0, 1, 2, 2, 2, 1, 2, 2, 2, 3, 3, 3, 3, 3, 2, 3, 1, 2, 3, 3, 3, 3, 2, 3, 3, 2, 3, 3, 3, 3, 1, 2, 2, 2, 2, 2, 2, 2, 2, 2, 2, 2, 2, 1, 2, 2, 2, 2, 2 ], "alignment": [ "h0_title h2_title h1_title", "h0_title h2_title", "h0_full", "h2_full", "", "h0_full h1_full", "h0_full", "", "h1_title", "h1_full", "h1_full", "", "h1_full", "h1_full", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "" ] }
{ "question": [ "What, surrounding the DOD, does this report cover?", "What is LOGCAP?", "How has LOGCAP previously been awarded?", "How do current LOGCAP personnel regard involvement in Iraq?", "How was LOGCAP IV awarded?", "What did this LOGCAP ask for?", "What potential reward does this LOGCAP have for companies?", "How have companies performed under LOGCAP IV?", "What was the first award given?", "How has this progressed a month later?", "Why was a review of the defense acquisition system ordered?", "How were the results of the review given?", "Why was IMPROVE introduced?" ], "summary": [ "This report examines Department of Defense (DOD) logistical support contracts for troop support services in Iraq and Afghanistan administered through the U.S. Army's Logistics Civil Augmentation Program (LOGCAP), as well as legislative initiatives which may impact the oversight and management of logistical support contracts.", "LOGCAP is an initiative designed to manage the use of civilian contractors that perform services during times of war and other military mobilization.", "The first LOGCAP was awarded in 1992. Four LOGCAP contracts have been awarded for combat support services in Iraq and Afghanistan.", "The current LOGCAP III contractor supports the drawdown in Iraq by providing logistical services, theater transportation, augmentation of maintenance services, and other combat support services.", "On April 18, 2008, DOD announced the Army's LOGCAP IV contract awards to three companies—DynCorp International LLC, Fort Worth, TX; Fluor Intercontinental, Inc, Greenville, SC; and KBR, Houston, TX, through a full and open competition.", "The LOGCAP IV contract calls for each company to compete for task orders.", "Each company may be awarded up to $5 billion annually for troop support services with a maximum annual value of $15 billion. Over the life of LOGCAP IV, the maximum contract value is $150 billion.", "As of March 2010, each company has been awarded at least one task order under LOGCAP IV.", "The U.S. Army Sustainment Command awarded the first performance task order on September 25, 2008, to Fluor Intercontinental, Inc., for logistical support services in Afghanistan.", "As of April 2010, approximately 12 tasks orders have been awarded under LOGCAP IV for a total of $1.8 billion in obligations under LOGCAP IV contracts.", "Congressional concerns over the federal oversight and management of defense contracts were the subject of a House Armed Services Committee (HASC) Panel on Defense Acquisition Reform to conduct a systematic review of the defense acquisition system.", "On March 23, 2010, the panel provided the HASC its findings and recommendations.", "Largely as a result of the panel's work, H.R. 5013, the Implementing Management for Performance and Related Reforms to Obtain Value in Every Acquisition Act (IMPROVE) of 2010, was introduced on April 14, 2010, seeking to improve the management and oversight of DOD's procurement of goods and services." ], "parent_pair_index": [ -1, -1, 1, -1, -1, 0, 0, -1, 3, 3, -1, 0, -1 ], "summary_paragraph_index": [ 0, 0, 0, 0, 1, 1, 1, 1, 1, 1, 4, 4, 4 ] }
GAO_GAO-14-648
{ "title": [ "Background", "DHS and GSA Consolidation Plans Do Not Fully Conform with Leading Capital Decision-Making Practices", "DHS and GSA Assessment of Needs and Capability Gaps for Headquarters Consolidation Have Not Been Updated to Reflect Changing Conditions", "Changing Conditions Call for DHS and GSA to Reevaluate Alternative Approaches and Prioritize Projects for Headquarters Consolidation", "Project Review and Approval Process Does Not Consistently Follow DHS Acquisition Standards", "DHS and GSA Cost and Schedule Estimates for the St. Elizabeths Project Do Not Conform with Leading Practices", "St. Elizabeths Cost and Schedule Estimates Are Unreliable", "St. Elizabeths Cost Estimate Partially or Minimally Conforms with Leading Practices", "St. Elizabeths Schedule Estimates Minimally Conform with Leading Practices", "St. Elizabeths Cost and Schedule Estimates Do Not Always Conform with GSA Project-Estimating Guidance", "Conclusions", "Recommendations for Executive Action", "Matter for Congressional Consideration", "Agency Comments and Our Evaluation", "Appendix I: Objectives, Scope, and Methodology", "Appendix II: Leading Practices in Capital Decision-Making", "Appendix III: The Leading Practices for Developing High-Quality Cost Estimates", "Appendix IV: 10 Leading Practices for Developing High-Quality Schedule Estimates", "Appendix V: Summary Assessment of St. Elizabeths 2013 Cost Estimate Compared with Leading Practices", "Appendix VI: Summary Assessment of St. Elizabeths 2008 and 2013 Schedule Estimates Compared with Leading Practices", "Appendix VII: Comments from the Department of Homeland Security", "Appendix VIII: Comments from General Services Administration", "Appendix IX: GAO Contacts and Staff Acknowledgments", "GAO Contacts", "Staff Acknowledgments:" ], "paragraphs": [ "The Homeland Security Act of 2002 combined 22 federal agencies specializing in various missions under DHS. Numerous departmental offices and seven key operating components are headquartered in the NCR.its various components were not physically consolidated, but instead were dispersed across the NCR in accordance with their history. For example, in 2007, DHS employees in the NCR were located in 85 buildings and 53 locations, accounting for approximately 7 million gross square feet of government-owned and -leased office space. As of July When the department was formed, the headquarters functions of 2014, DHS employees were located in 94 buildings and 50 locations, accounting for approximately 9 million gross square feet of government- owned and -leased office space.\nGSA, the landlord for the civilian federal government, acquires space on behalf of the federal government through new construction and leasing, and acts as a caretaker for federal properties across the country. Federal agencies give GSA information on their program and mission requirements and GSA then works with those agencies to develop and refine their real estate space needs. As such, GSA had the responsibility to select the specific site for a new, consolidated DHS headquarters facility, based on DHS needs and requirements. In addition, GSA is responsible for awarding and managing contracts for design and construction. DHS began planning the consolidation of its headquarters in 2005. According to DHS, increased colocation and consolidation were critical to achieve the following objectives: (1) improve mission effectiveness, (2) create a unified DHS organization, (3) increase organizational efficiency, (4) size the real estate portfolio accurately to fit the mission of DHS, and (5) reduce real estate occupancy costs. DHS and GSA developed a number of capital planning documents to guide the DHS headquarters consolidation process. To start, DHS identified its original housing requirements in 2006 during the development of the DHS National Capital Region Housing Master Plan. In the housing master plan, DHS identified a requirement for approximately 7.1 million square feet of total office space in the NCR to accommodate DHS headquarters operations, with 4.5 million square feet on a secure campus. DHS also developed a program of requirements for DHS headquarters components that included a listing of current and projected space needs. In June 2007, DHS released its Consolidated Headquarters Collocation Plan. The colocation plan summarized component functional requirements and the projected number of seats needed on- and off-campus for NCR headquarters personnel. According to DHS, the colocation plan is based on the idea that the consolidated headquarters campus serves as a central hub for leadership, operations coordination, policy, and program management in support of the department’s strategic goals. Table 1 summarizes DHS and GSA key planning documents.\nAccording to GSA’s planning documents, the West Campus of St. Elizabeths, held by GSA, was the preferred site for DHS headquarters consolidation because (1) it could accommodate the 4.5 million square feet of office space, plus parking, and (2) was available immediately—two key requirements for DHS. GSA developed a Master Plan in 2009 that was to guide the overall development at the St. Elizabeths site. The plan was vetted through numerous stakeholders and received final approval in 2009. Construction started at the campus in 2009. Figure 1 depicts the campus as envisioned in the 2009 Master Plan.\nThe full development of the St. Elizabeths Campus was intended to occur in three phases, with subphases, over 8 years. Table 2 shows the original planned construction for each of the project’s three phases, including the subphases, and their original and current estimated completion dates.\nFrom fiscal years 2006 through 2014, the St. Elizabeths consolidation project had received $494.8 million through DHS appropriations and $1.1 billion through GSA appropriations, for a total of over $1.5 billion. As part of this total, the DHS headquarters consolidation project received $650 million from the American Recovery and Reinvestment Act of 2009 (ARRA). In general, GSA funding was used for building construction and renovation, and other major infrastructure; DHS funding was used for tenant-specific capabilities, such as information technology (IT) infrastructure, furniture, and secure spaces, among other things. From fiscal year 2009—when construction began—through the time of the fiscal year 2014 appropriation, however, the gap between requested and received funding was over $1.6 billion. Figure 2 compares funds requested and received for the project for fiscal years 2006 through 2014.\nIn 2007, DHS and GSA estimated that the total cost of construction at St. Elizabeths was $3.26 billion, with construction to be completed in 2015, with potential savings of $1 billion attributable to moving from leased to owned space. However, according to DHS and GSA officials, the lack of consistent funding has affected cost estimates, estimated completion dates, and savings. Table 3 shows changes over time to GSA cost estimates and scheduled completion dates, as well as projected savings associated with moving DHS staff from leased space into federally owned space.\nThe majority of funding for the St. Elizabeths consolidation project through fiscal year 2013 has been allocated to the construction of a new consolidated headquarters for the U.S. Coast Guard (USCG) on the campus. In 2006, DHS and GSA projected that USCG would move to St. Elizabeths in 2011, but the move was delayed because sufficient funding for Phase 1 of the project was not available until fiscal year 2009. In 2009, DHS and GSA updated the projected completion date to the summer of 2013. Subsequently, USCG moved to the new building in August 2013. Figure 3 shows schedule slippage for the overall project.\nAccording to DHS and GSA officials, beginning in calendar year 2009, when construction commenced, Phase 1 of the overall project was successfully executed on schedule despite funding delays and shortfalls during fiscal years 2011 and 2012. GSA officials told us that, from fiscal years 2009 through 2013, DHS and GSA had requested about $1.6 billion to complete Phase 1 of the project but received only about $933 million for this purpose over the period. They said that they completed this phase of the project by deferring work planned to be completed in Phase 1 so that the USCG building could be occupied in 2013. GSA officials said that their efforts to save money by deferring work included reducing the scope of work needed to complete access road stonework and deferring landscaping and construction work on one building and the visitors’ center to future years. Figure 4 shows the entrance to the new U.S Coast Guard Headquarters Building on the St. Elizabeths Campus.\nCongress, the Office of Management and Budget (OMB), and GAO have all identified the need for effective capital decision-making among federal agencies. In addition, budgetary pressures and demands to improve performance in all areas put pressure on agencies to make sound capital acquisition choices. OMB’s Capital Programming Guide, a supplement to OMB Circular A-11, provides guidance to federal agencies in conducting capital decision-making. GAO also developed its Executive Guide: Leading Practices in Capital Decision-Making, which provides detailed guidance to federal agencies on leading practices for the four phases of capital programming—planning, budgeting, acquiring, and managing capital assets. These practices are, in part, intended to provide a disciplined approach or process to help federal agencies effectively plan and procure assets to achieve the maximum return on investment.", "DHS and GSA’s overall plans for headquarters consolidation do not fully conform with leading capital decision-making practices related to planning. DHS and GSA officials reported that they have taken some initial actions that could affect consolidation plans, such as adopting recent workplace standards at the department level and assessing DHS’s leasing portfolio. These types of actions may facilitate consolidation planning in a manner consistent with leading practices. However, the current collection of plans, which DHS and GSA finalized between 2006 and 2009, have not been updated to address these changes and funding instability that could affect future headquarters needs and capabilities. DHS and GSA have not conducted a comprehensive assessment of current needs, identified capability gaps, or evaluated and prioritized alternatives that would help officials adapt consolidation plans to changing conditions and address funding issues as reflected in leading practices. In addition, DHS has not consistently applied its acquisition guidelines to review and approve the project’s development. According to DHS and GSA officials, they have begun to work together to consider changes to the DHS headquarters consolidation plans. However, DHS and GSA have not announced when new plans will be issued, and it is unclear if they will fully conform with leading capital decision-making practices to help plan project implementation.\nIn the overall capital decision-making framework, planning is the first phase—and arguably the most important—since it drives the remaining phases of budget, procurement, and management. The results from this phase are used throughout the remaining phases of the process; therefore, if key practices during this phase are not followed, there may be repercussions on agency operations if poor capital investment decisions are made. Given that some aspects of the project are complete, we compared DHS and GSA headquarters consolidation efforts to date with the 5 of 12 capital decision-making practices that are most applicable to planning for the remaining segments of the consolidation.practices are evaluating alternatives to best decide how to meet any gaps, prioritizing and selecting projects based on established criteria, and establishing a review and approval framework supported by analysis. conducting comprehensive assessments of needs to achieve results, identifying gaps between current and needed capabilities, Appendix II lists these 5 planning practices along with the remaining practices that focus on other aspects of the overall capital decision- making framework not included in the scope of this review, such as budgeting, procurement, and management. In addition to the above, one important aspect of capital decision-making is recognition of the dynamic nature of capital plans and the planning process.\nThe following compares DHS and GSA planning and oversight for the remainder of the DHS headquarters consolidation project with the leading capital decision-making practices identified above.", "DHS and GSA capital planning efforts for DHS headquarters consolidation have not been updated to reflect changing workplace standards and inconsistent project funding. Leading practices in capital decision-making call for agencies to assess requirements and determine gaps between current and needed capabilities based on the results- oriented goals and objectives that flow from the organization’s mission. A comprehensive assessment of needs considers the capability of existing resources and makes use of an accurate and up-to-date inventory of capital assets and facilities, as well as current information on asset condition. Using this information, an organization can make decisions about where and how to invest in facilities. During the early stages of planning for the project, DHS and GSA developed various reports and planning documents (see table 1) to comprehensively assess DHS needs for a consolidated headquarters. DHS planning documents identified office space and DHS program requirements, and discussed which DHS functions needed to be colocated to achieve DHS’s mission. However, the plans, which were developed prior to the release of GSA’s Master Plan in 2009, have not kept pace with changes since then in workplace standards and do not account for delays attributable to inconsistent funding.\nWorkplace standards. Leading organizations we studied developed comprehensive needs assessments that usually cover 5 or 6 years into the future and are updated frequently—for example, as a part of the organizations’ budget cycles. A needs assessment is to examine, among other things, external factors that affect or influence the organizations’ operations, such as workplace standards. However, the current plans for St. Elizabeths do not reflect changes in the workplace, such as telework and smaller standard work areas that could reduce the volume of space needed to house DHS employees. Furthermore, leading practices state that utilizing current and accurate information is essential when taking an inventory of current capabilities and assessing future needs. While DHS and GSA’s original plans called for a certain size and configuration to house employees at St. Elizabeths, changes in workplace standards could affect the overall footprint of the St. Elizabeths project or increase the number of staff designated to occupy space at the site, or both. This could ultimately reduce the number of DHS headquarters employees housed in leased space. Recent federal initiatives have been introduced to reduce federal agency space. For example, a June 2010 presidential memorandum directed agencies to explore how innovative approaches to space management and alternative work arrangements, such as telework, could help reduce the need for real estate and office space. Another alternative work arrangement, hoteling, would allow employees to work at multiple sites and use non-dedicated, nonpermanent workspaces assigned for use by reservation on an as-needed basis. Implementing hoteling could also reduce an agency’s need for office space. Subsequently, in May 2012, OMB issued a memorandum that, among other things, establishes the Freeze the Footprint policy. This policy directs agencies to restrict growth in their civilian real estate inventory. OMB supplemented that policy in March 2013 with implementing guidance for Freeze the Footprint that required agencies not to increase the total square footage of their office and warehouse inventory, using fiscal year 2012 as a baseline. OMB’s implementing guidance also directs agencies to use various strategies to maintain the baseline, including consulting with GSA about using technology and space management to consolidate, increasing occupancy rates in facilities, and eliminating lease arrangements that are not cost- or space effective.\nInconsistent project funding. In addition to workplace standards, current funding for the St. Elizabeths project has not aligned with what DHS and GSA initially planned. As discussed earlier, from fiscal year 2009—when construction began—through the time of the fiscal year 2014 appropriation, the gap between what DHS and GSA requested and what was received was over $1.6 billion. According to DHS and GSA officials, this funding gap has created cost escalations of over $1 billion and schedule delays of 10 years, relative to their original estimates. DHS and GSA officials cited funding shortfalls as being disruptive in sequencing work, such as excavating soil for the DHS Operations Center and enabling repairs on the foundation of the St. Elizabeths Center Building.According to these officials, if funding had been available, excavation work associated with the new USCG building could have been extended to these other parts of the project without interruption. Officials said that if they had funds to do the excavation, they could have completed it while the site was under construction, instead of having to work around the full occupation and operation of the USCG building. DHS and GSA deemed this as a lost opportunity to purposely sequence the work to maximize construction efficiency and reduce the overall cost of development.\nOMB, Capital Programming Guide, Supplement to OMB Circular A-11. changes in workplace standards and delays attributable to funding shortfalls.\nA senior DHS project official stated that the basis of the consolidation plan remains the same and that it would be illogical to discard the plan mid-stream in favor of some unspecified alternative, given the years of comprehensive analysis that underpin the development and approval of the original 2009 Master Plan. However, DHS and GSA officials reported that they have begun to work together to consider changes to DHS headquarters consolidation plans. Specifically, in January 2014, DHS and GSA officials stated that they are currently reassessing requirements and alternatives for consolidation and colocation in recognition that workplace conditions have changed since the plan was formulated, beginning in 2006. The agencies have not announced when new plans will be issued. Furthermore, because final documentation of agency deliberations or analyses have not yet been developed, it is unclear if any new plans will be informed by an updated comprehensive needs assessment and capability gap analysis as called for by leading capital decision-making practices. Until DHS and GSA update their capital planning documents related to DHS headquarters consolidation—showing how DHS and GSA asset portfolios for the consolidation efforts meet the goals and objectives of the agencies’ strategic and annual performance plans and how these assets will be used to help agencies achieve their goals and objectives— agency managers and Members of Congress will be limited in their ability to fully understand how DHS and GSA intend to accomplish the consolidation and, consequently make informed decisions about future multi-billion dollar investments. Utilizing an updated comprehensive needs assessment and gap analysis of current and needed capabilities to inform revised headquarters consolidation plans can better position DHS and GSA to assure decision makers within both agencies and in Congress that consolidation is justified.", "Changes to workplace standards and funding instability provide GSA a commensurate opportunity to evaluate and prioritize alternative construction and leasing options to meet DHS space needs in the NCR. As stated earlier, leading capital decision-making practices call for agencies to determine how best to bridge performance gaps by identifying and evaluating alternative approaches. Before choosing to purchase or construct a capital asset or facility, leading organizations are to carefully consider a wide range of alternatives, such as using existing assets, leasing, or undertaking new construction. After evaluating alternatives, leading practices call for organizations to select projects based on a relative ranking of investment proposals. This prioritization of projects is important because limited resources require organizations to choose alternatives with the highest benefit or return. In the years leading up to 2009, when GSA issued the project Master Plan, DHS and GSA conducted alternatives analyses and used the results of these efforts to support the existing DHS headquarters consolidation plan and prioritize the individual projects that encompass the larger consolidation effort. For example, in 2007, we found that DHS examined various scenarios for housing DHS employees, such as a “campus” scenario, which would entail consolidation resulting in several campuses, including one large campus. Likewise, in 2008, GSA analyzed the feasibility of consolidating DHS headquarters at a variety of sites throughout the NCR, and determined that the only site with space available to accommodate DHS needs was the St. Elizabeths campus. After the site was selected, DHS and GSA worked together to prioritize the multiple construction phases that constitute the overall St. Elizabeths campus development.\nGiven changes in workplace standards, among other things, as well as cost escalation and schedule slippage associated with funding instability, DHS and GSA would benefit from updating their alternatives evaluation and prioritizing the range of leasing and construction alternatives. One potential alternative, for example, would be for DHS to consider moving entire components from currently leased space to St. Elizabeths, rather than only the leadership of particular components as originally envisioned. Moving more staff than currently planned to the campus from leased space could potentially increase long-term cost savings and facilitate more effective collaboration. If DHS and GSA were to take such an action, this would require an overall change in their approach to housing staff in government-owned and -leased space—a change beyond that already considered within the context of DHS’s 2007 colocation plan. Even if DHS were to consider moving smaller portions of its workforce rather than entire components—for example, certain offices within components—to St. Elizabeths, DHS would need to consider the cascading effect of those changes and develop updated plans to reflect that. This would entail a reconsideration of space needs in both owned and leased space, and a commensurate reevaluation of funding needs, depending on, among other things, the volume and type of available or projected owned and leased space, and associated costs and benefits, as well as alternative estimates showing when owned or leased space might be available.\nDHS and GSA officials acknowledged that new workplace standards could create a number of new development options to consider, as the new standards would allow for more staff to occupy the current space at St. Elizabeths than previously anticipated. DHS officials told us that when the St. Elizabeths project was conceived, the standard office workspace was 200 square feet per person. In response to the 2012 Freeze the Footprint initiative described earlier, where applicable, DHS intends to reduce the average space per person for its employees across the department to 150 square feet of space per person. However, this potential change is not reflected in current headquarters consolidation plans. As a result, if DHS and GSA choose to keep the original 4.5 million square foot footprint they initially planned, they could increase the number of staff occupying the 14,000 seats at St. Elizabeths from 14,000 to about 20,000. Conversely, if DHS and GSA decide to keep 14,000 staff they initially planned to work at St. Elizabeths, they could shrink the overall footprint to about 3.7 million square feet. According to DHS and GSA, the agencies have taken steps to adapt to the changes in workplace standards. For example, flexible workspaces were incorporated into the build-out of the Coast Guard headquarters building during construction. Specifically, the internal build-out of the space has flexible configurations that can be easily and inexpensively changed to support changes in the workplace environment, in the event that DHS decided to expand or reduce the workforce or space. Table 4 shows the original estimates, and the effect of increasing the number of staff occupying 14,000 seats from 14,000 to 20,000 (scenario A), or reducing the footprint to about 3.7 million square feet by keeping the estimated number of staff at 14,000 (scenario B).\nAdopting either scenario or some variation between the two could have a significant impact on the scope and cost of the project and could change how DHS and components perform their missions. The following is a description of potential alternatives that DHS and GSA could consider in light of new workplace standards. DHS and GSA officials said they are considering these types of options, although they have not yet developed final documents or analysis. For example:\nKeep the current estimated number of staff (14,000) with a reduced square footage (3.7 million). GSA and DHS could, over the short term, reduce the overall cost of the project with a decrease in construction costs. Furthermore, DHS and the components slated to move to St. Elizabeths would likely carry out their mission at the new location as originally intended.\nMaintain the current square footage projection (4.5 million square feet) while increasing the number of staff occupying the 14,000 seats (from 14,000 to 20,000). This change could result in an increase of the overall short-term cost of the project because GSA might have to build out additional office space and meet requirements for additional services, such as computer and telecommunication lines and technological services. However, the increased staff at St. Elizabeths could also increase long-term savings because DHS would not need to lease space for an increased number of employees should DHS decide to move more to St. Elizabeths.\nIn addition, as discussed earlier, from fiscal years 2009 to 2014, the gap between requested funding and funding received was over $1.6 billion. According to DHS and GSA officials, this funding gap has created cost escalations of over $1 billion. To help address the variation in funding requested and received, DHS and GSA have revised their funding strategy to focus on developing smaller construction segments that are intended to be more financially viable and less subject to uncertainty. For example, DHS and GSA may request full funding for a construction segment that will result in a functional, usable building and not be dependent on additional future funding to complete. This funding strategy is consistent with a leading practice related to the budgeting phase of capital decision-making, which calls for agencies to budget for projects in useful segments. Specifically, DHS and GSA would allocate funding for the remaining work at St. Elizabeths into usable segments that are independent of the overall consolidation, rather than incrementally over the length of the project, as has been done in the past. Developing a funding strategy into segments may be a viable approach in managing and overseeing a project with a scope and potential cost as large as St. Elizabeths, particularly in a constrained budgetary environment.\nSchedule delays—up to 10 years relative to original estimates, according to DHS officials—have also resulted from the gap between funding requested and funding received. These delays have posed challenges for DHS in terms of its current leasing portfolio. Specifically, DHS’s long-term leasing portfolio was developed based on the original expected completion date for St. Elizabeths development in 2016. However, according to DHS leasing data, 52 percent of DHS’s current NCR leases will expire in 2014 and 2015, accounting for almost 39 percent of its usable square feet. See figure 5 for DHS’s annual leasing costs and usable square feet by year of lease expiration for 2013 through 2023.\nDHS officials told us that, given delays moving the project forward and the expiration of existing leases, DHS is currently working with GSA to renegotiate leases where staff of individual components are currently housed. However, DHS acknowledged that a comprehensive analysis of its real property and leasing options in the NCR—which has a direct bearing on development options at St. Elizabeths—is ongoing, but not complete, and documents related to the analysis have not been finalized.\nGiven uncertainties about the size, scope, and timing of the project moving forward as well as the overall cost of the project to the government—DHS and GSA would be better positioned to make choices about capital investments if they were to identify and analyze a broader range of alternatives and use this alternatives analysis to inform their prioritization and selection of efforts related to headquarters consolidation. For example, a comprehensive alternatives analysis could take into account (1) DHS’s actual and projected leasing costs for locations where employees are currently housed; (2) DHS and GSA costs to develop additional segments of the St. Elizabeths Campus, as well as any transportation and infrastructure improvements; and (3) a range of leasing and construction alternatives and their associated costs for the St. Elizabeths site, depending on a determination of usable square footage needed. After identifying and analyzing a range of alternatives that better reflects current conditions, DHS and GSA would be better positioned to prioritize the individual steps or projects that will compose the larger headquarters consolidation effort. Given that $1.5 billion has already been invested in the headquarters consolidation, a comprehensive analysis and prioritization of alternatives, including cost and benefit analyses for each of the alternatives being considered, that accounts for the complete costs and benefits to the federal government as a whole, would improve transparency and allow for more informed decision making by DHS and GSA leadership and Members of Congress.", "DHS has not consistently applied its major acquisition guidance for reviewing and approving the headquarters consolidation project. Leading practices call for agencies to establish a formal process for senior management to review and approve proposed capital assets. The cost of a proposed asset, the level of risk involved in acquiring the asset, and its importance to achieving the agency mission should be considered when defining criteria for executive review. Leading organizations have processes that determine the level of review and analysis based on the size, complexity, and cost of a proposed investment or its organization- wide impact. DHS has guidelines in place to provide senior management the opportunity to review and approve its major projects, but DHS has not consistently applied these guidelines to its efforts to work with GSA to plan and implement headquarters consolidation. As discussed below, DHS has sometimes, but not always, classified the consolidation project as a major acquisition, which has affected the extent to which the department has oversight of the project. By not consistently applying this review process to headquarters consolidation, DHS management risks losing insight into the progress of the St. Elizabeths project, as well as how the project fits in with its overall acquisitions portfolio.\nDHS programs designated as major acquisitions are governed by the policies and processes contained in DHS Acquisition Management Directive 102-01 (MD 102) and the accompanying DHS Instruction Manual 102-01-001. MD 102 establishes an acquisition life-cycle consisting of four phases. According to MD 102, an acquisition program is considered a Level 1 Major Acquisition if its life-cycle cost is at or above $1 billion, and a Level 2 Major Acquisition if its life-cycle cost is $300 million or more, but less than $1 billion. At predetermined points throughout the life-cycle—known as Acquisition Decision Events—a program deemed to be a major acquisition undergoes review by a designated senior official, referred to as the Acquisition Decision Authority, to assess whether the program is ready to proceed through each of the four phases. An important aspect of this process is the review and approval of key acquisition documents that, among other things, establish the need for a major program, its operational requirements, and an acquisition baseline and plan. MD 102 also requires that a DHS Investment Review Board (IRB) review major acquisitions programs at Acquisition Decision Events and other meetings, as needed. The IRB is chaired by the Acquisition Decision Authority and made up of other senior officials from across the department responsible for managing DHS mission objectives, resources, and contracts. DHS’s Office of Program Accountability and Risk Management (PARM) is responsible for DHS’s overall acquisition governance process, supports the IRB, and reports directly to the DHS Chief Acquisition Officer. PARM is to develop and update program management policies and practices, oversee the acquisition workforce, provide support to program managers, and collect program performance data. Our prior work has assessed MD 102 and found that it establishes a knowledge-based acquisition policy for program management that is largely consistent with key practices.\nDHS has designated the headquarters consolidation project as a major acquisition in some years but not in others. In 2010 and 2011, DHS identified the headquarters consolidation project as a major acquisition and included the project on DHS’s Major Acquisition Oversight List. Thus, the project was subject to the oversight and management policies and procedures established under MD 102. In 2012, the project as a whole was dropped from the list, and in 2013 DHS included the IT acquisition portion of the project on the list. DHS issued the 2014 list in June 2014, which again included the IT portion of the project, but not the entire project. Figure 6 shows the extent to which the headquarters consolidation project has or has not been considered a major acquisition by DHS under MD 102.\nPARM officials explained that they considered the St. Elizabeths project to be more of a GSA acquisition than a DHS acquisition because GSA owns the site and the majority of building construction is funded through GSA appropriations. Furthermore, they stated that DHS appropriations for the project are largely transferred to GSA through interagency mechanisms so that, in effect, GSA is responsible for managing contracts procured with DHS funding. PARM officials also explained that they did not believe that the IT portion of the St. Elizabeths project should be classified as a DHS major acquisition. They said that although the IT acquisitions are a DHS responsibility and funded with DHS appropriations, GSA is managing the IT contracts and therefore they believe those acquisitions’ oversight should reside with GSA. They said that the reason the IT component was placed on the Major Acquisition Oversight List in 2013 was because the DHS Office of Inspector General (OIG) recommended its inclusion. When asked why the overall headquarters consolidation program was previously identified by DHS as a major acquisition in earlier years, and what had changed, PARM officials said that it was likely included on past acquisition lists because it was a new program and DHS and GSA roles and responsibilities had yet to be firmly established.\nWe recognize that GSA has responsibility for managing contracts associated with the headquarters consolidation project. However, a variety of factors, including the overall cost, scope, and visibility of the project, as well as the overall importance of the project in the context of DHS’s mission, make the consolidation project a viable candidate for consideration as a major acquisition. As noted above, an acquisition program is considered a Level 1 Major Acquisition if its life-cycle cost is at or above $1 billion. DHS and GSA were unable to provide an estimate of the life-cycle cost for the St. Elizabeths project. However, under the current plan, DHS reports it will need about $1.7 billion to complete the project by 2026, not including life-cycle cost, well above the normal threshold required for a major acquisition classification called for by MD 102. Furthermore, per MD 102, the Acquisition Review Board may consider a project a candidate for oversight under MD 102 if the project’s importance to DHS’s strategic and performance plans is disproportionate to its size, or if the project has high executive visibility, impacts more than one DHS component, has significant program or policy implications, or if the Deputy Secretary, Chief Acquisition Officer or Acquisition Decision Authority recommends an increase to a higher acquisition level. Given the size and scope of the project and the extent to which the completion of the project could impact the performance of DHS’s mission, the headquarters consolidation project should be considered a candidate for treatment as a major acquisition under MD 102. If DHS were to consider the headquarters consolidation project a major acquisition, consistent with MD 102 requirements, DHS would be better positioned to oversee the project and provide decision makers in DHS and Congress, and the taxpayer greater assurance that the project is being acquired on-time and on-budget.\nWe also observed that, during the years (2010, 2011, 2013, and 2014) that the headquarters consolidation project, or portions of it, was on DHS’s major acquisition list and therefore subject to MD 102 requirements, the project did not comply with major acquisition requirements as outlined by DHS guidelines. Specifically, the project has not produced any of the required key acquisition documents requiring department-level approval: (1) mission need statement, (2) capability development plan, (3) operational requirements document, (4) integrated logistics support plan, (5) life-cycle cost estimate, (6) acquisition program baseline, and (7) test and evaluation master plan. Furthermore, one role of PARM is to conduct independent evaluations of major programs’ health and risks, but PARM has not assessed the St. Elizabeths project as of March 2014. PARM officials stated, however, that they informally monitor the project through regular communication with DHS officials who oversee the St. Elizabeths project and have no concerns about the project’s management. In accordance with MD 102, the IRB’s predecessor body—the Acquisition Review Board—reviewed the headquarters consolidation program with a focus on ARRA funding in 2009 and 2010, but has not reviewed the program since then, even though the program as a whole was considered a major acquisition in 2011, and likewise with the IT component in 2013 and 2014. In May 2010, the board generally expressed concern about the level of DHS oversight given that the project was highly visible and important for the department, and recommended senior leadership meetings between DHS and GSA. In September 2010, DHS and GSA signed a memorandum of understanding that defined certain roles for both agencies regarding project oversight. As noted earlier, DHS officials stated the headquarters consolidation has not undergone review by the IRB since 2010 because they viewed it as primarily a GSA project.\nDHS officials also stated that the program was under way before MD 102 was issued and that the directive requirements were not applicable. In addition, officials stated that they regularly briefed leadership on the status of the project and have produced some documentation, such as a needs assessment and baseline, which officials said are similar to documents required by MD 102. For example, the St. Elizabeths baseline contains some cost and schedule information for the project as required by MD 102. However, it does not contain other required information to help measure program performance. In addition, a 2010 update to MD 102 stated the directive requirements are to be applied to the maximum extent possible to all major acquisitions in existence when the update was issued. According to DHS acquisition officials, since 2010, the DHS Acquisition Officer has issued waivers for some legacy programs, but not for the headquarters consolidation program or its IT component. Although the St. Elizabeths program managers may provide visibility of the project to leadership and may have similar key documentation, this falls short of the requirements contained in MD 102. The MD 102 process provides a more consistent, transparent review process that would involve a greater cross section of departmental stakeholders, among other things, especially given the magnitude of the project and the numbers of components that would occupy space at St. Elizabeths.\nDHS has established through MD 102 an acquisitions policy for major capital assets that provides the agency with tools to better manage large projects. For example, regular project review and approval by a cross section of departmental leadership, along with having standardized project documentation, can help mitigate significant acquisitions challenges such as funding instability and capability changes. Furthermore, the MD 102 process provides oversight and facilitates program accountability. If the entire headquarters consolidation program were designated as a major acquisition, DHS would be better positioned to follow its own acquisition policy. Utilizing the MD 102 review framework could provide the structure for more efficient program management and provide DHS, Congress, and taxpayers greater assurance that government funds are being spent in a way that is consistent with sound acquisition practices, and the project is moving forward as intended.", "DHS and GSA cost and schedule estimates for the headquarters consolidation project at St. Elizabeths do not or only minimally or partially conform with leading estimating practices, and are therefore unreliable. Furthermore, in some areas, the cost and schedule estimates do not fully conform with GSA guidance relevant to developing estimates. Developing cost and schedule estimates consistent with leading practices could promote greater transparency and provide decision makers needed information about the St. Elizabeths project and the larger DHS headquarters consolidation effort.", "DHS and GSA cost and schedule estimates for the headquarters consolidation project at St. Elizabeths contain numerous deficiencies that do not reflect leading practices, which render the estimates unreliable. In 2013, DHS and GSA updated earlier estimates to produce the current St. Elizabeths cost and schedule estimates summarized in figure 7. These DHS and GSA estimates showed a total project cost of about $4.5 billion—$2.8 billion funded through GSA appropriations and the remaining $1.7 billion funded through DHS appropriations. According to the 2013 estimates provided by DHS and GSA, based on this level of funding, the project would be completed in 2026.\nWe compared the 2013 cost estimate and the 2008 and 2013 schedule estimates with leading practices for developing such estimates and found that the estimates do not or only minimally or partially conform with key characteristics for developing reliable estimates. Specifically, we compared DHS and GSA overall project cost estimates with the GAO Cost Estimating and Assessment Guide (Cost Guide), which defines leading practices related to four characteristics—comprehensive, well documented, accurate, and credible—that are important to developing high-quality, reliable cost estimates. We also compared DHS and GSA overall schedule estimates with the GAO Schedule Assessment Guide, which defines leading practices related to four characteristics— comprehensive, well constructed, credible, and controlled—that are important to developing high-quality, reliable schedule estimates.5 and 6 describe the characteristics of high-quality, reliable cost and schedule estimates that served as the foundation of our comparative analysis.\nWe have applied our leading cost and schedule estimation practices in past work involving federal construction projects, and the leading practices were developed in conjunction with numerous stakeholders from government and the private sector, including DHS and GSA. Furthermore, GSA acknowledged the value of our leading cost estimation practices in 2007 and issued an order to apply the principles to all cost estimates prepared in every GSA project, process, or organization.\nWe established five descriptions for our assessments of leading practices and cost estimate characteristics: fully meets, substantially meets, partially meets, minimally meets, and does not meet. We consider a leading practice to be fully met when the associated tasks are completely satisfied, substantially met when a large portion of the associated tasks are satisfied, partially met when about half of the associated tasks are satisfied, minimally met when a small portion of the associated tasks are satisfied, and not met when none of the associated tasks are satisfied. Our assessment method weights each leading practice equally and bases the assessment of each characteristic on the average score of underlying leading practices. We assign each description a numerical value (5 for fully meets to 1 for does not meet) and round scores to the higher numerical value (i.e., a score of 4.5 would round up to 5). Assessments were conducted by an individual analyst, and then the results were independently traced and verified by a second analyst. reflect the characteristics of a high-quality estimate and cannot be considered reliable. The following two sections provide an overview of the results of our comparison of DHS and GSA cost and schedule estimates with the four characteristics for each of GAO’s cost- and schedule- estimating guidelines.", "Our overall comparison of the 2013 cost estimate for St. Elizabeths development with leading cost-estimating best practices showed that the estimate partially or minimally conforms with leading practices. Specifically, we found that the cost estimate for the headquarters consolidation at St. Elizabeths partially conforms with leading practices associated with the characteristics of comprehensive and well- documented estimates, and minimally conforms with leading practices associated with characteristics of accurate and credible estimates.\nWe assessed the DHS and GSA cost estimate using the framework of the four characteristics above associated with high-quality, reliable cost estimates. Table 7 shows the overall results of our comparison along with examples of selected leading practices under each characteristic and our rationale for assessment. Appendix V provides greater detail on our comparison of the estimate with specific leading practices that constitute the four cost-estimating characteristics.\nA reliable cost estimate is critical to the success of any program. Such an estimate provides the basis for informed investment decision making, realistic budget formulation and program resourcing, meaningful progress measurement, proactive course correction when warranted, and accountability for results. Accordingly, DHS and GSA would benefit from maintaining current and well-documented estimates of project costs at St. Elizabeths—even if project funding is not fully secured—and these estimates should encompass the full life-cycle of the program and be independently assessed. Among other things, OMB states that generating reliable program cost estimates is a critical function necessary to support OMB’s capital programming process. Without this capability, DHS and GSA are at greater risk of experiencing cost overruns, missed deadlines, and performance shortfalls related to the headquarters consolidation program.", "Our overall comparison of DHS and GSA schedule estimates with leading schedule-estimating practices showed that the most recent schedule estimate DHS and GSA prepared with sufficient detail for the entire project—in 2008—minimally conforms with leading practices. Specifically, the 2008 estimate minimally conforms with leading practices related to each of the characteristics of comprehensive, well-constructed, credible, and controlled estimates.\nWe assessed DHS and GSA schedule estimates using the framework of the four characteristics above associated with high-quality, reliable schedule estimates. Table 8 shows the overall results of our analysis of the 2008 schedule estimate, along with examples of select leading practices under each characteristic and our rationale for assessment. We highlighted the results of the 2008 schedule comparison because the 2008 schedule was the most recent schedule that included logic necessary for identifying a critical path. As noted above, at the request of GSA, we also analyzed a schedule estimate updated in 2013. However, the 2013 estimate was incomplete and did not cover the overall consolidation program in sufficient detail. For example, the schedule depicts only high-level activities and does not provide details needed to understand the sequence of events, including work to be performed in fiscal years 2014 and 2015. As a result, the 2013 schedule satisfied fewer leading practices than the 2008 schedule, and is also unreliable. Appendix VI provides greater detail on our comparison of both the 2008 and 2013 estimates with 10 specific leading practices that compose the four schedule estimating characteristics.\nIn accordance with leading schedule estimation practices, the success of a major program such as the consolidation project at St. Elizabeths depends in part on having an integrated and reliable master schedule that defines when work will occur and how long it will take and how each activity is related to the others. For example, the program schedule provides not only a road map for systematic project execution but also the means by which to gauge progress, identify and resolve potential problems, and promote accountability at all levels of the program. A program schedule is also a vehicle for developing a time-phased budget baseline and an essential basis for managing trade-offs among cost, schedule, and scope. Accordingly, and despite current funding uncertainty for the project, DHS and GSA would benefit from developing a comprehensive schedule for the St. Elizabeths consolidation project in accordance with leading practices. DHS and GSA officials, as discussed in more detail below, generally did not agree with this overall assessment because they believe the leading practices are not well-suited for the type of complex construction projects occurring at the St. Elizabeths site.", "We compared the cost and schedule estimates prepared by DHS and GSA for the St. Elizabeths project with relevant GSA guidance and found that the estimates do not always conform with agency estimating requirements. In commenting on our assessments of the St. Elizabeths cost and schedule estimates, DHS and GSA officials acknowledged that the estimates do not fully conform with our leading practices, but said that the estimates do conform with GSA project estimation policies. GSA officials agreed with the underlying objectives of our leading cost- and schedule-estimating practices, but noted that other methodologies are valid and better suited to GSA projects like construction at St. Elizabeths. GSA officials cited GSA’s Project Estimating Requirements for the Public Buildings Service, also called P-120, and GSA’s Facilities Standards for the Public Buildings Service, also called P-100, as the key documents for estimating and managing building construction programs within GSA. Because P-120 and P-100 focus on cost estimation requirements and do not fully describe schedule estimation, GSA officials subsequently provided us with GSA’s Global Project Management (gPM) guidance as an additional source as it includes the Scheduling Fundamental Guide.\nWe reviewed the GSA guidance listed above and noted several areas where GSA cost and scheduling-estimating policies align with our leading practices. More specifically, 8 of the 12 steps of a high-quality cost estimate were at least partially reflected in GSA guidance, and 5 of our 10 leading schedule-estimating practices were at least partially reflected. For example, GSA’s P-100 guidance fully reflects our leading cost estimation practice of “defining the program’s characteristics,” as it contains formal, detailed design standards and criteria for construction of new facilities and repairs or alterations to existing buildings. GSA’s gPM guidance fully reflects our leading schedule estimation practice of “capturing all activities,” as it states that the first step in building a schedule is to identify all activities required to complete the project and recommends incorporating the activities to the project’s Work Breakdown Structure (WBS)—a framework for documenting certain activities like estimating costs, identifying resources, determining where risks may occur, and providing the means for measuring program status.\nIn cases where GSA guidance and our leading practices align, we compared the St. Elizabeths cost estimates with GSA guidance and found some areas where the project estimates were developed consistent with the guidance. For example, P-120 and P-100 call for GSA to establish a set of ground rules for estimating GSA construction projects, such as how inflation is applied or how budget constraints might affect the project. Our comparison of the St. Elizabeths project cost estimate with GSA guidance showed that the project estimate documents the ground rules consistent with the guidance. Likewise, P-120 recommends using a WBS for projects to be funded over more than 1 year. Our comparison showed that the estimate included a WBS that outlined the end product and major program effort.\nIn contrast, we also found areas where the 2013 St. Elizabeth cost estimate was not prepared consistent with GSA guidelines. Specifically, our comparison showed that the project cost estimate:\nDoes not include a life-cycle cost analysis. P-120 and P-100 both require that a life-cycle cost analysis be conducted to help determine the value of a project beyond just the cost of acquiring it, such as the cost of repairs, operations, preventive maintenance, logistic support utilities, and depreciation over the useful lifetime of the facility. P-100 states, for example, that “three characteristics distinguish GSA buildings from buildings built for the private sector: longer life span, changing occupancies, and the use of a life-cycle cost approach to determine overall project cost.” No life-cycle cost analysis for St. Elizabeths is reflected in the estimate, including the cost of repair, operations, and maintenance. Is not regularly updated to reflect significant changes in the program. P-120 guidance states that the cost estimates for design projects should be updated throughout the design process, and furthermore, where costs are included, design assumptions must be addressed in order to completely define the scope of the estimate. We found that the estimate was updated based on available funding, but was not regularly updated to reflect significant changes to the program including actual costs.\nDoes not include an independent cost estimate. P-100 states that GSA will develop two separate independent government estimates (IGE) to aid in effective project controls and assist in tracking the budget. The GSA definition of IGE does not completely align with the GAO definition of an independent cost estimate, but no IGEs were conducted for the entire St. Elizabeths project.\nWith regard to St. Elizabeths 2008 and 2013 schedule estimates, we found some instances where the project schedule estimates were partially consistent with GSA guidelines—the estimates covered elements of the guidance—and others where they did not. For example, P-120 states that schedules should realistically reflect how long each activity should take. Our comparison of the St. Elizabeths schedule estimates with GSA guidance showed that the project estimates partially establish the duration of all activities—a factor that is reflected in both the 2008 and 2013 schedule estimates. Likewise, GSA’s gPM states that activities should be sequenced after they have been defined and their duration has been estimated, tracked according to start and finish dates, and structured to show relationships between them to reflect their dependency on each other. Our comparison showed that the 2008 schedule estimate (not the 2013 estimate) partially reflected these gPM guidelines. In those instances where schedule estimates were not prepared in a manner consistent with GSA guidelines, we found that the 2008 and 2013 schedule estimates:\nDo not capture all project activities. GSA’s gPM states that the first step in building a schedule is to identify all activities required to complete the project. GSA scheduling guidance also recommends incorporating the activities into the project’s WBS as this feature helps to organize and define the total scope of the project. However, we observed that the St. Elizabeths schedules did not define in detail the work necessary to accomplish a project’s objectives, including activities both the government and contractors are to perform.\nDo not contain an updated Integrated Master Schedule (IMS).\nGSA’s gPM stresses the importance of regularly updating the schedule so that it represents the most up-to-date information on planned and completed activities, but we found no evidence that DHS and GSA maintained and regularly updated an IMS for the entire project. This includes providing a review of missed milestones, current expected completion dates, and actions needed to maintain/regain schedule progress.\nDo not include a complete schedule baseline document. GSA’s gPM states that establishing a baseline schedule that should be changed only with formal approvals from both the project team and the client is one of the four steps to establish a schedule. The gPM guidance also states that the baseline schedule should be maintained and that it should serve as the record of the “approved” schedule to allow the project manager to calculate variance. We found no evidence of a schedule baseline document that described the overall schedule, the sequencing of events, and the basis for activity durations, among other things, to help measure performance.\nReliable cost and schedule estimates are critical to providing overall project transparency and also in providing information to a variety of decision makers. However, in commenting on our analysis of St. Elizabeths cost and schedule estimates, DHS and GSA officials said that it would be difficult or impossible to create reliable estimates that encompass the scope of the entire St. Elizabeths project. Officials said that given the complex, multiphase nature of the overall development effort, specific estimates are created for smaller individual projects, but not for the campus project as a whole. Therefore, in their view, leading estimating practices and GSA guidance cannot reasonably be applied to the high-level projections developed for the total cost and completion date of the entire St. Elizabeths project. In addition, DHS and GSA officials stated that given funding uncertainty for the St. Elizabeths project as a whole, they were reluctant to allocate resources to conduct more detailed cost and schedule estimates until additional appropriations were received. They described future project phases as “not real” until they are funded. They added that once funding for a project phase is secured, more complete estimates would be created as part of that segment’s design. For example, regarding the schedule estimates, a senior DHS official said that at the programmatic level, since future phases of construction have not been authorized, funded, or designed, it would be illogical to develop anything beyond a generalized milestone schedule. GSA officials also commented that planning estimates for future unfunded work is conceptual and milestone based and therefore is sufficient for planning Phases 2 and 3. GSA stated that the higher-level, milestone schedule currently being used to manage the program is more flexible than the detailed schedule GAO proposes, and has proven effective even with the highly variable funding provided for the project.\nWe found, however, that this high-level schedule is not sufficiently defined to effectively manage the program. For example, our review of the schedule showed that project bars in the schedule that represent the two active Phase 1 and Phase 2A efforts do not contain detailed schedule activities that include current government, contractor, and applicable subcontractor effort. Specifically, there is no detailed program schedule that enables the tracking of key deliverables, and the activities shown in the schedule address only high-level agency square footage segments, security, utilities, landscape, and road improvements. While we understand the need to keep future effort contained in high-level planning packages, in accordance with leading practices, near-term work occurring in fiscal years 2014 and 2015 should have more detailed information. Further, there are no milestones identified that are consistent with the contract dates and other key dates established by management in the baseline schedule, and the project bars for near-term work are not mapped to a statement of work to ensure all effort is accounted for in the schedule. Finally, the project bars for near-term work also do not contain any risk mitigation activities. We recognize the challenges of developing reliable cost and schedule estimates for a large-scale, multiphase project like St. Elizabeths, particularly given its unstable funding history and that incorporating GAO’s cost- and schedule-estimating leading practices may involve additional costs. However, unless DHS and GSA invest in these practices, Congress risks making funding decisions and DHS and GSA management risk making resource allocation decisions without the benefit that a robust analysis of levels of risk, uncertainty, and confidence provides.\nIn addition to stating that it is not feasible to develop cost and schedule estimates for the entire St. Elizabeths project that conform with leading practices, DHS and GSA officials pointed to the project’s performance to date as an indicator of sound overall management. Specifically, DHS and GSA officials maintained that Phase 1 of the overall consolidation project—primarily the USCG headquarters—was completed “on-schedule and near on-budget,” after taking into account delays in the project start and smaller than expected annual appropriations, thus proving that their estimation practices were sound. As noted earlier, some of the work that was originally planned for Phase 1, such as utility installation; security measures; landscaping; and work on the visitors’ center, historic auditorium, and access road, was deferred to later project stages. According to DHS and GSA officials, reducing the scope of Phase 1 enabled the project team to shift resources to more critical capabilities required for USCG occupancy, which resulted in on-schedule and near on-budget completion for the portion of Phase 1 funded by Congress. DHS and GSA officials maintained that the execution of Phase 1 was successful and that this should have factored into our analysis of cost and schedule estimates. However, our analysis of estimates is focused on the remaining work in the project, not the actual performance of work completed. Phase 1 results cannot be the sole basis used to forecast the reliability of cost and schedule estimates for the remaining phases of development at St. Elizabeths. As our analyses showed, the estimates were deficient in several areas, including comprehensiveness, accuracy, and credibility, which renders them unreliable in the context of future work.\nIn addition to the planned work deferrals and reductions in scope described above, other unanticipated obstacles affected Phase 1 project cost and schedule as well, but DHS and GSA officials did not document these impacts. For example, GSA officials noted that the original design for the Coast Guard fitness center was complete and construction was set to begin, but the building had to be redesigned and sunk farther underground after a historic preservation stakeholder objected to the structure’s sight-lines. Also, toxic ash was unexpectedly discovered in the walls of one of the historic buildings, which required additional funds and time to remove. DHS and GSA officials were not able to tell us how much additional funding and time were required to redesign and construct the fitness center and to remediate the toxic ash. Overall, without documentation, we could not quantify the specific effects of these types of actions on Phase 1 cost growth and delays. Because DHS and GSA project cost and schedule estimates inform Congress’s funding decisions and affect the agencies’ abilities to effectively allocate resources across competing projects in their capital programs, there is a risk that funding decisions and resource allocations could be made based on information that is not reliable.", "Several factors have changed since DHS began planning its consolidated headquarters in 2005. New workplace standards allow more people to work in less space, and recent government-wide initiatives like Freeze the Footprint have prompted agencies to rethink their real property portfolios and lease arrangements. In addition, the DHS headquarters consolidation effort has not received the level of funding that DHS and GSA officials originally envisioned. By taking into account changing workplace standards and funding instability, assessing alternatives, prioritizing projects, and using the results of these analyses to inform the revised project plan in accordance with leading practices, DHS and GSA would be better positioned to assure decision makers within both agencies and in Congress that the consolidation project is justified. In addition, DHS has an acquisitions policy that generally aligns with leading capital decision-making practices, which applies to major acquisitions, as determined by cost criteria and other factors such as project visibility. However, DHS has moved the headquarters consolidation project or elements of the project on and off its list of major acquisitions over the last several years. Furthermore, during the periods when the project was identified by DHS as a major acquisition, the program did not fully comply with acquisition policy requirements, such as obtaining department-level approval of certain documents. Although GSA owns the site, funds the majority of the building construction, and oversees other contracts on behalf of DHS, given DHS’s significant monetary investment, along with the project’s visibility and potential impact on DHS missions, treating headquarters consolidation as a major acquisition and applying the policy to the maximum extent possible would provide greater assurance that government funds are being spent in a way that is consistent with sound acquisition practices and that the project is moving forward as intended.\nCreating reliable cost and schedule estimates for the headquarters consolidation project should be an integral part of DHS and GSA efforts to reassess the project. DHS and GSA current estimates do not conform with several leading practices, which make the estimates unreliable. Furthermore, in several instances, the cost and schedule estimates do not fully conform with GSA’s estimation policies. Although DHS and GSA maintain that more comprehensive estimates will be conducted as the project advances and funding is secured, decision makers could benefit now from accurate estimates that encompass the life-cycle of the project. Without this information, it is difficult for agency leadership and Members of Congress to make informed decisions regarding resource allocations and compare competing priorities. Pending the development of reliable cost and schedule estimates, the project risks potential cost overruns, missed deadlines, and performance shortfalls.", "In order to improve transparency and allow for more informed decision making by congressional leaders and DHS and GSA decision-makers, we recommend that, before requesting additional funding for the DHS headquarters consolidation project, the Secretary of Homeland Security and the Administrator of the General Services Administration work jointly to take the following two actions: conduct the following assessments and use the results to inform updated DHS headquarters consolidation plans: a comprehensive needs assessment and gap analysis of current and needed capabilities that take into consideration changing conditions, and an alternatives analysis that identifies the costs and benefits of leasing and construction alternatives for the remainder of the project and prioritizes options to account for funding instability.\nAfter revising the DHS headquarters consolidation plans, develop revised cost and schedule estimates for the remaining portions of the consolidation project that conform to GSA guidance and leading practices for cost and schedule estimation, including an independent evaluation of the estimates.\nWe further recommend that the Secretary of Homeland Security designate the headquarters consolidation program a major acquisition, consistent with DHS acquisition policy, and apply DHS acquisition policy requirements.", "Congress should consider making future funding for the St. Elizabeths project contingent upon DHS and GSA developing a revised headquarters consolidation plan, for the remainder of the project, that conforms with leading practices and that (1) recognizes changes in workplace standards, (2) identifies which components are to be colocated at St. Elizabeths and in leased and owned space throughout the NCR, and (3) develops and provides reliable cost and schedule estimates.", "We provided a draft of this report to DHS and GSA for review and comment. In written comments, DHS concurred with all three of the recommendations, and GSA concurred with the two recommendations that applied to it. DHS and GSA comments are summarized below and reprinted in appendix VII and appendix VIII respectively.\nDHS and GSA concurred with our first recommendation that DHS and GSA conduct a comprehensive needs assessment and alternatives analysis. DHS and GSA commented that DHS and GSA have already completed a draft enhanced consolidation plan which DHS believes includes the needs assessment and gap analysis envisioned by GAO. In addition, DHS stated that that the cost-benefit analysis of leasing versus construction completed during development of the original project master plan has been updated to reflect current conditions and included as part of this draft plan. GSA reported that it is working closely with DHS and will share this plan with stakeholders upon completion.\nDHS and GSA concurred with our second recommendation that DHS and GSA develop revised cost and schedules that conform to GSA guidance and leading practices. DHS commented that a revised programmatic schedule and estimate was created in conjunction with development of the draft enhanced plan, which, according to DHS, is currently with the Office of Management and Budget for approval. DHS stated that it defers to GSA as to whether this estimate conforms to GSA or other criteria for cost and schedule estimation, since the project is being managed and executed by GSA and not DHS. GSA commented that it plans to update the cost and schedule estimates upon completion of the Enhanced Plan, and may adopt some of the leading practices referenced by GAO.\nDHS concurred with our third recommendation that DHS designate the headquarters consolidation program a major acquisition and apply DHS acquisition policy requirements. DHS reported that the Acting Under Secretary for Management determined in September 2014 that the DHS-funded portions of the St. Elizabeths project will come under the purview of the DHS Acquisition Review Board for oversight effective immediately to assure senior leadership visibility over DHS funds executed by GSA. DHS also requested that we consider this recommendation resolved and closed. Designating the DHS-funded portions of the St. Elizabeths project a major acquisition partially addresses our recommendation. It is still too early to assess the extent to which DHS is applying its acquisition policy to the project. As stated in our report, the St. Elizabeths headquarters consolidation project has been moved off and on the DHS master acquisition oversight list in prior years and in the years that it has been on the list, the project did not comply with major acquisition requirements as outlined by DHS guidelines. We will continue to monitor DHS’s actions to apply its acquisition policy to the project as part of our normal recommendation follow-up process.\nIn its comments, DHS also expressed concern that our report did not sufficiently describe the roles and responsibilities of DHS and GSA. Specifically, DHS stated that, as a tenant agency, its role is to establish programmatic requirements; budget for and fund tenant responsible items; provide oversight on GSA's use of DHS funds; validate that GSA managed design and construction activities meet DHS operational and program requirements; and coordinate with GSA and other stakeholders throughout the process, as appropriate. DHS also noted that other activities are managed by GSA in accordance with GSA policies and under GSA supervision and oversight. DHS stated that, while DHS cooperates with GSA and helps facilitate completion of these activities as appropriate, DHS does not have any supervisory control over the activities. Specifically, DHS stated that it did not select the St. Elizabeths site, nor does not award or manage contracts for design and construction. We agree that GSA has responsibility for these activities and have added more detailed discussion of DHS and GSA roles to the report. However, cooperation and collaboration between DHS and GSA is essential for a variety of reasons, including the overall cost, scope, and visibility of the project; the overall importance of the project in the context of DHS’s mission; and in light of the fact that DHS has received $494.8 million to date for the project. This does not include the additional $1.2 billion that DHS expects that it will need to ensure that the project is completed by 2026. In this context, we believe that the management and implementation of the St. Elizabeths project is a shared responsibility between DHS and GSA, requiring them to work closely together to help provide greater assurance to decision makers in Congress, DHS, and GSA—as well as taxpayers—that the project is being appropriately managed and acquired on-time and on-budget.\nDHS also expressed concern that the report is overly focused on “leading practices” as opposed to being more outcome and results oriented. We believe that applying the leading practice cited in our draft report would better position DHS and GSA to manage the St. Elizabeths’ project and help ensure better outcomes and results. DHS stated that GSA, in concert with DHS, has already conducted sufficient analysis to support the best practices in our report. We disagree. As we note in the report, cost and schedule estimates for the project were deficient in several areas, including comprehensiveness, accuracy, and credibility. Estimates also failed to comply with GSA’s internal guidance for cost and schedule.\nIn its written response, GSA also commented that several of the leading practices GAO identifies are better suited to non-real estate investments such as weapons systems, spacecraft, aircraft carriers, and software systems. We disagree. As stated in our report, we have applied our leading cost and schedule estimation practices in past work involving federal construction projects, and the leading practices were developed in conjunction with numerous stakeholders from government and the private sector, including DHS and GSA. Furthermore, GSA acknowledged the value of our leading cost estimation practices in 2007 and issued an order to apply the principles to all cost estimates prepared in every GSA project, process, or organization.\nWe are sending copies to the Secretary of Homeland Security, Administrator of GSA, and other interested parties. In addition, the report will be available at no charge on the GAO website at http://www.gao.gov.\nIf you or your staffs have questions about this report, please contact either David Maurer at (202) 512-9627 or [email protected], or David Wise at (202) 512-2834 or [email protected]. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. Key contributors to this report are listed in appendix IX.", "We conducted our review to examine (1) the extent to which the Department of Homeland Security (DHS) and the General Services Administration (GSA) developed DHS headquarters consolidation plans in accordance with leading capital decision-making principles, and (2) the extent to which DHS and GSA have estimated the costs and schedules of the DHS headquarters consolidation project at St. Elizabeths in a manner that is consistent with leading practices.\nTo determine the extent to which DHS and GSA developed DHS headquarters consolidation plans in accordance with leading capital decision-making principles, we reviewed and analyzed DHS and GSA capital planning documents and interviewed DHS and GSA officials responsible for the planning and management of the St. Elizabeths project, as well as DHS and GSA senior leadership. We compared DHS and GSA capital planning actions against Office of Management and Budget (OMB) and GAO leading practices (see app. II). Our analysis of DHS and GSA efforts using criteria for leading capital decision-making focused on planning for the remaining segments or phases of the project because, as we stated in previous reports, the planning phase is the crux of the capital decision-making process. The results from this phase are used throughout the remaining phases of the process; therefore, if key practices during this phase are not followed there may be repercussions on agency operations if poor capital investment decisions are made. To determine the extent to which DHS planned and implemented the DHS headquarters consolidation project at St. Elizabeths in accordance with departmental acquisition guidelines, we interviewed officials from DHS’s Office of Program Accountability and Risk Management (PARM) as well as DHS project managers. We reviewed and analyzed DHS Acquisition Management Directive 102-01 (MD 102) and DHS’s Major Acquisitions Oversight List for fiscal years 2010 through 2014. We then compared the acquisition standards detailed in MD 102 with DHS’s efforts to acquire a consolidated headquarters facility at the GSA-owned St. Elizabeths Campus.\nTo determine the extent to which DHS and GSA have estimated the costs and schedules of the DHS headquarters consolidation project at St. Elizabeths in a manner that is consistent with leading practices, we interviewed DHS and GSA program officials and compared DHS and GSA overall project cost and schedule estimates with GAO leading practices. Specifically, the GAO Cost Estimating and Assessment Guide (Cost Guide) identifies leading practices that represent work across the federal government and are the basis for a high-quality, reliable cost estimate. A cost estimate created using the leading practices exhibits four broad characteristics: it is accurate, well documented, credible, and comprehensive. That is, each characteristic is associated with a specific set of leading practices. In turn, each leading practice is made up of a number of specific tasks (see app. III). Similarly, we compared DHS and GSA overall schedule estimates with the GAO Schedule Assessment Guide, which defines leading practices related to four characteristics— comprehensive, well constructed, credible, and controlled—that are important to developing high-quality, reliable schedule estimates (see app. IV). For our evaluations of the cost and schedule estimates, when the tasks associated with the leading practices that define a characteristic were mostly or completely satisfied, we considered the characteristic to be substantially or fully met. When all four characteristics were at least substantially met, we considered a cost or schedule estimate to be reliable. To analyze the St. Elizabeths schedule estimate, we asked DHS and GSA to provide the most recent Integrated Master Schedule (IMS) that included all related embedded project schedules. Although the 2013 cost estimate provided by DHS and GSA was complete, the 2013 schedule estimate did not cover the entire consolidation project in sufficient detail. As a result, we initially analyzed the most recent complete schedule available, which was created in 2008. The 2008 schedule estimate listed project completion in 2016. Subsequently, at the request of GSA, we also applied our leading practices criteria to the incomplete 2013 schedule. We shared our analysis with DHS and GSA officials to review, comment on, and provide additional information, and we adjusted our analysis where appropriate. Finally, we reviewed GSA guidance that DHS and GSA officials stated was relevant to cost and schedule estimating for the St. Elizabeths project: P-120: Project Estimating Requirements for the Public Buildings Service (PBS); P-100: Facilities Standards for the Public Buildings Service; and GSA’s Global Project Management (gPM) guidance, which includes the PBS Scheduling Fundamentals Guide. In areas where GSA estimating guidance aligned with our leading cost and schedule-estimating leading practices, we evaluated the extent to which the St. Elizabeths cost and schedule estimates conformed with GSA guidance.\nWe conducted our work from August 2013 to September 2014 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 that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives.", "Congress, the Office of Management and Budget (OMB), and GAO have all identified the need for effective capital planning among federal agencies. GAO developed its Executive Guide: Leading Practices in Capital Decision-Making, which provides guidance to federal agencies on planning, budgeting, acquiring, and managing capital assets. Figure 8 illustrates how capital decision-making principles fit together.", "We developed the GAO Cost Estimating and Assessment Guide in order to establish a consistent methodology that is based on best practices and that can be used across the federal government for developing, managing, and evaluating capital program cost estimates. We have identified 12 steps under 4 characteristics that, followed correctly, should result in reliable and valid cost estimates that management can use for making informed decisions.", "The GAO Schedule Assessment Guide is a companion to the Cost Guide. A consistent methodology for developing, managing, and evaluating capital program cost estimates includes the concept of scheduling the necessary work to a timeline, as discussed in the Cost Guide. A well- planned schedule is a fundamental management tool that can help government programs use public funds effectively by specifying when work will be performed in the future and measuring program performance against an approved plan. Table 10 represents the 10 leading practices associated with a high-quality and reliable schedule and their concepts.", "We assessed the Department of Homeland Security (DHS) and General Services Administration (GSA) cost estimate using the framework of the four characteristics—comprehensive, well documented, accurate, and credible—associated with high-quality, reliable cost estimates. Table 11 provides greater detail on our comparison of the estimate with leading practices that constitute the four cost-estimating characteristics.", "We assessed Department of Homeland Security (DHS) and General Services Administration (GSA) schedule estimates using the framework of the four characteristics—comprehensive, well constructed, credible, and controlled—associated with high-quality, reliable schedule estimates. Table 12 provides greater detail on our comparison of both the 2008 and 2013 estimates with 10 specific leading practices that constitute the four schedule estimating characteristics.", "", "", "", "", "In addition to the contacts named above, John Mortin (Assistant Director), Karen Richey (Assistant Director), Juana Collymore, Giselle Cubillos, Daniel Hoy, Abishek Krupanand, Jennifer Leotta, and David Lutter made key contributions to this report. Also contributing to this report were Charles Bausell, Susan Hsu, Eric Hauswirth, Tracey King, Linda Miller, Jan Montgomery, and Cynthia Saunders." ], "depth": [ 1, 1, 2, 2, 2, 1, 2, 3, 3, 2, 1, 1, 1, 1, 1, 1, 1, 1, 1, 1, 1, 1, 1, 2, 2 ], "alignment": [ "h0_full", "h0_full", "", "h0_full", "", "h1_full", "h1_full", "", "", "h1_full", "", "", "", "", "h2_full", "", "", "", "", "", "", "", "", "", "" ] }
{ "question": [ "How does the consolidation of DHS headquarters not follow best practice?", "How has the DHS and GSA followed some leading practices?", "What did they do to adopt recent workplace standards?", "Why did they do this?", "How has the DHS and GSA failed to update their plans?", "What funding was not received according to the DHS and GSA?", "How has this gap behaved past 2014?", "How have the DHS and GSA failed to address their funding issues properly?", "What small work had they made on this point by 2014?", "How did the DHS and GSA fail to properly address cost in the St. Elizabeths project?", "What is the most recent cost estimate missing?", "What are the 2008 and 2013 schedule estimates missing?", "How did GAO analysis compare to other concerns?", "How did missing analysis support poor cost estimate?", "How did missing analysis support poor schedule estimates?", "Why are the mistakes of the DHS and GSA important?", "What, regarding the DHS and GSA, was the GAO asked to review?", "What does this report address?", "What material did the GAO utilize for the report?" ], "summary": [ "The Department of Homeland Security (DHS) and General Services Administration (GSA) planning for the DHS headquarters consolidation does not fully conform with leading capital decision-making practices intended to help agencies effectively plan and procure assets.", "DHS and GSA officials reported that they have taken some initial actions that may facilitate consolidation planning in a manner consistent with leading practices, such as adopting recent workplace standards at the department level and assessing DHS's leasing portfolio.", "For example, DHS has an overall goal of reducing the square footage allotted per employee across DHS in accordance with current workplace standards.", "Officials acknowledged that this could allow more staff to occupy less space than when the campus was initially planned in 2009.", "DHS and GSA officials also reported analyzing different leasing options that could affect consolidation efforts. However, consolidation plans, which were finalized between 2006 and 2009, have not been updated to reflect these changes.", "According to DHS and GSA officials, the funding gap between what was requested and what was received from fiscal years 2009 through 2014, was over $1.6 billion.", "According to these officials, this gap has escalated estimated costs by over $1 billion—from $3.3 billion to the current $4.5 billion—and delayed scheduled completion by over 10 years, from an original completion date of 2015 to the current estimate of 2026.", "However, DHS and GSA have not conducted a comprehensive assessment of current needs, identified capability gaps, or evaluated and prioritized alternatives to help them adapt consolidation plans to changing conditions and address funding issues as reflected in leading practices.", "DHS and GSA reported that they have begun to work together to consider changes to their plans, but as of August 2014, they had not announced when new plans will be issued and whether they would fully conform to leading capital decision-making practices to help plan project implementation.", "DHS and GSA did not follow relevant GSA guidance and GAO's leading practices when developing the cost and schedule estimates for the St. Elizabeths project, and the estimates are unreliable.", "For example, GAO found that the 2013 cost estimate—the most recent available—does not include a life-cycle cost analysis of the project, including the cost of operations and maintenance; was not regularly updated to reflect significant program changes, including actual costs; and does not include an independent estimate to help track the budget, as required by GSA guidance.", "Also, the 2008 and 2013 schedule estimates do not include all activities for the government and its contractors needed to accomplish project objectives.", "GAO's comparison of the cost and schedule estimates with leading practices identified the same concerns, as well as others.", "For example, a sensitivity analysis has not been performed to assess the reasonableness of the cost estimate.", "For the 2008 and 2013 schedule estimates, resources (such as labor and materials) are not accounted for and a risk assessment has not been conducted to predict a level of confidence in the project's completion date.", "Because DHS and GSA project cost and schedule estimates inform Congress's funding decisions and affect the agencies' abilities to effectively allocate resources, there is a risk that funding decisions and resource allocations could be made based on information that is not reliable or is out of date.", "GAO was asked to examine DHS and GSA management of the headquarters consolidation, including the development of the St. Elizabeths campus.", "This report addresses the extent to which DHS and GSA have (1) developed consolidation plans in accordance with leading capital decision-making practices and (2) estimated the costs and schedules of the St. Elizabeths project in a manner that is consistent with leading practices.", "GAO assessed various DHS and GSA plans, policies, and cost/schedule estimates, and interviewed DHS and GSA officials." ], "parent_pair_index": [ -1, -1, 1, 2, -1, -1, 5, -1, 7, -1, 0, 0, -1, 3, 3, -1, -1, -1, 1 ], "summary_paragraph_index": [ 2, 2, 2, 2, 2, 2, 2, 2, 2, 3, 3, 3, 3, 3, 3, 3, 1, 1, 1 ] }
CRS_R44943
{ "title": [ "", "Introduction", "Patent System Fundamentals", "Patentable Subject Matter at the Supreme Court", "Business Methods and Bilski v. Kappos", "Diagnostic Methods and Mayo v. Prometheus", "Genetic Materials and the Myriad Case", "Computer Software and Alice v. CLS", "Analysis", "Implications for Information Technology", "Implications for the Life Sciences", "Congressional Issues and Options", "Concluding Observations" ], "paragraphs": [ "", "Some Members of Congress have expressed interest in the rules governing patentable subject matter for many years. The term \"patentable subject matter\" refers to the requirement of Section 101 of the Patent Act of 1952 that an invention must consist of a \"process, machine, manufacture, or composition of matter\" in order to be patented. Most recently, the Leahy-Smith America Invents Act (AIA) of 2011 stipulated that \"no patent may issue on a claim directed to or encompassing a human organism.\" The AIA also limited the availability of patents claiming tax avoidance strategies.\nThe courts and the U.S. Patent and Trademark Office (USPTO) have historically understood the language of Section 101 to allow an expansive range of patentable subject matter. However, the courts have long held that several implicit exceptions exist to the four categories of patentable subject matter set out in Section 101. In particular, laws of nature, natural phenomena, and abstract ideas have been held to be unpatentable.\nFor many years, Section 101 was arguably a coarse filter that was rarely used to invalidate an issued patent or reject an application pending at the USPTO. This situation changed over the past decade due to a series of decisions issued by the Supreme Court of the United States. Four Supreme Court opinions have issued since 2010 addressing patentable subject matter. In each instance the Court concluded that the invention before it was unpatentable under Section 101. Since the Supreme Court issued its decisions, Section 101 has been more frequently invoked to invalidate issued patents and reject pending patent applications at the USPTO. Further, numerous patents granted by the USPTO under earlier standards would likely be held invalid if they were subject to scrutiny by the agency or the courts.\nViews differ on whether the recent prominence of Section 101 in the U.S. patent system has been desirable. Concerned observers have declared the U.S. patent system to be in a \"state of crisis\" due to \"confusing\" legal standards established by the Supreme Court. The former Chief Judge of the U.S. Court of Appeals for the Federal Circuit, the tribunal with exclusive jurisdiction over patent appeals, reportedly described the Supreme Court decisions as creating \"total chaos\" and marking \"a very harmful and completely unnecessary departure from a sensible patent policy.\" Other observers believe that these decisions may lead to patents of appropriate scope, curb abusive patent litigation, and encourage patent lawyers to draft and procure higher quality patents.\nThis report reviews the current law governing patentable subject matter and recent proposals for legislative reform. It begins by providing a basic overview of the patent system and introducing the principles of patentable subject matter. It then considers the leading Supreme Court decisions construing Section 101 of the Patent Act. The report then considers the implications of these decisions within the information technology and life sciences industries. The report closes with a review of legislative reform options.", "Individuals and enterprises must prepare and submit applications to the USPTO if they wish to obtain patent protection. USPTO officials, known as examiners, assess whether the application merits the award of a patent. Under the Patent Act of 1952, a patent application must include a specification that so completely describes the invention that skilled artisans are able to practice it without undue experimentation. The Patent Act also requires that applicants draft at least one claim that particularly points out and distinctly claims the subject matter that they regard as their invention. The patent acquisition process is commonly known as \"prosecution.\"\nWhile reviewing a submitted application, the examiner will determine whether the claimed invention fulfills certain substantive standards set by the patent statute. Two of the most important patentability criteria are novelty and nonobviousness. To be judged novel, the claimed invention must not be fully anticipated by a prior patent, publication, or other knowledge within the public domain. The sum of these earlier materials is termed the \"prior art.\" To meet the standard of nonobviousness, an invention must not have been readily within the ordinary skills of a competent artisan based upon the teachings of the prior art. The invention must also be useful, a requirement that is satisfied if the invention is operable and provides a tangible benefit.\nEven if these requirements of novelty, nonobviousness, and utility are met, an invention is not patentable unless it falls within at least one category of patentable subject matter. Section 101 of the Patent Act provides\nWhoever invents or discovers any new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof, may obtain a patent therefor, subject to the conditions and requirements of this title.\nThe statute defines the term \"process\" to mean a \"process, art, or method, and includes a new use of a known process, machine, manufacture, composition of matter, or material.\" Process patents claim a series of steps that may be performed to achieve a specific result. Process patents typically relate to methods of manufacture or use. A process patent may claim a method of making a product, for example, or a method of using a chemical compound to treat a disease.\nThe other three categories of patentable subject matter pertain to products. The Supreme Court has held that the term \"machine\" includes \"every mechanical device or combination of mechanical powers and devices to perform some function and produce a certain effect or result.\" The Court has construed to term \"manufacture\" to mean \"the production of articles for use from raw or prepared materials by giving to these materials new forms, qualities, properties, or combinations, whether by hand-labor or by machinery.\" The term \"composition of matter\" has been held to mean \"all compositions of two or more substances and ... all composite articles, whether they be the results of chemical union, or of mechanical mixture, or whether they be gases, fluids, powders or solids.\"\nAlthough the wording of Section 101 is quite broad, courts and the USPTO have nonetheless established certain limits upon the sorts of processes that may be patented. In particular, laws of nature, natural phenomena, and abstract ideas have been judged not to be patentable. The Supreme Court has described these sorts of inventions as the \"basic tools of scientific and technological work\" that should be \"free to all men and reserved exclusively to none.\" As explained by Supreme Court Justice Stephen Breyer, this rule \"reflects a basic judgment that protection in such cases, despite its potentially positive incentive effects, would too severely interfere with, or discourage, development and the further spread of future knowledge itself.\"\nIf the USPTO determines that a patent application satisfies Section 101 and the other requirements for patenting, it will allow the application to issue as a granted patent. The patent proprietor then obtains the right to exclude others from making, using, selling, offering to sell or importing into the United States the claimed invention. The term of the patent is ordinarily set at twenty years from the date the patent application was filed. Patent title therefore provides inventors with limited periods of exclusivity in which they may practice their inventions, or license others to do so. The grant of a patent permits inventors to receive a return on the expenditure of resources leading to the discovery, often by charging a higher price than would prevail in a competitive market.\nA patent proprietor bears responsibility for monitoring its competitors to determine whether they are using the patented invention. Patent owners who wish to compel others to observe their intellectual property rights must usually commence litigation in the federal courts. Although issued patents enjoy a presumption of validity, accused infringers may assert that a patent is invalid or unenforceable on a number of grounds. The Federal Circuit possesses national jurisdiction over most patent appeals. The Supreme Court retains discretionary authority to review cases decided by the Federal Circuit.", "Until its recent spate of decisions, the last time the Court addressed the law of patentable subject matter was nearly four decades ago. In its 1980 decision in Diamond v. Chakrabarty , the Court held that a genetically engineered microorganism could be patented. Similarly, in its 1981 opinion Diamond v. Diehr, the Court ruled that a process for curing artificial rubber through the use of a computer and a mathematical formula was patentable. These two decisions arguably set the stage for a period where the range of patentable subject matter was quite broad, both for information technologies and the life sciences. Since they issued, the lower courts and USPTO arguably made only occasional use of Section 101 to invalidate issued patents or reject pending patent applications.\nThe Supreme Court revisited the law of patentable subject matter in a series of four decisions issued from 2010 through 2014. In each instance, the Court held each invention it considered to be unpatentable under Section 101. As one commentator asserts: \"No one can reasonably deny that the Supreme Court's decisions narrowing patent eligibility have had a significant impact on the patent system.\" This report discusses each decision in the order of issuance.", "In its 2010 decision Bilski v. Kappos , the Supreme Court considered the patentability of a method of hedging risk in the field of commodities trading. The patent application before the Court claimed:\nA method for managing the consumption risk costs of a commodity sold by a commodity provider at a fixed price comprising the steps of:\ninitiating a series of transactions between said commodity provider and consumers of said commodity wherein said consumers purchase said commodity at fixed rate based upon historical averages, said fixed rate corresponding to a risk position of said consumer;\nidentifying market participants for said commodity having a counter-risk position to said consumers; and\ninitiating a series of transactions between said commodity provider and said market participants at a second fixed rate such that said series of market participant transactions balances the risk position of said series of consumer transactions.\nThe USPTO rejected the application as claiming subject matter that was ineligible for patenting under Section 101.\nOn appeal, the Federal Circuit characterized the \"true issue before us then is whether Applicants are seeking to claim a fundamental principle (such as an abstract idea) or a mental process.\" The Federal Circuit explained\nA claimed process is surely patent-eligible under §101 if: (1) it is tied to a particular machine or apparatus, or (2) it transforms a particular article into a different state or thing.\nApplying this standard, the Federal Circuit concluded that Bilski's application did not claim patentable subject matter. The Court of Appeals acknowledged Bilski's admission that his claimed invention was not limited to any specific machine or apparatus, and therefore did not satisfy the first prong of the Section 101 inquiry. The Federal Circuit also reasoned that the claimed process did not achieve a physical transformation. According to then-Chief Judge Michel, \"[p]urported transformations or manipulations simply of public or private legal obligations or relationships, business risks, or other such abstractions cannot meet the test because they are not physical objects or substances, and they are not representative of physical objects or substances.\" As a result, the USPTO decision to deny Bilski's application was affirmed.\nAfter agreeing to hear the case, the Supreme Court issued a total of three opinions, consisting of a plurality opinion for the Court and two concurring opinions. No single opinion was joined by a majority of Justices for all of its parts. The opinion for the Court, authored by Justice Kennedy, agreed that Bilski's invention could not be patented. But the plurality rejected the Federal Circuit's conclusion that the machine or transformation test was the sole standard for identifying patentable processes. Rather, that standard was deemed \"an important and useful clue.\"\nThe Court instead resolved the case based on the traditional rule that abstract ideas were not patentable subject matter. Justice Kennedy reasoned that hedging was a \"fundamental economic practice long prevalent in our system of commerce and taught in any introductory finance class.\" He explained that \"[a]llowing petitioners to patent risk hedging would pre-empt use of this approach in all fields, and would effectively grant a monopoly over an abstract idea.\"\nJustice Stevens, joined by Justices Breyer, Ginsburg, and Sotomayor, issued a lengthy concurring opinion on the day of his retirement from the Supreme Court. He agreed that the machine-or-transformation test was \"reliable in most cases\" but \"not the exclusive test.\" In his view, the Court should \"restore patent law to its historical and constitutional moorings\" by declaring that \"methods of doing business are not, in themselves, covered by the statute.\"\nJustice Breyer also issued a concurring opinion that Justice Scalia joined in part. Justice Breyer identified four points on which all nine justices agreed: (1) the range of patentable subject matter is broad but not without limit; (2) the machine-or-transformation test has proven to be of use in determining whether a process is patentable or not; (3) the machine-or-transformation test is not the sole standard for assessing the patentability of processes; and (4) not everything that merely achieves a \"useful, concrete, and tangible result\" qualifies as patentable subject matter.", "In its next Section 101 case, Mayo Collaborative Services v. Prometheus Laboratories, Inc. , the Supreme Court shifted focus from information technologies to the life sciences. Prometheus Laboratories, Inc., is the sole licensee of two patents (U.S. Patent Nos. 6,355,623 and 6,680,302) claiming methods for determining optimal dosages of thiopurine drugs used to treat autoimmune diseases. Stated generally, the patents claim methods of (a) administering a thiopurine drug to a patient, and (b) determining the levels of the drug or the drug's metabolites in red blood cells in the patient. The measured metabolite levels are then compared to known metabolite levels. If the measured metabolite levels in the patient are outside the known range, then the physician should increase or decrease the level of drug to be administered so as to reduce toxicity and enhance treatment efficacy. Claim 1 of the `623 patent, which reads as follows, was representative of the claims of the two patents at issue:\nA method of optimizing therapeutic efficacy for treatment of an immune-mediated gastrointestinal disorder, comprising:\n(a) administering a drug providing 6-thioguanine to a subject having said immune-mediated gastrointestinal disorder; and\n(b) determining the level of 6-thioguanine in said subject having said immune-mediated gastrointestinal disorder,\nwherein the level of 6-thioguanine less than about 230 pmol per 8x10 8 red blood cells indicates a need to increase the amount of said drug subsequently administered to said subject and\nwherein the level of 6-thioguanine greater than about 400 pmol per 8x10 8 red blood cells indicates a need to decrease the amount of said drug subsequently administered to said subject.\nIn a unanimous decision authored by Justice Breyer, the Supreme Court concluded that the claims were directed towards natural laws and were therefore unpatentable. The Court reviewed its precedents in order to explain that phenomena of nature and abstract concepts could not be patented because the \"monopolization of these basic tools through the grant of a patent might tend to impede innovation more than it would tend to promote it.\" The earlier cases recognized that all inventions at some level embody or apply laws of nature, however, and that processes that applied natural laws in a particular, useful way were eligible for patenting under Section 101 of the Patent Act.\nApplying these principles to the case at hand, the Court recognized that the claims in part recited \"laws of nature,\" in particular relationships between the concentration of thiopurine metabolites and the likelihood that a dosage of a thiopurine drug will prove ineffective or harmful. However, the claims included steps in addition to the law of nature—in particular, they called for \"administering\" the thiopurine drug and \"determining\" the level of the relevant metabolites, \"wherein\" the drug dosage should be adjusted. According to Justice Breyer, the question before the Court was whether the claims amounted merely to the natural laws, or whether they added enough to the statement of the correlations to qualify as patent-eligible processes that applied natural laws.\nThe Court reasoned that the three additional claimed steps did not suffice to render the claimed inventions patentable subject matter. Justice Breyer explained that the \"administering\" step referred simply to the relevant audience of the invention, namely, physicians who treat patients with certain diseases with thiopurine drugs. However, merely limiting the use of a natural law to a particular technological environment cannot render the principle patentable.\nSimilarly, the \"determining\" step merely advised physicians to measure the level of metabolites in a patient's blood—a step that had been done for years and was routine in the field. Justice Breyer stated that conventional or obvious pre-solution activity did not convert an unpatentable law of nature into a patent-eligible application of such law. Finally, the \"wherein\" clauses simply informed physicians that they should take account of pertinent natural laws in their practices. According to Justice Breyer, an unpatentable law of nature does not become patentable merely by advising individuals to use the law. As a result, the Court concluded that the three steps recited in the claim did not \"transform unpatentable natural correlations into patentable applications of those regularities.\"\nThe Supreme Court's opinion in Mayo v. Prometheus addressed a number of additional contentions raised during the litigation. First, the Court rejected the argument that the Prometheus patents satisfied the machine-or-transformation test. The Federal Circuit had reasoned that the patents-in-suit transformed both human blood (by analyzing it to measure metabolite levels) and the human body (by administering a thiopurine drug). Justice Breyer countered that the claims at issue required only that the metabolite levels be measured, not that human blood be transformed. And he also explained that the transformation of the human body was not pertinent to the patentability determination, for that claim limitation merely identified the group of individuals who might be interested in applying the law of nature.\nThe Court also responded to the position that virtually any step beyond a statement of a law of nature should be deemed to fulfill Section 101 standards. Under this view, Section 101 might be satisfied fairly readily; other requirements imposed under the Patent Act, including novelty and nonobviousness, would play a more significant role in deciding whether the patent should issue or not. Justice Breyer rejected this proposal, stating that the policy concerns that underlie Section 101 were distinct from those of the other patentability requirements.\nThird, the Court responded to concerns that rejecting the Prometheus patents would discourage diagnostic research. Justice Breyer observed that other interested parties had asserted that patents claiming the body's natural responses to illness and medical treatment should not be granted because they might limit physician access to critical scientific data. In view of these competing views, the Court was reluctant to depart from precedent denying patents on natural laws.", "In a June 2013 decision, the Supreme Court of the United States ruled in Association for Molecular Pathology v. Myriad Genetics, Inc., that genomic DNA was ineligible for patenting under 35 U.S.C. §101 because of the \"product of nature\" doctrine. Under longstanding case law, products of nature (preexisting substances found in the wild) may not be patented, per se . However, the courts have also determined that such a product of nature may be patentable if significant artificial changes are made. By purifying, isolating, or otherwise altering a naturally occurring product, an inventor may obtain a patent on the product in its altered form.\nAdopting the view that isolated and purified genomic DNA satisfied this exception to the \"product of nature\" doctrine, the USPTO issued over 50,000 patents relating at least in part to DNA. However, some experts believed that the decision to patent human genes misconstrued the \"product of nature\" principle. In their view, the fact that scientists have isolated a gene is a \"technicality\" that did not allow genes to be patented.\nThe Supreme Court decision in Myriad reflects this latter position. The litigation commenced on May 12, 2009, when the Association for Molecular Pathology and 19 other plaintiffs, including individual physicians, patients, and researchers, filed a lawsuit against the USPTO, Myriad Genetics, Inc., and the Directors of the University of Utah Research Foundation. The plaintiffs challenged several patents owned by Myriad that claim isolated human genes known as BRCA1 and BRCA2. Certain alterations or mutations in these genes are associated with a predisposition to breast and ovarian cancers. Due to its intellectual property rights, Myriad was the sole commercial provider of genetic testing related to breast and ovarian cancer associated with the BRCA1 and BRCA2 genes. The plaintiffs asserted that Myriad's gene patent claims were invalid because, in their view, human genes are naturally occurring products that do not constitute patentable subject matter.\nThe U.S. District Court for the Southern District of New York sided with the plaintiffs and held that Myriad's gene patent claims were invalid under 35 U.S.C. §101. Judge Sweet reasoned that Myriad's claimed isolated DNA was not \"markedly different from native DNA as it exists in nature\" and therefore could not be patented. Following an appeal, the Federal Circuit reversed this holding. The Court of Appeals reasoned that \"isolated\" DNA is not merely \"purified\" DNA—rather, it has been \"manipulated chemically so as to produce a molecule that is markedly different from that which exists in the body.\" Under this reasoning, human genes consist of patentable subject matter.\nThe Supreme Court subsequently agreed to hear the Myriad case but did not issue a ruling in the matter. Rather, on March 26, 2012, the Court vacated the judgment and remanded the matter back to the Federal Circuit with instructions to reconsider the appeal. The Federal Circuit responded by once again upholding Myriad's claims. The Supreme Court then agreed to hear the case.\nJustice Thomas, writing for the Court, initially observed that Myriad had neither created nor altered the generic information encoded in the BRCA1 and BRCA2 genes. Rather, Myriad had discovered the precise location and genetic sequence of those genes. According to Justice Thomas, then, \"Myriad did not create anything. To be sure, it found an important and useful gene, but separating that gene from its surrounding genetic material is not an act of invention.\" The Supreme Court also was unimpressed that Myriad claimed DNA that had been isolated from the human genome through the severing of chemical bonds, with a non-naturally occurring molecule as a result. According to Justice Thomas, \"Myriad's claims are simply not expressed in terms of chemical composition, nor do they rely in any way on the chemical changes that result from the isolation of a particular section of DNA\"\nThe Court took a more favorable view of a second set of claims pertaining to \"complementary DNA,\" however. More commonly known as cDNA, these claims were directed to synthetic DNA in which the sequence of bases is complementary to naturally-occurring DNA. Observing that \"cDNA retains the naturally occurring exons of DNA, but it is distinct from the DNA from which it was derived,\" Justice Thomas concluded that cDNA did not constitute a \"product of nature\" and therefore could be patented.\nJustice Thomas also found it important to note what the Myriad opinion did not implicate. The case involved neither an innovative method of manipulating genes while searching for the BRCA1 and BRCA2 genes, the Court explained, nor new applications of knowledge about those genes. The Court also indicated that it had not considered the patentability of DNA in which the order of the naturally occurring nucleotides has been altered. Instead, the Court \"merely [held] that genes and the information they encode are not patent eligible under §101 simply because they have been isolated from the surrounding genetic material.\"\nThe opinion of Justice Thomas was joined in full by seven of his colleagues. Justice Scalia contributed a one-paragraph concurring opinion that joined the judgment of the Court and all of its opinion except those portions \"going into fine details of molecular biology.\" Justice Scalia found himself \"unable to affirm those details on my own knowledge or even my own belief.\" This shortcoming did not prevent him from concluding that isolated genomic DNA was identical to its natural state, however, while cDNA could be patented because it was a synthetic creation not found in nature.", "In the most recent of its Section 101 decisions, the Supreme Court considered the patentability of a computer-implemented financial exchange system. The inventions at issue in Alice Corp. v. CLS Bank International were designed to mitigate \"settlement risk\"—the risk that only one party to a financial transaction will pay what it owes. The patents at issue were more specifically directed to (1) a method for exchanging financial obligations (the method claims); (2) a computer system used to carry out those methods (the computer system claims); and (3) a computer-readable medium, such as disk or memory stick, containing program code for performing those methods (the computer-readable media claims). The district court concluded that the inventions were unpatentable because they represented a \"basic business or financial concept\" that \"remains a fundamental, abstract concept.\"\nThe patent owner appealed the decision to the Federal Circuit, which affirmed the district court's ruling. The Supreme Court agreed to hear the case in order to address \"whether claims to computer-implemented inventions—including claims to systems and machines, processes, and items of manufacture—are directed to patent-eligible subject matter within the meaning of section 101.\" The Supreme Court unanimously upheld the Federal Circuit's determination that the patents were directed to a patent-ineligible abstract idea.\nWriting for the Court, Justice Thomas explained that the Court's Section 101 precedent established a two-part test for identifying patents that claim laws of nature, natural phenomena, and abstract ideas. First, the claim should be analyzed to determine whether it claims one of these types of excluded subject matter. If it does, then the claim should be reviewed to determine whether the claim recites additional elements that transform the claim into a patent-eligible application of a law of nature, natural phenomenon, or abstract idea. Justice Thomas described this second test as determining whether the claim incorporates an \"inventive concept\" that amounts to more than merely applying the law of nature, natural phenomenon, or abstract idea to a particular technological environment.\nWith this framework established, Justice Thomas turned first to the method claims. Applying the two-step process it established in Mayo v. Prometheus, the Court first determined that the method claims were drawn to the abstract idea of intermediated settlement—a fundamental and longstanding economic practice. The Court then turned to the second prong of the Mayo inquiry—namely, whether the claim contains \"an 'inventive concept' sufficient to 'transform' the claimed abstract idea into a patent-eligible application.\" The Court determined that the patented claims amounted to nothing more than implementation of an abstract idea on a computer. According to Justice Thomas, the \"mere recitation of a generic computer cannot transform a patent-ineligible abstract idea into a patent-eligible invention.\" To hold otherwise, he explained, would allow any abstract principle to become patentable simply by incorporating everyday computer hardware into the claim.\nThe Court rejected the computer system and computer-readable media claims for the same reason. Justice Thomas explained that the claims recited only generic computer hardware that failed to do more than generally link the invention to a specific technological environment—that is to say, computer implementation. Because these claims were not meaningfully restricted by these system and media limitations, they too were unpatentable.", "The Supreme Court decisions in Bilski, Mayo v. Prometheus, Myriad, and Alice present the current law of the land with respect to whether a particular invention is eligible for patenting. Several key themes may be gleaned from these four opinions. First, the courts and USPTO conduct a two-part test developed from the case law. That test asks (1) whether the claim recites a law of nature, natural phenomenon, or abstract idea; and (2) if so, whether the claim includes additional, inventive elements that indicate the claim applies one of the three excluded subject matters, rather than being a fundamental concept per se .\nWith regard to this second step, the Court will analyze a patent claim to determine if it preempts a field of activity. If a claim covers every practical application of a fundamental concept, then it cannot be patented under Section 101. In addition, the Court does not consider a claim's recitation of routine, nominal hardware—such as a general-purpose computer—to ameliorate concerns over Section 101 eligibility. Finally, although the machine-or-transformation test does not exclusively govern the patent eligibility of processes, it remains a useful guidepost within the decisionmaking process.\nSection 101 determinations have proven amenable to resolution early within the process of litigation, often at the pleading stage or a prompt summary judgment motion. In addition, the courts have often not required a formal construction of the patent's claims in order to resolve Section 101 challenges. Statistical analyses suggest that when these motions are raised, the moving party enjoys a good probability of invalidating the challenged claims. In particular, one empirical study concluded\nAs of June 19, 2016 (i.e. Alice 's two-year mark), courts have examined 568 challenged patents brought under §101 motions citing Alice , resulting in 190 valid patents and 378 patents invalidated with an average invalidation rate of 66.5%. Specifically, the Federal Circuit upheld 3 patents and invalidated 34 patents—an average invalidation rate of 91.9%. The [USPTO] has rejected over 36,000 published patent applications under Alice , where over 5,000 such applications were abandoned.\nNotably, these statistics do not suggest that approximately two-thirds of all issued patents do not comply with Section 101. Rather, they indicate that when attorneys assert that a particular patent claim is invalid in view of the existing law of patentable subject matter or a nonfrivolous argument for modifying existing law, they have a good chance of success. Such motions are not routinely brought with regard to such claimed subject matter as chemicals, consumer devices, electronics, medical devices, pharmaceuticals, tools, vehicles, and any number of other technologies. However, these statistics may be read to suggest that recent Supreme Court interest in patentable subject matter has animated a patent validity doctrine with implications for both information technologies and the life sciences. This report briefly considers these two fields next.", "The implications of recent Supreme Court case law have arguably been most keenly felt with respect to information technologies. The courts have invalidated numerous patents on computer-related inventions following the standards established in Bilski and Alice . As a general matter, patent claims that do not describe specific solutions to a problem, or identify an \"improvement in the functioning of technology,\" tend to be the most vulnerable to a Section 101 challenge. Among the patent claims invalidated were those directed towards the following inventions:\na computer system of generating a second menu from a first menu that allows users to select particular categories and items; a computer system and method for collecting, analyzing, and displaying information relating to an electric power grid using conventional computer and network technology; a method of (1) extracting data from hard copy documents using an automated digitizing unit such as a scanner, (2) recognizing specific information from the extracted data, and (3) storing that information in a memory, using conventional scanners and computers; systems and methods for administering and tracking the value of life insurance policies in separate accounts; and a computer-aided method and system for processing credit applications over electronic networks.\nThe patent invalidated in another representative decision, Affinity Labs of Tex. v. DIRECTV, LLC , claimed a broadcast system in which a cellular telephone located outside the territory of a regional broadcaster (1) requests and receives content from the broadcaster via a streaming signal, (2) downloads an application for performing those functions, and (3) contains a display that allows the user to select particular content. Applying the Supreme Court's two-part test for patentable subject matter, the Federal Circuit first deemed the concept of providing out-of region access to a local broadcast to constitute an abstract idea. Judge Bryson explained that the \"practice of conveying regional content to out-of-region recipients has been employed by nearly every form of media that has a local distribution,\" ranging from the mailing of local newspaper to distant locations, to the delivery of broadcasts of sporting events to a national audience.\nSecond, Judge Bryson observed that \"nothing in claim 1 [was] directed to how to implement out-of-region broadcasting on a cellular telephone. Rather, the claim is drawn to the idea itself.\" In particular, the patent did not describe how the invention accomplished the claimed functions. It merely confined the idea to one particular technological environment—cellular telephones. Under Supreme Court case law, the Federal Circuit concluded, these circumstances did not satisfy Section 101.\nThe Federal Circuit has not accepted a Section 101 challenge in every case. For example, the court of appeals has upheld patents directed towards an e-commerce system and method, an information management and database system, a method and system of filtering Internet content, and a method of automatically animating lip synchronization and facial expressions of three-dimensional animated characters. As a general matter, claims have been more likely to survive Section 101 if they avoid broad functional language and recite discrete structures to achieve specific results.", "The Supreme Court decisions in Mayo v. Prometheus and Association for Molecular Pathology v. Myriad Genetics have held consequences for the life sciences industry. Due to Mayo v. Prometheus , predictive diagnostic methods that depend on the presence or absence of a biomarker, as well as diagnostic methods that measure that biomarker, may be subject to narrow patents or be difficult to patent at all. In turn, the Myriad case appears to make any isolated bodily substance, including genes, proteins, and cell lines, of doubtful patentability. On the other hand, even slightly altered genes and other naturally derived substances likely pass the §101 threshold.\nFewer published judicial opinions have addressed the interaction of Section 101 with respect to the life sciences than to information technologies. However, one such decision, the 2015 ruling of the Federal Circuit in Ariosa Diagnostics, Inc. v. Sequenom, Inc. , has been subject to considerable discussion within the patent community. That case involved a non-invasive pre-natal diagnostic method useful for determining the gender and blood type of the fetus, as well as whether the fetus was subject to any genetic disorders. Sequenom was the exclusive licensee of U.S. Patent No. 6,258,540. Claim 1 of that patent recited\n1. A method for detecting a paternally inherited nucleic acid of fetal origin performed on a maternal serum or plasma sample from a pregnant female, which method comprises\namplifying a paternally inherited nucleic acid from the serum or plasma sample and\ndetecting the presence of a paternally inherited nucleic acid of fetal origin in the sample.\nThe Federal Circuit explained that the inventors had discovered cell-free fetal DNA (cffDNA) in maternal plasma or serum. The inventors then used known laboratory techniques to implement a method for detecting the small fraction of paternally inherited ccfDNA in material plasma or serum to determine fetal characteristics. The Federal Circuit determined that this invention failed the two-part patentable subject matter test because: (1) the claims were directed to a naturally occurring phenomenon, cffDNA; and (2) the claims simply instructed physicians to apply well-understood, conventional techniques when seeking to detect cffDNA.\nJudge Linn contributed a concurring opinion that joined the majority but expressed dissatisfaction with the result. He explained that prior to the patented invention, prenatal diagnosis involved invasive techniques that could potentially harm the mother and the pregnancy. According to Judge Linn, \"no reason, in policy or statute\" suggested \"why this breakthrough invention should be deemed patent ineligible.\"", "Congress possesses several apparent options with respect to the law of patentable subject matter. If the current situation is deemed acceptable, then no action need be taken. Congress could otherwise alter the law of patentable subject matter through legislation. As of the date this report was published, no bill has been introduced before Congress addressing the law of patentable subject since the enactment of the Leahy-Smith America Invents Act in 2011. However, at least three different industry associations have suggested modifications to Section 101.\nTwo of these organizations, the American Intellectual Property Law Association (AIPLA), a voluntary bar association, and the Intellectual Property Owners Association (IPO), a trade association for proprietors of patents and other intellectual property rights, have generated highly similar proposals. The AIPLA proposal would replace the existing Section 101 with the following language:\n35 U.S.C. § 101—Inventions Patentable\n(a) Eligible Subject Matter .—Whoever invents or discovers any useful process, machine, manufacture, composition of matter, or any useful improvement thereof, shall be entitled to a patent therefor, subject only to the conditions and requirements set forth in this title.\n(b) Sole Exceptions to Subject Matter Eligibility .—A claimed invention is ineligible under subsection (a) only if the claimed invention as a whole exists in nature independent of and prior to any human activity, or can be performed solely in the human mind.\n(c) Sole Eligibility Standard .—The eligibility of a claimed invention under subsections (a) and (b) shall be determined without regard to the requirements or conditions of sections 102, 103, and 112 of this title, the manner in which the claimed invention was made or discovered, or whether the claimed invention includes an inventive concept.\nThe IPO proposal reads almost identically.\nA third organization, the American Bar Association (ABA) Section of Intellectual Property Law, has offered a related proposal. The ABA proposal would amend Section 101 to read\n§ 101. Conditions for patentability: eligible subject matter.\n(a) Eligible Subject Matter. - Whoever invents or discovers any useful process, machine, manufacture, or composition of matter, or any useful improvement thereof, shall be entitled to obtain a patent on such invention or discovery, absent a finding that one or more conditions or requirements under this title have not been met.\n(b) Exception. - A claim for a useful process, machine, manufacture, or composition of matter, or any useful improvement thereof, may be denied eligibility under this section 101 on the ground that the scope of the exclusive rights under such a claim would preempt the use by others of all practical applications of a law of nature, natural phenomenon, or abstract idea. Patent eligibility under this section shall not be negated when a practical application of a law of nature, natural phenomenon, or abstract idea is the subject matter of the claims upon consideration of those claims as a whole, whereby each and every limitation of the claims shall be fully considered and none ignored. Eligibility under this Section 101 shall not be negated based on considerations of patentability as defined in Sections 102, 103 and 112, including whether the claims in whole or in part define an inventive concept.\nThe AIPLA asserts that Section 101 was intended to act as an \"enabling provision\" rather than \"provide the standard for whether a particular technical advance should receive patent protection.\" Similarly, the ABA Section on Intellectual Property asserts that recent Supreme Court decisions \"have injected ambiguity into the eligibility determination by requiring courts and the [USPTO] to apply criteria such as 'well known,' 'routine,' 'conventional or obvious,' factors that were previously relevant only to novelty and obviousness, in order to ignore limitations and render a claim patent ineligible and in effect have turned the gateway function of patent eligibility into a patentability test better left to the other statutory provisions.... \" For its part, the IPO explains that the Supreme Court's analysis \"is contrary to [c]ongressional intent, too restrictive, technologically incorrect, unsound from a policy standpoint, and bad law.\"\nNot everyone agrees that legislative reform is necessary. One commentator finds no evidence that more restrictive patent eligibility rules \"have affected innovation or investment in any meaningful way.\" In his view, the proposed amendments would \"essentially do away with any limits to software patenting.\" Another observer believes that these proposals would \"eliminate any real constraint on subject matter eligibility.\" He also observes that the AIPLA proposal would also change the current statutory phrase \"may obtain a patent subject to the conditions and requirements of this title\" to \"shall be entitled to a patent only subject to the conditions and requirements set forth in this title.\" In his view, this language would have the perhaps unintended effect of eliminating other common law patentability standards, including the so-called \"obviousness-type double patenting\" rule.", "Patents in the fields of software and life sciences have proven controversial for decades. Recent Supreme Court interest in the topic of patentable subject matter, which has made patenting in these fields more difficult, has led to a heated debate. Many knowledgeable observers believe that Section 101 helps ensure an appropriate balance between the innovative contributions of inventors and the scope of the rights that they receive. However, other experts express concern that the lack of availability of patent rights will decrease innovation and investment in the United States. Collectively, these debates may promote further inquiry into the sorts of inventions that may be appropriately patented." ], "depth": [ 0, 1, 1, 1, 2, 2, 2, 2, 1, 2, 2, 1, 1 ], "alignment": [ "h0_title h2_title h1_title h3_title", "h0_full h1_full", "h0_full", "h1_full", "", "", "", "", "h2_full", "", "", "h3_full", "" ] }
{ "question": [ "What language does Section 101 have?", "What does this mean for the spread of patents?", "How is the patentability of things addressed by law?", "What are these exceptions?", "How was Section 101 traditionally used?", "Why has the use of Section 101 changed?", "What happened in these cases?", "What is unpatentable?", "How does the Court address section two of patentability?", "What would then bar such patent claims?", "What else may be covered by Section 101?", "Why would action on Section 101 not be taken?", "How have stakeholders evaluated Section 101?", "What are most of these reforms?", "What do stakeholders consider separate to an invention's patentability?", "How has Section 101 related legislation been made so far?" ], "summary": [ "The courts and the U.S. Patent and Trademark Office (USPTO) have generally construed the language of Section 101 broadly.", "As a result, inventions from many different fields of human endeavor may be patented, so long as other statutory requirements such as novelty and nonobviousness are met.", "However, the courts recognize several implicit exceptions to the four statutory categories of patentable subject matter.", "In particular, laws of nature, natural phenomena, and abstract ideas have been held to be unpatentable.", "For many years, Section 101 was arguably used only infrequently to invalidate an issued patent or reject an application pending at the USPTO.", "This situation changed over the past decade due in large part to four decisions issued by the Supreme Court of the United States since 2010 addressing patentable subject matter.", "In each instance the Court concluded that the invention before it was unpatentable. The four cases were", "These decisions collectively hold that an invention is unpatentable if (1) it consists of a law of nature, natural phenomenon, or abstract idea; and (2) does not include additional, inventive elements that indicate the claim applies one of the three excluded subject matters, rather than being a fundamental concept per se.", "With regard to this second step, the Court analyzes a patent claim to determine if it covers every practical application of a fundamental concept.", "Claims with this preemptive scope cannot be patented under Section 101.", "In addition, the Court does not consider a claim's recitation of routine, nominal hardware—such as a general-purpose computer—to ameliorate concerns over Section 101 eligibility.", "If the current situation is deemed acceptable, then no action need be taken.", "However, several stakeholder groups have recommended legislative reforms to Section 101.", "In general, these proposals assert that an invention should be deemed patentable subject matter unless it exists in nature independently of human activity or it can be performed solely in the human mind.", "These proposals also state that whether an invention is implemented through conventional means is irrelevant to whether it is patentable subject matter or not.", "As of the date of publication of this report, legislation has yet to be introduced before Congress addressing reform of the law of patentable subject matter." ], "parent_pair_index": [ -1, 0, -1, 2, -1, -1, 1, -1, -1, 1, -1, -1, -1, 1, 1, -1 ], "summary_paragraph_index": [ 1, 1, 1, 1, 2, 2, 2, 4, 4, 4, 4, 6, 6, 6, 6, 6 ] }
GAO_GAO-18-538
{ "title": [ "Background", "The CFATS Regulation and Process", "ISCD Has Strengthened Its Processes for Identifying High-Risk Chemical Facilities", "ISCD Implemented Processes to Verify Self- Reported Information from Chemical Facilities", "ISCD Has Nearly Completed Applying Its Revised Risk Assessment Methodology for Designating High-Risk Chemical Facilities", "ISCD Has Made Progress Conducting Compliance Inspections but Does Not Measure Reduction in Facility Vulnerability ISCD Has Increased the Number of Completed Compliance Inspections and Issued Two Corrective Actions for Noncompliance with Security Plans", "ISCD Continues to Implement Changes to Compliance Inspections and Improve Efficiency", "DHS’s Methodology for Measuring Changes in Facility Site Security Does Not Reflect Reduction in Vulnerability", "First Responders and Emergency Planners May Not Have Information Needed to Respond to Incidents at High-Risk Chemical Facilities", "First Responders and Emergency Planners May Not Have Sufficient Information to Prepare for and Respond to Incidents at High-Risk Chemical Facilities", "ISCD Could Take Additional Action to Share Information about High- Risk Facilities with First Responders and Emergency Planners", "Conclusions", "Recommendations for Executive Action", "Agency Comments and Our Evaluation", "Appendix I: Comments from the Department of Homeland Security", "Appendix II: GAO Contact and Staff Acknowledgments", "GAO Contact", "Staff Acknowledgments" ], "paragraphs": [ "DHS’s National Protection and Programs Directorate leads the country’s effort to protect and enhance the resilience of the nation’s physical and cyber infrastructure. The directorate includes the Office of Infrastructure Protection, which leads the coordinated national effort to reduce risk to U.S. critical infrastructure posed by acts of terrorism. Within the Office of Infrastructure Protection, ISCD leads the nation’s effort to secure high-risk chemical facilities and prevent the use of certain chemicals in a terrorist act on the homeland; ISCD also is responsible for implementing and managing the CFATS program.\nThe CFATS program is intended to ensure the security of the nation’s chemical infrastructure by identifying high-risk chemical facilities, assessing the risk posed by them, and requiring the implementation of measures to protect them. Section 550 of the DHS Appropriations Act, 2007, required DHS to issue regulations establishing risk-based performance standards for chemical facilities that, as determined by DHS, present high levels of risk, to include vulnerability assessments and the development and implementation of site security plans for such facilities. DHS published the CFATS interim final rule in April 2007 and Appendix A to the rule, published in November 2007, lists 322 chemicals of interest and the screening threshold quantities for each. According to DHS, subject to certain statutory exclusions, all facilities that manufacture, store, ship, or otherwise use chemicals of interest above certain threshold quantities and concentrations are subject to CFATS reporting requirements. However, only those facilities subsequently determined to present a high level of security risk are subject to the more substantive requirements of the CFATS regulation as described below.", "The CFATS regulation outlines a specific process for how ISCD is to administer the CFATS program. A chemical facility that possesses any of 322 chemicals of interest in quantities that meet or exceed a threshold quantity and concentration is required to complete what is called a Top- Screen survey using ISCD’s Chemical Security Assessment Tool (CSAT) system. CSAT is a web-based application through which owners and operators of chemical facilities provide self-reported information about the facility. The Top-Screen is an on-line survey whereby the facility is to provide DHS various data, including the name and location of the facility and the chemicals, quantities, and storage conditions at the site.\nISCD uses a risk-based approach to evaluate chemical facilities of interest that are required to report under CFATS and determine whether these facilities are high-risk and therefore subject to further requirements under the regulation. More specifically, ISCD’s risk assessment methodology calculates risk scores—based on facility-supplied information in the Top-Screen survey, among other sources, and taking into account vulnerability, potential consequences, and threat of a terrorist attack—and uses these scores to determine which facilities are high-risk. Those facilities deemed high-risk are then placed into one of four risk- based tiers (Tier 1 through Tier 4). Tier 1 represents the highest risk. A facility not designated as high-risk is not subject to additional requirements under the CFATS regulation.\nIf ISCD determines that a facility is high-risk (Tier 1–4), the facility must then complete and submit to ISCD a Security Vulnerability Assessment and one of two types of security plans—a Site Security Plan or an Alternative Security Program—which describes the existing and planned security measures to be implemented in order to be in compliance with the applicable risk-based performance standards. Facilities determined to be Tier 3 or 4 also have an option to submit an expedited security plan under the CFATS Expedited Approval Program. To meet risk-based performance standards, covered facilities may choose the security programs or processes they deem appropriate so long as ISCD determines that the facilities achieve the requisite level of performance on each of the applicable areas in their existing and agreed-upon planned measures. Prior to approving a facility’s security plan, ISCD inspectors conduct an authorization inspection at the facility to verify and validate that the content listed in their plan is accurate and complete; that existing and planned equipment, processes, and procedures are appropriate and sufficient to meet the established requirements of the risk-based performance standards; and to assist the facility in resolving any potential gaps identified. After the facility’s security plan is approved, the facility enters into the CFATS compliance cycle, which includes regular and recurring compliance inspections.\nISCD inspectors conduct compliance inspections to ensure the existing and planned security measures identified in a facility’s approved security plan continue to be implemented fully; the equipment, processes, and procedures described in the security plan are appropriate and sufficient to meet the established performance standards; and the required corrective actions have been implemented and are sustainable. This compliance inspection includes a verification of other data provided to ISCD, including the Top-Screen. If, through a compliance inspection, ISCD determines a facility has not fully implemented security measures as outlined in its approved security plan, ISCD is to provide the facility with written notification that clearly identifies the deficiencies in the plan and will work with the facility toward achieving full compliance or, if warranted, take enforcement action. Figure 1 illustrates the CFATS regulatory process.", "", "In response to our prior recommendations, ISCD has taken action to strengthen its processes for verifying the accuracy of data it uses to identify high-risk chemical facilities. In July 2015, we found that ISCD used self-reported and unverified data to determine the risk categorization for facilities that held toxic chemicals that could threaten surrounding communities if released. At the time, ISCD required that facilities self- report the Distance of Concern—an area in which exposure to a toxic chemical cloud could cause serious injury or fatalities from short-term exposure—as part of its Top-Screen methodology. In our report, we estimated that more than 2,700 facilities with a toxic release threat misreported the Distance of Concern and recommended that ISCD (1) develop a plan to implement a new Top-Screen to address errors in the Distance of Concern submitted by facilities, and (2) identify potentially miscategorized facilities that could cause the greatest harm and verify that the Distance of Concern these facilities reported is accurate.\nISCD has addressed both of these recommendations. In response to the first recommendation, ISCD implemented an updated Top-Screen survey in October 2016 and now collects data from facilities and conducts more accurate modeling to determine the actual area of impact (formerly called the Distance of Concern), rather than relying on the facilities’ calculation. In response to the second recommendation, ISCD officials reported in November 2016 that they reassessed all facility Top-Screens that reported threshold quantities of chemicals posing a toxic release threat, and identified 158 facilities with the potential to cause the greatest harm. In April 2018, ISCD officials reported that all of these facilities have since been reassessed using updated Top-Screen information and, where appropriate, assigned a risk tier.\nIn addition, in October 2016, ISCD implemented a quality assurance review process whereby ISCD officials manually check and verify the accuracy of facility self-reported Top-Screen information used in identifying potential high-risk facilities. The objective of ISCD’s review process is to evaluate the information provided by a chemical facility in order to recommend approval or rejection of a submitted Top-Screen for accuracy prior to issuing a letter notifying the facility of its risk tier designation. According to ISCD, all Top-Screens undergo a quality assurance review with two exceptions: (1) a facility that registers through CSAT for the first time and submits a Top-Screen identifying zero chemicals of interest on site and which does not identify an exclusion; or (2) a facility that possessed a chemical of interest in the past but subsequently submits a follow-up Top-Screen for redetermination identifying they no longer possess the chemical of interest and after ISCD validates the removal of the chemical of interest. When a Top-Screen submission is rejected, ISCD sends a letter notifying the facility of the rejection and requesting that a revised Top-Screen be submitted. In addition, according to ISCD, they contact facilities prior to a Top-Screen rejection to ensure the facility understands the required updates and to discuss the potential reporting error. As of February 2018, a total of 1,956 Top-Screen submissions (across 1,799 unique facilities) were rejected as part of this quality assurance review process since implementing the updated Top-Screen survey in October 2016, according to ISCD data. According to ISCD, the majority of these Top-Screens were rejected due to common reporting errors, such as misreporting the flammability hazard rating for a chemical of interest subject to a release security issue or not reporting transportation packaging when a chemical of interest is identified as being subject to a theft or diversion security issue.", "ISCD Revised Its Risk Assessment Methodology to More Accurately Identify and Assign Tiers to High-Risk Chemical Facilities Since we last evaluated it in 2013, ISCD took action to enhance the CFATS program’s risk assessment methodology—used to determine whether covered chemical facilities are high-risk and, if so, assign them a risk-based tier—by incorporating changes to address prior GAO recommendations, as well as the findings of an ISCD-commissioned peer review conducted in 2013, among other efforts. In April 2013, we found that DHS’s risk assessment approach did not consider all of the elements of threat, vulnerability, and consequence associated with a terrorist attack involving certain chemicals. Our work showed that DHS’s CFATS risk assessment methodology was based primarily on consequences from human casualties, but did not consider economic consequences, as called for by the NIPP and the CFATS regulation. We also found that DHS’s approach was not consistent with the NIPP because it treated every facility as equally vulnerable to a terrorist attack regardless of location or on-site security. In addition, DHS was not using threat data for 90 percent of the tiered facilities—those tiered for the risk of theft or diversion—and using 5-year-old threat data for the remaining 10 percent of those facilities that were tiered for the risks of release or sabotage. We recommended that ISCD (1) review and improve its risk assessment approach to fully address each of the elements of threat, vulnerability, and consequence, and (2) conduct an independent peer review after enhancements to the risk assessment approach were complete.\nPartly in response to our findings and recommendations, from 2013 through 2016, ISCD conducted a multiyear effort to review and improve the CFATS program’s risk assessment approach and tiering methodology with the primary goal of improving the identification and appropriate tiering of high-risk chemical facilities. Among these efforts was an ISCD- commissioned peer review of the CFATS tiering methodology conducted in 2013 by the Homeland Security Studies and Analysis Institute (HSSAI). HSSAI’s final report summarized the findings of the peer review and included a list of 44 recommendations for ISCD to implement in its efforts to improve and revise the CFATS risk assessment and tiering methodology. ISCD undertook a risk assessment improvement project to implement most of the recommendations described in the 2013 HSSAI final report; these efforts included, for example, convening advisory board meetings with experts drawn from across industry, academia, and government to review and make additional recommendations on the proposed improvements to the CFATS risk assessment methodology and associated tools and processes.\nThe result of these efforts is an updated, “second generation” risk assessment approach and tiering methodology that addresses both of our prior recommendations and almost all of the recommendations described in the 2013 HSSAI final report. Specifically, with regard to our recommendation that DHS enhance its risk assessment approach to incorporate all elements of risk, ISCD worked with Sandia National Laboratories to develop and evaluate a model to estimate the economic consequences of a chemical attack. In addition, among other enhancements, the updated risk assessment methodology incorporates revisions to the threat, vulnerability, and consequence scoring methods to better cover the full range of chemical security issues regulated by the CFATS program. Additionally, with regard to our recommendation that DHS conduct a peer review after enhancing its risk assessment approach, DHS conducted peer reviews and technical reviews with government organizations and facility owners and operators, and worked with Sandia National Laboratories to verify and validate the CFATS program’s revised risk assessment methodology which was completed in January 2017. In addition, as of May 2018, ISCD has considered, implemented, or is in the process of implementing updates that address 39 of the 44 recommendations in the HSSAI peer review of the original CFATS risk assessment methodology. According to ISCD, DHS must undertake a rulemaking to update the CFATS regulation and to obtain public comment on any proposed changes to implement the remaining recommendations. These relate to possible changes in how or to what extent the CFATS program regulates the treatment of certain chemicals of interest, chemical weapons and their precursors, and other fuels or fuel mixtures.\nImplementation of the Revised Risk Assessment Methodology Is Nearly Complete Beginning in October 2016, ISCD notified chemical facilities that were not new to the CFATS program—that is, all facilities that had previously submitted a Top-Screen and had reported chemicals of interest above the threshold quantity and concentration on their most recent Top-Screen—to submit a revised Top-Screen in CSAT 2.0 so that they may be re- assessed using ISCD’s revised risk assessment methodology. As of February 2018, a total of 29,195 chemical facilities were assessed using ISCD’s revised risk assessment methodology, with 3,500 (or 12 percent) of these facilities designated as high-risk (i.e., assigned to tiers 1 through 4). The total of 29,195 chemical facilities includes 26,828 facilities that were previously assessed using the original risk assessment methodology and an additional 2,367 facilities new to the CFATS program, as shown in figure 2.\nOf the 3,500 tiered facilities, 265 were new to the CFATS program; 889 were not new to the program, but were previously not tiered and were reassessed as high-risk and assigned a tier; and 1,345 were previously tiered but were reassigned to a different tier. Also, 430 facilities that were previously tiered were no longer tiered. As of May 2018, ISCD had pending risk assessments for an additional 241 chemical facilities that were not new to the CFATS program but were not previously tiered. ISCD officials did not provide an estimated target completion date for these pending risk assessments, noting that completing the assessments is highly dependent on the facilities providing the necessary Top-Screen information.\nAccording to ISCD, there are four main drivers of the changes in facility tiering that resulted from implementing the second-generation risk assessment methodology: facilities placed in a lower tier due to implementation of revised consequence scoring methods that more accurately account for the impact of quantities of the chemicals subject to theft/diversion security issues; facilities placed in a higher or lower tier for chemicals of interest due to improvements to the distribution of population in consequence modeling for chemicals subject to release-toxic and release- flammable security issues; increases in the number of facilities tiered for select chemical weapon precursors due to the implementation of revised consequence scoring methods that more accurately account for the impact of certain chemicals of interest; and changes in tiering due to newly reported increases, decreases, and modifications of chemical holdings.", "Since 2013, ISCD has reduced its backlog of unapproved site security plans and increased the number of conducted compliance inspections. As discussed earlier, in order to approve a facility’s site security plan, ISCD inspectors conduct an authorization inspection at the facility to verify and validate that the content listed in their plan is accurate and complete; that existing and planned equipment, processes, and procedures are appropriate and sufficient to meet the established requirements of the risk-based performance standards; and to assist the facility in resolving any potential gaps identified. After the facility’s security plan is approved, the facility enters into the CFATS compliance cycle and is subject to a compliance inspection. In 2013, we calculated that it could take from 7 to 9 years to review and approve the approximately 3,120 site security plans submitted by facilities that had been designated as high-risk but that ISCD had not yet begun to review. In 2015, we found that ISCD had made improvements to its processes for reviewing and approving site security plans and substantially reduced the time needed to approve remaining site plans to between 9 and 12 months.\nOur analysis of ISCD data since our 2015 report showed that ISCD has made substantial progress conducting and completing compliance inspections. Specifically, our analysis showed that ISCD has increased the number of compliance inspections completed per year since ISCD began conducting compliance inspections in 2013. For the 2,466 high-risk facilities with an approved site security plan as of May 2018, ISCD had conducted 3,553 compliance inspections. Table 1 shows the number of conducted compliance inspections from fiscal year 2014 to May 2018.\nISCD officials project they will conduct fewer compliance inspections in fiscal year 2018 than in fiscal year 2017 due to two reasons. First, ISCD officials stated the program made progress resolving the backlog of facilities that required compliance inspections in fiscal years 2016 and 2017 when it conducted over 2,600 compliance inspections. Second, ISCD officials stated that the program’s revised risk assessment approach and continued outreach efforts have resulted in an increase in the number of identified facilities with chemicals of interest. As a result, ISCD officials stated they project an increased number of authorization inspections and fewer compliance inspections in fiscal year 2018 and 2019 as new facilities enter the program.\nISCD increased the number of compliance inspections conducted from fiscal years 2014 to 2017 and less than 1 percent of compliance inspections during this period resulted in a determination that a facility was not in compliance. During a compliance inspection, if an inspector finds that a facility is noncompliant with its security plan, the CFATS regulation authorizes ISCD to take enforcement action, such as issuing an order for corrective action to the facility. Of the 3,553 compliance inspections ISCD conducted between fiscal year 2014 and May 2018, ISCD issued two corrective actions—both to Tier 4 facilities—because these facilities were not in compliance with their approved site security plan.\nSpecifically, during the compliance inspection of one facility, which was determined to be high-risk based on both the release and theft/diversion security issues, ISCD found that the facility’s site security plan did not identify several existing or planned measures to secure the facility’s chemicals of interest. For example, the facility’s site security plan did not identify measures to monitor restricted areas or potentially critical targets within the facility against a theft or release attack. In addition, while the facility’s site security plan identified a chain link fence and an alarm on a gate to a secure cage that houses the chemicals of interest, ISCD inspectors found no evidence of either. During the compliance inspection of the second facility, which was determined to be high-risk based on the theft and diversion security issue, ISCD inspectors were unable to verify if the facility’s intrusion detection system was properly functioning and that an individual not employed by the facility may have had access to the facility’s chemicals of interest without a proper background check. Both of these facilities took actions to implement the measures identified in their site security plan and were later found to be in compliance with their site security plans. ISCD officials attribute the low number of corrective actions the program has issued to the program’s collaborative approach of working with facilities to ensure compliance. For example, of the two facilities ISCD found to be in noncompliance, ISCD conducted a compliance assistance visit with both facilities to provide assistance. In addition to compliance assistance visits, ISCD officials stated that the program has other collaborative tools, such as the CFATS Help Desk, to help ensure facility compliance.", "ISCD continues to implement changes that are intended to enhance compliance inspections. For example, ISCD officials stated the program continues to conduct preinspection phone calls with facilities to help them prepare for compliance inspections. In addition, ISCD officials stated they developed and provided supplemental guidance in fiscal year 2017 on steps ISCD inspectors need to take during a compliance inspection. ISCD’s supplemental guidance includes, among other things, best practices and lessons learned for conducting inspections and reporting items identified by the inspections. ISCD officials stated they plan to incorporate this supplemental guidance into their compliance inspection standard operating procedures in the third quarter of fiscal year 2018 and to update their compliance inspection handbook in the fourth quarter of 2018.\nIn addition to updating its guidance for inspectors, ISCD has taken steps to improve the efficiency of compliance inspections. For example, ISCD continues its outreach efforts to chemical facilities on the inspection process. As part of these efforts, ISCD published guidance for facilities on steps to take to prepare for the compliance inspection, including information on the appropriate personnel and documentation that should be made available during the inspection. Finally, ISCD increased the number of compliance assistance visits with facilities to better prepare them for inspections. Representatives from 9 of the 11 industry associations we spoke with told us that ISCD’s communication with facilities had improved the efficiency of compliance inspections and increased the ability of facilities to comply with the risk-based performance standards.\nWe accompanied inspectors on two separate compliance inspections to observe how the inspections were carried out and how inspectors used the risk-based performance standards to determine compliance. For example, during the compliance inspection of a facility identified as high- risk based on the theft and diversion security issue, we observed facility personnel and ISCD inspectors discussing the preinspection phone call ISCD had conducted to assist the facility in preparation for their compliance inspection. This discussion included confirmation that the facility communicated with the local fire and police departments and had requested their presence at the inspection. In addition, we observed the inspectors analyzing the facility’s emergency response plan to determine whether the facility’s plans were consistent with the applicable risk-based performance standards. We also observed the inspectors subsequently interviewing local fire and police department officials that were present during the inspection to validate statements made by the facility and to confirm that both entities received the facility’s emergency plan. We accompanied the inspectors and facility personnel on a tour of the facility where inspectors observed existing measures the facility used to protect the chemicals of interest, including the facility’s fencing barrier. We also observed inspectors testing security measures, including the facility’s access controls put in place to prevent unauthorized personnel gaining access to the chemicals of interest.\nAt the other compliance inspection we observed, the facility personnel and ISCD inspectors confirmed a preinspection phone call to prepare the facility for the inspection. This phone call included a discussion of the appropriate training records and contract documentation that inspectors needed to confirm compliance with the applicable risk-based performance standard. During the inspection, we observed that the facility made this documentation and the appropriate personnel available to answer ISCD inspector questions on the security training the facility held during the prior year. We also observed inspectors verifying that existing measures, such as the facility’s fence barrier, were still present and not compromised with breaches. In addition, we observed the inspectors testing key cards to the building that housed the chemicals of interest to ensure the cards prevented unauthorized access. Finally, we observed inspectors requesting a demonstration of how the facility’s chemicals of interest are delivered to the facility and what controls were in place to monitor third-party contractors during delivery of chemicals of interest.\nWe also discussed the compliance inspection process with representatives from trade associations that represent facilities covered by CFATS and considered high-risk. Representatives from 7 of the 11 trade associations that we spoke with stated that ISCD’s implemented changes have improved the compliance inspection process since the program’s inception. Specifically, representatives from three trade associations stated that ISCD inspectors’ efforts to increase communication with facilities, including preinspection phone calls and compliance assistance visits, have increased the ability of facilities to ensure they are compliant with their approved site security plan. However, representatives from 3 of the 11 trade associations we spoke with also noted some issues with the compliance inspection process. Specifically, officials from these 3 associations stated that ISCD inspectors inconsistently apply the risk-based performance standards relative to the measures the facilities implemented. Some of this inconsistency may be due, in part, to the flexibility inherent in the risk- based performance standards which give facilities the discretion or latitude to tailor security based on conditions and circumstances. For example, the amount and type of chemicals of interest may vary by facility, so some facilities may require additional security measures be put in place to ensure protection of these chemicals. In addition, facilities vary by geographic location, which may affect the measures the facility needs to implement to protect the chemicals of interest from potential theft or diversion.\nDHS officials stated that they believe any perceived inconsistency is due to the flexibility in application of the risk-based performance standards and the variety of facility conditions that contribute to the appropriateness of different security measures. Officials explained that, for example, inspectors would likely recommend that a large campus-type facility not invest in a perimeter fence line but instead utilize asset-based barriers to satisfy the performance standards. Officials noted that facilities can choose to employ security measures which best fit their specific situation and can request that inspectors provide multiple options for their consideration.", "ISCD developed its performance measure methodology for the CFATS program in order to evaluate security changes made by high-risk chemical facilities, but the methodology does not measure the program’s impact on reducing a facility’s vulnerability to an attack. In 2015 we found that while ISCD’s performance measure for the CFATS program was intended to reflect security measures implemented by facilities and the overall impact of the CFATS regulation on facility security, the metric did not solely capture security measures that are implemented by facilities and verified by ISCD. We recommended that DHS develop a performance measure that includes only planned security measures that have been implemented and verified. In response to our finding and recommendation, ISCD’s performance measure requires that ISCD officials verify that planned measures have been implemented in accordance with the approved site security plan (or alternative security program) by compliance inspection or other means before inclusion in the performance measure calculation.\nISCD has since decided to develop a new methodology and performance measure for the CFATS program. In 2016, ISCD began development of an approach called the guidepost-based site security plan scoring methodology. ISCD officials stated they plan to use the methodology to evaluate the security measures a facility implemented from initial state— when a facility submits its initial site security plan—to the facility’s approved security plan, according to ISCD officials. Officials stated that once implemented, the methodology’s resulting performance measure will be maintained internally and, if approved, may be used to satisfy the program’s reporting requirements consistent with the Government Performance and Results Act (GPRA) and included in DHS’s Annual Performance Report.\nThe methodology organizes a facility’s security measures based on five guideposts. Using the five guideposts as a framework, the security measures a facility reports in its site security plan are evaluated by ISCD under the applicable guidepost to determine the level of security performance. For example, the plan contains a question on whether a facility has a perimeter fence barrier and if so, what type, such as a chain link fence, metal fence, or vinyl fence. ISCD uses the facility’s responses to assign a numerical value that indicates the level of security performance for the type of fence a facility uses as a perimeter barrier. The scores of the five guideposts are then aggregated and the resulting score represents the site security plan score for a facility. Officials stated that a facility’s site security plan score is developed when the facility submits its initial site security plan and again when ISCD approves its site security plan and the facility has completed the CFATS inspection process.\nISCD officials stated the purpose of the methodology is to measure the increase in security attributed to the CFATS program and stated that the methodology is not intended to measure risk reduction. As a result, the methodology and resulting performance metric do not reflect the program’s impact on reducing a facility’s vulnerability to an attack. While ISCD officials stated the program is exploring how to use the site security plan scores of a facility, this methodological approach may provide ISCD an opportunity to begin assessing how vulnerability is reduced and, by extension, risk is lowered, not only for individual facilities but for the program as a whole. The NIPP calls for evaluating the effectiveness of risk management efforts by collecting performance data to assess progress in achieving identified outputs and outcomes. The purpose of the CFATS program is to ensure facilities have security measures in place to reduce the risks associated with certain hazardous chemicals and to prevent these chemicals from being exploited in a terrorist attack. A measure that reflects risk reduction may include how the CFATS inspection process measures the reduction of one element of risk— vulnerability—of high-risk facilities to a terrorist attack. ISCD officials stated that challenges exist with incorporating vulnerability into the measure’s methodology, such as how to accurately measure a facility’s vulnerability to an attack before the facility started the CFATS inspection process.\nWe recognize challenges ISCD might face in incorporating vulnerability into its scoring methodology. In our prior work, we acknowledged that assessing the benefits of a program—such as reducing a high-risk facility’s vulnerability to an attack—is inherently challenging because it is often difficult to isolate the impact of an individual program on behavior that may be affected by multiple other factors. However, ISCD could take steps to evaluate vulnerability reduction resulting from the CFATS compliance inspection process. For example, because facilities conduct their own vulnerability assessments when developing their site security plan for submission to ISCD, ISCD could establish a vulnerability baseline score when it evaluates a facility’s security measures during its initial review of the facility’s plan. ISCD could then use this baseline score as the starting point for assessing any reduction in vulnerability that ISCD can document that has occurred as a result of security measures implemented by the facility during the compliance inspection process. As the CFATS program continues to mature and ISCD begins its efforts to assign scores to facility site security plans, incorporating assessments of reductions in vulnerability at individual facilities and across the spectrum of CFATS facilities as a whole would enable ISCD to better measure the impact of the CFATS compliance inspection process on reducing risk and increasing security nationwide.", "We found over 200 chemicals covered by CFATS that may not be included in the chemical inventory information that officials told us they rely on to prepare for and respond to incidents at chemical facilities. ISCD shares some CFATS information with state and local officials, including access to CFATS facility-specific data via a secure portal; however, this portal is not widely used at the local level by first responders and emergency planners.", "First responders and emergency planners may not have the necessary information to prepare for and respond to incidents at high-risk chemical facilities regulated by the CFATS program. As mentioned earlier, on April 17, 2013, about 30 tons of ammonium nitrate fertilizer—containing a CFATS chemical of interest—detonated during a fire at a fertilizer storage and distribution facility in West, Texas killing 15 people, including 12 first responders, and injuring more than 260 others. This event, among others, prompted the President to issue Executive Order 13650 to improve chemical facility safety and security in coordination with owners and operators. The Executive Order established a Chemical Facility Safety and Security Working Group and included directives for the working group to, among other things, improve operational coordination with state, local, and tribal partners. The working group created a federal plan of action consisting of actions to improve the safety and security of chemical facilities.\nOne key element of this plan focused on the Emergency Planning and Community Right-to-Know Act of 1986 (EPCRA), which was intended to encourage and support emergency planning efforts at the state and local levels. In accordance with EPCRA, state and local entities, such as Local Emergency Planning Committees (LEPCs)—consisting of representatives including local officials and planners, facility owners and operators, first responders, and health and hospital personnel, among others—were created. These LEPCs were designed to (1) prepare for and mitigate the effects of a chemical incident and (2) ensure that information on chemical risks in the community is provided to first responders and the public. The working group acknowledged there was a need to share data with representatives of these state and local entities to enable them to identify gaps and inconsistencies in their existing information that could reveal previously unknown risks in their communities. For facilities subject to EPCRA requirements, this data is to include, among other things, information about chemicals stored or used at the facility for which facilities are required to submit an emergency and hazardous chemical inventory form to these state and local entities. The working group’s federal plan also included a DHS commitment to share certain CFATS data elements with first responders, state agencies and LEPCs to help communities identify and prioritize risks and develop a contingency plan to address those risks while acknowledging that access to certain sensitive portions of CFATS data will remain restricted to officials with a “need-to-know” so as to appropriately balance security risks.\nIn our interviews with 15 LEPCs—whose jurisdictions include 373 high- risk chemical facilities regulated by the CFATS program—we found that officials rely on information reported on EPCRA chemical inventory forms to prepare for and respond to incidents at CFATS facilities. These officials may not have sufficient information to respond to emergencies at CFATS facilities because EPCRA reporting requirements may not cover some of the chemicals covered under the CFATS program. Specifically, we analyzed the chemicals covered by both CFATS and EPCRA’s reporting requirements and found there are over 200 CFATS chemicals of interest that, depending upon state reporting guidelines, may not be covered by EPCRA reporting requirements. Several of these chemicals may require specific response techniques to minimize the risk of injury or death to first responders and the surrounding community. For example, in the event of fire, aluminum powder, a chemical not subject to EPCRA reporting requirements but regulated under CFATS, produces flammable gases when in contact with water and requires responders to instead use a dry chemical or sand to extinguish the fire. Based on our analysis of tiered CFATS facilities, we estimate that about 32 percent of these high- risk facilities possess at least one chemical that may not be covered by EPCRA reporting requirements.\nIn addition, we found these LEPCs may lack information on the CFATS facilities in their jurisdictions. Specifically, officials representing 11 of the 15 LEPCS we interviewed said they were not aware of which facilities in their jurisdiction were regulated by the CFATS program. Of these 11 LEPCs, officials from 8 LEPCs stated it would be very helpful or critical to know this information and officials from 2 LEPCs stated it would be somewhat helpful. According to these officials, this information would assist LEPCs, some of which have hundreds of facilities in their jurisdiction, to prioritize the most significant facilities for additional planning or scheduling of drills and exercises. Additionally, officials representing 5 LEPCs stated they were not aware of the differences between CFATS chemicals of interest and those chemicals subject to EPCRA reporting requirements. These LEPC officials stated that, among other things, it is critical to have a comprehensive understanding of all chemicals at a facility and that this information is very important for emergency responders to be aware of when responding to an incident.", "Consistent with the CFATS Act of 2014, ISCD is to play a role in ensuring that first responders and emergency planners are properly prepared for and provided with the situational awareness needed to respond to security incidents at high-risk chemical facilities. While the CFATS Act of 2014 does not specifically require that information be shared directly with first responders, ISCD has taken steps to share CFATS information with state and local officials to help ensure that first responders are prepared to respond to such security incidents. These steps include, among other things, ensuring that facilities are developing and exercising an emergency plan to respond to security incidents internally and with assistance of local law enforcement and first responders. Planning and training are important to ensure that facility personnel, onsite security, law enforcement, and first responders are ready to respond to external and internal security incidents. Additionally, these planning activities and relationships with first responders can assist in reducing the impact of these incidents. According to ISCD officials, to verify compliance with this requirement, ISCD inspectors validate facility outreach to first responders, such as local law enforcement and fire departments, through review of facility documentation, including emails with first responders, records of drills, and logs of meetings and tours, or through direct contact with the local first responders by the inspection team.\nIn addition, the Executive Order 13650 working group sought to, among other things, strengthen community planning and preparedness and ensure that first responders and emergency planners are aware of the risks associated with hazardous chemicals in their communities. Included was a goal to increase information-sharing with communities that are near chemical facilities. In a May 2014 report, this working group identified certain information, including the name and quantity of chemicals at a facility, as the most helpful to first responders and emergency planners. This information is intended to enable emergency planners to conduct an analysis to identify gaps and inconsistencies in their existing information that could reveal previously unknown risks in their communities.\nISCD has taken action to ensure first responders and emergency planners have access to CFATS data. For example, in response to Executive Order 13650, ISCD shares CFATS data through the Infrastructure Protection (IP) Gateway. This online portal contains critical infrastructure data and analytic tools, including data on covered CFATS facilities, for use by federal officials, state, local, tribal, and territorial officials, and emergency response personnel. CFATS data available in the IP Gateway includes, among other things, facility name, location, risk tier, and chemicals on-site and is accessible to authorized federal and other state, local, tribal, and territorial officials and responders with an established need-to-know. The IP Gateway provides these officials and responders access to CFATS facility-specific information that may be unreported on EPCRA chemical inventory forms. This CFATS facility-specific information can help ensure these groups are properly prepared to respond to incidents at high-risk chemical facilities in their jurisdictions.\nWhile the IP Gateway is a mechanism for sharing names and quantities of chemicals at CFATS high-risk facilities with first responders and emergency planners, we found it is not widely used by officials at the local level. ISCD told us that in May 2018 they published three revised fact sheets and included information on the IP Gateway in presentation materials that officials told us was intended to increase promotion and use of the IP Gateway. However, according to DHS, there are 14 accounts categorized at the local level whose access to the IP Gateway layer includes the names and quantities of chemicals at CFATS facilities. A local account indicates the individual with access is a county- or city- level employee or contractor. Additionally, while not generalizable to all LEPCs, officials representing 7 of the 15 LEPCs we interviewed were not aware of the IP Gateway and officials representing 13 of the 15 LEPCs stated that they do not have access to CFATS information within the IP Gateway. Of the 13 officials that reported they did not have access, 11 said that it would be helpful or critical to have access for several reasons. Specifically, officials representing these LEPCs stated that this information would assist them to better prepare and respond to incidents and help emergency planners prioritize the most critical sites among the thousands of facilities that they oversee.\nAccording to DHS officials, their outreach plan, developed in March 2015, specifically addresses regular engagement with LEPCs, among other groups. However, these officials acknowledged that information may not be reaching some state and local officials due to a number of factors, including the large number of LEPCs and first responders across the country, and changes in the level of LEPC activity and personnel over time. While we recognize these challenges, providing first responders and emergency planners access to CFATS facility-specific information, including the name and quantity of chemicals at a facility, can help ensure these groups are properly prepared to respond to incidents at high-risk chemical facilities in their jurisdictions. The NIPP states that agencies should share actionable and relevant information across the critical infrastructure community—including first responders and emergency planners—to build awareness and enable risk-informed decision making as these stakeholders are crucial consumers of risk information. Additionally, the 2015 Emergency Services Sector-Specific Plan, an Annex to the 2013 NIPP, further calls for engaging with local emergency planning organizations, such as LEPCs, to enhance information-sharing and analytical capabilities for incident planning, management, and mitigation between stakeholders. The IP Gateway is one way through which ISCD can share CFATS facility-specific information, including the name and quantity of chemicals at high-risk facilities with first responders and emergency planners. As discussed earlier, although ISCD is not required to share CFATS facility-specific information directly with first responders, this information is critical to prepare for and respond to incidents at high-risk chemical facilities and to protect them and their communities from injury or death. By exploring ways to improve information-sharing of CFATS facility-specific data, such as promoting wider use of the IP Gateway among first responders and emergency planners, DHS will have greater assurances that the emergency response community has access to timely information about high-risk chemical facilities.", "DHS, through ISCD, has made improvements to the CFATS program. ISCD has taken action to strengthen its processes for verifying the accuracy of data it uses to identify high-risk chemical facilities, revised its risk assessment methodology to more accurately identify and assign high-risk chemical facilities to tiers, and has nearly completed its efforts to apply this new methodology to facilities covered by CFATS. Furthermore, ISCD has conducted an increased number of compliance inspections and continues to make changes to improve the efficiency of the inspection process. While ISCD has developed a new methodology and performance measure for the CFATS program in order to evaluate security changes made by high-risk chemical facilities, we found that the methodology and metric do not reflect the program’s impact on reducing a facility’s vulnerability to an attack. ISCD may have an opportunity to explore how reductions in vulnerability at individual facilities resulting from the CFATS compliance inspection process could be used to develop an overall measure of the performance of the CFATS program in reducing risk and increasing security nationwide. Such a measure would be consistent with the NIPP, which calls for evaluating the effectiveness of risk management efforts by collecting performance data to assess progress in achieving identified outputs and outcomes. Moving forward, ISCD could also take additional actions to ensure information about high- risk chemical facilities is shared with first responders and emergency planners. During our review, we found that local emergency responders may not have the information they need to adequately respond to incidents at CFATS facilities; a situation that could expose them and their communities to potentially life-threatening situations. While the IP Gateway is a mechanism for sharing names and quantities of chemicals at high-risk facilities with first responders and emergency planners, we found it is not widely used by officials at the local level. The NIPP states that agencies should share actionable and relevant information across the critical infrastructure community—including first responders and emergency planners—to build awareness and enable risk-informed decision making, as these stakeholders are crucial consumers of risk information. By improving information-sharing with first responders and emergency planners, such as promoting access to and wider use of the IP Gateway, DHS will have greater assurances that the emergency response community has access to timely information about high-risk chemical facilities that could help protect them from serious injury or death.", "We are making the following two recommendations to DHS: The Director of ISCD should incorporate vulnerability into the CFATS site security scoring methodology to help measure the reduction in the vulnerability of high-risk facilities to a terrorist attack, and use that data in assessing the CFATS program’s performance in lowering risk and enhancing national security. (Recommendation 1)\nThe Assistant Secretary for Infrastructure Protection, in coordination with the Director of ISCD, should take actions to encourage access to and wider use of the IP Gateway and explore other opportunities to improve information-sharing with first responders and emergency planners. (Recommendation 2)", "We provided a draft of this report to DHS for review and comment. DHS provided written comments, which are reproduced in full in appendix I, and technical comments, which we incorporated as appropriate. In its comments, DHS concurred with both recommendations and outlined efforts underway or planned to address them.\nRegarding the first recommendation that ISCD should incorporate vulnerability into the CFATS site security scoring methodology to help measure the reduction in the vulnerability of high-risk facilities and use that data to further assess the CFATS program’s performance in lowering risk and enhancing national security, DHS concurred but noted that developing a system that could numerically evaluate vulnerabilities will be challenging. DHS stated that implementing the recommendation would likely require, among other things, revising the regulatory language describing CFATS vulnerability assessments and updating tools used to gather them, potentially creating a significant burden on both industry and government. DHS added that its new proposed performance metric, described earlier in this report, demonstrates the enhancement to national security resulting from the CFATS program and, by extension, the program’s impact on vulnerability and overall risk.\nAs stated earlier, we recognize challenges ISCD might face in incorporating vulnerability into its scoring methodology. In our prior work, we acknowledged that assessing the benefits of a program—such as reducing a high-risk facility’s vulnerability to an attack—is inherently challenging because it is often difficult to isolate the impact of an individual program on behavior that may be affected by multiple other factors. However, in order to fully implement this recommendation, ISCD needs to consider steps it can take to evaluate vulnerability reduction resulting from the CFATS compliance inspection process without revisions to the regulation or by creating a significant burden on both industry and government. We noted, for example, that ISCD could establish a vulnerability baseline score when it evaluates a facility’s security measures during its initial review of the facility’s site security plan. ISCD could then use this baseline score as the starting point for assessing any reduction in vulnerability that ISCD can document that has occurred as a result of security measures implemented by the facility during the compliance inspection process. As the CFATS program continues to mature and ISCD begins its efforts to assign scores to facility site security plans, incorporating assessments of reductions in vulnerability at individual facilities and across the spectrum of CFATS facilities as a whole would enable ISCD to better measure the impact of the CFATS compliance inspection process on reducing risk and increasing security nationwide.\nRegarding the second recommendation that the Office of Infrastructure Protection and ISCD take actions to encourage access to and wider use of the IP Gateway and explore other opportunities to improve information- sharing with first responders and emergency planners, DHS stated that it has various outreach activities underway, among other information- sharing efforts, to either directly share or ensure that high-risk chemical facilities are sharing CFATS information with first responders and emergency planners. DHS added that, to continue these efforts and to encourage better utilization of the IP Gateway, it will ensure contact is made with LEPCs representing the top 25 percent of CFATS high-risk chemical facilities no later than the end of the second quarter of fiscal year 2019. While the outreach and information-sharing efforts DHS described are a step in the right direction, in order to fully implement this recommendation it is critical that the intent of any actions taken is to ensure that all first responders and emergency planners with a need-to- know are provided with timely access to CFATS facility-specific information in their jurisdictions. This information should include the name and quantity of chemicals at a facility so as to help these groups be properly prepared to respond to incidents at high-risk chemical facilities and to minimize the risk of injury or death to first responders and the surrounding community. Furthermore, it is important that these actions are focused on ensuring that this CFATS facility-specific information is shared with first responders and emergency planners representing the entirety of CFATS facilities determined to be high-risk, not just those that represent the top 25 percent of CFATS high-risk facilities.\nWe are sending copies of this report to the Secretary of Homeland Security, the Under Secretary for the National Protection Programs Directorate, and other interested parties. In addition, the report is available at no charge on the GAO website at http://www.gao.gov.\nIf you or your staff have questions about this report, please contact me at (404) 679-1875 or [email protected]. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. Key contributors to this report are listed in appendix II.", "", "", "", "In addition to the contact named above, John Mortin (Assistant Director), Hugh Paquette (Analyst in Charge), Chuck Bausell, Kristen Farole, Michele Fejfar, Brandon Jones, Tom Lombardi, Mike Moran, Rebecca Parkhurst, and Claire Peachey made significant contributions to this report." ], "depth": [ 1, 2, 1, 2, 2, 2, 2, 2, 1, 2, 2, 1, 1, 1, 1, 1, 2, 2 ], "alignment": [ "h3_full h0_title", "h0_full h3_full", "h0_title h1_title h4_title", "h0_full", "h0_full h4_full", "h1_full", "h4_full", "h1_full", "h2_full h4_title h3_title", "h4_full", "h3_full h2_full", "h1_full", "", "h2_full", "", "", "", "" ] }
{ "question": [ "How has DHS addressed chemical facilities since 2013?", "How did DHS improve verification of chemical facilities?", "How did DHS improve it's risk assessments?", "What revisions were incorporated?", "How has this mew assessment been used?", "What was the result of this assessment?", "How do DHS inspections still lack some assessments?", "What was the state of DHS reviewing in 2013?", "How has the DHS progressed since?", "How has the DHS improved their measurement of security?", "What issues did the GAO find with their new measures?", "What would these additional checks improve?", "How are first responders to CFATS limited by their knowledge?", "What potential information is missing?", "How has DHS improved access to information?", "What issues did the GAO find with this solution?", "How might the DHS fix the IP Gateway?", "What is the security risk for chemical facilities with hazardous chemicals?", "How does the DHS address potentially at-risk chemical facilities?", "How does the DHS use their CFATS?", "How will the CFATS Act continue?", "How did the GAO asses the DHS?", "What information did the GAO use in their report?", "What additional information did they collect?" ], "summary": [ "Since 2013, the Department of Homeland Security (DHS) has strengthened its processes for identifying high-risk chemical facilities and assigning them to tiers under its Chemical Facility Anti-Terrorism Standards (CFATS) program.", "Among other things, DHS implemented a quality assurance review process to verify the accuracy of facility self-reported information used to identify high-risk facilities.", "DHS also revised its risk assessment methodology—used to assess whether chemical facilities are high-risk and, if so, assign them to a risk-based tier—by incorporating changes to address prior GAO recommendations and most of the findings of a DHS-commissioned peer review.", "For example, the updated methodology incorporates revisions to the threat, vulnerability, and consequence scoring methods to better cover the full range of security issues regulated by CFATS.", "As of February 2018, a total of 29,195 facilities—including all 26,828 facilities previously assessed and 2,367 facilities new to the program—were assessed using DHS's revised methodology.", "DHS designated 3,500 of these facilities as high-risk and subject to further requirements.", "DHS has also made substantial progress conducting and completing compliance inspections and has begun to take action to measure facility security but does not evaluate vulnerability reduction resulting from the CFATS compliance inspection process.", "In 2013, GAO found that the backlog of chemical facility security plans awaiting review affected DHS's ability to conduct compliance inspections, which are performed after security plans are approved.", "Since then DHS has made progress and increased the number of completed compliance inspections. As of May 2018, DHS had conducted 3,553 compliance inspections.", "DHS has also begun to update its performance measure for the CFATS program to evaluate security measures implemented both when a facility submits its initial security plan and again when DHS approves its final security plan.", "However, GAO found that DHS's new performance measure methodology does not measure reduction in vulnerability at a facility resulting from the implementation and verification of planned security measures during the compliance inspection process.", "Doing so would provide DHS an opportunity to begin assessing how vulnerability is reduced—and by extension, risk lowered—not only for individual high-risk facilities but for the CFATS program as a whole.", "DHS shares some CFATS information, but first responders and emergency planners may not have all of the information they need to minimize the risk of injury or death when responding to incidents at high-risk facilities.", "Facilities are currently required to report some chemical inventory information, but GAO found that over 200 CFATS chemicals may not be covered by these requirements.", "To improve access to information, DHS developed a secure interface called the Infrastructure Protection (IP) Gateway that provides access to CFATS facility-specific information that may be missing from required reporting.", "However, GAO found that the IP Gateway is not widely used at the local level. In addition, officials from 13 of the 15 Local Emergency Planning Committees—consisting of first responders and covering 373 CFATS high-risk facilities—told GAO they did not have access to CFATS data in the IP Gateway.", "By encouraging wider use of the IP Gateway, DHS would have greater assurance that first responders have information about high-risk facilities and the specific chemicals they possess.", "Facilities that produce, use, or store hazardous chemicals could be targeted or used by terrorists to inflict mass casualties, damage, and fear.", "DHS established the CFATS program to assess the risk posed by these facilities and inspect them to ensure compliance with DHS standards.", "DHS places high-risk facilities in risk-based tiers and is to conduct inspections after it approves their security plans.", "Under the CFATS Act of 2014, authorization for the CFATS program expires in January 2019.", "GAO assessed the extent to which DHS has (1) enhanced the process for identifying high-risk facilities and assigning them to tiers, (2) conducted facility inspections and measured facility security, and (3) ensured that information is shared with emergency responders to prepare them for incidents at high-risk facilities.", "GAO reviewed DHS reports and data on compliance inspections and interviewed DHS officials.", "GAO also obtained non-generalizable information from 11 trade associations representing chemical facilities regarding DHS outreach and from 15 emergency planning committees about their awareness of CFATS and the chemicals it covers." ], "parent_pair_index": [ -1, -1, -1, 2, 2, 4, -1, -1, 1, -1, 3, 4, -1, 0, -1, 2, 3, -1, -1, 1, 2, -1, -1, 1 ], "summary_paragraph_index": [ 2, 2, 2, 2, 2, 2, 3, 3, 3, 3, 3, 3, 4, 4, 4, 4, 4, 0, 0, 0, 0, 1, 1, 1 ] }
GAO_GAO-14-826
{ "title": [ "Background", "Risks Associated with Nuclear and Radiological Materials", "Agency Responsibilities for Combating Nuclear Smuggling", "CBP Screening Process for Nuclear and Radiological Materials", "Covert Operations Provide Limited Assessments of Capabilities to Detect and Interdict Smuggled Nuclear and Radiological Materials", "Covert Operations Assessed Detection and Interdiction Capabilities at Certain Locations and Showed Varying Rates of Success", "Covert Operations May Not Sufficiently Account for the Most Critical Nuclear Materials, Potential High- Risk Locations, or Key Nuclear and Radiological Detection Technology", "CBP Could Report More Consistently on Covert Operation Results and Provide Greater Oversight of Corrective Actions", "OFTD Covert Test Reports Have Not Been Timely and Have Not Encompassed All Locations where Operations Were Conducted", "CBP Has Provided Limited Oversight to Ensure Implementation of Corrective Actions", "Conclusions", "Recommendations for Executive Actions", "Agency Comments", "Appendix I: U.S. Customs and Border Protection (CBP) Ports of Entry and Permanent Checkpoints within the United States and Its Territories as of January 2014", "Appendix II: U.S. Customs and Border Protection’s Operational Field Testing Division (OFTD) Steps for Conducting a Covert Operation", "Appendix III: Number of U.S. Customs and Border Protection Covert Operations Conducted at Ports of Entry and Checkpoints, Fiscal Years 2006 through 2013", "Appendix IV: U.S. Customs and Border Protection’s Postcovert Operation Feedback Process", "Appendix V: Comments from the Department of Homeland Security", "Appendix VI: GAO Contact and Staff Acknowledgments", "GAO Contact", "Staff Acknowledgments" ], "paragraphs": [ "Concerns about the threats posed by nuclear smuggling initially focused on nuclear materials originating from the former Soviet Union. As a result, the first major initiatives to address these threats concentrated on deploying radiation detection equipment at borders in countries of the former Soviet Union and in Central and Eastern Europe. In the United States, the U.S. Customs Service began providing its inspectors with portable radiation detection devices in 1998. After September 11, 2001, the agency expanded its efforts to include the deployment of radiation portal monitors (RPM)—large-scale radiation detectors that can be used to screen vehicles and cargo. The U.S. Customs Service was transferred to DHS in fiscal year 2003, and the border inspection functions of the U.S. Customs Service, including radiation detection, became the responsibility of CBP. Accordingly, deploying radiation detection equipment at the U.S. border is part of DHS’s strategy for addressing the threat of nuclear and radiological terrorism. In April 2005, the President issued a directive establishing DNDO within DHS and giving DNDO responsibility, among other things, to enhance and coordinate federal, state, and local efforts to detect nuclear and radiological materials. From 1995 through 2013, CBP invested over $2.5 billion to acquire, deploy, and maintain radiation detection equipment; provide training; and conduct both overt and covert tests of this equipment to assess the equipment’s effectiveness. OFTD’s budget for covert operations was $1 million for fiscal years 2009 through 2013 to test CBP capabilities in several areas, including radiation and nuclear detection.", "A terrorist’s use of either an improvised nuclear device (IND) or a radiological dispersal device (RDD)—could have devastating consequences, including not only loss of life but also enormous psychological and economic impacts. An IND is a crude nuclear bomb made with highly enriched uranium or plutonium, generally referred to as special nuclear materials (SNM). It would create an explosion producing extreme heat, powerful shockwaves, and intense radiation that would be immediately lethal to individuals within miles of the explosion, as well as An RDD—frequently radioactive fallout over thousands of square miles.referred to as a dirty bomb—would disperse radioactive materials into the environment through a conventional explosive or through other means. Depending on the type of RDD, the area contaminated could be as small as part of a building or a city block or as large as several square miles. Hundreds of individuals might be killed or injured from the RDD explosion or face the risk of later developing cancer because of exposure to radiation and radioactive contamination.", "Federal agencies that have a role in combating nuclear smuggling are responsible for implementing their own programs per the GNDA. The GNDA is composed of programs run by U.S. agencies including CBP, the Federal Bureau of Investigation, and the Department of Energy as well as partnerships with local, state, tribal, and territorial governments; the private sector; and international partners. The programs are designed to encounter, detect, characterize, and report on radiological and nuclear material that is out of regulatory control. DNDO serves as the primary entity in the United States to develop GNDA-related programs and initiatives, and improve radiological and nuclear detection capabilities. In addition, DNDO coordinates the GNDA’s efforts with other federal agencies, and assists DHS agencies with both implementing the domestic portion of the GNDA and also acquiring radiation detection equipment.\nCBP’s OFO is responsible for implementing scanning procedures to detect smuggling of nuclear and radiological materials at 328 ports of entry composed of airports, seaports, and designated land ports of entry throughout the United States plus selected locations overseas. CBP’s USBP is responsible for implementing screening procedures at 35 permanent checkpoints generally located between 25 and 100 miles from the border. Figure 1 displays the locations of air, land, and sea ports of entry and permanent checkpoints across the nation.specific information about each location.)\nMove mouse over state names to see the breakdown of ports of entry. For a noninteractive version, see app. I.\nN.Dak.\nMinn.\nVt.\nS.Dak.\nWis.\nN.H.\nN.Y.\nMass.\nWyo.\nMich.\nR.I.\nNebr.\nPa.\nConn.\nN.J.\nIll.\nInd.\nColo.\nW.Va.\nDel. Md.\nKans.\nMo.\nVa.\nD.C.\nKy.\nN.C.\nTenn.\nOkla.\nN.Mex.\nArk.\nS.C.\nMiss.\nAla.\nGa.\nLa.\nTex.\nFla.\nOFTD is responsible for conducting covert operations at U.S. ports of entry and checkpoints to test the capabilities for detecting and interdicting nuclear and radiological materials smuggled into the United States, as well as testing capabilities in foreign locations. In selecting sites for covert operations, OFTD considers a universe of 655 sites. These sites include the 477 facilities at the 328 ports of entry, 35 permanent checkpoints, as well as 143 sites consisting of domestic user fee airports and express consignment carrier facility airports as well as preclearance locations and Container Security Initiative (CSI) ports in foreign locations.", "The technology, policies, and procedures to detect and interdict nuclear and radiological material smuggled across the border differ across ports of entry and checkpoints, but consist of four similar functions: (1) the ability to detect radiation, (2) the ability to locate the radiation source, (3) the ability to identify the radiation source, and (4) the ability to contact Laboratories and Scientific Services (LSS) and transmit data as needed when additional adjudication is required.vehicles or containers entering the United States must pass through RPMs that can detect the presence of neutron-and gamma-emitting radioactive material. As we have previously reported, different radioactive materials emit varying types of radiation, and although sources of neutron radiation are less common than gamma radiation, neutron radiation is emitted from some materials that are used to make nuclear weapons. Thus, RPMs and other tools that can detect neutron radiation are At land and sea ports of entry, particularly important for national security purposes, including securing our borders. RPMs detect the presence of radioactive material, which can include plutonium, kitty litter, or granite. If an RPM detects the presence of radioactive material in a scanned container or vehicle, the responding CBP officer is to utilize a device called a radiation isotope identification device (RIID) to identify the radiation source. For some sources, such as industrial radioactive sources, CBP officers must contact the CBP LSS staff to verify the type of source material in question and, if necessary, verify the Nuclear Regulatory Commission licensee and shipper information through the National Law Enforcement Communications Center.\nCBP officials reported that CBP officers and USBP agents in checkpoint and air ports of entry locations generally rely on devices called personal radiation detectors (PRD) to protect the health and safety of agency personnel. These devices detect elevated levels of radiation. Aside from relying on different equipment to detect radiological materials, CBP officers at air ports of entry and USBP agents at checkpoints follow procedures outlined in CBP’s Radiation Detection Standard Operating In keeping Procedures Directive, used at sea and land ports of entry.with these procedures, if a PRD alerts a CBP officer or USBP agent to the presence of radiation, the officer or agent uses RIID technology to identify the radioactive material. See figures 2, 3, and 4 for photographs of RPM, RIID, and PRD technology.\nCBP uses covert operations to test and evaluate whether the systems in place are working as designed to detect and interdict nuclear and radiological smuggling. These operations include an assessment of whether the equipment and technology are working according to specification, the policies and procedures for radiation handling and inspection are adequate to cover various smuggling scenarios, and the extent to which CBP personnel comply with established policies and procedures to detect and interdict nuclear and radiological material smuggled across the border. According to CBP documents, results of covert operations can identify the need for changes in how technology is used to detect nuclear and radiological material, agency policies or procedures, or personnel training to ensure that interdiction programs are working most effectively. Steps used in conducting a covert operation are discussed in appendix II.\nOFTD limits covert operations to the ports of entry and checkpoints where equipment and personnel are permanently placed. According to OFTD officials, CBP does not conduct covert operations outside of the system’s current capabilities, or to test the system’s known vulnerabilities. For example, CBP does not conduct covert operations beyond the technical capabilities and specifications of the RPMs, RIIDs, and PRDs. CBP conducts such tests of equipment capabilities using overt operations.", "", "OFTD conducted 144 covert operations at air, land, and sea ports of entry, checkpoints, and other sites to assess capabilities to detect and interdict nuclear and radiological material smuggled across the border between fiscal years 2006 and 2013, as shown in table 1.OFTD’s covert operations were conducted using radiological materials; however, OFTD officials said they conducted one or two tests using special nuclear material surrogates—radiation test sources with characteristics similar to those of SNM—each year.", "CBP has not conducted a risk assessment that could inform the decision- making process for prioritizing the materials, locations, and technologies to be tested through covert operations. DHS policy requires that components with limited resources make risk-informed decisions. However, OFTD’s covert operations may not sufficiently account for using nuclear materials that pose the highest risk to the country, testing capabilities in higher-risk border locations, or testing in locations that use key GNDA detection technologies. Specifically:\nThe extent to which OFTD’s covert operations use varying source materials is limited. Our review found that OFTD may not give sufficient priority to testing detection capabilities for the most dangerous materials. According to the CBP officials, OFTD has both gamma and neutron radiation sources available; however, DNDO has a broader variety of sources that CBP uses when conducting covert operations with DNDO once or twice a year.\nThe locations selected for covert testing may not be sufficiently taken into account. For example, as shown above in table 1, 45 of 144 OFTD covert operations, or 31 percent of all such operations, were conducted at checkpoints. While checkpoints are an important component in the nation’s border security infrastructure, they constitute only about 5 percent (35 of 655) of total locations, and checkpoints are generally situated from 25 to 100 miles from the border.\nCBP use of key detection technologies may not be sufficiently taken into account. CBP uses a mix of technologies across facility types and locations that can reflect significant differences in capabilities and federal investment. However, CBP’s methodology for choosing locations was not clearly linked to these differences in capability and federal investment.\nDHS’s May 2010 Policy for Integrated Risk Management states that components should use risk information and analysis to inform decision making, and we previously reported on the importance of using risk assessments to determine the most pressing security needs and developing strategies to address them. Moreover, CBP’s fiscal year 2009 through fiscal year 2014 strategic plan requires that programs use a risk-based approach to detect and prevent the entry of hazardous materials, goods, and instruments of terror into the United States, and OFTD’s documented site selection process states that they should consider available intelligence reports and risk assessments.\nCBP’s January 2013 Integrated Planning Guidance (IPG) for Fiscal Year 2015 through Fiscal Year 2019 included recommendations that CBP integrate risk analysis into all decision making, including a risk assessment for chemical, biological, radiological, and nuclear threats. CBP has not yet taken steps toward conducting such a risk assessment or integrating existing risk assessments into its covert testing decisions.Specifically, the IPG included recommendations that CBP conduct an in- depth risk and vulnerability assessment by mode and region to clearly identify the future threats that CBP will be facing to better align resources with priorities. According to OFTD, OFO, and USBP officials, they do not currently have risk assessments that could be used to help inform covert testing decisions. A DNDO official stated that DNDO has previously assessed the risks of nuclear and radiological smuggling through various entry points to the United States, pursuant to DNDO’s responsibilities under the GNDA. DNDO officials told us that they would share information they have with CBP; however CBP officials stated that DNDO’s information may not be applicable for OFTD’s risk-based site selection process.\nConducting a risk assessment that identifies priorities among nuclear and radiological materials, locations, and technology to evaluate under its covert testing program could help enable CBP to target the program’s efforts to maximize the return on the limited resources available. Moreover, a risk assessment could help CBP determine the extent to which its tests should use varying source materials, including SNM or its surrogates. A risk assessment could also help inform whether OFTD should direct more covert operations at certain locations and types of facilities based on the technologies and resources—including RPMs, RIIDs, and trained personnel—deployed at these facilities. By using a risk assessment to inform its decisions on how to prioritize covert operations, CBP would be better positioned to assess the strength of its cross-border capabilities for protecting against the smuggling of nuclear and radiological materials into the country. A risk assessment is particularly important given OFTD’s limited resources, as the number of covert operations OFTD is able to conduct is not sufficient to be statistically representative.", "", "OFTD issued periodic reports on the results of its covert operations but has not met its goal for reporting these results on an annual basis for all locations where operations were conducted. According to a document on OFTD’s policies and procedures for follow-up on covert testing, an OFTD goal is to compile and analyze its findings from covert operations at the end of each fiscal year to determine whether results show trends and systemic weaknesses. To communicate these findings, OFTD’s policy states that its goal is to issue reports to CBP management that include a discussion of the findings and the recommendations necessary to address the identified deficiencies. OFTD has issued three periodic reports that summarize results from covert operations testing capabilities to detect and interdict nuclear and radiological materials smuggled across the border ports of entry: (1) the Summary Report of OFTD Seaport Assessments for fiscal years 2007 through 2008; (2) the Comprehensive Report on Radiation Testing, which summarized the results of covert operations conducted at air, land, and sea ports of entry from fiscal years 2009 through 2011; and (3) the Comprehensive Report on Radiation Testing, which summarized the results of covert operations conducted at air, land, and sea ports of entry from fiscal years 2012 and 2013. OFTD officials stated that while their intention is produce comprehensive reports on an annual basis, they have been unable to do so because of resource constraints.\nOFTD officials stated that they have not yet issued a report on results of covert operations conducted at checkpoints and are in the process of developing the report recommendations. OFTD began covert operations to test capabilities at checkpoints in fiscal year 2009, but did not include results of checkpoint covert operations in its Comprehensive Report on Radiation Testing. OFTD officials said that they provided three briefings to CBP senior management, including the Office of Border Patrol (OBP) in fiscal years 2012 and 2013 on preliminary findings and recommendations resulting from covert operations at checkpoints conducted from fiscal years 2009 through 2013. OFTD officials said they plan to issue a comprehensive report for checkpoint covert operations for fiscal years 2009 through 2013 by the end of December 2014.\nStandards for Internal Control in the Federal Government states that program managers are to receive operational information to help them determine whether they are meeting strategic and performance plans, and that pertinent information is to be identified, captured, and distributed to the right people in sufficient detail, in the right form, and at the appropriate time to enable them to carry out duties and responsibilities efficiently and effectively. Further, these internal controls help managers achieve program objectives by ensuring they receive information on a timely basis to allow effective monitoring, enhancing their ability to address weaknesses.\nTimely reporting of weaknesses identified by covert operations could help CBP management provide timely and necessary oversight to OFO and USBP and appropriately address high-priority border vulnerabilities. According an OFTD document describing its procedures, these reports are important because they often generate requests for high-level discussions led by the Commissioner or Deputy Commissioner with the heads of operational offices. According to OFTD officials, their periodic briefings on covert testing resulted in management changes at USBP. USBP, for example, took action after OFTD’s January 2013 briefing to correct deficiencies that had first been identified in covert operations conducted in 2009. These actions included direction to USBP field management on the importance of USBP agents’ compliance with agency policy and procedures for wearing and using PRDs. In addition, because of continued findings of capability weaknesses at checkpoints over the last 5 years, USBP took action to implement an OFTD recommendation to institute its own covert operation program to test capabilities for CBP action to determine detecting radiological and nuclear smuggling.appropriate time frames for comprehensive reports and ensure they are issued would provide CBP, OFO, and USBP with information to strengthen oversight and improve program operations in detecting and interdicting transborder nuclear and radiological threats. Further, providing timely reports on results of covert operations could help ensure awareness among management and personnel at ports of entry and checkpoints about potential areas of weakness and corrective actions used at other facilities to address these weaknesses across the United States.", "OFTD tracks some corrective actions taken by CBP components to address weaknesses identified by covert operations, but not others. For example, OFTD tracks the status of corrective actions taken by OFO management to address recommendations included in its comprehensive reports resulting from covert operations. However, OFTD does not track the status of corrective actions taken by OFO at ports of entry to address weaknesses identified in covert operations that are not individually cited in these reports. Additionally, OFTD does not track the status of corrective actions taken by USBP to address the weaknesses identified through covert operations at checkpoints.\nOFTD officials told us that in order to develop the recommendations issued in the Comprehensive Reports on Radiation Testing, they reviewed the test summaries from all covert operations at air, land, and sea ports of entry and used their judgment to develop recommendations to address capability weaknesses related to equipment, technology, and personnel compliance with policies and procedures in the CBP radiation detection directive. The fiscal years 2009 to 2011 comprehensive report summarizes results from 43 covert operations conducted at air, land, and sea ports of entry, and the fiscal years 2012 and 2013 report summarizes results from 26 covert operations. The two comprehensive reports span a 5-year time period, and both identify several of the same issues: (1) CBP officers’ noncompliance with radiation detection policies and procedures, (2) radiation detection equipment not always functioning as designed, and (3) CBP officer error primarily due to the lack of training. Our assessment of OFTD’s fiscal year 2012 and 2013 report found that it provides CBP senior management with a more detailed analysis of covert operation results, including reasons why test sources were not interdicted, than previous reports.\nOFTD developed five recommendations to OFO management for addressing selected weaknesses identified from covert operations conducted from fiscal years 2009 through 2011. Specifically, in the Comprehensive Report on Radiation Testing, for fiscal years 2009 through 2011, OFTD recommended the following: 1. CBP officers follow policies and procedures on radiation detection as required by CBP Directive 5290-015A, entitled U.S. CBP Radiation Detection Program Directive. 2. All primary officers have PRDs as required. 3. RIID docking stations be made available wherever needed or required. 4. CBP officers receive training required to perform their assigned functions. 5. Speed limits should be enforced as required.\nOFTD officials stated that as of May 2014, OFO had implemented four of these five recommendations. OFTD officials told us that OFO is continuing to take action and to address the recommendation that all primary officers have PRDs as required. OFO officials stated that they are conducting training and checks during fiscal year 2014 to ensure that the PRD policy is being followed and plan to close the recommendation by procuring additional PRDs for officers by fiscal year 2015.officials further stated that they will keep this recommendation open until OFTD verifies that PRDs have been deployed in the field and that officers are using the PRDs at primary inspection points. The verification process will include spot checks of a random sample of air, land, and sea ports of entry throughout fiscal year 2014.\nOFTD developed nine recommendations to OFO management for addressing selected weaknesses identified from covert operations from fiscal years 2012 and 2013. response to the nine recommendations identified in the April 2014 Comprehensive Report on Radiation Testing were not yet available for our review, but that OFO is taking steps to address these recommendations.\nSpecific details related to the nine recommendations were removed for the purposes of this public report because DHS considered them to be For Official Use Only. radiation detection procedure, or if the weakness was related to the failure of a procedure affecting overall port operations. Corrective actions would be tailored by the port manager accordingly to address the underlying cause of the weakness. OFO and USBP officials stated that while they have a process in place to address weaknesses identified during OFTD covert operations, they were unable to provide us with complete information about corrective actions that were taken to address the results of the covert operations because they do not fully track them. OFTD officials also informed us that OFTD does not track information about corrective actions taken by OFO and USBP because doing so is outside of OFTD’s responsibilities.\nStandards for Internal Controls in the Federal Government states that agencies can enhance their ability to address weaknesses by establishing policies and procedures for ensuring that the findings of audits and reviews are promptly resolved, and ensure that ongoing monitoring occurs. Establishing a process for CBP to ensure that OFO and USBP implement corrective actions for individual ports of entry and at checkpoints could help provide CBP with reasonable assurances that radiation detection and interdiction weaknesses indentified at the port of entry and checkpoints are addressed and security is consistently improving. Without an overall mechanism for addressing weaknesses identified, CBP does not have the oversight capabilities necessary to hold officials at ports of entry and checkpoints accountable for managing program operations to detect and interdict transborder nuclear and radiological threats.", "Preventing nuclear and radiological materials from illegally entering the United States through ports of entry and checkpoints is a complex and challenging process that involves significant resources, including specialized radiological and nuclear detection equipment, detailed policies and procedures, and training for a large number of border protection personnel. The United States has invested billions of dollars to detect and interdict smuggled nuclear and radiological materials at U.S. ports of entry and checkpoints, and CBP reports multiple benefits of its covert operations that can identify the need for changes in how technology is used to detect nuclear and radiological material, agency policies or procedures, or personnel training to ensure that interdiction programs are working most effectively. Given the limited resources directed toward covert operations testing of U.S. detection and interdiction capabilities, it is essential that DHS make risk-informed decisions to enhance its ability to assess the success of these investments. By assessing risk to prioritize the most dangerous materials, most vulnerable locations, and most critical equipment for testing through covert operations, DHS could better inform its decisions on how to expend its limited resources effectively, consistent with the department’s risk management policies. In addition, establishing appropriate reporting time frames of covert operations results, and developing a mechanism to track whether ports of entry and checkpoints have implemented corrective actions, could help CBP ensure accountability and inform management decision making on the need for further investments or actions to protect U.S. borders from these potential consequences.", "To help ensure that resources for covert operations provide reasonable assurance that efforts to detect and interdict nuclear and radiological material smuggled across the border are working as intended and appropriately targeting the most critical materials, locations, and detection technologies, we recommend that the Secretary of Homeland Security conduct or use a risk assessment to inform the department’s priorities— related to such decisions as test locations, materials, and equipment—for covert operations at U.S. checkpoints and ports of entry in air, land, and sea environments.\nTo help ensure that CBP has the information necessary to provide oversight and accountability for implementing corrective actions to address weaknesses identified by covert operations we recommend that the Commissioner of CBP: determine time frames for OFTD reporting of covert operation results and status of corrective actions necessary to timely address border security weaknesses and work with OFTD to address any barriers to meeting these time frames, and develop a mechanism to track the corrective actions taken to address all weaknesses identified through covert operations at the ports of entry and checkpoints.", "We provided a draft of the sensitive version of this report to DHS for review and comment. On July 11, 2014, DHS provided written comments and technical comments, which we incorporated as appropriate. We provided a draft of this report with redacted sensitive information to DHS for a sensitivity review. On September 12, 2014, DHS approved the draft for public release and reissued its written comments, which are reproduced in full in appendix V, and additional technical comments, which we incorporated as appropriate. DHS concurred with all three of our recommendations and discussed action to address them. Specifically:\nWe recommended that the Secretary conduct or use a risk assessment to inform DHS’s priorities—related to such decisions as test locations, materials, and equipment—for covert operations at U.S. checkpoints and ports of entry in air, land, and sea environments. DHS concurred and stated that with input from stakeholders, CBP will formulate a process for conducting and using information from risk assessments and that the pending realignment of OFTD with the Office of Intelligence and Investigative Liaison (OIIL) will facilitate collaboration. DHS has not yet established an estimated completion date for these activities. If implemented effectively, these actions should meet the intent of our recommendation\nWe recommended that the Commissioner of CBP determine time frames for OFTD reporting of covert operation results and status of corrective actions necessary to timely address border security weaknesses and work with OFTD to address any barriers to meeting these time frames. DHS concurred and stated it would develop new policies and procedures that establish strict timelines for reporting results of all testing in all locations, report results within established time frames, and routinely and timely publish comprehensive annual reports. DHS estimated these actions would be completed by April 30, 2015. If implemented and monitored effectively, these actions should meet the intent of our recommendation.\nWe recommended that the Commissioner of CBP develop a mechanism to track the corrective actions taken to address all weaknesses identified through covert operations at the ports of entry and checkpoints. DHS concurred and stated that OFTD will collaborate with all CBP operational offices to develop a mechanism to monitor the status of corrective actions taken by all operational offices as a result of OFTD’s covert testing. DHS stated that OIIL will have the primary responsibility for monitoring the status of corrective action. DHS estimated these actions would be completed by December 31, 2014. If implemented and monitored effectively, these actions should meet the intent of our recommendation.\nAs agreed with your offices, unless you publicly announce the contents of this report earlier, we plan no further distribution until 25 days from the report date. At that time, we will send copies to the appropriate congressional committees and to the Secretary of Homeland Security; In addition, this report will be made publicly available at no extra charge on the GAO website at http://www.gao.gov.\nIf you have further questions about this report, please contact David C. Maurer at (202) 512-9627 or [email protected] or David C. Trimble at (202) 512-3841 or [email protected]. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. Key contributors to this report are listed in appendix VI.", "Information in this appendix is also presented in figure 1. Table 2 includes 328 ports of entry and 35 permanent checkpoints. However, some of the 328 ports of entry have one or more facilities, such as airports, sea ports, or land ports. For example, the Brownsville, Texas, port of entry includes air, land, and sea ports, and the San Diego port of entry includes both air and sea ports. Accounting for each air, land, and sea port separately, the map actually includes 477 facilities (241 airports, 110 land ports, and 126 sea ports) and 35 permanent checkpoints for a total of 512 locations. These are indicated in the map under their respective locations within each state or territory.", "1. CBP provides no notice to the port of entry or checkpoint officials in advance of the operation. 2. A CBP official inserts the radiological source into a cargo container, a vehicle, or personal luggage.3. An actor attempts to smuggle a hidden radiological or nuclear source material through a port of entry or checkpoint by hiding the source material in a vehicle, cargo, or luggage and attempting to enter the country with it. 4. The operation is recorded using a variety of surveillance equipment.\nCBP officials observe the test and take notes. 5. After the covert test is complete, OFTD officials interview the CBP officers or U.S. Border Patrol (USBP) agents involved in the operation and discuss test results with them, explaining what went well and what areas are in need of improvement. 6. Within 24 hours, OFTD officials prepare a one-page summary of the covert test. 7. OFTD officials provide a copy of the summary to the Office of Field Operations (OFO) or USBP management and conduct an out-brief the day after the operation.", "Information in this appendix is also presented in figure 5. Table 3 lists, for each of the 50 states, the District of Columbia, and selected territories, the number of covert operations conducted by Customs and Border Protection’s (CBP) Operational Field Testing Division at (1) air ports of entry, (2) land ports of entry, (3) sea ports of entry, (4) checkpoints, and (5) totals by state or territory.", "The process for informing the ports of entry and checkpoints of the results of covert tests includes the following:\nUpon the conclusion of a covert test, Operational Field Testing Division (OFTD) personnel will immediately complete a written test highlights using information associated with the test that includes their own observations from the test; interviews of involved officers, agents, and applicable supervisors; and other relevant documents.\nOFTD will disseminate the written test highlights to local port of entry or sector (checkpoint) management—Director of Field Operations or Sector Chief and headquarters senior management—Commissioner, Deputy Commissioner, Assistant Commissioners, Chief of U.S. Border Protection (USBP), and Executive Directors.\nOFTD provides an oral debrief the day after a covert test to local senior management informing them of OFTD’s findings and best practices.\nOFTD then prepares a written test summary that contains more details than a test highlights for dissemination via e-mail to local management and headquarters senior management. The test summary will also describe the specific test scenario used during the covert operation. The test summary is provided to local port of entry, sector, and senior headquarters management within several days of a test.\nLocal operational offices will develop corrective action plans to address weaknesses and vulnerabilities identified and noted during the debrief and in the written summary.\nOffice of Field Operations (OFO) and USBP will determine whether there should be changes to national policies and procedures as a result of its covert tests. These may include additional operational unit policy and procedural changes, policy memos, or directives that are disseminated across the United States. OFTD may also adjust test protocols based on test findings.", "", "", "", "In addition to the individuals named above, Lacinda Ayers, Assistant Director; Ned Woodward, Assistant Director; Nima Patel Edwards; Justin S. Fisher; R. Scott Fletcher; Robert T. Grace; Eric D. Hauswirth; Susan Hsu; Tracey King; Stanley J. Kostyla; and Brian J. Lipman made significant contributions to the work." ], "depth": [ 1, 2, 2, 2, 1, 2, 2, 1, 2, 2, 1, 1, 1, 1, 1, 1, 1, 1, 1, 2, 2 ], "alignment": [ "h2_full", "", "", "h2_full", "h0_title", "h0_full", "h0_full", "h2_title h1_title", "h1_full", "h2_full h1_full", "h0_full h2_full h1_full", "h1_full", "h2_full", "", "", "", "", "", "", "", "" ] }
{ "question": [ "What does the DHS covert operations do?", "What covert operations were conducted 2006 to 2013?", "What were the results of these operations?", "What is the purpose of covert operations?", "What was the budget for covert operations?", "What did the CBP not cover in their covert operations?", "What would be the gain of such an assessment?", "How has OFTD limited the CBP?", "What reports has OFTD issued?", "What issues lie within these reports?", "How are OFTD and CBP tracking of recommendations unaligned?", "What could be done to improve this?", "What related improvement would be beneficial?", "What importance is smuggling of radioactive material into the US?", "How is this threat being addressed?", "What is the CBP?", "What was the GAO asked to review?", "What information was used to conduct the review?", "How does this report differ from the original?" ], "summary": [ "The Department of Homeland Security's (DHS) covert operations provide limited assessment of capabilities to detect and interdict the smuggling of nuclear and radiological materials into the United States.", "DHS's U.S. Customs and Border Protection's (CBP) Operational Field Testing Division (OFTD) conducted 144 covert operations at 86 locations from fiscal years 2006 through 2013, selecting its locations from a total of 655 U.S. air, land, and sea port facilities; checkpoints; and certain international locations.", "Results showed differences in the rate of success for interdicting smuggled nuclear and radiological materials across facility types.", "These operations allowed OFTD to assess capabilities for detecting and interdicting—or intercepting—nuclear and radiological materials at locations tested.", "CBP had a $1 million budget for covert operations of various activities—including nuclear and radiological testing—covering fiscal years 2009 through 2013, and DHS policy requires that components with limited resources make risk-informed decisions.", "However, CBP testing does not inform capabilities across all border locations, and CBP has not conducted a risk assessment that could inform and prioritize the locations, materials, and technologies to be tested through covert operations.", "Given limited resources, assessing risk to prioritize the most dangerous materials, most vulnerable locations, and most critical equipment for testing through covert operations, DHS could better inform its decisions on how to expend its limited resources effectively, consistent with the department's risk management policies.", "OFTD has not issued reports annually as planned on covert operation results and recommendations, limiting CBP oversight for improving capabilities to detect and interdict smuggling at the border.", "OFTD has issued three reports on the results of its covert operations at U.S. ports of entry since 2007.", "However, OFTD officials stated that because of resource constraints, reports have not been timely and do not include the results of covert tests conducted at checkpoints.", "Furthermore, OFTD tracks the status of corrective actions taken to address recommendations in these reports; however, CBP does not track corrective actions identified from their individual covert operations that were not included in these reports.", "Establishing appropriate time frames for reporting of covert operations results and addressing barriers to meeting these time frames would help enhance CBP's accountability for its covert testing operations.", "Further, developing a mechanism to track whether ports of entry and checkpoints have implemented corrective actions could help inform management decision making on the need for further investments in equipment or personnel training to protect U.S. borders.", "Preventing terrorists from smuggling nuclear or radiological materials into the United States is a top national priority.", "To address this threat, DHS has deployed radiation detection equipment and trained staff to use it.", "CBP conducts covert operations to test capabilities for detecting and interdicting nuclear and radiological materials at air, land, and sea ports of entry into the United States as well as checkpoints.", "GAO was asked to review CBP's covert testing operations. This report assesses the extent to which (1) CBP covert operations assess capabilities at air, land, and sea ports and checkpoints to detect and interdict nuclear and radiological material smuggled across the border and (2) CBP reports its covert operations results and provides oversight to ensure that corrective actions are implemented.", "GAO analyzed documents, such as test summaries, directives, and planning and guidance papers and interviewed DHS, CBP, and Domestic Nuclear Detection Office officials.", "This is a public version of a sensitive report that GAO issued in July 2014. Information that DHS deemed sensitive has been redacted." ], "parent_pair_index": [ -1, 0, 1, 0, -1, -1, 5, -1, -1, 1, -1, 3, 3, -1, 0, -1, -1, 3, 3 ], "summary_paragraph_index": [ 1, 1, 1, 1, 1, 1, 1, 2, 2, 2, 2, 2, 2, 0, 0, 0, 0, 0, 0 ] }
CRS_RL34718
{ "title": [ "", "Background", "Overview of the Act", "Implementation Issues", "Reliability of Underlying Data", "Implementation Costs", "Overall Implementation Costs", "Subaward Information Costs", "Earmarks and \"Wasteful\" Spending", "Proposed Legislation to Amend the FFATA", "Concluding Observations" ], "paragraphs": [ "On September 26, 2006, President Bush signed into law S. 2590 , the Federal Funding Accountability and Transparency Act (FFATA; P.L. 109-282 ). According to supporters of the new law, the FFATA was an attempt to reduce \"wasteful and unnecessary spending\" by the federal government, including spending on funds earmarked for special projects. To that end, the legislation required the Office of Management and Budget (OMB) to establish a publicly available website that would allow users to search for detailed information about entities that are awarded federal grants, loans, contracts, and other forms of assistance. Using the website, supporters asserted, a citizen or watchdog group would be able to easily determine how much money was given to which organizations, and for what purposes. The premise of the legislation was that, by making the details of federal spending available to the public, government officials would be less likely to fund projects that might be perceived as wasteful. Supporters of the legislation also suggested that the website would give citizens the opportunity to better understand how the government distributes funds, and enable the public to become more involved in the discussion of federal spending priorities.\nThree of the primary categories of federal expenditures and obligations to be included in the database—federal grants, loans, and contracts—represent a significant element of federal spending. According to the most recently published Consolidated Federal Funds Report (CFFR), federal agencies award over $880 billion in those three categories of financial assistance alone: $470 billion in grants, $381 billion in contracts, and $29 billion in direct loans. OMB launched the database, USAspending.gov, on December 13, 2007. While the new database has been praised as a step toward a worthy objective—enhancing the transparency of government expenditures—government officials and members of the public have expressed concern about the quality of the data it provides, the ability of the database to identify earmarked awards, and the potential cost of enhancing and expanding data collection efforts.\nThis report initially discusses the background of the FFATA. It then discusses the act's provisions, noting what types of assistance are part of the new website, the primary sources of the data, and deadlines for implementation. The report then identifies and discusses issues that have been raised regarding the act that might affect its implementation. Finally, it examines a legislative proposal from the 110 th Congress that would have significantly expanded the information accessible through USAspending.gov.", "S. 2590 received extensive bipartisan support at each stage of the legislative process. In the Senate, the bill was introduced with bipartisan sponsors, voted unanimously out of committee, and passed by unanimous consent on April 6, 2006. The legislation was ultimately cosponsored by 47 Senators, including then-Majority Leader Bill Frist and then-Minority Leader Harry Reid. In the House, S. 2590 was passed by voice vote on September 13, with members of both parties speaking in support of the Senate bill and none speaking against it. The White House did not issue a Statement of Administrative Policy on S. 2590 , but President Bush did express his support in a press release distributed the same day the bill was enrolled, making it apparent he would sign the measure once he received it. As noted previously, the President signed S. 2590 on September 26, 2006.\nAccording to Senator Tom Coburn, the bill's original sponsor, S. 2590 was endorsed by over 150 organizations with a wide range of political leanings. The Senator's list of supporters included representatives of private enterprise, such as the U.S. Chamber of Commerce; unions, like the American Federation of State, County, and Municipal Employees; media groups, such as the American Society of Newspaper Editors; and government watchdog organizations, like OMB Watch. As evidence of the unusual alliance in support of S. 2590 , the list indicated that both People for the Ethical Treatment of Animals (PETA) and Gun Owners of America supported the bill, as did both the National Gay and Lesbian Task Force and the Traditional Values Coalition.", "The website required in the act was to be implemented in two phases. By January 1, 2008, the new website was required to provide access to information on entities that were awarded funds directly from the federal government. Entities covered in the first phase of implementation include corporations, associations, partnerships, sole proprietorships, limited liability companies, limited liability partnerships, states, and localities. By January 1, 2009, the website was required to include access to information on subgrantees and subcontractors that receive federal funds through a primary award recipient. The act excluded individual recipients of federal assistance, and organizations with less than $300,000 in total income were not required to report on subawards.\nConsistent with the objective of providing to the public comprehensive information on federal financial assistance, virtually all categories of awards are ultimately to be covered by the database, including grants, contracts, subgrants, subcontracts, and loans. Two special provisions addressed particular types of transactions: individual transactions of less than $25,000 are exempt, and credit card transactions were excluded until October 1, 2008.\nTo achieve greater transparency, the act required the website to provide the following information about each federal award:\nName of entity receiving award Amount of award Type of award (e.g., grant, loan, contract) Agency funding award A North American Industry Classification System (NAICS) code for contracts or a Catalog of Federal Domestic Assistance (CFDA) number for grants and loans Program source Award title that describes the purpose of the funding Location of recipient City, state, congressional district, and country in which award performance primarily takes place Unique identifier for entity receiving award and of the parent entity of recipient, if one exists Any other information specified by OMB\nThe act required that the website permit users to (1) conduct a search of federal funding by any of the data elements listed above, and (2) determine the total amount of federal funding awarded to an entity by fiscal year. In addition, the act stipulated that the website must provide information in a downloadable format, and that agencies must post new information to the website within 30 days of making an award.\nThree major financial assistance databases were identified in the act as likely sources of information for the new website—the Federal Procurement Data System-Next Generation (FPDS-NG), the Federal Assistance Award Data System (FAADS), and Grants.gov. According to the act, a user must be able to access information from these databases directly through the website. The act was explicit on this point: it was not acceptable merely to provide links to these or other databases, because that would force users to search for information at different websites.\nAs previously noted, the act did not require information on subcontractors and subgrantees to be included in the database until January 1, 2009. The delay reflected the fact that information on subrecipients was not collected consistently across federal agencies and programs. To address existing gaps in the data on subawards, the act required OMB to implement a pilot program that tested the feasibility of having primary recipients provide information on their subgrantees and subcontractors. There was a provision in the legislation that allowed federal award recipients and subrecipients to be reimbursed for the costs associated with collecting and reporting data on subrecipients. The act also specified that any requirements for collecting data on subawards made by state and local governments under block and formula grants be cost-effective. According to the Congressional Budget Office (CBO), no unfunded mandate would be placed on recipients or subrecipients for complying with the act.\nThe act also required OMB to submit an annual report to the Senate Committee on Homeland Security and Governmental Affairs and the House Committee on Government Reform. The report must include data on public usage of the website, an assessment of the reporting burden on federal award and subaward recipients, and an explanation of any extension of the subaward reporting deadline.", "", "A database of the breadth and depth contemplated by the FFATA is only as useful as the quality of the information it contains. As noted previously, the act referred to three existing databases as likely sources of information for the new public database: FAADS, FPDS-NG, and Grants.gov. USAspending.gov draws extensively from FAADS and FPDS-NG, but it is unclear whether data from Grants.gov is also incorporated. A number of observers have expressed concern about relying on information from FAADS and FPDS-NG. Both government officials and knowledgeable members of the public describe significant weaknesses in the databases—such as incomplete and inaccurate information—that cannot be quickly corrected. These observers suggest that substantial changes in the collection, reporting, and verification of information relating to federal assistance awards would likely be necessary before FAADS and FPDS-NG might be considered reliable sources of information.\nIn a 2005 report, GAO noted that FPDS-NG users lacked confidence in the data provided, largely because there was no rigorous system in place to ensure the data were accurate and complete. In 2006, a panel of procurement experts attempted to use FPDS-NG in their evaluation of federal contracting operations, but reportedly found so many errors in the data that the chairman declared that \"FPDS-NG is not a reliable database.\" One reason the data are inaccurate is human error; contract information might be incorrectly entered into FPDS-NG by inexperienced users who have received minimal training. Moreover, agencies might vary in the degree to which they fill out the fields in the database, resulting in data of uneven quality. In one instance, FPDS-NG users reportedly complained that the database failed to consistently identify contracts related to Hurricane Katrina recovery efforts that were awarded without competition. The problem has not been fixed, and gaps in FPDS-NG data are now evident in USAspending.gov. A January 2008 editorial stated that the new database might not provide information on whether $70 billion in FY2007 contracts was awarded with or without competition.\nSimilar problems have been reported with FAADS, the government's primary source of grant award information. In a 2006 report, GAO reviewed 86 federally funded grant programs and determined that, in the majority of cases, the administering agencies provided no data, incomplete data, or inaccurate data to FAADS over a three-year period. The report concluded that these problems occurred because (1) the Census Bureau lacked the resources to ensure agencies were submitting accurate and timely data, (2) agency program officials lacked knowledge of FAADS reporting requirements, and (3) agencies had not implemented sufficient oversight to ensure they were submitting accurate data. A Census Bureau official concurred with these findings, adding that a number of data elements required by the FFATA are not uniformly captured by federal agencies or grant award recipients, such as information on subrecipients and the congressional district in which federal funds are spent. The official also noted that agencies are currently required to update their information in FAADS on a quarterly basis, so it might take time for agencies to develop the capability to update FAADS within 30 days of making an award, as the FFATA requires.\nSome members of Congress have also expressed concerns about FPDS-NG and FAADS. During floor debate of the bill in the House, one supporter cautioned that the FFATA's potential to improve oversight of federal funds, while substantial, would be largely determined by the degree to which improvements in FPDS-NG and FAADS were made during implementation. Another supporter expressed concern that the problems with FPDS-NG and FAADS were so significant that, \"if the Administration is not committed to making this legislation work, all we will get is another incomplete and hard-to-use database.\"\nAfter the FFATA was enacted, OMB issued a series of memoranda requiring agencies to improve the quality of their financial award data reporting. A March 9, 2007, memorandum, while not specifically referencing the FFATA, required agency Chief Acquisition Officers (CAOs) to establish procedures and responsibilities for verifying and validating the procurement data they submit to FPDS-NG. Later that same month, OMB issued a memorandum to the President's Management Council—a high-level policy task force comprising agency Chief Operating Officers—that identified the specific data elements that agencies must report and the time frames in which the data are to be submitted to meet the requirements of the FFATA. On November 9, 2007, OMB issued its most comprehensive memorandum on data submission requirements under the FFATA. This memorandum required agencies to submit a plan to OMB by December 1, 2007, that identified gaps in their data on grants, contracts, and loans, and outlined their plans to address any deficiencies. In addition, it required agencies to implement internal controls to ensure the accuracy, integrity, and timeliness of their submissions.\nThe reliability of agency data submissions remains a concern. Less than three months after the launch of USAspending.gov, in December 2007, OMB criticized the quality of the data that agencies were providing. In a memorandum dated March 6, 2008, OMB called on agencies to \"redouble the efforts to improve data quality, as much of the data submitted for posting to the USAspending.gov in the past has been incomplete, untimely, and inaccurate.\" A review of the website on January 30, 2009—more than two years after the FFATA was enacted—bears out this assessment. With regard to timeliness of data, the FFATA requires award information to be posted to the website not more than 30 days after the award is made. As of January 30, 2009, however, not one agency met the 30 day standard for posting new award data to the website, for either grants or contracts.\nThe lack of timely information may result in significant gaps in award data on USAspending.gov. For example, on January 30, 2009, the website provided no FY2007 and FY2008 assistance data for the Department of Homeland Security (DHS), which reported assistance outlays in FY2006 of just below $730 billion. If assistance outlays at DHS were at similar levels for FY2007 and FY2008, then USAspending.gov may be missing data for as much as $1.46 trillion in assistance awards, just for that one department.\nEven when agencies did submit FY2007 or FY2008 data, it often appeared to be incomplete. On January 30, 2009, USAspending.gov showed that the Social Security Administration (SSA) reported $593.9 billion in assistance outlays for FY2006, but only $38 million in FY2007 and $34 million for FY2008. Similarly, the website showed that the Department of Agriculture reported assistance outlays of $147.0 billion for FY2006, but only $24.7 billion for FY2007 and $34.5 billion for FY2008. The Department of Housing and Urban Development (HUD) reported $100.3 billion in assistance outlays in FY2006, but nothing for FY2007. Here again it appears that data on hundreds of billions of dollars in assistance awards are not available on USAspending.gov, as mandated by the FFATA.\nSubaward information was also not yet available through USAspending.gov as of January 30, 2009. This is not wholly unexpected, given that the subaward pilot program was not launched by the statutory deadline. The FFATA does permit the Director of OMB to extend the reporting deadline by an additional 18 months for subawards that were passed through state, local, or tribal governments. The Director may also exempt entities with gross income from all sources of $300,000 or less from subaward reporting requirements, until the Director determines that such reporting would not cause \"undue burden\" on the subaward recipients. It is not clear whether the Director has delayed implementation of the subaward reporting requirement, and it is not known when subaward data will be available through USAspending.gov.", "Concerns have been expressed regarding the cost of implementing USAspending.gov. Two types of costs are at issue: the costs of implementing the act as a whole and the costs associated with the development of information on subawards.", "It is not known how much the initial implementation of USA spending.gov has cost. There is no publicly available estimate, for example, of the dollar value of the time it has taken federal agency employees to collect, validate, and submit award information. It is also not known whether agencies have had to modify their internal data collection systems to obtain information not previously collected. Implementation costs may not be distributed evenly across agencies. Agencies that have reported little or no information for FY2007 or FY2008 may have found that they are further behind other agencies in terms of their ability to obtain the required assistance award data, and may have to invest more resources to meet the FFATA's reporting provisions.\nPrior to enactment, CBO estimated that the FFATA would cost $15 million to establish and maintain the new database of federal assistance between 2007 and 2011. The CBO estimate, however, was based on OMB's assurance that \"the government currently collects all of the information needed to create a comprehensive database on federal spending.\" The estimate might thus reflect the cost of simply combining existing systems without fully accounting for other costs associated with improving the quality of the data in those systems. One expert familiar with FPDS-NG and FAADS said that \"an enormous amount of data cleanup\" will be necessary to correct inaccurate information in those systems. Another industry observer was quoted as saying that enhancing and integrating existing data sources to meet the requirements of the FFATA was a \"complex\" problem, and that implementing the database might exceed the $15 million projected by CBO.", "Prior to enactment of the FFATA, the National Association of State Auditors, Comptrollers, and Treasurers (NASACT) expressed strong reservations about the potential financial and administrative burden that the proposed reporting requirements would impose on state and local governments. In particular, NASACT noted that collecting data on subgrantees would be \"very, very costly\" for state and local governments, since federal grant funds are often passed down multiple levels (e.g., a state receiving federal assistance gives a subgrant to organization A, which in turn gives a subgrant to organization B). Additional costs might be incurred under the bill, NASACT said, if state and local grant recipients were required to modify their financial systems to collect and report any other new information. After S. 2590 was amended to include the pilot program for collecting information on subgrantees, NASACT said it supported the bill with the new language, but also noted that it still believed \"obtaining all the required information will be a challenge.\"\nSome trade groups have made similar arguments regarding the cost of collecting subcontractor information. The Council of Defense and Space Industry Associations (CODSIA), for example, has reportedly stated that prime contractors do not normally collect subcontractor information at the level of detail required by the FFATA, and that doing so would become a significant administrative burden on both contractors and subcontractors.\nThe subaward reporting pilot program mandated by the FFATA was intended to identify the least burdensome and most cost-effective method for collecting and reporting data on subawards. The pilot program did not commence until October 8, 2008—more than a year beyond the statutory deadline of July 1, 2007. After the pilot program is complete, it may provide a sense of the costs and technical challenges that agencies may face in collecting and reporting subaward data. Indeed, such challenges may be a significant factor in the pilot program's delay. The pilot will only test reporting award data from first-tier subrecipients, however, and there may be greater costs and technical challenges associated with collecting data from lower tier subrecipients, which tend to be smaller and may have less well-developed reporting systems in place.", "Although one of the stated purposes of the legislation was to enable the public to use the online database to identify congressional \"earmarks,\" it is unclear how users of USAspending.gov might actually do this, since neither FAADS nor FPDS-NG collect that information. Not all grants, loans, or contracts are congressionally directed; some are at the discretion of the responsible federal agency. Unless the congressionally directed items are specifically identified as such, the website will be of limited value for purposes of earmark identification.\nThe FFATA also intended the website to provide the public with an opportunity to assess the worthiness of individual awards. The manner in which an award is described under the \"award title\" field on USAspending.gov might lead the public to draw different conclusions about the value of a given federally funded project. For example, a project that some believe has merit might be described in a manner that puts it in an unfavorable light. In this way, award descriptions might influence the public's perception of whether a funding action is \"wasteful\" or not.", "On June 3, 2008, then-Senator Barack Obama, on behalf of himself and three cosponsors, introduced new legislation to expand and improve the quality of the data posted to USAspending.gov. S. 3077 , the Strengthening Transparency and Accountability in Federal Spending Act of 2008, would have amended the FFATA and required USAspending.gov to provide new information on federal awards, including\nthe same information about lease agreements that is already required for grants and contracts; a copy of each contract and its associated request for proposals, announcement, and scope of work; the highest, lowest, and median offered price among acceptable procurement bids; details about the amount of each contract awarded, including profit incentives and options to expand or extend a contract; information about the extent of competition in awarding a contract, including, when applicable, an explanation of why a contract was awarded without full and open competition; an indication if an award is the result of a congressionally directed spending item; and a number of data elements that had been voluntarily provided by USAspending.gov, such as the amount of non-federal matching funds required, if any, to obtain a federal assistance award.\nIn addition, S. 3077 would have required USAspending.gov to provide information about federal award recipients, including\nan assessment of the quality of work performed on federal awards during the previous five years; information about federal audit disputes and resolutions, award terminations, and suspensions and debarments; information about civil, criminal, and administrative actions taken against the recipient by the federal government or a state government for violation of federal or state laws or regulations related to the workplace, environment protection, fraud, securities, and consumer protections; and information about compliance with federal tax requirements, including whether the recipient has filed annual tax returns for the previous five years and is paying any taxes owed.\nTo improve the quality of data on USAspending.gov, the bill would also have required the Director of OMB to ensure that\neach agency inspector general reviews a sample of agency awards every six months to verify the accuracy of the data submitted to USAspending.gov; the data posted to USAspending.gov is audited for quality every six months; the website provides a simple method for the public to report errors in the data; and no personally identifiable information is made available through the website.\nIn contrast to the FFATA, which was almost universally supported when it was introduced, S. 3077 was both lauded and criticized. The president of Americans for Tax Reform, a supporter of the bill, argued that expanding the award information posted to USAspending.gov as proposed by S. 3077 would have been another step towards the objective of \"comprehensive fiscal transparency.\" The executive director of OMB Watch, another supporter, argued that enacting S. 3077 would have strengthened the public's ability to hold government officials accountable for their funding decisions.\nCritics voiced concerns about making certain contract information available to the public through USAspending.gov, a step they say could have unintended consequences. For example, S. 3077 would have required the website to include information on the highest, lowest, and median offer for contract bids. A procurement expert in the private sector said that if USAspending.gov included data on proposed contract prices—which is only one of the factors considered when awarding a contract—then government procurement officers may feel pressured to award contracts to the lowest bidder, even if the lowest bidder \"can't do the work.\" The president of a government contractor trade organization wrote in an editorial that posting information on a government website about purported contractor misconduct would be misleading to the public and unfair to contractors. The broad scope of contractor performance information would lack a proper context, he argued, such as a metric to help the public understand the comparative severity of actions taken against a contractor. Without the proper context, he wrote, the public might presume \"that all such cases represent probable or proven misconduct of a serious nature,\" when some actions are routine, and other actions may result in no findings of misconduct. He questioned how making such information available to the public would improve federal procurement oversight.\nThe FFATA and S. 3077 also differed in that the former identified specific sources of data to use in implementation, but the latter did not. It was not possible, therefore, to evaluate the potential costs and technical challenges that might have been associated with implementing S. 3077 . It was not known, for example, the extent to which agencies were already collecting the data they would have been required to report, the quality of that data, and the cost of collecting any new data. Implementing the reporting provisions of S. 3077 may have also posed technical challenges for agencies. The data that was required to be reported under the bill, which ranged from workplace discrimination to violations of the Clean Water Act, may have been located in a half dozen or more separate databases, and it is not known how difficult it would have been to incorporate these databases into the USAspending.gov search function.", "Although USAspending.gov was operating before the statutory deadline, implementation of the FFATA may be considered behind schedule in that the data made available to the public remain incomplete and untimely. Some agencies with significant expenditures, such as the Department of Homeland Security, had incomplete information, and no subaward data was available at all. The effectiveness of USAspending.gov as an oversight tool is diminished in proportion to the amount of award information it does not provide.\nImplementation of the FFATA might be affected by enactment of legislation that would expand the information available through USAspending.gov. Some observers may view such legislation as increasing transparency, a primary objective of the FFATA. For example, S. 3077 would have required USAspending.gov to identify earmarked awards, a function that the website does not currently have. S. 3077 would also have establish new rules to enhance the quality of data on USAspending.gov, which, as previously discussed, remains an issue.\nExpanding the data available through USAspending.gov might also slow full implementation of the FFATA. Agencies and award recipients are still developing procedures that will enable them to meet the FFATA's existing reporting standards, and OMB continues to address the technical challenges associated with posting data to USAspending.gov. Some observers suggested that expanding agency reporting requirements would strain already tight agency and recipient resources, and ultimately hamper FFATA implementation." ], "depth": [ 0, 1, 1, 1, 2, 2, 3, 3, 2, 1, 1 ], "alignment": [ "h0_title h1_title", "", "h0_full h1_full", "h0_title h1_title", "h0_full", "h0_full h1_title", "h1_full", "", "", "h1_full", "h1_full" ] }
{ "question": [ "How was USAspending.gov created?", "Why are there concerns surrounding USAspending.gov?", "Why is reliability an issue?", "What prompts this concern?", "Why is cost an issue?", "What does this report address?", "What information on the act does this report include?", "How does the report address issues with FFATA?", "How does the report cover information access?" ], "summary": [ "OMB launched the FFATA-mandated website, USAspending.gov, on December 13, 2007.", "While the website has been praised as a step toward a worthy objective—enhancing the transparency of government expenditures—government officials and members of the public have expressed concern that issues surrounding its implementation have not been adequately addressed.", "In particular, many observers question the reliability of information taken from the Federal Assistance Award Data System (FAADS) and the Federal Procurement Data System - Next Generation (FPDS-NG), which are important sources of information for USAspending.gov.", "They note that information in FAADS and FPDS is often incomplete and inaccurate, and therefore might limit transparency.", "Some observers also believe that the cost of establishing and maintaining the new website might grow as agencies seek to improve data quality and collect new information on subawards.", "This report initially discusses the background of the FFATA.", "It then discusses the act's provisions, noting what types of assistance are part of the new website, the primary sources of the data, and deadlines for implementation.", "The report then identifies and discusses issues that have been raised regarding the act that might affect its implementation.", "Finally, it examines a legislative proposal from the 110th Congress that would have expanded the information accessible through USAspending.gov. This report will be updated as events warrant." ], "parent_pair_index": [ -1, -1, 1, 2, 1, -1, 0, 0, -1 ], "summary_paragraph_index": [ 1, 1, 1, 1, 1, 2, 2, 2, 2 ] }
GAO_GAO-14-732
{ "title": [ "Background", "Key Terms and Examples of Partnership Structures", "IRS Audit Process for Large Partnership Returns", "Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA)", "Electing Large Partnership (ELP) Audit Procedures", "IRS Resource Constraints", "Large Partnerships Have Grown in Number, Size, and Complexity Since 2002", "Businesses Have Shifted From Organizing as C Corporations to Partnerships and Other Pass-through Entities in Recent Years", "The Number of Large Partnerships Has More Than Tripled", "Most Large Partnerships Have Complex Structures with Thousands of Partners and Multiple Tiers", "Large Partnerships Are Concentrated in the Finance Sector", "IRS Audits Few Large Partnerships Due to Challenges Presented by the Complexity of Both the Partnership Structures and Audit Procedures", "IRS Audits Less Than 1 Percent of Large Partnerships", "Audits of Large Partnerships Resulted in Minimal Changes to Partnership Returns", "IRS Reporting of Partnership Audit Data Does Not Provide Clear Picture of Large Partnership Audits", "Several Challenges Related to Complexity May Limit IRS’s Ability to Audit Large Partnerships and to Recommend Changes", "Complex Large Partnership Structures Make Audits and Detecting Noncompliance Challenging", "TEFRA Audit Procedures Add Complexity to Audits of Large Partnerships", "IRS Has Initiated Efforts That May Address Some Large Partnership Audit Challenges but Their Potential to Have Significant Impact Is Unclear", "Audit Procedures Improvement Projects Are Missing Some Planning and Evaluation Steps", "IRS Has Not Determined How Large Partnerships Should Be Incorporated Into Its Enterprise-Wide Risk Management", "Conclusions", "Matters for Congressional Consideration", "Recommendations for Executive Action", "Agency Comments and Our Evaluation", "Appendix I: Objectives, Scope, and Methodology", "Appendix II: Additional Data on Number and Characteristics of Large Partnerships", "Average and Median Number of Direct Partners Average Median Average and Median Number of Direct and Indirect Partners Average Median", "Number of Direct and Indirect Partners 100 to 500 928 501 to 1,000 366 1,001 to 2,500 371 2,501 to 10,000 725 10,001 to 100,000 384 100,001 to 500,000 57 501,000 or more d", "Number of Direct Partners 0 to 99 100 to 500 501 to 1,000 1,001 to 2,500 2,501 to 10,000 10,001 to 100,000 100,001 to 500,000 501,000 or more", "Average Asset Size Asset Size $100 million but less than $250 million $250 million but less than $500 million $500 million but less than $1 billion $1 billion but less than $5 billion $5 billion or more", "Industry Group Mining Manufacturing Transportation and Warehousing Finance and Insurance Real Estate, Rental, and Leasing Professional, Scientific, and Technical Services Holding Companies Other", "Appendix III: Data on Audits of Large Partnerships and Large Corporate Returns", "Asset Size $100 million or more $100 million but less than $250 million $250 million but less than $1 billion $1 billion or more", "Asset Size $100 million or more $100 million but less than $250 million $250 million but less than $500 million $500 million but less than $1 billion $1 billion but less than $5 billion $5 billion but less than $20 billion $20 billion or more", "Asset Size $100 million or more $100 million but less than $250 million $250 million but less than $500 million $500 million but less than $1 billion $1 billion but less than $5 billion $5 billion but less than $20 billion $20 billion or more", "Appendix IV: Comments from the Internal Revenue Service", "Appendix V: GAO Contact and Staff Acknowledgements", "GAO Contact", "Staff Acknowledgements" ], "paragraphs": [ "Forms of business organization and their tax treatment Partnership: generally an unincorporated entity with two or more members that conducts a business, does not pay income taxes, but rather passes income or losses through to their partners, which must include that income or loss on their income tax returns. C Corporation: a corporation that is generally taxed at the entity level under subchapter C of the Internal Revenue Code (IRC). S Corporation: a corporation that meets certain requirements and elects to be taxed under subchapter S of the IRC, which provides that in general income and losses be passed through to its shareholders.\nFor tax purposes, a partnership is generally an unincorporated organization with two or more members that conducts a business and divides profits. Partnerships generally report their income on Form 1065, U.S. Return of Partnership Income. Partnerships usually do not pay income taxes but pass—or allocate—the net income or losses to partners, who pay any applicable taxes. Partnerships report the share of income or losses accruing to each partner on a Schedule K-1 with copies going to the partners and to IRS. Partners can be individuals or other entities such as corporations or other partnerships.\nHaving no statutory, IRS, or industry-accepted definition of a large partnership, we have defined a large partnership in two ways: 1) as having 100 or more direct and indirect partners and $100 million or more in assets, and 2) as having 100 or more direct partners and $100 million or more in assets. Including just direct partners does not capture the entire size and complexity of large partnership structures. Accounting for indirect partners does, but it also raises the issue of counting income and assets more than once (described below). In this report, we generally use the definition that includes direct and indirect partners but sometimes use both definitions when the distinction might matter.", "Partnerships can be structured as tiers of pass-through entities creating direct and indirect partners. Table 1 defines key terms for a partnership structure.\nSee figure 1 for an example of a simple tiered partnership structure.\nFor a partnership structure with multiple partners linked in networks with other partnerships, the partners, assets, and income may be counted more than once as seen in figure 2.", "Large partnership audits typically involve two separate steps. One step is the field audit, which is a detailed examination of the partnership’s tax return (Form 1065) and supporting books and records to determine whether income and losses are properly reported. The field audit may recommend adjustments to the income and losses.\nThe other step is called a campus audit.partnerships to the tax returns of their direct and indirect partners. Adjustments to income or losses from the field audit may be passed through to the taxable partners responsible for paying any additional tax, based on the partners’ shares in the partnership. Although IRS counts campus audits as audits, they usually do not involve an examination of a taxpayer’s books and records.", "In response to concerns about IRS’s ability to audit partnership returns, Congress enacted specific rules regarding partnerships audits in TEFRA. TEFRA audit procedures were intended to streamline IRS’s partnership audit process while ensuring the rights of all partners. Before TEFRA, IRS audited partners separately, leading to inconsistent treatment and making it hard to detect tax shelters. According to the congressional Joint Committee on Taxation (JCT), the complexity and fragmentation of the audits—especially for large partnerships with partners in many locations—led to some audits of partners’ returns ending at varying times and some partners paying additional taxes while others did not. See table 2 for key features of TEFRA.\nIdeally, once a TEFRA audit begins, it would proceed as outlined in figure 3.", "According to the U.S. Department of Treasury (Treasury) and IRS, applying TEFRA to audits of large partnerships became an intensive and inefficient use of limited IRS resources as IRS spent more and more time on administrative tasks. As a result, Congress established the Electing Large Partnerships (ELP) procedures as part of the Taxpayer Relief Act of 1997. In general, the procedures apply to partnerships with 100 or more direct partners in a taxable year that elect this alternative reporting and audit framework. The ELP audit procedures differ from the TEFRA procedures in two key ways: partnerships (1) may pay tax on audit adjustments instead of the partners, and (2) must report fewer items to the partners.", "As we have previously reported, IRS’s appropriations declined by $855 million, or 7 percent, and IRS staffing declined by more than 10,000 full- time equivalents, or 11 percent, between fiscal years 2010 and 2014.Most of this staffing decline occurred in IRS enforcement, which is responsible for ensuring that tax returns, including partnership returns, comply with the tax laws.", "", "During tax years 2002 through 2011, the number of partnerships and S corporations of all sizes increased 47 percent and 32 percent, respectively, while the number of C corporations decreased 22 percent.See figure 4.", "During tax years 2002 through 2011, the number of large partnerships with 100 or more direct and indirect partners as well as $100 million or more in assets more than tripled to 10,099—an increase of 257 percent. Over the same years, total assets of these large partnerships (without accounting for double counting) increased 289 percent to almost $7.5 trillion.for various asset sizes.", "Almost two-thirds of large partnerships had 1,000 or more direct and indirect partners in tax year 2011, but hundreds of large partnerships had more than 100,000 partners. Large partnerships with the most direct and indirect partners had the greatest increase from tax years 2002 to 2011. See figure 6.\nThe number of large partnerships varies considerably from year to year due in part to investment choices made by other large partnerships. One IRS official said that the partnerships with more than a million partners increased from 17 in tax year 2011 to 1,809 in tax year 2012. The official attributed most of the increase to a small number of investment funds that expanded their interests in other partnerships. If those investment funds choose to divest their interests in other partnerships, the number of large partnerships would decrease significantly.\nTiering contributes to complexity. In tax year 2011, more than two-thirds of large partnerships had at least 100 or more pass-through entities and 36 percent had at least 1,000 or more pass-through entities as direct and indirect partners. These pass-through entities may be direct partners or may exist at various tiers below the direct partners. There is some evidence that large partnership structures are becoming more complex. In tax year 2011, 78 percent of the large partnerships had six or more tiers compared to 66 percent in tax year 2002.\nTiering complicates determining the relationships and allocations of income and losses within a large partnership structure. For example, in figure 7, the allocation from the audited partnership on the far left side of the figure passes through eight partnerships along the bolded path before it reaches one of its ultimate owners on the right. This path also may not be the only path from the audited partnership to the ultimate owner.\nWhile this example of a partnership structure is complex, it has only 50 partners and 10 tiers. Large partnership structures could be much more complex. In 2011, 17 large partnerships had more than a million partners. According to an IRS official, several large partnerships have more than 50 tiers.", "In tax year 2011, about 73 percent of large partnerships reported being in the finance and insurance sector, up from 64 percent in tax year 2002 (see table 3). About 87 percent of those in the finance and insurance sector in tax year 2011 engaged in financial investment activities, of which about 70 percent reported $1 billion or more in assets.\nAs we previously found, many of the large partnerships in the finance and insurance sector are investment funds, such as hedge funds and private equity funds, which are pools of assets shared by investors. See appendix II for additional data on the number and characteristics of large partnerships.", "", "IRS audits few large, complex partnerships. According to IRS data, in fiscal year 2012, IRS closed 84 field audits—or a 0.8 percent audit rate.This audit rate is well below that of C corporations with $100 million or more in assets, which was 27.1 percent in fiscal year 2012. See table 4.\nThis audit rate does not depend on whether large partnerships are defined to include direct and indirect partners or only direct partners. Our interim report, which focused on only direct partners in defining large partnerships, also showed a 0.8 percent audit rate in 2012.\nIt is possible that some large partnership audits in table 4 are audits of different partnerships within the same large partnership structure. For example, if IRS audits one large partnership and then discovers that it needs to audit another large partnership in the same complex structure, those would count as two separate audits. Available IRS data did not allow us to determine how often this occurred.", "Table 5 shows that most large partnership field audits closed from fiscal years 2007 through 2013 did not find tax noncompliance. In 2013, for example, 64.2 percent of the large partnership audits resulted in no change to the reported income or losses. In comparison, IRS audits of C corporations with $100 million or more in assets had much lower no change rates, as also shown in table 5. In addition, IRS audits of all partnerships, not just large partnerships, also had a lower no change rate of 47 percent in fiscal year 2013.\nAccording to IRS focus group participants, large partnership returns have the potential for a high tax noncompliance risk. However, it is not clear whether the high no change rate for large partnership audits is due to IRS selecting large partnerships that were tax compliant or is due to an inability of IRS audits to identify noncompliance, as discussed below.\nWhen field audits of large partnerships resulted in changes, the aggregate amount was minimal, as shown in table 6. This could be because positive changes on some audits were cancelled out by negative changes on other audits. In 3 of the 7 years shown in table 6, the total adjustments from the field audits were negative; that is, they favored the large partnerships being audited. This did not occur for audits of large corporations.\nIRS data show that its large partnership audits used fewer resources than large corporate audits, but still required significant audit staff time, as shown in table 7.\nThese field audit time measures for large partnerships do not cover all audit costs, such as the time spent passing through audit adjustments at the campus. For example, if the campus passes through audit adjustments to 100 partners of one large partnership (which means opening 100 campus audits), the total cost of the related large partnership audit may be significantly larger than the field audit time accounted for partnerships in table 7. However, the campus does not track the total hours spent working all the partners’ returns related to a partnership return audited in the field due to limitations associated with IRS information systems, which are discussed below. Campus officials noted that working returns related to large partnerships require significant time and resources given their growing complexity and size.", "IRS data that report audit results for partnerships do not break out large partnerships, which would help inform audit resource allocation decisions. Without such a break out, our analysis of audit data for large partnerships relied on combining various databases. According to standards for internal control in the federal government, managers need accurate and complete information to help ensure efficient and effective use of resources. IRS officials acknowledged that they need a better understanding of large partnership audits to improve resource allocation.\nThe problem arises because IRS’s audit data codes—known as activity codes—are not specific enough to identify large partnerships. IRS uses its activity codes to set goals for the number of returns IRS plans to audit in a fiscal year and track audit results. Because they do not identify large partnership returns, the current activity codes do not allow IRS to do the kind of analysis needed to plan resource usage, including the level of audit and support staff needed, for large partnership audits.\nIRS has developed new activity codes that would distinguish partnership returns based on asset size and the type of income reported; but they are not scheduled to begin reporting the new activity codes until fiscal year 2017 due to resource limitations. IRS has not decided which activity codes would be used to define large partnership returns. Further, the new activity codes do not account for the number of partners, which IRS has identified as a major driver of resource usage for large partnership audits—particularly for the work done at the campus. If these IRS activity codes do not account for such a driver of resource usage, IRS will not be able to make effective resource allocation decisions.\nRevising the activity codes requires defining a large partnership for audit purposes, which IRS has not done. The exact definition matters less than ensuring that one definition is consistently applied so that there is agreement on the scope of large partnership audit efforts and results can be assessed.\nIRS also does not distinguish between field audits and campus audits in counting the number of large partnership audits. When calculating its audit rate for all partnerships, IRS accounts for both field audits and campus audits, which misrepresents the number of audits that actually verify information reported on tax returns. Unless IRS separately accounts for field and campus audits, it cannot accurately measure audit results.", "IRS officials said that they do not have sufficient data on the results from field audits of large partnerships to know what is driving the high no Our focus groups with IRS field change rate and minimal tax changes.auditors and interviews with IRS officials, however, provided insights on the challenges to finding noncompliance in field audits.", "The complexities arising from large partnership structures challenge IRS’s ability to identify tax noncompliance. For example, IRS officials reported having difficulty identifying the business purpose for the large partnerships or knowing which entity in a tiered structure is generating the income or losses. In these cases, IRS auditors said they do not know with which partner or tier of the partnership structure to start the audit. Without finding the source of income and losses, it is difficult for IRS to determine whether a tax shelter exists, an abusive tax transaction is being used, or if income and losses are being properly characterized. Focus group participants said that complex structures could mask tax noncompliance. For example, one participant said I think noncompliance of large partnerships is high because a lot of what we have seen in terms of complexity and tiers of partnership structures… I don’t see what the driver is to create large partnership structures other than for tax purposes to make it difficult to identify income sources and tax shelters.\nIRS officials stated that determining compliance is especially challenging when auditing the returns of hedge funds that often have an interest in many other partnerships and in investments—such as financial derivatives that are complex and constantly changing, and can involve noncompliance, as we have previously found. Focus group participants noted that the complexity requires them to invest extensive time to research and understand the structure of large partnerships and technical tax issues. For example, one focus group participant noted the difficulty of auditing the returns of large, complex partnerships: … income is pushed down so many tiers, you are never able to find out where the real problems or duplication of deductions exist. The reporting of income, expenses could be duplicated but there is no way to figure it out unless you drill down and audit all tiers, all tax returns.", "As the number and complexity of large partnerships have increased, aspects of the TEFRA audit procedures have become an impediment, according to focus groups and interviews with IRS officials.\nTEFRA Reduces Time IRS Can Actually Spend on Audits IRS focus group participants stated that the interaction of TEFRA procedures with increasingly complex partnership structures has reduced the amount of time to effectively audit the return within the statute of limitations. A 3-year statute of limitations governs the time in which IRS must complete its audits of partnerships, which begins on the due date of the return or date of return filing, whichever is later. IRS on average takes about 18 months after a large partnership return is received until the audit is started, leaving another 18 months to actually conduct an audit, as illustrated in figure 8. After the field audit, TEFRA generally requires that any audit adjustments be passed through to partners within a 1-year assessment period.\nFocus group participants said that they sometimes run out of time on the statute of limitations and have to close the audit as no change. IRS has no data that supports this claim as it does not break out audit results by large partnerships, as discussed earlier.\nIdentifying the Tax Matters Partner (TMP) Can Take Months TEFRA defines the responsibilities of the TMP, such as providing information to IRS as well as communicating with partners, which generally help to facilitate the audit. Without a TMP, IRS is not able to conduct the audit. Further, if the audit proceeds without a qualified TMP, the partners may challenge any settlement agreed to between the IRS and the unqualified TMP at the conclusion of the audit, so IRS takes steps to ensure that any TMP is a qualified TMP.\nIRS focus group participants said that identifying a qualified TMP is a primary challenge in large partnership audits. The burden of doing so falls largely on IRS, taking time and effort away from doing the actual audit work. For example, TEFRA does not require partnerships to designate a TMP on their returns. In addition, TEFRA allows the TMP to be an entity, not a person. In either case, IRS auditors spend time requesting that the partnership designate a TMP or tracking down an actual person to act as a representative for the TMP—unless the partnership chose to list that person on the Form 1065. IRS focus group participants cited various reasons for not being able to immediately identify the TMP. Some said that large partnerships are purposely unclear about the TMP as an audit- delay strategy. As one participant said: Entities will often be elusive about designating the Tax Matters Partner. The entities will use this tactic as a first line of defense against an audit.\nIf a large partnership does not designate a TMP on the partnership return, IRS will provide the partnership the opportunity to do so. If the partnership does not, TEFRA requires that the partner with the largest profit interest automatically becomes the TMP. However, if IRS determines that it is impracticable to apply this rule, then IRS may designate the TMP.before giving the partnership an opportunity to designate a TMP because the IRS designation may be opposed by the partners and IRS needs to collect information to find a partner that meets the criteria. As a consequence, exercising this authority can still mean that the start of audit is delayed. However, if IRS were to move directly to the largest profit interest rule or chose to designate the TMP using its existing authority instead of reaching out to the partnership, IRS could save valuable time during the average 18-month window it has to completes the audit. IRS does not track data on the time spent identifying the TMP. Focus group participants said that identifying and qualifying the designated TMP could take weeks or months. Losing a few months from the 18 months to audit a large partnership could be significant to IRS field auditors.\nIRS officials said that they are hesitant to do so IRS officials said IRS has issued new job aids and training on identifying the TMP, clarified TMP requirements, and added a section about TEFRA in the December 2013 revision of IRS Publication 541, Partnerships. However, these steps do not solve the fundamental problem of limited audit time being lost while identifying a TMP. A legislative change to TEFRA requiring all large partnerships to designate a TMP on their tax returns and to provide updated TMP information to IRS once an audit starts would solve the problem. Without such a change, IRS’s field audits of large partnerships are inefficient which hinders its ability to fulfill its mission of ensuring tax law compliance. The costs of such a legislative change should be low. There would be no increased costs to IRS—the change would reduce IRS’s costs. Partnerships already have partners responsible for filing tax returns so designating a TMP should not be onerous.\nIRS Has Difficulty Utilizing the 45-Day Rule Due to Complexity of Large Partnerships Another TEFRA audit procedure that is meant to benefit IRS but is difficult to use is the TEFRA 45-day rule.withdraw its notification to the TMP about the start of the audit, within 45 IRS's TEFRA regulations allow IRS to days of notifying the TMP. If IRS does so within 45 days, IRS can close the audit as no change without having to notify the partners.\nIRS focus group participants said that they often do not have sufficient information to determine whether to close an audit within 45 days. In addition, time spent identifying the TMP reduces the time available to make this determination. As a result, of the 61 field audits of large partnerships closed in fiscal year 2013 as no change, none were closed within the 45-day period. its regulation to lengthen this period for withdrawing an audit notice beyond 45 days without having to notify all the partners of the withdrawal. Extending the notice withdrawal period would save IRS audit resources and allow the resources to be more effectively used in ensuring tax law compliance.\nIRS has the authority under TEFRA to amend Passing Through Audit Adjustments to Numerous Partners May Not be Worth the Effort TEFRA generally requires that audit adjustments be passed through to the taxable partners. Although IRS does not track the costs for the campus to pass field audit adjustments through to the partners, campus officials said the costs are high for a number of reasons.\nThe process of linking partnership returns (Forms 1065), Schedule K- 1s, and partners’ returns (Forms 1040) is largely manual and paper driven. According to IRS officials, the campus information systems do not have the capability to automate the process. Paper copies of all these returns must be retrieved and linked in a very labor intensive process.\nThe portion of the partnership audit adjustment that gets passed through to each partner must be manually determined by using the ownership share reported on the relevant Schedule K-1.\nThe regulation specifies that the 45-day rule starts when IRS notifies the TMP of the partnership audit, which likely occurs after the audit start date. However, IRS does not track this notification date. Thus, we counted how many audits closed within 45 days of the audit start date as a proxy.\nThe Schedule K-1 information may not always be accurate, as we have previously found, requiring IRS to contact the partnership and review the partnership agreement to clarify ownership shares among the partners.\nA copy of the partnership agreement must usually be requested from the partnership being audited and for potentially each partnership within the partnership structure that is linked. Partnership agreements may include special allocation for some income items that supersede the ownership interest reported on the Schedule K-1. Finding special allocations requires detailed reviews of the partnership agreements of the partnerships within the partnership structure. According to IRS officials, this step cannot be automated. IRS officials also said that partnerships could provide special allocation schedules to IRS, which would eliminate the need to review the entire agreement.\nAs a consequence, the process for passing audit adjustments through to partners is costly and very time consuming. This limits the number of large partnerships that IRS can audit. Furthermore, since IRS generally has one year after the 3-year statute of limitations ends to pass through adjustments, the campus has to start linking returns before it knows whether there will be an audit adjustment or whether an adjustment will be large enough to merit passing through. In a large partnership, dividing the adjustment among hundreds or thousands of partners may result in amounts that are so small that IRS deems them not worth the cost to pass through. IRS officials said that they do not track how often the audit adjustments are not passed through and how much unpaid tax is not collected as a result. IRS campus officials estimated that they close 50,000 to 60,000 returns for all partnerships each year and further estimated that 65 to 70 percent of these are closed without passing through any adjustment.\nIRC § 704(b) provides partnerships the option to use special allocations. They are generally listed in the partnership agreement that specifies such things as the partnership’s name and purpose, partner contributions, and management responsibilities. The agreement is to specify ratios for passing through partnership income, losses, deductions, and credits to the partners. information systems. IRS has requested funding in its fiscal year 2014 and 2015 budget proposals for an updated information system that would allow it to automate the linking process and collect more robust data but funding has not been approved.\nLarge Partnerships May Pay Tax on Audit Adjustments Rather Than Pass Them Through to the Partners but Such Payments are Not Widely Used Current law allows large partnerships to pay a tax owed as determined by audit adjustments at the entity level rather than passing the adjustments through to partners, which would avoid all the costs of campus audits. This is allowed under both the Electing Large Partnership (ELP) audit procedures and under IRS procedures for closing audits with what is called a closing agreement. However, few large partnerships elect to become an ELP. Further, partnerships must voluntarily agree to use a closing agreement to pay a tax at the entity level and few do so.\nThe Chairman of the House of Representatives Committee on Ways and Means and the Administration have also put forth proposals to address some of the challenges of auditing large partnerships. While the proposals differ somewhat and apply to partnerships with different numbers of partners, both would allow IRS to collect tax at the partnership level instead of having to pass it through to the taxable partners. For example, the Administration developed a legislative proposal to make the ELP audit procedures mandatory for partnerships with 1,000 or more direct and indirect partners, known as the Required Large Partnership proposal. IRS officials said that these legislative proposals, if passed, would significantly help address challenges involved with passing through audit adjustments.\nThese proposals would involve tradeoffs and decisions about how to treat partners. For example, because the partners may be taxed at different tax rates, the single tax rate applied to the net audit adjustment at the partnership level may be different than the rate partners would pay if the adjustment was passed through.\nIRS Field Auditors Face Barriers Accessing Timely Support and Training to Address Complexities IRS focus group participants stated that they do not have the needed level of timely support from IRS counsel, TEFRA coordinators, and specialists. Focus group participants said that the support is critical because they had limited knowledge of the technical tax issues for partnerships and they may only work on a partnership audit once every few years. Further, focus group participants stated that it can take weeks or months to get needed input and planning audits is difficult because they do not know how long it will take to get the needed stakeholder input. Unexpected delays reduce the average18-month window of time for audit work.\nFocus group participants said that some IRS locations have only one TEFRA coordinator to answer questions about partnership audits. For example, IRS has one TEFRA coordinator to support all audits in New York State. IRS officials said that the number of TEFRA coordinators declined from 28 in fiscal year 2006 to 20 in May 2014 while workload increased. One IRS official said that TEFRA coordinators have to respond to requests for assistance and review and process TEFRA audits for partnerships of all sizes, not only large partnerships. IRS officials said that they plan to hire two coordinators in fiscal year 2014 and five in fiscal year 2015.\nIRS counsel officials told us that they believe that the number of delayed responses is fairly low, in contrast to what focus group participants said, and IRS counsel strives to process all requests for legal advice within 45 days of receipt. However, IRS counsel officials said that they do not track the number of requests for large partnership audits; if known, the response time would help IRS auditors to plan their audit work. Such a change would be in line with IRS’s strategic plan, which has a strategic objective on utilizing data to make timely, informed decisions.\nIn addition to help from stakeholders, IRS focus groups participants told us that they have trouble accessing refresher courses on TEFRA and partnership tax issues. IRS officials told us that IRS field auditors may not understand that such training is available and can be taken with the permission of their supervisors. They also said that such training is not usually mandatory and some auditors may choose to not take it. Ensuring IRS auditors have access to training would be in line with IRS’s current strategic plan, which highlights the importance of building a talented workforce. IRS officials stated that they are developing and have implemented new tools and training to assist auditors with TEFRA rules and procedures. However, IRS’s Large Business and International division—the division responsible for auditing large partnership returns— experienced a 92 percent reduction in available training funds from 2009 to 2013.face training and relying on new virtual training courses on TEFRA and partnership audits in general.", "IRS has limited ability to directly address some of the challenges it faces auditing large partnerships. For example, IRS cannot make tiered partnerships less complex nor change the TEFRA audit procedures that are set in statute. Nevertheless, IRS has initiated three projects to improve its large partnership audit procedures. IRS has also begun an effort to better manage enterprise risk.", "Table 8 describes the three audit procedure projects and their potential for addressing certain challenges based on our interviews with IRS officials and reviews of available limited documents.\nThe two field audit-related projects (the Large Partnership CMT and Large Partnership Procedures) started in 2013. IRS officials said that it could be a few years before enough audits are completed to know whether the two efforts worked as intended. The project to improve the campus linkage process (Just-In-Time Linkage pilot) started August 2014, but it is still under development and IRS provided limited documentation detailing the development of this effort.\nIRS has not developed the two field audit-related projects consistent with project planning principles, as shown in table 9. These two projects did not meet three of the five principles.\nFor the Large Partnership CMT, while IRS officials said that they plan to collect data on five metrics, it is unclear how the metrics will be used to monitor progress because they are not specific to the CMT. Without following the principles in table 9, IRS may not be able to assess whether the projects succeeded in making large partnership audits more efficient and effective.", "IRS began an enterprise risk management (ERM) program agency wide in 2014. According to IRS documentation, IRS needed to evaluate how risks are identified, prioritized, evaluated, and mitigated across the agency. ERM objectives include deploying resources effectively, identifying and managing cross-enterprise risks, identifying the level of risk IRS is willing to absorb, aligning that risk level with strategies, and reducing operational surprises, among others.\nLarge partnership audits and the challenges associated with them raise a number of the issues listed as ERM objectives. Because of the lack of information IRS currently collects and tracks about large partnership audits, it does not have a very clear picture of how effectively its audit resources are being utilized. Nevertheless, as large partnerships grow in number, IRS will have to make decisions about whether to reallocate audit resources away from other compliance work to conduct more large partnership audits.\nIRS has not yet determined how large partnerships will be incorporated into its ERM effort. Without such a determination and without documentation of the risks considered, IRS managers and external stakeholders, including Congress, may lack a record of how compliance risks associated with large partnerships were identified and prioritized. We have previously reported on the benefits of risk management and identified elements of a risk-management framework. Risk management is a strategy for helping program managers and stakeholders make decisions about assessing risk, allocating resources, and taking actions under conditions of uncertainty. We recognize that IRS’s information systems currently provide little data on large partnerships, as noted in other sections of this report. Even though IRS is not explicitly planning for how many large partnerships to audit each year, it is devoting resources to such audits. IRS is implicitly making decisions about how to allocate audit resources between large partnerships and other types of taxpayers. A determination about how large partnership compliance risks are to be identified and weighed against the compliance risks of other types of taxpayers would better inform those decisions.", "Large partnerships are a significant part of the economy and are increasing in number, size, and complexity. However, the relatively low rate at which IRS audits large partnerships and the minimal results achieved raise concerns about IRS’s ability to ensure the tax compliance of large partnerships. IRS has little data available to know why its audits are finding so little tax noncompliance. That is because IRS has not consistently defined “large partnership”—accounting for both the number of partners and amount of assets—and devised a related coding system to track any audit results. Without such data, IRS cannot conduct analysis to identify ways to better plan and use IRS resources in auditing large partnerships as well as analyze whether large partnerships present a high noncompliance risk.\nWithout the data, testimonial evidence from IRS auditors indicates that they feel challenged to audit complicated partnerships for compliance without sufficient time and support. Existing audit procedures set in law and in IRS regulations add to the time pressures and constrain IRS auditors. Because so little is currently known about large partnership noncompliance, it would be premature to try to design overall, long-term solutions. An incremental approach could be based on what is currently known, including legislative changes that Congress should consider as well as actions that IRS should take.\nLegislative changes could help IRS auditors deal with the time constraints and reduce the resource demands of large partnership audits. Requiring large partnerships to designate a qualified TMP that the field auditors can contact is a relatively simple step that could reduce audit delays. Requiring large partnerships to pay any tax due at the entity level would also save resources but would not be a simple change. Such a change would have differing impacts on partners who may be in different tax brackets. The change would save the resources that are now devoted to the paper driven, labor intensive process of passing adjustments through to large numbers of partners. Paying taxes due on audit adjustments at the entity level has advantages over other options for audit efficiency gains such as automating the current paper driven process. Even if IRS was given resources to modernize its campus information systems, parts of the adjustment pass-through process would continue to require labor intensive reviews of partnership agreements.\nIRS can take several actions that would begin to provide better information about large partnership compliance and audit results, or that could lower audit costs. Actions that would be a first step towards better information for analyzing large partnership compliance include developing a consistent definition of a large partnership along with activity codes that could be used to track audit results. To lower audit costs and avoid wasting audit staff time, IRS could change its practice governing when to use its authority to select a TMP, and the regulation which established the number of days an audit can be open without triggering more costly closing procedures. IRS could also better ensure that limited calendar time is not wasted in an audit. It could do so by tracking delays in providing expert support, clarify when auditors can expect such support, and then use this information about the support that can realistically be provided to better plan the number and scope of new audits, so that the time allowed under the statute of limitations is more effectively used.\nWhile IRS has initiated three projects to improve its audit procedures, it has not followed project planning principles, including taking the steps needed to effectively track the results for the two projects that have been implemented. Without doing so, IRS will not know whether the projects succeeded in improving audit procedures.\nAs large partnerships continue to grow in number and complexity, IRS will have to make strategic decisions about whether to reallocate scarce audit resources from other categories of taxpayers—perhaps from C corporations which are declining in number—to conduct more large partnership audits. IRS’s new Enterprise Risk Management program provides a venue for weighing the compliance risks associated with large partnerships against those of other types of taxpayers.", "Congress should consider altering the TEFRA audit procedures to:\nRequire partnerships that have more than a certain number of direct and indirect partners to pay any tax owed as determined by audit adjustments at the partnership level.\nRequire partnerships to designate a qualified TMP and, if that TMP is an entity, to also identify a representative who is an individual and for partnerships to keep the designation up to date.", "We recommend that the Commissioner of Internal Revenue take the following eight actions:\nTrack the results of large partnerships audits: (a) define a large partnership based on asset size and number of partners; (b) revise the activity codes to align with the large partnership definition; and (c) separately account for field audits and campus audits.\nAnalyze the audit results by these activity codes and types of audits to identify opportunities to better plan and use IRS resources in auditing large partnerships.\nUse existing authority to promptly designate the TMP under the largest profits interest rule or some other criterion.\nExtend the 45-day rule to give field audit teams more flexibility on when to withdraw an audit notice.\nHelp field auditors for large partnership audits receive the support they request from counsel staff, TEFRA coordinators, and IRS specialists: (a) track the number of requests and time taken to respond; (b) clarify when responses to their requests should be expected; and (c) use the tracked and clarified information when planning the number and scope of large partnership audits.\nClarify how and when field auditors can access refresher training on TEFRA audit procedures and partnership tax law.\nDevelop and implement large partnership efforts in line with the five leading principles for project planning and track the results to identify whether the efforts worked as intended.\nMake and document a determination about how large partnerships are to be incorporated into the Enterprise Risk Management process.", "We provided a draft of this report for review and comment to the Commissioner of Internal Revenue. We received written comments dated September 8, 2014 from IRS’s Deputy Commissioner for Services and Enforcement (for the full text of the comments, see appendix IV). We also received technical comments from IRS, which we incorporated into the final report where appropriate.\nIn its written comments, IRS agreed with our recommendations but said two of our recommendations, related to revising IRS’s activity codes to enable tracking large partnership audits and then analyzing audit results, are dependent upon future funding. We acknowledge in the report the resource constraints IRS currently faces. However, continuing to audit large partnerships with limited ability to track and analyze audit results will not help IRS make sound resource allocation decisions or improve audit effectiveness.\nWe are sending copies of this report to the Secretary of the Treasury, the Commissioner of IRS, and interested congressional committees. In addition, the report is available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this testimony, please contact me at (202) 512-9110 or [email protected]. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this statement. The names of GAO staff who made key contributions to this report are listed in appendix V.", "The objectives of this report are to (1) determine what IRS knows about the number and characteristics of large partnerships; (2) determine what IRS knows about the costs and results of audits of large partnership returns and assess IRS’s ability to effectively conduct such audits; and (3) identify and assess IRS’s efforts to address the challenges of auditing large partnership returns.\nTo determine the number and characteristics of large partnerships, we obtained data on tax returns filed by large partnerships from the Enhanced Large Partnership Indicator (ELPI) file on partnerships for tax years 2002 to 2011, and on the number of partnerships with 100 or more direct and indirect partners and $100 million or more in assets. We merged these data with data obtained from the Business Returns Transaction File (BRTF). We analyzed and reported ELPI and BRTF data by the total number of partnerships by asset size, direct partner size, indirect partner size, industry group, and tiering depth. The ELPI data file captures information about the ownership structure of large partnerships. The ELPI file starts with a partnership and traces Schedule K-1 allocations through to the ultimate taxpayer. ELPI traces the ownership structure of a partnership as long as either the depth is less than 11 tiers or the ownership percentage is greater than 0.00001 percent and therefore can present a picture of the approximate number of direct and indirect partners in a partnership structure. The ELPI currently only has data on partnerships that file a 1065 and not those that file a 1065-B. For similar analysis on partnerships that file a 1065-B, see our prior work on large partnerships.\nTo determine the number of IRS audits of large partnership returns and the characteristics of those audits, we obtained data from the Audit Information Management System (AIMS) and reported those partnership returns subject to IRS audit that were closed during fiscal years 2007 to 2013.returns, we only reported those audits that were traditional IRS field audits (in which IRS audited the books and records of a large partnership return), and not campus audits (in which IRS usually passed audit adjustments through to the related partners’ returns), as they are mainly an administrative function and do not include an examination of the books and records of the taxpayer return in question. We analyzed the results from these data consistent with how IRS measures audit results, such as the audit coverage rate (partnership returns subject to audit as a percentage of the total partnership return population) and no change rate (those audits that resulted in no change to the tax return from the audit), and, where possible, without suppressing data due to disclosure requirements, by asset size. We also analyzed the hours and days spent on large partnership audits to assess the costs of these audits. Where data were available, we compared these measures for large partnership return audits to those for corporate return audits of the same asset size.\nOnce we identified the audited population of large partnership To assess the effectiveness of IRS audits of large partnership returns, we interviewed officials in the Office of Chief Counsel, Large Business and International division, Small Business and Self-Employed division, and Research, Analysis, and Statistics division. We also interviewed a number of external private sector lawyers who are knowledgeable about partnership tax law, reviewed academic research and literature, reviewed IRS documentation, such as IRS policies and procedures on partnership audits, and reviewed our recent reports on partnerships. We also completed six focus groups with 30 IRS team coordinators and managers on the challenges associated with completing audits of large partnership returns. These team coordinators and managers were selected for our focus groups because they supervised or worked on a large partnership return audit, based on our definition of large partnerships above, which was closed in calendar year 2013. Where available, we supplemented the challenges identified in these focus groups with supporting data and documentation to provide context or support those challenges identified. We performed a content analysis on the six focus groups, using NVivo software, to analyze and categorize the themes of the focus groups. The results of the focus group data are not generalizable to all IRS audits and do not necessarily represent the official viewpoint of IRS. Instead the results are used to identify themes in conjunction with the other data we collected. We compared information available to the intent of the In addition, we partnership audit procedures outlined in statute.compared information available on audits of large partnership returns to Standards for Internal Control in the Federal Government (GAO/AIMD-00-21.3.1, November 1999).\nTo identify and assess IRS efforts to address the challenges of audits of large partnership returns, we reviewed IRS documentation and interviewed IRS officials to identify any efforts and initiatives they have ongoing related to large partnership. We assessed IRS’s efforts and initiatives related to large partnerships using project planning criteria that our prior work identified work as leading practices. We identified these criteria by conducting a literature review of a number of guides on project management and business process reengineering.\nFor the purposes of this review, we determined that the data used in our analysis were sufficiently reliable for our purposes and all dollar values have been adjusted for inflation to tax year or fiscal year 2014. Our data reliability assessment included reviewing relevant documentation, conducting interviews with knowledgeable IRS officials, and conducting electronic testing of the data to identify obvious errors or outliers. All Statistics of Income estimates in this report have 95 percent confidence intervals that are within +/- 10 percent of the point estimate, unless otherwise specified. Based on IRS documents and interviews with IRS officials, data in the ELPI file may be incomplete since this file is based on Schedule K-1 data. For example, some Schedule K-1s may be missing from the database because partnerships did not file Schedule K-1s, IRS errors, and timing problems. In general, the depth of tiering in ELPI for a partnership structure represents a minimum amount resulting in approximate entity counts because the missing data would add more entities that qualify for our definition of large partnerships.\nWe conducted this performance audit from October 2013 to September 2014 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 that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives.", "", "", "Legend: d = Value not shown to avoid disclosure of information about specific taxpayers.", "Legend: d = Value not shown to avoid disclosure of information about specific taxpayers.", "Legend: d = Value not shown to avoid disclosure of information about specific taxpayers.", "", "Legend: d = Value not shown to avoid disclosure of information about specific taxpayers.\nCalendar year 2012 partnership filings were not available at the time we completed our analysis to determine the audit coverage rate for fiscal year 2013.", "Legend: d = Value not shown to avoid disclosure of information about specific taxpayers.", "For the audit coverage rate calculation for fiscal year 2012, we combine correspondence audits (audits completed by mail) and field audits in the calculations for the highest two asset brackets as the IRS Data Book does not report the number of field audits separately to avoid disclosure of information about specific taxpayers.", "", "", "", "", "In addition to the contact listed above, Tom Short, Assistant Director; Vida Awumey; Sara Daleski; Deirdre Duffy; Robert Robinson; Cynthia Saunders; Erik Shive; Albert Sim; A.J. Stephens; and Jason Vassilicos made key contributions to this report." ], "depth": [ 1, 2, 2, 2, 2, 2, 1, 2, 2, 2, 2, 1, 2, 2, 2, 2, 3, 3, 1, 2, 2, 1, 1, 1, 1, 1, 1, 2, 2, 2, 2, 2, 1, 2, 2, 2, 1, 1, 2, 2 ], "alignment": [ "h0_title h2_full h4_title", "", "", "h0_full", "h4_full", "", "h2_title", "", "h2_full", "h2_full", "", "h0_title h2_title h1_title", "h0_full", "h0_full", "h0_full", "h0_title h2_title h1_full", "h0_full h2_full", "h0_full h2_full", "h1_full", "h1_full", "", "h0_full h4_full h1_full", "", "", "h4_full", "h3_full", "", "", "", "", "", "", "", "", "", "", "", "", "", "" ] }
{ "question": [ "Why does the IRS audit few large partnerships?", "What challenge does the IRS face with large partnerships?", "What are example of these challenges?", "What logistical challenges confront IRS when attempting to determine each partner's share of the adjustment?", "What is preventing the IRS from adjusting the partnership return?", "What was the primary goal of the projects initiated by the IRS?", "Why did the projects face challenges?", "What was the result of the challenges that these projects faced?", "Why do businesses organize as partnerships rather than as C corporations?", "What is considered a large partnership?", "What is the IRS' main problem with tiered partnerships?", "What was GAO asked to do?", "How did GAO accomplish this task?", "What were GAO's primary goals for their assessment?", "What are the recommendations for the Congress?", "What actions should IRS take?", "How did IRS respond to this recommendation?" ], "summary": [ "The Internal Revenue Service (IRS) audits few large partnerships. Most audits resulted in no change to the partnership's return and the aggregate change was small.", "Although internal control standards call for information about effective resource use, IRS has not defined what constitutes a large partnership and does not have codes to track these audits. According to IRS auditors, the audit results may be due to challenges such as finding the sources of income within multiple tiers while meeting the administrative tasks required by the Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA) within specified time frames.", "For example, IRS auditors said that it can sometimes take months to identify the partner that represents the partnership in the audit, reducing time available to conduct the audit. TEFRA does not require large partnerships to identify this partner on tax returns. Also under TEFRA, unless the partnership elects to be taxed at the entity level (which few do), IRS must pass audit adjustments through to the ultimate partners.", "IRS officials stated that the process of determining each partner's share of the adjustment is paper and labor intensive. When hundreds of partners' returns have to be adjusted, the costs involved limit the number of audits IRS can conduct.", "Adjusting the partnership return instead of the partners' returns would reduce these costs but, without legislative action, IRS's ability to do so is limited.", "IRS has initiated three projects—one of which is under development—to make large partnership audit procedures more efficient, such as identifying higher risk returns to audit.", "However, the two projects implemented were not developed in line with project planning principles. For example, they do not have clear and measurable goals or a method for determining results. For example, they do not have clear and measurable goals or a method for determining results.", "As a consequence, IRS may not be able to tell whether the projects succeed in increasing audit efficiency.", "More businesses are organizing as partnerships while fewer are C corporations. Unlike C corporations, partnerships do not pay income taxes but pass on income and losses to their partners.", "Large partnerships (those GAO defined as having $100 million or more in assets and 100 or more direct and indirect partners) are growing in number and have complex structures. Some partnerships create tiers of partnerships with hundreds of thousands of partners.", "Tiered large partnerships are challenging for IRS to audit because tracing income through the tiers to the ultimate partners is complex.", "GAO was asked to assess IRS's ability to audit large partnerships.", "GAO analyzed IRS data from 2002 to 2011 and IRS audit documentation, interviewed IRS officials, met with IRS auditors in six focus groups, and interviewed private sector tax lawyers knowledgeable about partnerships.", "GAO's objectives include: 1) determine what IRS knows about the number and characteristics of large partnerships, 2) assess IRS's ability to audit them, and 3) assess IRS's efforts to address the audit challenges.", "Congress should consider requiring large partnerships to identify a partner to represent them during audits and to pay taxes on audit adjustments at the partnership level.", "IRS should take multiple actions, including: define large partnerships, track audit results using revised audit codes, and implement project planning principles for the audit procedure projects.", "IRS agreed with all the recommendations, but noted that revision of the audit codes is dependent upon future funding." ], "parent_pair_index": [ -1, 0, 1, 0, 0, -1, 0, 0, -1, 0, 1, -1, 0, 0, -1, -1, 1 ], "summary_paragraph_index": [ 3, 3, 3, 3, 3, 5, 5, 5, 0, 0, 0, 1, 1, 1, 6, 6, 6 ] }
CRS_RL32724
{ "title": [ "", "Background on Mexico", "Political Developments During the Calderón Administration", "July 1, 2012, Elections: Outcome and Political Transition7", "Drug Trafficking and Heightened Violence and Crime in Mexico9", "Economic Conditions21", "Social Conditions", "Foreign Policy", "Mexican-U.S. Relations: Issues for Congress", "U.S. Assistance to Mexico", "Merida Initiative45", "Non-Merida Assistance Programs", "Department of Defense Support to Mexico", "Bilateral Cooperation on Counternarcotics and Security Efforts", "Overview of Related Southwest Border Initiatives49", "Money Laundering and Bulk Cash Smuggling", "Firearms Trafficking68", "Alien Smuggling and Human Trafficking", "Human Rights", "Conditions and Mexican Efforts to Improve", "Human Rights Conditions on U.S. Assistance to Mexico", "Migration98", "Trends in Mexican Immigration to the United States", "Mexico's Immigration Policies", "The \"Whole Enchilada\" Framework", "Recent Migratory Reforms and 2011 Immigration Law", "Efforts to Enact Immigration Reform in the United States", "Energy and Environmental Issues", "Oil Production in Mexico and Efforts to Reform PEMEX", "U.S.-Mexican Energy and Environmental Cooperation", "United States-Mexico Trans-Boundary Hydrocarbons Agreement119", "Trade Issues126", "Functioning of NAFTA Institutions", "Trade Disputes and Emerging Trade Issues", "Trucking129", "Tuna", "Proposed Trans-Pacific Partnership (TPP) Agreement132", "Legislation Enacted in the 112th Congress133" ], "paragraphs": [ "", "Over the past two decades, Mexico has transitioned from a centralized political system dominated by the Institutional Revolutionary Party (PRI) to a true multiparty democracy. Since the PRI last governed in the 1990s, presidential power has become increasingly constrained by Mexico's Congress, its Supreme Court, and increasingly powerful governors. Partially as a result of those constraints, two successive National Action Party (PAN) administrations struggled to enact the structural reforms needed to boost Mexico's economic competitiveness and effectively address the country's security challenges. Weak institutions remain an impediment to democratic consolidation in Mexico.", "Felipe Calderón of the conservative PAN won the July 2006 presidential election in an extremely tight race, defeating Andrés Manuel López Obrador of the leftist Party of the Democratic Revolution (PRD) by fewer than 234,000 votes. President Calderón began his six- year term on December 1, 2006; his term concluded on November 30, 2012. Calderón was succeeded by Enrique Peña Nieto of the Institutional Revolutionary Party (PRI).\nThe serious economic and security challenges that Mexico has faced over the last few years have overshadowed the policy achievements of the Calderón Administration. Despite taking office in a relatively weak position after a disputed election, Calderón shepherded some significant reforms through the Mexican Congress in the beginning and end of his term, including historic labor reforms enacted in November 2012. The Calderón government maintained macroeconomic stability amidst an unstable global economy, expanded access to health insurance, and started to reform Mexico's federal security apparatus. Mexico-U.S. relations grew stronger through cooperation under the Mérida Initiative, as did Mexico's relations with Latin America. Nevertheless, Mexico experienced an unprecedented security crisis that occurred, at least in part, because of the government's campaign against organized crime. Escalating violence, persistent poverty and joblessness, and lingering corruption and impunity caused Calderón's popularity to decline and prompted some negative assessments of his presidency.\nIn the first half of his term, President Calderón, whose PAN became the largest party in the Senate and Chamber of Deputies after the 2006 legislative elections, had some success in turning to the PRI for help in advancing his legislative agenda. In 2007, he secured passage of long-awaited fiscal and pension reforms that had stalled under the PAN Administration of Vicente Fox (2000-2006). In June 2008, President Calderón signed a judicial reform decree after securing the approval of Congress and Mexico's states for an amendment to Mexico's Constitution. Under the judicial reform, Mexico will have until 2016 to move from a closed door process based on written arguments to a public trial system with oral arguments and the presumption of innocence. In October 2008, the government secured approval of an energy sector reform designed to improve the transparency and management flexibility of state oil company Petró leos Mexicanos (PEMEX). Critics maintained that the law, which provided only limited opportunities for private partnerships with the company, would not do enough to encourage new oil exploration.\nMexico held mid-term elections in July 2009. The PRI performed even better in those elections than polls had suggested it would, capturing a plurality of seats in the Chamber of Deputies and five of six governorships. Analysts attributed the PRI's strong performance to growing popular concern about the country's economic downturn, as well as the party's effective use of its still formidable national machinery. Although President Calderón remained popular, the PAN lost seats in the Chamber and two key governorships, with voters expressing frustration with the party's failure to distinguish itself from the PRI. (The PAN still controlled the Senate, however.) The PRD fared even worse than the PAN, as internal divisions led López Obrador to throw his support behind left-leaning candidates from smaller parties, many of whom won.\nThe composition of the Chamber of Deputies sworn in on September 1, 2009 complicated President Calderon's legislative agenda, which had included enacting a package of comprehensive political reforms. The PRI, with the support of the allied Green Ecological Party (PVEM) party, controlled a majority in the Chamber and proved reluctant to enact legislation that could have cost the party votes in the 2012 elections. Reforms to the national security law, labor reforms to regulate unions, and anti-money laundering legislation that had passed the Senate remained pending in the Chamber. Several presidential initiatives did not pass either body, including a law to reorganize municipal and state police and a reform of the federal criminal procedures code necessary for the 2008 judicial reforms to advance. During its three-year term, the Congress did enact antitrust legislation, an immigration law giving migrants (including illegal migrants) increased human rights protections, constitutional reforms on human rights, and some limited political reforms.", "On July 1, 2012, Mexico held federal (presidential and legislative) and state elections in 14 states. Voter turnout reached record levels as 63% of eligible voters cast ballots in the election. Mexico's Federal Electoral Institute (IFE) conducted the elections with the oversight of the Federal Electoral Tribunal, which officially certified the election results on August 31, 2012, after dismissing evidence presented by the PRD-led coalition that vote-buying tainted the results. While PRD leaders initially criticized the Tribunal's decision, they and the other leftist parties in their coalition later pledged to abide by its decision. In contrast, López Obrador refused to recognize the election results and left the PRD in order to turn his Morena (Movement for National Regeneration) social movement into a political party.\nAs predicted, the PRI that governed Mexico from 1929 to 2000 retook the presidency after 12 years of rule by the PAN and won a plurality (but not a majority) in the Senate and Chamber of Deputies. PRI/PVEM candidate Enrique Peña Nieto, a former governor of the state of Mexico, won the presidential election, albeit by a smaller margin than polls had forecast. Peña Nieto captured 38.2% of the vote, followed by Andrés Manuel López Obrador of the PRD with 31.6%, Josefina Vázquez Mota of the PAN with 25.4%, and Gabriel Quadri of the National Alliance Party (PANAL) with 2.3%. Peña Nieto vowed to lead a \"new PRI\" government free from the corruption that characterized the party in the past and ready to enact bold reforms.\nThe PRI/PVEM failed to capture a majority in either chamber of the legislature that began its three-year term on September 1, 2012, which could complicate President Peña Nieto's ability to enact legislation. The PRI/PVEM could achieve a simple majority in the Chamber of Deputies by aligning with its former ally, the PANAL, a small party affiliated with the Mexican teachers' union. However, for legislation to pass the Senate, and for any measures to amend the constitution (which require a two-thirds majority), the PRI will have to form cross-party coalitions. The PRI will most likely find support from the PAN, which lost seats in the Chamber but retained a powerful bargaining position. PAN leaders in the Congress have pledged to support aspects of Peña Nieto's reform agenda that they believe are in the best interest of the country, even proposals blocked by the PRI in the last Congress. The PRD-led coalition, which now has more seats in the Chamber than the PAN and remains the third-largest force in the Senate, could complicate some reform efforts, including those aimed at increasing private participation in the energy sector, a key priority for Peña Nieto.\nAlthough President Peña Nieto's government may encounter the same type of legislative opposition to his agenda that President Calderón encountered, he may be able to draw upon the PRI's formidable strength at the state and local level to garner support for his policies. Prior to the 2012 elections, the PRI controlled 19 of 32 governorships in Mexico. As depicted in Figure 2 below, the PRI picked up the governorship of Jalisco and Chiapas, but lost the state of Tabasco. On the contrary, should Peña Nieto's national agenda reform run counter to state interests, he could have to choose between maintaining party unity and challenging PRI governors.\nMexico has an unusually long five-month transition period from one presidency to the next, which can prove awkward for the outgoing and incoming Administrations. Between September and November 2012, however, there appeared to be some communication between the outgoing Calderón government and Enrique Peña Nieto's transition team. Outgoing President Calderón introduced labor reform legislation that the Mexican Congress approved under new fast-track provisions in November 2012, which had also been endorsed by President-elect Peña Nieto.\nOn December 1, 2012, President Peña Nieto took office for a six-year presidential term. Upon his inauguration, Peña Nieto announced a reform agenda with specific proposals under five broad pillars: reducing violence; combating poverty; boosting economic growth; reforming education; and fostering social responsibility. Somewhat surprisingly, leaders from the conservative PAN and leftist PRD signed on to President Peña Nieto's \"Pact for Mexico\" agreement containing legislative proposals for advancing that reform agenda. While some opposition legislators have since balked at their leaders' decisions to endorse the PRI-led pact, the Congress already approved an education reform bill, one of the 13 proposals based on the pact that Peña Nieto had identified as short-term priorities.", "Mexico is a major producer and supplier to the U.S. market of heroin, methamphetamine, and marijuana and the major transit country for more than 95% of the cocaine sold in the United States. Mexico is also a consumer of illicit drugs, particularly in northern states where criminal organizations have been paying their workers in product rather than in cash. The prevalence of illicit drug use in Mexico increased from 2002 to 2008, and then remained relatively level from 2008 to 2011. According to the 2011 National Drug Threat Assessment , Mexican drug trafficking organizations (DTOs) and their affiliates \"dominate the supply and wholesale distribution of most illicit drugs in the United States.\"\nIn the past few years, the violence and brutality of the Mexican DTOs have escalated as they have battled for control of lucrative drug trafficking routes into the United States and local drug distribution networks in Mexico. U.S. and Mexican officials now often refer to the DTOs as transnational criminal organizations (TCOs) since they have increasingly branched out into other criminal activities, including human trafficking, kidnapping, armed robbery, and extortion. From 2007-2011, kidnapping and violent vehicular thefts increased at even faster annual rates than overall homicides in Mexico. The expanding techniques used by the DTOs, which have included the use of car bombs and grenades have led some scholars to liken DTOs' tactics to those of armed insurgencies.\nThe Calderón Administration made combating drug trafficking and organized crime its top domestic priority. Government enforcement efforts, many of which were led by Mexican military forces, took down leaders from all of the major DTOs, either through arrests or deaths during operations to detain them. The pace of those takedowns accelerated beginning in late 2009, partly due to increased intelligence-sharing between the U.S. and Mexican governments. In 2009, the Mexican government identified the country's 37 most wanted criminals, and by October 2012, at least 25 of those alleged criminals had been captured or killed, including the head of the Gulf DTO and of Los Zetas. The Calderón government extradited record numbers of criminals to the United States, including 93 in 2011; however no top DTO leaders captured were tried and convicted in Mexican courts. The government's focus on dismantling the leadership of the major criminal organizations contributed to brutal succession struggles, shifting alliances among the DTOs, and the replacement of existing groups with ones that were even more violent.\nAnalysts estimate that drug trafficking-related violence in Mexico may have resulted in some 60,000 deaths over the course of the last six years; another 25,000 individuals reportedly went missing over that period. Several sources have reported that violence peaked in 2011, before falling in 2012, perhaps by as much as 20%. Although the violence has primarily taken place in contested drug production and transit zones, the regions of the country most affected by the violence have shifted over time, to include large cities (such as Monterrey, Nuevo León) and tourist zones (Acapulco, Guerrero). Still, there have been incidents of violence across the country, with the security situation in particular areas sometimes changing rapidly. A State Department Travel Warning cited security concerns in parts of 19 of Mexico's 32 states and urged U.S. citizens to \"defer non-essential travel\" to Chihuahua, Coahuila, Durango, and Tamaulipas.\nOn December 17, 2012, President Peña Nieto outlined a strategy that aims to achieve a \"Mexico in Peace\" where human rights are respected and protected by implementing a \"state\" security policy that involves binding commitments from all levels of government and civic participation. The six pillars of the strategy include: 1) planning; 2) prevention; 3) protection and respect of human rights; 4) coordination; 5) institutional transformation; and 6) monitoring and evaluation. Although President Peña Nieto has told U.S. media outlets that his government will not abandon the fight against organized crime, the primary goal of his security strategy is to improve security conditions inside Mexico. Its success will be measured in reductions in homicides and other crimes, rather than in drugs seized or kingpins arrested.", "In the late 1980s, Mexico began to restructure its economy through a series of measures that included liberalizing its highly protective trade regime. The transformation to an open market economy accelerated after Mexico entered into the North American Free Trade Agreement (NAFTA) with the United States and Canada in 1994. Through NAFTA, the United States, Mexico, and Canada form the world's largest free trade area, with about one-third of the world's total Gross Domestic Product (GDP). Since NAFTA, the Mexican economy has increasingly become a manufacturing-for-export nation, with exports representing 32% of Mexico's GDP, up from 10% twenty years ago. Mexico remains a major U.S. crude oil supplier, but its top exports to the United States have diversified to include automobiles and auto parts, television receivers, and other manufacturing goods. Overall, Mexico has entered into 12 free trade agreements (FTAs) involving 44 countries.\nDespite attempts to diversify its economic ties and build its domestic economy, Mexico continues to remain heavily dependent on the United States as an export market (79% of Mexico's exports in 2011 were U.S.-bound), and as a source of tourism revenues, remittances, and investment. Economic conditions in Mexico tend to follow economic patterns in the United States. When the U.S. economy is expanding, the Mexican economy tends to grow as well. However, when the U.S. economy stagnates or is in decline, the Mexican economy tends to decline as well, often by a higher degree. In 2009, for example, GDP growth in the United States fell by 2.5% and Mexico's GDP declined by 6.5%, the worst decline in decades.\nThe Calderón government has been praised for maintaining macroeconomic stability in the face of the global economic crisis and U.S. recession, a 2009 H1N1 swine flu epidemic that damaged the tourism industry, and declining oil production. The government used billions in its international reserves to shore up the peso, and the Mexican central bank established a temporary reciprocal currency sway line with the U.S. Federal Reserve. The government also hedged its oil exports in an effort to protect the economy from a decline in oil prices. The central government increased liquidity in the banking system. It also increased its credit lines with the World Bank, International Monetary Fund (IMF), and Inter-American Development Bank. In 2009, Mexico's fiscal stimulus amounted to 2.5% of GDP and included infrastructure spending and subsidies for key household budget items. Government programs to support small and medium-sized businesses, worker training, job creation, and social safety nets were maintained and, in some cases, expanded.\nSince late 2009, the Mexican economy has rebounded, partially as a result of a resumption in U.S. demand for Mexican manufacturing exports. Mexico's GDP grew by 5.5% in 2010 and 3.9% in 2011. As the economy has recovered, the Mexican government has gradually rolled backed stimulus measures and increased taxes, but has also extended its credit line with the IMF and continued to hedge its oil exports. The Calderón government took steps to try to boost consumer spending and housing construction so that, in the event that the U.S. and/or global economies contract, Mexico's domestic economy would remain as strong as possible. The Mexican economy grew by a healthy 4% in 2012.\nWhile encouraged by Mexico's rapid recovery, analysts have identified some challenges that could constrain the country's long-term growth potential. Economists have warned that continued sluggish growth in the U.S. economy could be a \"material drag\" on economic growth in Mexico. And, although the government can point to positive overall investment trends as evidence to the contrary, some studies maintain that organized crime-related violence has hurt Mexico's competitiveness by raising the costs of doing business in the country. Still others have identified Mexico's low tax base and over-reliance on declining oil revenues, rigid labor market, weak education system, and lack of competition in some sectors as obstacles to more robust economic growth. Recently enacted labor and education reforms could help address two of those obstacles.", "Over the 12 years of PAN rule, Mexico experienced macroeconomic stability and low inflation and unemployment, but continued to post relatively high rates of poverty and inequality. As elsewhere in Latin America, the 2009 economic downturn in Mexico had a negative impact on the country's recent progress in reducing poverty. With a population of 114.7 million (July 2012), Mexico is classified by the World Bank as an upper-middle-income developing country, with a per capita income level of $10,064 (2012). According to the U.N. Economic Commission for Latin America and the Caribbean, the percentage of Mexicans living in poverty fell between 2000 and 2006, but rose again between 2006 and 2008 to include almost 45% of the population. The percentage of Mexicans living in poverty increased again between 2008 and 2010 to include 46.2% of the population, or roughly 52 million people, according to Mexican government data. This increase in poverty occurred despite successful government efforts to expand access to health care, social security, and housing.\nRural poverty may have further worsened since 2010 as subsistence farmers have been hit hard by the effects of a drought that began in May 2011 and has affected more than half of the country. The Mexican government set aside at least $2.5 billion for drought relief, including support for infrastructure to provide drinking water and emergency food aid to affected communities. As Mexico's crop yields shrunk, the government purchased massive amounts of U.S. corn in an effort to stave off further price increases for a key food staple. Mexican officials have predicted that it may take years for the country's cattle industry to recover from the drought.\nMexico's main poverty reduction program is Oportunidades (Opportunities). The program, formerly known as Progresa (Progress), began under President Ernesto Zedillo (1994-2000) and has since expanded to benefit 5.8 million Mexican families (34 million individuals) mostly in rural areas. Oportunidades seeks not only to alleviate the immediate effects of poverty through cash and in-kind transfers, but to break the cycle of poverty by improving nutrition, health standards, and educational attainment. It provides cash transfers to families in poverty who demonstrate that they regularly attend medical appointments and can certify that their children are attending school. While some have praised Oportunidades for its positive effects on educational and nutritional outcomes, others have criticized it for creating dependency on government handouts. In 2010, the Calderón government established a new program within Oportunidades for families in urban areas such as Ciudad Juárez and began providing grants to secondary school students in some rural areas. After two years, high school enrollment had increased by 85% in rural areas where teenagers had been participating in the program.\nAnother key aspect of Mexico's recent social policy efforts has been to expand access to health insurance for people who are not covered by the country's social security system under a program known as Seguro Popular (Popular Health Insurance). In 2003, the Mexican Congress passed a law establishing a system by which public funding for health care would be gradually increased over seven years to achieve universal health insurance. By 2012, more than 52 million previously uninsured people received full or supplementary insurance through Seguro Popular . While many experts have praised Seguro Popular for expanding low-income Mexicans' access to medication and health care, some have criticized it for being inefficient and for not reaching the poorest communities.", "While the bilateral relationship with the United States has continued to dominate Mexican foreign policy, President Calderón, like his predecessor Vicente Fox, sought to strengthen Mexico's ties with Latin America. Calderón regularly met with former Colombian President Álvaro Uribe and with the government of Juan Manuel Santos, with whom he signed a series of agreements, including an extradition treaty. In June 2012, Mexico signed an agreement with Colombia, Peru, and Chile formally establishing an economic block known as the Pacific Alliance to promote regional integration and trade with Asia. Calderón supported the Central American Security Strategy adopted in June 2011, signed a free trade agreement (FTA) with Central America (excluding Panama), and offered $160 million to set up an infrastructure fund for the sub-region. The Calderón government also explored the possibility of forming a Brazil-Mexico FTA, as well as developing greater energy cooperation between PEMEX and Petrobras, Brazil's state oil company. President Calderón also tried to mend relations with Cuba and Venezuela, which had become tense during the Fox Administration.\nMexico also took an active role with respect to global issues. Calderón played a lead role in global climate change negotiations, with Mexico hosting the U.N. Climate Change Conference in Cancún in late 2010. At the Asia-Pacific Economic Cooperation (APEC) Forum in November 2011, the Mexican government announced that it would seek consultations with partner countries about joining the negotiations for a Trans-Pacific Partnership (TPP) Agreement. On June 18, 2012, President Obama announced that the nine countries involved in the TPP negotiations had extended an invitation to Mexico. As rotating head of the G20 nations, Mexico hosted the G20 Summit in June 2012. Although euro-zone debt problems dominated the discussions, Mexican officials also reportedly sought to focus attention on food security issues. This umbrella topic included concerns regarding sustainability, supporting small-scale farmers, and diversifying bio-fuels production to minimize its impact on global food supplies.", "Until the early 1980s, Mexico had a closed and statist economy and its independent foreign policy was often at odds with the United States. Those policies began to shift, however, under President Miguel de la Madrid (1982-1988), and changed even more dramatically under President Carlos Salinas de Gortari (1988-1994) and President Ernesto Zedillo (1994-2000). President Salinas opened Mexico's economy to trade and investment, while President Zedillo adopted electoral reforms that leveled the playing field for opposition parties and increased cooperation with the United States on drug control and border issues.\nPresident Fox (2000-2006) encouraged strong relations with the United States, and called for greater cooperation under NAFTA and for a bilateral migration agreement that would regularize the status of undocumented Mexicans in the United States. In the aftermath of the September 2001 terrorist attacks in the United States, the focus of relations shifted to border security issues as the United States became increasingly concerned about homeland security. Relations became strained during the debate on immigration reform in the United States. After then-President George W. Bush approved the Secure Fence Act of 2006, Mexico, with the support of 27 other nations, denounced the proposed border fence at the Organization of American States.\nUnder the Calderón government, security cooperation, rather than immigration or trade, dominated the U.S.-Mexican relationship. During then-President Bush's March 2007 visit to Mexico, President Calderón called for U.S. assistance in combating drug and weapons trafficking. Calderón's willingness to increase narcotics cooperation with the United States led to the development of the Mérida Initiative, a multi-year U.S. assistance effort announced in October 2007 to help Mexico and Central America combat drug trafficking and crime. The Mérida Initiative signaled a major diplomatic step forward for bilateral counterdrug cooperation as the Mexican government put sovereignty concerns aside to allow extensive U.S. involvement in its domestic security policies.\nU.S.-Mexican relations continued to be close under the first Obama Administration, with security cooperation intensifying under a new Mérida Initiative strategy that encompassed institution-building, border issues, and development in Mexico. In January 2009, President Calderón visited then President-elect Obama in Washington, DC. That pre-inaugural meeting, which has become somewhat of a tradition for recent U.S. Presidents, demonstrated the importance of strong relations with Mexico. President Obama met frequently with President Calderón throughout his first term, both on a bilateral basis and at trilateral North American Leaders' Summits convened with Canadian Prime Minister Stephen Harper. Although security issues frequently dominated these discussions, enhancing North American competitiveness and energy cooperation also figured prominently.\nU.S.-Mexican presidential summits were reinforced by frequent cabinet-level meetings between the two governments, as well as the creation of bilateral working groups formed to address specific topics. On September 18, 2012, U.S. and Mexican cabinet-level officials met for the fourth time to review the results of five years of Mérida cooperation, reaffirm their commitment to its strategic framework, and pledge to deepen the cooperation the Mérida Initiative has established. U.S.-Mexican security cooperation continued even as tension emerged in bilateral relations, including after the resignation of the U.S. Ambassador to Mexico in March 2011 and two incidents in which U.S. agents were shot while working in Mexico.\nAs Mexico is experiencing a domestic shift in power from PAN to PRI rule, U.S.-Mexican relations could also be in for some changes. 2013 marks the first time in 12 years that U.S. and Mexican presidential terms are beginning at roughly the same time. While President Obama and President Peña Nieto both face a full slate of domestic challenges, analysts have urged both leaders to work together on issues that are of critical importance to both countries, particularly those aimed at boosting trade and job creation. At a pre-inaugural meeting in late November 2012, President Obama embraced Peña Nieto's desire to bolster economic ties and to focus on a broad array of bilateral issues rather than focusing predominantly on security issues.", "", "In recent years, Congress has played an increasingly active role in shaping U.S.-Mexican relations through funding and overseeing the Mérida Initiative, an anticrime and counterdrug assistance package that began in FY2008. Prior to that time, Mexico, a middle income country, had not been a major recipient of U.S. foreign assistance. As a result of the Mérida Initiative, U.S. assistance to Mexico rose from $65 million in FY2007 to $406 million in FY2008. Table 1 below provides an overview of U.S. assistance to Mexico funded through the State Department.\nFrom FY2008-FY2012, Congress appropriated $1.9 billion in Mérida assistance for Mexico (see Table 2 below), roughly $1.1 billion of which had been delivered as of November 2012. Mérida Initiative assistance has flowed through the International Narcotics Control and Law Enforcement (INCLE), Economic Support Fund (ESF), and, until recently, Foreign Military Financing (FMF) accounts. Whereas Mérida assistance initially focused on training and equipping Mexican counterdrug forces, it now aims to address the weak institutions and underlying societal problems—including corruption and impunity—that have allowed the drug trade to flourish in Mexico. The updated Mérida strategy, announced in March 2010, focuses on four pillars: (1) disrupting organized criminal groups, (2) institutionalizing the rule of law, (3) building a 21 st century border, and (4) building strong and resilient communities. The bulk of U.S. assistance under Mérida is supporting training and technical assistance programs for Mexico's justice sector under pillar two of the Mérida strategy. U.S. assistance has shifted from only supporting the Mexican federal government to assisting certain key states with police and judicial reform efforts, as well as community-based crime prevention programs.\nCongress has played a major role in determining the level and composition of Mérida funding for Mexico. In the beginning, Congress included funding for Mexico in supplemental appropriations measures in an attempt to hasten the delivery of certain equipment. Congress has also earmarked funds for specific purposes in order to ensure that certain programs are prioritized, such as efforts to support institutional reform in Mexico. Finally, Congress has sought to influence human rights conditions and encourage efforts to combat abuses and impunity in Mexico by placing conditions on Mérida-related assistance (see \" Human Rights \" below).\nThere appears to be strong support in both the Senate and House for maintaining U.S. support to Mexico provided through Mérida Initiative accounts. The Administration's FY2013 budget request asked for $234 million in Mérida assistance for Mexico: $199 million in the International Narcotics and Law Enforcement (INCLE) account and $35 million in the Economic Support Fund (ESF) account. The Senate Appropriations Committee's version of the FY2013 foreign operations appropriations measure, S. 3241 ( S.Rept. 112-172 ), would have met the request for INCLE and provided $10 million in additional ESF for economic development projects in the border region. S. 3241 included restrictions on aid to the Mexican military and police. The House Appropriations Committee's version of the bill, H.R. 5857 ( H.Rept. 112-494 ), would have increased INCLE funding by $49 million to match the FY2012 enacted level for that account and met the request for ESF.\nIn the absence of a final FY2013 foreign appropriations measure, Congress passed a continuing resolution, H.J.Res. 117 , to fund most foreign aid programs—including assistance to Mexico—at FY2012 levels plus 0.6% through March 27, 2013.", "Apart from Mérida-related funding, Congress doubled development assistance (DA) to Mexico from FY2010 to FY2011, and increased it again to $33 million in FY2012. The U.S. Agency for International Development (USAID) uses DA to support programs aimed at boosting private sector competitiveness, promoting sustainable energy development, and forming partnerships with faculty and students from Mexican universities to address climate change and rule of law issues. Assistance provided through the Global Health and Child Survival (GHCS) that has helped the Mexican government both prevent and treat HIV/AIDS and other infectious diseases ended in FY2012. Mexico also benefits from military training programs funded through the State Department's International Military Education and Training Account (IMET), as well as counterterrorism assistance provided through the Non-proliferation, Anti-terrorism and Related Programs (NADR) account.", "Apart from the Mérida Initiative, DOD has its own legislative authorities to provide certain counterdrug assistance. DOD programs in Mexico are overseen by the U.S. Northern Command (NORTHCOM), which is located at Peterson Air Force Base in Colorado. DOD can provide counterdrug assistance under guidelines outlined in Section 1004 of P.L. 101-510 , as amended through FY2014, and can provide additional assistance to certain countries as provided for in Section 1033 of P.L. 105-85 , as amended through FY2013. DOD counternarcotics support to Mexico totaled roughly $34.2 million in FY2009, $89.7 million in FY2010, and $84.7 million in FY2011. DOD is using some $50 million in FY2011 per Section1033 of P.L. 105-85 funds to improve security along the Mexico-Guatemala-Belize border. Total DOD support to Mexico in stood at $100.4 million in FY2012 and may exceed $75.3 million in FY2013.", "In the 1980s and 1990s, U.S.-Mexican counternarcotics efforts were often marked by mistrust, especially following the 1985 killing of DEA Special Agent Enrique Camarena in Mexico. Beginning in 1986, when the U.S. President was required to certify whether drug-producing countries and drug-transit countries were cooperating fully with the United States, Mexico often was criticized for its lack of effort, which in turn led to Mexican government criticism of the U.S. assessment. Reforms to the U.S. drug certification process enacted in September 2002 ( P.L. 107-228 ) essentially eliminated the annual drug certification requirement, and instead required the President to designate and withhold assistance from countries that had \"failed demonstrably\" to make substantial counternarcotics efforts. In the aftermath of this legislative change, antidrug cooperation with Mexico improved considerably during the Fox administration (2000-2006).\nOver the last five years, U.S.-Mexican security cooperation has intensified significantly as a result of the Mérida Initiative. U.S.-Mexican cooperation has evolved to the point where it is able to continue even amidst serious strain caused by sometimes unforeseen events. For example, bilateral efforts against weapons trafficking continued even after the failed Bureau of Alcohol, Tobacco, Firearms, and Explosives (ATF) operation dubbed \"Fast and Furious\" resulted in firearms being trafficked into Mexico. U.S. training and law enforcement support efforts have advanced even as U.S. personnel have been injured and even killed while working in Mexico. The U.S. government has helped Mexican government investigate the circumstances under which two U.S. Central Intelligence Agency (CIA) employees were wounded on August 24, 2012, as their vehicle came under heavy fire from Mexican Federal Police.\nIn the 2007 U.S.-Mexico joint statement announcing the Mérida Initiative, the U.S. government pledged to \"intensify its efforts to address all aspects of drug trafficking (including demand-related portions) and continue to combat trafficking of weapons and bulk currency to Mexico.\" Although not funded through the Mérida Initiative, the U.S. government has made efforts to address each of these issues, with efforts to combat weapons trafficking and, to a lesser extent, money laundering having received congressional scrutiny.", "The increase in drug trafficking-related violence between and among DTOs in Mexico has generated concern among U.S. policy makers that the violence in Mexico might spill over into the United States. U.S. federal officials have denied that the recent increase in violence in Mexico has resulted in a spillover into the United States, but acknowledged that the prospect is a serious concern. In March 2009, Secretary of Homeland Security Janet Napolitano announced a set of Southwest border initiatives aimed at (1) guarding against violent crime spillover into the United States; (2) supporting Mexico's crackdown campaign against drug cartels in Mexico; and (3) reducing the movement of contraband in both directions across the border. The Obama Administration authorized the deployment of 1,200 National Guard troops to the U.S.-Mexico border in July 2010 to support counternarcotics enforcement efforts. In December 2011, DOD and the Department of Homeland Security (DHS) announced that the National Guard would shift from the use of ground troops in law enforcement support roles to an emphasis on providing aerial surveillance support for the Border Patrol. That mission is continuing in 2013.\nEscalating violence in Mexico has focused congressional concern on the efficacy of these efforts to secure the Southwest border. The 112 th Congress held hearings on the adequacy of DHS and other federal agencies' efforts to secure the border and enacted legislation to further bolster those efforts. P.L. 112-93 increases penalties for aviation smuggling and P.L. 112-127 tightens sentencing guidelines for building border tunnels.\nComponents of DHS are providing significant assistance to secure the Southwest border. Immigration and Customs Enforcement (ICE) has created 21 Border Enforcement Security Task Forces (BESTs) since 2006, including 12 on the Southwest border and 1 in Mexico City. The task forces serve as platforms for cooperation among local, state, and federal agencies as well as a point of cooperation with Mexico's Secretary of Public Security (SSP). The 112 th Congress enacted P.L. 112-205 , which provides statutory authority for the BEST program. ICE has also set up a Transnational Criminal Investigative Unit (TCIU) in Mexico that works with ICE special agents on criminal investigations and prosecutions. ICE, Customs and Border Protection (CBP), and the U.S. Coast Guard have long-standing relationships with their Mexican counterparts to jointly disrupt the activities of DTOS. CBP and Mexican Customs now coordinate southbound inspections in search of bulk cash and weapons. DHS has also provided funds to reimburse Southwest border states for border-security related expenses through Operation Stonegarden.\nIn March 2009, the Department of Justice (DOJ) announced increased efforts to combat Mexican drug cartels in the United States and to help Mexican law enforcement battle the cartels in their own country. DOJ components involved in the increased efforts include the FBI; Drug Enforcement Administration (DEA); ATF; U.S. Marshals Service (USM); the department's Criminal Division; and the Office of Justice Programs. By mid-2011, large-scale investigative operations against Mexican DTOs and their affiliates in the United States had led to the arrest of more than 5,500 suspects and the seizure of more than $300 million in illicit funds. DOJ's Criminal Division has created a team focused on investigating and prosecuting cases against Mexican DTOs within its Asset Forfeiture and Money Laundering Section. DOJ is also pursuing increased extraditions from Mexico.", "It is estimated that between $19 billion and $29 billion in illicit proceeds flow from the United States to drug trafficking organizations and other organized criminal groups in Mexico each year. Much of the money is generated from the illegal sale of drugs in the United States and is laundered to Mexico through mechanisms such as bulk cash smuggling. While bulk cash smuggling has been a prominent means by which criminals move illegal profits from the United States into Mexico, they have increasingly turned to stored value cards to move money. With these cards, criminals are able to avoid the reporting requirement under which they would have to declare any amount over $10,000 in cash moving across the border. Current federal regulations regarding international transportation only apply to monetary instruments as defined under the Bank Secrecy Act. Of note, stored value cards are not considered monetary instruments under current law.\nThe Financial Crimes Enforcement Network (FinCEN) has issued a final rule, defining \"stored value\" as \"prepaid access\" and implementing regulations regarding the recordkeeping and suspicious activity reporting requirements for prepaid access products and services. This rule does not, however, directly address whether stored value or prepaid access cards would be subject to current regulations regarding the international transportation of monetary instruments. A separate proposed rule would amend the definition of \"monetary instrument,\" for the purposes of BSA international monetary transport regulations, to include prepaid access devices. Even if FinCEN were to issue a final rule and implement regulations requiring individuals leaving the United States to declare stored value, the GAO has identified several challenges that would remain. These challenges relate to law enforcement's ability to detect the actual cards and to differentiate legitimate from illegitimate stored value on cards; travelers' abilities to remember the amount of stored value on any given card; and law enforcement's ability to determine where illegitimate stored value is physically held and subsequently freeze and seize the assets.\nAside from bulk cash smuggling and stored-value cards, Mexican traffickers move and launder money by using digital currency accounts, e-businesses that facilitate money transfers via the Internet, online role-playing games or virtual worlds that enable the exchange of game-based currencies for real currency, and mobile banking wherein traffickers have remote access—via cell phones—to bank and credit card accounts as well as prepaid cards. The proceeds may then be used by DTOs and other criminal groups to acquire weapons in the United States and to corrupt law enforcement and other public officials.\nCountering financial crimes—including money laundering and bulk cash smuggling—is one effort outlined by the National Southwest Border Counternarcotics Strategy (SWBCS). To curb the southbound flow of money from the sale of illicit drugs in the United States, the SWBCS includes several goals: stemming the flow of southbound bulk cash smuggling, prosecuting the illegal use of MSBs and electronic payment devices, increasing targeted financial sanctions, enhancing multilateral/bi-national collaboration, and empirically assessing the money laundering threat.\nIn 2005, ICE and CBP launched a program known as \"Operation Firewall,\" which increased operations against bulk cash smuggling in the U.S.-Mexico border region. This operation was re-initiated in January 2010, and between January 2010 and April 2011, Operation Firewall resulted in eight arrests and the seizure of $6 million in U.S. currency. U.S. efforts against money laundering and bulk cash smuggling are increasingly moving beyond the federal level as well, as experts have recommended. In December 2009, for example, ICE opened a bulk cash smuggling center to assist U.S. federal, state, and local law enforcement agencies track and disrupt illicit funding flows. Still, the GAO has identified several ways in which CBP outbound inspections and other U.S. efforts against bulk cash smuggling, particularly those aimed at combating the use of stored value cards, might be improved.\nThe United States and Mexico have created a Bilateral Money Laundering Working Group to coordinate the investigation and prosecution of money laundering and bulk cash smuggling. A recent Bi-national Criminal Proceeds Study revealed that some of the major points along the Southwest border where bulk cash is smuggled include San Ysidro, CA; Nogales, AZ; and Laredo, McAllen, and Brownsville, TX. Information provided from studies such as these may help inform policy makers and federal law enforcement personnel and assist in their decisions regarding where to direct future efforts against money laundering.\nDespite these efforts, the 112 th Congress held hearings, issued reports, and introduced legislation on how current money laundering efforts could be bolstered.", "Illegal firearms trafficking from the United States has been cited as a significant factor in the drug trafficking-related violence in Mexico. To address this issue, the Bureau of Alcohol, Tobacco, Firearms, and Explosives (ATF) stepped up enforcement of domestic gun control laws in the four Southwest border states under an agency-wide program known as \"Project Gunrunner.\" ATF has also trained Mexican law enforcement officials to use its electronic tracing (eTrace) program, through which investigators are sometimes able to trace the commercial trail and origin of recovered firearms. In the past, ATF has periodically released data on firearms traces performed for Mexican authorities. Although substantive methodological limitations preclude using trace data as a proxy for the larger population of \"crime guns\" in Mexico or the United States, trace data have proven to be a useful indicator of trafficking trends and patterns. In June 2009, GAO recommended to the Attorney General that he should direct ATF to update regularly its reporting on aggregate firearms trace data and trends. For the last two years, however, ATF has only released limited and arguably selected amounts of trace data.\nIn February 2011, ATF came under intense congressional scrutiny for a Phoenix, AZ-based Project Gunrunner investigation known as Operation Fast and Furious, when ATF whistleblowers reported that suspected straw purchasers had been allowed to acquire relatively large quantities of firearms as part of long-term gun trafficking investigations. Some of these firearms are alleged to have \"walked,\" or been trafficked to gunrunners and other criminals, before ATF moved to arrest the suspects and seize all of their contraband firearms. Two of those firearms were reportedly found at the scene of a shootout near the U.S.-Mexico border where U.S. Border Patrol Agent Brian Terry was shot to death. Questions have also been raised about whether a firearm that was reportedly used to murder ICE Special Agent Jamie Zapata and wound Special Agent Victor Avila in Mexico on February 15, 2011, was initially trafficked by a subject of a Houston, TX-based Project Gunrunner investigation. While it remains an open question whether ATF or other federal agents were in a position to interdict the firearms used in these deadly attacks before they were smuggled into Mexico, neither DOJ nor ATF informed their Mexican counterparts about these investigations and the possibility that some of these firearms could be reaching Mexico.\nLegislators in both the United States and Mexico have voiced ongoing concerns about Operation Fast and Furious. Repeated Congressional inquiries prompted U.S. Attorney General Eric Holder to direct his Inspector General to conduct a third evaluation of Project Gunrunner, which was delivered to Congress in September 2012. In addition, in July 2011, the Office of Management and Budget (OMB) approved an ATF multiple rifle sales reporting requirement for a three-year period. Under this reporting requirement, federally licensed gun dealers in Southwest border states are required to report to ATF whenever they make multiple sales or other dispositions of more than one rifle within five consecutive business days to an unlicensed person.", "As bilateral efforts under the Mérida Initiative and U.S. domestic efforts to combat illicit flows related to the drug trade have intensified, Mexican DTOs, particularly Los Zetas, have branched out into other illicit activities, including alien smuggling and human trafficking. Alien smuggling involves people who pay to be illegally transported from or through Mexico into the United States. Some of the smugglers who profit from this activity have ties to DTOs and have kidnapped, extorted, and killed migrants. U.S. and Mexican officials share security concerns about the increasing involvement of organized crime groups in alien smuggling. Human trafficking refers to cases in which individuals are coerced into sexual exploitation or forced labor; some migrants who contract with smugglers eventually become victims of human trafficking. Undocumented migrants, along with women, children, and indigenous persons, have been identified as groups that are particularly vulnerable to human trafficking in Mexico.\nMexican and U.S. law enforcement agencies collaborate to combat alien smuggling and human trafficking. For example, through the Operation Against Smuggling Initiative on Safety and Security (OASISS), Mexican alien smugglers apprehended in the United States can be prosecuted in Mexico. From the time of its inception in 2005 through the end of FY2011, OASISS referred 2,617 cases to Mexican authorities.\nMexican and bilateral investigations and prosecutions against human trafficking have intensified since Mexico reformed its federal criminal procedure code to criminalize trafficking in late 2007. All of Mexico's states have enacted code reforms that criminalize at least some forms of human trafficking. Since 2007, the State Department has removed Mexico from its human trafficking watch list and ranked it as a \"Tier 2\" country (the second-best out of four categories) in its annual Trafficking in Persons (TIP) reports, reflecting this progress. According to the State Department's TIP report covering 2011, Mexico convicted 14 sex traffickers in 2011, but did not report any convictions for forced labor. Observers maintain that the number of prosecutions recorded is low relative to the scale of the human trafficking problem in Mexico. The Mexican Congress recently approved a new law against trafficking that amends the 2007 federal anti-TIP law and includes prison sentences of up to 40 years for people convicted of sexual exploitation. Yet the Congress also cut funding for anti-TIP efforts and for the Attorney General's Office in 2012.\nMany Mexican law enforcement activities with respect to combating alien smuggling and human trafficking receive some degree of U.S. financial support. One way to increase Mexico's role in migration enforcement may be for Congress to consider additional investments in these programs. The United States also could include migration control as an explicit priority within other existing programs, such as the Mérida Initiative. On the other hand, Mexico is already among the largest recipients of U.S. anti-TIP assistance in the Western Hemisphere, and some Members of Congress may be reluctant to invest more resources in such programs.", "", "The State Department has long documented concerns about human rights conditions in Mexico. Mexican and international human rights groups have presented evidence that human rights conditions in the country have deteriorated as a result of the brutal violence perpetrated by organized crime groups and the government's response to that violence. Although human rights issues related to the Mexican government's struggle against organized crime have received the most attention in recent years, other societal abuses have continued to be observed. Those include domestic violence and femicide; trafficking in persons; and abuses against migrants transiting Mexico, particularly undocumented migrants from Central America.\nThere have been ongoing concerns about the human rights records of Mexico's federal, state, and municipal police. For the past several years, State Department's human rights reports covering Mexico have cited credible reports of police involvement in extrajudicial killings, kidnappings for ransom, and torture. While abuses are most common at the municipal and state level, where corruption and police collaboration with criminal groups often occurs, federal forces—including the Federal Police—have also committed serious abuses. Individuals are most vulnerable to police abuses after they have been arbitrarily detained and before they are transferred to the custody of prosecutors, or while they are being held in preventive detention. Some 43% of Mexican inmates are reportedly in pre-trial detention.\nThe Calderón government sought to combat police corruption and human rights abuses through increased vetting of federal forces; the creation of a national police registry to prevent corrupt police from being re-hired; the use of internal affairs units; and the provision of human rights training. In 2012, the government also announced new protocols on the use of force and how detentions are to be handled that were designed to prevent abuses. A January 2009 public security law codified vetting requirements and professional standards for state police to be met by 2013, but progress toward meeting those standards has been uneven. With a few exceptions, efforts to reform municipal police forces have lagged behind.\nThere has also been increasing concern that the Mexican military, which is less accountable to civilian authorities than the police, is committing more human rights abuses since it is has been tasked with carrying out public security functions. A November 2011 Human Rights Watch (HRW) report maintains that cases of torture, enforced disappearances, and extrajudicial killings have increased significantly in states where federal authorities have been deployed to fight organized crime. According to Mexico's Human Rights Commission (CNDH), the number of complaints of human rights abuses by Mexico's National Defense Secretariat (SEDENA) increased from 182 in 2006 to a peak of 1800 in 2009 before falling slightly to 1,695 in 2011. The Trans-Border Institute has found that the number of abuses by SEDENA forces that have been investigated and documented by CNDH has also declined since 2008-2009, particularly in areas where large-scale deployments have been scaled back. In contrast, complaints of abuses against the Secretariat of the Navy (SEMAR) reported to CNDH increased by 150% from 2010 to 2011 as its forces became more heavily involved in anti-DTO efforts. While troubling, only a small percentage of those allegations have resulted in the CNDH issuing recommendations for corrective action to SEDENA or SEMAR, which those agencies say they have largely accepted and acted upon. A June 2011 constitutional amendment gave CNDH the authority to force entities that refuse to respond to its recommendations to appear before the Mexican Congress.\nIn addition to expressing concerns about current human rights abuses, Mexican and international human rights groups have criticized the Mexican government for failing to hold military and police officials accountable for past abuses. In addition to taking steps to reform the police and judiciary, the Calderón government took some steps to comply with rulings by the Inter-American Court of Human Rights (IACHR) that cases of military abuses against civilians should be tried in civilian courts. While a few dozen cases were transferred to civilian jurisdiction and former President Calderón asked SEDENA and SEMAR to work with the Attorney General to accelerate transfers, most cases were still processed in the military justice system. Military prosecutors have opened thousands of investigations into allegations of human rights abuses as a result of complaints filed with the CNDH, with few having resulted in convictions.\nA reform of Article 57 of the military justice code was submitted by then-President Calderón in October 2010 mandating that at least certain human rights violations be investigated and prosecuted in civilian courts. A more comprehensive proposal that required that all cases of alleged military human rights violations be transferred to the civilian justice system was approved by the Mexican Senate's Justice Commission in April 2012; however, the bill was subsequently blocked from coming to a vote. In September 2012, another proposal to reform Article 57 was presented in the Mexican Senate, but not enacted. Enacting a reform of Article 57 of the military justice code may become more urgent now for the Peña Nieto Administration now that Mexico's Supreme Court is in the process of establishing binding legal precedent for determining jurisdiction in cases involving alleged military human rights violations against civilians.\nHuman rights defenders and journalists have been particularly vulnerable to abuses by organized crime, sometimes acting in collusion with corrupt government authorities. Recently, several prominent human rights defenders have been harassed, attacked, and even killed, including members of the high-profile Movement for Peace with Justice and Dignity led by Javier Sicilia. Increasing violent crimes targeting journalists, combined with high levels of impunity for the perpetrators of those crimes, have made Mexico the most dangerous country in the Western Hemisphere for journalists. Crimes against journalists range from harassment, to extortion, to kidnapping and murder. The Committee to Protect Journalists (CPJ) has documented 58 murders of journalists and at least 10 cases of journalists disappearing in Mexico since 2000. Threats from organized crime groups have made journalists and editors fearful of covering crime-related stories, and in some areas coverage of the DTOs' activities have been shut down.\nThe Calderón government and the Mexican Congress took some steps to better protect human rights defenders and journalists, but many human rights organizations have called upon the Peña Nieto Administration to do more. The Calderón government established a special prosecutor within the Attorney General's Office to attend to crimes against freedom of expression and created mechanisms to provide increased protection for journalists and human rights defenders. Those mechanisms have yet to be effectively implemented. The Mexican Congress enacted a law to make crimes against journalists a federal offense and a law to require the federal government to provide protection to journalists and human rights defenders who are \"at risk\" of being victimized and to their families. Another law approved by the Congress in 2012, but not promulgated by the Calderón government, would require the state to track victims of organized crime and provide assistance to victims and their families. Human rights organizations expressed satisfaction after President Peña Nieto signed that law, commonly referred to as the \"victims' law,\" in January 2013, but said that the real test of his government's commitment to human rights will be in how that and other laws are implemented.", "In 2008, Congress debated whether human rights conditions should be placed on Mérida assistance beyond the requirements in §620J of the Foreign Assistance Act (FAA) of 1961. That section was re-designated as §620M and amended by the Consolidated Appropriations Act of 2012 ( P.L. 112-74 ). It states that an individual or unit of a foreign country's security forces is prohibited from receiving assistance if the Secretary of State receives \"credible evidence\" that an individual or unit has committed \"a gross violation of human rights.\"\nThe FY2008 Supplemental Appropriations Act ( P.L. 110-252 ), which provided the first tranche of Mérida funding, had less stringent human rights conditions than had been proposed earlier, largely due to Mexico's concerns that some of the conditions would violate its national sovereignty. The conditions required that 15% of INCLE and Foreign Military Financing (FMF) assistance be withheld until the Secretary of State reports in writing that Mexico is taking action in four human rights areas:\n1. improving transparency and accountability of federal police forces; 2. establishing a mechanism for regular consultations among relevant Mexican government authorities, Mexican human rights organizations, and other relevant Mexican civil society organizations, to make consultations concerning implementation of the Mérida Initiative in accordance with Mexican and international law; 3. ensuring that civilian prosecutors and judicial authorities are investigating and prosecuting, in accordance with Mexican and international law, members of the federal police and military forces who have been credibly alleged to have committed violations of human rights, and the federal police and military forces are fully cooperating with the investigations; and 4. enforcing the prohibition, in accordance with Mexican and international law, on the use of testimony obtained through torture or other ill-treatment.\nSimilar human rights conditions were included in FY2009-FY2011 appropriations measures that funded the Mérida Initiative. However, the first two conditions are not included in the 15% withholding requirement in the FY2012 Consolidated Appropriations Act ( P.L. 112-74 ). As previously mentioned, Congress has yet to pass a final FY2013 appropriations measure. It remains to be seen whether an omnibus bill would include the conditions on aid to Mexico that are in the Senate Appropriations Committee's version of the FY2013 foreign operations appropriations measure S. 3241 ( S.Rept. 112-172 ). Those conditions would retain the condition related to torture, as well as require the State Department to report that Mexico has reformed its military justice code and is requiring police and military officials to immediately transfer detainees to civilian judicial authorities.\nThus far, the State Department has submitted three 15% progress reports on Mexico to congressional appropriators (in August 2009, September 2010, and August 2012) that have met the statutory requirements for FY2008-FY2012 Mérida funds that had been on hold to be released. Nevertheless, the State Department has twice elected to hold back some funding pending further progress in key areas of concern. In the September 2010 report, for example, the State Department elected to hold back $26 million in FY2010 supplemental funds as a matter of policy until further progress was made in the areas of transparency and combating impunity. Those funds were not obligated until the fall of 2011.\nIn the August 2012 report, the State Department again decided to hold back all of the FY2012 funding that would have been subject to the conditions (roughly $18 million) as a matter of policy until it can work with Mexican authorities to determine steps to address key human rights challenges. Those include: improving the ability of Mexico's civilian institutions to investigate and prosecute cases of human rights abuses; enhancing enforcement of prohibitions against torture and other mistreatment; and strengthening protection for human rights defenders.\nThe State Department has established a high-level human rights dialogue with Mexico, provided human rights training for Mexican security forces (at least eight hours for every course offered), and implemented a number of human rights-related programs. For example, USAID has provided $1.3 million to the U.N. Office of the High Commissioner for Human Rights to help civil society groups monitor abuses by security forces and to improve how security agencies respond to those abuses. In 2011, USAID launched a $5 million program being implemented by Freedom House to improve protections for Mexican journalists and human rights defenders.\nCongress may choose to augment Mérida Initiative funding for human rights programs, such as ongoing human rights training programs for military and police, or newer efforts, such as support for human rights organizations through ESF funds. Human rights conditions in Mexico, as well as compliance with conditions on Mérida assistance, are also likely to continue to be important oversight issues as well. Policy makers may closely follow how the Peña Nieto moves to punish past human rights abuses and prevent new abuses from occurring.", "", "Mexico is the leading country of origin among U.S. legal permanent residents (LPRs) and among unauthorized immigrants in the United States, according to the Department of Homeland Security Office of Immigration Statistics (OIS). While the Immigration and Nationality Act (INA) sets a ceiling on immigration from any one country at 7%, most Mexican immigrants are exempt from the statutory numerical limits because they enter as immediate relatives of U.S. citizens. Mexicans made up 62% of the unauthorized aliens living in the United States in 2010 according to estimates based upon the American Community Survey (ACS) of the U.S. Census Bureau. OIS demographers estimated from the ACS that there were 6.7 million Mexican nationals among the estimated 10.8 million unauthorized resident population in 2010.\nMexican migration flows, particularly unauthorized flows, began to decline in mid-2006 and have continued on a downward trajectory since that time. In fact, data from multiple sources estimate that the net rate of unauthorized migration from Mexico to the United States is fluctuating somewhere near zero. Researchers have variously attributed this declining emigration to the U.S. recession, to stepped up U.S. border security that has made the journey more hazardous, to increasing abuses of migrants by smugglers and criminal organizations, and to expanding job opportunities in Mexico. Emigration flows may increase again once economic growth picks up in the United States. However, future flows may be smaller than in the past because young Mexicans may feel less pressure than previous generations to emigrate in order to find work.", "Mexico is in a unique position in the international migration system because in addition to its role as a source of international emigrants, it is also an important country of transit and, to a lesser extent, a destination country for transnational migrants. Most transit migration though Mexico consists of unauthorized migration of U.S.-bound Central American migrants. Unauthorized flows peaked in 2005, when there were roughly 430,000 illegal crossings into Mexico from Central America, before falling to an estimated 140,000 crossings in 2010. Flows have declined for many of the same reasons that Mexico-U.S. emigration has declined, but particularly due to the fears that potential Central American migrants now have about being victimized by organized criminal groups in Mexico.\nUntil recently, Mexico lacked a cohesive migration policy, and successive Mexican governments appeared to express little concern about the number of Mexican citizens leaving for the United States without proper documents and often at great personal risk. Beginning in the late 1990s, however, increasing emigrant deaths along the U.S.-Mexico border and the precarious situation of unauthorized Mexican migrants in the United States led the Mexican government to take a more active and comprehensive approach to migration issues, including through greater engagement with the United States and reforms to its own migration policy.", "Vicente Fox's election in 2000 ended 71 years of one-party rule and his government made reaching a U.S.-Mexico immigration agreement a top priority. Fox and President George W. Bush met five times during the first nine months of 2001, and on September 6, 2001, the two presidents announced a framework agreement to negotiate a major bilateral migration accord. Although the possibility of a U.S.-Mexico migration accord faded after the 9/11 terrorist attacks, the Mexican government supported efforts to enact comprehensive immigration reform in the United States. In February 2006, for example, the Mexican Congress passed a Concurrent Resolution on Migration acknowledging Mexico's shared responsibility to enforce legal emigration, increase security along its northern and southern borders, and create opportunities for workers in Mexico so that fewer individuals would emigrate. In exchange for these commitments, the resolution called for the development of a U.S. guest worker program.", "Between 2006 and 2011, the Calderón Administration and the Mexican Congress took significant steps to overhaul Mexico's migration policies, although the implementation of recent reforms remains a work in progress. Previously, Mexico's primary immigration law, the General Population Act of 1974, limited legal immigration and restricted the rights of foreigners in Mexico, with unauthorized migrants subject to criminal penalties. A 2007 law made human trafficking a criminal offense at the federal level, and by 2010, all 32 Mexican states had enacted some form of anti-trafficking reform. In 2008, the Mexican Congress reformed the General Population Act to decriminalize simple migration offenses, making unauthorized migrants subject to fines and voluntary repatriation or deportation, but no longer subject to imprisonment. That year the Calderón government also announced a new strategy and more than $200 million in new investments to improve security conditions, modernize customs and immigration installations, and promote development in Mexico's southern border region. In 2010, Mexico's Congress passed a law stiffening penalties for alien smuggling, particularly abuses committed by public officials. Efforts to identify and punish corrupt officials who may have abused migrants have advanced a bit further at the federal level than in most states and municipalities.\nThe long-term results of Mexico's recent migratory reform efforts are likely to hinge on how well the Mexican government is able to implement a new immigration law that was unanimously approved by the Mexican Congress and signed by President Calderón in May 2011. Some of the main objectives of the law are to (1) guarantee the rights and protection of all migrants who transit Mexican territory; (2) simplify the procedures governing migration in Mexico to facilitate legal immigration; (3) establish the principles of family reunification and humanitarian protection as key elements of the country's immigration policy; and, (4) delineate the roles of each entity responsible for aspects of migration policy so as to improve migration management and reduce abuses of migrants by public officials.\nThe first and fourth objectives most directly respond to the criticisms that have been leveled against the Mexican government for failing to adequately prevent, investigate, and punish abuses of migrants by public officials and organized crime groups. Within the first objective, the law guarantees all migrants access to education, justice, and healthcare services and reduces the time that unauthorized migrants can be held in detention centers to 15 working days. The law also gives legal status to special government \"Beta Groups\" that assist migrants in distress and establishes special procedures for how children and other vulnerable groups should be treated. Under the fourth objective, the law gives INM legal authority to enforce immigration policy and stipulates that only federal immigration officials can ask for documents to verify a migrant's status.", "As previously stated, since the mid-2000s, the Mexican government has supported efforts to enact comprehensive immigration reform in the United States. Comprehensive bills have generally addressed border security, enforcement of immigration laws within the United States, employment eligibility verification, temporary worker programs, permanent admissions and, most controversially, unauthorized aliens in the United States.\nDespite President Obama's stated commitment to pursue comprehensive immigration reform, immigration was not a front-burner issue for the 112 th Congress. A comprehensive immigration reform bill ( S. 1258 ) and DREAM Act bills ( S. 952 , H.R. 1842 , and H.R. 3823 ) were introduced in the 112 th Congress, but not considered. The 112 th Congress did take legislative action on some measures containing provisions on a range of immigration-related topics.\nOn June 15, 2012, the Obama Administration announced that certain individuals who were brought to the United States as children and meet other criteria similar to those included in DREAM Act bills would be considered for relief from removal. Under a memorandum issued by Secretary of Homeland Security Janet Napolitano on that date, these individuals would be eligible for deferred action for two years, subject to renewal, and could apply for employment authorization. The deferred action process set forth in the June 15, 2012, memorandum, however, would not grant eligible individuals a legal immigration status.\nFormer President Calderón did not promise Mexicans that he could affect immigration reform efforts in the U.S. Congress or reach a bilateral accord with the Obama Administration. He saw how former President Vicente Fox's failure to secure a bilateral immigration accord with the United States in 2001 proved to be a major blow to his administration. Incoming President Peña Nieto has pledged his full support for President Obama's pledge to introduce comprehensive reform, and is likely to continue Mexico's efforts to improve border security, enforce its migration policies in a humane way, and create jobs in order to discourage illegal emigration. His government is also likely to continue protesting the excessive use of force by U.S. agents on the border; defending the rights of Mexican migrants in the United States, regardless of their status; and challenging state laws against illegal immigration.", "", "The future of oil and gas production in Mexico is of great importance for Mexico's economic stability and for U.S. energy security; Mexico is consistently a top U.S. crude oil supplier. Mexico's state oil company, PEMEX, established in 1938 as the world's first major national oil company, remains an important source of government revenue, but is struggling to counter the country's declining oil production. Production reached a peak of 3.48 million barrels per day in 2004 and has been declining since then, falling to 2.96 million barrels per day in 2011.\nPolicy experts have long urged Mexico to reduce the heavy fiscal burdens on PEMEX and to reform the constitution to enable PEMEX to pursue joint ventures with foreign oil companies that have the technological experience and capital required for oil and gas exploration and production. However, numerous stakeholders in Mexico are concerned that increasing private involvement in PEMEX could threaten Mexico's constitutionally protected control over its natural resources. Legislators from the left and center have derailed most oil and gas sector reform efforts introduced, despite limited reforms being enacted by the Calderón Administration in 2008. Those reforms brought private sector experts into PEMEX's management structure, created an independent board to advise the company, and added greater flexibility to its procurement and investment processes. Most significantly, the 2008 reforms permit PEMEX to create incentive-based service contracts with private companies.\nMany analysts contend, however, that the reforms did not go far enough and that they do little to help the PEMEX address its major challenges. Most experts contend that PEMEX only has the capacity to extract oil or gas in shallow waters and needs to bring in new technologies and know-how through private investment to allow the company to successfully explore and produce in the deep waters in the Gulf of Mexico. The lack of further reforms is keeping Mexico from allowing much-needed foreign investment in oil exploration. Though the performance-based contracts are expected to increase production and reserves, PEMEX faces serious challenges in finding new, productive wells and engineering capacity.\nEnacting energy reforms is a task which President Peña Nieto has said will be a top priority for his administration in 2013. However, constitutional reforms require a two thirds vote in the Mexican Congress. The PRI-led coalition's failure to capture a majority in either chamber of the Congress may mean that Peña Nieto will encounter the same type of opposition to his reformist agenda that Calderón has experienced, unless he is able to reach agreements with the PAN. The PRD and portions of the PRI remain opposed to increasing private involvement in PEMEX. Some predict that Peña Nieto may move to implement reforms that have broad based support, such as making PEMEX's budget more independent and reducing its tax burden as part of a larger fiscal reform effort, before pushing for greater private cooperation with PEMEX.", "The United States and Mexico have been collaborating on geothermal energy projects since the 1970s, but the possibility of expanding joint efforts to produce renewable energy sources has just recently returned to the bilateral agenda. On April 16, 2009, President Obama and Mexican President Calderón announced the Bilateral Framework on Clean Energy and Climate Change to jointly develop clean energy sources and encourage investment in climate-friendly technologies. Among others, its goals include enhancing renewable energy, combating climate change, and strengthening the reliability of cross-border electricity grids. Bilateral meetings to advance the Framework were held in January 2010, May 2011, and May 2012. There is particular interest on both sides in ensuring that Mexico is able to develop unconventional energy sources in an environmentally responsible way and in overseeing 10 new projects related to wind and solar energy that the North American Development Bank has helped finance. USAID and Mexico have also signed a memorandum of understanding to strengthen and expand cooperation on environmental issues with the Mexico Global Climate Change (GCC) Program , a five-year, approximately $70 million, program. Part of the program seeks to reduce emissions from the energy sector and will assist Mexico's long-term, low emissions development planning.", "Estimates that a marine area straddling the U.S.-Mexico border held billions of barrels of crude oil prompted discussions between the United States and Mexico starting in the 1970s on how to manage exploration. These resource estimates have continued to drive negotiations focused on jointly managing ocean areas in the Gulf of Mexico beyond the two nation's respective exclusive economic zones (EEZs). In 2001, the marine area was delimited by both countries and they agreed that a moratorium on exploration and drilling would be in effect for approximately 10 years in a \"buffer zone\" marking the area at the border of each country's marine boundary. The stated purpose of the moratorium was to grant time for each country to learn more about the geology and geophysical characteristics of the area and to determine how to best address managing trans-boundary resources once the moratorium was lifted. During the early years that the moratorium was in effect, both countries studied the area and considered options for managing oil and gas reserves in the border area. In May 2010, the United States and Mexico jointly announced their intention to work toward replacing the moratorium with a mutual plan for developing trans-boundary resources.\nOn February 20, 2012, the governments of the United States and Mexico announced the Trans-boundary Hydrocarbons Agreement. The agreement is a step toward clarifying relations between the two countries with respect to managing resources in portions of the Gulf of Mexico that straddle their international marine border. Former Secretary of State Hillary Clinton referred to the Trans-boundary agreement as an example of recent U.S.-Mexican efforts to develop a sustainable energy trading relationship.\nBefore the agreement can take effect, both countries must review and accept it. The Mexican Senate approved the agreement on April 12, 2012, and the Mexican Presidency completed all other domestic requirements to implement the agreement on May 22, 2012. Steps toward U.S. review and acceptance are currently underway with the Department of State taking lead responsibility for addressing questions about the agreement during this process. A procedural question has emerged with respect to what actions are needed for the agreement to be accepted in the United States. At issue is whether the agreement should be entered in the form of a treaty (in which case it would need to be submitted to the Senate and approved by a two-thirds majority) or a Congressional-Executive Agreement (in which case congressional authorization would take the form of a statute passed by a majority of both Houses).\nThe 113 th Congress may soon be called upon to decide what, if any, implications might stem from the United States accepting this agreement. Accordingly, the following questions arise with respect to how the agreement might affect U.S. interests: (1) Would the agreement lead to any new legal or regulatory obligations for U.S. interests? (2) Would existing environmental laws or existing lease terms and conditions in effect in the Gulf of Mexico be affected by the agreement?, and (3) What, if any, fiscal implications (gains or losses) might result from accepting the agreement and carrying out collaborative projects in the boundary area?", "The bilateral trade relationship with Mexico is of key interest to Congress because of Mexico's proximity, the high volume of trade with Mexico, and the strong cultural and economic ties between the two countries. The United States and Mexico have strong economic ties through the North American Free Trade Agreement (NAFTA), which has been in effect since 1994. Since the implementation of NAFTA, U.S.-Mexico trade has quadrupled, with the value of total bilateral trade reaching some $460 billion in 2011. Mexico ranks third as a source of U.S. imports, after China and Canada, and second, after Canada, as an export market for U.S. goods and services. The value of U.S. foreign direct investment (FDI) in Mexico rose from $17 billion in 1994 to $91.4 billion in 2011, a 440% increase. Most studies show that the net economic effects of NAFTA on both the U.S. and Mexican economies have been small but positive, though there have been adjustment costs to some sectors within both countries. Congress has monitored the implementation of NAFTA, the effects of NAFTA on the U.S. and Mexican economies, and the resolution of NAFTA-related trade disputes. Mexico's accession to negotiations for a Trans-Pacific Partnership (TPP) trade agreement is likely to generate congressional interest.", "Several NAFTA institutions mandated by the agreements have been functioning since 1994. The tripartite Commission on Environmental Cooperation (CEC) was established in Montreal, Canada; and the Commission for Labor Cooperation (CLC) was established in Dallas, TX. In addition, the bilateral Border Environment Cooperation Commission (BECC), located in Ciudad Juárez, Mexico, and the North American Development Bank (NADBank), headquartered in San Antonio, TX, were created to promote and finance environment projects along the U.S.-Mexico border. The NAFTA institutions have operated to encourage cooperation on trade, environmental and labor issues, and to consider nongovernmental petitions under the labor and environmental side agreements. Following up on a March 2002 agreement by Presidents Bush and Fox in Monterrey, Mexico, to broaden the mandate of the NADBank, Congress agreed in March 2004 to permit the NADBank to make grants and nonmarket rate loans for environmental infrastructure along the border. In the fall of 2011, the NADBank's mandate was broadened to include projects aimed at developing clean energy. Some U.S. and Mexican policymakers have supported broadening the functions of NADBank further to include other types of infrastructure development; this would likely require approval by both Congresses.", "", "Since 2005, the implementation of NAFTA trucking provisions has periodically been in dispute. In March 2009, Congress included a provision in P.L. 111-8 , the FY2009 Omnibus Appropriations Act, to terminate a pilot program that had allowed Mexican-registered trucks to operate beyond the 25-mile border commercial zone inside the United States. This move prompted Mexico to impose retaliatory tariffs on over 90 U.S. agricultural and industrial products. The goods accounted for a value of $2.4 billion in U.S. exports to Mexico in 2007. The FY2010 Consolidated Appropriations Act ( P.L. 111-117 ) and FY2011 Full-Year Continuing Appropriations Act ( P.L. 112-10 ) did not include language that was in P.L. 111-8 prohibiting the Department of Transportation from funding a pilot project for Mexican-registered trucks to operate in the United States.\nIn 2011, the United States and Mexico finally resolved the long-standing NAFTA trucking dispute. In January 2011, the Obama Administration released a concept document for a proposed program to implement the trucking provisions. The Mexican government agreed to phase out the retaliatory tariffs it had imposed once the plan was finalized and to end all retaliatory tariffs once the first Mexican carrier was certified to operate in the United States. On July 6, 2011, the Department of Transportation signed a formal agreement with Mexico establishing a pilot trucking program and ending 50% of the retaliatory tariffs that had been imposed on U.S. exports to Mexico. The first Mexican truck entered the United States under the program on October 21, 2011. Mexico then ended the rest of the retaliatory tariffs it had imposed on the United States. Some Members of Congress continue to oppose the implementation of the trucking provisions because they remain concerned about the safety of Mexican trucks operating in the United States. Others support a resolution to the issue and contend that Mexico's retaliatory tariffs have had strong negative effects on local U.S. industries and jobs.", "On tuna issues, the Clinton Administration lifted the embargo on Mexican tuna in April 2000 under relaxed standards for a dolphin-safe label in accordance with internationally agreed procedures and U.S. legislation passed in 1997 that encouraged the unharmed release of dolphins from nets. However, a federal judge in San Francisco ruled that the standards of the law had not been met, and the Federal Appeals Court in San Francisco sustained the ruling in July 2001.\nUnder the Bush Administration, the Commerce Department ruled on December 31, 2002, that the dolphin-safe label may be applied if qualified observers certify that no dolphins were killed or seriously injured in the netting process, but Earth Island Institute and other environmental groups filed suit to block the modification. On April 10, 2003, the U.S. District Court for the Northern District of California enjoined the Commerce Department from modifying the standards for the dolphin-safe label. On August 9, 2004, the federal district court ruled against the Bush Administration's modification of the dolphin-safe standards, and reinstated the original standards in the 1990 Dolphin Protection Consumer Information Act. That decision was appealed to the U.S. Ninth Circuit Court of Appeals, which ruled against the Administration in April 2007, finding that the Department of Commerce did not base its determination on scientific studies of the effects of Mexican tuna fishing on dolphins.\nIn late October 2008, Mexico initiated World Trade Organization (WTO) dispute proceedings against the United States, maintaining that the documentary evidence required for meeting U.S. \"dolphin-safe\" standards unfairly discriminated against Mexican tuna exporters. In April 2009, the WTO agreed to set up a dispute panel to rule on Mexico's complaint. In September 2011, the panel ruled that U.S. standards were \"more trade restrictive than necessary,\" but not discriminatory toward Mexico. The U.S government must respond to the ruling by July 2013. Separately, in September 2010, the U.S. government requested that a dispute resolution panel be convened under the auspices of the NAFTA agreement rather than through the WTO. The NAFTA panel proceedings have made little progress.\nDuring 2012, another potential trade issue emerged over the bilateral tomato trade. In late September 2012, the U.S. Department of Commerce announced a preliminary decision to end a suspension agreement with Mexican tomato growers that has been in place since 1996. The agreement has allowed Mexican growers to sell to the U.S. market as long as they have agreed not to sell their tomatoes below a reference price. Should a final decision definitively end the agreement, U.S. tomato growers would then be able to file complaints against Mexican producers for unfair trade practices that could result in antidumping tariffs on Mexican tomato exports, which in turn could lead to Mexican retaliation. Negotiators are trying to work out a revised suspension agreement that would comply with U.S. antidumping laws that are meant to protect U.S. producers from unfair competition.", "On June 18, 2012, President Obama announced that the nine countries involved in the negotiations of the proposed Trans-Pacific Partnership (TPP) had extended an invitation to Mexico to join negotiations for the proposed regional free trade agreement. The announcement that Canada has also been invited to join the negotiations came on June 19, 2012. The original countries involved in the negotiations included the United States, Australia, Brunei, Chile, Malaysia, New Zealand, Peru, Singapore, and Vietnam.\nU.S. negotiators and others describe and envision the TPP as a \"comprehensive and high-standard\" FTA, presumably because they hope it will liberalize trade in nearly all goods and services and include commitments beyond those currently established in the World Trade Organization (WTO). The broad outline of an agreement was announced on the sidelines of the Asia-Pacific Economic Cooperation (APEC) ministerial in November 2011 in Honolulu, HI. If implemented, the TPP potentially could eliminate tariff and non-tariff barriers to trade and investment among the parties and could serve as a template for a future trade pact among APEC members and potentially other countries. Congress has a direct interest in the negotiations, both through influencing U.S. negotiating positions with the executive branch, and by passing legislation to implement any resulting agreement.\nThe proposed TPP would likely enhance the trade links Mexico already has with the United States and Canada under NAFTA. This could include further reduction of barriers to trade and the negotiation of key issues in areas such as agriculture, intellectual property rights protection, government procurement, regulatory cohesion, investment issues, and others. The Mexican government agreed to several conditions that TPP countries had placed on its entry into the negotiations, including a commitment to \"high standards.\" The conditions included that Mexico would not be able to reopen any existing agreements that were already made by the current TPP partners, unless they agreed to revisit something previously agreed upon. Thus far, TPP partners have only closed out one chapter of the agreement, which is predicted to have 26 chapters in total.", "P.L. 112-10 ( H.R. 1473 ), Department of Defense and Full-Year Continuing Appropriations Act, FY2011. Signed into law April 15, 2011, the measure funded government programs, including foreign assistance to Mexico, at reduced levels for the remainder of FY2011. The measure contained the same human rights conditions as in P.L. 111-8 .\nP.L. 112-55 ( H.R. 2112 ), Consolidated and Further Continuing Appropriations Act, 2012. Signed into law November 18, 2011, the measure funded government programs through December 16, 2011. S.Amdt. 738 (Cornyn) prohibited funding for Operation \"Fast and Furious\" or any other similar programs.\nP.L. 112-74 ( H.R. 2055 ), Consolidated Appropriations Act, 2012. Signed into law December 23, 2011, the measure funds government programs, including foreign aid to Mexico, for the remainder of FY2012. The act does not include a final funding level for Mexico, but does make 15% of assistance provided to the Mexican military and police subject to human right conditions that are slightly different than previous Mérida appropriations. The conditions require the Secretary of State to report that the Mexican government is taking steps to investigate human rights abuses by military and police forces in civilian courts and prohibiting the use of evidence gathered through torture. The restrictions do not apply to assistance to promote transparency, anti-corruption, and the rule of law within the military and police forces. In the report ( H.Rept. 112-331 ) accompanying the act, the conferees express their support for the Obama Administration's request for Mexico, including the $282 million requested for the Mérida Initiative. The conferees also direct the Secretary of State to provide a report within 90 days of the enactment of the act detailing how U.S. programs are helping to achieve judicial and police reform in Mexico. They also call upon the State Department to develop and implement a border security strategy with Mexico. The act also contains a number of border security provisions.\nP.L. 112-81 ( H.R. 1540 ), National Defense Authorization Act for FY2012. Signed into law December 31, 2011, the measure authorizes the Department of Defense to continue providing support for counter-drug activities in Mexico through FY2014.\nP.L. 112-87 ( H.R. 1892 ), Intelligence Authorization Act for FY2012. Signed into law January 3, 2012, the measure requires the Secretary of Homeland Security to submit a report to the congressional intelligence and homeland security committees within 90 days of the enactment of the act on whether restrictions on the use of airspace are inhibiting the use of unmanned aerial vehicles by DHS along the U.S.-Mexico border.\nP.L. 112-93 ( H.R. 3801 ), Ultralight Aircraft Smuggling Prevention Act of 2012 . Signed into law February 10, 2012, the measure amends the Tariff Code of 1930 with respect to aviation smuggling to extend its coverage of aircraft to ultralight vehicles or any other contrivance used to fly in the air.\nP.L. 112-127 ( H.R. 4119 ), Border Tunnel Prevention Act of 2012 . Signed into law June 5, 2012, the measure tightens sentencing and prosecution regulations for those who conspire to build trans-border smuggling tunnels.\nP.L. 112-205 ( H.R. 915 ), Jaime Zapata Border Enforcement Security Task Force Act. Signed into law December 7, 2012, the measure provides statutory authority for the Border Enforcement Security Task Force (BEST) program within ICE, and authorizes funding for the program for FY2012-FY2016.\nP.L. 112-220 ( H.R. 3783 ), Countering Iran in the Western Hemisphere Act of 2012 . Signed into law January 18, 2012, the measure requires the State Department to submit a comprehensive strategy to counter Iran's presence in the Western Hemisphere, including in Mexico and along the U.S.-Mexico border.\nH.J.Res. 117 ( Rogers ), Continuing Appropriations Resolution, FY2013. Introduced September 10, 2012; House approved September 14, 2012. Senate approved September 22, 2012. Funds government programs through March 27, 2013." ], "depth": [ 0, 1, 2, 2, 2, 2, 2, 2, 1, 2, 3, 3, 3, 2, 3, 3, 3, 3, 2, 3, 3, 2, 3, 3, 4, 4, 3, 2, 3, 3, 3, 2, 3, 3, 4, 4, 3, 1 ], "alignment": [ "h0_title h2_title h1_title h3_title", "h0_title h1_title", "h0_full h1_full", "h0_full", "h1_full", "", "", "", "h0_full h2_full h3_title h1_full", "h2_title h3_title", "h3_full h2_full", "", "", "h3_full h2_title", "h3_full h2_full", "", "", "", "", "", "", "", "", "", "", "", "", "h2_title", "", "", "h2_full", "h0_full h2_title", "", "h2_title", "h2_full", "", "", "" ] }
{ "question": [ "What is the current relationship between the United States and Mexico?", "What was the result of Mexico's 2012 Presidential election?", "What concerns have analyzed raised regarding this presidency?", "What did Felipe Calderon pursue while in power?", "What where the results of these efforts?", "How has the United State's involvement in the Mérida Initiative evolved over time?", "What priorities have U.S. policymakers needed to balance regarding Mexico?", "How have economic ties changed?", "What was the stance of the 112th Congress regarding Mexico?", "What was the Obama Administration's stance vis-a-vis Mexico?", "How did Congress respond to this request?" ], "summary": [ "The United States and Mexico have a close and complex bilateral relationship as neighbors and partners under the North American Free Trade Agreement (NAFTA). Although security issues have recently dominated the U.S. relationship with Mexico, analysts predict that bilateral relations may shift toward economic matters now that President Enrique Peña Nieto has taken office.", "Peña Nieto of the Institutional Revolutionary Party (PRI) defeated leftist Party of the Democratic Revolution (PRD) candidate Andrés Manuel López Obrador and Josefina Vázquez Mota of the conservative National Action Party (PAN) in Mexico's July 1, 2012 presidential election. As a result, the PRI, which controlled Mexico from 1929 to 2000, retook the presidency on December 1, 2012.", "Some analysts have raised concerns regarding the PRI's return to power, but President Peña Nieto has pledged to govern democratically and to forge cross-party alliances.", "The outgoing PAN government of Felipe Calderón pursued an aggressive anticrime strategy and increased security cooperation with the United States. Mexico's ongoing security challenges overshadowed some of the Calderón government's achievements, including its successful economic stewardship during and after the global financial crisis.", "Those efforts helped Mexico arrest or kill record numbers of drug kingpins, but 60,000 people may have died as a result of organized crime-related violence during the Calderón Administration.", "In recent years, U.S. policy toward Mexico has been framed by security cooperation under the Mérida Initiative. Congress has provided more than $1.9 billion in Mérida aid since FY2008 to support Mexico's efforts against drug trafficking and organized crime. Whereas U.S. assistance initially focused on training and equipping Mexican counterdrug forces, it now prioritizes strengthening the rule of law.", "Along the border, U.S. policymakers have sought to balance security and commercial concerns.", "The U.S. and Mexican governments resolved a long-standing trade dispute in 2011 involving NAFTA trucking provisions and have sought to improve competitiveness through regulatory cooperation. Bilateral trade surpassed $460 billion in 2011. The February 2012 signing of a Trans-Boundary Hydrocarbons Agreement for managing oil resources in the Gulf of Mexico could create new opportunities for energy cooperation.", "The 112th Congress maintained an active interest in Mexico.", "The Obama Administration asked for $269.5 million in assistance for Mexico in its FY2013 budget request.", "The Senate and House Appropriations Committees' versions of the FY2013 foreign aid measure, S. 3241 and H.R. 5857, each recommend increases in aid to Mexico, with human rights conditions similar to P.L. 112-74. Congress held oversight hearings, issued reports, and introduced legislation on how to bolster the Mérida Initiative and on related U.S. domestic efforts to combat gun trafficking, money laundering, and drug demand." ], "parent_pair_index": [ -1, -1, 1, -1, 0, -1, 0, 1, -1, -1, 1 ], "summary_paragraph_index": [ 0, 0, 0, 1, 1, 3, 3, 3, 5, 5, 5 ] }
CRS_R45221
{ "title": [ "", "Introduction", "Raising Capital Through Securities Offerings", "Public Offerings", "Initial Public Offering", "IPO On-Ramp and Emerging Growth Company", "Private Offerings", "Regulatory Framework for Capital Markets", "Regulatory Entities and Approaches", "Securities Disclosure Through Registration", "Securities and Banking Regulation Compared", "Policy Issues", "Crosscutting Themes", "Capital Formation and Investor Protection", "A Scaled Regulatory Approach", "Facilitating Public Offerings", "Expansion of \"IPO On-Ramp\"—Emerging Growth Company Status", "Disclosure Requirements", "Disclosure \"Materiality\"", "Disclosure Costs and Readability", "Current Congressional and SEC Actions", "Preemption of State \"Blue Sky\" Laws", "Facilitating Private Offerings", "Investor Access to Private Offerings", "Accredited Investors", "Threshold Rule", "General Solicitation", "\"Mini-IPO\"—Regulation A+", "Micro Offering", "Facilitating Fintech Offerings", "Securities-Based Crowdfunding", "New Capital Access Venue and the \"Wisdom of the Crowd\"", "Potential Benefits and Drawbacks", "Initial Coin Offerings", "Regulatory Treatment", "Current Volume and Potential", "Regulatory Issues" ], "paragraphs": [ "", "Companies turn to a variety of sources to access the funding they need to grow. Capital markets are the largest source of financing for U.S. nonfinancial companies, representing 65% of all financing for such companies in 2016 ( Figure 1 ). Capital markets are segments of the financial system in which funding is raised through equity or debt securities. Equity, also called stocks or shares, refers to ownership of a firm. And debt, such as bonds, refers to the indebtedness or creditorship of a firm. In addition to capital markets, companies obtain funding from bank loans (13%) and other financing (23%).\nU.S. capital markets are considered the deepest and most liquid in the world. U.S. companies are more reliant on capital markets for funding than companies in the euro area, Japan, or China, which rely more on bank loans (see Figure 1 ).\nAccess to capital allows businesses to fund their growth, to innovate, to create jobs, and to ultimately help raise society's overall standard of living. Given the importance of U.S. capital markets and their role in allocating funding, issues affecting the markets generally warrant policy attention. Some of the most discussed recent trends include the decline in the number of public companies and the increased tendency of public capital to concentrate in larger companies. In addition, there are indications that private capital—which has less regulation and information disclosure—is growing in usage. Also of concern is the emergence of financial technology that both enables new methods of capital formation and poses significant regulatory challenges.\nTo address some of the trends mentioned above, Congress passed the Jumpstart Our Business Startups Act of 2012 (JOBS Act; P.L. 112-106 ; see text box below), which established a number of new options for expanding capital access especially for smaller companies. As discussed later in this report, some of the changes made by the JOBS Act have been successful in facilitating capital formation, but in other areas the same concerns remain. In response, the 115 th Congress has considered many proposals to boost capital markets, including S. 488, a capital formation package that consists of 32 titles that have mostly already passed the House with bipartisan support as standalone bills. Originally a relatively narrow bill, S. 488 was passed by the Senate before being amended significantly and passed by the House. The package has been referred to as JOBS Act 3.0, taking into account the initial JOBS Act in 2012 and the financial services provisions signed into law as part of the Fixing America's Surface Transportation Act (P.L. 114-94; parts of which are referred to as JOBS Act 2.0). Seven provisions in S. 488 are discussed in this report and were previously introduced as standalone legislation: H.R. 1585, H.R. 1645, H.R. 3903, H.R. 3972, H.R. 5970, H.R. 6324, and H.R. 6380.\nThis report provides background and analysis on proposals related to capital formation through the two main ways of raising capital—public and private offerings—and the regulatory environment in which they operate. The report also explores key policy issues and their connection to legislative discussions. It provides general background for more than a dozen current legislative proposals, allowing for discussion of each proposal within its own policy context as well as providing a framework for viewing the proposals in aggregate. For easy navigation, legislative proposals are highlighted in text boxes within each relevant policy issue section.", "As the principal regulator of U.S. capital markets, the Securities and Exchange Commission (SEC) requires that offers and sales of securities—whether debt or equity—either be registered with the SEC or be undertaken with an exemption from registration. Companies seeking funding through securities offering are referred to as issuers . Registered offerings, often called public offerings , are available to all types of investors and are not limited in the amount of funds that can be raised or resold. Registered offerings include a significant amount of disclosure about the company (the issuer), its financial status, and the funds that are being raised. A key attribute of public securities offerings is investors' ability to resell the securities on public secondary markets through national exchanges to all investor types. By contrast, securities offerings that are exempt from SEC registration are referred to as private offerings , private placements , or unregistered offerings . They are mainly available to those perceived to be more sophisticated financial institutions or individual investors thought to be better positioned to absorb the risk and make informed decisions with the reduced information disclosed in a private offering. Because of the restrictions on who may purchase them, private offerings generally do not trade on stock exchanges. In general, private offerings provide firms with more control over their internal affairs and lower compliance costs, whereas public offerings provide broader access to potential investors.", "Public offerings consist of initial public offerings (IPOs), the first time a company offers its shares of stock to the general public in exchange for cash, and subsequent public offerings. The IPO process, which is the source of much of the policy debate surrounding public offerings, is commonly regarded as the turning point for companies \"going public.\" By going public, a company's shares can be owned by the public at large rather than just by the original owners, venture capital funds, and the relatively small pool of those perceived to be more sophisticated investors. SEC registration, which is a key requirement for going public, enables public disclosure of key company financial information. Companies may choose to go public to access capital that would allow founders to cash out their investments, to provide substantial stock and stock options to employees and through management incentive plans, and to fuel the company's future growth. Public companies may also benefit from a \"liquidity premium,\" which translates into better share pricing compared with stock from comparable private offerings. Other potential benefits include publicity and brand awareness.\nThere are also a number of drawbacks to going public. From an issuer's perspective, two of the most discussed drawbacks are compliance costs and certain changes to business operations.\nCompliance Costs. Some believe the costs of registration are disproportionately burdensome for small and medium-sized businesses, including startup firms. The direct costs include underwriting, external auditing, legal fees, and financial reporting fees. Business Operations. Public companies are often perceived to face incremental market pressure to perform well over the short term, to reduce insider control and decisionmaking flexibility, and to contend with increased shareholder activism (which sometimes can benefit a firm financially). Some research has indicated that going public can adversely affect corporate innovation; however, there are also many examples of innovative public companies.", "An IPO is the first time a company offers its shares of capital stock to the general public. An IPO gives the investing public the opportunity to own and participate in the growth of a formerly private company. The process begins with the company's selection of underwriters, lawyers, and accountants to prepare for the issuance of the securities, and, along with the company's top executives, they form an IPO working group. The process generally consists of three phases.\nP re f iling P eriod . As part of an IPO, a company must file a registration statement and other documents that contain information about the company and the funds it is attempting to raise. During the prefiling period, the public filings are prepared and the planning begins with a thorough review of the company's operations, procedures, financials, and management, as well as its competitive positioning and business strategy. The disclosure documents serve the dual purpose of satisfying SEC registration requirements and communicating with investors.\nW aiting P eriod . Once the key disclosures are filed, the company waits for the SEC to review and provide approval of its draft registration statements. The company then concurrently addresses SEC comments and prepares roadshow presentations as well as legal documents. Roadshows are presentations made by an issuer's senior management to market the upcoming securities offering to prospective investors. Roadshows can commence only after the filing of registration statements because Section 5(c) of the Securities Act prohibits public offers of securities prior to the filing of a registration statement.\nP os t effective P eriod . The actual sales to investors take place after the SEC declares that the IPO registration is effective. The posteffective period extends from the effective date of the registration statements to the completion of distribution of the securities. With the completion of the IPO, a security generally continues to trade on a stock exchange.", "Title I of the JOBS Act established streamlined compliance options for companies that meet the definition of a new type of issuer, called an emerging growth company (EGC). The streamlined process available to an EGC is also referred to as the \"IPO On-Ramp,\" because it is a scaled-down version of a traditional IPO. This new process reduces regulatory requirements for companies to go public.\nTo qualify as an EGC, an issuer must have total annual gross revenues of less than $1 billion during its most recently completed fiscal year. EGCs maintain their status for five years after an IPO or when their gross revenue exceeds $1 billion, whichever occurs first, among other conditions. Relative to a standard IPO, EGCs' IPOs can take advantage of the following forms of relief:\nScaled disclosure requirements in which EGCs (1) need to provide two years of financial statements certified by independent auditors, instead of three years for a traditional IPO; and (2) are not required to provide compensation committee reports, among other things. EGCs are exempted from auditor attestations of internal control over financial reporting that are required by Sarbanes-Oxley Act Section 404(b). \"Test-the-waters\" communications mean EGCs may meet with qualified institutional buyers and institutional accredited investors to gauge their interest in a potential offering during the registration process, an activity prohibited during a normal IPO. A confidential SEC review process allows companies to submit draft registration statements to the SEC for a confidential review prior to making the filings public. While initially limited to EGCs, the SEC expanded this benefit to all companies as of July 10, 2017.\nWhereas the first two compliance-related forms of relief would appear to generate cost savings for all EGC status holders, the test-the-waters and confidential review features may be especially valuable for companies in industries where valuation is uncertain and the timing of the IPO depends on regulatory or other approval (e.g., the biotech and pharmaceutical industries). The ability to submit confidentially and to \"test-the-waters\" with prospective investors can provide additional flexibility to company issuers. EGCs that take advantage of these can either continue the IPO process or withdraw after receiving feedback from the SEC and prospective investors, prior to making public disclosures.\nFollowing the SEC's expansion of the confidential review option to all companies, most companies now use the process to incorporate feedback prior to public disclosure and announcement. IPO processes that used to take up to seven months from announcement to trading now take less than 50 days, with the reduced time due mostly to shifting of the review time to prior to announcements.", "Both public and private companies could conduct private offerings to offer or sell securities in accordance with registration exemptions under the Securities Act. To raise capital through a private offering, a company must use one of the key registration exemptions under federal securities laws, including the following:\nRegulation D is the most frequently used exemption to sell securities in unregistered offerings. Companies relying on a Regulation D exemption do not need to register their offerings with the SEC, but they face limitations regarding investor type and resale restrictions of their offerings. Regulation D includes two SEC rules—Rules 504 and 506, which provide different maximum offering amounts, among other conditions. Regulation A facilitates capital access for small to medium-sized companies. It has fewer disclosure requirements than the conventional securities registration process. Due to the JOBS Act, Regulation A was updated in 2015 with a two-tiered structure (Regulation A+) to exempt from registration offerings of up to $50 million annually, if specified requirements are met. Regulation Crowdfunding permits companies to offer and sell securities through crowdfunding, which generally refers to the use of the internet by small businesses to raise capital through limited investments from a large number of investors. Rule 144 A is for resale transactions only. Issuers generally use it in a two-step process to first facilitate an offering on an exempt basis to financial intermediaries, and then resell to qualified institutional buyers, or QIBs (corporations deemed to be accredited investors). Rule 147 A permits companies to raise money from investors within their home state by registering at the state level, without concurrently having to register the offers and sales at the federal level.", "", "U.S. capital markets are mainly regulated by the Securities and Exchange Commission (SEC), state securities regulators, self-regulatory organizations (SROs), and the Commodity Futures Trading Commission (CFTC), which generally regulates derivatives markets.\nAs the principal regulator of capital markets, the SEC is responsible for overseeing significant parts of the nation's securities markets and certain primary participants such as broker-dealers, investment companies, investment advisors, clearing agencies, transfer agents, credit rating agencies, and securities exchanges, as well as SROs such as the Financial Industry Regulatory Authority (FINRA), Municipal Securities Rulemaking Board (MSRB), and Public Company Accounting Oversight Board (PCAOB).\nThe SEC uses a combination of rules, enforcement, and examinations to construct a three-pronged regulatory approach that focuses on (1) disclosure-based rules, (2) an antifraud regime, and (3) rules governing securities market participants (for example, exchanges, broker-dealers, and investment advisors).", "One of the cornerstones of securities regulation—the Securities Act of 1933—is often referred to as the \"truth in securities\" law. As the phrase suggests, disclosures pertaining to securities allow investors to make informed judgments about whether to purchase specific securities by ensuring that investors receive financial and other significant information on the securities being offered for public sale. The SEC does not make recommendations as to whether to invest. The disclosure-based regulatory philosophy is consistent with Supreme Court Justice Louis Brandeis's famous dictum that \"sunlight is said to be the best of disinfectants; electric light the most efficient policeman.\"\nAs mentioned previously, the types of disclosure vary based on whether a company is making a public or private offering. For public companies, the registration process requires companies to file with the SEC essential facts, including financial statements certified by independent accountants, information about the management of the company, a description of the security to be offered for sale, and a description of the company's properties and business. Registration statements generally become public shortly after the company files them with the SEC. As such, registering an offering with the SEC would make a company a public company. Private offerings also involve a registration process, but the process is scaled back, and these offerings are generally limited to more sophisticated investors who are perceived as better positioned to comprehend or tolerate the risks associated with less disclosure.\nFor more on disclosure, see the \" Disclosure Requirements \" section of this report.", "Capital market regulation differs from banking regulation in its regulatory philosophy and structural setup. Stocks, bonds, and other securities are not guaranteed by the government and can lose value for investors. As such, the SEC's primary concerns are promoting the disclosure of important market-related information, maintaining fair dealing, and protecting against fraud. This is designed to help investors make informed investment decisions. Although the SEC requires that the information provided be accurate, it does not guarantee it. Investors who purchase securities and suffer losses have recovery rights if they can prove incomplete or inaccurate disclosure of important information.\nBanking regulation's prudential regulatory approach, on the other hand, emphasizes risk control and mitigation for the safety and soundness of individual institutions as well as the financial system as a whole. One rationale behind banking regulation is that, because bank deposits are guaranteed by the federal government, banks may have an incentive to take additional risks that they would not take in the absence of insurance on deposits. The government examines the operations of banks to safeguard taxpayer money and ensure that banks are not taking excessive risks.\nThese two different approaches have led to different agency designs and budget allocations. For example, banking regulators are heavily focused on examination programs that closely monitor and oversee financial institutions' operations and risk mitigation methods. One of the major banking regulators, the Federal Deposit Insurance Corporation, allocates half of its annual budget toward mostly examination-based supervision and consumer protection programs. SEC regulation, in contrast, relies less on examinations. The SEC cedes certain examinations to SROs like FINRA and focuses its own examinations on selected priority areas, instead of a broader examination coverage of all securities issuers.", "Some in Congress have called for modifying capital market regulations to make it easier for companies to raise capital. They argue that the existing regulatory structure unnecessarily restricts access to capital markets, making it more difficult for companies to grow and create jobs. Others have argued that certain approaches to expanding capital market access could put investors at risk of making uninformed decisions or becoming victims of fraud and other abuses.\nThis section analyzes key policy issues in public and private capital markets and assesses proposals to facilitate access to capital in each segment. In addition, emerging financial technology (\"fintech\") issues related to crowdfunding and initial coin offerings are also analyzed.", "For many of the proposals discussed below, two themes apply—the relationship between capital formation and investor protection, and a scaled regulatory approach. The section starts with an explanation of each.", "The policy debate surrounding efforts to promote capital access illustrates the perceived tradeoffs between investor protection and capital formation, two of the SEC's statutory mandates. Expanding capital access promotes capital formation and arguably \"democratizes\" capital markets by allowing for greater access to investment opportunities for more investors. Investor protection is considered to be important for healthy and efficient capital markets because some research suggests that investors would be more willing to provide capital, and even at a lower cost, if they have faith in the integrity and transparency of the underlying markets.\nMaintaining a balance between these two goals can pose challenges for policymakers. For example, capital formation needs may be better met if issuers could choose their preferred methods of fundraising without regard to SEC registration. This is because the registration process raises the costs of accessing securities markets, which could potentially deter investment activities and reduce funding to businesses. At the same time, the reduced disclosure may expose retail investors of limited financial means to additional risks if they are not aware of key risk factors prior to making investment decisions (see \" Investor Access to Private Offerings \" for a discussion of \"accredited investors\").", "The relationship between public and private offerings used to be more clearly defined; registration requirements were generally more substantial for public offerings than for private offerings prior to the 2012 JOBS Act. The public and private offering dichotomy started to blur following the JOBS Act, offering a more scaled regulatory approach. The act created a number of \"hybrid\" offerings that incorporate design features of both public and private offerings. The most obvious example is Regulation A+, a private offering that could potentially trade on public exchanges to a greater extent. As such, capital access regulation is less \"one size fits all\" than before, though the debate about whether regulation has been appropriately tailored is ongoing.\nTable 1 highlights a number of key attributes that determine each securities offering's capital access capacity. These attributes should not be viewed in isolation, as they work together to form a holistic design for meeting each offering's policy goal. Below are examples of key attributes of major offering programs.\nMaximum O ffering A mount . This is the upper limit of the offering program. For example, Regulation Crowdfunding currently has a size limit of around $1 million for any given year, limiting the program to smaller firms. In contrast, public offerings have no maximum amount, but issuers must undergo full disclosure. Filing R equirements . As mentioned previously, disclosure is at the core of securities regulation and is also the dividing point between public and private offerings. Generally, a higher level of disclosure (which may be associated with higher costs) leads to larger offering size limits and broader investor access, as well as reduced resale restrictions. Nonaccredited I nvestor A ccess . This attribute limits the kinds of investors allowed to participate in an offering. Generally, the higher the amount of disclosure, the more open an offering is to nonaccredited investors, who are perceived as less sophisticated. Resale R estrictions . R esale pertains to owners of securities transferring ownership to others for cash. Resale restrictions determine whether the instruments could enter secondary markets. Resale capability is a given for publicly traded shares, but for private offerings, resale is generally restricted. For example, the private offering with the largest volume—Regulation D—faces resale restrictions, meaning investors have fewer exit options. Preemption of S tate R egistration or Q ualification . States impose certain securities regulations concurrent with SEC regulations. Certain offering programs—for example, Regulation A-Tier 1—face requirements to register securities with the states, which have regulatory responsibility and expertise over small and local securities. This could be challenging and costly for issuers if the offering operates in multiple states, each with different registration requirements. In contrast, Regulation A-Tier 2, Regulation D-Rule 506, and Regulation Crowdfunding preempt state laws.\nThe various attributes are structured so as to create a relatively tailored system in which smaller companies have available to them less burdensome approaches to raising capital. In a 2017 public speech, SEC Chairman Jay Clayton emphasized the importance of a scaled regulatory approach in securities regulation.\nRecently, Congress and the SEC have taken significant steps to further develop a capital formation ecosystem that includes a scaled disclosure regime. Now, for example, a small company may begin with a Regulation A mini-public offering of up to $50 million, then move to a fully registered public offering as a smaller reporting company (EGC), and eventually develop into a larger, more seasoned issuer (Full-disclosure IPO). This is a potentially significant development and I believe there remains room for improving our approach to the regulation of capital formation over the life cycle of a company—to be clear, improvements that also serve the best interests of long-term retail investors.\nReflecting the same consideration for companies of different sizes and needs, the 115 th Congress is considering a number of legislative proposals to further expand this scaled approach, building on existing JOBS Act measures. Many of the proposals either modify the attributes listed in Table 1 so as to expand a particular type of offering or to create new types of offerings. Examples of these proposals are presented in text boxes throughout the remainder of this report.", "Once a company goes through SEC registration and public disclosure, it is generally referred to as a public company. A public offering was traditionally viewed as a significant funding source for growing companies, but its importance has generally deteriorated in the last two decades. The number of U.S.-listed domestic public companies has declined by half from the previous peak in the mid-1990s, as seen in Figure 2 , whereas listings rose by half in other developed countries over the same time period. According to data provider Dealogic, U.S. IPOs raised $49.3 billion through 189 offerings in 2017, more than double 2016's level of $24.2 billion raised through 111 offerings. Nevertheless, 2017's number of IPOs remains far below the pre-1999 average of 547 IPOs per year ( Figure 3 ), though there is some debate as to whether the period around the dot-com bubble of the late 1990s is the best comparison.\nThe companies that fundraise through public offerings are increasingly large companies. The average size of public companies has grown four-fold between 1996 and 2017. As of early 2017, more than half of all U.S. market capitalization was held by around 140 companies with $50 billion or more in market value. Around 29% of total market capitalization was held by the largest 1% of public companies. The average market capitalization of a U.S.-listed company was $7.3 billion as of early 2017, compared to $1.8 billion (inflation adjusted) in 1996. In addition, aggregate market capitalization in 2014 and 2015 remained close to the all-time high ( Figure 2 ). These trends indicate that although the absolute number of publicly listed companies has decreased, their average size has increased (through mergers, acquisitions, organic growth, or delisting of smaller public companies), aggregating to a total market capitalization that has showed no signs of decline in recent years.\nResearch indicates that smaller-company IPOs were down substantially prior to the JOBS Act ( Figure 3 ), and that smaller firms are particularly likely to experience losses and earn lower returns. Following enactment of the JOBS Act, smaller companies' relative difficulty accessing capital through public offerings improved somewhat through the EGC program (as discussed in the \" Expansion of \"IPO On-Ramp\"—Emerging Growth Company Status \" section of this report). However, some argue that the total number of IPOs has not increased significantly following enactment of the JOBS Act and is still below its long-term average, suggesting that improvements are not meaningfully reflected in the number of IPOs.\nAlthough there is a general consensus that regulatory relief could reduce entry barriers and the costs of going public, disagreement persists regarding the nature of the decline in the number of IPOs and whether the issue warrants regulatory intervention. Some argue that companies' decisions to shift from public offerings to private offerings are a structural change within the economy that does not require a regulatory fix. Others argue that the IPO decline is a consequence of the high costs of disclosure—an issue that could be remedied by policy. The main arguments concerning the IPO decline are summarized below.\nRegulatory Explanations\nRegulatory Compliance. Some argue that increased regulation can have unintended consequences for companies trying to access capital. Specifically, critics of securities regulation point to laws and regulations enacted during the past two decades that have significantly affected the amount of public company compliance requirements. These laws and regulations include National Association of Securities Dealers (NASD) order-handling rules (1996); the 1999 passage of the Gramm-Leach-Bliley Act ( P.L. 106-102 ); the Regulation Fair Disclosure (2000); the launch of decimalization (2001); the Sarbanes-Oxley Act (2002; P.L. 112-106 ); the 2003 Global Settlement ruling restricting conflicts of interest between equity research and investment banking; the Regulation National Market System (2005); and the Dodd-Frank Act (2010; P.L. 111-203 ), among others. ( Figure 3 ). Costs of Going Public . According to the IPO Task Force, public companies in 2011 faced a one-time initial regulatory compliance cost of around $2.5 million and annual ongoing compliance costs of $1.5 million. These costs may outweigh the benefits and discourage some companies from going public. \"Deregulation\" of Private Offerings. Some argue that the increased disclosure obligations for public companies coupled with the \"unleashing\" of investors in the \"disclosure-lite\" private markets have contributed to the increased use of private offerings as an alternative to public offerings, resulting in a decline in the number of public companies. According to the Wall Street Journal and data provider Dealogic, U.S. companies raised $2.43 trillion privately in 2017, around $0.36 trillion or 17% higher than the $2.06 trillion raised from public markets. The 2017 volumes represent the widest differential between the two methods since private capital reportedly surpassed public capital in 2011 ( Figure 4 ).\nStructural Explanations\nEconomies of \" Scope . \" Economies of scope may exist when it is more efficient for smaller companies to be acquired than to operate as standalone entities. Some argue that long-term structural changes in product markets have led to declining profitability for smaller companies, whether public or private. In addition, even after going public, smaller companies are said generally to have low liquidity and limited analyst coverage, leaving them unable to reap the full benefits of public listing. These interpretations coincide with increased merger and acquisition activities, which some observers identify as being largely responsible for the delisting of public companies over the last decade. Market Infrastructure . Some observers argue the market infrastructure needed to support smaller IPOs—such as specialized investment banks and analyst coverage of smaller public companies—is lacking, especially when compared to the market infrastructure for larger IPOs. Agency Conflict. Agency conflict refers to the conflict between owners and managers over the control and use of corporate resources—conflicts that can potentially undermine corporate financial health and efficiency. In corporate finance, the owners of firms are generally referred to as stockholders . Some argue that some organizations may choose to rely more heavily on public and private debt, rather than public equity, thus potentially avoiding certain agency conflict issues because of the absence of public stockholders. As such, capital funding through private offerings could reduce agency conflicts for those companies and generate operational efficiency and productivity. Financial Globalization. Financial globalization refers to the ease by which capital can flow around the world to find its most valued use. Financial globalization has increased significantly as countries have removed barriers to capital flows and new tools have facilitated cross-border investments. Several recent studies show that although the rest of the world has witnessed more IPOs due to greater financial globalization, U.S. IPO activity has not similarly benefited. A related study does not directly attribute U.S. IPO decline to financial globalization; however, it explains U.S. decline in relative terms when compared to the rest of the world. It is also evident that the global capital flow could affect the demand and supply dynamics of the U.S. domestic capital markets, thus impacting IPO-related capital needs.\nIn response to issues relating to public offerings, the 115 th Congress is considering further expansion of EGC benefits as well as other regulatory-relief proposals, including amendments to disclosure requirements and the expansion of certain preemptions to state \"blue sky\" laws. The following sections analyze several of these proposals.", "As noted previously, to address the decline in the number of IPOs over the last two decades and to reduce barriers preventing smaller companies from accessing public offerings, the bipartisan JOBS Act of 2012 created a scaled-down alternative to standard IPOs for smaller companies that meet the criteria to be deemed emerging growth company (EGC) issuers. This streamlined process is referred to as an IPO On-Ramp.\nThe IPO On-Ramp is a widely used JOBS Act provision. Around 87% of firms filing for an IPO after April 2012 were EGCs, meaning that only 13% of all IPOs since April 2012 were still subject to the conventional IPO process. Key EGC features—for example, the option to obtain confidential SEC review prior to public disclosure and elect for reduced disclosure of audited financials—are features adopted by the majority of IPO firms through the EGC status ( Figure 5 ).\nFollowing the rapid adoption of EGC status, new proposals in the 115 th Congress would further expand the length of time an EGC could maintain its status, and would also expand certain EGC benefits to all IPOs.\nProponents of regulatory relief stated that the EGC regime has enabled deeper capital formation without sacrificing investor protection, arguing that many private companies are still reluctant to go public, and suggesting further action. Some proponents believe the EGC program serves as a model for additional capital-formation-related regulation. As mentioned in the \" Raising Capital Through Securities Offerings \" section of the report, the test-the-waters and confidential-review features of the EGC framework can be particularly valuable for companies in industries where stock valuation is uncertain and the timing of the IPO depends on regulatory or other approval. For example, biotechnology and pharmaceutical industries reportedly have especially benefited from the EGC status. An executive from one biotechnology company that went public as an EGC testified in support of further expanding the EGC program, noting that 212 emerging biotech companies went public under EGC status as of March 2017, relative to 55 biotech IPOs in the five years leading up to the JOBS Act. The company argued this makes the EGC framework a significant capital access tool for biotechnology innovation.\nCritics point to the lighter regulatory standards under EGC, on top of other disclosure-related investor protection risks. They believe EGC is a regulatory label indicating lighter standards for listing. The EGC regime, they argue, appears to have enabled many relatively financially weak companies to conduct IPOs. The opponents believe that EGC companies tend to be lower in quality from a listing and investment perspective. In addition, these companies experienced underpricing relative to similarly sized companies prior to the JOBS Act. Underpricing refers to IPOs that are issued at below market value, leaving less money to fund company growth.", "SEC registration and disclosure are at the core of securities regulation. They are also central components of securities valuation and price discovery. Firms need capital and investors need information to evaluate investment conditions. Issuers have incentives to disclose information if they are to compete successfully for funds against alternative investment opportunities. Consistent with this understanding, early research shows that voluntary disclosure reduces firms' cost of capital. Early evidence also shows that firms voluntarily disclose significant amounts of information beyond what is mandated by securities regulators. Despite the strong support of required and even voluntary disclosure identified in earlier research, current debates about disclosure are more focused on disclosure costs and information overload.\nAs discussed previously, issuers currently have to provide a significant amount of disclosure of company information throughout the SEC registration process. The SEC requires that offers and sales of securities either be registered with the SEC or be undertaken with an exemption from registration. Different levels of filings and disclosures are required for both public and private offerings. Column three of Table 1 presents these disclosure requirements. The disclosure-based approach is not without drawbacks. Some question the efficacy of disclosures and suggest they could be so exhaustive as to be counterproductive. Concerns also exist regarding whether both retail and institutional investors could comprehend the disclosed information.", "Some companies struggle to determine precisely what information must be disclosed as part of the registration process. A general standard governing information to be disclosed under the securities laws is the concept of \"materiality.\" Materiality pertains generally to the likely importance of a disclosure to a reasonable investor. SEC Rule 405 states, \"When used to qualify a requirement for the furnishing of information as to any subject, [materiality] limits the information required to those matters to which there is a substantial likelihood that a reasonable investor would attach importance in determining whether to purchase the security registered.\" There is also significant case law concerning the concept of \"materiality\" in the courts, and it is generally defined in terms of whether a reasonable investor would have viewed the undisclosed information as having \"significantly altered the total mix of information available.\"\nIdeally, from an economic perspective, the securities disclosures would neither be so restrictive that they omit essential information, nor so voluminous that they create information overflow or exhaust resources on irrelevant information.\nThe concept of materiality has always posed challenges for regulators and issuers, as it is often difficult to apply consistent standards for determining materiality at the level of individual companies. Certain discretion has been given to companies through a principle-based approach, which means the companies would have some flexibility to provide disclosures that they believe are material to reasonable investors. A principle-based approach may provide additional flexibility for companies to make decisions about materiality on a case-by-case basis, which is also how the courts generally assess materiality, but the lack of a \"bright line\" about what exactly must be disclosed can make it difficult for both investors and companies. One recent example is that different companies interpreted the threshold for disclosing material cyber breaches vastly differently. There is generally no bright-line approach on materiality. It is difficult, if not impossible, to provide a clean-cut approach as to materiality for all situations; thus, companies reportedly struggle to know when to disclose and when to hold back.", "Public offerings generally face more rigorous and costly disclosure requirements relative to private offerings. Public company disclosure starts with an initial registration statement that includes a detailed description of the business, the security offered, and the management team, as well as audited financial statements, among other things. The reporting continues with the ongoing disclosure of quarterly and annual financials as well as the disclosure of key operational changes and corporate-governance-related information and events for shareholder voting. Public company regulatory compliance costs were estimated in 2011 to average about $2.5 million, with annual ongoing compliance costs of $1.5 million.\nAlthough disclosure requirements and related costs have increased over time, readability of disclosed information has become a regulatory concern in recent years. One of the most-cited examples is the size of Walmart's IPO prospectus in 1970, which totaled less than 30 pages. This compares to the hundreds of pages commonly expected of today's IPO filings. Studies show that the median text length of certain key SEC filings doubled between 1996 and 2013, yet the readability and the mix of \"hard\" information, which refers to the informative numbers in the text, have decreased. According to former SEC Chair Mary Jo White, most of this evolution was due to increased SEC rules and guidance that have required increasingly specific and detailed disclosures. This development eventually triggered regulatory discussions regarding \"information overload,\" a term for the high volume of disclosure that can make it difficult for investors to find the most relevant information.\nThe issue is further complicated when considering the types of investors to which the disclosed information is tailored. The majority of outstanding publicly traded U.S. company stocks are held by institutional investors. Their information needs and preferences may differ from those of retail investors. For example, more sophisticated institutional investors may find detailed reporting useful, whereas retail investors may have a harder time navigating the \"information overload\" and find \"plain English\" an easier way to comprehend investment disclosures. Some of these divergent preferences could be too costly to reconcile, because the current disclosure regime does not require different versions of disclosure by investor type. As such, the investor type that should serve as the benchmark for disclosure and reporting requirements continues to be a topic of debate.", "Several current legislative proposals and agency actions would ease disclosures. Recent agency actions include SEC's rulemaking initiatives on Regulation S-K, which concerns disclosure of information not found on financial statements. As required by Congress through Section 108 of the JOBS Act and Section 72003 of the Fixing America's Surface Transportation (FAST) Act, the SEC completed two studies on disclosure requirements, aiming to \"modernize and simplify\" disclosures. The SEC subsequently proposed amendments to Regulation S-K on October 11, 2017, incorporating recommendations from the studies.\nRegulation S-K is a key part of the integrated disclosure regime. Issuers of securities offerings, especially public offerings, must file various disclosure documents that include, but are not limited to, Regulation S-K, Regulation S-X (financial statement disclosure requirements), and Regulation S-T (electronic filing regulations). The first version of Regulation S-K included only two disclosure requirements—a description of business and a description of properties. Over time, new disclosure requirements were added to Regulation S-K, and now it is the repository for the nonfinancial statement disclosure requirements under the Securities Act and the Exchange Act.\nAs one law firm points out, the SEC rulemaking proposal to amend Regulation S-K includes approximately 30 discrete changes. Although none of the changes are likely to have a significant impact individually, taken together they could affect the preparation and presentation of disclosure documents, potentially reducing costs associated with disclosures.\nIn addition to the agency initiatives, Congress has proposed a number of bills to further amend disclosure requirements (see text box below). Most of these amendments relate to the exemption of issuers from specific registration and reporting requirements. There is also a proposal to expand eligibility for smaller companies to use a more simplified registration form.\nSome may argue that these proposals could circumvent the previously discussed tradeoff between capital formation and investor protection by increasing readability and usefulness of disclosures without coming at the expense of the exclusion of material information. Others argue that any decrease in regulation or disclosure would affect the effectiveness of investment decisionmaking and increase the risks facing investors.", "Another source of compliance costs for issuers is the fact that certain securities offerings have to navigate both federal- and state-level regulations. Although the SEC regulates and enforces federal securities laws, each state has its own securities regulator who enforces \"blue sky\" laws. These laws cover many of the same activities the SEC regulates, such as the sale of securities and those who sell them, but are confined to securities sold or persons who sell them within each state.\nThe SEC and the states differ in their approach to securities regulation. SEC securities regulation requires disclosure of information about securities and their issuers, whereas the majority of states adopt \"merit-based\" securities regulation. Merit-based regulation generally refers to the authority to deny registration to an offering on the ground that it is substantively unfair or presents excessive risk to investors. In other words, merit regulation prohibits specific conduct upon review. The issuers would have to convince the states that the offerings are fair to investors.\nState securities laws predate the first federal securities statute, the Securities Act of 1933, by a couple of decades. Although some federal statutes preempt state securities laws, state regulators retain the ability to police their own jurisdictions. In addition, there is said to be a separate line of tension between federal securities laws and state corporate law. For example, companies' bylaws of incorporation, which affect their corporate governance practices, are traditionally regulated through state corporate law. Some argue that certain federal provisions relating to executive compensation and shareholder voting, among other provisions, have challenged the decisionmaking authority of state regulation.\nPublic offerings trading on one of the national exchanges—New York Stock Exchange (NYSE), American Stock Exchange (AMEX), and Nasdaq—received preemption of state registration through the enactment of the National Securities Markets Improvement Act of 1996 (NSMIA; P.L. 104-290 ). NSMIA was a milestone for \"covered securities,\" which are preempted from blue sky laws' registration and qualification requirements. Under NSMIA, covered securities generally include securities (1) listed, or from a listed issuer, on certain national securities exchanges; (2) issued by a registered investment company; (3) sold only to SEC-defined qualified purchasers; or (4) that meet certain exemptions.\nPublic offerings that do not meet the criteria for covered securities may have to comply with certain state-level regulations. Some argue that state laws adversely affect the deployment of securities offerings that are not part of the covered securities universe. States have regulatory responsibility and expertise over small and local securities. However, an issuer operating in multiple states without preemption of state regulation would have to meet different regulatory requirements in each state, increasing operational complexity and costs. On the other hand, proponents argue state regulations prevent fraud or manipulation of securities offerings locally, and are unlikely to be eliminated because of various political reasons.\nThe National Securities Exchange Regulatory Parity Act (see text box below) is an example of a current legislative proposal that would affect blue sky laws. Under current law, a security, generally through public offering, must be listed, or authorized for listing, on one of the three specified national securities exchanges as discussed above, in order to be exempt from state registration requirements. The bill instead would require that a security be listed, or authorized for listing on any national securities exchanges that have been approved by the SEC. This amendment would allow public offerings to trade on other exchanges, in addition to the currently specified three, to be potentially exempt from state registration. Although the bill was generally considered a technical fix, opponents believe that it creates confusion and encourages a race to the bottom, as exchanges could potentially lower listing standards to compete for business.", "Private offerings have outpaced public offerings in recent years to become the more frequently used option for raising capital, as measured by aggregate capital raised ( Figure 6 ). According to an SEC staff white paper, private debt and equity offerings for 2012 through 2016 combined exceeded public offerings by about 26%.\nGoing public is arguably less of a necessity for certain private companies to raise capital, at least up to a certain size. Institutional investors, including mutual funds, hedge funds, and sovereign-wealth funds, are contributing to the trend of capital markets' increased reliance on private offerings as one of the key factors. For example, although these investors are not traditionally known for investing in startups, they are now allocating capital toward private offerings of high-tech \"unicorns.\" The term \"unicorn\" refers to startup companies that have achieved a valuation of at least $1 billion, while remaining privately funded.\nHowever, concerns persist that smaller companies face difficulties accessing capital. Private offerings are especially important for smaller companies, since they are traditionally viewed as the funding tool for smaller, pre-IPO firms. Some argue that the JOBS Act has not revived public capital access for smaller companies with market capitalization of less than $75 million. The SEC's Advisory Committee on Small and Emerging Companies stated in May 2017 that \"identifying potential investors is one of the most difficult challenges for small businesses trying to raise capital.\"\nSmaller companies' relative difficulty accessing capital through public offerings has encouraged the use of private offerings as an alternative funding source. All else equal, the increased use of private offerings could reduce companies' need to go public. It is within this context that Congress has initiated a number of policy changes and legislative proposals focusing on a scaled regulatory approach that would ease firms' access to private offerings. These proposals fall into three categories: (1) the expansion of investor access to private offerings, (2) the increase in the upper limit and issuer eligibility for Regulation A+, and (3) the creation of a new exemption for micro offerings.", "As shown in Table 1 , private offerings are often limited in the kinds of investors to which they can be offered. One approach to expanding capital access for private offerings is to expand investor availability. As explained below, policymakers could expand (1) the type of eligible investors by widening the accredited investor definition, (2) the number of eligible investors by increasing the number of nonaccredited investors allowed to participate in private offerings, or (3) the communication to eligible investors by allowing broader outreach. A number of legislative proposals in the 115 th Congress (listed in the text box below) would increase investors' access to private offerings along these lines.\nAs mentioned in the \" Capital Formation and Investor Protection \" section of the report, investor protection concerns are generally viewed alongside capital formation needs in a policy context. Some have argued that increasing investor access would improve capital formation by creating a larger eligible investor pool for certain securities offerings and would \"democratize\" investment opportunities by permitting a wider array of investors to participate. However, there are concerns regarding investor protection. Unlike offerings registered with the SEC, certain unregistered offerings lack disclosure of material information, thus exposing investors to higher risk.", "As mentioned earlier, generally only \"accredited\" investors are allowed to invest in private offerings. According to federal securities regulations, accredited investors are institutional investors or individual investors who (1) are financially sophisticated, (2) have the wherewithal to sustain financial losses, and (3) have the ability to fend for themselves if faced with adverse circumstances.\nThe purpose of the accredited investor concept is to identify entities and persons who can bear the economic risk of investing in unregistered securities and to protect ordinary investors from excess risk and potential fraud. According to the SEC, an accredited investor, in the context of an individual, is defined using a number of income and net worth measures: (1) earned income that exceeded $200,000 (or $300,000 together with a spouse) in each of the prior two years, and can reasonably be expected to be the same for the current year; or (2) net worth over $1 million, either alone or together with a spouse (excluding the value of the person's primary residence). Around 10% of U.S. households qualified as accredited investors in 2013.\nAn accredited investor, in the context of an institution, includes certain entities with over $5 million in assets, as well as regulated entities such as banks and registered investment companies that are not subject to the assets test.\nQualifying as an accredited investor is significant because accredited investors may participate in investment opportunities that are generally not available to nonaccredited investors, such as investments in private companies and offerings by hedge funds, private equity funds, and venture capital funds.\nThe income- and net-worth-based definition of an accredited investor has generated criticism, as it arguably suggests that higher net worth equates to investing sophistication. The definition also generates concerns about its sufficiency in capturing those who need investor protection. Some question, for example, whether a widow who relies on her existing net worth for financial security should be eligible for higher-risk investing.\nThe application of the accredited investor definition faces additional challenges. A definition relying on numeric thresholds provides a clear criterion or guideline for implementation that could produce predictable and consistent results in application. By reading the definition, investors would know if they are accredited investors or not. This approach, however, poses a challenge because certain measures of financial sophistication cannot be easily tracked through standardized numerical approaches or be determined based on income or wealth. This has led some to object to the current accredited investor definition, which is solely based on income and net worth measures.", "The SEC Threshold Rule (§12(g) of the Securities Exchange Act of 1934) restricts the maximum number of nonaccredited investors allowed to participate in private securities offerings. It establishes the thresholds at which an issuer is required to register a class of securities with the SEC. Prior to the JOBS Act, the Securities Exchange Act of 1934 required a private company to register securities with the SEC if it had total assets exceeding $10 million and shares held by 500 or more shareholders, without regard to nonaccredited investor status. Effective in 2012, the JOBS Act raised the shareholder registration threshold to either 2,000 persons, or 500 persons who are nonaccredited investors. In addition, to address the \"Facebook problem\"—when companies were forced to go public because the number of shareholders triggered threshold requirements for registration—employee compensation plan holders were no longer considered holders of record.", "Issuers often market their private offerings at promotional events. The events are often sponsored by angel investors (early-stage investors, mostly high-net-worth individuals), venture capital associations, nonprofits, or universities and are used to communicate that a company is interested in, if not actively seeking, investor financing. Certain types of general promotion or advertising were banned for Regulation D private offerings prior to the JOBS Act to prevent nonaccredited investors from inadvertently investing. The JOBS Act created a new private offering category under Regulation D, wherein issuers are allowed to engage in general solicitations to accredited investors while taking \"reasonable steps\" to verify their accredited status.\nSome market participants have advocated for a further removal of certain general solicitation restrictions, a move welcomed by trade groups that would benefit from reduced compliance costs and reduced uncertainty. Critics of these efforts, however, raise concerns about investor protection, especially given the potential participation of nonaccredited investors in promotional events intended for accredited investors.", "Another way that some propose to facilitate capital formation is the further expansion of Regulation A+. Regulation A+, or \"Mini-IPO,\" is a private exemption to facilitate private offering capital access for small- to medium-sized companies. A mini-IPO is like a regular IPO in the sense that it has no resale restrictions and could potentially list on public stock exchanges. But unlike an IPO, it is subject to offering size limits and certain investment limits on nonaccredited investor access, as summarized in Table 1 . Regulation A+, which expanded the existing Regulation A, became effective on June 19, 2015, a few years after the signing of the JOBS Act in 2012. Regulation A was a little-used regulatory regime prior to the JOBS Act; starting from the enactment of Regulation A+, the offerings have significantly expanded as measured by the number of total qualified offerings and the aggregate qualified offerings amounts sought ( Figure 7 ).\nRegulation A+ provides two tiers of offerings:\nTier 1, which allows securities offerings of up to $20 million in a 12-month period, with not more than $6 million in offers by selling to security-holders that are affiliates of the issuer. Tier 1 is subject to both state and federal registration and qualification requirements. Tier 2, which allows securities offerings of up to $50 million in a 12-month period, with not more than $15 million in offers by selling to security-holders that are affiliates of the issuer. Certain qualified purchasers of Tier 2 offerings are exempt from state securities law registration and qualification requirements.\nDespite the regime's perceived high potential and upward trend, some contend it has fallen short of expectations for the following reasons:\nCapital R aised I s R elatively L ow . Regulation A+'s aggregate capital raised in qualified offerings, less than $2 billion as of 2016, seems low compared to the total private market debt and equity issuance of $1.68 trillion in 2016. Pub l ic T rading I s R are . Although securities issued under Regulation A+ have traded on public exchanges in a few cases, the entering of Regulation A+ into public trading platforms is still uncommon. According to the Wall Street Journal , there were eight listed mini-IPOs in 2017. Seven of the eight were trading at an average of 42% below their offer prices (relative to average price rise of 22% for a traditional IPO in 2017). On average, around 15% of mini-IPO companies' total stock was available to trade in 2017, relative to 34% for all U.S.-listed IPOs, making the stocks harder to trade and more volatile ( Figure 8 ). Financial I ndustry I s the H eaviest U ser S o F ar . The program is not broadly adopted; around 37% of Regulation A+ filings and half of proceeds go to finance, insurance, and real estate companies.\nThere are legislative proposals in the 115 th Congress to further expand Regulation A+'s upper limit ( H.R. 4263 ) and to broaden its eligible issuer base ( H.R. 2864 ).\nSome have proposed expanding the upper limit of Regulation A+, arguing that in its current form it still faces hurdles in gaining market acceptance because such offerings cost more than a traditional private placement, but tend not to attract major underwriters, broker-dealers, and research coverage, because the deal sizes are small relative to a traditional IPO. Some believe that further lifting the upper limit would potentially alleviate size-related concerns for market intermediaries. Proponents of a proposal to broaden the Regulation A+ eligible issuer base also argue that thousands of SEC reporting companies are currently not able to access Regulation A+. By allowing more companies to use Regulation A+, it would enhance capital formation.\nOthers consider the expansion of Regulation A+ to potentially reduce incentives for companies to go public, thus undermining public securities markets. This could be to the detriment of both investors and markets, as public offerings provide greater investor protection and liquidity for trading. Some observers argue against immediate expansion, raising concerns that the regime is still in its early stages, and that demand and participation have not yet stabilized. In 2015, the upper limit for Regulation A+ was increased 10 times, to $50 million from $5 million. The program's long-term effects have not been observed in full, leading some to question whether now is the optimal time to extend the program, especially given that the SEC already has the discretion to change the size limit under the current rule.", "There is considerable demand for seed and startup capital for U.S. small businesses, some of which may be at the forefront of technological innovation and job creation. Yet some companies may be too small to realistically issue private offerings under existing exemptions. For example, an official from the U.S. Small Business Administration stated that 25% of startups report having no startup capital, while 20% cite lack of access to capital as a primary constraint to their business health and growth. Proposals related to what are referred to as m icro offering s are intended to assist small businesses that are deemed to have insufficient capital access. Specifically, the Micro Offering Safe Harbor Act proposes a new private offering that would exempt certain micro funding from federal registration as well as state blue sky laws. The exempted micro offerings would also be required to meet each of the following requirements:\nEach investor has a substantive preexisting relationship with an owner. There are 35 or fewer purchasers. The amount does not exceed $500,000.\nProponents believe it would more easily allow small businesses and startups to raise limited amounts of capital from their personal network of family and friends without running afoul of federal and state securities laws. Business trade groups have stated that the micro offering legislation would \"appropriately scale\" federal rules and regulatory compliance for small businesses.\nOpponents, however, raise investor protection concerns stemming from reduced disclosures and the absence of provisions to disqualify \"bad actors\" with criminal records, among other things. One point of contention is that micro offerings would not be subject to resale restrictions, meaning they could be immediately sold off to other qualified investors. The lack of a resale restriction for unregistered securities could expose investors to potential \"pump and dump\" schemes, a form of securities fraud that involves artificially boosting the price of a security in order to sell it for more.\nThe Congressional Budget Office (CBO) has estimated that only a relatively small number of securities transactions would be covered under the expanded exemption that are not currently covered by other existing exemptions.", "The development of financial technology (\"fintech\") has disrupted industries and led to new capital access options not previously overseen by the SEC regulatory regime. Policymakers are now considering whether these new innovations fit well within the existing regulatory framework, or whether the framework should be adapted to address the risks and benefits that they pose. This development affects not only the SEC, but also other financial regulators within the United States and across various global jurisdictions.\nCrowdfunding and initial coin offerings (ICOs) are two of the most popular fintech capital access tools that are regulated by the SEC, if they fall within the definition of being securities.", "Crowdfunding generally refers to a financing method in which money is raised through soliciting relatively small individual investments or contributions from a large number of people. Four kinds of crowdfunding exist: (1) donation crowdfunding, where contributors give money to a campaign and receive in return, at most, an acknowledgment; (2) reward crowdfunding, where contributors give to a campaign and receive in return a product or a service; (3) peer-to-peer lending crowdfunding, where investors offer a loan to a campaign and receive in return their capital plus interest; and (4) equity crowdfunding, where investors buy stakes in a company and receive in return company stocks. Generally, equity crowdfunding and certain peer-to-peer lending crowdfunding could be subject to SEC regulation if they conform to the definition of securities.\nTitle III of the JOBS Act created a new exemption from registration for internet-based securities offerings of up to $1 million (inflation-adjusted) over a 12-month period. Title III intends to help small and startup businesses conduct low-dollar capital fundraising from a broad and mostly retail investor base over the internet. The JOBS Act includes a number of investor protection provisions, including investment limitations, issuer disclosure requirements, and a requirement to use regulated intermediaries. The crowdfunding final rule became effective on May 16, 2016.", "Crowdfunding allows investors and entrepreneurs to connect directly, potentially creating access to new investment opportunities and allowing investors to tap into the collective opinions of a large group, often referred to as \"the wisdom of the crowd.\" These new opportunities could provide much-needed seed capital to entrepreneurs who would otherwise lack capital access. To illustrate this point, one SEC staff white paper indicates that the issuers of securities-based crowdfunding tend to be small, young, prerevenue, and not profitable. The effects of crowdfunding facilitating business growth are illustrated by a study that indicated around 70% of reward-based crowdfunding projects resulted in the creation of startups.\nThe total amount of reported securities-based crowdfunding is small relative to the estimated global crowdfunding volume. During the first approximately seven months that the rule was in effect (May 16, 2016, to December 31, 2016), there were 163 unique securities-based crowdfunding offerings by 156 issuers, seeking a total of $18 million (based on the target amount). The median (average) offering targeted approximately $53,000 ($110,000). During a similar time period, a smaller amount was actually raised, with approximately $10 million in proceeds reportedly raised for 33 offerings. These amounts may appear low, but could be partially due to underreporting. The SEC tracks crowdfunding volume using data taken from issuers filing Regulation Crowdfunding Forms C-U, but not all securities issuers initiated the filings.\nSecurities-based crowdfunding is a relatively small part of the crowdfunding total. As a point of comparison, the estimated global crowdfunding volume for all types of crowdfunding was $139 billion in 2015. A large portion of current online peer-to-peer funding activities are generally not considered \"securities-based\" crowdfunding subject to SEC regulation. Non-securities-based crowdfunding campaigns do not necessarily involve a profit-seeking business, and ones that do may have a project-specific nature, thus not conforming to the SEC's definition of securities. Peer-to-peer lending, if not considered a security, may still be under the oversight of banking regulators for consumer banking and related regulations.", "Crowdfunding's expansion of capital access and \"wisdom of the crowd\" characteristics are widely cited as benefits of the funding method. Some academic research of selected types of crowdfunding finds that crowdfunding democratizes access to funding, allows the crowd to look for signals of quality, and is \"remarkably free\" from fraud, even though over 75% of projects ultimately deliver but typically past the date on which it was expected. Others argue that crowdfunding, perhaps more than any other funding method, shows real-world demand for a company's product or service. Crowdfunding signals may reduce the need for disclosures, some have argued, because a successful crowdfunding campaign itself could be a positive signal of company quality, thus making the process more affordable to entrepreneurs. On the other hand, the disclosure process clarifies and codifies terms and conditions of an offering. Regulation Crowdfunding (see Table 1 ), for example, lists the financial statements and other information required for SEC filings.\nRegarding equity crowdfunding's balance between capital access and investor protection, some caution that investor protection that is too strong \"may harm small firms and entrepreneurial initiatives.\" Yet others fear investor protection is too weak, given low levels of compliance among many early companies that raised money through crowdfunding and offered \"bad terms\" to investors.\nThere are also a number of perceived regulatory concerns, including the following:\nHigh R isk and L ow L iquidity . Crowdfunding's securities-based offerings generally have high risk, given the types of prerevenue businesses seeking capital, the possibility of fraud, and the need for disclosure and transparency. Other concerns include the lack of liquidity through secondary markets, the professional guidance and corporate governance structure, investor protection, and platform operations and due diligence. Simple Agreement for Future Equity (SAFE) S ecurities . SAFE was developed in 2013 by Y Combinator, a technology accelerator, for investing in startups that expect to raise institutional capital at a later date. SAFE investors receive deferred equity entitling them to future shares. SAFE is the second-most-popular securities-based crowdfunding offering type, representing 26% of total offerings (equity is the most popular, accounting for 36% of offerings). Startups welcome SAFE because of its simplicity and generous terms, including, for example, the capability to potentially cap the upside payout in the event that SAFE investors receive shares. But researchers and regulators are concerned about SAFE's risk to retail investors. These concerns are typically associated with investor protection regarding how informed investors are of the risks and whether they are compensated accordingly. The SEC issued an investor bulletin in May 2017 to explain SAFE to retail investors. Some observers argue that SAFE is valuable to the holder only if the company that issues it raises a subsequent round of financing or is sold. However, the vast majority of companies raising capital through SAFE are said to be unlikely to ever raise institutional venture capital. Funding P ortals . The JOBS Act established an exemption to permit securities-based crowdfunding as well as a new type of entity—funding portals. The act allows these internet-based platforms or intermediaries to facilitate the offer and sale of securities without having to register with the SEC as brokers. As of February 20, 2018, there were 38 funding portals that were registered with the SEC and that were members of the Financial Industry Regulatory Authority (FINRA). Funding portals also draw investor protection concerns. An SEC official noted that from May 2016 to January 2017, 27 crowdfunded offerings were withdrawn, and of these, 16 were hosted by a funding portal that was recently expelled by FINRA. This may challenge the conception of funding portals as reliable gatekeepers for these transactions.\nA number of legislative proposals would lessen crowdfunding restrictions for both issuers and funding portals. Proponents of the bills state the intention of the bills is to further improve small businesses' access to capital and to provide more investment opportunities for investors of all kinds. Opponents assert that the proposals would \"deregulate\" crowdfunding offerings that are funding riskier startups, and in so doing would increase investor access while reducing investor protections, such as public disclosures. State securities regulators have asserted that it is too early to determine what changes are needed to improve the crowdfunding law.", "A relatively new approach to raising capital is the initial coin offering (ICO). ICOs as a fundraising tool have gained popularity in recent months. ICOs are crowdfunding processes conducted on distributed ledger or blockchain technology. Similar to crowdfunding, ICOs allow for solicitation of relatively small individual investments or purchases from a large number of participants. But instead of traditional crowdfunding's return of investments in the form of products, acknowledgments, interest payments, or a piece of ownership of the firm, ICOs offer supporters digital coins. These coins or tokens are new digital currencies each company creates and sells to the public. Coin purchasers could redeem the coins for goods or services, or hold them as investments in the hope that if the company is successful, the coins would increase in value. ICO investors generally exchange cryptocurrencies (e.g., Bitcoin, Ethereum) or fiat currencies (e.g., U.S. dollars) for the tokens issued pursuant to ICOs.\nAlthough every crypto enterprise is different, they generally provide publicly verifiable transactions, lower transaction costs, and the ability to make transfers without an intermediary or any geographic limitation.", "Some ICOs are securities and are subject to securities regulation. ICOs are generally considered securities if they promise a return based on the management practices of those offering them. For example, the cryptocurrency Bitcoin is not an ICO because it is not issued by a profit-seeking business.\nIn the United States, if an ICO qualifies as a security, its promoters would have to either register with the SEC (as a public offering) or obtain an exemption from registration (as a private offering), similar to the treatment of all other securities. But in practice, many ICOs have not conformed with the restrictions traditionally imposed on private offerings (see Table 1 ); instead, their characteristics include an unlimited offering amount, wide access by both accredited and nonaccredited investors, ability to trade in secondary markets, and limited investor disclosure. Based on these characteristics, an ICO could theoretically comply with securities laws by registering as the type of security shown in Table 1 that best fits its characteristics, and complying with the requirements of that type. For example, because ICOs are generally considered a combination of crowdfunding (see the section above) and blockchain, they could potentially seek a private offering exemption through Regulation Crowdfunding.\nHowever, as of March 6, 2018, only one ICO has filed for registration with the SEC, even though ICOs have largely been considered offers and sales of securities. This has led the SEC to acknowledge that many promoters of ICOs are not following securities laws. To address this issue, the SEC has increased ICO enforcement efforts, including establishing a new cyber unit. It has also issued investor bulletins and alerts to warn retail investors to proceed with caution. State securities regulators have also issued warnings about ICOs.\nThe SEC recently halted a number of ICOs and issued dozens of subpoenas and information requests to parties engaged in ICOs. Some of the SEC's enforcement efforts have reportedly focused on ICOs that involve simple agreements for future tokens (SAFTs). Similar to SAFEs, SAFTs offer investors the right to receive tokens at a future date. Investors receive the actual token only in the event the future network they are funding becomes genuinely functional in producing tokens. The SEC reportedly has concerns that some ICOs, both those with and without SAFTs, could be funding businesses that are nonexistent.\nIn addition, the SEC intervened to keep public companies from changing their names or business models to capitalize on the hype surrounding ICOs and blockchain technology. These SEC interventions are in reaction to the market response associated with simple name changes that are not backed by substantive track records, which have raised investor protection concerns. Two of the most cited examples are Long Island Iced Tea and Eastman Kodak. Eastman Kodak's stock price more than doubled after it announced the launching of a digital currency, \"KodakCoin,\" for an ICO. Similarly, the stock price of Long Island Iced Tea spiked five-fold after it announced its name change to Long Blockchain ( Figure 9 ). These incidents reportedly led to SEC's intervention in certain name changes, resulting in some companies erasing the word \"blockchain\" from their names. As to Long Blockchain, it received a notice from Nasdaq Stock Market indicating the exchange's intention to delist the company based on its misleading public statements relating to bitcoin and blockchain technology.\nRegulatory actions concerning ICOs are mixed globally. For example, ICOs have received warning notices by U.S. and European regulators and outright bans in China and South Korea, but have found more support in Switzerland.", "According to CoinDesk ICO Tracker, ICO funding activities started to escalate in 2017. The all-time cumulative ICO funding totaled $19.4 billion as of June 30, 2018, compared to $0.2 billion in mid-2016.\nAlthough ICOs are at present generally considered a method for young private startups to fundraise, some expect the ICO to transform capital formation for large companies as well. One former commissioner of the Commodity Futures Trading Commission (CFTC) speculated that certain large private companies considering IPOs could delay the process with an ICO.\nIn fact, crypto assets created through ICO and other processes have emerged as a new asset class. According to International Monetary Fund (IMF), crypto asset refers to \"digital currencies that rely on encryption techniques to regulate the generation of units and verification of transfers … ICOs are issuances of digital currencies sold via auction or investor subscription in return for crypto assets.\" This new asset class has received significant attention through rapid growth, maturing practices, and regulatory acknowledgement. For example, the Financial Stability Board (FSB) issued a report in July of 2018 to publicize metrics for monitoring the crypto-asset market risk, market capitalization, and institutional exposures, among other factors. The report identifies other asset classes, such as gold and equities, as comparators to crypto assets.", "During a testimony in February 2018, SEC Chairman Jay Clayton stated that \"the recent proliferation and subsequent popularity of cryptocurrency markets creates a question for market regulators as to whether our historic approach to the regulation of sovereign currency transactions is appropriate for these new markets.\" The SEC has not yet promulgated ICO-specific rules or exemptions. Some of the most salient ICO-related policy issues are as follows:\nRegulatory O versight . Current U.S. ICO and virtual currency regulation is fragmented, with multiple regulatory approaches at the federal and state levels. The nature of ICO regulation may differ from agency to agency. For example, the SEC has indicated that ICOs may qualify as offerings of \"securities,\" the CFTC treats certain virtual currencies as \"commodities,\" the Internal Revenue Service treats certain virtual currencies as \"property,\" state regulators oversee virtual currencies through state money transfer laws, and the Treasury Department's Financial Crimes Enforcement Network monitors virtual currencies for anti-money-laundering purposes. Enforcement A ction . ICOs may qualify as securities offerings subject to federal regulation. SEC Chairman Clayton was quoted as saying, \"I believe every ICO I've seen is a security.\" Yet no ICOs have been registered as of February 2018 (the first ICO registration was reportedly filed in March 2018), meaning the vast majority of ICO issuers may be violating securities laws. Issuers and investors face a steep learning curve in comprehending the regulatory landscape and in determining how or if securities laws apply to them. Investor P rotection . ICO investors include less-sophisticated retail investors, who may not be positioned to comprehend or tolerate high risks. Investor protection concerns are seen in several areas. First, the high levels of scams and business failures have been a source of concern. One study found that 81% of ICOs are scams and another 11% fail for operational reasons, estimating a 92% combined failure rate for ICO firms. Second, the failure of many ICO companies to comply with registration and disclosure associated with traditional securities has been cited as an issue. Without sufficient disclosure, investors would face difficulty understanding the amount of risks they are exposed to. Third, the high volatility of cryptocurrencies' valuations creates large gains and losses. Fourth, the lack of protection through the traditional financial system has also been a concern. The ICO investors are especially prone to new types of fraud and manipulation. For example, although banks have the option to halt or reverse suspicious transactions and associate transactions with user identity, a blockchain transaction is generally irreversible through intermediaries. In addition, cryptocurrencies could be transferred to anonymous criminal accounts. These characteristics were reported as having incentivized new waves of theft involving cryptocurrencies. T rading . Many cryptocurrency trading platforms are registered as money-transmission services (MTS) instead of national securities exchanges. MTS are money transfer or payment operations that are mainly subject to state instead of federal regulations. Because MTS were not designed for cryptocurrency trading activities, they are said to be inefficient when operating across state lines. In addition, these services raise major investor protection concerns because they are not subject to the same level of regulatory oversight as national securities exchanges. The SEC recently issued a statement clarifying that the online platforms for trading digital assets could be potentially unlawful. In response to increased regulatory attention, numerous crypto exchanges have become federally regulated as of July 2018. For example, one of the largest crypto exchanges, Coinbase, has obtained multiple licenses through acquisitions and is now under SEC and FINRA oversight. Cyber s ecurity . Investors risk losing their investments as well as personal information through hacker attacks. One study estimates that more than 10% of ICO proceeds are lost as a result of attacks. Scalability . Current blockchain networks are said to have limited capacity and scalability. For example, major network congestion occurred in November 2017, when the trading of virtual cats, \"CryptoKitties,\" clogged Ethereum. This has led to discussions regarding the fundamental design of blockchain technology, which requires that every transaction be processed by all network nodes, limiting the number of concurrent transactions. New blockchain solutions that could potentially circumvent network congestions have gained traction as measured by the amount of investments attracted. For example, proposed solutions provided by Oasis Labs and Block.one (the developer of the EOS platform) have attracted $45 million through a private token presale and $4.2 billion through an ICO, respectively. But the new blockchains' scalability has not yet been demonstrated in full." ], "depth": [ 0, 1, 1, 2, 3, 3, 2, 1, 2, 2, 2, 1, 2, 3, 3, 2, 3, 3, 4, 4, 4, 3, 2, 3, 4, 4, 4, 3, 3, 2, 3, 4, 4, 3, 4, 4, 4 ], "alignment": [ "h0_title h2_title h4_title h3_title h1_title", "h0_full h3_full h2_full", "h0_full", "", "", "", "", "h4_title", "", "", "h4_full", "h2_title h4_title h3_title h1_full", "h2_title h4_title h3_title", "h4_full", "h3_full h2_full", "h4_title h1_full", "", "h4_title", "", "", "h4_full", "", "h3_full h2_title h1_title", "h2_full", "", "", "", "", "h1_full", "h1_full", "", "", "", "", "", "", "" ] }
{ "question": [ "What is the general opinion about U.S. capital markets?", "Why is capital access important?", "What is the SEC?", "How do securities offerings vary?", "What prompted policymakers to update regulations on capital access?", "How has the number of publicly listed companies changed?", "How have capital access tools changed this landscape?", "How did the JOBS Act impact smaller companies?", "In what way did the JOBS Act impact capital access?", "What other legislation was impactful?", "What was the result of implementing the JOBS Act?", "What was the primary concern over capital information?", "How did the Congress act on this problem?", "What is one proposal that the Congress introduced?", "How has the bill changed over the years?", "What is the state of the current policy debate regarding capital formation?", "Why are these missions important to investors?", "To what extent do these two missions conflict?" ], "summary": [ "U.S. capital markets are the largest and considered to be the most efficient in the world.", "Companies rely heavily on capital access to fund growth and create jobs.", "As the principal regulator of U.S. capital markets, the Securities and Exchange Commission (SEC) requires that offers and sales of securities either be registered with the SEC or be undertaken with an exemption from registration.", "Registered securities offerings, often called public offerings, are available to all types of investors and have more rigorous disclosure requirements. By contrast, securities offerings that are exempt from SEC registration are referred to as private offerings and are mainly available to more sophisticated investors.", "Some policymakers have concluded that changes in market trends require updated regulations governing capital access.", "Specifically, the number of publicly listed U.S. companies has declined by half over the last two decades, and small- to medium-sized companies are said to have more difficulty accessing capital relative to larger companies.", "Additionally, new capital access tools not previously part of the SEC regulatory regime, such as crowdfunding and initial coin offerings, have emerged. These new tools are especially helpful for small businesses and startups.", "The bipartisan Jumpstart Our Business Startups Act of 2012 (JOBS Act; P.L. 112-106) scaled regulation for smaller companies and reduced regulations in general for certain types of capital formation.", "It established a number of new options to expand capital access through both public and private offerings, including a new provision for crowdfunding.", "Parts of the Fixing America's Surface Transportation Act (JOBS Act 2.0; P.L. 114-94) provided additional relief.", "Following the JOBS Act, the public and private offering dichotomy has started to blur, and securities regulation has become increasingly tailored to suit companies of different sizes and with different needs.", "However, concerns over capital formation have persisted, given that the number of IPOs remained at far below long-term average levels post-JOBS Act and smaller businesses continue to face capital access pressure.", "To address these concerns, Congress has considered numerous legislative proposals to further expand the scaled approach, with some proposals building on existing JOBS Act provisions.", "The most notable of these proposals is S. 488, a capital formation package referred to as JOBS Act 3.0. Originally a relatively narrow bill, S. 488 was passed by the Senate and then was amended significantly and passed by the House in a 406-4 vote on July 17, 2018. The package includes 32 titles, many of which have previously passed the House with bipartisan support as standalone bills.", "Originally a relatively narrow bill, S. 488 was passed by the Senate and then was amended significantly and passed by the House in a 406-4 vote on July 17, 2018. The package includes 32 titles, many of which have previously passed the House with bipartisan support as standalone bills.", "The policy debate surrounding capital formation proposals often focuses on expanding capital access and protecting investors, two of the SEC's core missions.", "Expanding capital access promotes capital formation and allows for greater access of investment opportunities for more investors. Investor protection is considered to be important for healthy and efficient capital markets because many investors would be more willing to provide capital, and even at a lower cost, if they could expect enforceable contracts for their investments through a transparent process.", "At times, expanding capital access can come at the expense of investor protection. For example, proposals that reduce the registration and disclosures that a company must make can decrease the company's compliance costs and increase the speed and efficiency of capital formation. But the reduced disclosures may expose a company's investors to additional risks if they are not receiving information that is important to making informed investment decisions." ], "parent_pair_index": [ -1, 0, -1, 2, -1, 0, 0, -1, 0, 0, 0, -1, 0, 1, 2, -1, 0, 0 ], "summary_paragraph_index": [ 0, 0, 0, 0, 1, 1, 1, 2, 2, 2, 2, 3, 3, 3, 3, 4, 4, 4 ] }
GAO_GAO-13-8
{ "title": [ "Background", "NRC’s Fire Safety Regulations", "NRC’s Adoption of a Risk- Informed Approach", "Status of Industry’s Adoption of the Risk- Informed Fire Safety Approach", "NRC Has Taken Steps to Resolve Long- standing Fire Safety Issues", "Benefits Cited in the Risk-Informed Fire Safety Approach, but NRC Considers Plants That Meet the Deterministic Approach to Be Safe", "NRC Officials, Plant Operators, and Consultants and Experts Cited Various Benefits of the Risk-Informed Approach", "NRC Made the Risk- Informed Approach Voluntary Because It Considers Plants Meeting Deterministic Regulations to Be Safe", "Plants Transitioning to the Risk-Informed Approach Face Three Key Challenges", "Agency Comments and Our Evaluation", "Appendix I: Objectives, Scope, and Methodology", "Appendix II: List of Consultants and Experts Contacted for This Report", "Appendix III: Schedule for Plants Transitioning to a Risk-Informed Approach to Fire Safety", "Appendix IV: Comments from the Nuclear Regulatory Commission", "Appendix V: GAO Contact and Staff Acknowledgments", "GAO Contact", "Staff Acknowledgments" ], "paragraphs": [ "This section discusses the development of NRC’s fire safety regulations, NRC’s adoption of risk-informed regulation, and the status of the nuclear industry’s adoption of the risk-informed fire safety approach.", "NRC’s deterministic fire safety approach and its risk-informed fire safety approach contain requirements that plants’ fire protection programs have defense-in-depth objectives in areas important to fire safety. Under both approaches, plants must meet the following objectives: (1) prevent fires from starting; (2) detect rapidly, control, and extinguish promptly those fires that do occur; and (3) provide protection for structures, systems, and components important to safety so that a fire that is not promptly extinguished by the fire suppression activities will not prevent the safe shutdown of the plant. The two approaches provide different methods for plants to demonstrate defense-in-depth capabilities. According to NRC officials and nuclear industry representatives, no fire since the Browns Ferry fire in 1975 has threatened a U.S. nuclear reactor’s ability to safely shut down.\nNRC’s deterministic fire safety approach requires that power plant operators ensure that at least one system of electric cables and equipment is available to safely shut down a reactor if a fire occurs. To meet requirements under the deterministic approach, these operators must, among other things, separate redundant systems, either by distance or fire resistant barriers, such as a fire resistant wall or floor, or by a material (fire wrap) that protects important cables and, in some cases, operators must install fire detection and automatic suppression systems. The requirements also specify the amount of space between redundant systems or how long fire barriers should be able to withstand For example, fire barriers must also be able to withstand fire for at fire. least 1 hour in areas with automatic fire suppression systems and fire detectors or for at least 3 hours where such features are not present. If these requirements are not met or if a redundant system required for shutdown could be damaged by fire suppression activities or operation of the fire suppression system, NRC requires an alternative dedicated shutdown capability. Figure 1 shows the process a plant operator uses to demonstrate fire safety compliance under the deterministic approach.\nSpecifically, the deterministic fire safety approach requires nuclear reactors to have at least one redundant system of electric cables and equipment available to safely shut down the reactor. When two systems are in the same area of a nuclear reactor building, the regulations require that they be (1) separated horizontally by more than 20 feet with no intervening combustibles or fire hazards and for the area to have fire detectors and automatic fire suppression systems, or (2) separated by a fire barrier, such as a fireproof wall or floor, or by a material (fire wrap) that can withstand fire for 3 hours, or (3) enclosed by a fire barrier or material that can withstand fire for 1 hour and for the area to have fire detectors and an automatic fire suppression system. “Containment” refers to structures, systems, or components provided to prevent or mitigate the release of radioactive materials.\nA “radiant energy shield” is a device used to protect components from the effects of radiant heat generated by a fire.\nOver the years, NRC has approved exemptions or deviations from this deterministic approach for units that could not meet the fire safety requirements if the units could otherwise demonstrate the ability to safely shut down. Plants follow the following processes, as applicable:\nExemption process. Under this process, plant operators could obtain an exemption from the deterministic requirements if they could demonstrate fire safety through methods or features other than those explicitly stated in the regulations.\nDeviation process. Some of the reactors that came online after NRC had defined the deterministic approach still could not meet the requirements. In such cases, NRC allowed operators to seek deviations from their licensing requirements if they could demonstrate an acceptable alternate approach to fire safety.\nIn part because of variations among plant designs and different interpretations of fire safety regulations between industry and NRC, the agency continued to issue updated guidance related to the deterministic regulations, according to NRC and industry documents. However, in 2004, NRC reported that the processing of exemption and deviation requests had placed a “significant” burden on the resources of the agency and the nuclear industry. NRC also acknowledged that industry representatives and some members of the public described the deterministic requirements as an “unnecessary regulatory burden.” As of April 2012, NRC had granted more than 900 exemptions and deviations from the deterministic fire safety approach, according to NRC documents and officials.\nIn response to charges that the processes for granting exemptions and deviations under the deterministic approach were burdensome, NRC issued a regulation in 2004 permitting plants to voluntarily transition to risk-informed fire protection requirements. Under this approach, a plant operator adopts performance goals, objectives, and criteria for fire safety that are defined by the fire protection standard issued by NFPA. The operator can use probabilistic risk assessments (PRA) and fire models, among other tools, to meet the performance criteria. A PRA is a systematic assessment of what can go wrong, its likelihood, and its potential consequences to determine quantitative estimates of a particular risk, such as a fire safety risk. Fire models are mathematical predictions of fire growth, environmental conditions, and potential effects on structures or systems. Figure 2 illustrates how a plant demonstrates fire safety compliance under the risk-informed approach.\nNuclear power plant operators can choose to make a transition from using the deterministic approach to the risk-informed approach. In doing so, they can conduct a PRA that is subsequently reviewed by teams of experts from other plant operators and consulting firms that are not involved in developing the PRA under review. After the PRA is reviewed, the transitioning plant requests that NRC amend the plant’s operating license. NRC staff review the amendment request and, if necessary, request additional information from plant operators and conduct audits of transition documents to ensure that the plant has conducted the necessary tasks. If NRC approves the license amendment request, it will issue a final report evaluating the safety of the plant, after which the transition is considered complete. According to NRC documents and officials, the agency expects the approval process for each plant to take about 2 years after the plant submits its request for a license amendment.", "NRC’s change to a risk-informed approach to fire safety is part of a larger NRC effort to move toward accepting or adopting a risk-informed approach to nuclear safety in general. Examples are as follows.\nIn 1995, NRC issued a policy statement encouraging the increased use of PRA in all regulatory matters to the extent supported by the state of the art in PRA methods and data and in a manner that complemented NRC’s existing deterministic approach and supported NRC’s defense-in-depth philosophy.\nIn 2007, NRC issued regulations requiring applicants for combined licenses for new nuclear power reactors to submit a description and the results of a plant-specific PRA to NRC as part of their applications. NRC also began requiring recipients of combined licenses to develop, maintain, and periodically upgrade a plant- specific PRA. Among other things, NRC required the PRA to cover initiating events––that is, events that can lead to a reactor accident— for which there are NRC-endorsed consensus standards for PRA.\nIn 2011, NRC commissioned a risk management task force to develop a strategic vision and options for adopting a more comprehensive risk- informed, performance-based regulatory approach. In its April 2012 report, the task force identified goals and objectives that could be the framework for NRC regulatory activities 10 to 15 years in the future and addressed changes that would be needed to ensure that the framework is implemented. The task force reported, “NRC has recognized that purely deterministic and prescriptive approaches can limit the flexibility of both the regulated industries and the NRC to respond to lessons learned from operating experience and support the adoption of improved designs or processes.” The task force went on to recommend, among other things, “the goal to adopt risk- informed and performance-based approaches, where practical, should continue and should be incorporated into the revised regulatory framework.”", "According to NRC documents, the 65 commercial nuclear power plants operating in the United States house 104 reactors that incorporate 80 different designs. Furthermore, operators for 47 of these reactors, located at 29 plants, plan to or are in the process of transitioning to the risk- informed approach to fire safety. NRC has adopted a staggered schedule for such plants to submit license amendment requests seeking approval to transition to the risk-informed approach. This schedule anticipates that the agency will receive amendment requests from all of the plants by 2014 and will decide on all of the requests by 2016. (Appendix III contains a list of transitioning plants and the dates they are scheduled to submit their license amendment requests to NRC.) According to NRC officials, the agency has implemented a discretionary enforcement policy under which inspection findings related to the transition will not automatically result in violations or penalties. The period of enforcement discretion is tied to each plant’s committed date for submitting its license amendment request and, according to NRC documents, provides incentive for plants to adhere to their transition schedule. Plants that elect not to complete the transition process must then seek exemptions or deviations or conduct the modifications necessary to comply with the deterministic approach.\nTo assist the transition process, operators at two plants—including a plant with three reactors in South Carolina and a plant with one reactor in North Carolina—participated in a pilot program for the risk-informed approach. These plants began the transition in August 2005 and, by December 2010, both plants had completed it. In 2011, NRC issued a report on lessons learned from the pilot experience for other plant operators interested in making the transition. Figure 3 shows the location of the 65 power plants and identifies those with nuclear reactors that will transition to the risk-informed approach and those that remain under the deterministic approach.", "NRC, in conjunction with plant operators, has made progress in resolving the three long-standing fire safety issues raised in our 2008 report at nuclear power plants remaining under the deterministic approach and those transitioning to the risk-informed approach. NRC implemented one of our three recommendations and took actions to resolve issues we had identified in making the other two recommendations but did not specifically implement these recommendations.\nFor the plants remaining under the deterministic approach, NRC has done the following in response to our 2008 recommendations:\nWe recommended that NRC commit to a specific date for developing guidelines that reactors should meet to prevent multiple spurious operations. In November 2009, NRC issued a document in which it endorsed industry guidance for methodologies that operators might use to mitigate multiple spurious operations that could occur because of a fire. NRC also set a November 2012 deadline for power plant operators to implement this guidance. Furthermore, as part of this mitigation effort, NRC required corrective actions at the 36 plants that have a total of 57 reactors remaining under deterministic regulations (hereafter referred to as nontransitioning plants). Information gathered by industry, as well as statements to us by selected plant operators, indicate that most operators expect to implement the guidance by NRC’s deadline. According to a January 2012 industry survey of operators at plants housing 46 of the 57 nontransitioning reactors, seven of the responding operators reported that they did not expect to mitigate the effects of multiple spurious operations by the deadline; the plants where these operators work at were not identified. We subsequently interviewed operators at 6 nontransitioning plants, and operators at 4 of these plants told us they expect to resolve issues associated with multiple spurious operations by NRC’s deadline. Operators at the fifth plant told us that an unexpected maintenance period requiring the plant to go off-line pushed back their mitigation of multiple spurious operations until its next maintenance period, which will occur after November 2012; operators at the sixth plant told us that their efforts to resolve other safety-related issues may delay their mitigation of multiple spurious operations until 2014. In August 2012, NRC officials told us that they may issue a generic letter requesting information from plant operators regarding the specific actions taken to mitigate multiple spurious operations because, under current guidance, operators are not required to provide such information unless requested during NRC plant inspections.information on the methodologies plants are using to mitigate multiple spurious operations, including any instances in which plants are using methodologies not endorsed in NRC’s guidance document. The NRC officials told us that the information request must go through NRC’s review process and public comment period, and that they did not expect that it would be released until November 2013 at the earliest. These officials stated that the information request could result in the need for additional work by licensees to fully mitigate multiple spurious operations.\nNRC, NUREG-1924, “Electric Raceway Fire Barrier Systems in U.S. Nuclear Power Plants” (Washington, D.C.: May 2010). plants we interviewed told us that they have deficient fire wrap in their plants but have resolved the associated safety issues through modifications approved by NRC or by obtaining exemptions from deterministic requirements. According to these plant operators, they have done so by demonstrating to NRC that other safety features compensate for the wraps, such as by installing upgrades to the wraps to meet deterministic requirements, or by conducting additional testing to demonstrate that the wraps are adequate as configured in the plants.\nNRC did not implement our recommendation that it address safety concerns related to extended use of interim compensatory measures but, in April 2009, the agency reported that it had committed its staff to resolving the issues that underlie the need for compensatory measures and developing metrics to gauge the progress of this effort. Beginning in 2009, NRC and the Electric Power Research Institute gathered data from nontransitioning plants on the use of “long-term compensatory measures”—measures that have been in place for longer than 18 months. NRC reported that the total number of areas within plants where long-term compensatory measures are used increased from June 2011 through December 2011. NRC officials stated their belief that the current use of extended interim compensatory measures is associated with plant operator efforts to mitigate multiple spurious operations, but that they had not conducted an analysis to confirm this. Operators of five of the six nontransitioning plants we contacted told us that they had implemented interim compensatory measures while they work to mitigate multiple spurious operations. NRC officials told us in April 2012 that they expected that the number of long-term compensatory measures would decline following NRC’s deadline for mitigating multiple spurious operations by November 2012. However, NRC officials informed us in August 2012 that they were no longer certain that the number of long-term interim compensatory measures would decline as expected. According to these officials, the agency’s planned information request related to multiple spurious operations could potentially uncover issues that would require operators to perform additional work to mitigate spurious operations. If this occurs, the NRC officials told us, operators may need to use additional extended compensatory measures at nuclear power plants as they work to finally mitigate these issues after the information request is released as planned in November 2013.\nFor the plants transitioning to the risk-informed approach to fire safety, NRC officials and plant operators told us that they are continuing to resolve the fire safety issues through modifications and analyses required to comply with the risk-informed approach. Following are examples.\nAt one of the transitioning plants we visited, operators showed us a new control facility that is being developed to shut down the plant’s reactors from a separate building if a fire affects the primary shutdown circuits. Such a capability allows the plant to mitigate multiple spurious operations at a reactor.\nAt that same transitioning plant, operators told us that the modifications and their use of PRA will eliminate their use of long-term compensatory measures, which predominately consisted of fire watches.\nAt a plant we visited that had completed the transition, operators stated that they had significant amounts of degraded fire wrap but had made upgrades to areas where the fire wrap was located, including adding additional fire detection devices. Figure 4 shows an example of a fire detection device—called an incipient fire detector alarm— installed at this plant in an area with degraded fire wrap to comply with the risk-informed approach. According to industry documents, the device detects combustion particles that overheating electrical cables produce before any smoke, flames, or heat. An operator at this plant told us that the PRA and other analysis performed as part of the transition had demonstrated that the wrap, in conjunction with upgrades, provide sufficient protection.", "The risk-informed regulatory approach to fire safety offers benefits over the deterministic approach, according to NRC documents we reviewed, and NRC officials, consultants and experts, plant operators, and industry representatives we spoke with, but NRC made the adoption of the risk- informed approach voluntary instead of mandatory because it considers plants that meet deterministic requirements to be safe. NRC officials stated that plant operators will have greater knowledge of plant risk and simpler licensing conditions under the risk-informed approach, and some consultants, experts, and power plant operators we interviewed stated to us that the approach improves plant safety. NRC ultimately elected to make the transition voluntary because of uncertainty over whether agency staff could make the required determination regarding the approach’s protection of health and safety to impose new requirements. NRC considers plants that meet deterministic requirements to be safe, including plants that do so through approved exemptions and deviations.", "NRC documents and agency officials identified two major benefits of transitioning to the risk-informed approach. First, according to NRC officials, the modifications and risk assessments that plant operators perform as part of the transition process will help them identify and devote resources to activities that quantifiably reduce risk while allowing them greater flexibility in areas that do not significantly affect risk. For example, in its April 2012 risk management task force report, NRC stated that the risk-informed approach includes performance-based methods for evaluating plant configurations that would not meet the deterministic requirements, and that these methods allow engineering analyses to demonstrate that changes in overall plant risk that result from these plant configurations are acceptably small and that fire protection defense-in- depth is maintained. To illustrate the difference between the risk- informed and deterministic approaches, NRC officials told us that, in 2008, operators of a nontransitioning plant notified NRC that they had found 17-½ feet of separation between safety systems in a single area, rather than at least 20 feet as required by deterministic regulations. The plant had to submit an exemption request—which NRC approved 8 months later—for what NRC officials characterized as a possibly minor or nonexistent safety issue. These officials told us that obtaining a single exemption—which could include engineering assessments or other work to demonstrate safety—could cost a plant tens of thousands of dollars. According to NRC documents, if the agency does not approve an exemption, a plant could be required to make safety-related modifications that are more expensive than obtaining an exemption but that do not quantifiably reduce risk. Operators from all six of the transitioning plants we contacted said they expected that the risk-informed approach would allow them to avoid making expensive modifications or seeking exemptions to comply with deterministic guidelines. According to NRC guidance and other information provided to us by NRC officials, the approach would also allow plant operators to have the flexibility to change aspects of their approved fire protection programs for reasons other than fire safety concerns—such as administrative controls, maintenance procedures, and physical plant modifications if they wished to do so— without prior NRC review and approval if those modifications would not increase risk beyond a certain threshold. An NRC official told us that he was not aware of any operator of a plant meeting deterministic rules making the changes listed above for any reason.\nSecond, according to NRC officials, under the risk-informed approach, plant operators can obtain licensing amendments that correspond to a single fire safety standard issued by NFPA, rather than be subject to the dozens of guidance documents, communications, and regulatory issue summaries that NRC has issued under the deterministic approach. NRC officials— including regional inspectors responsible for conducting fire safety inspections—told us they expect that simplified licensing requirements will enable plants to more easily demonstrate compliance and allow NRC inspectors to focus on technical issues significant to risk rather than on reading and interpreting complex licensing documents before conducting plant inspections. Operators from two of the six transitioning plants we contacted cited the prospect of clarifying or simplifying their license requirements as a major factor in their decision to adopt the risk-informed approach. For example, under this approach, operators at one plant expected to resolve long-standing issues dating from the 1980s, including differences in interpretation by the plant operator and NRC on how to implement deterministic requirements.\nAn NRC webpage updated in March 2012 states that the adoption of the risk-informed approach “can absolutely improve an already safe operating environment… fire risk analysis and fire science has evolved in the last two decades, and we now know how to make already safe plants safer.” The webpage also notes that early fire protection regulations were developed without the benefit of quantitative estimates of risk and before recent advances in performance-based methods such as fire modeling. / yr for LERF . The proposed change must also be consistent with the defense-in-depth philosophy and must maintain sufficient safety margins. The change may be implemented following completion of the plant change evaluation.\nOperators from the six transitioning plants and five of the nine consultants and experts we contacted said that they believed that transitioning plants will be safer than they were under the deterministic approach. Operators at the six transitioning plants said that the transition has improved plant safety because of the extensive fire safety analyses or modifications required during the transition process. For example, operators at one plant stated that they had added fire detection capabilities and that through safety analysis were able to determine that actions that operators were required to do manually in 70 areas throughout the plant to ensure safe shutdown under the deterministic approach were not needed. At the time of our review, the plant operators had yet to submit their license amendment request to NRC, and the agency had not formally evaluated the plant’s safety analysis.", "NRC officials told us that the agency considers plants that meet deterministic requirements to be safe and, therefore, it decided not to require these plants to transition to the risk-informed approach. Furthermore, as we previously noted, under the deterministic approach there has not been a fire at a U.S. plant that has prevented a plant’s reactor from safely shutting down. Also, in the late 1990s, NRC conducted an analysis of selected plants and determined that the cumulative effects of multiple exemptions at plants under the deterministic approach did not pose a significant risk.\nNRC, Development of a Risk-Informed, Performance-Based Regulation for Fire Protection at Nuclear Power Plants, SECY-98-058 (Washington, D.C.: March 1998). This document outlines three options that NRC staff considered, with industry input, related to adopting a risk-informed approach. regulation or to maintain the existing deterministic framework without adopting risk-informed regulation. According to the policy statement, NRC staff recommended to allow plant operators to either voluntarily adopt the risk-informed approach or remain under the deterministic approach because it was unclear at that time whether NRC staff would be able to determine if the risk-informed approach improved safety over the deterministic approach. Such a determination would be needed for NRC to comply with its “backfit rule.” Under this rule, NRC is generally prohibited from imposing new regulatory requirements on plants unless it determines that the requirements (1) are necessary to provide adequate protection to the health and safety of the public; (2) are necessary to bring a facility into compliance with a license or the agency’s rules or orders, or into conformance with plant operators’ written commitments; or (3) would substantially increase protection of public health and safety and the implementation costs would be justified in view of the increased protection. The NRC commissioners subsequently directed the staff to proceed with rulemaking to make adoption of the risk-informed approach voluntary. Similarly, in 1998, NRC staff recommended that the implementation of revised regulations pertaining to a wide range of reactor operations should be voluntary.it would be difficult to make the backfit determination needed to require mandatory implementation and further stated that doing so could create the impression that plants operating under the current regulations were less safe. Ultimately, the NRC commissioners determined that compliance would be voluntary.\nGAO, Nuclear Regulatory Commission: Natural Hazard Assessments Could Be More Risk-Informed, GAO-12-465 (Washington, D.C.: Apr. 26, 2012). to determine whether a new requirement should be implemented. Similarly, NRC officials we interviewed stated that conducting a backfit analysis for fire safety approaches requires extensive staff resources. These officials told us that plants that meet the deterministic requirements—including those that do so through approved exemptions or deviations—are considered by definition to be safe in that they provide a reasonable assurance of adequate protection. Therefore, the agency does not plan to consider further the need for a mandatory adoption of the risk-informed approach.", "NRC documents we reviewed and some of the plant operators, industry representatives, consultants and experts we spoke to identified three primary challenges that may affect plants’ ability to transition to the risk- informed approach by 2014, when NRC expects to have received requests for license amendments from all of the plants that have currently committed to make the transition. These challenges may also limit the number of plants that ultimately transition to the risk-informed approach beyond those that have already committed to doing so.\nFirst, transition costs have been higher than expected. Operators from 7 of the 12 plants we contacted told us that initial estimates for costs and resources for transition activities were relatively low (from several hundred thousand dollars to a few million dollars for each plant), and these estimates were based on projections that the activities could be conducted relatively easily. As information from the pilot program became available, however, cost estimates began to rise, according to plant operators we spoke with. For example, operators from one pilot plant told us that they had originally estimated transition costs of $5 to 10 million, but ultimately the plant spent $20 million because plant operators identified the need for more modifications than planned, and conducting the PRA was more costly than expected. Operators from all of the nontransitioning plants we contacted cited the cost of the transition as a reason why they are remaining under the deterministic approach, and five of the nine consultants and experts we spoke with stated that cost was a basis for plants not to transition to the risk-informed approach.\nAccording to the lessons learned report prepared by NRC staff after the two pilot plants completed the transition, both NRC and industry representatives underestimated the complexity of the analyses and level of resources needed for the pilot plants to transition to the risk-informed approach. NRC officials told us that none of the currently transitioning plants have officially informed the agency why their transition costs have been higher than expected, but that the officials believe that many of the plant operators did not know the precise location of important cables in their plants; thus, they had to spend substantial resources to pinpoint the location of the cables before conducting their PRA. NRC’s risk management task force characterized the transition in its 2012 report as a “high-cost, high-payback” endeavor. The task force also acknowledged the high cost of developing high-quality PRAs and implementing fire protection changes; nevertheless, it stated that the cost of the alternative—continuing with the deterministic approach or allowing plants to shut down—is “even more prohibitive” for the industry. Moreover, one plant operator—whose plant was not involved in the pilot program— stated that the results of the pilot program confirmed his plant’s original decision not to commit to the transition process.\nSecond, it may be difficult to develop realistic PRAs, according to industry documents and some of the plant operators, consultants, and experts we interviewed. Five of the nine consultants and 5 of the 12 plant operators we contacted expressed concern that NRC’s guidance for fire PRAs produces overly conservative results. Some of these individuals said that the assumptions underlying the guidance suggest that damage caused by fire is much more likely to occur than has actually been observed in nuclear power plants and that overly conservative risk assessments could cause plant operators to misallocate the resources available to reduce risk of fire. According to 4 of the 12 plant operators and two of the nine consultants and experts who discussed this issue with us, the specific reason for overly conservative PRAs is that sufficient data are not available to develop realistic calculations supporting fire models and PRAs because no major fire incidents—in which a fire threatens a plant’s ability to safely shut down—have occurred at nuclear power plants since the 1975 Browns Ferry fire. These individuals stated that, in the absence of sufficient data, NRC and its consultants used overly conservative assumptions in developing NRC’s guidance for conducting PRAs. NRC officials and two of the consultants we spoke with agreed that some aspects of NRC’s guidance are conservative, but not overly so. These consultants stated that overly conservative risk assessments could result from plant operators’ incorrect application of fire modeling, rather than conservative guidance by NRC. NRC is scheduled to release new guidance for fire modeling in October 2012 that is intended to help plant operators identify how to apply such modeling correctly. In addition, NRC officials told us that they are working with industry to identify areas where NRC’s PRA guidance can be improved as more fire data become available from ongoing research.\nThird, the number of people experienced in fire modeling and probabilistic risk assessment is relatively small compared with the potential need, according to plant operators, consultants, and experts we spoke with. These individuals differed on the extent to which the number of experts in the field would affect the transition effort. The experts needed to help with the transition include consultants who develop risk assessments and fire models for transitioning power plants, peer reviewers commissioned by industry who review PRAs, and NRC employees or contractors who assist in approving license amendments. Industry representatives we spoke with characterized the PRA field as barely able to keep up with the demands of the transition, and they noted that many individuals with relevant expertise are nearing retirement age. In addition, we identified only three universities that support accredited degree programs in fire protection engineering in the United States.\nWe have reported on the challenge posed by the limited number of consultants for conducting PRAs as far back as 1985. For example, in June 2008, we noted that numerous NRC officials, industry representatives, and academic experts expressed concern about the limited number of personnel with the necessary skills and training to develop and review PRAs. More recently, in April 2012, we reported that experts in PRAs had said that a key challenge to the use of these assessments is the limited number of experts qualified to develop PRAs. We recognize that our April 2012 report discussed PRAs for natural hazards and that fires in nuclear plants are not natural hazards, but the same pool of individuals conduct PRAs for both types of risk. One of the experts we consulted for our April 2012 report noted that finding individuals with PRA expertise has become more difficult because NRC and industry are conducting PRAs for natural hazards in response to the Fukushima Daiichi nuclear power plant disaster. For this review, operators at 5 of the 12 plants we interviewed expressed concern about the limited numbers of individuals skilled in PRA and the effect that these numbers may have on plant costs and PRA quality. Operators at one plant estimated that they had paid twice as much in contractor fees as originally planned. Seven of the nine consultants and experts we contacted acknowledged that the current demand for expertise could, in the short term, limit the ability of PRA or fire modeling experts to meet all of the needs of industry or NRC. For example, one expert observed that it has been very difficult to get the number of experts needed to conduct peer reviews of plants’ PRAs. However, six of the nine consultants and experts stated that enough people with expertise will ultimately be available to meet the modeling and review needs of both industry and NRC to meet the transition schedule, in part because of increased demand, training, and new practitioners entering the field. For its part, NRC has taken some steps to manage resource needs, including contracting with experts from the Department of Energy’s national laboratories and obtaining additional staff for the NRC team responsible for overseeing the transition. In October 2011, NRC identified the transition effort as a high-priority safety activity that would not be delayed by work related to the agency’s Fukushima response.", "We provided a draft of this report to the Chairman of the Nuclear Regulatory Commission for review and comment. NRC provided written comments on October 12, 2012, stating that it found the draft report to be accurate, complete, and appropriate in its handling of sensitive information. NRC also provided technical comments, which we incorporated into our report as appropriate. NRC’s comments are reproduced in appendix IV.\nAs agreed with your offices, unless you publicly announce the contents of this report earlier, we plan no further distribution until 30 days from the report date. At that time, we will send copies to the Chairman of NRC, the appropriate congressional committees, and other interested parties. In addition, the report will be available at no charge on the GAO website at http://www.gao.gov.\nIf you or your staff members have any questions about this report, please contact me at (202) 512-3841 or [email protected]. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. Key contributors to this report are listed in appendix V.", "Our review provides information on: (1) the Nuclear Regulatory Commission’s (NRC) progress in resolving the long-standing fire safety issues raised in our 2008 report at plants remaining under the deterministic approach and at those plants transitioning to the risk- informed approach; (2) the potential benefits of transitioning to a risk- informed approach and the basis for NRC’s decision to make adoption of this approach voluntary; and (3) challenges, if any, in efforts to transition to a risk-informed approach in regulating fire safety.\nFor all of these objectives, we reviewed relevant literature and NRC documents and interviewed NRC officials, representatives from the nuclear power industry, consulting organizations, public interest groups, and others to understand NRC’s efforts to oversee fire safety at nuclear power plants. In addition, we summarized the results of semistructured interviews from a nonprobability sample of operators of 12 nuclear power plants—housing a total of 24 of the nation’s 104 nuclear reactors— to obtain information about fire protection at plants that are remaining under the deterministic approach, as well as those that are transitioning to the risk-informed approach. Six of the plants we contacted are remaining under the deterministic approach, and the remaining six plants plan to or are in the process of transitioning to a risk-informed approach. These plants were Arkansas Nuclear One in Arkansas, Braidwood Nuclear Generating Station in Illinois, Browns Ferry Nuclear Plant in Alabama, Catawba Nuclear Station in South Carolina, Comanche Peak Nuclear Power Plant in Texas, Diablo Canyon Power Plant in California, Dresden Generating Station in Illinois, Edwin I. Hatch Nuclear Plant in Georgia, Indian Point Energy Center in New York, Joseph M. Farley Nuclear Plant in Alabama, Nine Mile Point Nuclear Station in New York, and Wolf Creek Generating Station in Kansas. We selected these plants to capture a variety of characteristics, including whether they are transitioning to a risk-informed approach to fire safety, the year their operating license was issued, and reactor type. The information gathered from these plants cannot be used to make inferences about the entire population of plants, or the nuclear power industry as a whole, but it does allow us to make qualified comparisons between different groups of plants and to discuss issues faced by each group. We also visited two plants, housing a total of four reactors, that participated in a pilot program for the risk-informed approach to fire safety. These reactors are the Oconee Nuclear Station in South Carolina and the Shearon Harris Nuclear Plant in North Carolina.\nWe also interviewed NRC officials from the Office of General Counsel, Office of Nuclear Regulatory Research, the Office of Nuclear Reactor Regulation (including the team overseeing the transition of plants to the risk-informed fire safety approach), as well as NRC officials in Region II and Region IV. We also interviewed officials from the National Institute of Standards and Technology regarding their development of fire models used at nuclear power plants and their role in providing modeling and experimentation expertise in NRC’s evaluation of fire models. Furthermore, we interviewed representatives from the Nuclear Energy Institute, the Union of Concerned Scientists, Beyond Nuclear, and NC WARN to discuss their views on NRC’s oversight of fire safety at U.S. nuclear power plants.\nTo obtain information on NRC’s progress in resolving the long-standing fire safety issues raised in our 2008 report at plants remaining under the deterministic approach and at those plants transitioning to the risk- informed approach, we reviewed relevant documents obtained from NRC and selected plant operators related to NRC’s progress in resolving fire safety issues raised in our 2008 report. We reviewed NRC and industry guidance to plant operators on mitigating issues associated with multiple spurious operations at plants remaining under the deterministic approach to fire safety, as well as those transitioning to the deterministic approach to fire safety. We also reviewed NRC reports and guidance on the use of fire wraps at nuclear power plants and documentation on how operators resolved issues associated with the use of fire wraps. We reviewed joint NRC and industry periodic reports on the extended use of interim compensatory measures at nontransitioning and transitioning plants.\nTo obtain information on the potential benefits of transitioning to a risk- informed approach and the basis for NRC’s decision to make adoption of this approach voluntary, we reviewed relevant documents obtained from NRC and industry on NRC’s efforts to transition to a risk-informed approach to regulating fire safety at 29 plants. We reviewed NRC regulations, standards, and guidance on risk-informed regulation, probabilistic risk assessment (PRA), and the use of fire modeling at nuclear power plants. We reviewed industry guidance documents and policy statements on the transition. We also summarized the results of semistructured interviews with nuclear engineering consultants and academic experts with experience in PRA, fire modeling, or both. To identify consultants and experts to interview, we conducted a review of journal articles, prior GAO reports, NRC guidance documents, industry conference publications, and congressional and NRC hearings. We then solicited recommendations from NRC, the Nuclear Energy Institute, and public interest groups on possible interview subjects. We also asked consultants and experts we contacted for our initial interviews to identify others whom we should interview. Out of a list of 23 potential interview contacts, we ultimately selected a total of nine nuclear engineering consultants and academic experts based on (1) the relevance of their publications, testimony, and background to our review and (2) the extent to which these individuals were recommended to us by NRC, industry representatives, public interest groups, and their peers. Of these nine individuals, six nuclear engineering consultants are currently employed by private consulting firms, one nuclear engineering consultant is currently employed by a Department of Energy national laboratory, and two academic experts are currently employed by universities. Appendix II lists the experts we interviewed. We contacted these nuclear engineering consultants or academic experts by telephone and e-mail, informed them about the nature of our review, and requested their participation in our semistructured interviews. The number of individuals with the relevant expertise to address our questions is limited and, as a result, all of the individuals we interviewed are currently working or have in the past worked for or consulted with the nuclear industry or NRC. We conducted a content analysis to assess experts’ responses to a standard set of questions and grouped responses into overall themes. The views expressed by experts do not necessarily represent the views of GAO. Not all of the experts provided their views on all issues.\nTo obtain information on challenges, if any, in efforts to transition to a risk-informed approach in regulating fire safety, we reviewed documentation related to NRC’s decision to make the adoption of the risk- informed approach voluntary. We reviewed NRC regulations, guidance, and policy documents on the deterministic and risk-informed fire safety approaches, as well NRC’s 2012 risk management task force report and other documentation related to the agency’s expected future use of risk management principles in the regulation of nuclear safety. We reviewed NRC inspection reports from plants that are remaining under the deterministic approach to fire safety and those that are transitioning to a risk-informed approach. We summarized the results of our semistructured interviews with the nine nuclear engineering consultants and academic experts we contacted regarding their views on the benefits of the deterministic and risk-informed approaches to fire safety. We also attended relevant presentations at NRC’s March 2012 Regulatory Information Conference, and we observed multiple NRC public meetings with industry concerning issues related to the risk-informed approach to fire safety.\nWe conducted this performance audit from September 2011 to October 2012 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 that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives.", "", "Shearon Harris was a pilot plant for the risk-informed approach transition. NRC approved the plant’s license amendment request on June 28, 2010.\nOconee was a pilot plant for the risk-informed approach transition. NRC approved the plant’s license amendment request on December 29, 2010.\nOn September 7, 2012, NRC notified Arkansas Nuclear One, Unit 2 that it did not accept the reactor’s license amendment request, and the reactor is no longer under enforcement discretion. Plant operators may resubmit an amendment request at an unspecified future date.\nArkansas Nuclear One, Unit 1 submitted an extension request to delay submittal of its license amendment request to August 2013. NRC staff are currently reviewing the extension request.\nBeaver Valley submitted an extension request to delay submittal of its license amendment request to December 2013. NRC staff are currently reviewing the extension request.\nBrowns Ferry originally committed to submit its License Amendment Request in March 2012 but was granted an extension by NRC to March 2013.", "", "", "", "In addition to the individual named above, Kim Gianopoulos and Ernie Hazera, Assistant Directors; Steve Carter; and Stephanie Gaines made key contributions to this report. R. Scott Fletcher, Cindy Gilbert, Amanda Manning, Armetha Liles, Cynthia Norris, Carol Herrnstadt Shulman, Jeanette Soares, and Kiki Theodoropoulos provided technical assistance." ], "depth": [ 1, 2, 2, 2, 1, 1, 2, 2, 1, 1, 1, 1, 1, 1, 1, 2, 2 ], "alignment": [ "h1_title", "h1_full", "h1_full", "", "h0_full h1_full", "", "", "", "h1_full", "", "", "", "", "", "", "", "" ] }
{ "question": [ "How well has NRC addressed their fire safety issues?", "How has the NRC implemented GAO's recommendations?", "To what extent have they addressed fire wraps and compensatory measures?", "What is notable example of a fire safety concern?", "What did the NRC to resolve the problems related to the fire?", "What new approaches has NRC since engaged?", "What is GAO's relationship to the issue of fire safety?" ], "summary": [ "The Nuclear Regulatory Commission (NRC), together with plant operators, has made progress in resolving three fire safety issues raised in GAO's 2008 report by implementing GAO's recommendations or taking other actions.", "NRC implemented the recommendation on multiple spurious operations (malfunctions caused by fire that could cause safety-related equipment to malfunction) by issuing new guidance or requiring additional modifications at the 36 plants with 57 reactors operating under deterministic regulations.", "NRC did not implement the recommendations to address the effectiveness of fire wraps or the extended use of interim compensatory measures plants use instead of repairing or replacing damaged safety equipment; however, NRC did take some actions, including (1) evaluating and reporting on corrective actions plants used to mitigate safety concerns associated with fire wraps and (2) developing metrics to gauge the progress of NRC's staff in resolve underlying issues related to the extended use of compensatory measures.", "In 1975, a fire at a nuclear power plant damaged critical control cables and hampered operators' ability to monitor the status of the plant's reactor.", "NRC subsequently issued deterministic fire safety regulations for plants to follow, but differences in plant design, coupled with changes in NRC guidance, made it difficult for most plants to meet the regulations without seeking numerous exemptions.", "In 2004, NRC issued a regulation permitting plants to voluntarily transition to risk-informed fire protection requirements. This new approach mirrors NRC's efforts to adopt a more risk-informed regulatory approach to nuclear safety in general.", "This new approach mirrors NRC's efforts to adopt a more risk-informed regulatory approach to nuclear safety in general." ], "parent_pair_index": [ -1, 0, 0, -1, 0, 0, -1 ], "summary_paragraph_index": [ 3, 3, 3, 0, 0, 0, 0 ] }
CRS_RL34556
{ "title": [ "", "Introduction", "Overview of Noncitizen Detention", "Overview of Detention Population", "Oversight of Detention Facilities", "Health Care for Detained Aliens", "ICE's Detention Standards for Detainee Medical Care", "Overview of Detention Standards", "Detention Standards on Medical Care", "Provision of Health Services", "Role of Division of Immigrant Health Services", "ICE Issues with DIHS", "Additional Health Care Services/Treatment Authorization Requests", "Review Process for Declined TARs", "Preauthorization Issues and Concerns", "Other Reported Issues with Detainee Health Care", "Governmental Reports on Compliance with the Medical Care Detention Standards", "DRO Semiannual Report", "GAO Alien Detention Standards", "DHS OIG Report", "Selected Issues", "Spending on Detainee Health Care94", "Medical Release From Detention", "Health Care for Detained Asylum Seekers", "Deaths in Custody", "Procedures", "Death Rates", "Proper Standard of Care", "P.L. 110-329", "H.R. 5950/S. 3005" ], "paragraphs": [ "", "Congressional hearings and press coverage critical of the medical care received by noncitizens in the custody of the Department of Homeland Security's (DHS's) Immigration and Customs Enforcement (ICE) have increased congressional interest in the subject, including the introduction of legislation related to detainee health care. An overarching debate on this issue concerns the appropriate standard of health care that should be provided to foreign nationals in immigration detention.\nThe medical care required to be provided to detainees is outlined in ICE's National Detention Standards, and the Division of Immigrant Health Services (DIHS), which is detailed from the U.S. Public Health Service to ICE is ultimately responsible for the health care of noncitizens detained by ICE. However, the Florida Immigrant Advocacy Center has reported that problems with access to medical care is one of the chief complaints of aliens in detention. Similarly, the National Immigrant Justice Center states that complaints about access to medical care are a constant theme in conversations with detained aliens. In addition, the U.S. government recently admitted negligence in the death of Francisco Castaneda, a former ICE detainee. Thus, although standards exist, one of the questions raised is are the standards being followed?\nThis report begins with an overview of noncitizen detention and then examines the procedures and policies related to the provision of health care to detainees. The report concludes with a discussion of the issues surrounding detainee health care. The report does not investigate the veracity of claims of substandard medical care made in the press or ICE's rebuttals.", "The law provides broad authority to detain aliens while awaiting a determination of whether they should be removed from the United States, and mandates that certain categories of aliens are subject to mandatory detention (i.e., the aliens must be detained) by the Department of Homeland Security (DHS). Aliens not subjected to mandatory detention can be paroled, released on bond, or continue to be detained.\nAny alien can be detained while DHS determines whether the alien should be removed from the United States. Although some detainees are criminal aliens, others are asylum seekers who have not committed a crime, and others are aliens who are present without status (illegal aliens) who, while in violation of their immigration status and immigration law, have not committed a criminal offense. In addition, some of the criminal alien detainees are legal permanent residents who have resided in the United States for many years. Other detained aliens include those who arrive at a port-of-entry without proper documentation (e.g., fraudulent or invalid visas, or no documentation), but most of these aliens are quickly returned to their country of origin through a process known as expedited removal . The majority of aliens arriving without proper documentation who claim asylum are held until their \"credible fear hearing\" and then released; however, some asylum seekers are held until their asylum claims have been adjudicated.\nAlthough noncitizens in immigration detention are in the custody of ICE, only a minority are detained at facilities owned or fully contracted by ICE. In October 2007, 65% of noncitizen detainees were detained at state and local prisons, 19% at contract facilities, 14% at Service Processing Centers (SPCs) owned and operated by ICE, and 2% at Bureau of Prisons (BOP) facilities. Notably, all facilities housing immigration detainees must comply with ICE's National Detention Standards (discussed below).", "On an average day, up to 33,000 immigration detainees are in ICE's custody in more than 300 facilities nationwide. The average stay is 37.5 days. For FY2008, as of December 31, 2007, the average daily detained population was 31,244. In FY2008, approximately 311,000 aliens were detained by ICE. As of April 30, 2007, ICE reported that, cumulatively, 25% of all detained aliens were removed within four days, and 90% within 85 days. Nonetheless, in FY2006, more than 7,000 aliens were in detention longer than six months. For FY2006, approximately 48% of the aliens in detention were criminal aliens. (For a more detailed discussion of the detention population, see Appendix A .)", "Currently, ICE contracts with Creative Corrections, L.L.C., to perform the annual inspections of detention facilities. ICE also contracts with another company, the Nakamoto Group Inc., to serve as on-site, full-time quality assurance inspectors at the 40 largest detention facilities. The Detention Facilities Inspection Group (DFIG) within the ICE's Office of Professional Responsibility (OPR) is primarily responsible for oversight of detention facilities. The DFIG, which began in February 2007, provides oversight and independent validation of the annual detention facility inspection program (done by Creative Corrections). DFIG also conducts investigations of serious incidents involving detainees. Lastly, DRO's Detention Standards Compliance Unit is tasked with ensuring that facilities that detain aliens comply with ICE's National Detention Standards. The press has reported that a DHS Inspector General's 2008 draft report finds that previous oversight has not been effective in identifying serious problems at the facilities.", "The US Immigration and Customs Enforcement (ICE), Office of Detention and Removal Operations (DRO) is responsible for ensuring safe and humane conditions of confinement for detained aliens in federal custody, including the provision of reliable, consistent, appropriate and cost-effective health services. —Immigration and Customs Enforcement", "", "In 2000, the former Immigration and Naturalization Service (INS) created National Detention Standards for aliens in detention, which are published in the Detention Operations Manual. In late 2008, ICE—reportedly with input from detention experts, non-governmental organizations, and DHS' Civil Rights and Civil Liberties Office—published new Detention Standards in a performance-based format. The standards specify the detention conditions appropriate for immigration detainees. In most cases, the standards mirror American Correctional Association (ACA) standards, though some of ICE's Detention Standards provide more specificity or are unique to the needs of alien detainees. The Detention Standards, however, do not have the force of law, thus detainees do not have legal recourse for violations of the standards. The Detention Operations Manual contains a section on health services, which addresses standards for medical care; hunger strikes; suicide prevention and intervention; and terminal illness, advanced directives, and death.\nThe American Civil Liberties Union (ACLU) and the National Immigration Law Center have complained about the standards. They note that ICE lacks written guidelines for how to rate a facility's adherence to the Detention Standards, and that ICE notifies the facilities 30-days before their annual reviews, giving facilities opportunities to prepare for the reviews. In addition, they note that annual reviews do not require detainee interviews and are only observational reviews of the facilities and files. In 2007, the Assistant Secretary of ICE directed that ICE's Office of Detention and Removal (DRO) report semiannually on agency-wide adherence with the National Detention Standards. The semiannual reports explain the standards used to rate the detention facilities. The first report under this directive was issued in May 2008.", "According to ICE's Detention Operations Manual the Detention Standards ensure, \"that detainees have access to emergent, urgent or non-emergent medical, dental, and mental health care that are within the scope of services provided by the DIHS, so that their health care needs are met in a timely and efficient manner.\" According to the Detention Operations Manual, every facility has to provide detainees with initial medical screening, primary medical care, and emergency care. The ICE Officer in Charge (OIC) must arrange for specialized health care, mental heath care, and hospitalization within the local community. All facilities are required to employ a medical staff large enough to provide basic exams and treatments to all detainees. Medical care at facilities ranges from small clinics with contract staff to facilities with on-site medical staff and diagnostic equipment.\nThe facilities are required to have a mechanism (normally paper request slips) that allows detainees to request health care services provided by a physician or other qualified medical officer in a clinical setting. The facilities are required to have regularly scheduled times, known as sick call , when medical personnel are available to see detainees who have requested medical services. All detainees, without exception, have access to sick call, and the facilities have to have procedures in place that ensure that all sick call requests are received and triaged by medial personnel within 48 hours after the detainee submits the request.\nICE detainee policy requires that all detainees receive an initial health screening immediately upon arrival at the detention facility to determine the appropriate necessary medical, mental health, and dental treatment. In addition to the initial screening, ICE policy also requires that detainees receive a health appraisal and physical examination within 14 days of arrival to identify medical conditions that require monitoring or treatment. In addition, all detainees are supposed to receive a mental health screening within 12 hours of admission. Detainees also receive a mental status evaluation during their physical examination, which is required to take place within 14 days of admission. According to ICE, a detainee with a medical condition will be scheduled for as many follow-up appointments as necessary. In addition, detainees have access to sick call (i.e., the opportunity to request non-emergeny health care provided by a health service provider during scheduled times at the detention facility).\nIn addition, the manual states that an initial dental screening exam should be performed within 14 days of the detainee's arrival, and if an on-site dentist is not available, the initial dental screening may be performed by a physician, physician's assistant, or nurse practitioner. All detainees are afforded authorized emergency dental treatment. Aliens detained for more than six months are eligible for routine dental treatment. Detainees' dental care, reportedly, is often limited to extractions, and care for painful dental conditions is often delayed or denied. Dentures are not provided, nor are eyeglasses, unless the glasses were broken while the alien was in detention. In addition, detainees may not use their own money to get medical or dental care.\nUnder the Medical Standards, detainees also have access to medication from an on-site pharmacy or a pharmacy in the community. Detainees may get medicine from their family members, provided that the medicine can be verified as appropriate for the detainee to take and is not contraband. There have been reports, however, of detainees having problems getting medications even when their families have been willing to provide them.", "The Division of Immigrant Health Services (DIHS), which is indefinitely detailed from the U.S. Public Health Service to ICE, is ultimately responsible for the provision of health care to noncitizens detained by ICE. At 15 of over 300 detention facilities, DIHS provides on-site health care, while in the others, mostly for detainees in local prisons and jails, health care is provided by contract workers who are not affiliated with DIHS. The amount of care available on-site at detention facilities is variable. Some facilities have full-time, on-site medical staff, while other facilities make use of local providers. Notably, DIHS is responsible for the approval of any off-site medical care, regardless of where the alien is detained.\nSome immigration advocates maintain that since the Detention Standards do not have the force or law or regulation, DIHS policy exercises the largest influence over the provision of medical care to detainees. Although the medical care that is supposed to be received is detailed in the Detention Standards Manual, one stated concern is that the procedures and standards are not followed. Another concern focuses on the covered benefits package (discussed below) and whether that and the Detention Standards allow for the provision of adequate services to the detained populations.", "DIHS is a stand-alone medical unit consisting of U.S. Public Health Service (PHS) Officers and contract medical professionals who work under DIHS supervision. DIHS serves as the medical authority for ICE. Prior to October 1, 2007, ICE received the medical services of DIHS through the Department of Health and Human Services's (HHS's) Health Resources and Services Administration (HRSA). In other words, HRSA oversaw DIHS, including the U.S. Public Health Service Officers assigned to DIHS.", "According to DHS, ICE was interested in greater administrative control over DIHS for a variety of reasons, including HRSA's inability to fill DIHS vacancies in a timely manner and unwillingness to provide Public Health Service (PHS) Officers to support ICE law enforcement missions. In October 2007, DIHS was detailed indefinitely to ICE. The detail of the PHS Officers in DIHS was accomplished via a memorandum of agreement (MOA), which also covers the assignment of PHS resources elsewhere within DHS. Since the detail became effective, ICE has provided both administrative support to DIHS and oversight of the administration of DIHS. Under the MOA, DHS is responsible for the day-to-day conduct of PHS Officers under its detail and assumes liability for their negligence or malpractice. Lawyers in the DHS Office of Health Affairs (OHA) handle such claims.\nIn addition, beginning on October 1, 2007, ICE has stated that it has been collaboratively working with OHA on a variety of improvement initiatives, including selecting a new Director for DIHS at the appropriate rank; implementing aggressive hiring strategies to address staffing needs; identifying and implementing a new electronic medical records system; and reviewing (or changing, if necessary) the process by which Treatment Authorization Requests (TARS) are approved. ICE is also working with OHA to develop an enhanced process for TAR appeals.", "ICE has established a covered benefits package that delineates the health care services available to detainees in ICE custody, in addition to the minimum scope of services provided by the detention facilities. This package, known as the DIHS Medical Dental Detainee Covered Services Package (CSP), primarily provides health care services for emergency care, which is defined as \"a condition that is threatening to life, limb, hearing or sight,\" rather than elective or non-emergency conditions. The CSP states that:\n[accidental] or traumatic injuries incurred while in the custody of ICE or BP [Border Patrol] and acute illnesses will be reviewed for appropriate care. Other medical conditions which the physician believes, if left untreated during the period of ICE/BP custody, would cause deterioration of the detainee's health or uncontrolled suffering affecting his/her deportation status will be assessed and evaluated for care.... Elective, non-emergent care requires prior authorization.... Requests for pre-existing, non-life threatening conditions, will be reviewed on a case by case basis.\nDetainees who require non-emergency medical care beyond that which can be provided at the detention facilities must get preauthorization. They submit a Treatment Authorization Request (TAR), which is evaluated by the DIHS Managed Care Program. The TAR must be approved before the detainee may receive care. According to ICE, more than 40,000 TARs are submitted each year; the average turn-around time is 1.4 days, and 90% are approved. Nonetheless, some detainees have described waiting weeks or months to get basic care. In addition, reportedly, detainees have been told that biopsies were \"elective surgery\" and, as such, have had trouble getting the diagnostic test. According to a 2007 GAO report, officials at several detention facilities reported difficulties obtaining approval for outside medical and mental health care.\nTAR reviews for care are conducted by DIHS nurses in Washington, DC, who review the paperwork submitted by physicians. These nurses are known as Managed Care Coordinators (MCCs). The nurses are on duty Monday through Friday, 7:30 a.m to 4 p.m. Regardless of where the alien is held, approval from DIHS is required for diagnostic testing, speciality care, or surgery. However, when an ICE detainee is hospitalized, the hospital assumes medical decision-making authority, including the patient's drug regimen, lab tests, X-rays, and treatments. Off-site medical care for people in the custody of the U.S. Marshals service is handled in a similar manner.", "According to ICE, DIHS has a formal appeals process that is similar to industry standards and comparable to that of the Bureau of Prisons for declined Treatment Authorization Requests (TARs). Facilities and individual detainees have the right to appeal denial determinations. TARs denied for lack of medical necessity may be resubmitted for reconsideration to the Managed Care Coordinator (MCC) (i.e., the DIHS nurses in Washington DC). If a TAR is denied for lack of timely submission, the medical records are forwarded to the Managed Care Coordinator (MCC) Branch Chief for review.\nAccording to DIHS Standard Operating Procedure, the Managed Care Review Committee (MCRC) conducts a second level review for all appeals which are upheld by the MCC. The MCRC is comprised of the DIHS Medical Director, appropriate medical, dental, or mental health consultants, and MCC(s). Decisions of the MCRC are made in writing within three working days of the appeal. ICE, DIHS, and OHA are working to develop a more independent appeal body outside of DIHS and ICE.", "The preauthorization (also called pre-certification of medical necessity) requirement is similar to those of many managed care/health insurers. Nonetheless, some contend that this procedure can prevent detainees from getting the necessary care, and note that off-site nurses have the ability to deny care that was requested by on-site medical personnel. Reportedly, the DIHS Medical Dental Detainee Covered Services Package (CSP) has been amended several times since 2005, to limit the scope of medical care for detainees. A repeating theme in press reports and congressional testimony concerned difficulties getting biopsies when there is a concern about cancer.\nThe ACLU is involved in a class action suit regarding inadequate medical care for immigration detainees at the San Diego Correctional Facility, and contends that there are serious deficiencies in the CSP which should be fixed to ensure that detainees receive adequate medical care consistent with the ICE Detention Standards on Medical Care. The CSP primarily provides health care services for emergencies only. According to the ACLU, as recently as August 2005, the CSP did not extend to pre-existing conditions. In his testimony, Tom Jawetz of the ACLU argued that there is a disconnect between ICE's Detention Standards and the CSP. In addition, he contends that \"the standard is inconsistent with established principles of constitutional law and basic notions of decency.\"\nRepresentative Zoe Lofgren also stated in a question to ICE at the October 2007 hearing that there seems to be an inconsistency between the CSP and the Detention Standards because the CSP states that medical conditions will be evaluated for treatment based on the criteria that, \"if left untreated during the period of ICE/BP custody [the medical condition] would cause deterioration of the detainee's health or uncontrolled suffering affecting his/her deportation status [emphasis added],\" (i.e., the detainees health issues would have to jeopardize the ability of ICE to remove the alien before treatment would be rendered.) ICE responded that it disagrees that the Detention Standards and CSP are inconsistent. ICE contends that all detainees receive medical treatment when DIHS determines that care is required, \"regardless of whether the alien is about to be deported or not.\"", "There have been reports of problems with detainees being transferred without their medical records. ICE does not have a system to track the transfer of medication and medical records of detainees. Some lawyers described difficulties getting access to medical records on their client's behalf. Other detainees have complained about problems with getting interpreters during medical treatment. Female detainees have also reported not getting regular gynecological or needed obstetric care.", "The following section synthesizes the finding in three U.S. government reports that examined selected detention facilities' compliance with all or some of the National Detention Standards. All three reports examined compliance with the Medical Care standard. The reports are as follows:\nU.S. Immigration and Customs Enforcement, Office of Detention and Removal (DRO), Semiannual Report on Compliance with ICE National Detention Standards: January—June 2007 , May 9, 2008. Government Accountability Office (GAO), Alien Detention Standards: Telephone Access Problems Were Pervasive at Detention Facilities; Other Deficiencies Did Not Show a Pattern of Noncompliance, GAO-07-875, July 2007. Department of Homeland Security, Office of the Inspector General (DHS OIG), Treatment of Immigration Detainees Housed at Immigration and Customs Enforcement Facilities , OIG-07-01, December 2006.\nTable 1 presents the time period of the reviews, the number of facilities reviewed, and the total number of standards evaluated for the studies discussed.", "In May 2008, ICE released its first semiannual report on compliance with the National Detention Standards. The report covers reviews conducted during the first six months of 2007 and includes the inspections of more than 175 facilities. The report rated the facilities on the Detention Standards as either \"acceptable\" or \"deficient.\" Overall, on the medical care standard, 98% of the facilities were rated acceptable, while 2% were rated deficient. Of the evaluated Service Processing Centers (SPCs) owned and operated by ICE, 80% were rated acceptable, while 20% were rated deficient.", "In July 2007, the Government Accountability Office (GAO) released an audit of 23 detention facilities. GAO found a lack of adherence to the medical care standards at 3 of the 23 facilities, including failing to administer the mandatory physical exams within 14 days of admission and failure to administer medical screening immediately after admission. In addition, GAO found that concerns about medical care were common reasons for aliens to file complaints.", "The DHS Office of the Inspector General (OIG) conducted an audit of compliance with selected detention standards at five facilities used to house immigration detainees. Of the five facilities reviewed, DIHS managed and administered health care at two facilities. At the other three facilities, DIHS was responsible for approving off-site care, but the on-site care was administered by contractors at those facilities. The OIG identified instances of non-compliance with the medical care standards at four of the five detention facilities, including failure to provide timely initial medical care. The one facility found to be in full compliance with the standards for initial medical screening and physical examination was Krome SPC, where medical care is provided by DIHS.\nThe OIG stated in its review that the Detention Standards on sick calls do not clearly define what is considered a timely response to a non-emergency sick call request. Thus, the report found that in the absence of standards, local detention facilities have established differing policies regarding response time to non-emergency care. Nonetheless, at three of the detention facilities (two local prisons and one contract facility), 196 out of 481 detainee non-emergency medical requests were not responded to in the time-frame specified by the facility. As a result, the OIG recommended that ICE develop specific criteria to define a reasonable time for medical treatment. ICE responded to the recommendation, concurring in part and promising to examine the merits of the issue, but contending that its medical program provides adequate detainee care and is consistent with industry standards. ICE also stated that it \"must rely on its service providers to make medical decisions regarding the provision of medical care and any criteria to be established that would determine timeliness.\"", "Reports of inadequate care being provided to detainees raise several policy issues pertaining to the health care provided to the detained noncitizen population. First, the detention population, both in funded bed space and in the total detention population, increased between FY2003 and FY2007 raising interest in spending on detainee medical care, and concerns that spending has not increased in the same proportion as the detained population. In addition, ICE has the authority to release aliens due to medical and psychological problems, elevating interest in the existing guidelines and practices for medical release, and their adequacy. Similarly, due to the likely special needs of asylum seekers in detention, another policy issue focuses on whether proper care is and can be provided to this population within a detention setting.\nWhile every death is regrettable, preventable deaths of aliens in detention who are reliant on the government for medical care heighten concerns about the quality of health care. Doubts about the propriety of the number of deaths in detention as a reliable measure of standard of care, lead to the policy question of which measures would provide insight into the adequacy and quality of care. Finally, an overarching debate on this issue concerns the appropriate standard of health care that should be provided to foreign nationals in immigration detention. This debate is especially emotional because of the balancing act between basic human rights and the cost of health care when U.S. citizens also face barriers in accessing health care.", "Concerns about the adequacy of health care for detained aliens has increased interest in funding for detainee medical care. As shown in Table 2 , from FY2003 to FY2007, the total amount spent on detainee medical care increased by 83%, from $50 million to $92 million. During that same time period, the total amount of funded bed space increased by 41%. The total amount of funds spent on ICE detainee health care increased between FY2003 and FY2004. Between FY2004 and FY2006, the total expenditures on detainee health care fluctuated but remained between $70 and $74 million. Between FY2006 and FY2007, the total expenditures increased from $74 million to $92 million.\nMost of the increase in total spending on detainee health care was from increases in program operations, not in medical claims, which are for services rendered by an off-site health care provider to detainees. The total amount of money spent on detainee health care program operations doubled between FY2003 and FY2007. However, the funds expended for medical claims increased between FY2003 and FY2004, then decreased between FY2004 and FY2005. Between FY2005 and FY2007, expenditures on medical claims remained almost constant. During the same time, the funded amount of bed space increased by 49%.", "ICE has the authority to release aliens due to medical and psychological problems; however, how often this authority is exercised and whether it is used effectively is unknown. ICE has prosecutorial discretion in determining custody for aliens with humanitarian (including medical) concerns. The alien may be released into an Alternatives to Detention program, released on an Order of Supervision, or released on his or her own recognizance. These decisions are made on a case-by-case basis, \"whenever a medical or psychiatric evaluation makes the alien's detention problematic and/or removal [from the United States] unlikely.\" ICE does not keep track of how often this discretion is exercised.", "While there is general debate about the merits of detaining asylum seekers, asylum seekers often have medical and psychological issues and it is not clear how well-equipped the detention health care system is to deal with the specific physical and psychological needs of asylum seekers. As discussed, aliens in expedited removal must be detained, and thus aliens in expedited removal who claim asylum are detained while their \"credible fear\" cases are pending, and they may then be detained while their case is decided. In FY2006, 5,761 asylum seekers were detained, and 1,559 (27%) were detained for more than 180 days. Notably, some claim that the practice of detaining asylum seekers has helped reduced the number of fraudulent asylum claims.\nHowever, the position of the United Nations High Commission on Refugees is that detaining asylum seekers is \"inherently undesirable.\" It argues that detention may be psychologically damaging to an already fragile population such as those who are escaping from imprisonment and torture in their countries. Often, the asylum seeker does not understand why he or she is being detained, which can increase psychological stress. In addition, asylum seekers may have unusual medical conditions resulting from the imprisonment and torture suffered in their home countries.\nNonetheless, ICE reports that it routinely provides medical care for life-threatening conditions, such as cardiac arrest, kidney disease, HIV/AIDS, hypertension, and diabetes. As discussed earlier in the report, according to ICE detainees receive dental care, physical exams, sick call visits, prescription drugs, and mental health services. ICE states that staff are trained to spot detainees who may be at risk of suicide, and to use prevention and intervention techniques to assist such detainees. Between May 2007 and May 2008, psychologists and social workers have managed a daily population of over 1,350 seriously mentally ill detainees without a single suicide. Thus, current ICE procedures may adequately address the health care needs of detained asylum seekers.", "Two policy issues become highlighted when a detainee dies in custody. The first issue concerns the quality of oversight when a death occurs and whether there is enough oversight to identify possible cases of inadequate care. Secondly, while a detainee's death may heighten concerns about the quality of health care, there are doubts about the propriety of using deaths in detention as a reliable measure of standard of care. What follows is a discussion of these two issues.", "Although there is a system to report the death of a detainee, some question whether there is effective oversight when a death occurs in detention. Current ICE procedure dictates that when a detainee dies while in the custody of ICE's Detention and Removal Office (DRO), the death is to be reported to ICE headquarters via a system known as the Significant Event Notification (SEN) system. Under its proceedures, DRO is also supposed to report detainee deaths to the ICE Office of Professional Responsibility (OPR) and to the DHS Office of the Inspector General (OIG) so that they can conduct independent reviews of the incident. In addition, deaths are referred to the local medical examiner's office, which decides whether to perform an autopsy. The OIG is also notified of the death by the Joint Intake Center (JIC), which is notified by the SEN system and sends all records regarding the death (including those from the local medical examiner) to the OIG. The OIG may accept the case for investigation or may decline and refer the case back to the JIC for referral to the Office of Professional Responsibility.", "ICE has reported a decline in the number of deaths of aliens in detention between 2004 and 2008. Some, however, question whether mortality rates should be used in appraising health care in a transitional population, and truly reflect the quality of care provided to detainees. In May 2008, ICE published a fact sheet reporting that there were 71 deaths in immigration detention facilities from calendar year 2004 (inclusive) through May 2, 2008 (see Table 3 ). ICE reported a decline in the number of detainee deaths between 2004 and 2008, a period when the detainee population increased. ICE also asserted that the mortality rate in its facilities is lower than in U.S. prisons and jails and the general U.S. population.\nA critical analysis of the death rates was published by physicians at the New York University School of Medicine, who commented that ICE's comparisons were not valid because, among other things, the respective mortality rates had not been adjusted for age or for length of detention. These doctors stated that mortality is an imprecise method for appraising health care in a transitional population, and that morbidity which refers to sickness or having a disease would be a better measure of ICE healthcare. They also stated that, in their calculations, the length-adjusted mortality rate for detainees increased between 2006 and 2007. In addition, critics of the reported death rates stated that those who die outside the facilities but whose deaths were precipitated by their time in detention are not included in the mortality rates.", "There is debate about the appropriate standard of care that should be provided to aliens in detention. Many U.S. citizens lack health insurance and face barriers in accessing health care, and there are issues of patient safety in many medical settings, not just in correctional facilities. In addition, a proportion of aliens are in detention who are not authorized to be in the country. The cost of care for aliens in detention is paid by the American taxpayer. Reportedly, the health care provided to detained aliens tends to be similar to that provided to those in criminal incarceration. According to a press report, ICE has argued that some aliens are getting better health care in detention than they would in their home countries and that they had received earlier in their lives. Assistant Secretary of ICE, Julie Myers testified that in FY2007, 34% of detainees screened were diagnosed with and treated for preexisting chronic conditions (e.g., hypertension, diabetes), and many of these detainees would not have known of their medical condition or received treatment if it were not for the comprehensive health screening they obtained when entering the detention system. In addition, some health care decisions need to be made with the consideration that the alien is going to be removed to a country where he or she may not be able to get any follow-up care.\nSome contend that despite ICE's acknowledgment of the substantial burden of chronic diseases among the detained population, the ICE health plan focuses on an acute care model, and is not crafted for a population with significant chronic medical or mental health needs. Some aliens in detention, especially long-term residents, do have health insurance but are unable to use it. Some further allege that officers frequently view ICE detainees as criminals, even when they do not have a criminal record, and as such are sometimes quick to assume that the detainees are faking their illnesses, and sometimes slow to get the aliens care.\nAppendix A. Detention Statistics\nOn an average day, up to 33,000 immigration detainees are in ICE's custody in more than 300 facilities nationwide. The average stay is 37.5 days. In FY2007, a total of 311,213 aliens were detained by ICE. As of April 30, 2007, ICE reported that, cumulatively, 25% of all detained aliens were removed within four days, 50% within 18 days, 75% within 44 days, 90% within 85 days, 95% within 126 days, and 98% within 210 days (see Table A -1 ). For FY2006, approximately 48% of the aliens in detention were criminal aliens.\nAs Figure A -1 shows, the average daily detained population increased between FY2003 and FY2004 and then decreased between FY2004 and FY2006. The daily average detained population increased significantly between FY2006 and FY2007, from 20,594 to 30,295 detainees. As of December 31, 2007, the average daily detention population for FY2008 was larger than the FY2007 average daily population. For FY2008, as of December 31, 2007, the average daily detained population was 31,244.\nAs illustrated in Figure A -1 , the total number of aliens detained by ICE during the fiscal year was fairly consistent between FY2003 and FY2005, and then increased in both FY2006 and FY2007. In FY2007, ICE detained 79,713 (34%) more noncitizens than in FY2003. Some of the increase in the total annual detention population was due to the expansion of expedited removal. Aliens in expedited removal are mandatorily detained but tend to be in detention for shorter periods of time than other aliens because they are not entitled to the same judicial review as aliens who are not subject to expedited removal (i.e., who are in removal proceedings under INA §241).\nAppendix B. Legislation in the 110 th Congress", "The Consolidated Security, Disaster Assistance, and Continuing Appropriations Act, 2009 ( P.L. 110 - 329 ) appropriated $2 million for the Office of Professional Responsibility to undertake an immediate comprehensive review of the medical care provided to ICE detainees. The Act also directed ICE to immediately implement the Government Accountability Office's recommendation to improve medical services.", "The Detainee Basic Medical Care Act of 2008, H.R. 5950 , was introduced by Representative Zoe Lofgren on May 1, 2008. The companion bill, S. 3005 , was introduced by Senator Robert Menendez on May 12, 2008. The bills would have required the Secretary of Homeland Security (DHS) to establish procedures for the timely and effective delivery of medical and mental health care to immigration detainees, designed to ensure continuity of care throughout the alien's detention. The procedures would have been required to address all health needs, including but not limited to primary care, emergency care, prenatal care, dental care, eye care, and mental health care. The procedures would have to have been designed to ensure that\neach detainee received a comprehensive medical and mental health screening upon intake; each detainee received a comprehensive medical and mental health examination and assessment within 14 days after arrival at the detention facility; each detainee taking prescribed medications was allowed to continue taking such medications on schedule and without interruption; and each detainee with a serious medical or mental condition, subject to immigration laws, been given priority consideration for release on parole, bond, or an alternative to detention program.\nThe procedures would also have been required to ensure that medical records are accessible by the detainee or his or her designate, and were transferred if the detainee was moved to another detention facility. Also, H.R. 5950 / S. 3005 would have required the procedures to include \"discharge planning\" for aliens with serious medical or mental health conditions to ensure continuity of care, for a reasonable period of time, upon removal or release from detention.\nThe bills would also have required the Secretary of DHS to establish an administrative appeals process for denials of medical or mental health care. The process would have included the opportunity to appeal the denial of services to an impartial board. H.R. 5950 / S. 3005 would have required that the Secretary report to the Inspector Generals of the Departments of Homeland Security and Justice information regarding a detainee's death no later than 48 hours after the death of the detainee. The bills would have also require an annual report to Congress detailing any detainee deaths during the previous fiscal year." ], "depth": [ 0, 1, 1, 2, 2, 1, 2, 3, 3, 2, 3, 4, 3, 4, 4, 3, 1, 2, 2, 2, 1, 2, 2, 2, 2, 3, 3, 2, 2, 2 ], "alignment": [ "h0_title h2_title h1_title h3_title", "h0_full h3_full h1_full", "h0_full", "", "", "h2_title h1_title h3_title", "h1_title", "", "h1_full", "h3_full h2_full", "", "", "h2_full", "", "", "", "", "", "", "", "h3_title", "", "", "", "", "", "", "h3_full", "", "" ] }
{ "question": [ "What factors have raised concern about medical care received by those ICE custody?", "What does the law stipulate about aliens?", "What is addressed in the ICE National Detention Standards?", "What does ICE stipulate about detainee facilities?", "What is DIHS' involvement in detention facilities?", "What does ICE stipulate about detention facility healthcare?", "What happens when a detainee needs medical care that is not provided at the facility?", "How is the requested medical care evaluated?", "What does the press say about medical care in detention facilities?", "How do aliens in the facilities feel about their medical care?", "What does the opposing viewpoint say about medical care in detention facilities?", "What policiy questions can be asked about this situation?" ], "summary": [ "Congressional hearings and press coverage critical of the medical care received by those in the custody of the Department of Homeland Security's (DHS's) Immigration and Customs Enforcement (ICE) have raised interest in the subject.", "The law provides broad authority to detain aliens while awaiting a determination of whether they should be removed from the United States and mandates that certain categories of aliens are subject to mandatory detention by DHS. Aliens not subject to mandatory detention may be detained, paroled, or released on bond.", "The medical care required to be provided to aliens detained in ICE custody is outlined in ICE's National Detention Standards, which address standards for medical care; hunger strikes; suicide prevention and intervention; and terminal illness, advanced directives, and death.", "According to ICE's Detention Standards, \"All detainees shall have access to medical services that promote detainee health and general well-being.\" In addition, every facility has to provide detainees with initial medical screening, \"cost-effective\" primary medical care, and emergency care.", "The Division of Immigrant Health Services (DIHS), which is detailed indefinitely from the U.S. Public Health Service to ICE, is responsible for the health care of noncitizens detained by ICE. In some detention facilities, DIHS provides all medical care; in others, DIHS is responsible only for approving medical services that are not provided by the detention facility.", "ICE has established a covered benefits package that delineates the health care services available to detainees in ICE custody.", "Detainees who require non-emergency medical care beyond that which can be provided at the detention facilities must submit a Treatment Authorization Request (TAR) to the DIHS Managed Care Program.", "TARs are reviewed by DIHS nurses in Washington, DC, who review the paperwork submitted by physicians and decide whether to allow the treatment.", "There have been press reports and congressional testimony of individuals in ICE custody who apparently received inadequate medical care. In addition, problems with access to medical care is one of the chief complaints of aliens in detention.", "In addition, problems with access to medical care is one of the chief complaints of aliens in detention.", "However, others state that immigration detainees may receive better health care than some U.S. citizens, and assert that the death rate in ICE custody is lower than that of the prison and general populations.", "Overall, there seem to be two major policy questions: (1) do the Detention Standards and the covered benefits package allow for the provision of adequate services to the detained populations; and (2) are the procedures and standards for the provision of medical care being followed?" ], "parent_pair_index": [ -1, -1, -1, 0, -1, 0, -1, 2, -1, 0, -1, -1 ], "summary_paragraph_index": [ 0, 0, 1, 1, 2, 2, 2, 2, 3, 3, 3, 3 ] }
GAO_GAO-19-76
{ "title": [ "Background", "State of the Airline Industry", "Factors That Affect Passengers’ Satisfaction with Service", "DOT’s Regulatory, Compliance, and Education Efforts", "DOT’s Data Provide Mixed Information on Improvement in the Quality of Airline Service; Selected Airlines Indicate They Are Taking Steps Intended to Enhance Service DOT’s Data Provide Mixed Information on the Quality of Airline Services", "Selected Airlines Indicate They Have Taken a Variety of Actions to Enhance Passenger Service", "DOT Conducts Multiple Activities to Monitor Airline Compliance, but Opportunities Exist to Improve These Efforts’ Effectiveness", "DOT Conducts Five Key Compliance Activities", "Improvements to DOT’s Procedures Could Provide Greater Assurance That Passengers’ Complaints Are Consistently Coded and that Consumer Protection Violations are Properly Identified", "DOT Is Missing Opportunities to Use Its Case Management System to Help Inform Its Compliance Program", "DOT Lacks Performance Measures for Three of Five of Its Compliance Program Objectives", "DOT Has Made Recent Improvements, but Its Passenger Education Efforts Do Not Fully Align with Key Consumer Outreach Practices", "DOT Updated Its Website to More Effectively Educate Passengers on their Rights", "DOT’s Educational Efforts Fully Align with Five of Nine Key Practices", "Conclusions", "Recommendations for Executive Action", "Agency Comments", "Appendix I: Studies on the Effect of Market Structure on Elements of Airlines’ Customer Service", "Appendix II: Objectives, Scope, and Methodology", "Appendix III: Key Practices for Conducting Consumer Outreach", "Appendix IV: Comments from the Department of Transportation", "Appendix V: GAO Contact and Staff Acknowledgments", "GAO Contact", "Staff Acknowledgments" ], "paragraphs": [ "", "In the U.S. commercial airline industry, passengers travel by air on network, low-cost, and regional airlines. With thousands of employees and hundreds of aircraft, network airlines support large, complex hub- and-spoke operations, which provide service at various fare levels to many destinations. Low-cost airlines generally operate less costly point- to-point service using fewer types of aircraft. Regional airlines typically operate small aircraft—turboprops or regional jets with up to 100 seats—and generally provide service to smaller communities on behalf of network airlines.\nThe U.S. airline industry’s financial health has improved greatly in recent years due in part to increased demand for air travel as a result of the improved economy, industry reorganization, and changes in business practices. Starting in 2007, airlines faced a number of major challenges, including volatile fuel prices, the financial crisis, and the ensuing recession of 2007–2009. These events led to a wave of domestic airline bankruptcies, five airline mergers, and changes in airlines’ business practices. In all, these circumstances—such as the improved economy and new airline business practices—contributed to record level profits for airlines. For example, in 2017, U.S. airlines reported an after-tax net profit of $13.4 billion for domestic operations, according to DOT data.\nAs the industry recovered from the recession and passenger traffic began to rebound, airlines began to exercise “capacity restraint” by carefully controlling the number of seats on flights to achieve higher load factors in order to control costs and improve profitability. Because capacity restraint may result in fewer empty seats on many flights, this practice also limits airlines’ ability to rebook passengers if a flight is delayed or cancelled. Airlines have also made changes in their ticket pricing. For example, airlines now generally “unbundle” optional services from the base ticket price and charge ancillary fees for those services. Unbundling may result in passengers paying for services that were previously included in the price of the ticket. Additionally, certain aspects of customer service quality are tied to the class of ticket passengers purchase. For example, purchasing a “basic economy” ticket may include restrictions, such as not allowing passengers to select seats or charging for carry-on bags, that would not apply to a higher priced ticket class. Similarly, the quality of seating varies based on the ticket class purchased—even within the main cabin of the aircraft. Moreover, while the recent airline mergers have resulted in some new service options for passengers in certain markets, they have also reduced consumers’ choice of airlines on some routes and can result in higher ticket prices. At the same time, low-cost airlines provide greater competition in the markets they serve, which may help to keep prices in check.", "Many factors—from booking a flight through collecting checked baggage—may contribute to passengers’ level of satisfaction with an airline’s service, according to an airline industry association and market research organizations (see fig.1). For example, one industry survey found that passengers most valued affordable airfare, convenient flight schedules, and reliable on-time departures and arrivals.", "DOT’s regulatory activities include issuing consumer protection regulations. Specifically, DOT may issue or amend consumer protection regulations under its statutory authority to prohibit unfair or deceptive practices, or unfair methods of competition by airlines, among others. As mentioned previously, under this authority DOT has promulgated various regulations to enhance airline consumer protections since 2009 (see table 1).\nWhen regulations are promulgated, agency officials must determine how to promote compliance and deter noncompliance. Agencies charged with promoting regulatory compliance, including DOT, usually adopt a program that consists of two types of activities: those that encourage compliance and those that enforce the regulations. Compliance assistance helps regulated entities, such as U.S. airlines, understand and meet regulatory requirements, whereas activities such as monitoring, enforcement, and data reporting deter noncompliance and ensure that entities follow requirements. Agencies choose a mix of compliance activities that will achieve their desired regulatory outcome.\nDOT promotes airlines’ compliance with consumer protection requirements through a number of activities, and it educates passengers on their rights. For example, DOT has the authority to investigate whether an airline has been, or is engaged, in an unfair or deceptive practice or an unfair method of competition in air transportation or the sale of air transportation. If DOT finds that an airline has violated consumer protection requirements, DOT may take enforcement action against the airline by, for example, assessing civil penalties. In addition to promoting airlines’ compliance with consumer protection requirements, DOT also conducts activities aimed at educating passengers about their rights and the services provided by airlines. For example, DOT has an aviation consumer protection website where it highlights passengers’ rights and describes how to file complaints with DOT, in addition to other consumer resources. Within DOT’s Office of the Secretary (OST), the Office of the Assistant General Counsel for Aviation Enforcement and Proceedings and its Aviation Consumer Protection Division are responsible for these efforts. According to DOT officials, the annual appropriation to OST’s Office of the General Counsel provides funding for DOT’s consumer protection activities, among other things. At the end of fiscal year 2017, DOT employed 38 staff—including 18 attorneys and 15 analysts—to conduct these activities, according to DOT officials.", "DOT’s data, which include both operational measures of airline service, as well as passenger complaints received by DOT, provide mixed information on whether service improved from 2008 through 2017. DOT requires reporting airlines to provide operational data, including information on late, cancelled, or diverted flights; mishandled baggage; and denied boardings. These data showed some general improvement in the quality of airline service from 2008 through 2017. However, during the same time period, the total number of passenger complaints filed with DOT increased for “selected” airlines. Moreover, while these data may be imperfect measures of service quality, they do provide some indication of the passenger experience. DOT publishes data on both operational performance and passengers’ complaints in its monthly Air Travel Consumer Report to inform the public about the quality of services provided by airlines.", "Representatives from all 11 selected airlines highlighted actions they took to enhance passenger service since 2013, including in some of the areas discussed above. While customer service is important for airlines, these actions can also be motivated in part by other factors—including compliance with certain consumer protection requirements or DOT consent orders, or competition with other airlines. For example, one airline developed a wheelchair tracking system in response to DOT enforcement, which also contributed to the airline’s goal to improve its services to passengers with disabilities. Additional examples of service improvements are listed below.\nOn-time performance. Representatives we interviewed from almost all selected airlines (10 of 11) reported taking actions intended to improve on-time performance or mitigate challenges associated with flight delays and cancellations. These actions varied across airlines from those intended to improve operational performance to those intended to improve the comfort of passengers. For example, one airline began tracking flights that were “at-risk” of meeting DOT’s definition of a chronically delayed flight, so it could, among other things, swap crews or substitute aircraft and avoid these types of delays. According to DOT regulations, airlines with a chronically delayed flight for more than four consecutive one-month periods are engaging in a form of unrealistic scheduling, which is an unfair or deceptive practice and an unfair method of competition. Airlines have also used technology, such as text-messaging updates, to communicate with passengers during delays and cancellations (8 of 9); increased the number of situations where passengers are compensated during delays and cancellations (5 of 9); and empowered customer service agents to provide food, beverages, and entertainment to passengers during flight delays (1 of 9). For example, one airline e-mails all passengers that experience long delays with an apology and voucher for future travel, regardless of whether the delay was within the airline’s control. While DOT has some requirements for airlines on delays and cancellations, such as on tarmac delays and chronically delayed flights, it generally does not require airlines to compensate passengers for delays.\nBaggage handling. Representatives we interviewed from almost all network and low-cost airlines (8 of 9) reported investing resources in order to improve baggage-handling efforts and minimize the effects to passengers whose bags are lost or delayed. Among other things, airlines upgraded baggage technology (5 of 9); modernized the claims process, so passengers could complete forms on-line (3 of 9); and instituted replacement baggage programs, where passengers get a replacement bag at the airport (2 of 9). For example, one airline invested several million dollars to use radio frequency identification technology (RFID) to track bags, as well as allowing passengers to track their baggage via an application on their smartphone. Another airline introduced a policy to use FedEx to deliver delayed bags if the airline cannot return them within 24 hours. Since 2011, DOT has required certain airlines to make every reasonable effort to return mishandled baggage within 24 hours.\nQuality of interaction with airline staff. Representatives we interviewed from almost all selected airlines (10 of 11) reported improving training programs in an attempt to enhance interactions between airline staff and passengers. For example, one airline worked with the Disney Institute to provide training to staff on relating to guests during travel disruptions and de-escalating conflict. While airlines have increased customer service training, representatives from one industry association said that the training would be more beneficial if it was provided on a more regular basis. Two airlines also expanded their customer service departments’ hours to better match when passengers travel. According to DOT officials, airlines are not required to provide customer service training to staff.\nPassengers with disabilities. Representatives we interviewed from almost all network and low-cost airlines (8 of 9) reported taking actions intended to improve services for passengers with disabilities. These actions included programs to replace damaged or misplaced wheelchairs or other assistive devices (3 of 9); improving seating and access to lavatories in the aircraft (1 of 9); and using RFID technology to track wheelchairs (1 of 9). For example, representatives from one airline told us they have retrofitted their larger single aisle aircraft lavatories to be wheelchair accessible. Two airlines also reported changing policies pertaining to emotional support animals. For example, one airline has an online registration for emotional support animals where passengers must submit all documentation at least 48 hours in advance of the flight; according to representatives, the process allows the airline to validate the required paperwork, while providing relevant information to passengers with emotional support animals and ensuring the safety of everyone onboard the aircraft.\nInvoluntary denied boardings. Representatives we interviewed from network and low-cost airlines (9) reported taking steps to reduce or eliminate involuntary denied boardings. Representatives from three airlines said they have reduced or stopped overbooking flights, and other representatives (5 of 9) said their airlines have begun soliciting volunteers to be “bumped” off a flight (i.e., give up their seat) earlier in the process. Two conduct reverse auctions where they ask passengers what compensation they would accept to take an alternative flight. Airlines are also offering additional incentives to encourage passengers to voluntarily switch to flights with available seats (5 of 9)—including travel vouchers with fewer restrictions or that cover ancillary fees, gift cards for Amazon and other retailers, or large travel credits of up to $10,000.", "DOT promotes and monitors airlines’ compliance with consumer protection requirements and deters noncompliance in five key ways, such as by reviewing passenger complaint data and taking enforcement action where it identifies violations. However, we found that DOT could improve its procedures to provide additional assurances that analysts consistently code passengers’ complaints and properly identify potential consumer protection violations, in addition to more fully utilizing data from DOT’s information systems to inform its compliance program. Further, while DOT has objectives for each of its five key compliance activities, it lacks performance measures for three of these objectives. As a result, DOT is limited in its ability to assess progress toward achieving its goal of promoting airlines’ compliance with consumer protection requirements or to identify and make any needed improvements.", "DOT conducts five key activities to help airlines understand and comply with consumer protection requirements: (1) providing compliance assistance to airlines, (2) processing complaints from passengers, (3) conducting compliance inspections of airlines at headquarters and airports, (4) conducting airline investigations, and (5) enforcing airlines’ compliance with consumer protection requirements. Collectively, these key compliance activities are intended to help airlines understand and meet consumer protection requirements and deter noncompliance.\nProviding compliance information to airlines. DOT attorneys assist airlines in meeting consumer protection requirements by developing guidance materials and responding to questions. DOT publishes these materials—such as topic-specific webpages and frequently asked questions—on its website. Attorneys and analysts also informally respond to questions or requests for information from airline representatives.\nProcessing complaints from passengers. As previously stated, passengers may file complaints with DOT via its website, by mail, or through DOT’s telephone hotline. DOT analysts use a web application—the Consumer Complaints Application system—to receive, code, and track passenger complaints. In 2017, DOT’s 15 analysts processed about 18,000 air travel-related complaints. Initial processing involves reviewing the information in the complaint, notifying complainants that their complaint was received, and transmitting the complaint to the relevant airline for action. Analysts assign one of 15 high-level complaint category codes (e.g., “advertising” or “discrimination”) to each complaint as well as more specific lower-level complaint codes and codes indicating a potential violation of consumer protection requirements as necessary. Analysts initially code a complaint based on the passenger’s perception of events and not on an assessment of whether the complaint is a potential violation of consumer protections. According to DOT officials, when initially coding passenger complaints, analysts generally use their judgment to code each passenger’s complaint based on the primary issue. While analysts handle a variety of complaints, DOT may designate specific analysts to handle more complex complaint codes, such as disability complaints. On a monthly basis, DOT provides airlines the opportunity to review the complaints received and the agency’s categorization of each complaint. At that time, airlines have an opportunity to challenge DOT’s categorizations. According to DOT officials, a limited number of complaints are recoded as a result of this process.\nConducting compliance inspections of airlines at headquarters and airports. DOT analysts and attorneys inspect airlines at airline headquarters and airports to assess their compliance with consumer protection requirements. From 2008 through 2016, analysts and attorneys conducted compliance inspections of airlines at the airlines’ headquarters, but DOT has not conducted any such inspections since September 2016. Beginning in 2015, DOT initiated compliance inspections of airlines at airports, and DOT continued to conduct these inspections through 2018. According to DOT officials, they have exclusively conducted on-site inspections of airlines at airports in recent years due, in part, to limited resources and budget unpredictability. However, officials stated that they would consider conducting more inspections of airlines at airline headquarters in the future.\nInspections of airlines at airlines’ headquarters examine customer service policies and passenger complaints received directly by airlines, among other things. According to DOT officials, these inspections represent a “deep dive” into an airline’s relevant policies and involve collecting and analyzing data prior to and after their weeklong visit, as well as interviewing corporate personnel. DOT analysts and attorneys use the agency’s inspection checklist to assess compliance with a variety of regulated areas such as the inclusion of certain information on the airline’s website and the proper reporting of data to DOT (e.g., mishandled baggage and on-time performance data). According to DOT data, between 2008 and 2016 DOT completed inspections at 33 U.S. airlines’ headquarters. These 33 inspections identified 23 systemic violations, resulting in consent orders. Two inspections resulted in warning letters, and eight did not identify any systemic violations. The assessed penalty amounts for these inspections ranged from $40,000 to $1,200,000.\nInspections of airlines at airports examine staff’s knowledge of certain consumer protection requirements and the availability and accuracy of signage and documentation. Such inspections provide DOT the opportunity to examine multiple airlines in one visit. According to DOT officials, during these unannounced inspections, attorneys and analysts focus on assessing compliance through observation and interviews with randomly selected airline employees. For example, analysts and attorneys may confirm the availability of information on compensation for denied boarding from an airline gate agent or review an airline’s required signage on compensation for mishandled baggage to determine whether the information is accurate. According to DOT data, DOT inspected 12 to 14 U.S. airlines annually—most multiple times—at 51 domestic airports from 2015 through 2017. In 2017, DOT conducted inspections at 18 domestic airports that included inspecting 12 U.S. airlines multiple times. In total, from 2015 through 2017, DOT found violations of various consumer protection requirements for 13 airlines that DOT addressed through warning letters. In addition, DOT found violations related to incorrect (e.g., out-of-date) or missing notices regarding baggage liability limits or oversales compensation for 8 airlines that were settled by consent orders with penalties between $35,000 and $50,000.\nConducting airline investigations. According to DOT officials, attorneys determine whether to open an investigation by weighing numerous factors, including whether they believe an airline is systematically violating consumer protection requirements. Attorneys may initiate an investigation based on findings from trends in passenger complaints, compliance inspections, monitoring of airline websites and news media, or information supplied by other entities, including other DOT offices or governmental agencies. According to DOT officials, after gathering preliminary information, an attorney may notify the airline of his or her investigation, request information for further analysis, and then determine whether a violation has occurred and which enforcement action, if any, is appropriate. Attorneys document these investigations using DOT’s case management system. From 2008 to 2017, DOT initiated almost 2,500 investigations as shown in table 2 below.\nEnforcing airlines’ compliance with consumer protection requirements. When investigations result in a determination that a violation occurred, DOT may pursue enforcement action against the airline by, for example; (1) seeking corrective actions through warning letters; (2) consent orders (which may include fines); or (3) commencement of a legal action (see table 2). According to DOT officials, attorneys consider a number of factors in determining the appropriate enforcement action, including whether there is evidence of recidivism or systemic misconduct, and the number of passengers affected. According to DOT data, most investigations result in administrative closures and findings of no violation.\nAccording to DOT officials, when attorneys decide to issue a consent order, they work with their managers to arrive at an initial civil penalty level and then negotiate with the airline to arrive at a final settlement agreement and civil penalty amount if applicable. DOT has criteria for setting civil penalties, but officials describe the process as “more art than science” because facts and circumstances always vary. Civil penalties assessed in consent orders often include three parts: mandatory penalties, credits, and potential future penalties (see table 3). A mandatory penalty is the portion of the assessed penalty that must be paid immediately or in installments over a specified period of time. A credit is the portion of the assessed penalty that DOT allows an airline to not pay in order to give credit to the airline for spending funds on passenger compensation or toward specific service improvements, both of which must be above and beyond what is required by existing requirements. A potential future penalty is the portion of the assessed penalty that the airline will pay if DOT determines that the airline violated certain requirements during a specified period of time.\nOur review of 76 consent orders for our 12 selected airlines where a penalty was assessed found that DOT issued penalties totaling $17,967,000 from 2008 through 2017. Of this, 47 percent ($8,437,700) comprised mandatory penalties paid by the airline. The remaining amounts were either credits or potential future penalties. According to DOT officials, credits are a better way to effect positive change than merely assessing a mandatory penalty. For example, one recent consent order included violations of regulations regarding assistance for passengers with disabilities, among other things. The airline and DOT agreed to an assessed civil penalty amount of $400,000, $75,000 of which was credited to the airline for compensation to customers filing disability-related complaints in certain years and for implementation of an application to provide real-time information and response capabilities to a wheelchair dispatch and tracking system, among other things. However, our review found that consent orders do not always ensure future compliance. Specifically, we found 14 instances where an airline received multiple consent orders for the same regulatory violation. Three of these instances—each for different airlines—related to violations of the “full fare rule,” and two—also for different airlines—related to airlines’ failure to adhere to customer service plans.", "We found that while DOT has some procedures (i.e., guidance documents and on-the-job training) in place for coding passenger complaints, it lacks others that could help ensure that analysts consistently code complaints and that potential consumer protection violations are properly identified. Federal internal control standards state that agencies should design control activities to achieve objectives and establish and operate monitoring activities to evaluate results. By designing and assessing control activities, such as procedures and training, agencies are able to provide management with assurance that the program achieves its objectives, which in this case involve identifying instances of airline noncompliance.\nDOT has taken some steps to help analysts code passenger complaints and properly identify potential violations of consumer protection requirements:\nGuidance documents. DOT developed two documents to guide complaint processing and evaluation—a coding sheet that helps analysts determine how to code complaints and identify potential consumer protection violations, and a user guide that describes how analysts should enter complaint information into the web application. However, we found that these documents may not be clear or specific enough to ensure that analysts consistently coded complaints or properly identified potential consumer protection violations. For example, while the coding sheet includes explanatory notes in 9 of the 15 complaint categories, it does not include definitions and examples for each of DOT’s 15 complaint categories that would illustrate appropriate use of a complaint code, a gap that could result in inconsistent coding.\nOn-the-job training. DOT supplements its guidance documents with on-the-job training, which officials told us helps analysts consistently code complaints and identify potential consumer protection violations; however, DOT has not established formal training materials to ensure all new analysts get the same information. DOT pairs each newly- hired analyst with a senior analyst to be their coach and instruct them on how to code complaints. According to DOT officials, senior and supervisory analysts determine when new analysts are able to code and work independently but continue to monitor their work as needed and determined by the senior analyst. DOT officials stated that while the agency does not regularly check the extent to which complaints are consistently coded, supervisory analysts check analysts’ complaint coding on an as-needed basis throughout the year, as well as during semi-annual performance reviews. However, DOT does not provide formal training materials or other guidance to ensure that senior analysts are conveying the same information during these informal, on-the-job training sessions.\nDOT officials stated that the combination of the existing guidance, procedures, and hands-on training provides adequate assurance that analysts share a common understanding of the complaint categories resulting in complaints being consistently coded. As a result, DOT officials have not developed additional guidance documents or established formal training materials.\nWhile DOT officials said they believe their procedures and on-the-job training are sufficient to ensure that complaints are consistently coded and that potential consumer protection violations are properly identified, a recent DOT Office of Inspector General (OIG) report found that DOT analysts did not identify when to code complaints as potential consumer protection violations for a sample of frequent flyer complaints the agency reviewed. As a result, in 2016, the DOT OIG recommended that DOT provide additional training on what constitutes an unfair or deceptive practice to strengthen oversight of airlines’ frequent flyer programs. In response, DOT created a special team to process frequent flyer complaints and developed and provided review team analysts and other members with training on how to review complaints and identify potential violations related to airlines’ frequent flyer programs.\nImproving DOT’s procedures that analysts use to code complaints and identify potential consumer protection violations could provide DOT with additional assurances that analysts: share a common understanding of the definitions of all the complaint codes, are coding complaints in each category consistently, and are identifying potential consumer protection violations. Consistent coding among analysts is important for a number of reasons. First, according to DOT officials, passengers use complaint data—which are publicly reported in DOT’s Air Travel Consumer Report—to make decisions about air travel, including which airlines to fly. Second, DOT analysts and attorneys use complaint data to guide their compliance activities (e.g., selecting airlines for inspections and investigations, and determining proper enforcement actions).", "We found that while DOT’s case management system allows attorneys to track investigations, it lacks functionality that would allow DOT officials to more efficiently use data from the system to inform other key activities, such as making compliance and enforcement decisions. Federal internal control principles state that agencies should design an entity’s information system and related control activities to achieve objectives and respond to risks, which in this case involve using data from DOT’s case management system to inform its compliance activities.\nOur review of DOT’s case management system identified the following limitations that affect DOT’s ability to use data from its case management system to target resources and accurately monitor trends in violations, compliance activities, and the results of its enforcement actions:\nKey data are optional. Attorneys are not required to complete certain key data fields in the case management system. For example, attorneys are not required to document the outcome of an investigation in the “enforcement action” field. According to officials, while attorneys do not always complete this field, they often choose to document the outcome of investigations in the case notes. Even if that information is captured in the case notes section, attorneys can only access that information by individually reviewing each case file.\nData entries are limited. Attorneys cannot record multiple consumer protection violations for a single investigation in the case management system. As a result, when multiple violations occur, attorneys must use their professional judgement to select the primary violation to record. Our review of the 76 consent orders against selected airlines resulting from airline investigations identified 24 instances—or more than 30 percent—where an airline violated multiple consumer protection regulations. While this is a small subset of all investigations (2,464) DOT completed across our timeframe, it suggests investigations could include violations of multiple consumer protection regulations.\nData entries do not reflect DOT’s compliance activities. While the case management system includes a field for attorneys to document the source of investigations, the field’s response options do not fully correspond to DOT’s key compliance activities or align to DOT’s documentation listing the sources of investigations. For example, the field that tracks the source of an investigation includes an option to identify passenger complaints as the source but not an inspection of an airline. Officials told us that, like the outcomes of investigations, attorneys often document the source of an investigation in the case notes. However, as mentioned previously, information captured in the case notes section can only be accessed by individually reviewing each case file.\nLimited reporting capabilities exist. Attorneys are limited in their ability to run reports to understand trends across multiple investigations, according to DOT officials. For example, the case management system lacks a function to run reports by certain data fields. Specifically, according to DOT officials, attorneys cannot run reports by the airline name data field and must instead type in the airline name to create a report, a process that could produce unreliable results if an airline’s name is inconsistently entered into the database.\nAccording to DOT officials, the case management system’s capabilities are limited largely because the database was designed as a mechanism for attorneys to manage ongoing investigations. DOT officials told us that, while the database has successfully fulfilled that role, officials have increasingly used data from the case management system to make enforcement decisions. For example, DOT attorneys use information from the case management system to inform civil penalty amounts. In addition, DOT uses data from the case management system to analyze the results of investigations and inspections, as well as the details of consent orders in order to target future compliance activities. However, because of limited reporting capabilities, attorneys and managers must manually create summary documents from the case management system’s data, work that could be time consuming and subject to manual errors, and that does not address the issue that some data are not entered into various data fields in the first place.\nRecognizing limitations with the case management system, DOT has taken steps to improve the system. Specifically, starting in June 2018, DOT began working with a contractor to update the case management system’s functionality. Among other things, the updates are intended to improve the system’s ability to run reports, which could enhance DOT’s ability to examine trends in enforcement actions and penalty amounts, and allow the system to track investigation milestones. While DOT’s planned updates may help DOT officials better examine trends in enforcement actions, the planned updates do not fully address the issues we identified above, particularly related to collecting complete data. Collecting complete and comprehensive data in the case management system could allow DOT to better track trends in its investigations, inspections, and enforcement actions and to use that information to make data-driven decisions about future compliance activities and enforcement actions.", "While DOT has five objectives for its key compliance program activities, it has not established performance measures for three of these objectives. Objectives communicate what results the agency seeks to achieve, and performance measures show the progress the agency is making toward achieving those objectives. Federal internal control standards state that agencies should define objectives clearly to enable the identification of risks and define risk tolerances. They further state that management defines objectives in measurable terms, so that performance toward those objectives can be assessed. Additionally, the Government Performance and Results Act of 1993 (GPRA), as enhanced by the GPRA Modernization Act of 2010, requires agencies to develop objective, measurable, and quantifiable performance goals and related measures and to report progress in performance reports in order to promote public and congressional oversight, as well as to improve agency program performance.\nIn fiscal years 2017 and 2018, DOT developed objectives for each of its five key compliance activities; however, as illustrated in table 4 below, DOT does not have performance measures for three of its objectives.\nFor the three objectives for which DOT has not established performance measures, it has documented qualitative measures in internal agency documents. For example, while DOT has not developed a performance measure related to enforcing airlines’ compliance with consumer protection requirements, it summarized enforcement cases in fiscal year 2017 that illustrated actions the agency had taken to achieve this objective. For instance, one enforcement action included a consent order against an airline with an assessed penalty of $1.6 million for violating DOT’s tarmac delay rule. DOT highlighted similar accomplishments for educating airlines and conducting inspections. For example, DOT issued guidance to help airlines understand their legal obligations to not discriminate against passengers in air travel on the basis of race, color, national origin, religion, sex or ancestry, and the agency highlighted identifying unlawful practices by multiple airlines during an inspection of airlines at an airport. While the actions described may provide DOT with some information on whether it is achieving its objectives, they fall short of internal control standards that call for federal agencies to define objectives in measureable terms to assess performance.\nDOT officials stated that they have not developed performance measures to monitor progress toward achievement of some objectives because it is difficult to develop quantifiable performance measures. We have previously reported that officials from other enforcement agencies with similar objectives found it challenging to develop performance measures in part due to the reactive nature of enforcement as well as the difficultly of quantifying deterrence, but were ultimately able to do so. Developing performance measures for all objectives would allow DOT to more fully assess the effectiveness of its efforts at promoting airlines’ compliance with consumer protection requirements. Specifically:\nProviding compliance information to airlines. DOT has not developed quantifiable performance measures to assess how well DOT educates airlines about consumer protection requirements. For example, DOT does not have a performance measure for developing and disseminating guidance for specific rules or to issue information on new rules within a certain time frame. Rather, officials told us that they proactively e-mail stakeholders new consumer protection rules— rather than relying on stakeholders having to find them on DOT’s website or Regulations.gov—and if officials receive the same question repeatedly, about the same requirement they might issue guidance on the topic. According to DOT officials, these activities help ensure that stakeholders are complying with relevant consumer protection requirements. DOT officials did not provide a specific reason for why they do not have a performance measure related to this objective. However, without such a measure, DOT cannot be sure that it is providing timely educational materials to clarify new consumer protection requirements and assist airlines in complying with these requirements.\nConducting compliance inspections of airlines at headquarters and airports. DOT lacks quantifiable performance measures related to conducting inspections of airlines at airlines’ headquarters and at airports. Having such a measure could help ensure that DOT conducts these activities. Specifically, we found that while DOT continues to conduct inspections of airlines at airports, it has not conducted inspections at airlines’ headquarters since 2016, despite having identified this compliance activity as a key priority in planning documents. According to DOT officials, they have not conducted inspections at airlines’ headquarters for two primary reasons. First, DOT officials said inspections at airlines’ headquarters require significant staff resources, which DOT has allocated to other compliance activities in recent years. Second, officials said that no airline was an obvious choice for an inspection at its headquarters because DOT had not received a disproportionate number of complaints against a specific airline to suggest an inspection was warranted. However, the DOT OIG previously directed the agency to make these inspections a priority and to allocate resources accordingly, and DOT officials themselves have said that these inspections provide incentives for airlines’ continued compliance regardless of whether one airline has an obvious problem. Establishing performance measures for conducting both types of inspections would provide greater assurance that DOT conducts these activities on a regular basis.\nMoreover, officials told us that inspections at airlines’ headquarters examine specific consumer protection requirements that are not examined during inspections at airports, and that inspections at headquarters help promote compliance. Among other things, inspections at airlines headquarters allow DOT officials to: (1) review training manuals and training records; (2) examine a sample of passengers’ complaint data received directly by the airlines, including disability and discrimination complaints; and (3) verify that airlines are current on reporting data such as on mishandled baggage and denied boardings to DOT. Performance measures related to how often and under what circumstances compliance inspections should take place could provide assurance that DOT conducts these activities, and is not missing opportunities to monitor airlines’ compliance with consumer protection requirements.\nEnforcing airlines’ compliance with consumer protections. DOT officials told us that they have not developed performance measures for enforcement actions because they would not want to have performance measures that were punitive or reactive by, for example, requiring the agency to collect a certain penalty amount from airlines. While we acknowledge the complexity and risks involved in setting these types of performance measures, as mentioned previously, other agencies have done so. For example, one of the Federal Trade Commission’s performance measures is to focus 80 percent of enforcement actions on consumer complaints. Without a performance measure for enforcement activities, DOT is missing opportunities to assess the effectiveness of these activities and make any needed changes. We have previously reported that performance measurement gives managers crucial information to identify gaps in program performance and plan any needed improvements.", "", "DOT’s primary vehicle for educating passengers is its aviation consumer protection website, which it relaunched in November 2017 (see fig. 3). According to DOT officials, as part of the relaunch, DOT improved the navigability and accessibility of the website by, among other things, arranging material by topic, adding icons for various subjects, and including a link for the website on DOT’s aviation homepage. The website now includes summaries of passengers’ rights on a number of issues including tarmac delays, overbookings, mishandled baggage, and disability issues, as well as DOT’s rules, guidance issued to airlines and others, and enforcement orders on key consumer protection issues. Moreover, the website is now accessible to people with disabilities. Moving forward, DOT has a number of additional updates planned through fiscal year 2019. For example, DOT plans to update its website with information on frequent flyer issues, optional services and fees, and codeshare agreements by the end of calendar year 2018. According to DOT officials, while not statutorily required to conduct these education activities, passenger education is a key effort to ensuring airlines’ compliance.\nDOT also has numerous other efforts to educate passengers on their rights. For example:\nEstablishing resources for passengers. DOT developed Fly Rights—an online brochure that details how passengers can avoid common travel problems—in addition to material on unaccompanied minors, family seating, and a glossary of common air travel terms. DOT also developed training tools (e.g., brochures, digital content, and videos) on the rights of passengers with disabilities under the Air Carrier Access Act of 1986 and its implementing regulations, including wheelchair assistance at airports and onboard aircraft, traveling with a service animal, and traveling with assistive devices. While some of these materials were developed primarily for airline employees and contractor staff, others were developed to directly assist passengers with disabilities by providing helpful tips on airlines’ responsibilities, according to DOT officials.\nBuilding consumer education information into existing regulations. Passenger education is built into certain consumer protection requirements, according to DOT officials. For example, when an airline involuntarily denies a passenger boarding, immediately after the denied boarding occurs the airline must provide a written statement explaining the terms, conditions, and limitations of denied boarding compensation, and describing the airline’s boarding priority rules and criteria.\nResponding to complaints. DOT officials said they include information on an airline’s responsibilities when responding to passenger complaints. For example, if a passenger submits a complaint to DOT about not receiving compensation for a delayed or cancelled flight, the DOT analyst may inform the passenger that airlines are generally not required to compensate passengers in these instances.", "We compared DOT’s efforts to educate airline passengers about their rights against key practices for consumer outreach GAO identified in prior work and found that DOT’s efforts fully align with five of the nine key practices (see fig. 4). For example, we found that DOT has successfully identified the goals and objectives of its passenger education program and identified the appropriate media mix for disseminating its materials. Similarly, we found that DOT had identified and engaged stakeholders, a step that, according to DOT officials, allowed them to better tailor materials.\nHowever, as summarized in the figure below, we found that DOT only partially met or did not meet the remaining four key practices.\nFor example, DOT’s actions do not align with the key practice to “identify resources” and only partially align with the key practice to “develop consistent, clear messages” based on the established budget. According to a senior DOT official, DOT has not identified budgetary resources because, while important, DOT’s educational efforts are secondary to the office’s other efforts. Further, officials said that it has been difficult for the agency to develop a budget when it has been operating under a continuing resolution for some part of the fiscal year for the last decade. However, without identifying short- and long-term budgetary resources and planning activities accordingly, DOT is missing an opportunity to plan educational efforts or prioritize needs based on available resources.\nIn addition, we found DOT’s efforts only partially align with the key practice that calls for an agency to research its target audience. While DOT has solicited some input from stakeholder groups such as those representing passengers with disabilities, DOT has not solicited feedback directly from passengers to understand what they know about their rights. DOT officials said they have not sought such feedback because they have not identified a method for doing so that would be statistically generalizable and not cost prohibitive. While costs are always an issue when considering budget priorities, we have previously reported on other agencies’ direct consumer outreach efforts that while not statistically generalizable were nonetheless useful for understanding the effect of the agencies’ efforts. For example, the Bureau of Consumer Financial Protection has used focus groups to understand its outreach efforts. Bureau of Consumer Financial Protection officials previously told GAO that while obtaining information through such efforts was resource intensive, it allowed them to assess the performance of their outreach activities. In another case, an agency surveyed users that access its website to help it understand whether its outreach efforts were effective. Obtaining input from passengers directly on what information they want or what they know about their rights would provide DOT with greater assurance that educational materials are appropriately tailored to meet a wide range of passengers’ needs.\nFinally, DOT has not established performance measures to understand the quality of its passenger education materials (i.e., process measures) or the effectiveness of its efforts (i.e., outcome measures). DOT officials said that they receive informal input from stakeholders on the quality of the materials and track website traffic to understand whether materials are reaching passengers. Officials said they believe that these mechanisms provide them with some assurance that the materials are meeting passengers’ needs and that passengers are accessing and using the materials. While these mechanisms may provide DOT with some information on how often materials are accessed online, they do not help it understand the quality of the materials and measure the success of its passenger education efforts. For example, while DOT officials track website traffic, they have not established a related performance measure. A number of different measures could be used to track processes and outcomes related to the use of its website, including the time consumers spend on the website, number of website pages viewed, bounce rate (i.e., percentage of visitors who looked at only one page and immediately left the site), or user’s perception of the experience of their visit. Establishing such measures would provide DOT with greater assurances that its educational efforts are appropriately tailored to passengers and leading to improved understanding of passengers’ rights, including whether any adjustments are needed.", "To enforce consumer protection requirements, such as those preventing unfair or deceptive practices or unfair methods of competition by airlines, DOT has conducted almost 2,500 investigations and issued about 400 consent orders over the last decade. However, DOT lacks reasonable assurance that its approach is achieving the highest level of airlines’ compliance, given its available resources. For example, DOT has not assessed whether its procedures and training materials help analysts consistently code passengers’ complaints and identify potential consumer protection violations. Additionally, DOT has not fully used data from its case management system to inform its compliance program. Moreover, in the absence of comprehensive performance measures, DOT lacks a full understanding of the extent to which it is achieving its goal of airlines’ compliance with consumer protection requirements and whether any programmatic changes may be warranted. Improvements in these areas would provide DOT with additional information to target its resources and improve compliance.\nDOT has taken positive steps to educate passengers about their rights— through its revamped website and other educational resources. Nevertheless, DOT could improve its efforts by more fully following key practices GAO previously identified for conducting consumer education, such as by: seeking feedback directly from consumers; identifying short- and long-term budget resources; and establishing performance measures.\nTaking such actions would provide DOT with greater assurance that its efforts are meeting passengers’ needs.", "We are making the following six recommendations to DOT:\nThe Office of the Secretary should assess its procedures and training materials for coding airline passengers’ complaints, as appropriate, to help ensure that passengers’ complaints are consistently coded and that potential consumer protection violations are properly identified. (Recommendation 1)\nThe Office of the Secretary should assess the feasibility and cost of updating its airline case management system to address data and reporting limitations, and to undertake those updates that are cost effective and feasible. (Recommendation 2)\nThe Office of the Secretary should establish performance measures for each of its objectives for its five key airline-compliance activities. (Recommendation 3)\nThe Office of the Secretary should capture feedback directly from airline passengers or identify other mechanisms to capture passengers’ perspectives to inform DOT’s education efforts. (Recommendation 4)\nThe Office of the Secretary should identify available short- and long- term budgetary resources for DOT’s airline-passenger education efforts. (Recommendation 5)\nThe Office of the Secretary should develop performance measures for DOT’s efforts to educate airline passengers. (Recommendation 6)", "We provided a draft of this report to DOT for review and comment. DOT provided written comments, which are reprinted in appendix IV, and technical comments, which we incorporated as appropriate. DOT concurred with our recommendations and officials said that they had begun taking steps to address the recommendations.\nWe are sending copies of this report to the appropriate congressional committees, DOT, and other interested parties. In addition, the report is available at no charge on the GAO website at http://www.gao.gov.\nIf you or your staff members have any questions about this report, please contact me at 202-512-2834 or [email protected]. Contact points for our Office of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made major contributions to this report are listed in appendix V.", "Since its deregulation in 1978, numerous studies have examined the effects of competition in the airline industry. Most have examined the link between competition and pricing on specific airline routes—i.e., airline service between two airports or cities. These routes are viewed as the relevant markets for competitive analysis because they reflect the products that consumers purchase and for which airlines set prices. These studies have examined the pricing effect: (1) of route competition, (2) of the extent of an airline’s presence at airports, and (3) of mergers in the evolving airline industry. Studies have generally shown (1) that prices tend to be higher when fewer airlines serve a city-pair market and (2) that airline dominance at airports can be associated with higher market prices. Other studies have also shown that the presence of a low-cost airline on a route—or even the threat of entry by a low-cost airline—is associated with lower fares.\nIn addition, some studies have examined whether there is a link between the level of competition in city-pair markets and certain elements of customer service quality, such as the incidence and length of delays, cancellations, lost baggage, flight frequency, and denied boarding. While competition generally lowers prices, the effect of competition on the quality of service is more ambiguous. On the one hand, firms may compete on quality of service; in this instance, competition leads to higher service, but it is also possible that a firm facing less competition may invest in quality of service to more fully differentiate among passengers. A variety of factors could influence the association between competition and customer service. These factors include, for example: the cost of providing higher levels of quality, the extent to which consumers have full knowledge of quality, the extent to which consumers change future purchasing decisions based on quality, and the value consumers place on product quality relative to product price.\nIn the context of the airline industry, airline investments that underlie the provision of consumer services are not necessarily route-specific as they more likely relate to investments airlines make at airports, or at the overall airline level. For example, airlines make decisions about the extent to which resources—such as the number of aircraft and customer service personnel—are available at a given airport. Moreover, policies regarding training of gate and customer service personnel likely take place at the corporate level as do decisions about the configuration of aircraft, which may have related quality of service factors. Also, because airlines provide a service that involves a large network, some elements of quality may relate to the broad decisions regarding the management of that network. For example, if a flight is delayed on one route, it may affect the timeliness of several downstream flights due to the late arrival of the aircraft, pilots, and flight attendants, and airlines may take these networked effects into consideration in ways that could affect customer service. Still, some decisions that airlines make do have route-specific consequences that could influence customer service, such as decisions on flight scheduling, and which flights to cancel or delay in the face of operational disruptions.\nSome empirical airline literature on the impact of competition on certain quality factors predates several airline mergers, and some was conducted more recently. In the earlier literature, several studies found a linkage between the competitiveness of airline markets and customer service outcomes such as on-time performance, cancellations, mishandled baggage and flight frequency. These studies generally found that more competitive markets are associated with an improvement in one or more of these aspects of customer service. For example, one study found a small increase in the number of cancelled flights when a route was served by only one airline, and another found that such routes had, on average, slightly longer delays. However, the extent of these improvements has typically been small, such as an association with a small reduction in cancellations or a reduced average delay of just a few minutes. On the other hand, some studies found that delays and cancellations are less common when they involve airlines’ hub airports—especially when a flight is destined for an airline’s hub airport.\nIn order to look more closely at the relationship between market competition and airline customer service in recent years, we reviewed several more current studies. Specifically, because the nature of the airline industry—particularly its competitive landscape—transformed after the 2007–2009 recession, we selected studies that included at least some of the study period post-recession. We identified six studies that met our criteria for inclusion, each of which examined some aspect of the link between airline market competition and one or more element of customer service.\nAs with the earlier studies, these more recent studies generally found greater competition was associated with some improved customer service. Specifically, some studies found that flight delays were, on average, a little longer, and flight cancellations more likely when markets were more highly concentrated or in the aftermath of an airline merger. For example, one study found that a particular level of increased route concentration was associated with about a 4-minute average increase in flight delay. Another study found a similar effect on delay and also found a slightly higher incidence of cancellations on more concentrated routes. These increases in delays and cancellations were generally small. In the case of mergers, the findings are somewhat mixed. One study we reviewed found increased cancellations and more delays after mergers, but the effects tended to diminish over time, while another study did not find an effect of mergers on these measures of customer service. Another study found that the effect of mergers on consumer welfare—as measured by both price and flight frequency—may be idiosyncratic to the specific airlines involved in the merger and the state of competition in the broader market at the time of the merger. Finally, a GAO study that examined the effect of the tarmac delay rule on flight cancellations found that flights on routes where either the originating or destination airport was a hub airport for the airline had a lower likelihood of cancellation, possibly indicating a focus by airlines on maintaining smooth operations as much as possible. Generally, the differing findings on the extent or existence of quality impacts could be the result of varied methodologies in these analyses, including differing model specifications, variable measurements, and analysis time frames.\nFinally, while these studies provide insight into the link between competition and certain aspects of service quality, some elements of airline’s service quality are harder to explore in this way. For example, there are no data that would be readily usable in empirical analyses on the effect of competition on certain quality measures such as the extent airline websites are user-friendly, the ability to be rebooked on a different flight when a flight is missed or was cancelled, the helpfulness of airline staff, and consumer satisfaction with airline cabin amenities, such as seat comfort and availability and quality of food for sale. Moreover, while studies examine effects of competition at the route level, the national airline industry has become more concentrated in the past decade due to a series of bankruptcies and mergers. The reduced competition at this broad level may also have implications for customer service, such as the level of service provided at airports and policies on flight cancellations and rebooking.", "Our objectives for this report were to: (1) describe trends in DOT data on airline service from 2008 through 2017 and airlines’ actions to improve service; (2) assess how effectively DOT ensures airlines’ compliance with consumer protection requirements; and (3) assess the extent to which DOT’s airline passenger education efforts align with key practices for consumer outreach. We also examined the relationship between airline competition and customer service (app. I).\nThe scope of this report focused on issues regarding consumer protections for airline passengers (i.e., “consumer protections”) overseen by DOT. We focused our analysis on the time period 2008 through 2017 unless otherwise noted because it encompassed key additions or amendments to consumer protection regulations, including Enhancing Airline Passenger Protections I, II, and III. For each of our objectives, we reviewed documents and data from DOT and airlines, to the extent possible. We also conducted multiple interviews with officials from DOT’s Office of the Assistant General Counsel for Aviation Enforcement and Proceedings and its Aviation Consumer Protection Division, in addition to a non-generalizable sample of 25 stakeholders—including representatives from 11 airlines, 3 market research organizations, 3 aviation academics, and 8 industry associations representing airlines, airline staff, and airline passengers.\nTo describe trends in airline service, we analyzed DOT operational data and passenger complaints submitted to DOT from 2008 through 2017. Specifically, we analyzed DOT’s data on late flights; cancellations; diverted flights (i.e., flights operated from the scheduled origin point to a point other than the scheduled destination point in the airline’s published schedule); voluntary and involuntary denied boardings; and mishandled baggage to describe airlines’ operational performance. From 2008 through 2017, DOT required airlines with at least one percent of domestic scheduled-passenger revenues in the most recently reported 12-month period to report this data for reportable flights—we refer to these airlines as “reporting airlines” throughout our report. We also obtained data for passenger complaints submitted to DOT and analyzed the data to identify the frequency, types, and changes in complaints over time. We limited our analysis of passenger complaint data to “selected” airlines that were required to report operational data to DOT in 2017— the most recent year of available data when we started our review—because they were the 12 largest U.S. domestic passenger airlines in 2016. To assess the reliability of the operational data and complaints, we conducted electronic testing of the data to identify any outliers, compared our results to DOT published data, and interviewed DOT officials about how the data were collected and used. Because our interviews with DOT officials indicated that no changes had been made to the processes used to collect and maintain both data sources, we also relied on our past data reliability assessments from recently issued GAO reports, assessments that found that both data sources are sufficiently reliable for providing information on trends over time. Therefore, we determined that the data were sufficiently reliable for our purposes, including to present high-level trends in service over time. Moreover, we also reviewed analyses from three market research organizations that we identified during the course of our work— J.D. Power and Associates, the American Customer Satisfaction Index, and the Airline Quality Rankings—to provide additional information on airline service quality. We interviewed the authors to understand how they conducted the analyses; however, we did not evaluate the underlying methodologies. We determined that the results were reliable enough to report their high-level trends on passenger satisfaction.\nTo understand airlines’ actions to enhance service, we interviewed or received written responses from 11 of 12 selected airlines. We conducted interviews with airline representatives using a semi-structured interview instrument, which included questions pertaining to business practices aimed at improving service from 2013 through 2017, among other things. We conducted three pretests with one airline and two industry groups. Representatives from each group provided technical comments, which we incorporated, as appropriate. We limited our timeframe to the most recent 5 years because business practices in the industry evolve quickly and we wanted to highlight the most relevant and recent practices. During interviews, we asked selected airline representatives whether these practices were documented in contracts of carriage or other customer commitment documents and reviewed those documents as appropriate. During these interviews, we also asked selected airline representatives if they considered certain aspects of their passenger complaint data they receive directly from passengers to be proprietary, and all airline representatives said the data were proprietary. To inform interviews with selected airlines representatives and to understand recent airlines business practices aimed at improving service for passengers, we also conducted a literature search of trade publications and industry reports from 2013 through 2017. Where relevant, we used information from this literature search as additional context and as a basis for our questions to airline representatives regarding specific business practices.\nTo describe how DOT ensures airlines’ compliance with consumer protection requirements, we reviewed DOT’s documentation of the policies, procedures, and guidance that describe its five key compliance activities. In addition, we conducted multiple interviews with staff from DOT’s Office of the Assistant General Counsel for Aviation Enforcement and Proceedings and its Aviation Consumer Protection Division. To identify trends in DOT’s key compliance activities from 2008 through 2017, we analyzed reports and data DOT provided on the number and results of its airline inspections, investigations, enforcement actions, and civil penalties—including data from DOT’s case management system. To assess the reliability of the data, we interviewed DOT officials to understand how the data are collected and used and the steps DOT takes to ensure the data are accurate, complete, and reliable. We determined that the data were reliable enough to summarize trends in DOT’s investigation and enforcement actions from 2008 through 2017.\nTo determine how effectively DOT implements its compliance program, we assessed selected key compliance activities—i.e., coding passenger complaints, using the case management system to inform compliance activities, and developing objectives and related performance measures—against selected principles of Standards of Internal Control in the Federal Government related to control activities. We also summarized other leading practices for developing performance measures, in addition to our past work, which has identified other agencies with successful performance measures.\nTo understand the extent to which passenger education materials developed by DOT align with key practices for consumer outreach, we reviewed DOT’s educational materials and assessed them against nine key practices we previously developed for consumer education planning. In that prior work, GAO convened an expert panel of 14 senior management-level experts in strategic communications to identify the key practices of a consumer education campaign. We believe the key practices the expert panel identified in 2007 remain relevant today since the practices are not time-sensitive. In addition to reviewing relevant materials, we also conducted interviews with DOT officials to understand their outreach efforts. During these interviews, DOT officials agreed that these criteria were relevant to conducting consumer outreach. For a complete list of the criteria and corresponding definitions, see appendix III.\nTo understand the impact of airline competition on customer service provided to passengers we conducted a literature search of pertinent studies in scholarly, peer-reviewed journals, conference papers, and government publications. We restricted our review to results published between January 1, 2012, and December 31, 2017, and our search yielded 57 academic results and 10 government studies. Of these results, we reviewed each abstract to determine whether it was relevant to our objective based on criteria we established. For example, we limited results to those looking at the U.S. airline system and eliminated results that focused solely on airfares. In total, we found that 5 academic studies and 1 government study were ultimately relevant and sufficiently reliable for our report. Moreover, we also summarized 6 additional studies that we identified by reviewing the bibliographies of our selected studies or that were identified as key pieces of research in the field to summarize prior work in this area.\nWe conducted this performance audit from September 2017 to November 2018 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 that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives.", "GAO previously identified nine key practices that are important to conducting a consumer education campaign (see table 5).", "", "", "Andrew Von Ah, (202) 512-2834 or [email protected].", "In addition to the individual named above, other key contributors to this report were Jonathan Carver, Assistant Director; Melissa Swearingen, Analyst-in-Charge; Amy Abramowitz; Lacey Coppage; Caitlin Cusati; Delwen Jones; Kelsey Kreider; Ethan Levy; Gail Marnik; SaraAnn Moessbauer; Malika Rice; Minette Richardson; Pamela Snedden; and Laurel Voloder." ], "depth": [ 1, 2, 2, 2, 1, 2, 1, 2, 2, 2, 2, 1, 2, 2, 1, 1, 1, 1, 1, 1, 1, 1, 2, 2 ], "alignment": [ "", "", "", "", "", "", "h0_title", "", "", "", "h0_full", "h1_title", "", "h1_full", "h1_full", "", "", "", "h2_full", "", "", "", "", "" ] }
{ "question": [ "To what extent does DOT employ performance measures?", "What is an example of a measure that the DOT has not implemented?", "What is the result of the lack of implementation?", "How successful was DOT in implementing GAO's recommendations on passenger education?", "What is one example of DOT's shortcoming?", "What are other ongoing imperatives for DOT?", "How would taking this action help the DOT?", "What was GAO asked to review?", "What does thie sreport examine?", "How did GAO perform its analysis?" ], "summary": [ "DOT has established objectives for each of its five key compliance activities that state what it seeks to achieve; however, DOT lacks performance measures for three objectives.", "For example, DOT lacks a performance measure for conducting inspections of airlines' compliance with consumer protection requirements at airlines' headquarters and at airports.", "As a result, DOT is missing opportunities to capture critical information about airlines' compliance with consumer protection requirements.", "GAO found that while DOT has taken steps to educate passengers on their rights, its efforts did not fully align with four of nine key practices GAO previously identified for conducting consumer education.", "For example, while DOT has defined the goals and objectives of its outreach efforts, it has not used budget information to prioritize efforts or established performance measures to assess the results.", "DOT has also not solicited input directly from passengers to understand what they know about their rights.", "Taking such actions would provide DOT with greater assurance that its efforts are meeting passengers' needs.", "GAO was asked to examine airline consumer protection issues.", "This report examines, among other issues, (1) trends in DOT's data on airline service; (2) the effectiveness of DOT's compliance efforts; and (3) the extent to which DOT's passenger education efforts align with key practices for consumer outreach.", "GAO reviewed DOT data on airline service and analyzed passenger complaint data for the 12 largest domestic airlines from 2008 through 2017; reviewed relevant documents and data on DOT's compliance program; assessed DOT's educational efforts against key practices for successful consumer outreach; and interviewed DOT officials. GAO interviewed or obtained written information from 11 of the 12 airlines." ], "parent_pair_index": [ -1, 0, 1, -1, 0, 0, 2, -1, 0, 0 ], "summary_paragraph_index": [ 4, 4, 4, 6, 6, 6, 6, 1, 1, 1 ] }
GAO_GAO-18-600
{ "title": [ "Background", "History of the Polar Icebreakers and Icebreaking Capability Gap", "Polar Star Sustainment Efforts", "Coast Guard’s and Navy’s Roles in the Heavy Polar Icebreaker Program", "Heavy Polar Icebreaker Program’s Acquisition Framework", "Starting Programs with Sound Business Cases", "The Coast Guard Did Not Assess Design Maturity or Technology Risks Prior to Setting the Polar Icebreaker Program’s Baselines", "Polar Icebreaker Program Took Steps to Identify Design Risks but Did Not Assess Design Maturity Prior to Setting Baselines", "Early Efforts to Identify Design Risks", "Coast Guard Intends to Use Proven Technologies for the Polar Icebreaker Program but Has Not Assessed Their Maturity", "The Coast Guard Based the Polar Icebreaker Program’s Baselines on a Cost Estimate That Is Not Fully Reliable and an Optimistic Schedule", "Polar Icebreaker Program’s Cost Estimate Substantially Met Best Practices but Is Not Fully Reliable Because It Does Not Include Full Range of Possible Costs", "Polar Icebreaker Program’s Optimistic Schedule Is Driven by Capability Gap and Does Not Reflect Robust Analysis", "Analysis Conducted to Determine Lead Ship Construction Schedule Not Robust", "Schedule Risks after Construction Start Not Identified", "Polar Icebreaker Program’s Anticipated Contract May Be Funded by Both the Coast Guard and the Navy, but They Have Not Fully Documented Responsibility for Addressing Cost Growth", "Acquisition Strategy Anticipates Use of Contract Options, Ways to Mitigate Cost Risks, and Foreign Suppliers", "Program Has Received Both Coast Guard and Navy Funds, but Unclear How Program Will Be Funded Moving Forward", "Plans to Address Cost Growth Not Fully Documented", "Conclusions", "Recommendations for Executive Action", "Agency Comments", "Appendix I: Objectives, Scope, and Methodology", "Appendix II: Shipbuilding Phases", "Appendix III: Summary of Results of Heavy Polar Icebreaker Program’s Cost Estimate Assessed against GAO’s Best Practices", "Appendix IV: Comments from the Department of Homeland Security", "Appendix V: GAO Contact and Staff Acknowledgments", "GAO Contact", "Staff Acknowledgments" ], "paragraphs": [ "", "The Coast Guard has been responsible for carrying out the nation’s polar icebreaking missions since 1965—when it assumed primary responsibility for the nation’s polar icebreaking fleet. The Coast Guard’s responsibilities are outlined in various statutes, policies, and interagency agreements.\nA 2010 Coast Guard study identified gaps in the Coast Guard’s ability to support and conduct missions in the Arctic and Antarctic. As a result, in June 2013, the Coast Guard established the need for up to three heavy polar icebreakers and three medium icebreakers to adequately meet these Coast Guard mission demands. More recently, in November 2017, Coast Guard officials reiterated that they will be able to fulfill all mission requirements—which include support to agencies with Arctic responsibilities such as DOD, the National Science Foundation (NSF), Department of State, National Oceanic and Atmospheric Administration, and National Aeronautics and Space Administration—with a fleet of three heavy and three medium polar icebreakers. Coast Guard officials told us they are not currently assessing acquisition of the medium polar icebreakers because they are focusing on the HPIB acquisition and plan to assess the costs and benefits of acquiring medium polar icebreakers at a later time.\nThe Coast Guard currently has two active polar icebreakers in its fleet— the Polar Star, a heavy icebreaker, and the Healy, a medium icebreaker. An additional Coast Guard heavy icebreaker, the Polar Sea, has been inactive since 2010 when it experienced a catastrophic engine failure. Commissioned in 1976, the Polar Star is the world’s most powerful active non-nuclear icebreaker. The less powerful Healy primarily supports Arctic research. Although the Healy is capable of carrying out a wide range of activities, it cannot operate independently in the ice conditions in the Antarctic or ensure timely access to some Arctic areas in the winter. See figure 1 for the Coast Guard’s active icebreakers.\nThe Coast Guard has faced challenges in meeting the government’s icebreaking needs in recent years. For example, in June 2016, we found that when neither the Polar Sea nor the Polar Star was active in 2011 and 2012, the Coast Guard did not maintain assured, year-round access to both the Arctic and Antarctic, as the Healy cannot reach ice-covered areas with more than 4½ feet of ice. According to a January 2017 Coast Guard assessment, the Coast Guard does not plan to recommission the Polar Sea because it would not be cost-effective.", "According to Coast Guard planning documents, the Polar Star’s service life is estimated to end between fiscal years 2020 and 2023. This creates a potential heavy polar icebreaker capability gap of about 3 years, assuming the Polar Star’s service life ends in 2020 and the lead HPIB is delivered by the end of fiscal year 2023 as planned. If the lead ship is delivered later than planned in this scenario, the potential gap could be more than 3 years. As a result, according to a 2017 polar icebreaking bridging strategy, the Coast Guard is planning to recapitalize the Polar Star’s key systems starting in 2020 to extend the service life of the ship until the planned delivery of the second HPIB (see figure 2).\nIn September 2017, we found that the Coast Guard’s $75 million cost estimate for the Polar Star life extension project may be unrealistic, in part because it was based on the assumption of continuing to use parts from the decommissioned Polar Sea, as has been done in previous maintenance events. Because of the finite number of parts available from the Polar Sea, the Coast Guard may have to acquire new parts for the Polar Star that could increase the $75 million estimate. As a result, we recommended that the Coast Guard complete a comprehensive cost estimate and follow cost estimating best practices before committing to the life extension project. The Coast Guard concurred with this recommendation.\nAs of May 2018, Coast Guard officials told us they were still conducting ship engineering inspections on the Polar Star to determine the details of the work needed for the limited service life extension, which will then inform the development of a cost estimate. In January 2018, the Coast Guard completed its ship structures and machinery evaluation board report. Coast Guard officials told us that this report will help to determine the details of the work needed for the limited life extension. The January 2018 report estimated the remaining service life of the Polar Star as 5 years or less. In April 2018, the Coast Guard approved the Polar Star life extension project to establish requirements and evaluate the feasibility of alternatives that will achieve the requirements. Coast Guard officials stated they completed a notional cost estimate in April 2018 and plan to complete a detailed formal cost estimate by June 2020.", "The Coast Guard and the Navy established the IPO to collaborate and develop a management approach to acquire three HPIBs. Through the IPO, the Coast Guard planned to leverage the Navy’s shipbuilding expertise and pursue an accelerated acquisition schedule. A Coast Guard program manager heads the IPO, which includes embedded Navy officials who provide acquisition, contracting, engineering, cost- estimating, and executive support to the program. The IPO has responsibility for managing and executing the HPIB’s acquisition schedule, acquisition oversight reviews, budget and communications, and interagency coordination. In addition, the IPO coordinates with several key organizations within the Coast Guard and Navy that contribute to the HPIB program, including:\nCoast Guard Capabilities Directorate: This directorate is responsible for identifying and providing capabilities, competencies, and capacity and developing standards to meet Coast Guard mission requirements. The directorate sponsored the HPIB’s operational requirements document, which provides the key performance parameters the HPIB must meet—such as icebreaking, endurance, and interoperability thresholds and objectives.\nShip design team: The ship design team includes Coast Guard and Navy technical experts that develop ship specifications based on the HPIB operational requirements document. The ship design team is under the supervision of a Coast Guard ship design manager, who provides all technical oversight for development of the HPIB design, including development of “indicative,” or concept, designs used to inform the ship’s specifications and the program’s lifecycle cost estimate. Generally, the purpose of an indicative design is to determine requirements feasibility, support cost estimating, and provide a starting point for trade studies.\nNaval Sea Systems Command (NAVSEA) Cost Engineering and Industrial Analysis Group (NAVSEA 05C): The group developed the HPIB lifecycle cost estimate, which informs the program’s cost baselines and affordability constraints. NAVSEA 05C developed the HPIB’s lifecycle cost estimate based on the ship design team’s indicative design and the technical assumptions outlined in the program cost estimating baseline document.\nNAVSEA Contracts Directorate (NAVSEA 02): This directorate includes the Navy contracting officer who released the HPIB detail design and construction contract’s solicitation in March 2018 and plans to award the contract under Navy authorities. The contracting officer performs contract management services and provides guidance to the IPO to help ensure the HPIB’s contract adheres to DOD and Navy contracting regulations and guidance.\nFigure 3 shows key organizations that support the HPIB program and their responsibilities prior to the award of the contract.\nSince establishing the IPO, the Coast Guard, DHS, and the Navy formalized agreements on their approach for the HPIB acquisition in three 2017 memorandums of agreements and understanding. These agreements define the Navy’s and Coast Guard’s roles in the HPIB acquisition with respect to funding responsibilities, acquisition oversight functions, and contracting and program management authorities, among other things.", "DHS, the Coast Guard, and the Navy have agreed to manage and oversee the HPIB program using DHS’s acquisition framework, as Coast Guard is a component within DHS. DHS’s acquisition policy establishes that a major acquisition program’s decision authority shall review the program at a series of predetermined acquisition decision events (ADE) to assess whether the major program is ready to proceed through the acquisition life-cycle phases (see figure 4).\nAs we found in April 2018, the Coast Guard and the Navy will adhere to a tailored DHS acquisition framework for the HPIB program that supplements DHS ADE reviews with additional “gate” reviews adopted from the Navy’s acquisition processes. The DHS Under Secretary for Management retains final decision authority for the HPIB’s ADEs as the acquisition decision authority.\nThe HPIB program achieved a combined ADE 2A/2B in February 2018, when DHS approved the program’s baselines and permitted the program to enter into the Obtain Phase of the DHS acquisition framework. The corresponding acquisition decision memorandum was signed in March 2018. The Coast Guard and the Navy plan to start detail design work for the HPIB in June 2019, once the detail design and construction contract is awarded. In Navy shipbuilding, detail design work can include outlining the steel structure of the ship; determining the routing of systems, such as electrical and piping, throughout the ship; and developing work instructions for constructing elements of the ship, such as installation drawings and material lists.\nThe program’s ADE 2C, or the low-rate initial production decision, corresponds with the approval to start construction of the lead ship, which is planned to begin no later than June 2021. Key steps typically taken in the construction phase of a Navy ship include steel cutting and block fabrication, assembly and outfitting of blocks, keel laying and block erection, launch of the ship from dry dock, system testing and commissioning, sea trials, and delivery and acceptance (see appendix II for more detailed information on each shipbuilding phase). ADE 3, scheduled to be held no later than March 2026, authorizes the program to start follow-on test and evaluation.\nFigure 5 shows the HPIB’s acquisition framework, including ADE milestones and major program decision points, and how they relate to the shipbuilding phases.\nDHS acquisition policy establishes that the acquisition program baseline is the fundamental agreement between programs, component, and department-level officials establishing what will be delivered, how it will perform, when it will be delivered, and what it will cost. Specifically, the program baseline establishes a program’s schedule, costs, and key performance parameters, and covers the entire scope of the program’s lifecycle. The HPIB acquisition program baseline serves as an agreement between the Coast Guard and DHS that the Coast Guard will execute the acquisition within the bounds detailed in the document. The acquisition program baseline establishes objective (target) and threshold (maximum acceptable for cost, latest acceptable for schedule, and minimum acceptable for performance) baselines. Tables 1, 2, and 3 show selected cost, schedule, and performance baselines that DHS approved for the HPIB program at ADE 2A/2B in March 2018.\nAfter DHS approved the HPIB’s program baselines, the Navy released the solicitation for the program’s detail design and construction contract in March 2018. As revised, the solicitation requires offerors to submit their technical proposals in August 2018 and their price proposals in October 2018. The Navy plans to competitively award the HPIB detail design and construction contract to a single shipyard for all three ships in June 2019. The contract award would include design (advance planning and engineering) and long lead time materials, with separate options for detail design and construction of each of the three ships. The HPIB contract award and administration will follow DOD and Navy contracting regulations and policies, including the Defense Federal Acquisition Regulation Supplement. Although the Navy is planning to award the contract, the source selection authority is from the Coast Guard, with both Coast Guard and Navy personnel serving on the source selection evaluation board.", "Our prior work has found that successful programs start out with solid, executable business cases before setting program baselines and committing resources. For Coast Guard programs, such a business case would be expected at ADE 2A/2B. A sound business case requires balance between the concept selected to satisfy operator needs and the resources—technologies, design knowledge, funding, and time—needed to transform the concept into a product—or in the HPIB’s case, a ship. At the heart of a business case is a knowledge-based approach—we have found that successful shipbuilding programs build on attaining critical levels of knowledge at key points in the shipbuilding process before significant investments are made. We have previously found that key enablers of a good business case include firm, feasible requirements; plans for a stable design; mature technologies; reliable cost estimates; and realistic schedule targets. Without a sound business case, acquisition programs are at risk of breaching the cost, schedule, and performance baselines set when the program was initiated—in other words, experiencing cost growth, schedule delays, and reduced capabilities.\nIn November 2016, we found that a particular challenge for Congress is the fact that committees must often consider requests to authorize and fund a new program well ahead of program initiation—the point at which key business case information would be presented. Given the time lag between budget requests and the decision to initiate a new acquisition program, Congress could be making critical funding decisions with limited information about the soundness of the program’s business case. Although the HPIB program has already proceeded through ADE 2A/2B and established acquisition program baselines, information about the soundness of the HPIB’s business case will be helpful for decision makers as the Coast Guard and the Navy request funding in preparation for the detail design and construction contract award in June 2019 and anticipated construction start by the end of June 2021—two points at which significant resource commitments will need to be made.", "The Coast Guard set the HPIB’s acquisition program baselines at ADE 2A/2B without conducting a preliminary design review to assess the design maturity of the ship or a technology readiness assessment to determine the maturity of key technologies. This approach meets DHS acquisition policy requirements but is contrary to our best practices (see figure 6).\nWhile the Coast Guard is committed to a stable design prior to the start of lead ship construction, it established baselines without clear knowledge of the ship design because it does not plan to assess design maturity until after the planned June 2019 award of the detail design and construction contract. In addition, without a technology readiness assessment, the Coast Guard does not have full insight into whether the technologies are mature, potentially underrepresenting technical risk and increasing design risk. As a result, the Coast Guard will be committing resources to the HPIB program without key elements of a sound business case, increasing the risk that the program will exceed its planned costs and schedule.", "", "To help inform the HPIB’s key performance parameters, specifications, and design considerations prior to setting the acquisition program baselines, the Coast Guard conducted design studies and partnered with Canada (with which the United States has an existing cooperative agreement) to gain knowledge on the HPIB’s design risks. For example:\nStarting in November 2016, the HPIB ship design team developed an indicative (or concept) design, which has undergone several revisions as more information became available, completing a fifth iteration in September 2017. To inform the HPIB indicative design, the ship design team told us they used design elements with validated characteristics, such as the hull form, from existing Coast Guard icebreakers, including the Polar Star, Polar Sea, Healy, and the Mackinaw (a Great Lakes icebreaker). Collectively, these icebreakers informed elements of the indicative design such as the size and producibility of the ship. The indicative design represents an icebreaker design that meets the threshold key performance parameter of breaking 6 feet of ice at a continuous speed of 3 knots rather than the objective parameter of 8 feet of ice at a continuous speed of 3 knots. Coast Guard officials stated that based on preliminary analysis, a design that meets the HPIB’s objective key performance parameters would be an entirely separate design and would be too costly to construct. Coast Guard officials told us that in addition to price, the shipbuilders’ HPIB proposals will be evaluated on design factors, including how much the potential design exceeds the threshold icebreaking performance parameters.\nIn February 2017, the Coast Guard contracted with five shipbuilders, who teamed with icebreaker design firms, to conduct a series of iterative design studies. These studies examined major design cost drivers and technology risks for the HPIB program. Coast Guard officials stated the results of these studies helped inform and refine the ship’s specifications and provided them with a better understanding of the technology risks and schedule challenges. As of February 2018, each contract was valued at about $5.6 million. Under these contracts, each shipbuilder completed five detailed industry study iterations. For example, the shipbuilders analyzed various hull forms, propulsion systems, cold weather operations, space arrangements, and icebreaking enhancements.\nIn April 2017, the Coast Guard completed an alternatives analysis study—an independent study required prior to ADE 2A that identifies the most efficient method of addressing an identified capability gap. The study examined various options, including whether existing foreign icebreakers could meet the Coast Guard’s HPIB performance requirements. The Coast Guard analyzed 18 domestic and foreign icebreaker designs against the HPIB’s key performance parameters and other requirements, such as seakeeping and habitability. The icebreaker designs included a variety of icebreakers in terms of propulsion power and size, such as nuclear-powered Russian icebreakers and polar research and supply vessels from Australia, Finland, and Germany.\nThe alternatives analysis found that only a Russian nuclear-powered icebreaker and a design for a Canadian diesel-electric-powered icebreaker, which has yet to be constructed, passed initial screening for design maturity and performance requirements. Given a previous independent study analyzing the cost-effectiveness of nuclear- powered icebreakers, the Coast Guard deemed a nuclear-powered icebreaker design as infeasible. The alternatives analysis also noted that the Canadian design met icebreaking requirements. However, Coast Guard officials told us the Canadian design did not meet requirements such as habitability and military-oriented multi-mission tasks, but the design could potentially be modified to meet those needs. In addition, IPO officials stated the Canadian design was designed for science missions rather than military missions. The Canadian design was considered among some of the shipbuilders as a starting point in examining HPIB design risks.\nFrom May to August 2017, the Coast Guard tested two scale models of icebreakers at the Canadian National Research Council’s ice tank facility in Newfoundland. Coast Guard officials told us the testing helped to mitigate potential design risks with the hull form and propulsors—a mechanical device that generates thrust to provide propulsion for the ship. The Coast Guard tested the resistance, powering, and maneuvering of the model icebreakers’ hull form and propulsion to inform their indicative design and discovered that the ship’s maneuverability was a challenge during model testing. However, through model testing, the Coast Guard was able to validate general characteristics of its indicative design, including power needs and the hull form. In addition to model testing, Canadian Coast Guard officials told us that the U.S. Coast Guard has engaged with them in formal and informal exchanges regarding icebreaker acquisitions more generally.\nAs a result of its indicative design, industry studies, and model testing efforts, the Coast Guard identified the integrated power plant, propulsors, and hull form as key design considerations for the HPIB. Because these design elements work together to ensure the HPIB can meet its icebreaking requirements, we determined that these are the HPIB’s main design risks (see figure 7).\nAlthough the Coast Guard undertook early efforts to identify design risks, it did not conduct a preliminary design review for the HPIB program prior to setting program acquisition baselines at ADE 2A/2B. These baselines inform DHS’s and Coast Guard’s decisions to commit resources. Our best practices for knowledge-based acquisitions state that before program baselines are set, programs should hold key systems engineering events, such as a preliminary design review, to help ensure that requirements are defined and feasible and that the proposed design can be met within cost, schedule, and other system constraints. Similarly, in November 2016, we found that establishing a preliminary design through early detailed systems engineering results in better program outcomes than doing so after program start. During the HPIB’s preliminary design review, the Coast Guard plans to verify that the contractor’s design meets the requirement of the ship specifications and is producible, and the schedule is achievable, among other activities.\nThe Coast Guard has yet to conduct a preliminary design review for the HPIB program because DHS’s current acquisition policy does not require programs to do so until after ADE 2A/2B. The Coast Guard plans to hold the preliminary design review by December 2019, after the award of the detail design and construction contract. Holding a preliminary design review after ADE 2A/2B is consistent with DHS policy. However, in April 2017, we found that DHS’s sequencing of the preliminary design review is not consistent with our acquisition best practices, which state that programs should pursue a knowledge-based acquisition approach that ensures program needs are matched with available resources—such as technical and engineering knowledge, time, and funding—prior to setting baselines. In that report, we found that by initiating programs without a well-developed understanding of system needs through key engineering reviews such as the preliminary design review, DHS increases the likelihood that programs will change their user-defined key performance parameters, costs, or schedules after establishing their baselines. As a result, we recommended that DHS update its acquisition policy to require key technical reviews, including the preliminary design review, to be conducted prior to approving programs’ baselines. DHS concurred with this recommendation and stated that it planned to initiate a study to assess how to better align its processes for technical reviews and acquisition decisions. Upon completion of the study, DHS plans to update its acquisition policies, as appropriate.\nInstead of establishing the HPIB program’s acquisition program baselines after assessing the shipbuilder’s preliminary design, the Coast Guard established cost baselines based on a cost estimate that used the ship design team’s indicative design. Coast Guard officials told us that the selected shipbuilder will develop its own HPIB design as part of the detail design and construction contract, independent of the indicative design. The ship design team noted that the indicative design informed the ship’s specifications but is not meant to be an optimized design, does not represent a design solution, and will not be provided to the shipbuilders. Coast Guard officials stated that the shipbuilders that respond to the request for proposals will propose their own designs based on their production capabilities, which will drive where they will place components, such as bulkheads, within the design. As a result, the shipbuilder’s design will be different from the indicative design.\nBy setting the HPIB’s acquisition program baselines prior to gaining knowledge on the shipbuilder’s design, the Coast Guard has established cost, schedule, and performance baselines without a stable or mature design. Although completing the preliminary design review after setting program baselines is consistent with DHS policy, this puts the Coast Guard at risk of breaching its established baselines and having to revise them later in the acquisition process, after a contract has been signed and significant resources have already been committed to the program. At that point, the program will be well underway and it will be too late for decision makers to make appropriate tradeoff decisions between requirements and resources without causing disruptions to the program.\nConsistent with DHS acquisition policy, DHS and the Coast Guard must monitor the HPIB program against the acquisition program baselines set at ADE 2A/2B; however, DHS acquisition policy does not require an official update to the baseline unless the program breaches its baselines or until the next major milestone, whichever occurs first. For the HPIB, the next milestone is ADE 2C, which is currently planned for no later than June 2021. ADE 2C corresponds to the approval of low-rate initial production and in the case of the HPIB, the start of construction for the lead ship. Evaluating the HPIB’s baselines at ADE 2C—immediately before the shipbuilder is authorized to start construction—is too late because the funding required for the construction phase likely would have already been requested and provided. On the other hand, evaluating the acquisition program baselines after the preliminary design review but before ADE 2C would help to ensure that the knowledge gained during the preliminary design review is used to inform the program baselines and business case for investing in the HPIBs before significant resource commitments are made.\nAlthough the Coast Guard set the acquisition program baselines prior to gaining knowledge on the feasibility of the selected shipbuilder’s design, it has expressed a commitment to having a stable design prior to the start of lead ship construction. In Navy shipbuilding, detail design typically encompasses three design phases:\nBasic design. Includes fixing the ship steel structure; routing all major distributive systems, including electricity, water, and other utilities; and ensuring the ship will meet the performance specifications.\nFunctional design. Includes providing further iteration of the basic design, providing information on the exact position of piping and other outfitting in each block, and completing a 3D product model.\nProduction design. Generating work instructions that show detailed system information and including guidance for subcontractors and suppliers, installation drawings, schedules, material lists, and lists of prefabricated materials and parts.\nShipbuilding best practices we identified in 2009 found that design stability is achieved upon completion of the basic and functional designs. At this point of design stability, the shipbuilder has a clear understanding of the ship structure as well as how every system is set up and routed throughout the ship. Consistent with our best practices, prior to the start of construction on the lead ship, the Coast Guard will require the shipbuilder to complete basic and functional designs, develop a 3D model output, and provide at least 6 months of production information to support the start of construction. IPO officials have stated that they are committed to ensuring that the HPIB’s design is stable before construction of the lead ship begins, given the challenges prior Navy shipbuilding programs have experienced when construction proceeded before designs were completed.", "The Coast Guard intends on using what it refers to as proven technologies for the HPIB but has not conducted a technology readiness assessment to determine maturity of key technologies that drive performance of the ship prior to ADE 2A/2B, which is inconsistent with our best practices. A technology readiness assessment is a systematic, evidence-based process that evaluates the maturity of critical technologies—hardware and software technologies critical to the fulfillment of the key objectives of an acquisition program. This assessment does not eliminate technology risk but, when done well, can illuminate concerns and serve as a basis for realistic discussions on how to mitigate potential risks. According to our best practices, a technology readiness assessment should be conducted prior to program initiation. DHS systems engineering guidance also recommends conducting a technology readiness assessment before ADE 2A to help ensure that the program’s technologies are sufficiently mature by the start of the program.\nThe Coast Guard intends on using what it has deemed “state-of-the- market” or “proven” technologies for the HPIB. DHS’s technical assessment of the HPIB noted that the February 2017 design studies resulted in industry producing designs that used commercially available, state-of-the-market, and proven technologies. From the studies and industry engagement, Coast Guard officials determined that the technologies required for the HPIB, such as the integrated power plant and azimuthing propulsors—thrusters that rotate up to 360 degrees and provide propulsion to the ship—are available commercially and do not need to be developed. Coast Guard officials further stated that the integrated power plant is the standard power plant used on domestic and foreign icebreakers. Coast Guard officials told us that similarly, market survey data on azimuthing propulsors shows that ice-qualified azimuthing propulsors in the power range have been used on foreign icebreakers. The Coast Guard has also communicated to industry through the request for proposals that the HPIB should have only proven technology and plans to have the shipbuilders provide information on the maturity of the technologies when they submit their proposals. As a result, Coast Guard officials stated the HPIB program does not have any critical technologies, as defined by DHS systems engineering guidance, and does not need to conduct a technology readiness assessment.\nHowever, according to DHS systems engineering guidance, a technology element is considered critical if the system being acquired depends on this technology to meet operational requirements, and if the technology or its application is new, novel, or in an area that poses major technological risk during detailed design or demonstration. The guidance further states that technologies can become critical if they need to be modified from prior successful use or expected to operate in an environment beyond their original demonstrated capability. Similarly, according to our best practices for assessing technology readiness, critical technologies are not just technologies that are new or novel. Technologies used on prior systems can also become critical if they are being used in a different form, fit, or function.\nOur technology readiness assessment guide notes that program officials sometimes disregard critical technologies when they have longstanding history, knowledge, or familiarity with them. The best practices guide cites examples of organizations not considering a technology critical if it has been determined to be mature, has already been fielded, or does not currently pose a risk to the program. Additionally, our guide notes that contractors may be overly optimistic about the maturity of critical technologies, especially prior to contract awards. According to our best practices guide, presuming a previously used technology as mature is problematic when the technologies are being reapplied to a different program or operational environment.\nAs a result, based on our analysis of available Coast Guard information, we believe the HPIB’s planned integrated power plant and azimuthing propulsors should be considered critical technologies given their criticality in meeting key performance parameters, their use in a different environment from prior ships, and the extent to which they pose major cost risks (see table 4).\nWithout conducting a technology readiness assessment, the Coast Guard does not have insight into how mature these critical technologies are. According to our best practices, evaluating critical technologies requires disciplined and repeatable steps and criteria to perform the assessment and make credible judgments about their maturity. The evaluation of each critical technology must be based on evidence such as data and test results. In addition, the team that assesses the technologies must be objective and ideally independent. Instead, the Coast Guard has relied on industry to provide information on the maturity of the HPIB’s technologies and uses terms such as “state-of-the-market” or “proven,” which do not translate into meaningful measures for systematically communicating the technology readiness, especially when discussing new applications of existing technologies.\nAdditionally, even if the Coast Guard determines the maturity levels of the HPIB’s technologies through an objective and independent technology readiness assessment, the program’s planned level of maturity for the ship’s technologies falls short of our best practices. According to the HPIB’s systems engineering tailoring plan and request for proposals, the program intends on implementing only proven technologies that have been demonstrated in a relevant environment, commensurate with a technology readiness level (TRL) of 6. However, our best practices do not consider a technology to be mature until it has been demonstrated in an operational environment, commensurate with a TRL 7. Specifically, our best practices for shipbuilding recommend that programs should require critical technologies to be matured into actual prototypes and successfully demonstrated in an operational or a realistic environment (TRL 7) before a contract is awarded for the detail design of a new ship. DHS’s systems engineering guidance also states that critical technologies below TRL 7 should be identified as technical risks.\nBy not conducting a technology readiness assessment and identifying, assessing, and maturing its critical technologies prior to setting the HPIB’s program baselines and prior to awarding the detail design contract, the Coast Guard is underrepresenting the program’s technical risks and understating its cost, schedule, and performance risks. Technology risks that manifest later could require the shipbuilder to redesign parts of the ship, which increases the risk of rework and schedule delays during the construction phase.", "The cost estimate and schedule that informed DHS’s decision to authorize the HPIB program do not reflect the full scope of the program’s risks. We found that while the Navy substantially adhered to a number of best practices when it developed the HPIB’s cost estimate, the estimate is not fully reliable, primarily because it does not reflect the full range of possible costs over the HPIB’s 30-year lifecycle. We also found the HPIB schedule was not informed by a realistic assessment of the work necessary to construct the ship. Rather, the schedule was driven by the potential gap in icebreaking capabilities once the Coast Guard’s only operating HPIB reaches the end of its service life. Reliable cost estimates and schedules are key elements of an executable business case, and are needed at the outset of programs—when competitive pressures to obtain funding for the program are high—to provide decision makers with insight into how risks affect a program’s ability to deliver within its cost and schedule goals.", "We found that the lifecycle cost estimate used to inform the HPIB program’s baselines substantially adheres to most cost estimating best practices; however, the estimate is not fully reliable. The cost estimate only partially met best practices for being credible primarily because it did not quantify the range of possible costs over the entire life of the program. We assessed the program’s lifecycle cost estimate, which was performed by NAVSEA 05C, against our best practices for cost estimating. For our reporting purposes, we collapsed 18 of our applicable best practices into the four general characteristics of a reliable cost estimate: comprehensive, well-documented, accurate, and credible. Figure 8 provides a summary of our assessment of the HPIB’s lifecycle cost estimate.\nComprehensive. We found the HPIB cost estimate substantially met the best practices for being comprehensive. For example, the estimate includes government and contractor costs over the full lifecycle of all three ships and contains sufficient levels of detail in the program’s work breakdown structure—a hierarchical breakdown of the program into specific efforts, including system engineering and ship construction. The estimate also documents detailed ground rules and assumptions, such as the learning curve used to capture expected labor efficiencies for follow- on ships. However, we found that the costs for disposal of the three ships were not at a level of detail to ensure that all costs were considered and not all assumptions, particularly regarding operating and support costs, were varied to reflect the impact on cost should these assumptions change.\nWell-Documented. We also found the cost estimate substantially met the best practices for being well-documented. Specifically, the cost estimate’s documentation mostly captured the source data used as well as the primary methods, calculations, results, rationales, and assumptions used to generate each cost element. However, the documentation alone did not provide enough information for someone unfamiliar with the cost estimate to replicate what was done and arrive at the same results. For example, NAVSEA officials discussed and showed us how historical data from the analogous ships were used to create the estimate, but these specific sources were not found in the cost estimate documentation.\nAccurate. We found the estimate substantially met best practices for being accurate. In particular, the estimate was properly adjusted for inflation, and we did not find any mathematical errors in the estimate calculations we inspected. Officials stated that labor and material cost data from recent, analogous programs were used in the estimate. While the documentation does not discuss the reliability, age, or relevance of the cost data, NAVSEA officials provided us with additional information regarding those data characteristics. Additionally, officials provided documentation that demonstrated that they had updated the cost estimate several times in the last 2 years.\nCredible. We found the HPIB cost estimate partially met the best practices associated with being credible. A credible cost estimate should analyze the sensitivity of the program’s expected cost to changes among key cost-driving assumptions and risks. It should also quantify the cost impact of risks related to assumptions changing and variability in the underlying data used to create the cost estimate. Credible cost estimates should also be cross-checked internally and reconciled with an independent cost estimate that is performed by an outside group. These two best practices ensure that the estimate has been checked for any potential bias. Our review of the HPIB cost estimate determined it partially met the best practices for being credible due to the following:\nExclusions of major costs from sensitivity analysis and risk and uncertainty analysis. The cost estimators conducted sensitivity analysis as well as risk and uncertainty analysis on only a small portion of the total lifecycle costs. For both the sensitivity analysis and risk and uncertainty analysis, we found that NAVSEA only modeled cost variation in the detail design and construction portion of the program and excluded from its analyses any risk impacts related to the remainder of the acquisition, operating and support, and disposal phases, which altogether comprise about 75 percent of the lifecycle cost. The cost estimate documents that the limited number of active icebreakers and available data prevented NAVSEA from identifying accurate risk bounds for the operating and support and disposal phases. Further, NAVSEA officials told us because they used historical data, including average maintenance costs from the Healy, they felt that their estimate was reasonable. However, similar to how NAVSEA consulted with the ship design team to establish high and low-end costs using analogous ships, NAVSEA could have used cost ranges in the historical data to develop risk bounds for the remaining costs in the acquisition, operations and support, and disposal phases. Without performing a sensitivity analysis on the entire life cycle cost of the three ships, it is not possible for NAVSEA to identify key elements affecting the overall cost estimate. Further, without performing a risk and uncertainty analysis on the entire life cycle cost of the three ships, it is not possible for NAVSEA to determine a level of confidence associated with the overall cost estimate. By not quantifying important risks, NAVSEA may have underestimated the range of possible costs for about three-quarters of the entire program.\nLack of applied correlation in the risk and uncertainty analysis. In its independent assessment of the HPIB cost estimate, the DHS Cost Analysis Division similarly found that the results of the risk and uncertainty analysis may understate the range of possible cost outcomes for the HPIB. The DHS assessment noted that NAVSEA did not use applied correlation—which links costs for related items so that they rise and fall together during the analysis—in its cost model. According to a joint agency handbook on cost risk and uncertainty, applied correlation helps to ensure that cost estimates do not understate the possible variation in total program costs. Omitting applied correlation when assessing a cost estimate for risk can cause an understated range of possible program costs and create a false sense of confidence in the cost estimate. For example, absent applied correlation, the DHS assessment noted that the Navy calculated with a 99-percent level of confidence that the program will not exceed its threshold (maximum acceptable) acquisition cost. Navy officials explained that they will incorporate applied correlation in future updates to the cost estimate when better data are available. However, by applying correlation factors from the joint agency handbook to the same data that NAVSEA used, DHS’s Cost Analysis Division determined that NAVSEA overstated the likelihood of the program not exceeding its threshold acquisition cost.\nCost estimate not fully reconciled with a comparable independent cost estimate. While the Naval Center for Cost Analysis performed an independent cost estimate of the HPIB program, the office used a different methodology from NAVSEA’s, and its estimate was based on an earlier version of the indicative ship design and associated technical baseline. NAVSEA officials told us that before the Coast Guard’s ship design team updated the indicative ship design and technical baseline, NAVSEA met twice with Naval Center for Cost Analysis to reconcile their results. However, NAVSEA officials told us that due to the speed at which the program was progressing, no reconciliation occurred after the ship design team finalized the indicative ship design. While we did not find any specific ground rules and assumptions that differed between the two estimates, some ship characteristics had changed, such as the weight estimates for propulsion and auxiliary systems, among others. The use of two different technical baselines creates differences in the two estimates and makes them less comparable to one another.\nFor additional details on our assessment of the HPIB’s cost estimate against our 18 cost estimating best practices, see appendix III.\nBy excluding the majority of the HPIB program’s lifecycle costs from the sensitivity analysis as well as the risk and uncertainty analysis, and reconciling the estimate with an independent cost estimate based on a different iteration of the ship design, the cost estimate does not provide a fully credible range of costs the program may incur. Moreover, the exclusion of applied correlation further provides a false sense of confidence that the program will not exceed its threshold cost. As a result, the estimate provides an overly optimistic assessment of the program’s vulnerability to cost growth should risks be realized or current assumptions change. This, in turn, may underestimate the lifecycle cost of the program and calls into question the cost baselines DHS approved and used to inform the HPIB’s budget request. Without a reliable cost estimate to inform the business case for the HPIB prior to award of the contract option for lead ship construction, Congress is at risk of committing to a course of action without a complete understanding of the program’s longer-term potential for cost growth.", "The Coast Guard set an optimistic schedule baseline for the HPIB based on operational need, but its approach does not reflect a robust analysis of what is realistic and feasible. According to DHS and Coast Guard acquisition guidance, the goal of ADE 2A/2B is, among other things, to ensure that the program’s schedule baseline is executable at an acceptable cost. Rather than building a schedule based on knowledge—including determining realistic schedule targets, analyzing how much time to include in the schedule to buffer against potential delays, and comprehensively assessing schedule risks—the Coast Guard used the estimated end date of the Polar Star’s service life as the primary driver to set the lead ship’s objective (or target) delivery date of September 2023 and threshold (latest acceptable) delivery date of March 2024.", "The Coast Guard and the Navy did not conduct a robust analysis to determine how realistic the 2.5- to 3-year construction cycle time is for the lead HPIB before setting the schedule baseline. Our best practices for developing project schedules state that, rather than meeting a particular completion date, estimating how long an activity takes should be based on the effort required to complete the activity and the resources available. Doing so ensures that activity durations and completion dates are realistic and supported by logic.\nThe Coast Guard and the Navy validated the reasonableness of the 2.5- to 3-year construction time by comparing this duration to historical Navy ship construction data. Program officials told us that they used 211 Navy ships in their analysis and determined that the HPIB’s construction schedule was within historical norms given its weight. However, program officials told us they included both lead and follow-on ships in their analysis. As we have found in our prior Navy shipbuilding work, schedule delays tend to be amplified for lead ships in a class. Therefore, we believe the program’s analysis for the lead ship was overly optimistic.\nThe Coast Guard also sought industry feedback to determine whether 2.5 to 3 years to build the lead HPIB was feasible. Design study information provided to the Coast Guard by several shipbuilders estimated that they would need between 2.5 to 3.5 years to build the lead ship. We determined that the Coast Guard used the more optimistic estimate of 2.5 years for the objective delivery date and 3 years for the threshold delivery date. Three years was also the time frame reflected in the request for proposals for the detail design and construction contract. The request for proposals lists December 2023 as the target delivery date for the lead ship, which is approximately 3 years from the objective construction start date.\nFurther, we compared the HPIB’s planned construction schedule to the construction schedules of delivered lead ships for major Coast Guard and Navy shipbuilding programs active in the last 10 years as well as the Healy. We found that the HPIB’s lead ship construction cycle time of 2.5 to 3 years is optimistic, as only three of the ten ships in our analysis were constructed in 3 years or less. For the purposes of our analysis, we included information on each ship’s weight and classification, both of which can affect complexity and, therefore, construction times (see figure 9).\nThe Coast Guard also did not conduct any analysis to identify a reasonable amount of margin to include in the program schedule baseline to account for any delays. Estimating and documenting schedule margin based on an analysis of schedule risks helps to ensure that a program’s baseline schedule is achievable despite delays that may unexpectedly arise. Program officials told us that the only margin included in the HPIB schedule is the 6 months between the objective and threshold dates—the maximum time between objective and threshold dates before DHS policy requires additional rationale and justification. According to the request for proposals, the winning shipbuilder will examine schedule risks while preparing an integrated schedule. In addition, Coast Guard officials told us that the current schedule will remain largely notional until the winning shipbuilder provides detailed updates to the schedule.\nDelays in project schedules, whether they are in the program’s control or not, should be expected. For example, in prior shipbuilding programs we have reviewed, we have found that delays have resulted from a number of issues, including redesign work to address issues discovered during pre-delivery testing, key system integration problems, and design quality issues. Delays outside of the program’s control such as funding instability, late material delivery, and bid protests have previously affected a program’s ability to meet schedule. Program officials told us these and other schedule risks are not accounted for in the HPIB schedule.\nFurther, our analysis of 12 selected shipbuilding acquisition programs active in the last 10 years shows that the Navy and the Coast Guard have delayed delivery of all but one lead ship from their original planned delivery dates by more than 6 months, with delays occurring both before and after the start of construction. The delays in lead ship deliveries ranged from 9 months to 75 months. For the purposes of our analysis, we included the lead ships of major Coast Guard and Navy shipbuilding programs that have been active from 2008 to 2018. We excluded the Navy submarines and aircraft carriers from our analysis because we determined that their size and complexity did not make them reasonable comparisons to the HPIB (see figure 10).\nBy supporting the lead ship construction time with overly optimistic analysis and by not conducting analysis to estimate a reasonable amount of margin, the Coast Guard’s HPIB schedule does not fully account for likely or unforeseen delays, which would help ensure that the planned delivery date for the lead ship is feasible.", "The Coast Guard has set the HPIB’s schedule baselines, including when all three ships are planned to achieve full operational capability, but has not yet identified risks for the program’s schedule that could occur after the start of lead ship construction, such as risks related to the construction schedule or concurrency between ship testing and construction of subsequent ships. According to the HPIB risk management plan, the program should formally track risks, which includes developing risk mitigation plans and reporting risks to DHS. Prior to setting its baselines, the Coast Guard formally tracked some schedule risks that affect the program’s ability to start construction on time, such as an aggressive schedule for releasing the request for proposals for the detail design and construction contract. IPO officials told us they retired that risk because the Navy released the request for proposals in March 2018. However, our analysis of the HPIB construction schedule and 6- month margin for delays found the program’s schedule was optimistic, thereby warranting additional risk tracking and management.\nThe DHS Office of Systems Engineering also identified and recommended the Coast Guard track and take steps to mitigate HPIB’s schedule risks, including those related to concurrency. In its technical assessment, this office noted that the program plans to deliver the first two ships prior to completing initial operational testing and evaluation for the lead ship. The assessment further noted that construction on the third ship is planned to be nearly three-quarters finished prior to completing initial operational testing and evaluation. DHS’s Office of Systems Engineering found that this concurrency creates cost, schedule, and technical risk resulting from rework that may be necessary to address deficiencies found during initial testing. By not comprehensively and formally tracking risks to the HPIB schedule that occur after the start of lead ship construction, the program may not sufficiently identify and take timely risk management actions to address this key phase in the acquisition.\nBy not conducting a robust analysis to inform whether the HPIB’s schedule baselines are feasible, the Coast Guard is not providing Congress with realistic dates of when the ships may be delivered before requesting funding for the construction of the lead ship. While the Coast Guard is planning a service life extension of the Polar Star starting in 2020, as noted above, the HPIB’s optimistic schedule may put the Polar Star at risk of needing to operate longer than planned. The HPIB schedule’s optimism also puts the Coast Guard at risk of not fully implementing a knowledge-based acquisition approach to meet its aggressive schedule goals. Our prior work on shipbuilding programs has shown that establishing optimistic program schedules based on insufficient knowledge can create pressure for programs to make sacrifices elsewhere. For example, we found that the Navy moved forward with construction with incomplete designs and when key equipment was not available when needed. Additionally, some Navy programs pushed technology development into the design phase or pushed design into the construction phase. These concurrencies often result in costly rework to accommodate changes to the design, further delays, or lower than promised levels of capability.", "According to the IPO, the HPIB’s anticipated detail design and construction contract may be funded by both Coast Guard and Navy appropriations, but how certain types of cost growth will be addressed between the Coast Guard and the Navy has not been fully documented. The HPIB’s acquisition strategy anticipates award of a contract that will have options, includes efforts aimed at mitigating cost risks, and acknowledges the use of foreign suppliers to provide components and design services as allowable under statute and regulation. Since 2013, the program has received $360 million in funding, which includes both Coast Guard and Navy appropriations. Moving forward, it is unclear how much Coast Guard and Navy funding will be used to fund the contract. The Coast Guard and the Navy have an agreement in place for funding issues, but the agreement does not fully address how they plan to address cost growth on the program.", "As part of the HPIB’s acquisition strategy, the Navy structured the detail design and construction of each of the ships as contract options in the March 2018 request for proposals. Specifically, the request for proposals structured the detail design and construction work into four distinct contract line items, all under a fixed-price incentive (firm-target) contract type. Generally, this contract type allows the government and shipbuilder to share cost savings and risk through a specified profit adjustment formula, also known as a share ratio; ties the shipbuilder’s ability to earn a profit to performance by decreasing the shipbuilder’s profit after costs reach the agreed upon target cost; and, subject to other contract terms, fixes the government’s maximum obligation to pay at a ceiling price. Table 5 provides information on the HPIB’s request for proposals as of May 2018.\nAccording to the request for proposals, in addition to potentially earning profit by controlling costs, the shipbuilder may also earn up to $34 million in incentives for achieving other programs goals, such as quality early delivery, reducing operations and sustainment costs, and production readiness. IPO officials stated that they based the incentives on prior Navy shipbuilding contract examples. However, in March 2017, we found that the Navy had not assessed the effectiveness of added incentives for the reviewed fixed-price incentive contracts in terms of improved contract outcomes across the applicable shipbuilding portfolio. As a result, we recommended that DOD direct the Navy to conduct a portfolio-wide assessment of the Navy’s use of additional incentives on fixed-price incentive contracts across its shipbuilding programs. DOD concurred with this recommendation, but the Navy has not yet taken steps to implement it.\nAs part of the HPIB acquisition strategy, the IPO is striving to control costs on the detail design and construction contract through the following:\nA fixed-price incentive (firm-target) contract type. Because the shipbuilder’s profit is linked to performance, fixed-price incentive contracts provide an incentive for the shipbuilder to control cost. Most of the Navy’s proposed share ratios and ceiling prices for the detail design and construction work are consistent with DOD’s November 2010 Better Buying Power memo, which states a 50/50 share ratio and 120 percent ceiling price should be the norm, or starting point, for fixed-price incentive contracts.\nFull and open competition. The Navy plans to competitively award the HPIB’s detail design and construction contract. From market research and industry engagement, the IPO determined that there were multiple viable competitors. In March 2017, we found that competition helped to strengthen the Navy’s negotiating position with shipbuilders when setting contract terms, such as the share line and ceiling price for fixed-price incentive type contracts.\nProviding offerors the government’s estimated ship costs. The request for proposals does not set affordability caps but does include information on the government’s estimated cost for the ships, including $746 million for the lead ship’s advance planning, engineering, detail design, and construction, and an average ship price of $615 million across all three ships. Navy contracting officials explained that offers will not be disqualified from the source selection solely for being higher than the estimated costs. Instead, the estimated costs provide the offerors with cost bounds to help appropriately scope the capabilities. For example, IPO officials stated that they are striving to appropriately size the integrated power plant so that it is generating sufficient power to meet key performance parameters but not so much power that it drives up the cost.\nInquiries on block buys and economic order of quantity purchases. The Navy gave offerors an opportunity to provide the estimated savings that the government could achieve if it were to take a “block buy” approach in purchasing the ships or purchasing supplies in economic order quantities. The Navy did not include a definition of “block buy” in the HPIB request for proposals synopsis. Based on our prior work, block buy contracting generally refers to special legislative authority that agencies seek on an acquisition-by-acquisition basis to purchase more than one year’s worth of requirements. The request for proposals synopsis stated a preference for submission of the estimated savings within 60 days of the release of the request for proposals, or by May 2018. As of June 2018, the Navy had not received any formal responses from industry on potential savings from block buys or economic order quantities. For the HPIB request for proposals, the Navy stated that any information on block buys or economic order of quantities would be optional and would not be used as part of the evaluation of proposals submitted by offerors.\nOur prior work on block buy contracting approaches for the Littoral Combat Ship and F-35 Joint Strike Fighter programs found that the terms and conditions of the contracts affect the extent to which the government achieves savings under a block buy approach. For example, the Littoral Combat Ship’s block buy contracts indicated that a failure to fully fund the purchase of a ship in a given year would make the contract subject to renegotiation. DOD has pointed to this as a risk that the contractors would demand higher prices if DOD deviated from the agreed to block buy plan.\nIn its HPIB acquisition strategy, the IPO has also considered the use of foreign suppliers as allowable under the law. According to the February 2018 HPIB acquisition plan, the HPIB must be constructed in a U.S. shipyard given statutory restrictions, including restrictions on construction of Coast Guard vessels and major components in foreign shipyards unless authorized by the President. However, foreign suppliers will be permitted to provide components and design services to the extent applicable statutes and regulations allow. According to Coast Guard officials, foreign design firms have extensive expertise and knowledge to produce the design for HPIBs. As a result, the U.S. shipbuilders planning to submit proposals on the HPIB solicitation may partner with these foreign design firms when submitting proposals. Similarly, Coast Guard officials stated that the azimuthing propulsors that have the necessary power and ice classification for the HPIB are manufactured by foreign companies. Therefore, the selected shipbuilder may subcontract with these companies to acquire the propulsors.\nIn addition, Navy contracting officials stated that the program did not need to obtain a waiver from the Buy American Act—which generally requires federal agencies to purchase domestic end products when supplies are acquired for use in the United States, and use domestic construction materials on contracts performed in the United States—for certain components. The Act includes exceptions, such as when the domestic end products or construction materials are unavailable in sufficient and reasonably available commercial quantities and of a satisfactory quality.", "From 2013 through 2018, the program has received $360 million in funding—$60 million in the Coast Guard’s Acquisition, Construction, and Improvement appropriations (hereafter referred to as Coast Guard funding) and $300 million in Navy’s Shipbuilding and Conversion, Navy advance procurement appropriations (hereafter referred to as Navy appropriations). In addition, according to Coast Guard officials, in fiscal year 2017, Coast Guard reprogrammed $30 million in fiscal year 2016 appropriations for the HPIB from another program (see figure 11).\nAccording to IPO and Navy contracting officials, the Navy plans to use $270 million of the $300 million in Navy appropriations to award the detail design and construction contract in fiscal year 2019, which would fund the advanced engineering, long lead time materials, and detail design work. Navy officials stated the remaining $30 million in Navy appropriations will be held in reserves for potential scope changes. Of the $60 million in Coast Guard funding, the IPO has used $41 million for program office costs and the February 2017 design study contracts, and plans to use the remaining $19 million for program office costs. Coast Guard officials stated that they used the $30 million in reprogrammed 2016 appropriations to fund the design studies, model testing, and Navy warfare center support.\nAs the program prepares to award a contract worth billions of dollars if all the options are exercised, Congress, the Coast Guard, and the Navy face key funding considerations. These include the extent to which the program will be funded using Coast Guard and Navy appropriations in the future and whether each of the ships will be fully or incrementally funded. Navy contracting officials stated that by structuring the contract’s construction work as options, the contract has flexibility to accommodate any type of additional funding the program may receive.\nThe National Defense Authorization Act for Fiscal Year 2018 authorized procurement of one Coast Guard heavy polar icebreaker vessel. The Navy did not request any funding in fiscal year 2019 for the HPIB, while Coast Guard requested $30 million. Subsequently, after discretionary budget caps were relaxed by Congress, the Administration’s fiscal year 2019 budget addendum requested an additional $720 million in fiscal year 2019 Coast Guard appropriations for the program. Although the Navy did not request fiscal year 2019 funding for the lead ship, and Navy officials told us they have no plans to budget for the HPIB program moving forward, Congress may still choose to appropriate funds for the HPIB to the Navy. For example, in fiscal years 2017 and 2018, the Navy did not request funding but received $150 million in appropriations each year for the HPIB (see figure 12).\nAdditionally, the Coast Guard has been expressly authorized to use incremental funding for the HPIB. This authorization is reflected in the Coast Guard’s January 2018 affordability certification memo, submitted to DHS leadership. These memos are required to certify that a program’s funding levels are adequate and identify tradeoffs needed to address any funding gaps. However, as noted above, with the addition of the Administration’s fiscal year 2019 budget request addendum, the Coast Guard requested $750 million in full funding for the lead ship. The Navy has informed us that it plans to award the advance planning, design, engineering, long lead time material contract line item with its $270 million in appropriations. Navy officials also told us they are in the process of determining whether it needs to be authorized by Congress to use an incremental funding approach to fund the detail design and construction options if full funding is not received by the Navy.\nAccording to the Office of Management and Budget’s A-11 budget circular, full funding helps to ensure that all costs and benefits of an acquisition are fully taken into account at the time decisions are made to provide resources. The circular goes on to say that when full funding is not followed, without certainty if or when future funding will be available, the result is sometimes poor planning, higher acquisition costs, cancellation of major investments, or the loss of sunk costs. The circular, however, also notes that Congress may change the agency’s request for full funding to incremental funding to accommodate more projects in a year than would be allowed with full funding.", "Regardless of the funding strategy and which service funds the contract, the Coast Guard and the Navy do not have a clear agreement on how certain types of cost growth within the program will be addressed. The budgeting and financial management appendix of the July 2017 agreement between the Coast Guard and Navy for the HPIB notes that any cost overruns will be funded by the originating source of the appropriation and be the responsibility of the organization that receives the funding. However, the Coast Guard and the Navy have interpreted “cost overruns” differently in the context of the agreement.\nCoast Guard and Navy officials are in agreement that given the fixed- price incentive contract type, the government’s share of cost overruns between the target cost and ceiling price (based on the share ratio) will be the responsibility of the organization that provided the funding for the contract line item. Navy officials also noted that because the contract type is fixed-price incentive, any cost overruns above the ceiling price are generally the responsibility of the contractor, not the government.\nHowever, the Coast Guard and the Navy have not addressed in an agreement how they plan to handle any cost growth stemming from changes to the scope, terms, and conditions of the HPIB detail design and construction contract. For example, if the Coast Guard or the Navy revises the program’s requirements, this could increase the scope and value of the contract and result in additional contract costs. It is unclear in this instance, which organization is responsible for paying for the additional costs. Further, our 2005 work on Navy shipbuilding programs found that the most common causes of cost growth in these programs were related to design modifications, the need for additional and more costly materials, and changes in employee pay and benefits, some of which required changes in contract scope.\nIPO officials told us that unplanned changes to the program’s scope and any corresponding funding requests for unanticipated cost growth would require discussions and agreements with both Coast Guard and Navy leadership. Coast Guard and Navy officials stated that they are in the process of reviewing the July 2017 budget appendix of the agreement to clarify the definition of cost overruns and plan to finalize revisions no later than September 2018. Our prior work on implementing interagency collaborative mechanisms found that agencies that articulate their agreements in formal documents can strengthen their commitment to working collaboratively, which can help better overcome significant differences when they arise. Different interpretations or disagreements on financial responsibility between the Coast Guard and the Navy on cost growth for the HPIB program could result in funding instability for the program, which could affect the program’s ability to meet its cost and schedule goals.", "In the last several years, the Coast Guard and the Navy have made significant strides in their efforts to acquire heavy polar icebreakers. It has been over 40 years since the United States has recapitalized its aging heavy polar icebreaker fleet, and Congress has expressed the need for investment in the HPIB program to help ensure our continued presence in the polar regions. The Coast Guard and the Navy have taken steps to examine design risks and expressed commitment to design maturity before starting construction on the lead ship.\nHowever, the Coast Guard and the Navy did not take key steps to reduce risks on the HPIB program before setting the HPIB’s program baselines— namely, conducting a preliminary design review, conducting a technology readiness assessment, developing a fully reliable cost estimate, and conducting analysis to determine a realistic schedule and risks to that schedule. By setting the program’s baselines prior to obtaining sufficient knowledge in the design, technologies, cost, and schedule of the HPIB, DHS, the Coast Guard, and the Navy are not establishing a sound business case for investing in the HPIB nor putting the program in a position to succeed. There is risk that the program will cost more than the planned $9.8 billion and the lead ship will not be delivered by 2023 as planned. Further, without clear agreement between the Coast Guard and the Navy on which service will be responsible for any cost growth on the HPIB, the program is at further risk of not meeting its ambitious goals. In the current budget environment, it is imperative that the Coast Guard and the Navy obtain sufficient acquisition knowledge and put together a sound business case before asking Congress and taxpayers to commit significant resources to the HPIB program.", "We are making six recommendations total to the Coast Guard, DHS, and the Navy:\nThe Commandant of the Coast Guard should direct the polar icebreaker program to conduct a technology readiness assessment in accordance with best practices for evaluating technology readiness, identify critical technologies, and develop a plan to mature any technologies not designated to be at least TRL 7 before detail design of the lead ship begins. (Recommendation 1)\nThe Commandant of the Coast Guard, in collaboration with the Secretary of the Navy, should direct the polar icebreaker program and NAVSEA 05C to update the HPIB cost estimate in accordance with best practices for cost estimation, including (1) developing risk bounds for all phases of the program lifecycle, and on the basis of these risk bounds, conduct risk and uncertainty analysis, as well as sensitivity analysis, on all phases of the program lifecycle, and (2) reconciling the results with an updated independent cost estimate based on the same technical baseline before the option for construction of the lead ship is awarded. (Recommendation 2)\nThe Commandant of the Coast Guard should direct the polar icebreaker program office to develop a program schedule in accordance with best practices for project schedules, including determining realistic durations of all shipbuilding activities and identifying and including a reasonable amount of margin in the schedule, to set realistic schedule goals for all three ships before the option for construction of the lead ship is awarded. (Recommendation 3)\nThe Commandant of the Coast Guard should direct the polar icebreaker program office to analyze and determine appropriate schedule risks that could affect the program after construction of the lead ship begins to be included in its risk management plan and develop appropriate risk mitigation strategies. (Recommendation 4)\nThe DHS Under Secretary for Management should require the Coast Guard to update the HPIB acquisition program baselines prior to authorizing lead ship construction, after completion of the preliminary design review, and after it has gained the requisite knowledge on its technologies, cost, and schedule, as recommended above. (Recommendation 5)\nThe Commandant of the Coast Guard, in collaboration with the Secretary of the Navy, should update the financial management and budget execution appendix of the memorandum of agreement between the Coast Guard and the Navy to clarify and document agreement on how all cost growth on the HPIB program, including changes in scope, will be addressed between the Coast Guard and the Navy. (Recommendation 6)", "We provided a draft of this report to DHS and DOD for review and comment. In its comments, reproduced in appendix IV, DHS concurred with all six of our recommendations and identified actions it planned to take to address them. The Navy stated that it deferred to DHS and the Coast Guard on responding to our recommendations. DHS, the Coast Guard, and the Navy also provided technical comments, which we incorporated as appropriate.\nWe are sending copies of this report to the appropriate congressional committees, the Secretary of Defense, the Secretary of Homeland Security, the Commandant of the Coast Guard, the Secretary of the Navy, and other interested parties. In addition, the report is available at no charge on the GAO website at http://www.gao.gov.\nIf you or your staff have any questions about this report, please contact me at (202) 512-4841 or [email protected]. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to the report are listed in appendix V.", "This report examines (1) the extent to which the heavy polar icebreaker (HPIB) program has taken steps to develop mature designs and technologies consistent with best practices, (2) the extent to which the HPIB program has taken steps to set realistic cost and schedule estimates, and (3) the status of the HPIB program’s contracting efforts and funding considerations.\nTo assess the extent to which the HPIB program has taken steps to develop mature designs and technologies consistent with GAO-identified best practices, we reviewed program performance and design requirements, including the program’s operational requirements documents, system specifications such as the power plant, propulsion system, and hull, and technical baseline; the program’s alternatives analysis study, tailored systems engineering plan, test and evaluation master plan, and model testing results; cooperative agreements with Canada related to the HPIB; excerpts from industry studies; and the March 2018 detail design and construction request for proposals and subsequent amendments. We also reviewed relevant Department of Homeland Security (DHS), Coast Guard, and Department of Defense (DOD) acquisition guidance and instructions. From these documents, we determined the program’s design and technology efforts and compared them to GAO’s various best practices, including using a knowledge-based approach to shipbuilding, knowledge-based approach to major acquisitions, and evaluating technology readiness. We also interviewed knowledgeable officials from the Coast Guard’s Capabilities Directorate, Research and Development Center, and Marine Transportation Systems Directorate; DHS’s Science and Technology Directorate’s Office of Systems Engineering; the Canadian Coast Guard; and the National Science Foundation.\nTo assess the extent to which the HPIB program has taken steps to set realistic cost and schedule estimates, we determined the extent to which the estimates were consistent with best practices as identified in GAO’s Cost Estimating and Assessment and Schedule Assessment guides. To assess the cost estimate, we reviewed the HPIB’s January 2018 lifecycle cost estimate used to support the program’s initial cost baselines, Coast Guard and Navy documentation supporting the estimate, relevant program briefs to Coast Guard leadership, and HPIB program documentation containing cost, schedule, and risk information. We met with Naval Sea Systems Command (NAVSEA) officials responsible for developing the cost estimate to understand the processes used by the cost estimators, clarify information, and request additional documentation to support the estimate. Because we did not have direct access to the HPIB cost model, we observed portions of the model during a presentation and discussion with Navy cost estimators. We also reviewed the Naval Center for Cost Analysis’ September 2017 independent cost estimate for the HPIB program, the DHS Cost Analysis Division’s January 2018 independent cost assessment of the HPIB lifecycle cost estimate, and DHS Office of Systems Engineering’s January 2018 technical assessment of the HPIB program. We also conducted interviews with officials from the Naval Center for Cost Analysis, DHS Cost Analysis Division, and the DHS Office of Systems Engineering.\nTo assess the program’s schedule, we compared the HPIB program’s schedule, including the program’s initial schedule baselines, delivery schedules from the HPIB’s request for proposals for the detail design and construction contract, and integrated master schedule, to selected GAO best practices for project schedules, including establishing the duration of activities, ensuring reasonable total buffer or margin, and conducting a schedule risk analysis. To specifically assess the HPIB lead ship’s 3- year construction schedule estimate, we reviewed the Coast Guard’s and the Navy’s analysis supporting the HPIB schedule. We did not assess the reliability of the historical ship construction data the Coast Guard and Navy used for this analysis. We also compared the HPIB lead ship’s 3- year construction schedule to historical construction cycle times of lead ships among a nongeneralizable sample of major Navy and Coast Guard shipbuilding programs. We selected programs that were active within the last 10 years and have completed construction of the lead ship. We also included the Coast Guard’s Healy medium polar icebreaker, even though it is not a recent shipbuilding program, because it is the most recent polar icebreaker to be built in the United States. We excluded the Coast Guard Fast Response Cutter, Navy submarines, and Navy aircraft carriers because we determined that their size and complexity did not make them reasonable comparisons to the HPIB for construction times. This resulted in an analysis of construction schedules for 10 shipbuilding programs. We obtained data on these programs’ construction schedules from program documentation, such as acquisition program baselines, Navy selected acquisition reports, and Navy and Coast Guard budget documentation. We selected only lead ships for comparison because we have found in our prior work that schedule delays are amplified for lead ships in a class. Lead ships are thus more comparable to the HPIB lead ship than follow- on ships. We reviewed ship displacement data from the Naval Vessel Registry and the Coast Guard to control for the size of the ships. To assess the reliability of Naval Vessel Registry data, we reviewed the Navy’s data collection and database maintenance documentation, cross- checked select data across Navy websites, and interviewed cognizant Navy officials regarding internal controls for the database. We determined the ship displacement data were reliable for our purposes. To assess the degree to which the 6-month schedule margin that the HPIB baseline affords the lead ship is in keeping with historical ship delivery delays, we reviewed Coast Guard, Navy, and DHS acquisition documentation from a nongeneralizable sample of major Navy and Coast Guard shipbuilding programs. We selected programs active within the last 10 years and analyzed changes in lead ship delivery dates. We excluded Navy submarines and aircraft carriers because we determined that their size and complexity did not make them reasonable comparisons to the HPIB for delivery delays. We included programs that have not yet delivered their lead ships. This resulted in an analysis of construction schedules for 12 shipbuilding programs. For delivered ships, we used the actual delivery date; for ships not yet delivered, such as the Offshore Patrol Cutter and DDG 1000, we used the most recent, planned delivery date in the program baseline.\nTo determine the status of the HPIB program’s contracting efforts and funding considerations, we reviewed the program’s acquisition plan, March 2018 request for proposals and subsequent amendments, certification of funds memorandum, budget justifications, lifecycle cost estimate, and the Coast Guard’s fiscal year 2019 Capital Investment Plan. We also interviewed knowledgeable officials from the Coast Guard’s Office of Budget and Programs, NAVSEA Contracts Directorate, NAVSEA Comptroller Directorate, and the Office of the Assistant Secretary of Navy’s Financial Management and Comptroller.\nFor all objectives, we reviewed relevant DHS and Coast Guard policies and interviewed knowledgeable officials from DHS, the Coast Guard’s and the Navy’s HPIB integrated program office, and ship design team.\nWe conducted this performance audit from August 2017 to September 2018 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 that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives.", "There are four primary phases in shipbuilding: pre-contracting activities and contract award, detail design and planning, construction, and post- delivery activities (see table 6).", "The GAO Cost Estimating and Assessment Guide (GAO-09-3SP) was used as criteria in this analysis. Using this guide, GAO cost experts assessed the heavy polar icebreaker (HPIB) program’s lifecycle cost estimate against measures consistently applied by cost-estimating organizations throughout the federal government and industry that are considered best practices for developing reliable cost estimates. For our reporting purposes, we grouped these best practices into four categories—or characteristics—associated with a reliable cost estimate: comprehensive, accurate, well documented, and credible. A cost estimate is considered reliable if the overall assessment ratings for each of the four characteristics are substantially or fully met. If any of the characteristics are not met, minimally met, or partially met, then the cost estimate does not fully reflect the characteristics of a high-quality estimate and cannot be considered reliable. After reviewing documentation the Navy submitted for its cost estimate, conducting interviews with the Navy’s cost estimators, and reviewing other relevant HPIB cost documents, we found the HPIB lifecycle cost estimate substantially met three and partially met one characteristic of reliable cost estimates.\nWe determined the overall assessment rating by assigning each individual rating a number: Not Met = 1, Minimally Met = 2, Partially Met = 3, Substantially Met = 4, and Met = 5. Then, we took the average of the individual assessment ratings to determine the overall rating for each of the four characteristics. The resulting average becomes the Overall Assessment as follows: Not Met = 1.0 to 1.4, Minimally Met = 1.5 to 2.4, Partially Met = 2.5 to 3.4, Substantially Met = 3.5 to 4.4, and Met = 4.5 to 5.0. See table 7 for a high level summary of each best practice and the reasons for the overall scoring.", "", "", "", "In addition the contact named above, the following staff members made key contributions to this report: Rick Cederholm (Assistant Director), Claire Li (Analyst-in-Charge), Peter Anderson, Brian Bothwell, Juaná Collymore, Laurier Fish, Kristine Hassinger, Karen Richey, Miranda Riemer, Roxanna Sun, David Wishard, and Samuel Woo." ], "depth": [ 1, 2, 2, 2, 2, 2, 1, 2, 3, 2, 1, 2, 2, 3, 3, 1, 2, 2, 2, 1, 1, 1, 1, 1, 1, 1, 1, 2, 2 ], "alignment": [ "h3_title", "", "", "", "", "h3_full", "h0_full h1_title h4_title", "h0_title h1_title", "h0_full h1_full", "h4_full h1_full", "h2_title h1_title", "h2_full h1_full", "", "", "", "h2_title h4_title h3_title", "h2_full", "h3_full h4_full", "", "h3_full", "", "", "h0_full h4_full", "", "h4_full", "", "", "", "" ] }
{ "question": [ "What initial mistakes did the Coast Guard make?", "In what way does this practice fit with DHS's current acquisition policy and acquisition best practices?", "What were the implications of these mistakes on DHS policy?", "In the Coast Guard, how have technology readiness assessments influenced baselines?", "Why did Coast Guard officials not feel it was necessary to conduct a technology readiness assessment?", "Were the Coast Guard officials correct in their assumption that this assessment was unnecessary?", "Did the financial estimate fully meet GAO's standards and best practices?", "What was lacking in the cost estimate?", "What are the implications of the flaws in the cost estimate?", "Why are the Coast Guard and Navy collaborating?", "What does GAO recommend for successful acquisition programs?", "What important information was included in Section 122?", "What were the most important objectives of the report?", "How did GAO conduct its review?" ], "summary": [ "The Coast Guard set program baselines before conducting a preliminary design review, which puts the program at risk of having an unstable design, thereby increasing the program's cost and schedule risks.", "While setting baselines without a preliminary design review is consistent with DHS's current acquisition policy, it is inconsistent with acquisition best practices.", "Based on GAO's prior recommendation, DHS is currently evaluating its policy to better align technical reviews and acquisition decisions.", "The Coast Guard intends to use proven technologies for the program, but did not conduct a technology readiness assessment to determine the maturity of key technologies prior to setting baselines.", "Coast Guard officials indicated such an assessment was not necessary because the technologies the program plans to employ have been proven on other icebreaker ships.", "However, according to best practices, such technologies can still pose risks when applied to a different program or operational environment, as in this case. Without such an assessment, the program's technical risk is underrepresented.", "The lifecycle cost estimate that informed the program's $9.8 billion cost baseline substantially met GAO's best practices for being comprehensive, well-documented, and accurate, but only partially met best practices for being credible.", "The cost estimate did not quantify the range of possible costs over the entire life of the program.", "As a result, the cost estimate was not fully reliable and may underestimate the total funding needed for the program.", "To maintain heavy polar icebreaking capability, the Coast Guard and the Navy are collaborating to acquire up to three new heavy polar icebreakers through an integrated program office.", "GAO has found that before committing resources, successful acquisition programs begin with sound business cases, which include plans for a stable design, mature technologies, a reliable cost estimate, and a realistic schedule.", "Section 122 of the National Defense Authorization Act for Fiscal Year 2018 included a provision for GAO to assess issues related to the acquisition of the icebreaker vessels.", "This report examines, among other objectives, the extent to which the program is facing risks to achieving its goals, particularly in the areas of design maturity, technology readiness, cost, and schedule.", "GAO reviewed Coast Guard and Navy program documents, analyzed Coast Guard and Navy data, and interviewed knowledgeable officials." ], "parent_pair_index": [ -1, 0, 0, -1, 0, 0, -1, -1, 1, -1, -1, -1, -1, -1 ], "summary_paragraph_index": [ 3, 3, 3, 4, 4, 4, 5, 5, 5, 0, 0, 1, 1, 1 ] }
CRS_RL34481
{ "title": [ "", "Introduction", "The Effects of Cyclone Nargis", "Estimated Numbers at a Glance", "Damage", "Criticism of the SPDC's Response", "Humanitarian Relief Operation", "Overall Conditions", "Access", "Post-Nargis Joint Assessment (PONJA)", "Status of the Relief Operation", "Responsibility to Protect", "Sources of International and U.S. Assistance", "International Pledges of Aid and Assistance", "U.N. Consolidated Appeals Process", "ASEAN-U.N. International Pledging Conference", "U.S. Assistance", "The U.S. Emergency Response Mechanism", "Constitutional Referendum", "Immediate Response After Cyclone", "Background", "Provisions of the Draft Constitution", "Outcome of the Constitutional Referendum", "The SPDC's Account", "Opposition's Account", "U.S. Policy towards Burma106", "Burma-Related Legislation in the 110th Congress", "Issues for Congress", "Humanitarian Assistance", "Relief Operation and Political Developments", "Competing Aid and Budget Priorities", "Constitutional Referendum", "Long-Term Food Shortages", "Potential Political Instability" ], "paragraphs": [ "", "Around 6:30 p.m. (local time) on May 2, 2008, Cyclone Nargis, a category 3 cyclone, made landfall in the Irrawaddy (Ayeyarwady) Division of Burma, and then moved across the country from southwest to northeast, cutting a huge path of destruction 100 miles wide and 200 miles long, and striking Burma's largest city, Rangoon, with winds of up to 190 kph (120 mph) (see Figure 1 ). It caused major damage in the low-lying agricultural delta region, which also suffered the impact of a storm surge. The disaster struck just a week before the Burmese people were to vote on a proposed new constitution and just the day after President Bush announced an Executive Order tightening trade and economic sanctions.\nThe scale of the disaster requires a major relief effort that has proved to be well beyond the response capacity of the authorities in Burma. Several days after the cyclone, the State Peace and Democracy Council (SPDC) indicated that it would accept offers of assistance from the international community. Despite millions of dollars in aid pledges, many aid agencies and organizations experienced problems in obtaining visas for their relief workers, essentially hampering a full-scale, immediate relief effort. These factors—a devastating natural disaster and lack of access by the international humanitarian community—combined with a controversy over the recent constitutional referendum and the extension of opposition leader Aung San Suu Kyi's house arrest for the sixth consecutive year, have the potential to foster significant political change within Burma. Congress faces several issues with respect to Burma in dealing with both the direct impact of Cyclone Nargis and its potential indirect effects on Burmese politics.", "", "Initial reports estimated the death toll at 351 people, but that number quickly rose to 4,000, then 15,000, and then later to over 22,500, with 41,000 people reported as missing. At the end of May the numbers had risen to 77,738 dead and 55,917 missing. Official Burmese figures have now been revised to 84,537 dead and 53,836 missing. Most of the deaths were reportedly due to a 3.5 meter (11.5 feet) storm surge that swept across the affected areas after the eye of the cyclone passed. With extensive damage to the nation's transportation and communications systems, however, information about the disaster has proved difficult to gather and confirm.\nThe numbers of dead, missing, and injured remain fluid and uncertain and a final death toll is unlikely ever to be known. Unofficial estimates have exceeded the government's figures. Early on, Burma's Foreign Minister Nyan Win indicated at a press conference that the death toll could rise as more information became available. An unnamed U.S. envoy in Burma told reporters on May 7, 2008 that the death toll could reach 100,000. The United Nations cited figures closer to 100,000, while the Red Cross suggested that the number of dead might be closer to 128,000. More recently, experts have said the figures are likely to exceed 138,000 with some estimating the total dead and missing at 200,000.\nMany people who have been displaced, their homes and livelihoods destroyed, remain at risk. The United Nations estimates the number of people affected to be 2.4 million.", "Apart from Rangoon, sources in Burma reported significant damage to the Bago, Irrawaddy, Karen, and Mon regions of Burma. The State Peace and Development Council (SPDC) quickly announced a state of emergency in the five regions, but on May 6, 2008, lifted the state of emergency for much of the area struck by the cyclone. As of May 7, 2008, only seven townships in the Irrawaddy Division and 40 townships in Yangon Division were declared emergency disaster zones.\nIn addition to loss of life, injury, and massive displacement, the cyclone also caused extensive damage to much of Burma. A significant percentage of the houses, hospitals and other buildings in storm-affected regions were damaged or destroyed. Initial reports from U.N. aid officials indicated that the storm left several hundred thousand people homeless. In the coastal islands along the Irrawaddy River, entire villages were reportedly destroyed. Flooding was widespread. Electricity was knocked out in Rangoon and much of the other four areas struck by the storm. Most of the potable water and water treatment facilities in the affected areas were disrupted or were not operational. Many of the roads and bridges along the cyclone's path were damaged or blocked by felled trees and debris. The nation's telecommunications system—including telephone and internet service—was disrupted. As many as 25 of the Burmese Navy's estimated 144 ships in service were sunk by the cyclone, along with an unknown number of naval personnel lost.\nThere is some speculation that the damage done by the cyclone was worsened by the removal of mangrove forests in the past along Burma's coastal areas. In Burma, mangrove forests have been destroyed to build shrimp and fish farms. According to research by the International Union for the Conservation of Nature (IUCN), the preservation of Sri Lanka's coastal mangrove forests saved many lives when the 2004 tsunami struck. Based on the research in Sri Lanka, some experts maintain that Cyclone Nargis would have done less damage in Burma if the mangrove forests had not been removed.\nThe areas of Burma most severely damaged by the cyclone were also a major source of food for the nation, particularly rice, seafood, pork, and poultry. According to the U.N. Food and Agricultural Organization (FAO) the five states struck by Cyclone Nargis provided Burma with 65% of its rice, 80% of its aquaculture, 50% of its poultry, and 40% of its pigs. In June 2008, the FAO completed a needs assessment for the areas affect by the cyclone an with a focus on crops, livestock, fisheries and forestry. An expert specializing in Burma's economy anticipates \"incredible [food] shortages in the next 18 to 24 months.\"", "In a break with past practices, several days after the cyclone, the SPDC indicated that it would accept offers of assistance from the international community, though it was also reported that the SPDC did not \"officially endorse\" international assistance and would prefer bilateral arrangements. The SPDC said it would allocate $5 million for relief activities. Military and police units reportedly began to conduct rescue and recovery operations, deploying helicopters, boats, and trucks, but as the scale of the disaster became more evident, the relief effort required was thought to be well beyond their capacity.\nThe government coordinated national efforts of the response through an Emergency Committee, which put into operation a national disaster management plan, with the Ministry of Social Welfare, Relief, and Resettlement heading up the relief response.\nIn addition, there reportedly was widespread criticism about how the military junta has managed the disaster. According to the Burma Campaign-UK, the SPDC did not issue a warning to the people living along the path of Cyclone Nargis that the storm was approaching. A back page article that appeared in the junta-run newspaper, The New Light of Myanmar , the day the cyclone struck reported that a \"severe cyclonic storm\" was forecast to reach the coast of Burma within the next 36 hours, and \"under the influence of this storm, rain or thunderstorms will be widespread.\" Meteorologists in India say that they gave Burma 48 hours warning before Cyclone Nargis hit the country, including where and when landfall would occur. However, SPDC-run television issued a statement that, \"[t]imely weather reports were announced and aired through television and radio in order to keep the people safe and secure nationwide.\" Many people in Burma reportedly maintain that the state media notices failed to indicate the severity of the approaching storm or provide instructions on how to prepare for the cyclone's arrival.\nIn the first few days after the cyclone struck, it appeared that the SPDC either underappreciated the extent of the damage caused by the cyclone, or was intentionally underplaying the cyclone's impact. The first edition of The New Light of Myanmar released after the cyclone struck contained a number of articles that implied that life in Rangoon was quickly returning to normal, and that the cyclone's impact in the Bago Division, the Kayin State, and the Mon State were minimal. There were also reports that the SPDC focused its relief and rescue efforts to areas where SPDC officials and military personnel lived and worked, and offered little or no assistance to the general population. In addition, there were allegations that local officials stole relief supplies for their own use or to sell on the black market.\nThere was also criticism of the SPDC's failure to prevent disaster profiteering by merchants of essential items, such as food and fuel. The pro-opposition news magazine, Irrawaddy , reported that \"many commodity prices—including vegetables and eggs—instantly increased 100 percent following the aftermath of Cyclone Nargis.... \" According to other reports, food prices had reportedly risen three and four times what they were before the cyclone struck by May 6, 2008.\nThe SPDC was also being criticized for delaying the entrance of international relief organizations into Burma. According to an article in the Irrawaddy , the SPDC views international relief agencies as \"neocolonialist tools.\" In April 2008, for instance, the SPDC-run newspapers accused the International Committee of the Red Cross of supporting rebel groups in Burma's Karen state. Burmese political analyst Aung Naing Oo also thinks the military junta did not want large numbers of international aid workers entering Burma so close to the vote on the constitutional referendum.", "", "Cyclone Nargis created devastation in its path: resulting challenges include a general lack of transportation, blocked roads, poor communications systems, damaged infrastructure, and the difficulty of reaching remote areas and isolated parts of the country. Lack of electricity and clean water are a major problem. Fuel shortages also have been reported. The combined total population in the affected townships is thought to have been 4.7 million people. The United Nations estimates that up to 2.4 million people may have been affected by the disaster. According to initial assessments, the United Nations Office for the Coordination of Humanitarian Assistance (UNOCHA) reports that up to 2 million may be in need of prioritized assistance.\nAlthough the critical need for food, clean water, and shelter remains, until recently in-depth assessments, which are necessary to obtain a more detailed understanding of the situation on the ground, could not be completed. Needs vary by area and impact of the cyclone or tidal surge that followed. Immediate requirements included plastic sheeting, water purification equipment, cooking sets, mosquito nets, emergency health kits, and food. The arrival of supplies has been steady, but onward distribution is often difficult due to access problems in dealing with the Burmese government and because of local destruction from the cyclone and aftermath.\nAccording to the United Nations, the relief effort is expected to last at least six months, although it is anticipated that recovery and reconstruction will begin as soon as possible in a parallel effort. Some agencies have already begun to shift their focus towards long term needs. Concerns remain about potential food shortages, particularly given the devastation of the rice plantations in the Irrawaddy Delta.", "The international relief effort began very quickly, but nearly three weeks after Cyclone Nargis hit Burma, delays on visas, inadequate distribution of aid allowed into Burma, and insufficient access to those most affected were still major obstacles to mounting a full-scale relief operation. The military junta continued to say they could manage the relief effort and did not need experts. Despite pledges of cash, supplies, and assistance from around the world, most aid agencies had still not been granted visas to enter Burma and there was no word on when visas might be issued.\nDuring this time, the United Nations and the broader aid community were assembling staff in Bangkok, Thailand, and remained poised for deployment. Immediately following the cyclone, a relatively small number of international aid workers were allowed in to Burma, and within weeks, it was reported that 160 foreign aid workers (mostly from neighboring Asian countries, including Bangladesh, China, India, and Thailand) would be allowed in also, but with little indication on how far outside Rangoon they would be permitted to travel. It is believed aid workers from Western nations that have isolated the SPDC were not being welcomed. Customs clearance of relief materials, a potential problem in initial days, is apparently no longer an issue. The main international airport in Rangoon reopened early on and the junta slowly but increasingly allowed in international aid flights.\nOn May 23, during a visit by Secretary-General Ban Ki Moon, the government of Burma promised to allow some international aid relief staff, regardless of nationality, into the country, including access to the Irrawaddy Delta area. U.S. and British ships with relief supplies on board can enter the port of Rangoon to transfer supplies to small local boats, but military ships are not be permitted.\nIncreased access has enabled a massive international relief effort to move ahead, albeit slowly. According to the United Nations, more than 230 international staff have been granted visas and are now in the country. More than 200 operation U.N. staff have traveled to the affected areas. For those entering the delta, some report that access has not been a problem and that logistical arrangements are improving, while other NGOs indicate that it remains a difficult and frustrating situation. Some are concerned about lack of sustained access and report that the authorities require two days' notice and that access may be granted for only a 24-hour period. Visa procedures were not discussed at the pledging conference on May 25 (discussed later in this report).\nThe role played by the Association of Southeast Asian Nations (ASEAN) as an intermediary has been significant in creating diplomatic links and access to Burma, which is also a member of ASEAN. ASEAN took the lead in coordinating assistance offered by the international community, with full support from the United Nations, and formed the Tripartite Core Group (TCG), which includes high-level representatives from the government of Burma, the United Nations, and ASEAN. ASEAN has been working closely with other international institutions, including the United Nations and World Bank. For the first time, ASEAN deployed an Emergency Rapid Assessment Team (ERAT) on June 1, 2008, to conduct field assessments. An ASEAN field office has been set up in Rangoon to support the humanitarian operation of the ASEAN Humanitarian Task Force for the Victims of Cyclone Nargis (Coalition of Mercy), which includes senior offices as experts from ASEAN countries, and the TCG. Secretary-General of ASEAN, Dr. Surn Pitsuwan is chair of the Task Force. The coordination effort, facilitation, and monitoring of the flow of international assistance into Burma appear to be working. ASEAN also offered aid under the Disaster Management and Emergency Response to provide cash and in-kind aid supplies. In addition, it established the ASEAN cooperation Fund for Disaster Assistance.\nOn June 10, Burma issued new operating guidelines or regulations for U.N. agencies and international NGOs, which outlined procedures that aid agencies had to follow in providing assistance to the cyclone victims. On June 20, the Burmese authorities agreed to revert back to the old operating system under the Ministry of Foreign Affairs and TCG. Travel authorizations will be handled by the Ministry of Social Welfare, Relief, and Resettlement. The backlog of visa and travel authorization requests has now largely been processed.\nIt has also been reported that local authorities in the delta townships of Bogalay and Laputta want to move thousands who have been displaced, either because they are on park land or because of reconstruction efforts. Reports have also surfaced about restrictions on those fleeing survivors who have fled to the Thai border.", "The TCG is coordinating a multi-sector needs assessment, the most in-depth study of the cyclone affected areas to date. From June 10-19, field surveys were conducted for the Post-Nargis Joint Assessment (PONJA), with 350 personnel visiting approximately 30 townships. The assessment focuses on humanitarian needs and how survivors are coping (Village Tract Assessment or VTA) and damage components, such as economic and physical losses (Damage and Loss Assessment or DaLA.) At a meeting of the ASEAN Roundtable for Response, Recovery and Reconstruction, which convened on June 24, a progress report on the assessment was presented. Initial data confirms that continued relief assistance is required. Food and water shortages, damage to housing and poor shelter, and psychological stress were identified as some of the priority needs. The findings of the PONJA Report are expected to be published in mid-July. The data will be also be used by the United Nations in its revised Humanitarian Flash Appeal. A second pledging conference may be held thereafter. Future discussions are also expected to focus on the most appropriate mechanism to manage the transition to reconstruction.", "While the operating environment for internationals remains constrained, initial estimates suggest that through the efforts of the government, Myanmar Red Cross Society (MRCS), international and local NGOs, 1.3 million people have been reached, in many cases with a single effort to get something to the largest number of needy people. In severely affected areas, only about one third of the population has been reached. Reports also indicate that many communities have mobilized to support each other.\nThe United Nations Resident/Humanitarian Coordinator and Humanitarian Country Team (which includes U.N. agencies, international NGOs, national NGOs, and the IFRC and ICRC as observers) are working with national counterparts and focusing on sectoral priorities. The United Nations country team continues to work with government ministries, including the Ministry for Foreign Affairs, on how best to provide assistance. The United Nations deployed a Disaster Assessment and Coordination Team (UNDAC). According to UNOCHA, U.N. teams on the ground—including the World Food Program (WFP), the U.N. High Commissioner for Refugees (UNHCR), the U.N. Children's Fund (UNICEF) and the U.N. Development Program (UNDP)—deployed assessment teams and are continuing to provide assistance. The WFP also began to operate helicopters for food distribution. U.N. staff include local Burmese who are not subject to travel restrictions. Initially drawing on stockpiles inside the country, WFP distributed relief supplies and food stored in Rangoon. UNHCR also brought basic supplies and used shelter materials from warehouses in Thailand.\nHumanitarian relief sectors have been organized in clusters, including:\nAgriculture (FAO) Child Protection (UNICEF) Early Recovery (UNDP) Emergency Education (UNICEF) Emergency Shelter (IFRC) Emergency Telecommunications (WFP) Food Assistance (WFP) Health (WHO) Logistics (WFP) Nutrition (UNICEF) Water/Sanitation (UNICEF)\nDuring the first month following the cyclone, the World Health Organization (WHO) stated that it was particularly concerned about potential health problems—such as malaria and cholera—that could emerge in the aftermath of the cyclone's flooding. The first case of cholera following the cyclone was reported on May 9, 2008. Emergency health kits have been provided as part of a wide-ranging health care response that includes immunization campaigns, and according to the WHO, so far there are no major outbreaks of disease, although the threat remains extremely serious. The VTA component of the Post-Nargis Joint Assessment focused on five areas in the health sector: disease prevalence, availability of drugs, health personnel available, health care requirements, and sanitation.\nVarious international non-governmental organizations (NGOs) that were already operating in Burma before the cyclone continue to respond to the crisis and have had some access to affected areas. Reportedly hundreds of local staff are assisting with the relief effort. The former international airport of Don Muang in Thailand has become the humanitarian staging area to allow for extra warehousing, coordination, and consolidation of relief flights to Rangoon.\nThe International Federation of the Red Cross and Red Crescent Societies (IFRC) is working with the Myanmar Red Cross Society (MRCS) to provide emergency shelter and clean water to the cyclone survivors. Its initial allocation to the MRCS for the relief effort is 200,000 Swiss francs ($189,000) to distribute clean drinking water, plastic sheeting, clothing, bed netting, and kitchen supplies. The IFRC has also launched a revised emergency appeal for Burma for $50.8 million. The IFRC is coordinating efforts with the International Committee of the Red Cross (ICRC) to support the MRCS. As of June 20, 327,500 beneficiaries have received relief assistance.", "France's foreign minister reportedly suggested that the international community should deliver aid without waiting for approval from Burma and do so under the U.N. resolution on the Responsibility to Protect, which speaks to the obligations of a state to protect its own people and the obligations of all states to do so when that fails. On the one hand, some observers are arguing that the Burmese government is a threat to its own people and that Burma is violating its responsibility to protect its own citizens in the wake of the current disaster. On the other hand, others question whether forcing the Burmese government to accept international assistance should fall under the Responsibility to Protect resolution. From this perspective, as sovereign power, the SPDC, is in charge of the aid efforts and the United Nations (and others in the international aid community) should work to support the SPDC aid effort as much as possible.\nSo far, the United Nations has said that it does not think approaching the Burmese government in what could be seen as a confrontational manner would be helpful and that it might undermine the start of more constructive discussions, particularly as progress, albeit small, has been made in recent days. The U.N. Security Council has reportedly decided not to take up a discussion of the humanitarian crisis for the time being. In recent remarks, the U.N. Secretary-General Ban Ki-Moon said, \" ... our immediate challenge is humanitarian ... we must think about people, just now, not politics.\"\nAccording to media reports, on June 19, 2008, activist monks called for the European Union to charge Burma's junta leader, Than Shwe, who they accuse of blocking relief supplies to victims, with committing crimes against humanity and to bring the case before the international criminal court. In May, the European Parliament approved a non-binding resolution that indicated the regime could face charges if it continued to obstruct aid delivery to cyclone victims in Burma.", "", "So far, through governments and the private sector, the international community has pledged millions of dollars in aid, materials, and technical support. Some donors have indicated they are concerned about transparency and how the SPDC would use the money, and there have been reports of misuse of relief aid meant for cyclone victims, but these are difficult to substantiate.", "Under the Consolidated Appeals Process, the U.N. country team issued a Flash Appeal for emergency financial assistance on May 9, 2008, in the amount of $187 million, \"to enable international partners (10 U.N. organizations and nine NGOs) to support the Government of Myanmar in addressing the needs of more than1.5 million people affected by the cyclone.\" This amount was later increased to $202 million, and as of June 16, the appeal is 65% funded, with $131 million in contributions directly to the appeal and $24 million in uncommitted pledges. A total of $241 million has been contributed and $66 million pledged to the overall relief effort. The U.N.'s Central Emergency Response Fund (CERF) initially made available $10 million for projects identified by the country team. This amount has now been increased to 22 million. A revised flash appeal will be released on July 10 and will cover the period May 2008 through April 2009.", "On May 25, the ASEAN-UN co-sponsored donor conference convened in Rangoon with representatives from 51 countries in attendance. Agreement was reached on the need for a rapid increase in relief efforts, support for the work of ASEAN and the United Nations in coordinating the response, and an assessment of rehabilitation and recovery needs in the long term. The Burmese government said that $11 billion was needed for reconstruction and recovery efforts. The conference was seen as an important step towards cooperation between the international community and government of Burma. The private sector has made significant contributions of assistance.\nContributions and in-kind pledges are listed in the table below.", "The U.S. Embassy in Burma announced on May 5, 2008 that it had issued a disaster declaration and authorized $250,000 in humanitarian assistance. This initial contribution was allocated to implementing partners (UNICEF, WFP and UNHCR) for water and sanitation, emergency food assistance, and shelter. The embassy also issued a travel warning, and authorized the departure of non-emergency U.S. citizen embassy employees and eligible family members.\nOn May 6, White House Press Secretary Dana Perino announced that the Administration would provide an additional $3 million in aid for Burma for a total pledge of $3.25 million, $1 million of which would be allocated to the American Red Cross (ARC). U.S. assistance was later increased by an additional $13 million for a total pledge of $16.25 million. The U.S. Agency for International Development (USAID) reports that total humanitarian funding provided to date is $41.17 million, with funding from USAID's Office of Foreign Disaster Assistance and Food for Peace Program and DOD assistance. The DOD-operated U.S. government airbridge completed 185 airlifts and delivered relief commodities from USAID, DOD, the United Nations, NGOs and the Government of Thailand. The airbridge ceased operations on June 22.\nIt was initially reported that the release of U.S. assistance was conditional on the SPDC allowing a U.S. Disaster Assistance Response Team (DART) into the country. This was later denied by Scott Marciel, U.S. Ambassador for ASEAN Affairs. According to a State Department spokesperson, the funds would be allocated to implementing partners and used for emergency materials (such as shelter, food, water and other basic assistance). President Bush also indicated that the United States was prepared to use U.S. Navy personnel for search and rescue and other logistical assistance. Although an initial U.S. aid flight was cancelled on May 8, since then, as of May 15, U.S. airlifts of relief materials have been flown from Thailand to Rangoon. A ten-person USAID-DART has been assembled in Bangkok and Utapeo, Thailand.\nFor the time being, U.S. personnel and military equipment will remain in Thailand with additional U.S. naval assets on stand by in international waters off the Burmese coast.\nOn May 6, 2008, the Office of Foreign Asset Control of the U.S. Department of the Treasury issued General License No. 14 to allow certain financial transactions in support of humanitarian or religious activities by non-governmental organizations in Burma. Under current U.S. federal law, it is illegal to export financial services, including the transfer of funds, to Burma. Under General License No. 14, the U.S. government and humanitarian organizations may transfer funds legally to Burma to provide cyclone disaster relief.", "The United States is generally a leader and major contributor to relief efforts in response to humanitarian disasters. The President has broad authority to provide emergency assistance for foreign disasters and the U.S. government provides disaster assistance through several U.S. agencies. The very nature of humanitarian disasters—the need to respond quickly in order to save lives and provide relief—has resulted in a rather unrestricted definition of what this type of assistance consists of at both a policy and an operational level. While humanitarian assistance is assumed to provide for urgent food, shelter, and medical needs, the agencies within the U.S. government providing this support typically expand or contract the definition in response to circumstances. Funds may be used for U.S. agencies to deliver services or to provide grants to international organizations (IOs), international governmental and non-governmental organizations (NGOs), and private or religious voluntary organizations (PVOs). USAID is the U.S. government agency charged with coordinating U.S. government and private sector assistance. It also coordinates with international organizations, the governments of countries suffering disasters, and other governments.\nThe Office of Foreign Disaster Assistance (OFDA) in USAID's Bureau of Humanitarian Response provides immediate relief materials and personnel, many of whom are already abroad on mission. It is responsible for providing non-food humanitarian assistance and can quickly assemble DARTs to assess conditions. OFDA has wide authority to borrow funds, equipment, and personnel from other parts of USAID and other federal agencies. USAID has two other offices that administer U.S. humanitarian aid: Food For Peace (FFP) and the Office of Transition Initiatives (OTI). USAID administers emergency food aid under FFP (Title II of P.L. 480) and provides relief and development food aid that does not have to be repaid. OTI provides post-disaster transition assistance, which includes mainly short-term peace and democratization projects with some attention to humanitarian elements but not emergency relief.\nThe Department of Defense (DoD) Overseas Humanitarian, Disaster and Civic Aid (OHDACA) funds three DoD humanitarian programs: the Humanitarian Assistance Program (HAP), Humanitarian Mine Action (HMA) Program, and Foreign Disaster Relief and Emergency Response (FDR/ER). OHDACA provides humanitarian support to stabilize emergency situations and deals with a range of tasks including providing food, shelter and supplies, and medical evacuations. In addition the President has the authority to draw down defense equipment and direct military personnel to respond to disasters. The President may also use the Denton program to provide space-available transportation on military aircraft and ships to private donors who wish to transport humanitarian goods and equipment in response to a disaster.\nGenerally, OFDA provides emergency assistance for 30 to 90 days after a disaster. The same is true for Department of Defense humanitarian assistance. After the initial emergency is over, assistance is provided through other channels, such as the regular country development programs of USAID.\nThe State Department also administers programs for humanitarian relief with a focus on refugees and the displaced. The Emergency Refugee and Migration Account (ERMA) is a contingency fund that provides wide latitude to the President in responding to refugee emergencies. Assistance to address emergencies lasting more than a year comes out of the regular Migration and Refugee Account (MRA) through the Population, Migration and Refugees (PRM) bureau. PRM assists refugees worldwide, conflict victims, and populations of concern to the United Nations High Commissioner for Refugees (UNHCR), often extended to include internally displaced people (IDPs). Humanitarian assistance includes a range of services from basic needs to community services.", "The cyclone struck one week before the people of Burma were to vote on a new constitution that potentially is the most significant political development in Burma since the military seized power in 1988. In the first few days following the natural disaster, the SPDC said it would proceed with the vote as scheduled on May 10, 2008. However, on May 6, 2008, the SPDC announced that the vote on the proposed constitution would proceed as planned in most of Burma, but that the vote would be delayed until May 24, 2008 for most of the townships around Rangoon and in seven of the townships in the Irrawaddy region.\nThere are conflicting accounts about the conduct and outcome of the election. The SPDC reported a heavy turnout on both dates, with few voting irregularities. Opposition groups say the turnout was comparatively light, with many reported cases of voting irregularities, such a pre-marked ballots, voter intimidation, and other techniques to influence the outcome of the referendum. On May 29, 2008, the SPDC issued Announcement No. 7/2008, reporting that 98.12% of the 27,288,827 eligible voters had cast votes, and that 92.48% had voted in favor of the adoption of the constitution. On the basis of these official results, the SPDC declared that the new constitution had been ratified.", "After Cyclone Nargis caused widespread flooding and destruction in Burma, opposition to holding the referendum as scheduled arose from many sources. A May 5 editorial in the Irrawaddy stated, \"The response by the Burmese regime to this weekend's cyclone disaster shows that the junta is incapable of running the country, let alone helping the victims.\" The editorial called for the postponement of the referendum as did other voices within the Burmese opposition movement. A representative of the opposition-run media group, the Democratic Voice of Burma, said, \"They [the SPDC] would be very stupid to go ahead with the it. Thousands of people are dying or missing. It is very difficult to get around or get food and water. How can people vote?\" On May 7, 2008, one of Burma's leading opposition groups, the National League for Democracy (NLD), issued a statement demanding that \"the referendum be held simultaneously in all parts of the country once the conditions in the country have improved.\"", "On February 9, 2008, the SPDC issued an announcement stating, \"in accordance with the fourth step of the seven-step Road Map, the approval of the Constitution draft will be sought in a National Referendum to be held in May 2008.\" On the same date, the SPDC released a second announcement, which states, \"In accordance with the forthcoming State Constitution, the multi-party democracy [sic] general elections will be held in 2010.\"\nIn order to pass the new constitution at least 50% of Burma's eligible voters must vote, with a simple majority voting in favor of adoption of the constitution. According to the SPDC, there are over 27 million eligible voters in Burma.\nOn February 26, 2008, the SPDC released a new law governing \"the approval of the draft constitutional.\" Chapter V, Section 11(d) of the law barred the following people from voting: members of religious orders; people of unsound mind; persons in prison or convicted of a crime; people illegally abroad; and foreigners. Chapter VII, section 20(a) allows the postponement or dissolution of a vote \"if [a] free and fair referendum may not be held stably due to natural disaster or situation affecting the security, or any other disaster.\" Chapter XX prohibited \"lecturing, distributing papers, using posters, or disturbing the voting in any other manner.... \" Some opposition groups were concerned that this provision would be used to suppress the anti-constitution campaign.\nAccording to the SPDC Chairman, Senior General Than Shwe, Burma's military did not \"crave for power,\" and that its \"ultimate aim is to hand over the state power to the people.\" As Than explained in his speech on Myanmar's 63 rd Armed Forces Day on March 27, 2008, the military was \"compelled\" to assume state responsibilities due to \"unavoidable circumstances.\" Than also indicated that the referendum on the draft constitution was consistent with the SPDC's \"seven-step roadmap\" for the return of civilian rule.\nEver since the SPDC announced that a referendum on the proposed constitution would be held, it has run an extensive pro-constitution multi-media campaign. The SPDC has regularly run slogans in its newspapers, such as, \"To approve the State Constitution is a national duty of the entire people today. Let us all cast 'Yes' vote in the national interest.\" The May 5, 2008 edition of the SPDC-run newspaper, the Myanma Ahlin , stated, \"It's only a few days left before the coming referendum and people are eager to cast their vote.\"\nAt the same time, the SPDC has actively tried to suppress the anti-constitution campaign. Human Rights Watch reports, \"Political opposition activists face constant harassment, state-sponsored violence, vicious slandering in the state-controlled press (where they are routinely described as the 'internal stooges' of 'external destabilizing elements'), arbitrary arrest and detention, and long-term imprisonment.\" There have also been reports of \"unidentified assailants\" assaulting opposition leaders and anti-constitution campaigners in the weeks before the election; the Burmese police reportedly refused to investigate the alleged assaults.\nAccess to the actual text of the draft constitution was at first limited. Photocopies and electronic copies were secretly circulated among journalists, senior government officials, and diplomats. A copy of the draft constitution, in Burmese, was available on the web page of Burma Digest , \"a magazine specializing in human rights affairs in Burma.\" The SPDC began providing copies of the 194-page draft constitution to the public on April 9, 2008 at a cost of 1,000 kyat ($1.50)—two months after announcing that a referendum would take place in May 2008. At the same time, the military junta announced the date for the referendum—May 10, 2008.", "The draft constitution creates a parliament ( Pyidaungsu Hluttaw ) with two chambers—the Union Assembly ( Pyithu Hluttaw ) and the National Assembly ( Amyotha Hluttaw )—and sets aside a quarter of the seats in each chamber for the military. The draft constitution also permits a military takeover \"in the event of an emergency.\" A provision in the draft constitution also bars a person who has dual citizenship, or has a close relative who is a foreign national from holding public office, effectively preventing opposition leader Aung San Suu Kyi from running for office because she was married to a British citizen and has two sons who are British nationals.\nBurma's various opposition groups were initially uncertain how to respond to the SPDC's announcement of a referendum on a draft constitution. According to a leader of the 88 Generation Students Group, Tun Myint Aung, \"The only real choice is, should we vote 'no' or just boycott?\" However, Dr. Nay Win Maung, a member of the \"Third Force Group,\" a group that advocates engagement with the military junta and opposes sanctions, recommends that the opposition groups endorse the draft constitution and focus on the 2010 elections. On April 2, 2008, the main opposition group, the National League for Democracy (NLD), called on the people of Burma to vote \"no\" on the constitutional referendum. On May 1, 2008, the United Nationalities League for Democracy (UNLD), an umbrella group of political parties representing Burma's ethnic minorities, called for complete boycott of the referendum.", "There are conflicting accounts coming out of Burma about the conduct and outcome of the May 10 and May 24 votes. According to the junta-operated media, the constitutional referendum was done in a free and fair fashion with international observers. According to various pro-opposition sources and much of the international media, there were a significant number of cases of voting irregularities to bring the validity of the outcome into question. Also, there were varying views of the percentage of voters who actually went to the voting booths.", "A post-referendum issue of The New Light of Myanmar contained several stories on the voting on May 10, 2008, covering the situation at polling stations in various townships in various districts or states across Burma. In every story, mention was made of the presence of a representative of a foreign embassy or consulate observing the voting process, including officials from Bangladesh, Chad, China, Indonesia, Japan, Malaysia, North Korea, the Philippines, Russia, South Korea, Thailand, the United States, and Vietnam. Although none of the stories included comments or quotes from the foreign officials, the implication was that the vote was monitored by international observers.\nA story in The New Light of Myanmar the day after the vote stated, \"The referendum was held successfully ... with massive turnout of citizens.\" However, the article provided no estimate of the percentage of voters who participated in the referendum or the results of the May 10 vote.\nOn May 14, 2008, the military junta announced the official results of the May 10 vote (see Table 2 ). The SPDC claimed that \"more than 99 percent\" of the 22.7 million eligible voters for the May 10 ballot cast their vote, with 92.4% voting in favor of the new constitution. If these figures are correct, over 20 million people voted in favor of the constitution on May 10—enough votes to approve the new constitution, even though there were approximately five million eligible voters scheduled to go to the polls on May 24. The official results were higher than the rumored percentages being circulated in parts of Burma. It was being said before the vote that the SPDC had already determined the results of the referendum, and would announce that 84.6% voted in favor of the new constitution.\nPage 9 of the May 25 edition of the New Light of Myanmar was devoted to stories covering the vote in the more severely affected townships of Irrawaddy and Rangoon. In contrast to the coverage of the May 10 vote, the stories did not mention the presence of international observers or describe the voter turnout. Instead, the focus was on the number of polling stations and the voting procedures.\nOn May 29, 2008, the SPDC announced the final vote count for the constitutional referendum, which was published the next day in the New Light of Myanmar . According to the official results, between May 14 and May 29, the number of eligible voters had declined by 81,110 people. Of the 27,288,827 eligible voters, a reported 98.12% had cast ballots, of which 92.48% had voted in favor of the new constitution.", "Burma's various voices of opposition paint a very different image of the conduct and outcome of plebiscite. According to Irrawaddy , turnout on May 10 was \"very low.\" The NLD compiled a list of voting irregularities on the day of the vote that included the following:\nThe distribution of pre-marked ballots, already checked in favor of the constitution, to voters at polling stations; Election officials watching voters as they marked their ballots; Intimidation and threats to voters; The confiscation of identity cards of voters who voted against the constitution; Reports that voters were told that ballots had already been submitted in their name by local government officials; Refusing to allow eligible voters to vote; Pressuring people to vote yes, and to vote yes for relatives not at the polling station; The arrest of people distributing anti-constitution literature at polling stations; and Denying NLD and other opposition members access to the polling stations to observe the referendum.\nThere were also reports that some polling stations closed early and people who tried to vote were told that ballots in favor of the constitution had already been submitted in their name.\nOn the same day the SPDC announced the official results of the May 10 vote, the NLD released a statement condemning the junta's decision to go ahead with the constitutional referendum in the areas of Burma most severely damaged by Cyclone Nargis. According to the NLD's statement, \"It is not the right time to hold the referendum in the cyclone-hit region because people are dying and still struggling.\" The statement called on the SPDC to concentrate its efforts on humanitarian work and postpone the May 24 vote.\nAccording to an Irrawaddy news report, the Public International Law & Policy Group (PILPG) published a report, \"Burmese Constitutional Referendum: Neither Free nor Fair,\" on May 26, 2008, sharply criticizing the conduct of the plebiscite. According to the PILPG, \"The referendum was not free or fair, as it was not conducted in accordance with international law or basic democratic standards.\" The Irrawaddy article states that the PILPG report outlines how the conduct of Burma's constitutional referendum violated eight conditions for a free and fair election, including the right to vote; secret ballots; freedom of opinion; freedom from coercion; the right to information; freedom of the media; electoral monitoring; and independent electoral administration.", "Two days before Cyclone Nargis struck Burma, President Bush issued an executive order expanding U.S. trade and economic sanctions effective May 1, 2008. U.S. foreign policy towards Burma in general is currently delineated by the Burmese Freedom and Democracy Act of 2003 [ P.L. 108-61 , extended by P.L. 108-272 , P.L. 109-39 , and P.L. 110-52 ] and a series of Executive Orders. These laws and Executive Orders:\nProhibit the import into the United States products from Burma; Ban the export or re-export of financial services to Burma by U.S. persons; Prohibit a U.S. person or company from approving, aiding, or supporting a foreign party's investment in Burma; Prohibit U.S. persons from purchasing shares in a third-country company if the company's profits are predominantly derived from the company's development of resources in Burma; Authorize the President to impose a freeze on funds or assets in the United States of the Burmese Government and individuals who hold senior positions in that government; Freeze all property and interests in property held in the United States or that come to the United States of the Myanmar Gem Enterprise, the Myanmar Timber Enterprise, the Myanmar Pearl Enterprise, and any person determined by the Secretary of Treasury, after consultation with the Secretary of State, to be either directly or indirectly owned or controlled by the SPDC or supportive of the SPDC; and Require U.S. representatives in international financial institutions to vote against the extension of any financial assistance to Burma.\nUnder the Bush Administration, the U.S. policy has been to minimize contact with the SPDC and to isolate the military junta. The U.S. Embassy in Rangoon has no ambassador. In addition, as indicated above, the United States actively supports the efforts of international organizations (such as the UN) to place pressure on the SPDC to improve human rights in Burma and return the government to civilian rule. The U.S. State Department issued a statement on February 11, 2008, that called the proposed constitutional referendum \"evidence of its [the SPDC's] refusal to pursue a meaningful and time-bound dialogue with Burma's democratic and ethnic minority representatives.\" In its 2008 annual human rights report, the State Department cited Burma for a wide range of human rights abuses including arbitrary or unlawful deprivation of life; torture and other cruel, inhuman, or degrading treatment or punishment; arbitrary arrest or detention; denial of fair public trial; the detention of political prisoners; forced relocations; restriction of the freedom of speech and press; restriction of the freedom of peaceful assembly and association; repression of religion; and human trafficking.", "On May 7, 2008, the Senate passed by unanimous consent S.Res. 554 expressing the Senate's \"deep sympathy to and strong support for the people of Burma, who have endured tremendous hardships over many years and face especially dire humanitarian conditions in the aftermath of Cyclone Nargis.\" The resolution also expressed the Senate's support for President Bush's decision to provide humanitarian aid and indicated a willingness \"to appropriate additional funds, beyond existing emergency international disaster assistance resources, if necessary to help address dire humanitarian conditions throughout Burma in the aftermath of Cyclone Nargis and beyond.\" On May 13, 2008, the House passed H.Res. 1181 by a vote of 410 yeas to one nay, expressing its sympathy and condolences to the people of Burma, and demanding that \"the referendum to entrench military rule be called off, allowing all resources to be focused on disaster relief to ease the pain and suffering of the Burmese people.\"\nIn December 2007, both the House of Representatives and the Senate passed versions of H.R. 3890 . The bill—\"The Block Burmese JADE (Junta's Anti-Democratic Efforts) Act of 2007\" in the House and \"The Burma Democracy Promotion Act of 2007\" in the Senate—would ban both the direct and indirect import of gemstones mined or extracted from Burma. The House version would also prohibit \"direct or indirect payments of any tax, cancellation penalty, or any other amount to the Burmese Government, including amounts paid or incurred with respect to any joint production agreement relating to the Yadana or Shwe gas fields or pipeline—an apparent provision to force Chevron to divest from its business activities in Burma. The Senate version does not contain prohibition on tax payments to the Burmese government, but does ban the direct or indirect import of products containing teak or other hardwood timber from Burma. Consultations between the House and Senate have not yet reconciled the differences between the two versions of H.R. 3890 .\nOn March 14, 2008, Representative Rush D. Holt introduced H.Con.Res. 317 \"Condemning the Burmese regime's undemocratic constitution and scheduled referendum.\" The resolution \"denounces the one-sided, undemocratic, and illegitimate act by the State Peace and Development Council (SPDC) to legalize military rule with the constitution\" and urges the President to work through the UN Security Council and the Association of Southeast Asian Nations (ASEAN) to \"end junta political intransigence and promote meaningful political dialogue\" in Burma. On May 6, 2008, the House passed the resolution by a vote of 413 yeas and one nay.\nOn November 16, 2007, the Senate agreed by unanimous consent to S.Con.Res. 56 that \"encourages ASEAN to take more substantial steps to ensure a peaceful transition to democracy in Burma.\" On December 4, 2007, the House of Representatives referred the resolution to the House Committee on Foreign Affairs.\nLegislation was also introduced in both the House of Representatives and the Senate to award the Congressional Gold Medal to Aung San Suu Kyi. The House of Representatives passed its version of the bill on December 17, 2007 by a vote of 400 yeas and zero nays. On April 24, 2008, the Senate passed H.R. 4286 without amendment by unanimous consent. The legislation was presented to the President on May 1, 2008, and signed into law on May 6, 2008.", "The concurrence of the tightening of U.S. sanctions on Burma and the arrival of Cyclone Nargis just one week before the nation was to vote on a proposed new constitution has compounded the political pressure on the ruling military junta. Many of the people of Burma need humanitarian aid and are dissatisfied with the SPDC's initial response to the crisis. The current situation presents Congress with at least four key issues: humanitarian assistance; the constitutional referendum; a possible long-term food shortage; and potential political instability in Burma.", "", "Humanitarian emergencies usually stem from two overall types of disasters: natural or conflict-related. U.S. and international humanitarian assistance have an important impact not only on the relief operation itself, but on broader foreign policy issues. Natural disasters (like the 2004 tsunami in the Indian Ocean, 2005 earthquake in South Asia, and 2007 cyclone in Bangladesh) may affect millions of people each year who require prolonged urgent assistance. Responses are typically multilateral, often have a relief operation end date, and are less likely to be hindered by the politics of the situation. By contrast, in many conflicts—terrorist attacks, war between states, or where groups within a country are fighting and in the absence of a political solution—the response cannot be separated from broader foreign policy developments and the overall strategy (including determining an exit point) may be much less clear.\nIn the case of Burma, the response to the natural disaster is closely linked to political developments both within the country and in its relationships with the international community. The circumstances and difficulties of mobilizing a relief operation were hampered in part by the politics of the situation. Some are saying that the provision of humanitarian assistance and an increase in the international presence in Burma could represent an opportunity to change the authoritarian system in Burma. This may be what the SPDC fears, not only with the constitutional referendum at stake, but in the long term as well, with the result that it has not allowed most offers of international humanitarian experts.", "Humanitarian assistance generally receives strong bipartisan congressional support and the United States is typically a leader and major contributor to relief efforts in humanitarian disasters. When disasters require immediate emergency relief, the Administration may fund pledges by depleting its disaster accounts intended for worldwide use throughout a fiscal year. In order to respond to future humanitarian crises, however, these resources would need to be replenished or it could curtail U.S. capacity to respond to other emergencies. These accounts are typically restored through supplemental appropriations. Amid efforts to tackle rising budget deficits by, among other measures, slowing or reducing discretionary spending, finding the resources to sustain U.S. aid pledges may present some challenges, depending upon the resources required and competing aid priorities at hand.\nThe Senate passed S.Res. 554 on May 7, 2008, calling for Congress \"to stand ready to appropriate additional funds, beyond existing emergency international disaster assistance resources, if necessary to help address dire humanitarian conditions throughout Burma in the aftermath of Cyclone Nargis and beyond.\"\nOn June 30, 2008, President Bush signed into law P.L. 110-252 , which provides FY2008 and FY2009 supplemental appropriations for overseas military operations, international affairs, and some domestic programs. The law provides funding for urgent humanitarian assistance worldwide, including support for critical needs in Burma. It also states, \"As the Peace and Development Council (SPDC) has compounded the humanitarian crisis in Burma by failing to respond to the needs of the Burmese people in the wake of Cyclone Nargis and by refusing offers of assistance from the international community, the Department of State and USAID should seek to avoid providing assistance to or through the SPDC.\"", "Prior to the arrival of Cyclone Nargis, several Members of Congress had indicated their opposition to Burma's planned constitutional referendum. After the cyclone struck, on May 6, 2008, the House of Representatives passed H.Con.Res. 317 \"condemning\" the constitutional referendum and calling on the SPDC to enter into \"meaningful political dialogue\" with Burma's opposition groups. Since the SPDC announced its plan to hold the plebiscite, the Senate has not passed any legislation relating directly to the constitutional referendum.", "Even after the immediate post-cyclone emergency has passed, experts expect the country to face a potentially severe food shortage for up to two years. The areas struck by Cyclone Nargis were important sources of rice, seafood, pork, and chicken for Burma; it is unlikely that the rest of the country will be able to step up food production to replace the lost output of the cyclone-devastated regions. It is also uncertain if Burma will be able import enough food to replace its lost domestic output because of damage to its transportation infrastructure and a shortage of foreign exchange. As a result, Burma may require food assistance for many months and possibly years.\nIn addition, in the first few days after Cyclone Nargis, food prices in Burma reportedly increased by 100% or more. While this spike in food prices is likely to subside to some extent in the coming weeks, it is also likely that prices will not return to their pre-cyclone levels. In addition to the challenge of recovering from the destruction caused by the cyclone, the people of Burma will probably face higher—and possibly rising—food prices for many months. Given that most households in Burma were living in poverty before the arrival of Nargis, the higher food prices will place more strain on the Burmese people. It is noteworthy to recall that widespread protests in Burma in September 2007 began as a demonstration against an unannounced increase in fuel prices.\nBurma's potential long-term need for food assistance presents two possible concerns to Congress. First, Congress may be asked to appropriate funds to provide long-term food and agricultural assistance to Burma. Second, these recent developments may also prompt changes in the current laws governing sanctions on Burma.", "The possible combined effects of public dissatisfaction with the SPDC's response to the cyclone disaster, a potential rejection of the junta's proposed constitution, and widespread food shortages and food price inflation could combine to pose a threat to the political survival of Burma's ruling military junta. In addition, the announced \"official results\" of the constitutional plebiscite are widely viewed as obviously fraudulent by Burma's opposition groups and much of the general population. These factors have increased the prospects for public demonstrations against the SPDC.\nPolitical tensions—both domestic and international—were also heightened by the SPDC's decision on May 27, 2008, to extend the house arrest of Aung San Suu Kyi for a sixth consecutive year, as well as the arrest of several NLD members. The detention decision was announced just a few days after United Nation Secretary-General Ban Ki-moon had raised the issue with the leaders of the SPDC. It also came on the same day that NLD members rallied at Aung San Suu Kyi's home in remembrance of their election victory in 1990.\nAfter the announcement of the detention's extension, Secretary-General Ban expressed his regret about the junta's decision and called for an end to all such \"restrictions\" of \"political figures\" in Burma. In an official statement, President Bush indicated that he was \"deeply troubled\" by the decision and called upon the SPDC \"to release all political prisoners in Burma and begin a genuine dialogue with Aung San Suu Kyi, the National League for Democracy, and other democratic and ethnic minority groups on a transition to democracy.\"\nOne question Congress may move to consider is whether current circumstances warrant a further tightening or easing of political pressure on the SPDC. Given Burma's current and anticipated future need for humanitarian assistance, as well as the apparent heightened dissatisfaction with the SPDC, some are likely to argue that the current situation is an opportune moment to ramp up U.S. sanctions and seek greater action from the United Nations and other multilateral organizations. For example, resolution of the differences between the House and Senate versions of H.R. 3890 and subsequently forwarding the legislation to the President would build upon Executive Order 13464. However, new congressional sanctions would possibly eliminate any possibility of the SPDC admitting U.S. aid or relief workers in the future and could potentially be used by the military junta to rally support based on patriotic or nationalist appeals to opposition to \"outside interference.\"\nA key factor that will impact the effectiveness of any changes in U.S. sanctions on Burma will be the perceived ability of the SPDC to weather any political storm. One critical element in the post-Nargis period will be the strength of the SPDC's support among rank-and-file soldiers. Burma's military has grown from 180,000 to around 400,000 troops over the last 20 years.\nThe SPDC will also rely on its paramilitary support group, the Union Solidarity and Development Association (USDA), to remain in power. Formed in 1993, the USDA is ostensibly a social organization that claims nearly 23 million members, but has a reputation for violent acts against opposition groups in Burma. In recent years, the USDA has organized \"people's militias\" that have reportedly been involved in attacks on Aung San Suu Kyi and other opposition leaders in Burma. Burma's soldiers have already demonstrated a readiness to open fire on civilian protests and the USDA have similarly demonstrated a willingness to be a weapon of oppression for the SPDC. Whether of not the soldiers and the USDA members will continue to support the military junta during any post-Nargis civil unrest remains to be seen.\nThere are some indications of significant political changes within the SPDC since Cyclone Nargis and the constitutional referendum. On June 20, 2008, the SPDC released Orders 2/2008 and 3/2008 reassigning Major General Saw Lwin to become the Minister of Immigration and Population, and making Vice Admiral Soe Thien his replacement as Minister for Industry-2. According to one report, unnamed military sources said that Soe Thien's replacement as the navy's commander in chief will be Major General Nyan Tun. Another report claims that five top SPDC lieutenant generals were asked to retire and several junior officers were promoted as part of a restructuring of the SPDC.\nThere are differing interpretations of the significance of the replacement of ministers and retirement of generals. Some observers speculate that there is a power struggle within the SPDC for the successor of Than Shwe between General Shwe Mann and Lieutenant General Myint Swe. While Shwe Mann is purportedly the \"number three man in the armed forces,\" Myint Swe supposedly is very loyal to Than Shwe. Other analysts are interpreting the recent changes in the SPDC as the punishing of people who failed to take action after the cyclone and replace them with loyal and trusted officers. In particular, Soe Thien was allegedly removed from his position as the head of the navy because of his failure to deploy ships to counter the U.S. and French naval vessels of the coast of Burma.\nAnother important issue will be the image of Burma's Buddhist monks and nuns—and their actions—in the weeks ahead. Various accounts indicate that the monks and nuns have been key figures at the local level in organizing and coordinating disaster relief efforts. Although the SPDC has attempted to prevent the monks and nuns from involvement in disaster assistance—and reportedly have tried to take credit for work done by the monks and nuns—Burma's \"members of religious orders\" may have strengthened their popularity since the arrival of Cyclone Nargis. Having been barred from voting on the constitutional referendum, Burma's Buddhist monks and nuns may choose to leverage their stronger popular support into renewed political action against the Burma's oppressive military junta." ], "depth": [ 0, 1, 1, 2, 2, 1, 1, 2, 2, 2, 2, 2, 1, 2, 3, 3, 2, 2, 1, 2, 2, 2, 2, 3, 3, 1, 2, 1, 2, 3, 3, 2, 2, 2 ], "alignment": [ "h0_title h2_title h1_title", "h0_full h2_full", "h0_title", "h0_full", "h0_full", "h2_full", "", "", "", "", "", "", "h2_title", "", "", "", "h2_full", "", "h1_full", "h1_full", "h1_full", "", "h1_title", "h1_full", "", "", "", "h0_title h2_title h1_title", "h1_title", "h1_full", "", "h2_full", "h0_full h2_full", "h2_full" ] }
{ "question": [ "How confident was the data collection from Cyclone Nargis?", "What struggles will Burma face during recovery from the storm?", "Why was the junta already facing controversy before the cyclone struck?", "What is the consequence of the controversial referendum?", "What was the junta's controversial next move?", "What discrepancies were noted during the election?", "On what basis did the junta announce the new constitution?", "What does the new constitution stipulate about elections?", "What might the effect of Cyclone Nargis be on Burma?", "Why has the junta faced domestic and international pressure?", "What factors may heighten domestic opposition to the junta?", "What is the purpose of this report?", "How will this report be updated?" ], "summary": [ "The storm left in its wake an official death toll of 84,537 and 53,836 more missing, and extensive damage to the nation's premier agricultural areas. Some have speculated that the final number of dead is actually more than 130,000.", "Vital infrastructure was destroyed by the storm, severely limiting the ability to assess the loss of life and provide assistance to the survivors for weeks following the cyclone. In addition, much of Burma's most productive agricultural land has been severely damaged; some experts expect that it will take up to two years for Burma's production of rice, seafood, pork and poultry to recover, and that the nation may face chronic food shortages and the need for international assistance for many months.", "Even before Cyclone Nargis struck, the junta was already facing a highly controversial referendum on a proposed constitution scheduled for May 10, 2008, that could shape U.S. and other countries' policies toward Burma.", "As a consequence, the evolution and implications of the humanitarian crisis became inextricably linked to Burma's political situation and its relations with the international community.", "In a widely criticized move, the military junta decided go ahead with the vote, holding the constitutional referendum in most of Burma on May 10, 2008, and in the more severely affected areas on May 24, 2008.", "The SPDC reported a heavy turnout on both days and few voting irregularities. Opposition groups state that the turnout was light, and there were many cases of voting fraud and voter intimidation.", "On May 29, 2008, the junta announced the promulgation of the new constitution, on the basis of on its approval by 90.7% of the eligible voters.", "According to the new constitution, elections to form a new government are to be held in 2010.", "Some experts are speculating that Cyclone Nargis may precipitate major political change in Burma, including the destabilization of Burma's military regime.", "The junta has already faced domestic and international pressure to cancel the constitutional referendum.", "Local dissatisfaction with the speed and quality of the junta's provision of emergency assistance may heighten domestic opposition to the junta and its proposed constitution. Also, rising food prices and food shortages may feed popular discontent, much like fuel price increases led to protests in Burma of September 2007. In addition, two days before announcing the official results of the constitutional referendum, the SPDC extended opposition leader Aung San Suu Kyi's house arrest for the sixth consecutive year.", "This report examines the scope of and response to the disaster, as well as its links to Burma's political situation and U.S. policy.", "The report will be updates as circumstances warrant." ], "parent_pair_index": [ -1, -1, -1, 0, -1, 2, -1, -1, -1, -1, 1, -1, 3 ], "summary_paragraph_index": [ 0, 0, 2, 2, 2, 2, 2, 2, 3, 3, 3, 3, 3 ] }
CRS_R43264
{ "title": [ "", "Introduction", "Patent Fundamentals", "The Role of Patents Within Different Industries", "Implications for the Patent System", "The Feasibility of Sector-Specific Patent Rules", "Concluding Observations" ], "paragraphs": [ "", "The recent enactment of the Leahy-Smith America Invents Act (AIA) demonstrates congressional interest in the patent system. Most of the provisions of the AIA apply to any type of patented invention. For example, the first-inventor-to-file priority system, prior user rights, and post-grant and inter partes review proceedings apply equally to chemical compounds, electrical appliances, mechanical devices, and any other invention that may be protected by a patent. However, other AIA provisions are specific to particular types of inventions. That statute limited the availability of patents on tax strategies, prohibits the issuance of patents claiming human organisms, and creates \"transitional proceedings\" that apply exclusively to patents pertaining to business methods. The AIA also allows \"prioritization of examination of applications for products, processes, or technologies that are important to the national economy or national competitiveness....\"\nThe AIA reflects the principle that, for the most part, the U.S. patent system operates in a uniform manner. All patentable inventions are generally subject to the same statutory provisions. A number of exceptions exist to this concept of technological neutrality, however. For example, statutory provisions limit the enforceability of patents claiming methods of medical treatment; call for patent term extension for certain products regulated by the Food and Drug Administration (FDA); and establish specialized patents for designs and plants.\nThis blended architecture has for many years prompted inquiry into whether the patent system operates best as a uniform system that applies neutrally to all inventions, or whether it could or should be tailored to meet the specific needs of different industries. Commentators have proposed, for example, that software patents should receive shorter terms than patents on other inventions, and that patents on genes should be subject to compulsory licenses that allow individuals to use the patented technology upon paying a license fee. Unenacted legislation in the 112 th Congress, H.R. 6245 , proposed patent litigation reforms that would apply to patents claiming computer software and hardware, but not to other sorts of inventions.\nNotably, U.S. membership in the World Trade Organization (WTO) may influence congressional willingness to promulgate industry-specific patent statutes. One component of the WTO agreements, the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS Agreement), requires patents to be available and enforceable \"without discrimination as to ... the field of technology.... \" Although the TRIPS Agreement allows for some limited exceptions to this rule of technological neutrality, one consequence of U.S. membership in the WTO may be a restricted ability to tailor the patent statute to particular inventions and industries.\nThis report considers the possibility of modifying the U.S. patent system to meet the needs of specific industries. After providing a brief review of the patent system, the report identifies different industrial traits, such as the pace of innovation, product cycle, and the cost of research and development, which potentially suggest the desirability of tailored patent rights. It then considers possible points of adjustment within the patent system, including patent term, scope of exclusive rights, and the availability of remedies for infringement. The report then discusses potential difficulties associated with distinguishing among industries within the patent system, including the provisions of the TRIPS Agreement. The report closes with concluding observations.", "The patent system covers a broad variety of inventions. U.S. patents cover traditional subject matter such as machines, pharmaceuticals, and manufacturing processes, along with high-tech inventions in the fields of biotechnology, computer software, and nanotechnology. No matter what the sort of technology, however, the patent system in large measure operates under the same general principles.\nIn particular, all inventors who wish to obtain patent rights must file an application at the U.S. Patent and Trademark Office (USPTO). USPTO examiners then review the application to ensure that certain statutory requirements are met. These statutory requirements—including that the invention be adequately described in the patent application, and that the invention must not have been obvious to a skilled artisan —apply to every invention for which a patent is sought. Similarly, once a patent has issued, the statutory term is set uniformly to 20 years from the date of filing no matter what the type of invention. All patents received the identical exclusive rights—namely, the right to prevent others from making, using, selling, offering to sell, or importing the patented invention in the United States.\nSome exceptions exist to this general notion of standardization. The United States has long provided for the protection of industrial designs through so-called \"design patents.\" The Patent Law Treaties Implementation Act of 2012, P.L. 112-211 , recently caused U.S. law to conform to the Hague Agreement Concerning the International Registration of Industrial Designs, the leading international agreement on these specialized rights. The United States also established two sorts of intellectual property rights for plants: plant patents, which are administered by the USPTO; and plant variety protection certificates, which are administered by the Department of Agriculture. In addition, the Hatch-Waxman Act extends the terms of patents covering pharmaceuticals, medical devices, and other products which are subject to premarketing approval by the FDA. As well, over the years private legislation has increased the terms of a number of particular patents.\nFurther, some commentators observe that the statutory provisions for patents are stated fairly generally. In their view, these broad parameters provide courts and the USPTO with some ability to recognize the diverse characteristics of distinct technologies and tailor their rulings accordingly. For example, one core patentability requirement is that the invention must not have been obvious to a person of ordinary skill in the art. The courts have arguably developed nuanced obviousness principles that take into account whether the invention falls within a predictable art, including many mechanical and electrical inventions, as compared to a less predictable art, such as some branches of chemistry and biotechnology. Inventions within these latter, less predictable arts may possibly be more readily able to satisfy the obviousness requirement and therefore are more likely to be patented.\nDespite these exceptions, the Patent Act of 1952, as amended by such legislation as the American Inventors Protection Act and AIA, is generally worded in a neutral fashion. The uniform treatment provided by the patent system may be contrasted with the diversity of the technologies and industries to which patents pertain, however, a topic this report takes up next.", "Commentators have for many years recognized that technologies and industries vary in ways that are salient to the patent system. In particular, the costs and risks of conducting R&D differ widely among industries. Arguably the patent incentive should be greater for innovative efforts that are expensive and more likely to fail. Similarly, some sectors are marked by stand-alone, discrete advances, while others feature steady, cumulative innovation. Firms that operate within the latter sorts of industries may have greater need to access technologies invented and patented by others.\nAs well, product cycles also vary markedly across the U.S. economy. For example, patients may use a particular pharmaceutical for decades, even as consumers quickly discard their old mobile telephones and other electronics in favor of new devices. Industries with compact product cycles may be better served by short application pendency periods at the USPTO and also may be less concerned with lengthy terms of patent protection.\nStill another factor may be the practical availability of trade secret protection. Competitors may readily reverse engineer many electrical and mechanical products, for example. Firms within these industries must therefore seek patent rights or enjoy no effective intellectual property rights whatsoever. On the other hand, certain chemical and biotechnology inventions may be more plausibly maintained as trade secrets. Arguably greater encouragement is needed for public disclosure of chemical and biological inventions through the patent system.\nThe number of patents that cover a particular product also varies widely among industry. Within the pharmaceutical industry, often only a handful, and sometimes only one or two patents cover an individual drug. In contrast, numerous patents may cover a particular electronics product. As RPX Corporation, a self-described \"comprehensive patent risk management firm,\" explains:\nModern products and services incorporate numerous technology components. The evolution of mobile devices provides an example. Based on our research, we believe there are more than 250,000 active patents relevant to today's smartphones, a significant increase compared to our estimate of approximately 70,000 patents that were active and relevant to mobile phones in 2000. This growth can be attributed to the expanded set of features and functionality incorporated in today's smartphones, including touchscreens, internet access, streaming video, media playback, application store readiness and other web-based services, and WiFi connectivity options.\nThese \"vast disparities in patent-to-product\" ratios may influence the perceptions of different business enterprises over the value of individual patents as compared to larger portfolios of intellectual property rights.\nAnother arguable distinction among industries is the detectability of patents that are pertinent to particular products. Fields such as small-molecule chemistry employ an internationally recognized, standardized nomenclature to identify the composition of a particular compound. As a result, firms within the agricultural, industrial, and pharmaceutical chemical industries may enjoy some confidence that they will be able to identify patents that are relevant to products they wish to sell. In contrast, fields such as software arguably have yet to develop a standardized terminology for identifying programs, procedures, algorithms, and other sorts of machine instructions. The lack of conventions for identifying software inventions potentially impacts the patent system, arguably making the identification of pertinent patents difficult for firms in the computer industry.", "In view of these and possibly other distinctions between technologies and markets, policy makers may not be particularly confident that a one-size-fits-all patent system ideally encourages innovation throughout a diverse array of industries. Observers have for many years suggested that the statute distinguish among the varying inventions and industries for which patents are available. In theory, many aspects of the patent system could be tailored to reflect the needs of distinct technology sectors. Some possible points of adjustment include\nThe speed with which the USPTO reviews patent applications could be adjusted to meet the needs of industries with varying product cycles. Patents could be more difficult to obtain within some fields than others depending upon the perceived need of the patent incentive to encourage innovation. Patents on inventions capable of being protected by trade secrets in whole or in part—for example, biotechnologies or chemical processes—might be required to have more complete technical disclosures in order to allow others to practice the invention expeditiously. The term of protection could vary among technologies depending upon the pace of innovation within particular fields. The scope of exclusive rights could be adjusted in order to immunize select individuals or enterprises—such as physicians or universities—from liability for patent infringement. Compulsory licenses could be made available for categories of patented inventions perceived to fulfill an important public need—for example, healthcare or environmental technologies—thereby allowing third parties to use the invention without the permission of the patent proprietor.\nCongress has implemented some of these technology-specific measures. Among other examples, the Hatch-Waxman Act extends the terms of patents covering pharmaceuticals, medical devices, and other products which are subject to premarketing approval. Congress also imposed restrictions upon the enforceability of patents claiming medical procedures. Specialized patent rights exist both for industrial designs and plants.\nMore recently, the deliberations that led to the enactment of the Leahy-Smith America Invents Act (AIA) again placed focus upon the role of the patent system within different industries. One topic that focused attention upon these distinctions concerned the award of remedies when firms or individuals are found to infringe patents. Broadly speaking, the patent law allows courts to award two sorts of remedies against infringers: (1) injunctions, or court orders requiring an entity to cease future infringements; and (2) damages, consisting of an award of money to compensate patent proprietors for financial losses suffered due to infringements. The legislative history of the AIA reveals that certain representatives of the pharmaceutical and information technology sectors often held different views about the state of the law of patent remedies.\nWith respect to injunctions, prior to 2006 courts would virtually always enjoin an adjudicated infringer from future practice of the patented invention. Some observers—particularly those from the information technology sector—believed that this \"automatic injunction\" rule was particularly unfair when the patented invention supported a single function in a multifunctional product, such as an automobile, smart phone, or computer software. They also believed that this rule encouraged the assertion of patents of dubious quality and offered patent proprietors too much leverage during licensing and settlement negotiations. However, other observers—primarily from the pharmaceutical sector—asserted that absent the award of an injunction, competitors would not respect the exclusive rights afforded by a patent.\nA predecessor, unenacted version of the AIA, the Patent Reform Act of 2005, proposed changes to the principles governing injunctions in patent law. Section 7 of that bill provided that in deciding whether to issue an injunction or not, \"the court shall consider the fairness of the remedy in light of all the facts and the relevant interests of the parties associated with the invention.\" Perhaps because of the discordant view of different patent stakeholders as to the availability of injunctions in the patent community, this provision was identified as one of the most controversial within the bill.\nWhile debate about congressional action with respect to injunctions in patent law continued, the Supreme Court issued its decision in eBay Inc. v. MercExchange, L.L.C. in 2006. There the Court unanimously held that an injunction should not automatically issue based on a finding of patent infringement. Under the eBay ruling, courts must weigh equitable factors traditionally used to determine if an injunction should issue, including whether the patent proprietor suffered an irreparable injury; the award of damages would be inadequate to compensate for that injury; that considering the balance of hardships between the patent owner and infringer, an injunction is warranted; and that the public interest would not be disserved by a permanent injunction.\nFollowing the eBay decision, Congress did not include legislative provisions concerning injunctive relief in the AIA. Some commentators believe that the Supreme Court struck an appropriate balance by addressing concerns of information technology firms that were concerned that patent holders would assert their rights after the launch of a commercially successful product in an effort to extort an unreasonably large royalty using the threat of an injunction; but also recognized that most often a prevailing patent holder would be awarded an injunction. Further, the early prediction that \"the biotech and pharmaceutical industries have little to fear in the post- eBay world\" appears to have been correct, for the great majority of judicial decisions declining the award of a permanent injunction have concerned information technology patents.\nA second, arguably divisive issue between the information technology and pharmaceutical industries pertains to damages. Marketplace realities often render the determination of an appropriate damages award a difficult affair in patent litigation. In some cases, the product or process that is found to infringe may incorporate numerous additional elements beyond the patented invention. For example, the asserted patent may relate to a single component of a touch screen display, while the accused product consists of an entire smartphone. In such circumstances, a court may apply \"the entire market value rule,\" which \"permits recovery of damages based upon the entire apparatus containing several features, where the patent-related feature is the basis for consumer demand.\" On the other hand, if the court determines that the infringing sales were due to many factors beyond the use of the patented invention, the court may apply principles of \"apportionment\" to reach a just measure of damages for infringement.\nSome believe that current damages standards have resulted in the systemic overcompensation of patent owners. Such overcompensation may place unreasonable royalty burdens upon producers of high technology products, ultimately impeding the process of technological innovation and dissemination that the patent system is meant to foster. Others believe that current case law appropriately accounts for apportionment concerns. These observers are concerned that this reform might overly restrict damages in patent cases, thereby discouraging voluntary licensing and promoting infringement of patent rights. Limited damage awards for patent infringement might prevent innovators from realizing the value of their inventive contributions, a principal goal of the patent system.\nAs discussion of damages reform has proceeded before Congress, the courts have also been active. One of the more notable cases on patent damages principles arose from the efforts of Lucent Technologies, Inc., to enforce its so-called \"Day patent,\" which related to a method of entering information into fields on a computer screen without using a keyboard. In 2002, Lucent brought an infringement suit against computer manufacturer Gateway, Inc., asserting that certain pre-installed Microsoft software infringed the Day patent. At trial, the jury found the Day patent not invalid and infringed. Lucent sought damages of $561.9 million based on 8% of Microsoft's infringing sales, while Microsoft asserted \"that a lump-sum payment of $6.5 million would have been the correct amount for licensing the protected technology.\" The jury then awarded Lucent a single lump-sum amount of $357.7 million.\nThe litigation in Lucent v. Gateway captured the attention of many observers. In a March 3, 2009, letter addressed to Senator Patrick Leahy, Senator Arlen Specter requested a delay in Senate action on the pending patent reform bill until the Federal Circuit heard oral argument in the case. Observing a \"symbiotic relationship between the judicial and legislative branches with regard to changes to the patent system,\" Senator Specter believed that \"oral argument has the potential to facilitate a compromise or clarify the applicability of damages theories in various contexts.\"\nIn its subsequent decision, the Federal Circuit upheld the lower court's determination that the Day patent was not invalid and infringed. In the most anticipated portion of the opinion, the appellate court also struck down the jury's damages award as not supported by substantial evidence. Some commentators have viewed the lengthy opinion as doing much to dampen speculative damages awards, particularly with respect to patents from the information technology sector. Following that opinion, Lucent and Microsoft have reportedly settled the litigation. Of broader interest, Congress also chose not to address damages for patent infringement within the AIA.\nThe timely issuance of eBay and Lucent v. Gateway may have contributed to congressional belief that courts were appropriately addressing injunctions and damages, respectively. As a result, Congress did not endeavor to reconcile the perceived needs of industries with different innovation and marketplace environments. Another legislative possibility, at least in theory, was to enact distinct remedial rules for different categories of inventions. This report next explores whether industry-specific rules are a practical possibility for patent legislation.", "In view of the concerns noted above, commentators have gone so far to say that \"it has become increasingly difficult to believe that a one-size-fits-all approach to patent law can survive.\" To the extent the current patent system creates a blanket set of rules that apply comparably to distinct industries, it likely over-encourages innovation in some contexts and under-incentivizes it in others. Further, some observers have asserted that the need of firms to identify and access the patented inventions of others may differ among industries. As a result, the case can be made that distinct industrial, technological, and market characteristics that exist across the breadth of the U.S. economy compel industry-specific patent statutes.\nHowever, others have questioned the wisdom and practicality of such line-drawing. The following concerns, among others, have been identified:\nOver its long history, the U.S. patent system has flexibly adapted to new technologies such as biotechnology and computer software. Legislative adoption of technology-specific categories may leave unanticipated, cutting-edge technologies outside the patent system. Defining a specific industry or category of technologies may prove to be a contested proposition. Over time, new industries may emerge and old industries may consolidate. The dynamic nature of the U.S. economy suggests greater need for legislative oversight within a differentiated patent regime. Even if an industry or technology remains relatively stable, the innovation environment within it might change. For example, technological or scientific advances might open new possibilities for research and development within hidebound industries—but also increase expense and risk for those firms. Distinct patent rights among industries or technologies may lead to strategic behavior on behalf of patent applicants. For example, a computer program that controls a fuel injector within an automobile could possibly be identified as either an automobile-related or a computer-related invention. The legislative effort to enact sector-specific patent laws may provide an opportunity for politically savvy firms to exert more lobbying and political power, at the possible expense of less sophisticated firms.\nIn addition to these practical concerns, U.S. membership in the World Trade Organization (WTO) may restrict congressional ability to tailor the patent system to account for different industries and inventions, to the extent that compliance with WTO standards is desired. The Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS Agreement) is a WTO-administered treaty that stipulates minimum standards for many forms of intellectual property protection. Article 27, paragraph one of the TRIPS Agreement expressly provides that, with some exceptions, \"patents shall be available and patent rights enjoyable without discrimination as to the place of invention, the field of technology and whether products are imported or locally produced.\"\nAt the time it was drafted, the TRIPS Agreement standard of technological neutrality was arguably intended to provide for patent protection for a variety of inventions for which patents were previously unavailable in many countries. For example, certain jurisdictions did not allow patents to issue on pharmaceuticals and agricultural chemicals prior to joining the WTO. The wording of Article 27.1 appears to have broader implications than merely requiring WTO member states to grant patents on pharmaceuticals and other previously unpatentable inventions, however. Its principle of nondiscrimination seems broadly to require that all inventions in all fields of technology be treated identically—a reading that would block, for example, discriminating in favor of particular inventions as well as against them.\nArticle 27 expressly permits some limited exceptions to this concept of homogeneity. In particular, WTO members may exclude from patentability inventions whose commercial exploitation would violate the public order or morality. However, inventions may not be exempted from patentability merely because their use is illegal. In addition, diagnostic, therapeutic, and surgical methods may also be excluded from patentability. In addition, WTO member states may deny patents on \"plants and animals other than micro-organisms, and essentially biological processes for the production of plants or animals other than non-biological and microbiological processes.\" However, if a WTO member state opts to do so, it must protect plant varieties through an alternative specialized system, typically known as \"plant breeder's rights.\" In addition, the TRIPS Agreement allows for \"security exceptions\" that permit WTO members to take any action considered necessary for the protection of \"essential security interests.\"\nIn addition, Article 30 of the TRIPS Agreement allows for \"exceptions to rights conferred.\" The TRIPS Agreement stipulates that each WTO member state must provide patent proprietors with the right to exclude others from making, using, selling, offering to sell, and importing the patented invention. Article 30 then reads:\nMembers may provide limited exceptions to the exclusive rights conferred by a patent, provided that such exceptions do not unreasonably conflict with a normal exploitation of the patent and do not unreasonably prejudice the legitimate interests of the patent owner, taking account of the legitimate interests of third parties.\nArticle 30 appears to contemplate limited exceptions to the patent rights for such reasons as scientific experiments or use of a patented product for purposes of obtaining regulatory approval.\nAt first glance, Article 30 of the TRIPS Agreement might seem to provide WTO member states with the ability to provide technology-specific exceptions despite the wording of Article 27.1. However, one dispute settlement panel of the WTO has \"concluded ... that the anti-discrimination rule of Article 27.1 does apply to exceptions of the kind authorized by Article 30.\" Stated differently, the WTO has reasoned that even exceptions to a patent owner's exclusive rights must be technology neutral.\nThe WTO's conclusion that even exceptions to a patent holder's exclusive rights must operate in a uniform manner has attracted some critical commentary. On one hand, if an exception to a patent holder's exclusive rights must apply to all technologies and industries, it is less likely to be \"limited\" and therefore compatible with Article 27.1. On the other hand, the WTO reasoned that \"the TRIPS Agreement [required] governments to apply exceptions in a nondiscriminatory manner, in order to ensure that governments do not succumb to domestic pressures to limit exceptions to areas where right holders tend to be foreign producers.\"\nThe WTO dispute resolution panel in the Canada Pharmaceutical case further observed:\n[I]t is not true that Article 27 requires all Article 30 exceptions to be applied to all products. Article 27 prohibits only discrimination as to the place of invention, the field of technology, and whether products are imported or produced locally. Article 27 does not prohibit bona fide exceptions to deal with problems that may exist only in certain product areas.\nThe distinction drawn by the WTO panel between the terms \"field of technology\" and \"certain product areas\" arguably does not shimmer with clarity. The panel's opinion obtains no further guidance as to the meaning of \"certain product areas.\" However, some commentators have suggested that patent statutes may permissibly draw distinctions based on narrow categories of goods or services, in contrast to broader fields of technological endeavor. For example, Wesley A. Cann, Jr., an emeritus member of the University of Connecticut business school faculty, has asserted that \"[e]ven if Article 30 would not allow a limited exception to be directed at the entire pharmaceutical industry (a position that is still open to substantial doubt), it can be argued that an exception could be made for those particular pharmaceuticals aimed at the prevention and treatment of HIV/AIDS.\"\nAs a result, the membership of the United States within the WTO provides a possible constraint against tailoring the patent system to meet the perceived needs of specific industries. To the extent that WTO compliance is desired, the U.S. patent system must ordinarily act in a homogenous manner with respect to particular fields of technology. The TRIPS Agreement does permit some specific exceptions, however, for such subject matter as diagnostic, therapeutic, and surgical methods; matters of national security; and, as explained by the Canada Pharmaceutical WTO panel, \"certain product areas.\"", "The patent system involves numerous parameters, including the requirements to obtain a patent, the scope of proprietary rights, and the term of protection. In theory these attributes could be tailored to meet the needs of different sectors. Defining industry-specific or technology-specific patent doctrines presents some practical difficulties, however, and may also give rise to incompatibilities with the WTO TRIPS Agreement.\nShould Congress consider current circumstances with respect to the patent system to be appropriate, then no action need be taken. However, should Congress believe that different sectors possess distinctive needs with respect to the patent system, a number of options exist. As noted, the TRIPS Agreement provides for a number of limited exceptions to the general rule of technological neutrality. U.S. legislation could simply track the exceptions identified by the provisions of the TRIPS Agreement, with particular reference to their interpretation by WTO dispute resolution panels.\nCongress could also potentially draw distinctions among grounds not identified by Article 27.1 of the TRIPS Agreement—namely, the place of invention, the field of technology, and whether products are imported or produced locally. For example, the Leahy-Smith America Invents Act (AIA) established an infringement defense based upon the prior commercial use of the patented invention by the accused infringer. The AIA stipulated that this defense was unavailable if the patented invention was made by an institution of higher education, however. This \"university exception\" appears to comply with the TRIPS Agreement because it draws a distinction based upon the identity of the inventor, rather than on a ground identified in Article 27.1.\nAnother option is the establishment of additional intellectual property rights that complement patents. For example, Congress has established so-called \"regulatory exclusivities,\" a term that refers to a period of time during which a regulated product is afforded protection from competing applications for marketing approval. Most notably, the food and drug laws establish a number of regulatory exclusivities that apply to pharmaceuticals and are administered by the Food and Drug Administration. In contrast to patents, regulatory exclusivities are not subject to extensive regulation by the TRIPS Agreement. As a result, at least with respect to regulated industries, regulatory exclusivities may provide a more flexible instrument for legislative tailoring of intellectual property rights.\nWhether legal doctrines should be expressed as discrete rules or more generally phrased standards is a long-standing debate within the field of jurisprudence. Placed within the context of congressional consideration of our intellectual property laws, the debate suggests that distinct rules for different sectors form one possibility for patent reform. Yet Congress may also craft broader principles that may be appropriately applied across the diverse industries and technologies to which the patent system pertains. Determining whether a rule or a standard provides the most appropriate vehicle for a particular reform to our patent laws remains a matter of legislative judgment." ], "depth": [ 0, 1, 1, 1, 1, 1, 1 ], "alignment": [ "h0_title h2_title h1_title h3_title", "h0_full h1_full", "", "h1_full", "", "h3_full h2_full", "h3_full h1_full" ] }
{ "question": [ "How has congressional interest in the patent system been demonstrated?", "How do AIA provisions apply to different types of inventions?", "What is AIA's stance on equality of provisions applied to inventions?", "Why has there been inquiry into whether or not the patent system operates best as a uniform system?", "How do technologies and industrial sectors differ?", "How could the patent system be adjusted to meet the needs of different sectors?", "How do observers view sector-specific patent principles?", "Why do some observers believe sector-specific patent principles are infeasible or unwise?", "How might the WTO affect sector-specific patent principles?", "How does the TRIPS Agreement affect WTO member states?", "Why might action not be necessary?", "How else could Congress legislate?", "How does the TRIPS Agreement deal with discrimination regarding different fields?", "How else could Congress approach regulation?" ], "summary": [ "Congressional interest in the patent system has been demonstrated by the enactment of the Leahy-Smith America Invents Act (AIA) in the 112th Congress.", "Most of the provisions of the AIA apply to any type of patented invention, whether it consists of a chemical compound, mechanical device, electrical circuit, or other technology. However, other AIA provisions are specific to particular types of inventions, including business methods, tax strategies, and human organisms.", "The AIA reflects the principle that, for the most part, patentable inventions are generally subject to the same statutory provisions. However, a number of exceptions exist to this concept of technological neutrality.", "This blended architecture has for many years prompted inquiry into whether the patent system operates best as a uniform system that applies neutrally to all inventions, or whether it could or should be tailored to meet the specific needs of different industries.", "Technologies and industrial sectors arguably differ in ways salient to the patent system. Among these distinctions are the costs and risks of research and development, the availability of trade secret protection as an effective alternative to patenting, the number of patents that cover a particular product, and the patterns of patent acquisition and enforcement of firms within that sector.", "The patent system involves a number of parameters that could potentially be adjusted to meet the needs of individual sectors, including the speed with which applications are reviewed, the scope of exclusive rights afforded by a patent, and the term of the patent.", "While some observers suggest the desirability of sector-specific patent principles, others believe them to be infeasible and unwise.", "They observe that legislative efforts to define particular industries may prove difficult, that attorneys may sometimes be able to draft patents artfully so as to fall within a favored category, and that U.S. industry is dynamic and resistive to a static statutory definition.", "In addition, U.S. membership within the World Trade Organization (WTO) may limit the ability to tailor the patent system to account for different industries and inventions, to the extent that compliance with WTO standards is desired.", "The WTO-administered Agreement on Trade-Related Aspects of Intellectual Property, or TRIPS Agreement, in part requires WTO member states to make patent rights available without discrimination as to the field of technology. The TRIPS Agreement admits some exceptions exist to this principle of technological neutrality, however.", "Should Congress believe current circumstances to be appropriate, then no action need be taken.", "To the degree WTO compliance is desired, Congress could also legislate along the lines permitted by the TRIPS Agreement.", "Notably, although the TRIPS Agreement generally disallows discrimination with respect to technological fields, it permits distinctions on other grounds.", "Congress could also make use of regulatory exclusivities and other complementary intellectual property rights that the TRIPS Agreement regulates less heavily." ], "parent_pair_index": [ -1, -1, 1, -1, 0, 0, -1, 0, 0, 2, -1, -1, 1, -1 ], "summary_paragraph_index": [ 0, 0, 0, 1, 1, 1, 2, 2, 2, 2, 3, 3, 3, 3 ] }
GAO_GAO-13-263
{ "title": [ "Background", "AMP Process Partially Aligns with Several Leading Practices but Does Not Provide Needed Information to Decision Makers", "AMP Process Partially Aligns with Several Leading Practices in Capital Planning", "Current 5-Year Plan Lacks Transparency, and $1- Billion Cost Estimate Is Not Comprehensive", "Most Courthouse Projects Were Not Evaluated under AMP Process and Do Not Meet AMP Criterion for New Construction", "Judiciary Has Not Evaluated Most 5-Year Plan Projects under the AMP Process", "Most Projects Do Not Qualify for a New Courthouse under the AMP Courtroom Criterion", "Conclusion", "Recommendations", "Agency Comments and Our Evaluation", "Appendix I: Objectives, Scope and Methodology", "Appendix II: Judiciary’s Courtroom-Sharing Policy for New Construction", "Senior District Judges", "Appendix III: Judiciary’s Asset-Management Planning Process Urgency-Evaluation Matrix for New Construction Projects", "Appendix IV: Judiciary’s New Courthouse Projects for Fiscal Years 2012 to 2016 and Fiscal Years 2014 to 2018", "New asset-management planning process", "Appendix V: Comments from the Federal Judiciary", "GAO Comments", "Appendix VI: GAO Contact and Staff Acknowledgments", "GAO Contact", "Staff Acknowledgments" ], "paragraphs": [ "The U.S. district courts are the trial courts of the federal court system. There are 94 federal judicial districts—at least one for each state, the District of Columbia, and four U.S. territories—organized into 12 regional circuits. Each circuit has a court of appeals whose jurisdiction includes appeals from the district and bankruptcy courts located within the circuit, as well as appeals from decisions of federal administrative agencies.The Administrative Office of the United States Courts (AOUSC) within the judicial branch carries out a wide range of services for the federal judiciary, including capital-planning. The Judicial Conference of the United States (Judicial Conference) supervises the Director of the AOUSC and is the principal policy-making body for the federal judiciary and recommends national policies and legislation on all aspects of federal judicial administration.\nFederal courthouses can house a variety of appellate, district, senior district, magistrate, or bankruptcy judges as well as other court and non- court-related tenants. Prior to 2008, the judiciary did not require judges to share courtrooms, except in situations where the courthouse was out of space. courtroom-sharing (1) between senior district judges and (2) between magistrate judges. In 2011, the Judicial Conference adopted a courtroom- sharing policy for bankruptcy judges. These policies apply to new courthouse projects and existing courthouses when there is a new space need that cannot otherwise be accommodated. (See app. II for more information on judiciary’s courtroom-sharing policies.) The judiciary has also been studying the feasibility of an appropriate sharing policy for district judges in courthouses with more than 10 district judges, but has not yet finalized a policy and could not tell us when or if it expected to do so. Our 2010 report examined judiciary data on courtroom usage and found that there are additional opportunities for significant cost savings through courtroom-sharing, particularly for district judges.\nAppellate judges, however, have always shared courtrooms because they sit in panels of three or more. operational deficiencies in the existing courthouse, and (4) the current number of judges who do not have a permanent courtroom and chambers in the existing courthouse, plus the projected number of judges over the 10-year planning period who will not have a courtroom and chambers. From fiscal years 2005 to 2006, as a cost containment initiative, the judiciary imposed a moratorium on new courthouse construction while it reevaluated its capital-planning process.\nIn 2008, the judiciary began using a new capital-planning process, called the Asset Management Planning (AMP) process, to assess, identify, and rank its space needs. According to judiciary officials, the AMP process addresses concerns about growing costs and incorporates best practices related to capital-planning. The AMP process includes several steps beginning with the completion of a district-wide Long Range Facilities Plan (LFRP). Collectively, the AMP process: documents courthouse space conditions and district space needs develops housing strategies that can include construction of a new based, in part, on the judiciary’s AMP process rules and building standards as specified in the U.S. Courts Design Guide; identifies space needs on a building-specific and citywide basis; and courthouse or annex and renovation projects.\nThe AMP process results in an urgency score for construction or renovation based primarily on the current and future need for courtrooms and chambers and the condition assessment of the existing building (see app. III). The AMP process establishes criteria for qualifying for new courthouse construction, such as requiring that an existing courthouse have a chamber for each judge and needing two or more additional courtrooms. Judiciary officials told us that unlike the previous capital- planning process, a new courthouse could no longer be justified as part of the AMP process based solely on security or operational deficiencies. The judiciary has chosen to improve security within existing courthouse rather than replace them with new courthouses. After the Judicial Conference identifies courthouse projects, GSA conducts feasibility studies to assess alternatives for meeting the judiciary’s space needs and recommends a preferred alternative. The judiciary adopts the GSA recommended alternative, which may differ from the alternative recommended in the AMP process. For example, a project may not qualify for new courthouse construction under the AMP process, but GSA may determine through its feasibility study that new construction is the most cost-efficient, viable solution. See figure 1 for the judiciary’s current process for selecting and approving new courthouse construction projects.\nPart of the judiciary’s capital-planning—both the previous and current processes—has been to periodically communicate its facility decisions for construction projects via a document known as the Five Year Courthouse Project Plan (5-year plan). The 5-year plan is a one-page document that lists proposed projects by fiscal year and the estimated costs for various project phases (site acquisition, design, or construction) as approved by the Judicial Conference. The judiciary uses the plan to communicate its most urgent projects to Congress and other decision makers. Previously, we found that judiciary’s 5-year plans did not reflect the most urgently needed projects and lacked key information about the projects selected— such as a justification for the project’s priority level.\nGSA reviews its courthouse studies with the judiciary and forwards approved projects for new courthouses to the Office of Management and Budget (OMB) for review. If approved by OMB, GSA then submits requests to congressional authorizing committees for new courthouse projects in the form of detailed descriptions, or prospectuses, authorizing acquisition of a building site, building design, and construction. Following congressional authorization and the appropriation of funds for the projects, GSA manages the site, design, and construction phases. After occupancy, GSA charges federal tenants, such as the judiciary, rent for the space they occupy and for their respective share of common areas, including mechanical spaces. In fiscal year 2012, the judiciary’s rent payments to GSA totaled over $1 billion for approximately 42.4 million square feet of space in 779 buildings that include 446 federal courthouses.\nBefore Congress makes an appropriation for a proposed project, GSA submits detailed project descriptions called prospectuses to the Senate Committee on Environment and Public Works and the House Committee on Transportation and Infrastructure, for authorization by these committees when the proposed construction, alteration, or acquisition of a building to be used as a public building exceeds a specified dollar threshold. For purposes of this report, we refer to these committees as “authorizing committees” when discussing the submission of the prospectuses and providing additional information relating to prospectuses to these committees. Furthermore, for purposes of this report, we refer to approval of these projects by these committees as “congressional authorization.” See 40 U.S.C. § 3307. evaluating all of the courthouses until October 2015 and would take another 18 to 24 months to complete the LRFPs, dependent upon the availability of funding.", "", "The AMP process, which the judiciary has applied to about 67 percent of its courthouses, represents progress by the judiciary in aligning its capital- planning process with leading capital-planning practices, but the document the judiciary uses to request courthouse construction projects lacks transparency and key information. We have previously reported that prudent capital-planning can help agencies maximize limited resources and keep capital acquisitions on budget, on schedule, and aligned with mission needs and goals. Figure 2 summarizes leading capital-planning practices and our assessment of the extent to which the AMP process aligns with those practices. For our analysis of judiciary’s planning practices, we focused on the judiciary’s implementation of the concepts that underlie the planning phase of OMB and GAO guidance, including linking capital-planning to an agency’s strategic goals and objectives and developing a long-term capital investment plan.\nSeveral aspects of the AMP process partially align with leading capital- planning practices, but none fully align and the 5-year plan only aligns to a limited extent—which we discuss further in this report. Here are some examples to illustrate partial alignment:\nStrategic Linkage. The judiciary’s strategic plan links to its management of capital assets, but the AMP process does not link to the strategic plan. For example, the AMP process documents we reviewed did not explain how the process helps achieve the goals and objectives in the judiciary’s current strategic plan, which are organized around seven issues: providing justice; the effective and efficient management of public resources; the judiciary workforce of the future; harnessing technology’s potential; enhancing access to the judicial process; the judiciary’s relationships with the other branches of government; and enhancing public understanding, trust, and confidence. However, after our review, a judiciary official told us that the Long Range Facility Plans (LRFP) currently under development would include a reference to the strategic plan.\nNeeds Assessment and Gap Identification. The AMP process has improved judiciary’s needs assessment and gap analysis by establishing a comprehensive, nationwide 328-factor study for every courthouse, whereas the previous process was not as comprehensive and only assessed courthouses when requested by a local judicial district. The AMP process evaluates the degree to which existing facilities support court operations by applying space functionality standards, security, and building condition factors. However, cost estimates supporting the judiciary’s needs are incomplete, as discussed later in this report.\nAlternatives Evaluation. The AMP process establishes a review and approval framework criteria for justifying new construction, whereas none existed in the previous process. The AMP process evaluates some alternatives, such as renovating existing courthouses to meet needs, but it is unclear if the judiciary considered other options, such as courtroom-sharing in the existing courthouse. Assessing a wide- range of alternatives would help the judiciary ensure that it evaluated other, less costly, approaches to bridging the performance gap before recommending new construction.\nReview and Approval Framework with Established Criteria for Selecting Capital Investments. The AMP process includes a review and approval framework with criteria, such as courthouses needing two or more courtrooms to qualify for a new courthouse project. However, courtroom deficits are not apparent in most projects reported in the 5-year plan.\nLong-Term Capital Investment Plan. Judiciary officials with whom we spoke agreed that the 5-year plan is not a long-term capital investment plan, but it is what the judiciary uses to document its request for new courthouse construction to decision makers. The one- page 5-year plan document does not reflect the depth of the AMP process, describe all other projects that the judiciary considered, or indicate how the projects chosen will help fulfill the judiciary’s mission, goals, and objectives.\nTwo courthouse projects illustrate how the AMP process has changed the way the judiciary evaluates its need for new courthouses. Specifically, two projects listed on a previous 5-year plan (covering fiscal years 2012 through 2016) were re-evaluated under AMP—San Jose, California, and Greenbelt, Maryland. Both had ranked among the top 15 most urgent projects nationwide under the previous capital-planning process, and as such, the judiciary prioritized them for new construction in 2010. However, after the judiciary evaluated the San Jose and Greenbelt projects under the AMP process, their nationwide rankings fell to 117 and 139, respectively. Judiciary officials explained that this drop was largely because of the completion of additional AMP assessments, coupled with the reduced space needs because of courtroom-sharing. Following the change in rankings, GSA and the judiciary determined that judiciary’s needs could alternatively be addressed through repair and alteration projects that reconfigure existing space. The judiciary added that its decision saved taxpayer money. As a result, at the request of the judiciary, the Judicial Conference of the United States removed the two projects from the 5-year plan.", "The judiciary’s current 5-year plan—the end product of the judiciary’s capital-planning process—does not align with leading practices for a long- term capital investment plan in a number of ways. The plan does not provide decision makers with detailed information about proposed construction projects or how they were selected. The one-page document lists each project by city name, year, and dollar estimate for the next phase of the project’s development as shown in figure 3. The one-page plan also provides the project’s urgency score from the judiciary’s capital- planning process. However, the document does not specify whether the scores were developed under the old process or the AMP process. Unlike a long-term capital investment plan—usually the end product under leading capital-planning practices—the 5-year plan lacks complete cost and funding information, linkage to the judiciary’s strategic plan, and information on why projects were selected. Specifically, while courthouses provide facilities for the judiciary to accomplish goals set out in its strategic plan, such as enhancing access to the judicial process, the 5-year plan contains no mention of the strategic plan. In addition, the 5- year plan does not include a discussion of the AMP process and criteria; a schedule of when the AMP process will be completed; and details on the alternatives considered during the process, such as whether the judiciary’s courtroom-sharing policy was applied prior to requesting a new courthouse project.\nThe 5-year plan is not transparent and does not provide key funding information, such as total estimated project costs. Specifically, it lists about $1.1 billion in estimated costs, which are the funds needed for that specific 5-year period. However, these costs only include part of the project phases. The estimated cost of all project phases—site acquisition, building design, and construction—comes to $1.6 billion in 2013 dollars. In addition, while no longer included in the 5-year plan, the judiciary estimated that it would need to pay GSA $87 million annually in rent, or $1.6 billion over the next 20 years, to occupy these courthouses if constructed. Table 1 describes our analysis of judiciary’s data for the estimated cost of all phases and projected rent costs that total almost $3.2 billion. However, even though the $3.2-billion estimate provides a more complete presentation of the project costs, that estimate could change based on GSA’s redesign of projects because of changes in the judiciary’s needs. In addition, the $3.2-billion estimate does not include life-cycle costs, such as furniture and GSA disposal of existing facilities, which would also have to be included for the cost estimate to be comprehensive. GAO and OMB have established that estimates of life-cycle costs are necessary for accurate capital-planning.\nIn addition, the 5-year plan does not provide the amount of funding already provided for all of the projects. Since fiscal year 1995, Congress has appropriated about $177 million of the estimated $1.6 billion needed for 10 of these projects’ phases, mostly for site acquisitions and designs. None of the projects has begun construction, and only the Mobile project has received any construction funding (see fig. 4).\nWe found that the 5-year plan does not align with the leading practice of considering the risks involved in acquiring new courthouses. Specifically, the plan does not inform stakeholders that 11 of the 12 projects require further design before construction can begin. According to GSA officials, the agency has not received funding for the design of two projects (Chattanooga and Des Moines). Of the remaining 10 projects that have design funding, 1 is in the design process and 9 are on hold. According to GSA officials, some of the projects on hold must be re-designed to accommodate policy and other requirements relating to, for example, changes such as courtroom-sharing and energy management.example, the design of the Savannah courthouse project was completed in 1998 and now needs extensive re-design to accommodate changes mandated by policy shifts, including improved security and a reduction in the number of courtrooms needed. GSA officials said that only the design of the Nashville project—though oversized by one floor—is likely to remain largely intact because it would be more cost-effective to rent the additional space to other tenants than to completely re-design the project.\nIn February 2012, judiciary submitted its 5-year plan to Congress and other decision makers. As a result, there is a risk that funding decisions could be made without complete and accurate information. Congress would benefit from having information based upon a long-term capital investment plan for several reasons. Specifically, transparency about future priorities could allow decision makers to weigh current-year budget decisions within the context of projects’ expected future costs. In the case of the judiciary, which has identified a number of future courthouse projects estimated to cost several billion dollars, full transparency regarding these future priorities may spur discussion and debate about actions Congress can take to address them. Additionally, transparency regarding future capital costs would put the judiciary’s priorities in context with federal spending. There is widespread agreement that the federal government faces formidable near- and long-term fiscal challenges. GAO has long stated that more transparent information and better incentives for budget decisions, involving both existing and proposed programs, could facilitate consideration of competing demands and help put U.S. finances on a more sustainable footing.", "", "The judiciary has not applied the AMP process to 10 of the 12 construction projects on the current 5-year plan dated September 2012. These 10 projects were evaluated under the judiciary’s prior capital- planning process and approved based on their urgency levels as determined under that process. Judiciary officials said that they did not want to delay the projects or force them to undergo a second capital- planning process review because the judiciary had already approved the projects. Only 2 projects on the current 5-year plan (2014 to 2018) were assessed under the AMP process—Chattanooga, Tennessee, and Des Moines, Iowa. Judiciary officials said these projects were added to the 5- year plan in September 2010 because they had the highest priority rankings of the projects that had undergone an AMP review at that time. Judiciary officials explained that these projects also had GSA feasibility studies that recommended new construction. However, the Chattanooga and Des Moines projects have not retained their top rankings as the judiciary has continued to apply the AMP process to additional courthouses. Specifically, judiciary documents show that more than a dozen other projects not included on the 5-year plan now rank above the Chattanooga and Des Moines projects, six of which recommend new construction. For example, we visited the federal courthouse in Macon, Georgia, which now ranks higher than either the Chattanooga or Des Moines projects. The Macon courthouse suffers from numerous operational and security issues typical of historic courthouses, but it is not included on the 5-year plan. As we previously noted, the judiciary also applied the AMP process to 2 other projects that were included on an older 5-year plan (2012 to 2016)—San Jose and Greenbelt—and subsequently removed them after the projects received substantially lower priority rankings, as shown in appendix IV.\nThe change in the rankings of the 4 projects calls into question the extent to which the projects remaining on the 5-year plan represent the judiciary’s most urgent projects and whether proceeding with these projects while hundreds of AMP reviews remain to be done represents the most fiscally responsible path. We recognize that conducting AMP reviews of the 10 projects on the 5-year plan would involve additional costs; however, not conducting AMP reviews on these projects could involve spending billions of dollars over the next 20 years on courthouses that may not be the most urgent projects. While the AMP process only partially aligns with leading practices in capital-planning, it is a significant improvement over the capital-planning process the judiciary used to choose 10 of the 12 projects on the 5-year plan. Assessing the 10 projects with the AMP process could help ensure that projects on the 5- year plan do, in fact, represent the judiciary’s most urgent projects.", "found that 5 of the projects on the list currently need additional courtrooms, and of those, only the Charlotte and Greenville projects would qualify under the AMP criterion because both need three additional courtrooms (see table 2). We did not assess if the shortage of courtrooms alone is the most appropriate criterion for requesting new construction from GSA, but the establishment of a clear criterion adds an element of transparency that was lacking in the judiciary’s previous capital-planning process.\nWe visited two courthouses on the current 5-year plan that were selected as new construction projects under the prior capital-planning process— Savannah and Anniston built in 1899 and 1906, respectively. These historic courthouses qualified for new construction under the previous process because of space needs and security and operational deficiencies because of their age, condition and building configuration. According to judiciary and GSA officials, neither courthouse meets Design Guide standards for (1) the secure circulation of prisoners, the public, and courthouse staff and (2) the adjacency of courtrooms and judge’s chambers. However, neither of these courthouses would qualify for new construction under the AMP criterion as both have a sufficient number of existing courtrooms for all the judges. Specifically, the Savannah and Anniston courthouses each have enough courtrooms for all assigned judges to have exclusive access to their own courtroom. Savannah currently houses one district judge, one senior district judge, one magistrate judge, and one bankruptcy judge. Figure 5 shows two courtrooms in the Anniston courthouse that currently house one senior district judge and one bankruptcy judge.\nAs discussed, the judiciary’s courtroom-sharing policies for senior district, magistrate, and bankruptcy judges allow it to reduce the scope of its courthouse projects and contributed to the cancelation of other courthouse projects. The judiciary has also been studying a courtroom- sharing policy for district judges but has not yet finalized a policy and could not provide a date when and if it planned to do so. Our 2010 report based on judiciary data on courtroom scheduling and use showed that judges of all kinds, including district judges, could share courtrooms without delaying any scheduled events and recommended that the judiciary expand courtroom-sharing to more fully reflect the actual scheduling and use of district courtrooms. Specifically, judiciary data showed that three district judges could share two courtrooms or a district judge and a senior district judge could share one courtroom. If district judges shared courtrooms in this way, the judiciary would have a sufficient number of courtrooms in all of the 12 proposed projects in the 5- year plan, based on the AMP criterion.\nIn responding to our recommendation, the judiciary stated that our 2010 report oversimplified the complex task of courtroom-sharing by assuming that judicial proceedings were more certain and predicable than they are. We addressed the uncertainty of courtroom scheduling by (1) accounting for unused scheduled time as if the courtroom were actually used and (2) providing additional unscheduled time in courtrooms. Since potential courtroom-sharing among district judges could reduce the need for additional courtroom space and the AMP criterion for qualifying for new courthouse construction, it is important for the judiciary to finalize its position and policy on courtroom-sharing, as we previously recommended.", "With the development and implementation of the AMP process, the judiciary’s capital-planning efforts partially align with several leading practices. The AMP process has the potential to provide a wealth of information on the judiciary’s existing facilities and assess and rank the need for new construction based on measurable criteria. However, the 5- year plan submitted for approval of several billion-dollars worth of projects—a one-page list of projects with limited and incomplete information—does not support the judiciary’s request for courthouse construction projects. For example, the AMP process introduces a criterion for when new construction is warranted—when two or more courtrooms are needed—but the 5-year plan does not show how this criterion applies to the recommended projects. Furthermore, the 5-year plan has underestimated total costs of these projects by about $2 billion because it does not include all project phases and because the judiciary no longer includes its rent costs on the 5-year plan. Additionally, construction has not begun on any of the 12 courthouse projects on the 5- year plan and most need to be redesigned to meet current standards. Given the fiscal environment, the judiciary and the Congress would benefit from more detailed information about courthouse projects and their estimated costs than judiciary currently provides. Such information would enable judiciary and Congress to better evaluate the full range of real property priorities over the next few years and, should fiscal constraints so dictate, identify which should take precedence over the others. In short, greater transparency would allow for more informed decision making among competing priorities.\nCurrent fiscal challenges also require that the federal government focus on essential projects. While the judiciary has made significant strides in improving its capital-planning process, most of the 12 projects listed on the 5-year plan are products of its former process. It is possible that some of the 12 projects do not reflect the most urgent capital investment needs of the judiciary under its current criteria. Two projects on a previous 5- year plan that were assessed under the AMP process were removed from the list and now rank well down on the judiciary’s list of priorities, but the judiciary has not applied the AMP process to 10 courthouses on the current 5-year plan dated September 2012. Furthermore, 10 of the 12 projects on the current 5-year plan do not require a sufficient number of courtrooms to qualify for new construction under the AMP courtroom criterion. In addition, there is no evidence that the judiciary considered how it could meet the need for courtrooms without new construction if district judges shared courtrooms. Although there would be some incremental costs involved with an additional 10 AMP reviews, those costs appear justified given the billions involved in moving forward with the construction of those 10 courthouses. Similar to the 2-year moratorium the judiciary placed on courthouse construction while it developed the AMP process, it is not too late to apply the AMP process to the 5-year plan projects and possibly save taxpayers from funding construction of projects that might not represent the judiciary’s highest priorities under current criteria. It is critical that the judiciary accurately determine its most urgent projects because of the taxpayer cost and the years of work involved in designing and constructing new courthouses.", "To further improve the judiciary’s capital-planning process, enhance transparency of that process, and allow for more informed decision making related to the federal judiciary’s real property priorities, we recommend that the Director of the Administrative Office of the U.S. Courts, on behalf of the Judicial Conference of the United States, take the following two actions: 1. Better align the AMP process with leading practices for capital- planning. This should include linking the AMP process to the judiciary’s strategic plan and developing and sharing with decision makers a long-term capital investment plan. In the meantime, future 5- year plans should provide comprehensive information on new courthouse projects, including: a) a summary of why each project qualifies for new construction and is more urgent than other projects, including information about how the AMP process and other judiciary criteria for new courthouse construction were applied to the project; b) complete cost estimates of each project; and c) the alternatives to a new project that were considered, including courtroom-sharing, and why alternatives were deemed insufficient. 2. Impose a moratorium on projects on the current 5-year plan until AMP evaluations are completed for them and then request feasibility studies for courthouse projects with the highest urgency scores that qualify for new construction under the AMP process.", "We provided copies of a draft of this report to GSA and AOUSC for review and comment. GSA and AOUSC provided technical comments that we incorporated as appropriate. Additionally, AOUSC provided written comments in which it agreed with our recommendation to link the AMP process to the judiciary’s strategic plan. However, AOUSC raised a number of concerns that the subpoints related to our first recommendation on improving capital planning would duplicate other judiciary or GSA documents. Furthermore, AOUSC disagreed with our recommendation to place a moratorium on the projects in the 5-year plan until it could perform AMP evaluations of those projects because it would take years and not change the result. We continue to believe that our recommendation is sound because the projects included on the 5-year plan were evaluated under the judiciary’s previous capital planning process and evidence suggested they no longer represent the judiciary’s highest priorities. Specifically, two projects on a previous 5-year plan that were assessed under the AMP process were removed from the list and now rank well down the judiciary’s list of priorities. In addition, 10 of the 12 projects on the current 5-year plan do not qualify for new construction under the AMP process. In response to AOUSC’s comments, we made some technical clarifications where noted, none of which materially affected our findings, conclusions, or recommendations. AOUSC’s complete comments are contained in appendix V, along with our response to specific issues raised.\nIn commenting on a draft of our report, AOUSC said it would take steps to address our first recommendation to link the AMP process to the judiciary’s strategic plan, but cited concerns about our presentation of information, accuracy of data, and the subpoints of the first recommendation. Specifically, AOUSC disputed our characterization of the judiciary’s role in the capital-planning process for new courthouses and the information provided to Congress to justify new courthouses. According to AOUSC, Congress receives extensive, detailed information on new courthouse projects from GSA, and our recommendation for the judiciary to provide more comprehensive information on courthouse projects in 5-year plans would duplicate the GSA’s work. AOUSC also disputed our presentation of the AMP process, stating that GAO did not consider all documents when making our conclusions. AOUSC disagreed with our recommendation for a moratorium on all projects currently on the 5-year plan because completing AMP evaluations for those projects would unnecessarily delay the projects and exacerbate existing security and structural issues with the existing courthouses. In AOUSC’s view, AMP evaluations for these courthouses would take years and not alter the justification for new construction projects. AOUSC further disputed the data we used to support our conclusions about the projects on the 5-year plan and our explanation of the data’s source. AOUSC also questioned our characterization of the judiciary’s actions in response to recommendations in a prior GAO report.\nWe believe our findings, analysis, conclusions, and recommendations are well supported. GAO adheres to generally accepted government auditing standards, which ensure the accuracy and relevance of the facts within this report. These standards include a layered approach to fact validation that includes supervisory review of all work papers, independent verification of the facts within the report, and the judiciary’s review of the facts prior to our release of the draft report for agency comment. To the extent that the judiciary is questioning any facts, the judiciary had multiple opportunities provide supporting documentation to substantiate its view. We believe that our description of the roles and responsibilities of the judiciary and the GSA in the capital-planning process for new courthouses is correct and appropriate. In reaching our conclusions about the information provided to Congress, we relied on documents we received from the judiciary and GSA. We continue to believe that by implementing our recommendation about providing additional information to Congress, the judiciary would improve the completeness and transparency of the information that Congress needs to justify and authorize funding of new courthouse projects. We will review AOUSC’s steps, once finalized, to address our recommendation that the AMP process be linked to the judiciary’s strategic plan. We continue to believe that any steps that AOUSC takes should be aligned with leading practices, including presentation of total project cost estimates and alternatives considered, such as greater courtroom sharing in existing courthouses.\nWith regard to our recommended moratorium on projects on the current 5-year plan, we note that the AMP process represents progress by the judiciary in better aligning its capital-planning process with leading practices. Consequently, we believe that it would be worthwhile to use this improved process to ensure that all courthouse construction proposals remain the judiciary’s top priorities and qualify for new construction under the AMP process. The San Jose and Greenbelt projects were approved as among the highest priorities for new construction under the old process but, after being evaluated under the AMP process, now rank far lower on the judiciary’s list of priorities—117th and 139th, respectively. We also noted that regardless of whether a project is on the 5-year plan, GSA is responsible for ensuring that courthouses are adequately maintained. We relied on data provided by the judiciary and the GSA to support our analysis of whether the projects on the 5-year plan would qualify under the AMP process, and stand by our conclusions. We used the most current and complete data provided by the judiciary to evaluate the cost of these projects. We will review information provided by the judiciary and determine whether to close the recommendation from our 2010 report at the appropriate time. In response to AOUSC’s comments, we clarified the report and added detail to our methodology in appendix I as appropriate.\nAs agreed with your office, unless you publicly announce the contents of this report earlier, we plan no further distribution until 30 days from the report date. At that time, we will send copies of this report to the appropriate congressional committees, Director of the Administrative Office of the U.S. Courts, the Administrator of GSA and other interested parties. In addition, the report will be available at no charge on GAO’s website at http://www.gao.gov.\nIf you or your staffs have any questions on this report, please contact me at (202) 512-2834 or [email protected]. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. Contact information and key contributors to the report are listed in appendix VI.", "This report addresses the following objectives:\nTo what extent does the judiciary’s capital-planning process align with leading practices and provide the information needed for informed decision making?\nTo what extent were the courthouse projects recommended for funding in fiscal years 2014 to 2018 assessed under the judiciary’s current capital-planning process?\nTo evaluate the judiciary’s capital-planning process, we collected information on leading capital-planning practices from the Office of Management and Budget’s (OMB) Capital Programming Guide and GAO’s Executive Guide and compared this information with the AMP process contained in the judiciary’s Long Range Facility Plans, Facility Benefit Assessments, Citywide Benefit Assessments, Urgency Evaluations, 5-year plans and Strategic Plan. We did not review the appropriateness of criteria used by judiciary in its AMP process. We reviewed documentation on the status of courthouse construction projects and information about other federal buildings occupied by the judiciary. We reviewed GSA data on actual costs of construction and tenant improvements at two courthouse projects (Las Cruces, NM and Ft. Pierce, FL) one completed in 2010 and one completed in 2011; and GSA and judiciary estimated costs of construction for the courthouse projects on the most recent 5-year plan, covering fiscal years 2014 to 2018. To determine if life-cycle cost estimates were provided in the 5-year plan, we assessed the judiciary data against GAO’s Cost Estimating and Assessment Guide. To determine the current dollar value of the judiciary’s estimate of courthouse projects’ rents, we calculated the present value of the estimated project cost based upon averages of monthly indexes from U.S. Department of Labor, Bureau of Labor Statistics, and rent based upon 20 year OMB published discount rate for analyses. In addition, we interviewed judiciary officials on the AMP process and its alignment with leading capital-planning practices. To analyze judiciary’s capital-planning process, we reviewed our previous reports on capital-planning across the federal government, including the efforts by the judiciary and the Department of Veterans Affairscommunicate its urgent housing needs to Congress.\nTo assess recent courthouse projects recommended for funding under the judiciary’s current capital-planning process, we reviewed the judiciary’s documents detailing the projects recommended for funding for fiscal years 2009 through 2018, called 5-year plans, and other documents on: congressional authorizations and funding appropriations for courthouse projects; judiciary information on courts and courthouses; and GSA information on federal buildings, existing and planned federal courthouses, courthouse design, and federal historic property. We interviewed judiciary and GSA officials in Washington, D.C., and federal courthouses we selected in Anniston, AL; Macon, GA; and Savannah, GA. To observe existing courthouses, we selected Anniston and Savannah because they were evaluated under judiciary’s old capital- planning process and are on the most recent 5-year plan, covering fiscal years 2014 to 2018. We selected Macon because it was highly ranked under the judiciary’s new capital-planning process and is in close proximity to Anniston and Savannah. While our observations cannot be generalized to all federal courthouses, they provide keen insights into physical conditions at old historic courthouses. We reviewed documentation provided by the judiciary on strategic planning, capital- planning, existing courthouse evaluations, the rating and ranking of existing courthouse deficiencies, existing and future judgeships, and courtroom-sharing by judges. To determine the extent that courthouse projects on the 5-year plan reflect future judges needed and courtroom- sharing, we compared the judiciary’s planned occupancy information to the judiciary’s own guidance, our previous work on judiciary’s courtroom- sharing, and a recently proposed bill from the 112th Congress that would have required GSA to design courthouses with more courtroom-sharing.\nWe determined the number of courtrooms in the existing courthouses and compared them to the number of courtrooms needed in the new courthouses using the judiciary’s courtroom-sharing policy. We also applied judiciary’s courtroom-sharing policy for new courthouses to existing courthouses. We reviewed documentation provided by GSA on the status of courthouse construction; the status of courthouse projects on the two most recent 5-year plans; and federal buildings and courthouses occupied by the judiciary. We reviewed the judiciary’s and GSA’s data for completeness and determined that the data were sufficiently reliable for the purposes of this report.\nWe conducted this performance audit from March 2012 to April 2013 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 that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives.", "", "In court facilities with one or two Bankruptcy Judges, one courtroom will be provided for each Bankruptcy Judge. In court facilities with three or more bankruptcy judges, one courtroom will be provided for every two bankruptcy judges, rounding down when there is an odd number of judges. In addition, one courtroom will be provided for emergency matters, such as Chapter 11 first-day hearings.", "Categories (weight) Description Current additional courtrooms needed (15%)\nCourtrooms needed today. Data separated by judge type and weights assigned (district judges 100%, senior district judges 75%, magistrate judges 50% or bankruptcy judges 50%). Courtroom-sharing per Judicial Conference policy.\nFuture additional courtrooms needed (5%)\nCourtrooms needed within 15 years. Data separated by judge type and weights assigned (district judges 100%, senior district judges 75%, magistrate judges 50% or bankruptcy judges 50%). Courtroom-sharing per Judicial Conference policy.\nCurrent additional chambers needed (22.5%)\nChambers needed today. Data separated by judge type and weights assigned (district judges 100%, senior district judges 75%, magistrate judges 50% or bankruptcy judges 50%). Courtroom-sharing per Judicial Conference policy.\nFuture additional chambers needed (7.5%)\nChambers needed within 15 years. Data separated by judge type and weights assigned (district judges 100%, senior district judges 75%, magistrate judges 50% or bankruptcy judges 50%). Courtroom-sharing per Judicial Conference policy.\nCitywide benefit assessment result (40%)\nIn cities where courtrooms and chambers are located in multiple facilities, a citywide benefit assessment is produced. This incorporates the individual Facility Benefit Assessment for each facility; the type, a mix of facility ownership; and fragmentation of the court operations on a citywide basis. In cities with a single courthouse, the Facility Benefit Assessment is the same as the citywide assessment and covers 328 items in four main categories: building conditions (30%); space functionality (30%); security (25%); and space standards (15%).\nCivil filings historic (3%)\nAverage annual change in the number of civil filings (1997-2011).\nCivil filings projected (1%)\nProjected average annual change in the number of civil filings (2012-2026).\nCriminal defendants historic (4.5%)\nAverage annual change in the number of number of criminal defendants (1997-2011).\nCriminal defendants projected (1.5%)\nProjected average annual change in the number of criminal defendants (2012-2026).", "", "Fiscal year 2014 – 2018 5- X 90.4 See note See note The higher the “score,” the greater the space need urgency.\nMore than one building assessed.", "", "1. AOUSC stated that we failed to understand the purpose of the 5-year plan, indicating that it is not a long-term capital investment plan. The draft report that we provided to AOUSC for comment indicates that the 5-year plan is not a long-term capital investment plan. However, the 5-year plan represents the only document that communicates the judiciary’s recommendations related to new courthouse projects to Congress and other stakeholders. Since it is important for stakeholders to understand the context for new courthouse projects, we continue to believe that the judiciary should improve the completeness and transparency of the information the judiciary uses to justify these projects. 2. AOUSC stated that funding for the projects totaled $188.29 million, but did not provide any supporting information for this amount. We used General Services Administration (GSA) data to determine the amount of funding appropriated for the projects on the 5-year plan, which we state to be $177 million in our report. 3. AOUSC stated that GSA already provides sufficient information to Congress on the judiciary’s behalf for courthouse projects. While GSA provides information to congressional committees when seeking authorization for new courthouse projects, by that time, the judiciary has already recommended the projects for new construction. The 5-year plan represents the only document that communicates the judiciary’s recommendations for new construction, and it is incomplete and lacks transparency. For example, the 5-year plan underestimates the total costs of these projects by about $2 billion because it does not include all project phases and because the judiciary no longer includes its rent costs on the 5-year plan. 4. AOUSC was critical of our conclusion that the AMP process does not link to the judiciary’s strategic plan. According to AOUSC, the template for future Long-Range Facilities Plans will clearly illustrate how the AMP process supports and links to the judiciary’s strategic plan. We continue to welcome improvements to the judiciary’s approach to strategic planning for courthouse construction. We will assess these changes when they are implemented, as part of our recommendation follow-up process. 5. AOUSC noted that, with respect to our recommendation, imposing a moratorium and reviewing the projects on the 5-year plan under the AMP process would create a delay of up to 6 years and that 10 of the 12 projects have been on the 5-year plan since 1999 or earlier. AOUSC states in its response that the previous capital-planning process was “stringent,” and as a result should be respected for its policy and budgetary implications. We have previously found deficiencies in the judiciary’s previous capital planning process, including that the judiciary tends to overstate the number of judges that will be located in a courthouse after 10 years. Our draft report noted that the AMP process represents progress by the judiciary in better aligning its capital-planning process with leading practices. When the judiciary applied the AMP process to two projects on a previous 5-year plan—San Jose, California, and Greenbelt, Maryland—neither project ranked among the judiciary’s revised priorities for new construction, indeed, they ranked 117th and 139th, respectively. In addition, only two projects in the current 5-year plan qualify for new construction under the judiciary’s AMP process. Shifting courthouse priorities demonstrate a process that is not yet finalized. Given the federal government’s current budgetary condition, the judiciary should assure the Congress through its planning process that the courthouses prioritized for construction funding truly represent its most urgent needs. Otherwise, the government stands to potentially spend billions of dollars on courthouse construction that does not meet the judiciary’s most urgent needs. Assessing all courthouses under the AMP process, given the problems of the previous process, would help assure the judiciary and the Congress that the highest priority courthouses are selected and that the government is effectively spending construction funds. 6. AOUSC stated that the declining conditions in existing courthouses on the 5- year plan place judges, staff, and the public in harm’s way. Our work over a number of years has shown that many federal buildings face deteriorated conditions, a reason that federal property was included on GAO’s High Risk List. The courts are not alone in this regard. Our draft report noted that GSA is responsible for ensuring that courthouses are adequately maintained. As a result, GSA addresses building maintenance issues regardless of the status of the courthouse construction program. In addition, we note that the criteria the judiciary uses to select new courthouse construction projects are its own. The AMP process established that space shortages, not facility condition, are the only criteria for requesting new courthouse construction. 7. AOUSC noted the security concerns at existing courthouses we visited that we did not independently evaluate. For additional context, we added to the report references to the judiciary’s approach to improve security within existing courthouses rather than replace them with new courthouses. The judiciary’s AMP process criteria are consistent with this approach, as facility security deficiencies under the AMP process are no longer a justification for new courthouse construction. 8. AOUSC attached a letter from Chief Judge Lisa Godbey Wood of the Southern District of Georgia, which we have printed in this report on pages 47 to 54. We address Judge Wood’s comments separately (see comments 21- 27). 9. AOUSC stated table 2 included incorrect information and provided revisions to the table. We stand by the information provided in our report, which was provided by the GSA and the judiciary and was reviewed consistent with our internal controls under generally accepted government auditing standards. The AOUSC’s most recent numbers relate only to one courthouse in each city, but our numbers represent all the judiciary’s courtrooms in each city for which we used judiciary and GSA data. We revised our final report to clarify that the number of courtrooms in table 2 were for cities, some of which have more than one existing courthouse. For example, in Chattanooga, Tennessee, the AOUSC revised our number of courtrooms from six to four possibly because there are only four courtrooms in the Joel W. Solomon Federal Building and United States Courthouse from which the judiciary is seeking to relocate district and magistrate judge’s chambers and courtrooms. However, there are six courtrooms in Chattanooga because the bankruptcy judges’ chambers and courtrooms are located in a leased former post office/customs house. 10. AOUSC stated that the criteria of needing two or more courtrooms in order to recommend constructing a new courthouse pertains to the housing strategy recommendations contained in a district’s Long Range Facilities Plan, and that the next step is the completion of a GSA feasibility study. However, AOUSC is describing the new AMP process. The fact remains that most projects on the current 5-year plan were selected based on their evaluation under the judiciary’s previous capital-planning process, which did not include the courtroom shortage criteria. As a result, those courthouses slated for new construction under the old process and those selected under the new process are not comparable and do not represent the judiciary’s highest priorities. 11. AOUSC noted that when projects on the 5-year plan have a shortfall of one courtroom as opposed to two, the GSA feasibility study concluded that new courthouse construction was recommended. Our draft report observed that although a project may not qualify for new courthouse construction under the AMP process, GSA may determine through a feasibility study that new construction is the most cost-efficient, viable solution despite the fact the courthouse in question did not rise to the top in the selection process. 12. According to AOUSC, two projects were removed from the 5-year plan because their space needs had changed and not because their rankings dropped. Our draft report correctly stated that reduced space needs contributed to the removal of these projects from the 5-year plan. 13. AOUSC questioned if we reviewed any of the Long Range Facility Plans produced as part of the AMP process and the previous capital planning process. We reviewed these judiciary documents and have revised the description of our methodology discussed in appendix I to include the names of the documents related to the judiciary’s capital-planning process that we reviewed while developing this report. Specifically, we added the Long Range Facility Plans, Facility Benefit Assessments, Citywide Benefit Assessments, Urgency Evaluations, and the 5-year plan. 14. AOUSC stated that our assessment that the AMP process partially aligns with the leading capital practice related to “needs assessment and gap identification” was a gross error. According to AOUSC, it is not the judiciary’s role to generate cost estimates, and they believe that our partially aligns assessment is too low. While GSA is responsible for estimating the costs of courthouse projects, we continue to believe that the judiciary’s capital- planning process partially—not fully—aligns with this leading practice. GAO and Office of Management and Budget (OMB) guidance has established that estimates of life-cycle costs are necessary for accurate capital planning. The judiciary’s 5-year plan lists GSA estimated costs, but they are incomplete. Specifically, the cost estimates do not include all project phases—site acquisition, building design, and construction. In addition, the judiciary no longer includes the estimated cost of rent in its 5-year plan even though they have estimated costs for all project phases and rent. We believe this omission denies stakeholders and congressional decision makers complete information on judiciary construction-program costs. In addition, our draft report notes that these estimates are not life-cycle costs, which would also have to be included for the cost estimate to be comprehensive. 15. AOUSC disagreed with our assessment that the AMP process partially aligns with the leading capital practices related to “alternatives evaluation” because the judiciary does evaluate options with an emphasis on the least costly option. AOUSC also indicated that we did not consider Long Range Facility Plans in making this determination. We did consider Long Range Facility Plans, and continue to believe that the judiciary’s capital-planning process partially aligns with this leading practice. GAO and OMB guidance established that leading organizations carefully consider a wide range of alternatives. Our draft report noted that the AMP process evaluates some alternatives, such as renovating existing courthouses to meet needs, but the judiciary provided no evidence that it considered other viable options, such as courtroom sharing in existing courthouses, even though courtroom sharing is required in new courthouses. 16. AOUSC disagreed with our assessment that the AMP process partially aligns with the leading capital practices related to establishing a “review and approval framework with established criteria for selecting capital investments” because our draft report indicated that the judiciary has established such a framework. We continue to believe that the judiciary’s capital-planning process partially aligns with this leading practice because while we were able to discern that there are review and approval criteria in the AMP process, we found no evidence that the judiciary’s current 5-year plan applies those criteria. Specifically, the judiciary established the criterion that courthouses need to have a shortage of two or more courtrooms to qualify for a new courthouse construction project. However, 10 of the 12 projects recommended for new construction on the 5-year plan do not qualify under this criterion. 17. AOUSC stated that we used incorrect and inflated estimates for project costs.\nWe sought to provide total project cost estimates for each project on the 5- year plan. Our draft report uses estimates that the judiciary provided for total project costs and rent, which we adjusted for inflation to the current fiscal year. In response to our statement of facts, AOUSC provided a revised table (reprinted on p. 51 of this report). However, the data in the table that AOUSC provided were incomplete and they did not include supporting documentation. Consequently, we continue to use the most current, complete estimates of the total project costs and rent available. 18. AOUSC stated that the estimates of total project costs were provided to them by GSA. We added GSA to the source of table 1. 19. AOUSC stated that the judiciary has implemented changes to address recommendations from our 2010 report (GAO-10-417). GAO has a process for following up and closing previous recommendations. We have not yet assessed the extent to which the judiciary’s actions have fulfilled the recommendations from our 2010 report. We will, however, consider this and all other information from the judiciary when we determine whether to close the recommendations from our 2010 report. We plan to examine this recommendation in the summer of 2013. 20. According to AOUSC, the projects on the 5-year plan are fully justified under its previous “stringent” process that preceded the AMP process. However, as we have previously noted, the former process had shortcomings and in our opinion does not represent a process that the Congress should rely upon for making capital budget decisions. The new AMP process will, when complete, likely provide Congress with greater assurance that the judiciary’s construction priorities represent the highest priority needs. We addressed the difference in funding for the projects on the current 5-year plan in comment 2. 21. Judge Wood stated that the number of judges in Savannah may change. For each project, we used data provided by AOUSC. However, in our 2010 report (GAO-10-417), we found that the judiciary often overestimated the number of future judges it would have in planning for new courthouses. 22. According to Judge Wood, it is inappropriate to subject the Savannah courthouse to the AMP process when over $6 million has already been spent on design services. We found, and the AOUSC agreed, in comments to our draft report, that the Savannah courthouse has four courtrooms and four judges. Consequently, it does not qualify for new construction under the AMP criterion. In addition, according to GSA, the original courthouse design from 1998, to which Judge Wood refers, is old and outdated. As a result, if the project moves forward, the government would need to spend additional money to redesign a new courthouse for Savannah. 23. Judge Wood noted the poor condition of the existing Savannah courthouse and the need for a repair and alterations project to address deferred maintenance issues. We toured this courthouse and noted many of the same deficiencies. Our draft report noted that regardless of whether a project is on the 5-year plan, GSA is responsible for ensuring that courthouses are adequately maintained. In addition, as the current plan for the Savannah project is to continue to use the existing courthouse and build an annex, deferred maintenance in the existing courthouse would still need to be addressed if the plan moved forward. 24. Judge Wood noted that the existing Savannah Courthouse was built in 1899 and has several deficiencies to Design Guide standards. Our draft report noted that some existing courtrooms may not meet Design Guide standards for size. However, as we also note, according to AMP guidance, a disparity between space in an existing facility and the Design Guide standards is not justification for facility alteration and expansion. 25. Judge Wood noted several security concerns in the existing Savannah Courthouse. See comment 7. 26. Judge Wood noted that the Savannah Courthouse project preceded the AMP process and the courthouse needs an additional courtroom and judge’s chamber. We address the judiciary’s previous capital planning process and judge and courtroom counts in Savannah in comments 20 and 21, respectively. 27. Judge Wood attached photos documenting some of the building condition problems at the Savannah Courthouse, and those are reprinted on pages 49 and 50. See comment 23. 28. AOUSC provided changes to the courtroom numbers in table 2 from our draft report. As we explained in comment 9, we changed the table to make clear that the courtroom count refers to the number of courtrooms citywide, not just in one courthouse.", "", "", "In addition to the contact named above, Keith Cunningham, Assistant Director; George Depaoli; Colin Fallon; Geoffrey Hamilton; James Leonard; Faye Morrison; and Sara Ann Moessbauer made key contributions to this report." ], "depth": [ 1, 1, 2, 2, 1, 2, 2, 1, 1, 1, 1, 1, 2, 1, 1, 2, 1, 2, 1, 2, 2 ], "alignment": [ "", "h0_title h2_title h1_title", "h0_full h2_full h1_full", "h0_full", "h2_title h1_title", "h1_full", "h2_full", "h2_full h1_full", "", "h2_full", "h2_full", "", "", "", "", "", "", "", "", "", "" ] }
{ "question": [ "Why is the AMP 5-year plan lacking?", "How is the 5-year plan lacking with respect to courthouse projects?", "Why is this lack a problem?", "How has Congress responded to the 5-year plan?", "Why is it a problem that most projects will need design changes?", "How will complete information be more useful to Congress?", "Why were most recommended projects not evaluated under the AMP process?", "How were courthouse project priorities reorganized?", "Why do most of the recommended projects not qualify for a new courthouse?", "What do these projects reveal about the AMP's 5-year plan as a whole?", "Why is it important that AMP conduct these remaining evaluations?", "Why has the courthouse construction program been slowed?", "Why was AMP created?", "Why was this report written?", "What topics are examined in this report?", "How did GAO conduct research for this report?" ], "summary": [ "The Asset Management Planning (AMP) process represents progress by the federal judiciary (judiciary) in better aligning its capital-planning process with leading capitalplanning practices, but its 5-year plan for fiscal years 2014 to 2018--the document the judiciary uses to request courthouse construction projects--lacks transparency and key information on how projects qualify for new construction, alternatives the judiciary considered, and their cost.", "For example, the plan lists costs for the next phase of the 12 recommended courthouse projects, which have several phases, but does not list previous funding or ongoing annual costs for the projects.", "As a result, the plan lists about $1 billion in costs for the 12 projects, but the projects would actually cost the federal government an estimated $3.2 billion over the next 20 years.", "Congress has appropriated a small share of the money needed for the projects, and most will need design changes before construction can begin.", "As a result, there is a risk that congressional funding decisions could be made without complete and accurate information.", "However, with this information, decision makers could weigh current-year budget decisions within the context of projects' expected future costs, spur discussion and debate about actions to address them, and put the judiciary's requests in context with other federal spending.", "Ten of the 12 recommended projects were not evaluated under the AMP process. Judiciary officials said that they did not want to delay the current projects or force them to undergo a second capital-planning process after they had already been approved.", "Two courthouse projects from a previous 5-year plan that were assessed under AMP were removed from the list and are now ranked behind more than 100 other courthouse construction projects.", "Furthermore, 10 of the 12 recommended construction projects do not qualify for a new courthouse under the AMP criterion, which requires that new courthouses need two or more additional courtrooms.", "These conditions call into question the extent to which the projects remaining on the 5-year plan represent the judiciary's most urgent projects and whether proceeding with these projects represents the most fiscally responsible proposal.", "While 10 additional AMP evaluations would involve some additional costs, not conducting those evaluations could involve spending $3.2 billion over the next 20 years on courthouses that may not be the most urgent projects.", "Rising costs and fiscal challenges have slowed the multibillion-dollar courthouse construction program of the judiciary and the General Services Administration (GSA).", "In 2006, the judiciary developed AMP to address increasing costs and incorporate best practices and has evaluated about 67 percent of its courthouses under the new system.", "As requested, GAO assessed changes introduced with AMP.", "GAO examined: (1) the extent to which the AMP process aligns with leading practices and provides information needed for informed decision making and (2) the extent to which courthouse projects recommended for funding in fiscal years 2014 to 2018 were assessed under the AMP process.", "GAO compared the judiciary's capitalplanning practices with leading practices, analyzed courthouseplanning documents, and interviewed officials from the judiciary and GSA. GAO visited three courthouses selected because they were highly ranked by the judiciary for replacement, although observations from these site visits cannot be generalized." ], "parent_pair_index": [ -1, 0, 1, -1, 3, 3, -1, 0, 0, 2, 0, -1, -1, -1, 2, 2 ], "summary_paragraph_index": [ 1, 1, 1, 1, 1, 1, 2, 2, 2, 2, 2, 0, 0, 0, 0, 0 ] }
GAO_GAO-19-281
{ "title": [ "Background", "Overview of Federal Disaster Response and Recovery", "FEMA’s Contracting Workforce", "Regional Contracting Officers", "Joint Field Offices", "Post-Katrina Emergency Management Reform Act Contracting Requirements", "Federal Agencies Obligated at Least $5 Billion through Post- Disaster Contracts as of June 2018, but More Comprehensive Data on Disaster Contracting Obligations Would Enhance Transparency", "Federal Agencies Obligated at Least $5 Billion through Post- Disaster Contracts for the 2017 Disasters", "More Comprehensive Data Could Provide Increased Transparency on Disaster Contracting", "Challenges in Planning Post- Disaster Contracts Hindered Response and Recovery Efforts", "Agencies We Reviewed Experienced Challenges Contracting with Local Vendors", "Some Officials We Interviewed Were Not Consistently Aware of the Regulatory Definition of Local Area", "Regulation for Determining Whether a Vendor Resides or Primarily Does Business in the Set-Aside Area Presents Challenges", "Some Agencies We Reviewed Did Not Consistently Write Justifications for the Use of Non-Local Vendors", "FEMA Has Begun to Address Challenge with Requirements Development for Post- Disaster Contracts", "Agencies in Our Review Have Identified Some Lessons Learned in Disaster Response, but Interagency Contracting Coordination and FEMA Workforce Challenges Remain", "Selected Agencies Have Processes for Identifying Lessons Learned", "FEMA Established Interagency Lessons Learned Group but the Coast Guard and USACE Could Enhance Information Sharing", "Interagency Contracting Coordination Challenges within the Mission Assignment Process Remain", "FEMA Identified Contracting Workforce Shortages, but Has Not Fully Assessed Its Needs", "Conclusions", "Recommendations for Executive Action", "Agency Comments and Our Evaluation", "Appendix I: Objectives, Scope, and Methodology", "Appendix II: Emergency Support Functions Responsibilities across the Federal Government", "Appendix III: Comments from the Department of Defense", "Appendix IV: Comments from the Department of Homeland Security", "Appendix V: Comments from the General Services Administration", "Appendix VI: GAO Contact and Staff Acknowledgments", "GAO Contact", "Staff Acknowledgments" ], "paragraphs": [ "In 2017, three major hurricanes made landfall in the United States and historic wildfires struck California. According to FEMA, the 2017 hurricanes and wildfires collectively affected 47 million people—nearly 15 percent of the nation’s population. See figure 1 for a timeline of these major disasters.", "When disasters hit, state and local entities are typically responsible for disaster response efforts. The Stafford Act establishes a process by which the Governor of the affected state or the Chief Executive of an affected Indian tribal government may request a presidential major disaster declaration to obtain federal assistance. According to the DHS National Response Framework—a guide to how the federal government, states and localities, and other public and private sector institutions should respond to disasters and emergencies—the Secretary of Homeland Security is responsible for ensuring that federal preparedness actions are coordinated to prevent gaps in the federal government’s efforts to respond to all major disasters, among other emergencies. The framework also designates FEMA as the lead agency to coordinate the federal disaster response efforts across 30 federal agencies.\nThe National Response Framework identifies 14 emergency support functions that serve as the federal government’s primary coordinating structure for building, sustaining, and delivering disaster response efforts across more than 30 federal agencies. Each function defines specific mission areas—such as communication, transportation, and energy—and designates a federal department or agency as the coordinating agency. For example, provision of assets and services related to public works and engineering, such as temporary roofing or power, are coordinated by USACE within DOD. See Appendix II for more information about emergency support function responsibilities across the federal government.\nFEMA’s Response Directorate coordinates disaster response efforts through mission assignments—work orders that it issues to other federal agencies to direct them to utilize their authorities and the resources granted to them under federal law in support of direct assistance to state, local, tribal, and territorial governments. Mission assignments are authorized by the Stafford Act, and agencies may fulfill these assignments through federal contracts. FEMA made 1,515 mission assignments for the 2017 hurricanes and California wildfires, and total obligations for these mission assignments were more than $7.8 billion as of January 2018, according to FEMA. See figure 2 for a depiction of the mission assignment process under a notional scenario of removing derelict marine vessels—boats and ships damaged during a hurricane and that are determined to be inoperable.\nThe National Response Framework states that when an Emergency Support Function is activated in response to an incident, the primary agency for that emergency support function is responsible for executing contracts and procuring goods and services as needed, among other things. For example, DOD and USACE are the coordinators for Emergency Support Function 3—public works and engineering—and as part of this role, these agencies are responsible for emergency contracting support for lifesaving and life-sustaining services. As such, during the 2017 disasters, USACE obligated funds on contracts in support of its assigned mission of public works and engineering by restoring the electrical grid in Puerto Rico following Hurricane Maria and removing debris following the California wildfires.", "In its role as the lead coordinator of federal disaster response efforts across federal agencies, FEMA’s contracting workforce plays a key role in post-disaster contracts. FEMA’s contracting efforts are supported by its contracting workforce within FEMA’s Office of the Chief Procurement Officer (OCPO). In our prior work, we found that FEMA’s contracting workforce had grown significantly since Hurricane Katrina, but the agency struggled with attrition at times. While the majority of FEMA’s contracting workforce is located in headquarters, contracting officers are also located in each of FEMA’s 10 regional offices. See figure 3 for the location of FEMA’s 10 regional offices as well as the states and territories for which each one is responsible in terms of fulfilling National Response Framework duties.\nIn addition, FEMA can deploy members of its Disaster Acquisition Response Team (DART), a group whose primary purpose is to support contract administration for disasters. There are two DART teams under FEMA’s Expeditionary branch, each comprised of contracting officers, contracting specialists, and quality assurance specialists. Figure 4 shows how FEMA’s contracting workforce is organized.\nIn headquarters, FEMA’s contracting officers support a variety of functions, such as contracting for information technology needs, activities to prepare for and mitigate disasters, and disaster response. In the field, the disaster and field operations division manages contracting for disaster response efforts including:\nLogistics: delivering goods and services to support disaster survivors and communities, including life-sustaining commodities such as meals, blankets, and electricity generators,\nResponse: coordinating capabilities needed immediately following a disaster, such as air and ground evacuation services and emergency sheltering, and\nRecovery: primarily supporting rebuilding efforts, including technical assistance programs.", "Regional contracting officers serve as the first response for contracting if a disaster occurs in their region. During a disaster, the regional offices can request additional contracting support from headquarters if needed. Contracting officers are typically located in each regional office’s mission support division, which provide essential administrative, financial, information technology, and acquisition support for the region. Each region is headed by a Regional Administrator who reports directly to the head of FEMA, the FEMA Administrator.\nIn response to a 2009 DHS Inspector General Report, FEMA created a formal agreement to establish a new role for FEMA’s OCPO to oversee regional contracting staff. The Inspector General report found that regional contracting officers only reported to their respective supervisor in the region—who usually are not contracting officers—with no formal link to FEMA’s OCPO. The Inspector General recommended that only contracting officials should manage the technical performance of contracting officers. The report stated that having the contracting officer’s performance and career advancement controlled by someone who is not a contracting professional was an internal control risk and created a potential conflict-of-interest situation for the contracting officer. A subsequent 2011 agreement between the regions and headquarters states that a FEMA OCPO official will be the contracting officers’ performance reviewer and that the regional supervisors will continue to manage regional contracting officials’ day-to-day activities. As a result, regional contracting officers have a dual reporting chain to both FEMA OCPO in headquarters and to their supervisor within the region.\nIn September 2015, we identified challenges with how the agreement was being implemented, particularly in that it heightened the potential for an environment of competing interests for the regional contracting officers. Specifically, we found that being physically located in a regional office where their regional supervisor is not a contracting professional gave contracting officers less standing to resist requests to perform duties outside of a contracting officer’s responsibilities or to resist pressure from program officials to make certain decisions. Further, we found that FEMA had not updated its 2011 agreement, even though the agreement states that FEMA OCPO and the regions will revisit it each year. We recommended that the FEMA Administrator direct FEMA OCPO and the regional administrators to revisit the 2011 agreement to, among other things, add details about the extent of operational control headquarters and regional supervisors should exercise to minimize potential competing interests experienced by regional contracting officers, and further detail headquarters and regional supervisors’ roles and responsibilities for managing regional contracting officers to improve coordination and communication. We also recommended, and FEMA agreed, that it establish a plan to review this agreement on an annual basis. As of January 2019, FEMA had not implemented these recommendations.", "After a major disaster is declared, FEMA establishes a joint field office, a temporary office through which it coordinates disaster response and recovery efforts with state and local governments and organizations. Once the need for disaster response and recovery ends and a joint field office is closed, the contracts supporting the disaster are returned to the cognizant regional contracting office.", "Congress enacted the Post-Katrina Emergency Management Reform Act of 2006 (PKEMRA) after shortcomings were identified in preparation for and response to Hurricane Katrina—one of the largest and most destructive natural disasters in U.S. history, which hit the Gulf Coast in 2005. PKEMRA included several provisions related to contracting, including:\nContracting preference for local vendors. PKEMRA amended the Stafford Act to provide a contracting preference for local vendors. Specifically, for contracts or agreements with private entities, the provisions of the act state, in part: in general, for major disaster assistance activities, agencies shall provide a preference, to the extent feasible and practicable, to organizations, firms, and individuals residing or doing business primarily in the area affected by the major disaster or emergency; they may be set aside for local vendors, which means that only vendors residing or primarily doing business in the declared disaster area are allowed to compete for an award; those not awarded to local vendors shall be justified in writing in the contract file.\nAfter the enactment of PKEMRA, changes were made to the FAR to implement provisions regarding the award of set-aside contracts to local vendors. Figure 5 displays the steps a contracting officer must take to implement the preference for awarding post-disaster contracts to a local vendor based on related laws and regulation.\nUse of noncompetitive contracts using the urgency exception.\nAgencies are generally required to use full and open competition— achieved when all responsible sources are permitted to compete— when awarding contracts. The Competition in Contracting Act of 1984 recognizes that full and open competition is not feasible in all circumstances and authorizes contracting without full and open competition under certain conditions, such as in cases with an unusual and compelling urgency and the government would be seriously injured unless the agency is permitted to limit the number of sources from which it solicits offers (“urgency exception”). When DHS awards disaster contracts non-competitively based on the urgency exception, PKEMRA, as implemented in the Homeland Security Acquisition Regulation, restricts the period of performance to 150 days, unless the Head of Contracting Activity determines that exceptional circumstances apply. For other uses of the urgency exception, the FAR’s period of performance limit is generally no more than one year. Generally, exceptions to full and open competition must be supported by written justifications that contain sufficient facts and rationale to justify use of the specific exception. Depending on the proposed value of the contract, the justifications require review and approval at successively higher approval levels within the agency.\nUse of advance contracts. PKEMRA requires FEMA to establish advance contracts, which are typically needed to quickly provide life- sustaining goods and services, such as tarps and meals, in the immediate aftermath of disasters. While not required under PKEMRA, USACE also establishes advance contracts for supplies and services (e.g., generators for its temporary power mission) using its independent statutory authorities for emergency management, such as Section 5 of the Flood Control Act of 1941. In addition, DLA has an interagency agreement with FEMA to provide disaster commodities and services, including fuel. As such, DLA also has some advance contracts in place. In December 2018, we found that FEMA and USACE were the primary users of advance contracts.", "As of June 30, 2018, federal agencies obligated at least $5 billion through post-disaster contracts to support disaster response and recovery efforts after hurricanes Harvey, Irma, and Maria and the 2017 California wildfires. USACE and FEMA awarded over three quarters of the reported obligations on post-disaster contracts. However, data on post-disaster contracting are not comprehensive due to changes in the criteria for establishing and closing a NIA code and DHS’s inconsistent implementation of the criteria for closing codes. Specifically, we found DHS closed the codes for Hurricanes Harvey and Irma less than a year after the storms hit, compared to prior hurricanes when the NIA codes remained open for at least 5 years.", "As of June 30, 2018, federal agencies obligated at least $5 billion through post-disaster contracts in response to the three 2017 hurricanes and the California wildfires. Data on obligations for the California wildfires are limited to those contracts identified by two selected agencies in our review—FEMA and USACE—because no NIA code was established in FPDS-NG to track contracts specifically for the wildfire events at a government-wide level. The obligations on post-disaster contracts accounted for more than half of the $9.5 billion in contract obligations on contracts related to the three hurricanes and the 2017 California wildfires, with the remainder of the dollars obligated on advance contracts. See figure 6 for details on post-disaster and advance contract obligations by event.\nFEMA and USACE accounted for more than three quarters of the total obligations on post-disaster contracts for the three hurricanes. Because there was no NIA code for the 2017 California wildfires, we cannot identify government-wide obligations in FPDS-NG and, therefore, do not know which agencies had the highest contract obligations for the two wildfire events. Figure 7 provides details on known obligations on post-disaster contracts, by agency.\nAbout 63 percent of the obligations on post-disaster contracts, or $3.1 billion, was for services. See figure 8 for a breakdown of services and products by 2017 disaster.\nFive services across the 2017 disasters comprised nearly 80 percent of total obligations for services on post-disaster contracts. Contracts for repair and maintenance services comprised 38 percent of total obligations on post-disaster contracts for services, largely driven by the $1 billion obligated to support the power restoration effort in Puerto Rico following Hurricane Maria. Following Hurricanes Harvey and Irma, agencies primarily awarded post-disaster contracts for management support functions, such as call center services. See figure 9 for the top post- disaster contract services across the three hurricanes and the California wildfires.\nOf the $1.8 billion agencies obligated on goods through post-disaster contracts, 28 percent was on contracts for subsistence, such as food and water. Nearly 30 percent, or more than $530 million, of all obligations on post-disaster contracts for goods was on contracts for electric wire and power distribution equipment, almost all of which was for the power mission in Puerto Rico following Hurricane Maria. See Figure 10.\nAcross all three hurricanes and the California wildfires, we found that the competition rate—the percentage of total obligations reported under competitive contracts—was about 75 percent for post-disaster contracts. This is an increase from the past since we previously found that the competition rate in the immediate aftermath of Hurricane Katrina was about 53 percent. Contracting for disaster relief and recovery efforts presents unique circumstances in which to solicit, award, and administer contracts. Under the FAR, agencies are generally required to use full and open competition when soliciting offers, with some exceptions. As discussed earlier, an agency may award a contract without full and open competition, for example when the need for goods and services is of such an unusual and compelling urgency that the federal government faces the risk of serious financial or other type of loss, unless the agency is permitted to limit the number of sources from which it solicits offers (“urgency exception”). When using the urgency exception, the FAR requires agencies to request offers from as many potential sources as practicable.\nBased on FPDS-NG data, we found that about 47 percent of obligations on post-disaster contracts were on contracts citing the urgency exception, with 63 percent of those obligations on contracts coded in FPDS-NG as using “limited competition.” Among our selected contracts, we also found that contracting officers implemented the urgency exception to seek offers from as many sources as possible in different ways. Of the 11 contracts in our sample that cited the urgency exception, five included abbreviated award time frames in the justification documentation.", "The full extent of disaster contracting—for both advance and post- disaster contracts—related to the 2017 disasters is unknown due to changes in the criteria for establishing and closing a NIA code in FPDS- NG and DHS’s inconsistent implementation of the updated criteria for closing codes. The NIA code data element in FPDS-NG was established following landfall of several major hurricanes in 2005 to enable consistent tracking of emergency or contingency-related contracting. Contracting officers select the applicable NIA code in FPDS-NG when entering related contract information into the system. Officials at GSA—the agency responsible for operating and maintaining FPDS-NG—stated there is little to no cost or administrative burden associated with establishing or maintaining a NIA code.\nBased on a memorandum of agreement (the agreement), GSA, DHS, and DOD are jointly responsible for determining when a NIA code should be established and closed. DHS delegated its role, on behalf of civilian agencies for disaster or emergency events, to its Office of the Chief Procurement Officer (DHS OCPO), and DOD, on behalf of military departments and defense agencies for contingency operations, delegated its role to the Defense Contract and Pricing office. The agreement outlines criteria DHS and DOD should consider in making determinations to establish and close a NIA code. We identified changes in the criteria for establishing and closing a NIA code between a June 2012 agreement and a June 2018 update that superseded and replaced it. According to DHS OCPO officials, the agencies updated the agreement to incorporate lessons learned (such as adding that events should have a procurement impact as criteria for establishing a NIA code), and because it had not been revisited in 6 years. See table 2 for criteria from the agreements, changes in 2018, and examples of potential implications of those changes that we identified related to emergency or disaster events.\nThe June 8, 2012 agreement criteria applied to the establishment of NIA codes for the 2017 disasters, while the June 1, 2018 updates applied to determinations to close or extend the NIA codes after this date for the 2017 disasters. DHS OCPO requested that a NIA code be established for each of the 2017 major hurricanes (Harvey, Irma, and Maria). However, the codes for Harvey and Irma closed on June 30, 2018, less than a full year after the hurricanes hit. The code for Maria was scheduled to close on December 15, 2018, and in August 2018 we began raising questions about the planned or actual NIA code closures for the three 2017 hurricanes. Since December 2018, DHS OCPO provided two additional extensions for Maria, with the code now valid through June 15, 2019, about 21 months after that hurricane made landfall. In contrast, the NIA code for Hurricane Sandy, which made landfall in October 2012, remained open until December 2017, more than 5 years after the disaster. The NIA code for Hurricane Katrina, which made landfall in August 2005, remained open until August 2018, 13 years after the disaster. We observed that DHS OCPO requested NIA codes for Hurricanes Florence and Michael in 2018, although we did not review the data associated with those events. After we sent this report to the agencies for comment on February 15, 2019, the agencies allowed the codes for Florence and Michael to expire, on March 15, 2019 and April 12, 2019, respectively.\nDHS OCPO officials offered several different rationales to support their decision to close the NIA codes for the 2017 hurricanes and cited the changes to the criteria in the 2018 agreement for closing the codes. However, we found that these rationales were inconsistent with the criteria in the agreement, did not consider key user needs, and did not fully explain the decisions to close these codes. For example:\nDHS OCPO officials told us that NIA codes for disasters should be closed when agencies no longer use the special emergency procurement authority such that the procurement thresholds—such as the simplified acquisition and micro purchase thresholds—return to the general (non-emergency) procurement thresholds in the FAR. Further, when FEMA requested to keep the codes open, DHS OCPO questioned why agencies would need to continue tracking with a NIA code after the thresholds had returned to general procurement thresholds. DHS officials stated that the updated agreement put an emphasis on this criterion; however, our analysis indicated that was not consistent with 2018 agreement, which includes multiple criteria and is not limited to this factor. Further, the agreement does not provide additional emphasis on one criterion over others.\nDHS OCPO officials stated that the purpose of the NIA code is to track federal procurement related to response, not recovery efforts. However, both the 2012 and 2018 agreements specifically state that the NIA code is intended to track disaster response and recovery efforts. Further, according to the National Response Framework and National Disaster Recovery Framework, we found that there are no clear lines of distinction between the start and end date of these two efforts, and often these stages of the process overlap. Additionally, FEMA officials from the Recovery Support Function Leadership Group’s Program Management Office stated that they use the NIA code to track government-wide contracting related to recovery efforts. The Recovery Support Function Leadership Group, an interagency body chaired by FEMA, tasked the Program Management Office with providing accountability and transparency of projects and outcomes for the 2017 disasters, among other things.\nDHS OCPO officials pointed to the Digital Accountability and Transparency Act of 2014 as providing alternatives to FPDS-NG. The Digital Accountability and Transparency Act of 2014 required improvements in the quality of data on federal spending, including disaster spending, by making data more accessible and transparent, such as by improving the quality of data submitted by federal agencies to USASpending—an online tool that tracks federal grant, loan, contract, and other awards. However, we found that USASpending provided some information on contract obligations using disaster response and recovery funds but does not separate obligations by disaster event. Further, our prior work on the Digital Accountability and Transparency Act of 2014 has found limitations with the data agencies provide, notably the completeness and accuracy of data. Specifically, we found that agencies routinely provided award descriptions in an abbreviated way and lacked clarity needed to compare data across the federal government. Moreover, we found inconsistencies in agencies’ ability to track contract actions by disaster. While FEMA has the capacity to provide contract information by disaster through a centralized contract tracking tool, USACE officials stated that they use a decentralized tracking process where they reach out to the districts and centers to identify and track disaster contracts without a NIA code.\nPrior to the June 30, 2018 decision to close the NIA codes for Harvey and Irma, DHS OCPO officials told us they found that the number of actions FEMA was making for these events had decreased. Our analysis of the NIA codes showed that components across ten departments, including within DHS and DOD, were executing contracts related to Harvey and Irma in June 2018. When we requested supporting documentation and analysis, DHS OCPO officials provided some correspondence with FEMA but did not provide government-wide data analysis to identify what other agencies were awarding and executing contracts related to these events. DHS OCPO officials stated they also sought input from DOD through the Defense Pricing and Contracting Office on whether to keep the codes open. According to DHS officials, DOD deferred to DHS on the decision because DHS was responsible for establishing the codes. Further, DOD officials did not provide evidence that would allow us to determine whether they assessed which defense components were executing contracts related to these events or sought the input of the components that were doing so, such as USACE and the Navy.\nFPDS-NG—a public, government-wide database of federal procurements—offers a resource the federal government can use to create recurring and special reports for key users, such as the President, Congress, executive agencies, and the general public. The NIA code in FPDS-NG provides consistent tracking and government-wide visibility into contracting related to disaster events through a publicly available database. Without clear criteria for establishing and closing NIA codes that consider the needs of data providers and users, such as FEMA, and the high visibility of the event being tracked and a mechanism to ensure consistent implementation of these criteria, insight into disaster contracting may be limited. Additionally, federal internal control standards state that management should use quality information, communicate quality information internally, and communicate quality information externally to achieve objectives. Management should accomplish this by considering appropriate methods for communicating externally, such as to the President, Congress, and the general public.\nAs noted above, the 2018 agreement no longer includes the 2012 criteria that a NIA code can be closed if the NIA no longer has high visibility and there is no other interest in the NIA code. In our discussions with officials, DHS OCPO could not provide a rationale for these changes and the rationale is also not included in the updated agreement. Prior to DHS OCPO’s decision to close the codes for Hurricanes Harvey and Irma, a senior FEMA procurement official requested that they remain open, in part because of the high visibility of these events. As such, this official stated that there will be continued interest in the 2017 hurricanes including inquiries from Congress, which will require agency officials to pull data for interested parties, as that data can no longer be tracked and identified through public databases, such as FPDS-NG and USASpending. DHS OCPO officials denied FEMA’s request, pointing to the criteria in the 2018 agreement, which does not include consideration of the visibility of the event or key user needs. As the federal agency responsible for coordinating disaster response and recovery, FEMA is well positioned to understand the level of national and political interest in tracking procurement information for a disaster or emergency event. Yet, it is unclear why neither the 2012 nor the updated 2018 agreements included a role for or consideration of key users, such as FEMA and Congress. Further, as noted above, FEMA program officials expressed concern over closing the Harvey and Irma codes because they had planned to use the codes to assess recovery efforts for the 2017 disasters.\nAs we have previously reported, it can take years to fully account for federal contract obligations related to response and recovery after a hurricane. Once a NIA code is closed, there is no publicly available, government-wide system to track contract obligations for specific events. Moreover, DHS OCPO officials were unable to provide data analysis conducted using available data from prior events to determine historical patterns in federal contracting obligations for disasters prior to closing the codes for Hurricanes Harvey and Irma. Figure 11 illustrates the lack of insight we have into disaster contracting activities related to the 2017 hurricanes, in comparison to what we know about prior storms with high federal procurement obligations.\nFurther, using the description field in FPDS-NG, we found that between July 1 and September 30, 2018, after the NIA codes were closed, agencies obligated at least $136 million on contracts for Hurricane Harvey and $123 million on contracts for Hurricane Irma. While this provides some important insights regarding the continued contracting activity related to these hurricanes, the description field in FPDS-NG cannot be relied on to provide a full picture. Some agencies may include event- specific information in the description field; however, we found that, for the 2017 hurricanes, about 65 percent of contract obligations linked to a NIA code did not include event-specific information in the description. Without reopening the NIA codes for Hurricanes Harvey and Irma, and, to the extent practicable, retroactively populating the NIA codes for contract actions supporting response and recovery for these hurricanes during the period they were closed, decision makers are missing important information to understand the procurement impact of these disasters. Retroactively entering NIA code information is not unprecedented. For example, based on our analysis, the NIA codes for the 2005 hurricanes were established in October 2005, and contracting officers retroactively entered data for contracts related to these events which occurred as early as August of that year to enable full insight into contracting for these disasters.", "Based on the contracts we reviewed and officials we spoke with responsible for the planning of these contracts, we found that agencies experienced challenges planning for post-disaster contracts, especially when it came to contracting with local vendors. Additionally, FEMA also experienced challenges with requirements development—in that program officials did not always provide well-defined or sufficiently specific requirements for post-disaster contracts. However, FEMA has taken steps to address its challenges with requirements development, but it is too soon to tell the extent to which these steps will address the challenges we identified.", "Steps to Implement Local Vendor Preference, as Outlined in the Post-Katrina Emergency Management Reform Act and the Federal Acquisition Regulation (FAR) Step 1: Identify the set-aside area in accordance with FAR § 26.202-1—Local Area Set-Aside and § 6.208—Set-asides for Local Firms During a Major Disaster or Emergency Step 2: Conduct market research to determine whether there are qualified vendors in the set-aside area. Step 3: Issue a solicitation that provides for local vendor preference to the extent feasible and practicable either through the use of a set-aside or an evaluation preference. Step 4: Review offers based on evaluation criteria in the solicitation. If using a local area set-aside, review information from potential vendors to determine if they reside or primarily do business in the set-aside area in accordance with FAR § 52.226-3—Disaster or Emergency Area Representation. Step 5: Award contract to qualified vendor. If the vendor selected is not local or no qualified vendors are in the set-aside area, justify the decision in writing. determine that a vendor resides or primarily does business in the local justify in writing awards that they made to vendors outside the set- aside area.", "For the contracts we reviewed, contracting officials at FEMA correctly identified the local area for six set-aside contracts across the three hurricanes, and USACE correctly identified the local area for two set- aside contracts in Puerto Rico. However, based on the interviews we conducted during our review, USACE contracting officials were not consistently aware of the specific regulation for doing so and did not correctly identify the local area for two other USACE contracts awarded in support of the California wildfires. When awarding a local area set-aside or using an evaluation preference for local vendors, FAR § 26.202-1 states that a major disaster area can span several counties in several contiguous states, but need not include all the counties in the disaster area, and cannot extend beyond the counties designated in a Presidential disaster declaration.\nFigure 12 provides an example of a disaster declaration that depicts which counties could be included in the set-aside area.\nFor all six local area set-aside FEMA contracts—awarded in response to Hurricanes Harvey, Irma, and Maria—we reviewed, FEMA officials defined the local area in accordance with regulation. This was an improvement from what we previously found. Specifically, in 2015, we found that FEMA contracting officers were confused about the definition of the set-aside area and recommended that the FEMA Administrator provide new or updated guidance to ensure all contracting officers are aware of requirements concerning contracting with local vendors, among other things. DHS concurred, and FEMA updated its annual disaster contracting webinar training to reiterate the requirement and clarify how to determine the geographic area using the disaster declaration.\nFor the two local area set-aside USACE contracts awarded, officials responsible for those contracts told us that when awarding these contracts, they were not aware of the regulatory requirements for defining the geographic area of the local area set-aside. However, as the presidential disaster declaration for Hurricane Maria included the entire island of Puerto Rico, the local set-aside area covered the entire island. As a result, officials met the set-aside area requirement in accordance with regulation, even though they noted that they were not familiar with the requirement at the time. Officials told us they became aware of the regulation after conducting research pursuant to a protest related to the use of local vendor preference.\nWe also reviewed two other USACE contracts that were used to support the debris removal mission following the California wildfires. Contracting officials stated that they conducted market research on the availability of local contractors, and they ultimately did not find qualified local firms. However, based on a review of contract file documentation, we found that USACE officials did not identify the local area in accordance with regulation for these contracts. Instead they used congressional districts that overlapped with impacted areas to identify the local area. We found that the areas USACE identified included areas outside of the geographic area defined by the presidential disaster declaration for the California wildfires. Contracting officials responsible for these debris removal contracts stated they were not aware of a policy or regulation for how to identify the geographic area for a local area set-aside, but that their office had internally determined the use of congressional districts impacted by a disaster to be the preferred method.\nA senior USACE official told us that there is no agency supplemental guidance or related training regarding the use of local vendor preference for contracts supporting disaster recovery and response, only that they expect USACE contracting officials to comply with the FAR. Without additional guidance or related training, contracting officers may be unaware of how to define the geographic area for a local area-set aside in accordance with regulation and may miss opportunities to support improving the local economies of disaster impacted areas by giving preference in awarding contracts to local vendors to the extent feasible and practicable, per the Stafford Act.", "Despite contracting officers having a high degree of discretion to determine that an offeror qualifies as a “local firm,”—that is, a firm that resides or primarily does business in the designated set-aside area— contracting and legal officials at both FEMA and USACE told us they were unsure what or how much information is sufficient to determine that an offeror qualifies as a local firm under the FAR. After contracting officials have identified the geographic boundaries of the local “major disaster or emergency area” and included required clauses in the solicitation and issued it as a local area set-aside, offerors must represent in their offer that they reside or primarily do business in the set-aside area. Specifically, FAR § 52.226-3(c) outlines two criteria a contracting officer should use to determine whether an offeror is to be considered “local.” If an offeror does not meet these first two criteria, FAR § 52.226- 3(d) provides eight additional criteria contracting officers may consider to make this determination (see sidebar). under FAR § 52.226-3(c) An offeror is considered to reside or primarily do business in the set-aside area if, during the last 12 months, 1) the offeror had its main operating office in the area; and 2) that office generated at least half of the offeror’s gross revenues and employed at least half of the offeror’s permanent employees. If the offeror does not meet the criteria under FAR § 52.226-3(c) consider other factors listed in FAR § 52.226-3(d) including: 1) Physical location(s) of the offeror’s permanent office(s) and date any office in the set-aside area(s) was established; 2) Current state licenses; 3) Record of past work in the set-aside area(s); 4) Contractual history the offeror has had with subcontractors and/or suppliers in the set-aside area; 5) Percentage of the offeror’s gross revenues attributable to work performed in the set-aside area; 6) Number of permanent employees the offeror employs in the set-aside area; 7) Membership in local and state organizations in the set-aside area; and 8) Other evidence that establishes the offeror resides or primarily does business in the set-aside area.\nOf the eight local area set-aside contracts we reviewed, two were impacted by bid protests—which is when an offeror challenges an award or proposed award of a contract or a solicitation—related to the FAR criteria for determining that an offeror qualifies as a local firm. The following protests show examples of the criteria agencies reviewed to determine whether a firm resided or primarily did business in a set-aside area.\nFEMA contract for food: In a protest of the award of a contract for food on the basis that FEMA improperly determined the protester failed to meet the requirements in FAR§ 52.226-3(d), the protester stated it met the requirements of FAR § 52.226-3(d), because it had (1) done past work in the set-aside area; (2) maintained a warehouse in the set-aside area; (3) maintained a contractual history with subcontractors in the set-aside area; and (4) maintained a current state license and filed a franchise tax return. FEMA denied, the protest stating that the evidence the protester provided was not sufficient to qualify as “residing or primarily doing business” in the local area.\nUSACE Blue Roof contract: To support the Blue Roof mission— which provides temporary blue plastic roofs for disaster-impacted residences to prevent further damage and allow homeowners to arrange for permanent repairs—following Hurricane Maria in Puerto Rico, contracting officials awarded two post-disaster contracts. In a protest of the awards filed with GAO, the protestor argued, among other things, that one of the awardees did not meet local firm criteria in FAR § 52.226-3(c). USACE had assessed information on the awardee, including its local business address in the System of Award Management and other documentation of prior work in Puerto Rico, prior to award and determined that the awardee met Stafford Act criteria for award to a local vendor. USACE officials told us that, after the protest was filed, they further assessed information on the awardee in question and determined that it was a subsidiary of a larger national company. According to USACE officials, in order to quickly continue work on the Blue Roof mission, which had increased in scale, USACE negotiated pricing with the protestor while the protest was ongoing and made a third award under the solicitation. The protestor withdrew the protest.\nContracting and legal officials at FEMA and USACE described difficulty in determining whether a vendor resides or primarily does business in the local set-aside area and cited a lack of clarity and different interpretations of the FAR. Based on conversations with the agencies’ legal officials, we found that USACE and FEMA applied the eight criteria in FAR § 52.226- 3(d) differently. FEMA officials told us that in determining whether a firm is local, if the first two criteria are not met, they evaluate an offeror’s information related to the eight criteria in FAR §52.226-3(d) to see if the first two criteria can be met with this additional information. They added that they look to see if the firm’s main operating office is in the set-aside area and if that office generated at least half of the offeror’s gross revenues and employed at least half of its permanent employees, but stated that the eight criteria do not need to be met within the last 12 months. Alternatively, USACE officials told us that in determining if a firm is local, if the first two criteria are not met, they evaluate an offeror’s information against the eight criteria in FAR § 52.226-3(d) independent of the two criteria described under FAR § 52.226-3(c). Legal officials at both USACE and FEMA stated that the FAR criteria should be clarified. Further, agencies’ varying application of the criteria increases the risk that an offeror may be considered local by some agencies, but not others.\nFEMA legal officials told us that contracting officers have been instructed to ask offerors for information on a local firm status in post-disaster solicitations. USACE legal officials explained that it is not always clear what specific information or documents provide the necessary information to meet the criteria under FAR § 52.226-3. For example, it may not be clear what documentation adequately demonstrates the number of permanent employees the offeror employs in the set-aside area, or the percentage of the offeror’s gross revenue earned in the set-aside area. The Office of Federal Procurement Policy provides overall direction of government-wide procurement policies, regulations, procedures, and forms for executive agencies. However, Office of Federal Procurement Policy staff told us that they have not provided additional guidance or clarification related to this FAR clause.\nFederal internal control standards state that management should use quality information to achieve objectives. Management should accomplish this by identifying information requirements, collecting relevant data from reliable sources, and processing data into quality information to be communicated internally and externally. Without clarifying guidance, contracting and legal officials will likely continue to have varying interpretations on how to implement the FAR criteria for determining that an offeror qualifies as a local firm.", "When contracts for major disaster or emergency assistance activities are not awarded to local vendors, the Stafford Act, as implemented in the FAR, requires that the decision be justified in writing in the contract file. Contracting officers at three of the four agencies included in our review— FEMA, USACE, and the Coast Guard—did not consistently justify in writing the award of selected contracts to non-local vendors. Specifically, 12 of the 14 contracts in our review that were not awarded to local vendors did not contain the required written justifications in the files (see table 3).\nDLA included written justifications for the use of non-local vendors, as required. After the 2017 disasters, FEMA identified the absence of justifications for the use of non-local vendors as an area for improvement. According to FEMA officials, they subsequently released guidance and a pre-solicitation memorandum to assist contracting officers in identifying what documentation related to local vendor preference is required in a contract file. FEMA officials told us they expect these steps will improve compliance with the requirement to document the justification for using non-local vendors going forward. While the Coast Guard provided a memorandum ahead of the 2017 disaster response that addressed the use of local vendors, it did not reference the requirement under the Stafford Act, as implemented in the FAR, to justify in writing the use of non-local vendors. A senior USACE official told us the agency had not issued any guidance to address requirements for contracting with local vendors and was not aware of any guidance issued at the department level. USACE legal officials noted the lack of written justification may be due to abbreviated timeframes under which post-disaster contracts are awarded. However, we found that USACE contracts included consolidated justification documents outlining rationales for the use of limited competition or abbreviated solicitation timeframes, but they did not include justifications for the use of non-local vendors. Without additional guidance or tools, contracting officials may not be aware that they are required to include written justifications for the use of non-local vendors in contract files, and federal agencies are at risk of not complying with the Stafford Act requirement to do so.", "Contracting officers responsible for the FEMA contracts we selected and senior procurement officials stated that during disaster response they received post-disaster requirements packages that were lacking in technical specificity or were otherwise deficient, but FEMA has begun to address this challenge. Program officials communicate contract requirements to contracting officers through requirements documents that include, among other items, a statement of work describing goods or services to be provided by an offeror, market research, and an independent government cost estimate. Contracting officials explained that when they received deficient documents, they had to conduct additional work to refine the requirements before soliciting for the contract—such as spending time assisting program officials to develop the required documentation. This additional work may add time to already tight award time frames for post-disaster contracts. When compared to large dollar value acquisitions, post-disaster contracts are awarded on significantly abbreviated time frames. For example, among the 12 FEMA contracts we assessed, time frames between the submission of a resource request and award date ranged from 1-26 days. This is faster than suggested; FEMA’s Procurement Administrative Lead Time guidance suggests preparation time frames of 60-300 days for new procurements based on the nature and value of an action.\nWe found instances where FEMA program offices provided inaccurate or untimely estimates of the quantities of goods or services needed for the contracts we reviewed, in some cases leading to additional time and efforts spent to meet the need. For example:\nAfter Hurricane Harvey, FEMA awarded contracts to supply a food bank. Officials told us the initial requirement from the food bank through the program office to the contracting officer was expressed in terms of “truck loads” but did not specify, for example, how large the truck should be, or how many pallets should be loaded per truck. FEMA ultimately awarded three contracts to meet the post-disaster need—the first contract had a period of performance of 4 days and, according to FEMA officials, was intended to meet initial needs for food while the program and contracting officials determined the full scope of the requirement. The second contract—a $37 million contract with a period of performance of 52 days—was intended to fulfill the remaining requirement. However, due to miscommunication of the requirement as documented in the contract files and according to a program official responsible for the contracts, FEMA needed to award a third contract for an additional 2.5 months and $23 million to meet the need. Due to the value of the contracts, FEMA deemed that the subsequent contract required a new solicitation and award, rather than a modification to the existing contracts, thereby increasing the time and effort required of procurement personnel to meet the post- disaster need for food.\nIn response to Hurricane Maria, FEMA awarded four post-disaster contracts for self-help tarps—which are used to cover small areas of roof damage. Of these contracts, two were terminated for convenience, both of which were included in our sample. The terminations were due in part to a national supply shortage. FEMA officials told us that under one of the contracts included in our review, at the request of the Commonwealth of Puerto Rico through program officials, FEMA ordered 500,000 40-foot-by-40-foot tarps, which differ from the size of the tarps normally ordered and stocked by the agency. Due to the supply shortage, FEMA received none, but officials noted that the impact of not receiving the tarps was minimal because the agency had initially overestimated the total number of tarps needed.\nSince the 2017 disasters, FEMA has started to address the issues with requirements development. Specifically, in 2018, FEMA officials told us the agency used portfolio managers in the field to assist with developing requirements for disaster response. Previously, in 2017, portfolio managers told us they supported the National Response Coordination Center but did not deploy to the disasters. Organizationally housed within FEMA’s OCPO, portfolio managers we spoke with told us they provide general templates for and guidance on acquisition documents for program officials to use and are primarily responsible for supporting steady-state acquisitions included in FEMA’s Master Acquisition Planning Schedule. Additionally, portfolio managers told us they provide informal, optional, “brown bag” training sessions for program officials. FEMA OCPO officials told us that they receive more requests for portfolio manager assistance than they can support, as the portfolio management section only maintains up to six staff. FEMA OCPO officials noted, however, that the agency expected to award an acquisition support contract to expand portfolio management capabilities. While the use of portfolio managers is an important step, it is too soon to tell the extent to which the use of portfolio managers in the field will address FEMA’s challenges with requirements development for post-disaster contracts.", "The agencies we reviewed each have a process for identifying lessons learned following a disaster, and we found they used these processes for the 2017 disasters. While agencies have identified actions they plan to take in response to the lessons they found following the 2017 disasters, additional challenges remain. Specifically, the agencies in our review encountered interagency contracting coordination challenges during the mission assignment process. Further, FEMA identified disaster contracting workforce shortages.", "FEMA, USACE, Coast Guard, and DLA each have processes for identifying lessons learned within their agencies through after-action reports. These reports identify lessons learned and areas for improvement and may be completed following a training exercise or a real-world event. Through these processes, agencies identified lessons learned during the 2017 disasters. Table 4 lays out each agency’s practice or requirement for identifying lessons learned and key findings— those related to contracting and mission assignments during the 2017 disasters.", "FEMA has also taken steps to identify interagency lessons learned by leading the Emergency Support Function Leadership Group and developing a mechanism to regularly report to the Secretary of Homeland Security. This group consists of the national emergency support function coordinators from each of the functions (such as transportation and firefighting), along with FEMA headquarters and regional officials. This body of senior officials is tasked with coordinating responsibilities and resolving operational and preparedness issues relating to interagency response activities in support of the National Response Framework. According to its charter, the group is required to carry out post-incident and after-exercise critiques, and perform substantive reviews of after- action reports, with recommendations for federal interagency partners to address shortfalls. Following the 2017 disasters, in May 2018, the Emergency Support Function Leadership Group identified 19 corrective actions, including improvements to mission assignment submission documents.\nFederal internal control standards state that communicating internally is key to an entity achieving its objectives. Further, as part of this communication, management should receive quality information about the entity’s operational processes that flows up the reporting lines from personnel to help management achieve the entity’s objectives. FEMA officials stated that there are processes, such as data calls, in place to solicit input from agencies. However, we noted, and FEMA officials agreed, that there is no formal reporting mechanism to the leadership group, and that it is up to the representatives from these agencies to raise issues for the group’s consideration.\nHowever, this is not consistently happening within the Coast Guard because it does not have a formal reporting process for soliciting input from officials directly involved in responding to these disasters to share with the Emergency Support Function Leadership Group. Coast Guard officials stated that they actively collect input during and immediately after an event or incident response, and that Coast Guard responders are able to provide input and issues through their chain of command at any time, but there is no formal process for reporting to the interagency group.\nDuring the course of our review, USACE officials did not provide information that indicated they had a formal reporting process for soliciting input from officials directly involved in responding to these disasters to share with the Emergency Support Function Leadership Group. Some senior level USACE officials responsible for the agency’s public works and engineering mission stated that they were unsure of the process for raising concerns to the Emergency Support Function Leadership Group and that officials were sometimes hesitant to raise issues to the group. However, in response to our draft report, USACE stated it has a formal process called the USACE Remedial Action Program for soliciting input from officials directly involved in the agency’s response and recovery following a disaster. As discussed later, we will follow up with USACE as part of our recommendation follow-up process.\nWhile Emergency Support Function Leadership Group member agencies may raise issues to the group, additional opportunities exist within these agencies to enhance the lines of communication from responders to the senior officials that comprise this leadership group. For example, some of the interagency challenges we identified in our review were not identified by this group, such as challenges in managing state and local expectations of federal response, which is discussed in more detail below. Also, USACE officials told us that some of the interagency challenges they cited following the 2017 disasters related to the mission assignment process were still present during the response to Hurricane Florence, which struck the Carolina coast in 2018. Formal processes for Emergency Support Function agencies—such as the Coast Guard and USACE—to solicit and share input from officials directly involved in the response and recovery efforts would help ensure the Emergency Support Function Leadership Group does not miss additional opportunities to improve disaster response.", "As the federal disaster coordinator, FEMA obtains requirements from states and localities and tasks the appropriate federal agencies, based on their emergency support function, through the mission assignment process. The agency assigned to a specific mission is then responsible for fulfilling those requirements, and may use contracts to do so. For example, the Coast Guard fulfills its pollution mitigation mission by executing contracts, and utilizes its own workforce to execute its search and rescue mission.\nUSACE officials we spoke with raised concerns about the mission assignment process for the debris removal and power restoration missions related to the 2017 disasters. Specifically, USACE officials noted concerns about coordination between state, local, and federal partners for the contracts we reviewed.\nUSACE debris removal mission: In December 2018, we found that USACE and California state officials reported different expectations related to USACE’s debris removal contracts following the wildfires, such as what structures would be removed from private properties and what levels of soil contamination would be acceptable. USACE removed more than 2.2 million tons of debris from more than 4,500 properties following the northern California wildfires. Due to the size and scope of this mission, USACE used both its advance contracts and additional post-disaster contracts for debris removal. According to USACE officials, they relied on FEMA, the lead for coordinating federal disaster response, to manage communication with states and localities and to identify and manage expectations about the scope of work to be performed using their debris removal contracts.\nUSACE officials cited challenges with communicating to state and local officials what the agency was permitted to do under its mission assignment. For example, USACE officials told us that local officials believed that USACE would replace soil removed as part of its debris removal efforts; however, this was not part of the mission assignment from FEMA. Further, officials added that different environmental standards created confusion regarding what types of soil should be removed. For example, Napa County officials said that USACE’s mission required them to ensure that no contaminated soil remained on the properties, without regard for the naturally occurring levels of arsenic and asbestos in Napa area soil. As a result, Napa County officials said that USACE removed more soil than was necessary. However, following discussions with Napa County officials, USACE obtained site-specific samples from some properties to understand pre-existing contamination levels prior to further debris removal.\nUSACE power restoration mission: Hurricane Maria destroyed much of the electricity grid in Puerto Rico, leaving millions without power and resulting in the longest blackout in U.S. history. To restore power to its 3.3 million people, Puerto Rico requested federal assistance with its power grid. To coordinate this effort across all stakeholders, FEMA established a unified command structure—which included the federal agencies, the Puerto Rican government and its contractors, and utility companies providing mutual assistance. According to FEMA officials, this structure allowed stakeholders to target priority work, ensure crews could access the work areas, and identify the needed materials. USACE officials stated that they received direction from FEMA and had limited direct interaction with Puerto Rican officials. However, despite this structure, USACE officials noted that changing direction from FEMA contributed to inefficiencies in contract management. For example, the scope of power restoration work Puerto Rico was requesting changed several times—such as from transmission work to distribution. These changes necessitated adjustments in contractor workforce configurations and contributed to idle time and equipment, according to officials.\nFEMA’s mission assignment policy designates a Federal Disaster Recovery Coordinator as the person responsible for facilitating disaster recovery coordination and collaboration among federal, state, local, tribal, and territorial governments; the private sector; and voluntary, faith-based, and community organizations. However, neither FEMA’s mission assignment policy nor its guide—which provides guidance on how to open and close mission assignments—provide additional details on how that coordination is to take place. Further, FEMA’s Response Directorate—the office that oversees the mission assignment process— was unable to identify at what level this coordination should occur.\nUSACE and Coast Guard officials also noted that the mission assignment process does not account for other contracting considerations, such as demobilization, which occurs when contractor personnel leave the work site and return to their headquarters. According to USACE and Coast Guard officials, demobilization is required to be completed by the end of the contract’s period of performance; therefore, contracting officers need to know when the mission will end so that they can build adequate time for demobilization into the contract.\nCoast Guard pollution mitigation mission: Under this mission, the Coast Guard is responsible for responding to threats to public health, welfare, or the environment caused by actual or potential oil and hazardous materials incidents. Coast Guard officials told us that mission timing and the length of requirements were not communicated by FEMA in a timely manner. They told us that they contacted FEMA multiple times to determine if its mission assignment would be continued, but they did not receive an answer until shortly before the end of a contract’s period of performance. As a result, officials told us they were unsure whether they would need to demobilize contractors before completing the work, which created uncertainty about the availability of subcontractors. A FEMA Response Directorate official stated that these issues are coordination and planning concerns that should be worked out in advance between FEMA and the mission assigned agency. Ultimately, FEMA extended the Coast Guard’s mission assignment for pollution mitigation following Hurricane Maria four times. Figure 13 depicts the number of times Coast Guard’s mission was extended by FEMA.\nUSACE power restoration mission: USACE officials cited similar challenges during the power restoration mission in Puerto Rico following Hurricane Maria. For example, USACE officials stated they typically begin planning for demobilization as soon as a mission begins. However, in this instance, officials did not know the eventual end date in order to plan for demobilization activities. Officials added that demobilization may take about 30 days, but USACE cannot extend contracts or obligate funds without a FEMA mission assignment extension. For example, if the mission assignment is scheduled to end on June 30, contracting officials would need to direct the contractor to begin demobilization as early as May 31. Officials stated that a mission assignment extension or option period of 30 days beyond the anticipated mission end date would facilitate demobilization and reduce any undue burden or concern around demobilization efforts.\nFEMA’s mission assignment guide does not provide a process or mechanism to follow up on the status of a mission once it is assigned. A FEMA official stated that the Response Directorate is responsible for informing their leadership of expiring mission assignments and contacting the mission-assigned agency to make them aware of the impending expiration, but that there is no standard time frame for doing so. Further, the official stated that, in some cases, FEMA may be performing this work a few days before a mission is set to expire. However, officials at USACE and Coast Guard told us they are dependent upon FEMA to reissue, clarify, or extend mission assignments. Further, the FEMA official told us that contracting considerations—such as the time needed for a contractor to mobilize and demobilize—are not necessarily built into the period of performance of a mission assignment.\nFEMA identified issues related to the mission assignment process, both during the 2017 disasters and following Hurricane Sandy in 2012. For example, in its 2013 Hurricane Sandy After-Action Report, FEMA found that the mission assignment process was not optimally set up to quickly surge resources to the field in a large-scale incident. To address these challenges, FEMA convened an Executive Steering Committee to update the mission assignment process, among other actions, and subsequently updated its mission assignment policy in 2015. Following the 2017 disasters, the Emergency Support Function Leadership Group identified challenges related to the mission assignment process and made recommendations to: (1) ensure response officials are properly trained on their department or agency’s statutory authorities and FEMA’s mission assignment process, and (2) develop specific recommendations to the FEMA Response Directorate on ways to reform mission assignment submission documents.\nThese recommendations have been assigned to working groups within the Emergency Support Function Leadership Group, which plans to track the status until they are implemented. While these actions may improve the mission assignment process, they do not specifically address the issues we identified related to coordination and contracting.\nWhile the emergency support functions lay out agencies’ general responsibilities, agencies are dependent upon FEMA’s mission assignment process to further define how to perform their roles. Federal internal control standards state that management should implement control activities through its policies. These control activities include periodically reviewing policies, procedures, and related control activities for continued relevance and effectiveness in achieving the entity’s objectives or addressing related risks. Further, these standards also state that communicating internally and externally are key to achieving an entity’s objectives. As part of its internal controls, entities should evaluate the methods to communicate quality information throughout and outside of the entity on a timely basis. While FEMA revised its mission assignment guide in 2017, it still does not require FEMA to lay out coordination responsibilities in detail when assigning a mission. Without a mission assignment policy and related guidance that better incorporates contracting considerations, such as demobilization, and requires FEMA to clearly define coordination responsibilities with federal, state, and local stakeholders during the mission assignment process, federal agencies may encounter challenges fulfilling their assigned missions and may not fulfill their disaster response and recovery missions efficiently.", "During the 2017 disasters, FEMA leveraged contracting staff from its regions, headquarters, and the DART teams—FEMA’s deployable contracting workforce. However, FEMA’s after-action report and officials we spoke with cited workforce shortages as a continuing challenge for disaster response and recovery. For example, officials we spoke with in several regional offices stated that there are only one to three contracting officers per region. Further, information provided by FEMA OCPO shows that eight of FEMA’s 10 regional offices have only one permanent full- time contracting official. Some of FEMA’s regional offices have additional contracting staff through FEMA’s Cadre of On-Call Response/Recovery Employees, but this varies from region to region. Regional offices are responsible for managing post-disaster contracts, even if regional procurement staff were not involved in the initial award of those contracts, according to FEMA officials.\nAs noted in table 4 above, FEMA’s after-action report recommended increasing contract support capacities; however, it did not provide a specific plan to do so. According to FEMA officials, the agency’s workforce needs have not been assessed since a FEMA workforce analysis pilot conducted in 2014. We have identified several key principles that strategic workforce planning should address, including: determining the critical skills and competencies that will be needed to achieve current and future programmatic results, and developing strategies that are tailored to address gaps in the number, deployment, and alignment of human capital approaches for enabling and sustaining the contributions of all critical skills and competencies.\nFurther, in our review of FEMA’s 2014 analysis, we found that FEMA evaluated contracting workforce needs, but did not specifically consider contracting workforce needs in the regional offices or address DART employees. The analysis was based on 5 years of workload data and conducted at the task or activity level, such as performing market research prior to making a contract award. However, the analysis did not prioritize skills or mission needs, nor did it identify critical competencies. In September 2018, FEMA procurement officials told us that, based on the 2014 analysis, they planned to hire 57 additional contracting staff. Officials noted that FEMA’s general operation funding does not support these additional hires, thus the agency plans to hire these staff as Stafford Act employees for 2-year appointments using disaster funding. While this is an important step, it is unclear when these staff will be hired or how they will be allocated across FEMA OCPO. For example, as of July 2018, FEMA OCPO had 72 vacant positions, including key leadership positions and contracting specialists. Without assessing its current contracting workforce needs—including staffing levels, mission needs, and skill gaps—and developing a plan to address these gaps that includes time frames, FEMA will not know whether it has the appropriate number of contracting officials with the key skills needed to meet its mission and is not likely to be well-positioned to respond to future disasters.", "Contracting during a disaster can pose a unique set of challenges as officials face a significant amount of pressure to provide life-sustaining goods and services to survivors as quickly as possible. Given the scale and consecutive nature of the 2017 disasters, disaster contracts— particularly post-disaster contracts—played a key role in the response and recovery efforts. In these situations, it is important that the federal government be accountable for the contracting decisions it makes and the money it obligates, support the local economy and survivors as effectively as possible, and implement lessons learned before the next disaster strikes.\nRegarding accountability for the contracting decisions it makes and dollars obligated following disasters, without the ability to track disaster contracts using a NIA code in FPDS-NG, agencies, Congress, and the public lack full insight into post-disaster contracts. Providing clear criteria for establishing and closing the NIA code that accounts for the needs of users and consistently implementing these criteria will help ensure insight into high-visibility disaster events. Further, the ability to identify and track contracting dollars for disasters through a publicly available database, such as FPDS-NG, can reduce the burden on agencies to provide these data for interested parties, including Congress and other users, and offer a resource for historical data across major disasters.\nTo help meet the needs of the local economy as effectively as possible, using a contracting preference for vendors in a disaster-affected area is an important component to early recovery efforts. Without guidance or training to ensure contracting officers are aware of the regulatory definition of the local area, agencies may miss opportunities to provide financial support to local vendors. Additionally, without clarifying how contracting officers determine whether offerors reside or primarily do business in a disaster area for the purposes of a local area set-aside, contract officials will remain uncertain on how to implement related FAR criteria. Similarly, guidance and tools to help ensure contracting officials are aware of the requirement to provide preference to the extent feasible and practicable to local vendors, including the need for written documentation on the use of non-local vendors for post-disaster contracts, will help ensure agencies comply with the requirement to do so. Taken together, these actions could enhance compliance with the Stafford Act provisions related to the award of contracts to local businesses in the disaster area, which could help jump-start the local economy.\nWith regards to implementing lessons learned before the next disaster strikes, large scale disasters, like those that occurred in 2017, require effective coordination across emergency support function agencies. Given the Emergency Support Function Leadership Group’s responsibility to identify gaps or seams in the federal government’s efforts to respond to disasters, it is essential that the group have accurate and up-to-date information. Formal processes for soliciting and sharing information to communicate lessons learned to this group would help enhance agencies’ abilities to identify and address weaknesses in disaster response. Further, incorporating contracting considerations, such as demobilization, into the mission assignment policy, could enhance federal agencies’ ability to fulfill their disaster response and recovery missions efficiently. Lastly, without an assessment of FEMA’s contracting workforce needs, FEMA is at risk of not having a sufficient contracting workforce during a disaster.", "We are making a total of 10 recommendations, including one to DHS, one to the Office of Federal Procurement Policy, two to FEMA, three to the Army, two to the Coast Guard, and one to GSA (in coordination with DOD and DHS).\nThe Administrator of the General Services Administration, in coordination with the Secretaries of Defense and Homeland Security, should jointly revisit and assess the extent to which the criteria in the 2018 NIA code Memorandum of Agreement, including criteria for closing NIA codes, meet long-term visibility needs for high visibility events and account for the needs of users, such as FEMA, other agencies, and the Congress. At a minimum, the agreement should include criteria that take into account the roles of the federal agencies involved in response and recovery and provide a process that ensures consistent consideration and implementation of the criteria. (Recommendation 1)\nUntil the NIA code Memorandum of Agreement between the General Services Administration and the Departments of Defense and Homeland Security is revised, the Secretary of Homeland Security should, in coordination with the Department of Defense and the General Services Administration, keep the existing NIA code for Hurricane Maria open, reopen the other NIA codes established for 2017 and 2018 hurricanes (Hurricanes Harvey, Irma, Florence, and Michael), and request that agencies retroactively enter NIA codes for contract actions for Hurricanes Harvey and Irma made after June 30, 2018, for Hurricane Florence made after March 15, 2019, and for Hurricane Michael made after April 12, 2019 into FPDS-NG to adequately capture contract obligations, to the extent practicable. (Recommendation 2)\nThe Secretary of the Army should direct the Commanding General of the U.S. Army Corps of Engineers to provide guidance or related training to ensure contracting officers are aware of the regulatory definition of “local area”. (Recommendation 3)\nThe Administrator of the Office of Federal Procurement Policy should provide additional clarification on how contracting officers should determine whether offerors reside or primarily do business in a disaster area for the purposes of a local area set-aside contract. (Recommendation 4)\nThe Commandant of the Coast Guard should provide guidance and tools for contracting officials to use to ensure requirements concerning contracting with local vendors, including justification requirements for the use of non-local vendors, are consistently met. (Recommendation 5)\nThe Secretary of the Army should direct the Commanding General of the U.S. Army Corps of Engineers to provide guidance and tools for contracting officials to use to ensure requirements concerning contracting with local vendors, including justification requirements for the use of non- local vendors, are consistently met. (Recommendation 6)\nThe Secretary of the Army should direct the Commanding General of the U.S. Army Corps of Engineers to establish a formal process to solicit input from officials directly involved in the agency’s response and recovery following a disaster and to share that input with the Emergency Support Function Leadership Group. (Recommendation 7)\nThe Commandant of the Coast Guard should establish a formal process to solicit input from officials directly involved in the agency’s response and recovery following a disaster and to share that input with the Emergency Support Function Leadership Group. (Recommendation 8)\nThe FEMA Administrator should take the lead to work together with the Coast Guard and the U.S. Army Corps of Engineers to revise the mission assignment policy and related guidance to better incorporate consideration of contracting needs, such as demobilization, and to ensure clear communication of coordination responsibilities related to contracting. (Recommendation 9)\nThe FEMA Administrator should assess its workforce needs—including staffing levels, mission needs, and skill gaps—for contracting staff, to include regional offices and DART; and develop a plan, including timelines, to address any gaps. (Recommendation 10)", "We provided a draft of this report to DOD, DHS, GSA, and OMB for review and comment. In written comments provided by DOD, DHS, and GSA (reproduced in appendixes III, IV, and V), as well as an email response from OMB, the agencies concurred with nine of the 10 recommendations. They generally provided steps they plan to take to address these recommendations. As discussed further below, USACE described actions it stated were sufficient to fully address the seventh recommendation, the steps described by FEMA would not fully meet the intent of the tenth recommendation, and DHS did not concur with our second recommendation.\nIn response to the seventh recommendation as written in our draft report—to establish a formal process to solicit input from officials directly involved in the agency’s response and recovery following a disaster and to share that input with the Emergency Support Function Leadership Group—in its comments, USACE concurred and stated it has a formal process and it considered the recommendation completed. USACE noted that its Remedial Action Program solicits input from officials involved in response and recovery efforts and added that USACE shares findings from this program with the Emergency Support Function Leadership Group throughout the year and annually during the senior leaders seminar. During the course of our review, USACE did not provide information that indicated that they had such a formal process. As part of our recommendation follow-up process, we will request documentation regarding the process and how it solicits and shares information to the Emergency Support Function Leadership Group.\nIn response to the tenth recommendation that FEMA assess its workforce needs—including staffing levels, mission needs, and skill gaps—for contracting staff, to include regional offices and DART; and develop a plan, including timelines, to address any gaps, FEMA stated that its Office of the Chief Component Procurement Officer assesses its workforce on an annual basis, with the last assessment conducted in January 2019. FEMA also noted that it entered into a contract for acquisition support services and plans to hire Cadre of On-Call Response and Recovery employees to provide dedicated support during disasters. Following FEMA’s response, we requested and received the FEMA Office of the Chief Component Procurement Officer’s 2019 workforce assessment. As with FEMA’s 2014 workforce analysis, the 2019 assessment calculated the number of employees needed based on the estimated time to complete a task. However, the assessment did not include an analysis of mission needs or skill gaps, and the assessment provided does not specify whether it includes the needs of regional offices and DART. FEMA estimates that it will implement this recommendation in September 2019, and we will continue to monitor FEMA’s planned efforts through our recommendation follow-up process.\nDHS did not concur with the draft report’s second recommendation regarding NIA codes. In its response, with regards to extending existing NIA codes and reinstating expired NIA codes, DHS stated that it is bound by the memorandum of agreement with GSA and DOD, unless or until all three signatory agencies agree to revise or suspend the agreement. We recognize that all three agencies are bound by the agreement, and also recommended in the first recommendation that GSA, DOD, and DHS jointly revisit the agreement. GSA concurred with this recommendation in its written comments reproduced in Appendix V. In an email sent from an official within DOD’s Defense Pricing and Contracting Office, DOD concurred. DHS did not respond to our first recommendation. As such, we have revised the second recommendation to state that DHS take action in coordination with DOD and GSA. We also note that the memorandum of agreement states that extending expiring or already expired NIA code end date is appropriate, in part, when two or more agencies do not have a reasonable alternative method of identifying and internally tracking those emergency acquisitions. We discuss in our report how once the NIA code is closed, there is no publicly available, government-wide system to track contract obligations for specific events. We also discuss how, using the description field (which does not provide a full picture) in FPDS-NG, agencies obligated more than $250 million on contracts for Hurricanes Harvey and Irma during the three months after the NIA codes for these two hurricanes were closed. Given this, we continue to believe DHS should consider reopening the codes for Hurricanes Harvey and Irma, in coordination with DOD and GSA.\nMoreover, in its response to the second recommendation DHS further stated that FEMA’s Office of the Chief Component Procurement Officer (who is not currently a party to the memorandum of agreement), believes the recommendation to extend the NIA codes for 2018 Hurricanes Michael and Florence goes beyond the scope of this audit. While the main focus of this report is the 2017 hurricanes and California wildfires, we discuss Hurricanes Florence and Michael in this draft with respect to the NIA codes, as the same issues and concerns we raised apply regardless of the year of the hurricane. However, after we sent the draft to the agencies for comment, the agencies let the codes for Hurricanes Florence and Michael expire on March 15, 2019 and April 12, 2019, respectively. We therefore revised the second recommendation to recommend that the codes for Hurricanes Florence and Michael should be reopened (rather than kept open).\nIn its written comments, DHS also stated that neither DHS nor FEMA can unilaterally direct other agencies to retroactively enter FPDS-NG data for Hurricanes Harvey and Irma. We acknowledge this and have revised the recommendation to recommend that DHS request, rather than direct, other agencies to retroactively enter the information, to the extent practicable. As we state in the report, the NIA codes for the 2005 hurricanes were established in October 2005, and contracting officers retroactively entered data for contracts related to these events to enable full insight into contracting for these disasters. DHS further stated that retroactively entering data into FPDS-NG is not practical and places an unreasonable burden on contracting staff, and that the draft did not support the case that there were any benefits to be gained. We recognize that there is some burden associated with the recommendation, thus we recommended that DHS request agencies take action to the extent practicable. In terms of benefits, the report identifies benefits in terms of providing decision makers with important information to understand the procurement impact of such disasters.\nDOD and DHS also provided technical comments, which we incorporated as appropriate.\nWe are sending copies of this report to the appropriate congressional committees, the Secretary of Defense, the U.S. Army Corps of Engineers Director of Contracting, the Director of the Defense Logistics Agency, the Secretary of Homeland Security, the Administrator of the Federal Emergency Management Agency, the Federal Emergency Management Agency’s Chief Procurement Officer, the Commandant of the Coast Guard, the Administrator of the General Services Administration, the Director of the Office of Management and Budget, and the Administrator of the Office of Federal Procurement Policy. In addition, the report is available at no charge on the GAO website at http://www.gao.gov.\nIf you or your staff have any questions about this report, please contact me at (202) 512-4841 or [email protected]. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix VI.", "This report specifically addresses the use of post disaster contracts and: (1) assesses the extent to which federal agencies obligated funds on post-disaster contracts in response to the 2017 major disasters; (2) assesses the extent to which selected agencies experienced challenges in the planning process for selected post-disaster contracts; and (3) describes selected agencies’ lessons learned as a result of the 2017 major disasters and assesses the extent to which they have taken action to address them.\nTo identify the extent to which federal agencies obligated funds on post- disaster contracts in response to the 2017 disasters, we reviewed Federal Procurement Data System-Next Generation (FPDS-NG) data through June 30, 2018, the most recent and complete data at the time of our review. We adjusted the obligation data to constant fiscal year 2018 dollars using the Fiscal Year Gross Domestic Product price index. We identified hurricane obligations using the national interest action (NIA) code, as well as the contract description.\nData on obligations for the California wildfires is limited to those contracts, if any, identified by the agencies with the highest obligations on post- disaster contracts for the hurricanes—the Federal Emergency Management Agency (FEMA), U.S. Army Corps of Engineers (USACE), Defense Logistics Agency (DLA), and the U.S. Coast Guard (Coast Guard)—because no NIA code was established in FPDS-NG. Coast Guard officials stated that they did not execute any contracts in response to the 2017 California wildfires. DLA officials stated that they maintain contracts, which for the most part provide inventory replenishment for DLA and the U.S. Forest Service within the U.S. Department of Agriculture, but they were unable to provide data on contracts awarded or executed specifically for the two wildfire disasters in the scope of our review. Therefore, our analysis only captures obligations for FEMA and USACE reported contracts related to the 2017 California wildfires.\nTo determine which obligations were made through the use of post- disaster contracts versus advance contracts, we reviewed documentation provided by FEMA and USACE identifying the advance contracts they have in place and that were used in support of the 2017 disasters. We analyzed the FPDS-NG data against these contracts to identify obligations on post-disaster contracts and compared these to obligations on advance contracts by disaster. We analyzed competition procedures used and the types of goods and services procured for post-disaster contracts. In addition to advance contracts for disaster response, agencies can leverage other existing contract vehicles. For example, to respond to its pollution mitigation functions under emergency support function 10, the Coast Guard awards task orders off of its portfolio of basic ordering agreements. For the purposes of this report, post-disaster contracts include all contract awards and orders that were not identified by FEMA or USACE as advance contracts.\nTo assess the extent to which disaster contract obligations can be tracked through FPDS-NG using the NIA code, we identified prior hurricane events with the highest contract obligations from 2005 through September 2018. We analyzed the data to determine when the highest level of federal contract obligations occurs following a hurricane. We also assessed the process for establishing and closing a NIA code. Specifically, we reviewed the criteria in the 2012 and 2018 memorandums of agreement between DHS, DOD, and the General Services Administration, and interviewed officials involved in the process.\nWe assessed the reliability of FPDS-NG data by reviewing existing information about the FPDS-NG system and the data it collects— specifically, the data dictionary and data validation rules—and performing electronic testing. We also compared FPDS-NG data to the contract files in our review. Specifically, to review our selected post-disaster contracts for data reliability, we compared items such as, the extent competed, the use of a local area set-aside, NIA code, and termination status, based on the contract information and the information in FPDS-NG. Based on the steps we took, we determined the FPDS-NG data were sufficiently reliable for the purposes of describing agencies’ post- disaster contract obligations.\nTo assess the extent to which agencies experienced challenges in the planning of selected post-disaster contracts, we reviewed relevant laws and regulations, including the Post-Katrina Emergency Management Reform Act (PKEMRA), the Federal Acquisition Regulation (FAR), the Robert T. Stafford Disaster Relief and Emergency Assistance Act (Stafford Act), as well as agency policy and guidance. We identified a non-generalizable sample of 23 post-disaster contracts from the four agencies with the highest post-disaster obligations based on FPDS-NG data as of March 31, 2018—DHS’s FEMA, DOD’s USACE, DOD’s DLA, and DHS’s Coast Guard. We selected contracts across the four major 2017 disasters included in our scope (Hurricanes Harvey, Irma, and Maria, as well as the California wildfires) based on four selection criteria—(1) contracts using the urgency exception to full and open competition; (2) contracts using a local area set-aside; (3) contracts awarded to small businesses; and (4) contracts terminated for cause or convenience. Our goal in this selection was to ensure we selected a range of contracts within each of these four criteria so as to assess the extent to which these contracts implemented certain laws and regulations. Specifically, we selected contracts based on the use of urgency and local area set-asides in order to assess agencies’ implementation of relevant PKEMRA, Stafford Act and FAR criteria for post-disaster contracts. Because the obligations for local area set-aside contracts was low across all federal agencies, about 5 percent of total post-disaster obligations, we selected contracts that were awarded to small business vendors as a proxy to identify other awards to local vendors. Finally, we selected terminated contracts to assess additional challenges related to post- disaster contracts, such as the availability of contracted services and supplies and the requirement setting process. Based on these criteria, we selected 12 FEMA, 7 USACE, 2 DLA, and 2 Coast Guard contracts. Findings based on information collected from the 23 contracts cannot be generalized to all post-disaster contracts. Additional details on our selected contracts can be found in table 5.\nTo assess how agencies used the urgency exception to full and open competition, we reviewed selected contracts for the inclusion of a justification and approval for other than full and open competition including sole source justifications and exclusion of sources justifications.\nTo assess the extent to which agencies provided preference to local vendors for post-disaster contracts, we reviewed selected contract files for the use of a set-aside or an evaluation preference listed in the contract solicitation, and the inclusion of justifications for contracts not awarded to local vendors. Additionally, we reviewed applicable agency guidance and interviewed contracting and senior procurement officials across all four agencies regarding their use of local area set-asides, including the means by which they define the geographic set-aside area and determine that an offeror primarily resides or does business in the set-aside area. We also met with officials from the Office of Management and Budget’s Office of Federal Procurement Policy to discuss relevant FAR criteria.\nTo assess how FEMA program offices develop and deliver requirements packages for use by contracting officers and the extent to which those packages are sufficiently specific to allow contracting officers to issue a contract solicitation, we interviewed contracting, program, and senior procurement officials responsible for the contracts in our selection sample. We discussed the specificity of initial versus final requirements, the nature of requirements changes, the process of requirements development, and training provided to program officials regarding the requirements development process. We also reviewed new post-disaster awards at FEMA to determine time frames between resource request to award on average for post-disaster contracts. We compared these findings to relevant agency guidance on acquisition planning.\nTo describe lessons learned selected agencies identified related to the use of post-disaster contracts and assess the extent to which agencies have taken action to address them, we reviewed available completed after-action reports from the 2017 and prior disasters, including the Hurricane Sandy FEMA After-Action Report, the 2017 Hurricane Season FEMA After-Action Report, USACE’s Temporary Emergency Power Mission After Action Review for Hurricane Matthew, USACE’s Puerto Rico After Action Review, USACE’s Northern California Wildfires Debris Removal Mission After Action Review, the Coast Guard’s 2017 Hurricane Season Strategic Lessons Learned After Action Report, and the Defense Logistics Agency’s 2017 Hurricane After Action Meeting papers. We also reviewed findings from the Emergency Support Function Leadership Group related to interagency lessons learned. As part of our review, we identified requirements for agencies to document or practices agencies use to document lessons learned following a disaster, agency specific and interagency lessons learned specific to post-disaster contracts and mission assignments, and recommendations or actions planned by the agencies to address them. We reviewed federal internal control standards and the Emergency Support Function Leadership Group charter and the standard operating procedures for its Preparedness Evaluation/Corrective Action Working Group.\nTo describe challenges related to coordination with state and local officials on the use of post-disaster contracts, we interviewed FEMA, USACE, DLA, and Coast Guard officials. To obtain perspectives and examples from state and local government officials involved in disaster response, we interviewed officials in California on the use of federal contracts. We also met with state and local officials in Texas, Florida, Puerto Rico, and the U.S. Virgin Islands to discuss the federal response to the 2017 hurricanes more broadly. The information gathered from these officials is not generalizable to all officials.\nTo describe challenges related to the mission assignment process, we interviewed FEMA, USACE, and Coast Guard officials, including officials from FEMA’s Response Directorate and the contracting officials from USACE and the Coast Guard that awarded the contracts these agencies used to fulfill their missions. We also reviewed the mission assignment documents, where FEMA assigned USACE and Coast Guard missions and laid out their responsibilities.\nTo assess workforce challenges, we reviewed DHS’s 2014 workforce assessment, which identified gaps in FEMA’s contracting workforce. We also obtained information from FEMA on its current contracting workforce in headquarters, regional offices, Disaster Assistance Response Team, and joint field offices. We also interviewed FEMA contracting officials to obtain their perspectives and experiences during the 2017 disaster season.\nWe conducted this performance audit from March 2018 to April 2019 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 that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives.", "The National Response Framework identifies 14 emergency support functions (ESF) and designates a federal department or agency as the coordinating agency for each function. ESFs are the federal government’s primary coordinating structure for response, and under this structure, the Federal Emergency Management Agency (FEMA) acts as the federal coordinating agency.", "", "", "", "", "", "In addition to the contact named above, Janet McKelvey (Assistant Director), Katherine Trimble (Assistant Director), Caryn E. Kuebler (Analyst in Charge), Lindsay Taylor, and Sarah Tempel were principal contributors. In addition, the following people made contributions to this report: Emily Bond, Lorraine Ettaro, Suellen Foth, Julia Kennon, Carol Petersen, Sylvia Schatz, Alyssa Weir, and Robin Wilson." ], "depth": [ 1, 2, 2, 3, 3, 2, 1, 2, 2, 1, 2, 3, 3, 3, 2, 1, 2, 2, 2, 2, 1, 1, 1, 1, 1, 1, 1, 1, 1, 2, 2 ], "alignment": [ "", "", "", "", "", "", "h0_title", "", "h0_full", "h1_title", "h1_title", "", "h1_full", "h1_full", "", "", "", "", "", "", "h1_full", "h2_full", "h2_full", "h1_full", "", "", "", "", "", "", "" ] }
{ "question": [ "Why is the full extent of post-disaster contracting unknown?", "How does the NIA code work?", "How have NIA codes been used for hurricanes in the past?", "How did GAO identify challenges in planning?", "What were GAO's findings on USACE officials?", "What problem did GAO find with justification writing?", "How have agencies addressed this issue with justification writing?", "How can failure to address planning challenges be detrimental to agencies?", "What are GAO's recommendations?", "How did agencies respond to these recommendations?", "How does GAO view the agency response?" ], "summary": [ "However, the full extent of post-disaster contracting related to the 2017 disasters is unknown due to the Department of Homeland Security's (DHS) inconsistent implementation of the criteria for closing a national interest action (NIA) code.", "This code allows agencies to track data on contract actions related to national emergencies, providing government-wide insight into response and recovery efforts.", "DHS closed the codes for Harvey and Irma on June 30, 2018, less than a year after those hurricanes hit. In contrast, the codes for prior hurricanes were open for at least five years, with Katrina remaining open for 13 years.", "Based on a review of 23 contract files from FEMA, USACE, the Defense Logistics Agency, and the Coast Guard, GAO identified challenges in the planning of selected contracts.", "For example, GAO found USACE officials were not consistently aware of the regulation that defines “local area.”", "GAO also found that contracting officers at FEMA, USACE, and the Coast Guard did not consistently write justifications for awards to non-local vendors outside the disaster area, as required.", "FEMA developed guidance to address this, but the Coast Guard and USACE have not issued guidance or tools to address this requirement.", "Without addressing planning challenges, agencies may miss opportunities to award contracts to local businesses in the disaster area to the extent feasible and practicable, which could help jump-start the local economy.", "GAO is making 10 recommendations, including that DHS reopen NIA codes for Hurricanes Harvey and Irma; USACE provide guidance on the local area definition; and the Coast Guard and USACE provide guidance to ensure contracting requirements for the use of non-local vendors are met.", "Agencies concurred with 9 recommendations. DHS did not agree that NIA codes should be reopened.", "GAO continues to believe DHS should do so, to the extent practicable, as discussed in the report." ], "parent_pair_index": [ -1, 0, 0, -1, 0, 0, 2, 0, -1, 0, 0 ], "summary_paragraph_index": [ 4, 4, 4, 5, 5, 5, 5, 5, 6, 6, 6 ] }
CRS_R42533
{ "title": [ "", "Background and Context", "Selecting the Delegates", "Winning the Nomination", "The Contemporary Nominating Process", "How This Report is Organized", "The Primary Season", "How Does the Caucus Process Work?", "The Iowa Example", "What Are the Different Types of Primaries?", "What Is Front-loading?", "Why Do Iowa and New Hampshire Go First?", "Who Has Authority Over the Rules for Delegate Selection?", "Democrats", "Republicans", "What Rules Are Different for 2016?", "Timing", "Proportional Allocation", "What Are the Methods for Determining Number of Delegates and Alternates from the States and Territories?", "Democrats", "Republicans", "How Do Primary and Caucus Results Determine the Election of National Convention Delegates?", "Democrats", "Republicans", "What Happens to Delegates Pledged to a Presidential Candidate Who Drops Out of the Race?", "Who Are the Superdelegates?", "The National Party Conventions", "How Are the Primaries, Caucuses, and National Party Conventions Financed?", "What Occurs at the National Nominating Conventions?", "Could There Be a Brokered or Multi-ballot National Convention in 2016?", "When Was the Last Brokered or Multi-ballot Convention?", "Where and When Are the 2016 National Conventions?" ], "paragraphs": [ "", "This report answers frequently asked questions about presidential primaries and caucuses, and the national party nominating conventions that follow them. The nominating process elicits questions because it relies on a dense combination of national and state party rules and state election laws to conduct the primaries and caucuses, and it proceeds according to a seemingly haphazard calendar of events. Furthermore, the conventions officially select the presidential candidates, but the nominating contest is almost always resolved earlier, during the primary season, as soon as one candidate can claim a majority of delegates. The role of the modern conventions is to officially ratify the primary season results.\nDespite its complicated nature, the presidential nominating process is simply a race among presidential candidates to accumulate a majority of delegates, in order to claim the nomination at the national convention. This report discusses selected aspects of the convoluted process of choosing delegates in the primaries and caucuses and the national conventions that officially mark the end of the nominating season.", "State parties use two basic methods to select the national convention delegates, the caucus and the primary. Some state parties combine the two to select delegates. A caucus is a local meeting, usually at the precinct level, where participants register their presidential candidate preference in a public way by joining a group of supporters for that candidate. In some caucuses, participants simply write their presidential candidate preference on a slip of paper. The presidential candidate supporters then elect delegates from the group to the next level, usually county conventions, where the same process is repeated. The national convention delegates are usually elected at the congressional district and state conventions. In contrast to primary elections, the caucuses are run by the political parties.\nA presidential primary is run by elections officials in the state, and the voter goes to his or her regular polling place to cast a ballot. The voter may mark the ballot for a presidential candidate only, called a preference primary, or may mark it for a presidential candidate and for a certain number of delegates pledged to that candidate, called a direct election primary. In the latter case, the delegates are elected in the primary based on individual delegate vote tallies. In both types of primaries, the national delegate slots are assigned to presidential candidates according to the primary results. The primary and caucus processes are discussed in greater detail in the body of this report.", "Until recent decades, the national party conventions played the key role in choosing the presidential nominees. In the era of \"party bosses,\" state and local party leaders often controlled blocs of delegates or entire state delegations, because the delegates were chosen in closed party meetings or conventions. Presidential candidates needed the support of the party leaders and bosses to win the nomination, and deal-making was crucial to the process. The focal point of this activity was the national convention itself, where the outcome was often unknown until the convention conferred the nomination, following a roll call vote of the state delegations. Some conventions required repeated voting by the delegates before one candidate emerged with a majority of support. These multiple ballot, or brokered, conventions were fairly common, but the last one occurred in 1952, when Democrats needed three ballots to nominate Governor Adlai Stevenson to face General Dwight D. Eisenhower in the general election. The last Republican convention to require multiple ballots was in 1948, when Governor Thomas Dewey claimed the nomination on the third ballot over Senator Robert Taft and former Governor Harold Stassen. There has been speculation that no candidate will secure a majority of support from delegates to the 2016 Republican convention, which could result in pre-nomination maneuvering or even multiple ballots to declare a nominee.\nSince the 1970s, reform of the nominating process has diminished the importance of the conventions and increased the importance of primaries in choosing the nominees (discussed in the following section entitled \"The Contemporary Nominating Process\"). Although the conventions no longer select the candidates, but simply ratify the results from the primary season, they perform an important political function by showcasing the political parties, their presidential and vice presidential candidates, and kicking off the general election campaign.", "In the turbulent decade of the 1960s, various reform movements focused attention on perceived inequities in society and on the political process in particular. Within the Democratic Party, the 1968 national convention in Chicago gave rise to a reform effort after the convention erupted in controversy and violence. Inside the convention hall, disputes arose because of the boss-controlled selection process while, outside the hall, police and anti-war protesters clashed repeatedly over a six day period. When the convention ended, the party appointed a group to examine the nomination process. The Commission on Party Structure and Delegate Selection, better known as the McGovern-Fraser Commission, made various recommendations to democratize the delegate selection process that were subsequently adopted by the Democratic National Committee. The new rules, first in effect for the 1972 election, transformed the process by making it more open and responsive to rank and file party voters, and by reducing the power of party leaders and bosses to control delegations to the national conventions.\nOne result of the rules changes was that many state parties, both Democratic and Republican, adopted the primary to elect the delegates, rather than choosing them in caucuses, conventions, or meetings of party officials and leaders. The primary was perceived as more open and transparent. The rising number of primaries shifted the suspense of choosing the nominee from the convention to the primary season, because the delegate count was now public. A candidate could publicly claim the nomination as soon as he or she won a majority of the delegates, as every candidate in both major parties has done in recent decades, with one exception. In 1976, President Gerald Ford and Governor Ronald Reagan competed for delegate support until the start of the national convention, with Ford prevailing.\nSome candidates in recent primary seasons have claimed the nomination as early as March, after just a few weeks of voting, because of the trend known as \"front-loading.\" Over the past 25 years, an increasing number of states and state parties scheduled events at the beginning of the primary season to attract candidate and media attention, resulting in a calendar that featured a large cluster of early primaries and caucuses. On the positive side, front-loading has often meant that the nomination was resolved early in the primary season, allowing the presumptive nominee to begin campaigning for the general election. Two criticisms of the front-loading trend were that the contest could be resolved only weeks after its start, without much of a testing period for the candidates, and that the contest was usually over before voters in states with later primaries and caucuses could cast their ballots. The calendar for 2012 was less front-loaded than at any time in recent decades, which contributed to a more prolonged contest on the Republican side but also generated complaints as a result. The 2016 calendar is even less front-loaded and features the latest start since 1996, with the Iowa caucuses on February 1 and the New Hampshire primary on February 9, nearly a month later than in 2012.\nThe contemporary nominating system is only a few decades old, having grown out of the 1970s reforms that replaced the boss-dominated convention system with a process that emphasized rank and file participation. Among the concepts that define the current system is that primaries are the dominant method for selecting the delegates, front-loading of the calendar has been prevalent for most of the past three decades, and the national conventions are largely symbolic with respect to conferring the nomination. Perhaps the most important result of the reform era is that, despite the system's complexities, the contest for delegates among the presidential candidates is now a mostly transparent, democratic process.", "The report is organized into two sections. The first section includes questions that pertain to the primary season and the second section includes questions about the national party conventions. The section on the primary season includes basic questions about caucuses and primaries; the calendar; the rules for selecting the delegates, including new Republican Party rules for 2016; and questions about the delegates, such as their bound or unbound status, and the disposition of delegates who support a candidate who has left the race.\nThe second section provides answers to questions about the national party conventions, including questions about how they are financed, what transpires once they convene, and a brief history of brokered, or multi-ballot, conventions.", "", "A conventional caucus system relies on a tiered series of meetings to choose national convention delegates. Rank-and-file voters participate in precinct caucuses or local mass meetings (where a presidential preference vote is taken and delegates are elected to the next level based on those preferences), followed by county conventions, congressional district (or perhaps state legislative district) conventions, and a state convention. The national convention delegates are usually chosen at the congressional district and state conventions.\nAs with other elements of the delegate selection process, there is a great deal of variation in how state parties employ the caucus/convention system and, therefore, few generalizations can be made about it. The key to understanding a particular state party's caucus/convention system is whether the preferences of rank-and-file voters at the first stage of the process are or are not the determining factor in choosing national convention delegates. If the preferences of rank-and-file voters are not the determining factor, the system is more likely a meeting or series of meetings of party activists and leaders who, as \"free agents,\" choose the national convention delegates. One generalization that applies, however, is that the caucus/convention system is party-run, whereas a primary election is conducted and paid for by the state (with rare exception). As a result, although some precinct voting places might be used for caucuses, other unofficial election venues could include schools, fire stations, government buildings, private businesses, community centers, and private residences.\nFrom a participant's point of view, a conventional caucus is different from a primary because the voting may be public, rather than by secret ballot, and may require a time investment of a few hours, often on a weekday evening. The rules for participating in a caucus are also more complicated than those for participating in a primary, in which a voter simply marks the ballot to record his or her choice.\nIn a precinct caucus, a voter would typically check in upon arrival to verify his or her eligibility and to facilitate a count of all attendees. Once the caucus begins, supporters of the various presidential campaigns might make short speeches in favor of the candidates, after which voters would be asked to separate into groups according to their presidential candidate or uncommitted preference. To be eligible to elect delegates to the next stage, a group may need to constitute a certain percentage of all attendees—the minimum threshold for viability—such as 15%, which Democrats require under national party rules. The viability threshold at this level might be higher than 15%, depending on the total number of delegates to be elected from the particular precinct. Republicans do not mandate a specific viability threshold, although the party advises states to establish a threshold that is no higher than 20%.\nOnce the viable groups have been determined, participants from non-viable groups are given an opportunity to join a viable group or leave. Members of a viable group may try to persuade them to join the group on the basis of candidate traits or positions, or even by offering delegate or alternate slots at the next level, in order to increase the size of the viable group. When the time period for re-caucusing has expired, a count of the members of each of the viable groups is taken to determine the number of delegates and alternates to be elected to the next level, usually county caucuses, within each preference group.\nA similar process occurs at the county caucuses, where viable preference groups elect delegates to the next two levels, the congressional district conventions and the state convention, where the national convention delegates and alternates are chosen. Procedures to determine viability and elect the delegates and alternates by preference group at the congressional district and state conventions are similar to those used at earlier stages, although delegate and alternate candidates may require approval at this level from a representative of the respective presidential campaigns or someone designated as such.\nThe caucus/convention process typically takes several months to complete, from the date of the initial caucuses until the state convention. For example, this year's Iowa Republican caucuses will be held on February 1; county conventions will be held on March 12; congressional district caucuses will be held on April 9; and the state convention will be held on May 21.\nVoter turnout in caucuses tends to be lower than in presidential primaries. In 2012, there were 25,000 Democratic voters and 121,354 Republican voters in the Iowa caucuses, for a combined turnout rate of 6.5% of eligible voters. Turnout in the other prominent early contest, the New Hampshire primary, was 31.1%. The turnout range for other (two party) primaries was 3.0% (Rhode Island) to 31.5% (Ohio).", "To illustrate how varied the caucus system is, Iowa is the best-known caucus state, but Democrats and Republicans do not use the same design to elect national convention delegates. For Republicans, the February 1, 2016, precinct caucuses involve taking a simple presidential preference vote using blank ballots handed out to participants. Delegates are elected to the next stage county caucuses on March 10, but their selection is not connected to the presidential preference vote. At the county conventions, delegates are elected to the congressional district conventions on April 21 and the state convention on June 16, where the national convention delegates will be chosen. All of the national convention delegates are unbound. Consequently, the premier event of the presidential primary season features a presidential preference \"straw\" vote for Republicans, but the state's delegation was chosen in a separate and unconnected process.\nDemocrats use a conventional caucus system as described previously in this section, with precinct caucuses, followed by county, congressional district, and state conventions.", "Generally, there are two types of primaries: a preference primary and a direct election primary. A preference primary simply allows a voter to mark his or her ballot for a presidential candidate or uncommitted preference. A direct election primary includes a presidential preference vote and instructs the voter to mark the ballot for a certain number of delegates (and alternates, possibly) pledged to a presidential candidate. In a preference primary that uses winner-take-all rules, the presidential candidate with the highest vote total statewide wins the at-large delegates, and the winner in each congressional district is awarded the congressional district delegates. In a direct primary election, the delegates may be awarded on a proportional basis, according to the vote for presidential candidates, and elected within each presidential candidate preference according to their own individual vote totals.\nSome state parties have both a primary and a caucus event, although the two events do not always work together when choosing national convention delegates. Some states have a \"beauty contest\" primary in which voters mark their presidential preferences, but the results have no effect on the selection of national convention delegates. Kentucky Republicans, for example, will vote in a presidential primary on May 17, 2016, but the national convention delegates will be selected in a separate caucus/convention process that begins with precinct caucuses on March 5. In preference primary states, the primary results usually determine the number of delegates each presidential candidate receives. The delegates may be slated in pre-primary caucuses and awarded according to the results or chosen in post-primary caucuses, based on the presidential vote in the primary.", "Front-loading is the decades-long trend among the states or state parties to schedule primaries and caucuses near the beginning of the nominating season, resulting in a crowded calendar of events in the first several weeks of the contest. Front-loading came about largely because of the prominence of the New Hampshire primary and the Iowa caucuses in the nominating process. The trend was reversed to an extent in 2012 and even more so for 2016—as the result of cooperation between the two major parties regarding the calendar, as shown in Figure 1 .\nThe era of rules changes that Democrats initiated after the 1968 national convention encouraged state parties to adopt primaries, but the subsequent rise in the number of primaries did not initially result in a more front-loaded calendar. Scattered efforts to schedule early events in other states to attract candidate attention or promote a \"native son,\" either individually or as part of a regional effort, only resulted in Iowa and New Hampshire scheduling even earlier events over time to protect their \"first-in-the-nation\" status. (The New Hampshire primary was held at the end of February in 1976, 1980, and 1984, and it was held on January 8 in 2008 and January 10, 2012; the Iowa caucuses were held in late January and February between 1976 and 1984; they were held on January 3 in 2008 and 2012.) In addition to being the first to assess the candidates, the two states benefit economically from hosting the various presidential campaigns in the months before the voting begins. One estimate in 2012 noted that New Hampshire could reap $264 million because of its early date.\nWith a few exceptions, other states did not challenge Iowa and New Hampshire's claim to being first. Democrats continued to revise their rules after each election and the party eventually adopted its current timing rule in 1980, which provided an exemption from the party's sanctioned \"window\" for delegate selection events for Iowa and New Hampshire.\nIn 1988, when Iowa voted on February 8 and New Hampshire voted on February 16, the creation of the southern Super Tuesday regional primary on March 8 accelerated the \"front-loading\" phenomenon. The Super Tuesday event was organized by the Southern Legislative Conference (SLC), a group of southern and border state legislators, and included primaries in 14 states on a single date. It was designed to increase the impact of southern voters in the nominating process and to possibly encourage and promote southern candidates who might enter the race. In the presidential election cycles that followed, Iowa and New Hampshire continued to vote in February until the 2000 election, when Iowa held caucuses on January 24 and New Hampshire held its primary on February 1. In the meantime, however, large numbers of states that were not exempt from the Democratic Party window began scheduling primaries or caucuses at the beginning of the window. This accelerated the nominating season because so many delegates were at stake within the first few weeks of voting. The last primaries traditionally have been held in early June.\nThe front-loading phenomenon meant that clusters of state contests on a single date dominated the early part of the calendar, but the length of the nominating season was not shortened. This, in turn, reinforced the view that the contest was over before voters in later state contests had cast their ballots. A front-loaded primary season also limited the testing period during which voters in different parts of the country could evaluate the candidates once the campaign was in full swing. Conventional wisdom also suggests that a strongly contested primary better prepares the nominee for the general election. On the positive side, front-loading has often meant that the nomination was resolved early in the primary season, allowing the presumptive nominee to begin campaigning for the general election.\nThe effort to reduce front-loading for the 2012 election was largely successful. The early part of the calendar was very similar to 2008's, with Iowa on January 3, followed by New Hampshire (January 10), South Carolina (January 21), and Nevada (February 4). However, while the 2008 calendar featured more contests in February than in any other month—including 15 primaries and four caucuses for both parties on the first Tuesday—there were only a handful in 2012. The new timing rule adopted by both parties that established March as the starting point for nonexempt states partly explains this shift. The 2016 calendar features a February start for the first time since 1996, with Iowa on February 1 and New Hampshire on February 9, and a comparatively orderly format thereafter, in contrast to 2012. The largest number of contests held on a single day will occur on March 1, the first day that nonexempt states are permitted to hold contests. As a result, the front-loading problem that has characterized the primary process for many election cycles has been reduced for 2016 and, except for the exempt states, primary and caucus contests have been contained within the calendar design that the two parties have agreed to follow.", "The New Hampshire primary has been an important event since 1952, when the primary ballot allowed a voter to mark his or her presidential candidate preference for the first time. The preference vote was not connected to the selection of delegates, but the results boosted the candidacies of General Dwight D. Eisenhower and Senator Estes Kefauver at the expense of favorites Senator Robert Taft and President Harry Truman, for the Republican and Democratic nominations, respectively, and captured the attention of the media because they provided an early gauge of candidate strength or weakness. Although New Hampshire had first adopted its presidential primary in 1913—eventually moved in 1915 to the second Tuesday in March to coincide with town meetings—voters in the primary cast their ballots for unpledged delegates. The primary rose to prominence because of the preference vote that debuted in 1952. New Hampshire has protected its \"first-in-the-nation\" primary status by legislating that it be held on the second Tuesday in March, but gives the secretary of state the power to change the date so that it precedes any similar contest by seven days. The national Democratic Party has protected, in effect, New Hampshire's frontrunner primary status since 1980 by restricting the period during which state parties may hold contests (and exempting Iowa and New Hampshire), and the national Republican Party recently formalized that arrangement as well.\nThe Iowa caucuses rose to prominence largely as the result of events in 1972, when Democrats first held their caucuses in January (Republican caucuses were in April). Democrats were operating under entirely new nominating rules designed to democratize the delegate selection process. The reforms had been implemented as a result of the violence and upheaval at the 1968 Democratic National Convention in Chicago. The reforms were based on subsequent recommendations from the party's Commission on Party Structure and Delegate Selection, also known as the McGovern/Fraser Commission. Iowa was the first event of the nominating season under the new rules.\nAlthough the results of the January 24, 1972, precinct caucuses were imprecise, presumed frontrunner Senator Edmund Muskie was unexpectedly challenged by Senator George McGovern (of the McGovern/Fraser Commission), who finished third behind Muskie. \"Uncommitted\" was first. Although Muskie was the leading candidate in Iowa, his campaign had performed below so-called media expectations, to some extent, which damaged his frontrunner status. For his part, McGovern had recognized both the importance of the new rules and Iowa's January 24 caucuses and had begun organizing in the state months before other candidates. A closer than expected result in the New Hampshire primary that followed on March 7, which Muskie won with McGovern second, further slowed Muskie's campaign. McGovern eventually prevailed in winning the nomination, only to lose to President Richard Nixon in the general election (520 to 17 in the electoral college).", "The presidential nominating process is the single most complicated feature of the nation's electoral system, because it relies on national and state political party rules and practices, as well as aspects of federal and state election laws. Consequently, there are overlapping authorities for different aspects of delegate selection primaries and caucuses.", "Democrats rely on the Delegate Selection Rules for the 201 6 Democratic National Convention and the Call for the 201 6 Democratic National Convention to set national rules . State Democratic parties are required to submit delegate selection plans to the Democratic National Committee Rules and Bylaws Committee to determine compliance with national party rules and receive approval in the year before the presidential election. The Rules and Bylaws Committee is required to act on proposed delegate selection plans by September of the year preceding the election, or four months before the state's first determining step, whichever is earlier.", "For Republicans, the national party sets certain general parameters for the nominating process in The Rules of the Republican Party and the Call of the Convention , but leaves many of the details of delegate selection to the state parties. Consequently, there is a great deal of variation in how each state party elects its delegates to the national convention.\nVarious aspects of state and territory election laws apply to presidential primaries, and some caucuses as well, such as whether they are open to all voters or closed, meaning participation is restricted to registered party voters only. Minnesota and Iowa, two states with a long-standing caucus tradition, codified many of the rules in state election law, although this is likely the exception and most caucus procedures depend on state party rules rather than state election law.", "A number of new Republican party rules changes were adopted for the 2012 presidential primary season that may also impact the 2016 election. These changes included a timing rule for when primaries and caucuses could be held and a rule that required the use of proportional allocation of delegates under certain conditions, rather than the winner-take-all system preferred by state parties. The changes shaped the contest for the first three months and led to pronouncements that the nomination would be unresolved until the national convention in September. Ultimately, Governor Romney was able to claim a majority of delegates needed for the nomination once the May 29 Texas primary results were tallied.", "Republicans began evaluating the performance of the nominating process before the primaries and caucuses had concluded in 2008. The 2008 convention created the \"Temporary Delegate Selection Committee\" to review delegate selection procedures and make recommendations to the RNC. Subsequently, at its 2010 summer meeting the RNC approved a window for holding delegate selection events that was similar to the Democratic Party's long-standing rule on the timing of delegate selection events. As the result of a revision to Rule 16 of The Rules of the Republican Party , delegate selection events cannot be held before the first Tuesday in March, with exceptions for Iowa, Nevada, New Hampshire, and South Carolina, which can hold their events on or after February 1. The change imposed a timing rule for the first time for Republican delegate selection events.", "A related change to Rule 16 requires states that hold contests before March 16 to allocate delegates on a proportional basis, but it does not impose a specific proportional system (although the threshold to receive delegates may not be higher than 20%). The party did not previously require the use of a specific allocation method, and the new requirement is intended to further decompress the calendar by delaying the use of a winner-take-all system until the second half of March. Many state parties used winner-take-all in the past. In guidance that was provided to the state parties, the RNC counsel's office outlined a number of ways to implement proportional allocation. The requirement to award delegates proportionally applied in general, but the guidance left open the possibility that district level delegates could be awarded on a winner-take-all basis, with only the at-large delegates awarded on a proportional basis. The four states that are exempt from the timing rule are also exempt from this requirement.", "", "Democrats have two categories of delegates, pledged and unpledged. Delegates in the pledged category are required to express a presidential candidate or an uncommitted preference as a condition of election. Pledged district delegates are allocated and elected at a district level (usually the congressional district, but sometimes by state legislative district), and at-large delegates are allocated and elected at the statewide level. A third type of pledged delegate is called an \"Add-on\" delegate, which allows for representation by party leaders and elected officials within the state. The number of such delegates is calculated by multiplying the number of total base delegates for a state by 15%, so it is also based on the allocation factor. The add-on delegates are usually chosen in the same manner as the at-large delegates.\nDemocrats begin the allocation process with a base of 3,200 delegate votes, which are assigned to the states and the District of Columbia based on the allocation factor. The allocation factor is a formula that relies on the state's Democratic vote in the previous three presidential elections and the assigned number of electoral college votes, divided by the corresponding national totals, to assign the delegates. The formula is expressed as follows:\nA = allocation factor\nSDV = state vote for Democratic candidate in the year indicated\nTDV = total vote for Democratic candidate in the year indicated\nSEV = state electoral college vote\nFor example, South Dakota's allocation factor is .00399, so its base number of delegates is: .00399 x 3,200 = 12.76, or 13 delegates. The base delegates are assigned as district level delegates (75% of the base, or 10 delegates) and at-large delegates (25% of the base, or 3 delegates). South Dakota is also entitled to two add-on delegate slots for party leaders and elected officials in the state. Delegates in these three categories are pledged delegates and required to express a presidential candidate or uncommitted preference as a condition of election. The state is also allocated a number of unpledged delegates, including four for its members of the Democratic National Committee and one for the former Senate majority leader as a Distinguished Party Leader delegate. These are the superdelegates (discussed in greater detail in the next section). Thus, the total number of delegates for South Dakota is 20, with 2 alternates, for a total delegation of 22.\nDemocrats also allocate delegates for six entities for which the allocation factor cannot be computed because they do not participate in presidential elections: American Samoa, Democrats Abroad, Guam, the Northern Mariana Islands, Puerto Rico, and the Virgin Islands. The party assigns at-large delegates to each entity, which also receives delegate slots for its members of the DNC, Members of Congress, and Democratic Governors.", "Republicans use a simpler delegate allocation method than Democrats. The party assigns 10 at-large delegates to each state, as well as 3 delegates per congressional district. In addition, the party assigns bonus delegates to a state that cast its electoral votes (or a majority thereof) for the Republican nominee in the preceding election, and also assigns a single at-large delegate to states in which Republicans were elected to the following: the governor's office, at least one half of the seats in the U.S. House of Representatives, a majority of the members of a chamber of the state legislature (if the presiding officer is a Republican elected by the chamber), a majority of members in all chambers of a state legislature (if the presiding officers are Republicans elected by each chamber), or a U.S. Senate seat (in the six-year period preceding the presidential election year). Republicans assign one alternate for each delegate.\nRepublicans assign at-large delegates to American Samoa, the District of Columbia, Guam, the Northern Mariana Islands, Puerto Rico, and the Virgin Islands. The District of Columbia is also eligible for bonus delegates if it cast its electoral vote (or a majority thereof) for the Republican nominee in the preceding election.\nThere will be 4,763 delegates and 319 alternates to the Democratic National Convention and 2,470 delegates and 2,302 alternates to the Republican National Convention in 2016. A candidate needs 2,382 Democratic delegates to secure the nomination and 1,236 delegates to secure the Republican nomination.", "", "For Democrats, the preferences of rank-and-file voters in primary or caucus events always translate into the selection of pledged delegates (the superdelegates are unpledged):\nDelegates shall be allocated in a fashion that fairly reflects the expressed presidential preference or uncommitted status of the primary voters or, if there is no binding primary, the convention and/or caucus participants.\nFurthermore, those who wish to be elected as delegates at any level of the process must make known their presidential candidate preference:\nAll candidates for delegate and alternate in caucuses, conventions, committees and on primary ballots shall be identified as to presidential preference or uncommitted status at all levels of a process which determines presidential preference.\nFinally, the national party mandates the use of a proportional allocation of delegates according to the presidential candidate and uncommitted preferences of voters in primaries and caucuses, with a minimum threshold of 15% to be eligible to receive delegates. Consequently, the caucus and primary results determine the allocation of delegates according to presidential candidate or uncommitted preferences.", "Republican rules for translating 2016 primary and caucus results into the selection of national convention delegates vary considerably. In some contests, the preferences of rank-and-file voters in a primary or caucus have no effect on choosing the delegates, while in others, the outcome results in a proportional or winner-take-all allocation of delegates at the congressional district and statewide levels.\nOne measure to gauge the effect of primary and caucus results on the elected delegates is whether the delegation is \"bound\" to reflect those results when voting at the national convention, and for how long (discussed in greater detail in the next section of this report below). Some state parties bind the national convention delegation for one ballot or more. Delegates who are unbound presumably are free to vote for any candidate, regardless of the caucus or primary results in the state. Furthermore, national Republican Party rules state that:\nAny statewide presidential preference vote that permits a choice among candidates for the Republican nomination for President of the United States in a primary, caucuses, or a state convention must be used to allocate and bind the state's delegation to the national convention in either a proportional or winner-take-all manner, except for delegates and alternate delegates who appear on a ballot in a statewide election and are elected directly by primary voters.\nFurther instructions say that:\nDelegates at large and their alternate delegates and delegates from Congressional districts and their alternate delegates to the national convention shall be elected, selected, allocated, or bound in the following manner:\n(1) In accordance with any applicable Republican Party rules of a state, insofar as the same are not inconsistent with these rules; or\n(2) To the extent not provided for in the applicable Republican Party rules of a state, in accordance with any applicable laws of a state, insofar as the same are not inconsistent with these rules; or\n(3) By a combination of the methods set forth in paragraphs (b)(1) or (b)(2) of this rule; or\n(4) To the extent not provided by state law or party rules, as set forth in paragraph (e) of this rule (which outlines the national party rules for electing national convention delegates in congressional district and state conventions).\nThe category of automatic delegates to the national convention—who are the three members of the Republican National Committee from each state—are usually bound along with the rest of the delegates.", "As noted, Republican rules for binding or not binding the delegates to vote for a certain candidate at the convention vary from state to state. Consequently, in some states, the entire delegation is bound for one or more ballots at the national convention, whereas in other states, some delegates are bound and some are not, or the entire delegation is unbound. Some states specify that delegates are bound unless released by a presidential candidate or when the candidate has dropped out of the race, or by a vote of the delegation.\nFor Democrats, the relevant national party rule states that \"[d]elegates elected to the national convention pledged to a presidential candidate shall in all good conscience reflect the sentiments of those who elected them.\" A related provision states that \"[n]o delegate at any level of the delegate selection process shall be mandated by law or Party rule to vote contrary to that person's presidential choice as expressed at the time the delegate is elected.\"", "Among the many differences between the parties in delegate selection is the number of automatic delegate slots each party reserves for party or elected officials. Although the Republican Party designates as automatic delegates the three members of the Republican National Committee from each state, the term \"superdelegate\" has generally been used in reference to a group of unpledged Democratic Party delegates. During the 2012 election cycle, the media referred to the automatic RNC delegates to the convention as superdelegates as well.\nThe Democratic Party superdelegates are designated automatically and are not required to make known their presidential candidate or uncommitted preference, in contrast to all the other elected delegates. They include all Democratic Party Members of Congress and governors; members of the Democratic National Committee; distinguished party members, who include former Presidents and Vice Presidents, former Democratic leaders of the Senate, Speakers of the House, and minority leaders; and former chairs of the Democratic National Committee.\nThe superdelegates were added after the 1980 election when incumbent President James E. Carter lost to Governor Ronald Reagan in a 489-49 electoral vote landslide. The belief was that superdelegates, as party and elected leaders, could serve as a counterweight to rank and file party voters in evaluating presidential candidates. In this way, the superdelegates represented an effort to reduce somewhat the effect of the 1970s reforms that diminished the influence of \"party elders.\" Democrats increased the number of such delegates every four years since they were introduced in 1984 until the 2012 convention, for which they were slightly reduced. They made up nearly 20% of all delegates in 2008, were 14% of all delegates in 2012, and will be a little more than 16% of the total delegates to the Democratic convention. For Republicans, the automatic delegates to the convention make up slightly less than 7% of the total national convention. They are unbound in most states, but a few state parties bind them to vote as part of the whole delegation at the national convention.\nFor most of their existence, the superdelegates attracted little attention, but in 2008, it appeared that they might decide the contest. By February, Senator Hillary Clinton and Senator Barack Obama were so evenly matched in the fight to win delegates that the campaigns courted individually many of the 796 superdelegates, who were nearly 20% of the convention total. The contest was not resolved until the last events on the calendar, the June 3 primaries in South Dakota and Montana. Obama claimed victory with 1,764 pledged delegates and 438 superdelegates (2,201), as compared to 1,640 pledged delegates and 256 superdelegates for Clinton (1,896). A candidate needed 2,118 to win the nomination.", "", "Presidential primaries are paid for by each state, or more specifically, by local election jurisdictions within each state, as are other federal elections. On rare occasions, a state party will conduct its own primary, sometimes called a \"firehouse\" primary, but generally presidential primaries are financed by the state. A state party might hold a firehouse primary to exert greater control over the delegate selection process. An issue that emerged for the 2012 election cycle was the additional cost of a separate presidential primary in some states, if the regular state primary was held on a different date, which caused a few to cancel the presidential primary altogether. Caucuses are conducted and paid for by the state parties.\nBetween 1976 and 2012, the two major parties and qualifying minor parties received funds from the taxpayer checkoff program to finance the national nominating conventions, as part of the presidential public financing system—the Presidential Election Campaign Fund (PECF). The amount for the major parties was initially set at $2 million, with an inflation adjustment for future elections. The program provided $17.7 million each to the Democratic and Republican convention committees for 2012. The program was eliminated with the enactment of P.L. 113-94 in April 2014.\nAdditional federal funds have been provided since 2004 for convention security, coordinated by the U.S. Secret Service in conjunction with state and local law enforcement in jurisdictions where the conventions were held. Congress appropriated $100 million for convention security in 2004, 2008, and 2012, of which $50 million was for each convention in each year.", "Contemporary national nominating conventions give the parties a rare opportunity to showcase nominees, party leaders, and positions before a national television audience, but they are no longer the venue in which the nominee is chosen. Although some observers speculated that a contested convention could occur at the 2012 Republican national convention, that did not occur. There has been speculation that the 2016 Republican nomination could be contested in some fashion, if a candidate does not emerge from the primary season with a majority of delegates. If that does not occur, the 2016 conventions will again be largely ceremonial, campaign driven events.\nIn recent decades, the role of the national conventions has been to ratify, rather than select, the party nominees. Elections without an incumbent President running, even if they are competitive, are usually resolved early in the primary season, well before the convention meets. Elections that include an incumbent President are usually concluded without much drama as well, and the delegates are elected in primaries and caucuses that attract little attention because of the lack of competition (i.e., President Reagan in 1984, President Clinton in 1996, President Bush in 2004, and President Obama in 2012). Both the 1976 Republican and 1980 Democratic conventions provided a reminder that incumbents can be endangered under certain conditions, but Presidents Ford and Carter ultimately prevailed in 1976 and 1980, respectively, despite strong challenges from Governor Ronald Reagan and Senator Edward Kennedy.\nAs the conventions have evolved into media events, the traditional format of past years has been replaced by a television-friendly script designed for a prime time audience each night. As in the past, delegates ratify the choice of nominee in a roll call vote and various party leaders and rising stars give speeches, but the action is targeted to viewers, rather than the delegates inside the convention venue. Finally, the party may have a traditional keynote speaker or multiple keynote speakers address the convention, followed by a vice presidential candidate speech on the second to last night and, on the last night, a speech by the nominee to kick off the general election campaign.", "A brokered, or multi-ballot, convention was a phenomenon of the mid-20 th century and earlier, when the convention delegates were sometimes required to vote multiple times before a candidate could achieve a majority of vote to claim the nomination. For the past 60 years, the major party nominees have always accumulated a majority of delegate votes before the convention, with one exception (discussed in the following section).\nThe competitive results of 2012 Republican primaries and caucuses through the first three months of the contest and rules changes that were adopted—particularly the requirement until April 1 for the proportional division of delegates based on the results—raised speculation that no candidate would amass a majority of delegates before the convention. That possibility did not come to pass, as the presumed nominee, Governor Willard M. Romney, claimed a majority of the delegates following the results from the Texas primary on May 19.\nOne phenomenon that fuels speculation in 2016 about an extended primary season and a brokered Republican convention is the fact that the state parties do not have uniform rules for whether the delegations are \"bound\" to vote a certain way at the national convention, and that the results of some contests have no effect on the selection of delegates. In several of the primaries and caucuses, the results will not determine which candidates receive delegates or how many they receive, which makes the process somewhat unpredictable. To win the nomination, a candidate needs1,236 of 2,470 total delegates to secure the Republican nomination. There has been on similar speculation regarding the Democratic convention; a candidate needs 2,382 of 4,763 total delegates to secure the nomination.", "In the years since the nominating reforms of the late 1960s were adopted, the party nominees have usually been decided before the conventions. The principal reason for this phenomenon was the widespread adoption of the primary to choose delegates, allowing one of the candidates to secure a majority publicly, before the convention met. An exception was the 1976 Republican convention, when President Gerald Ford and Governor Ronald Reagan personally lobbied for support among delegates in the days before the convention began; President Ford eventually won on the first ballot.\nThe primary was perceived to be more democratic than the previously popular caucus/convention method, in which party leaders and bosses controlled the nomination, occasionally \"brokering\" the outcome at the convention itself. Rank-and-file voters had little say in choosing the delegates to the conventions. The reforms sought to democratize the nominating process in the aftermath of the Democrats' violent 1968 national convention in Chicago. The Democratic Party subsequently convened in 1969 the Commission on Party Structure and Delegate Selection, also known as the McGovern/Fraser Commission, which made recommendations to democratize the process. Democrats continued to revise delegate selection rules every four years throughout the 1970s and up to the present, while Republicans made few changes to their rules. The new rules encouraged the use of the primary to achieve compliance and, as a result, the rising number of presidential primaries shifted the setting for selecting the nominees from the national conventions to the primary season itself.\nEven before the reforms of the 1960s and 1970s, multi-ballot conventions had become somewhat rare. The last major party convention to require more than one ballot to choose the nominee was in 1952, when Democrats needed three ballots to nominate Illinois Governor Adlai Stevenson. Prior to that, the 1948 Republican and 1932 Democratic conventions took multiple ballots to choose the nominees. Deadlocked conventions were more common in the 19 th and early 20 th centuries and often required multiple votes to choose the nominee. The longest in history was the 1924 Democratic convention that famously took 103 ballots and 17 days to nominate John W. Davis of New York.", "Republicans will meet in Cleveland, OH, from July 18-21, and Democrats will meet in Philadelphia, PA from July 26-28." ], "depth": [ 0, 1, 2, 2, 2, 2, 1, 2, 3, 2, 2, 2, 2, 3, 3, 2, 3, 3, 2, 3, 3, 2, 3, 3, 2, 2, 1, 2, 2, 2, 2, 2 ], "alignment": [ "h0_title h2_title h1_title h3_title", "h0_title", "", "h0_full", "", "", "h0_title h2_title h1_title", "", "", "", "h2_full", "", "h0_full", "", "", "h2_full h1_full", "", "h2_full", "", "", "", "h0_title", "", "h0_full", "", "", "h0_title h2_title h3_title", "h0_full", "h3_full", "h2_full", "h3_full h2_full", "h3_full" ] }
{ "question": [ "Why are presidential elections unique in the United States?", "Why does Congress have an interest in presidential nominations?", "How has Congress reformed the nomination process?", "What was the effect of the Republican Party rule changes for 2012?", "Why did the 2012 election feature a protracted contest for Republicans?", "How did the Republican Party attempt to decrease front-loading?", "What were the results of the rules changes?", "How did Republicans add to party rules for 2016?", "How have national party conventions changed over time?", "How does a brokered convention occur?", "Why are conventions still important?", "How will party nominations be conferred in 2016?" ], "summary": [ "The presidential nominating process is a subject of enduring congressional and national interest. Presidential elections are the only nationwide elections held in the United States and the initial phase of primaries and caucuses is subject to change every four years.", "Congress has a legislative, as well as a practical and political, interest in the presidential nominating process. Presidential nominees lead the party ticket in the fall election; the elected President will set many policy and political goals in the ensuing four years; and many Members of Congress will serve as delegates to the major party conventions.", "No legislation has been introduced in the 114th Congress to reform the presidential nominating process; taxpayer financing of the national party conventions was eliminated with the enactment of P.L. 113-94 in April 2014.", "Republican Party rules changes for 2012 set the background for the 2016 presidential primary season.", "The 2012 election featured a protracted contest for Republicans that began in January and continued until the end of May, partly due to two new Republican Party rules that led to a comparatively long primary battle.", "In an effort to decrease the large cluster of contests at the beginning of the primary and caucus calendar—the phenomenon known as front-loading—the Republican Party adopted two important changes to national party rules for 2012:", "The rules changes reduced front-loading, but they also prolonged the contest in comparison to past primary cycles and led to speculation that the Republican convention might need more than one ballot to choose the nominee, an unprecedented occurrence in recent decades. That possibility did not occur.", "Republicans made additional revisions to party rules for 2016 that might impact the contest for the nomination. The proportional allocation of delegates is required for events held between March 1 and 14, rather than for the entire month, as was done in 2012. Delegates are bound according to the results, either on a proportional or winner-take-all basis (permitted after March 14). Finally, the calendar window imposed for only the second time by Republicans (Democrats have imposed a window for many years) appears to have contained efforts by some state parties to \"front-load\" the calendar by scheduling events early in the year in order to attract media and candidate attention.", "The national party conventions have evolved over the past half century and now serve as the forum for officially ratifying the results of the primary season, rather than the place where the nominee is actually chosen.", "The last time more than one ballot was required to nominate a presidential candidate—a so-called \"brokered\" convention—occurred in 1952.", "Even so, the conventions remain important as media events that launch each major party's general election campaign.", "In 2016, the major parties' nominations will be officially conferred when Republicans meet in Cleveland from July 18-21 and Democrats meet in Philadelphia from July 26-28." ], "parent_pair_index": [ -1, 0, -1, -1, 0, 0, -1, -1, -1, 0, -1, -1 ], "summary_paragraph_index": [ 2, 2, 2, 4, 4, 4, 6, 6, 8, 8, 8, 8 ] }
GAO_GAO-19-470
{ "title": [ "Background", "Overview of CBP’s Roles and Responsibilities", "Resources Used by CBP to Secure the Northern Border Between Ports of Entry", "Collaborative Efforts Used by CBP to Secure the Northern Border", "Task Forces and Partnerships", "CBP Collaboration with the Government of Canada", "CBP Identified Terrorism, Contraband Smuggling, and Violations of U.S. Immigration Law as Threats along the Northern Border Between Ports of Entry", "Contraband Smuggling", "Violations of U.S. Immigration Law", "CBP Identified Northern Border Staffing and Resource Challenges and Actions to Address Them but Faces Competing Priorities", "CBP Identified Staffing Challenges in Securing the Northern Border and Has Ongoing Efforts to Improve Recruitment, Hiring, and Retention Border Patrol Staffing", "AMO Staffing", "CBP’s Ongoing Efforts to Address Staffing Challenges", "CBP Identified Resource Challenges Affecting Northern Border Security and Actions to Address Them Air and Maritime Radar", "Land Surveillance Technology", "Network Infrastructure and Bandwidth", "Tactical Communications", "Tactical Infrastructure", "Facilities", "Vehicles and Usage Reporting Technology", "DHS Is Developing an Implementation Plan for Its Northern Border Strategy but Faces Competing Priorities with the Southwest Border", "CBP Has Not Developed Performance Measures to Assess Its Effectiveness at Securing the Northern Border Between Ports of Entry", "Conclusions", "Recommendations", "Agency Comments and Our Evaluation", "Appendix I: Objectives, Scope, and Methodology", "Appendix II: U.S. Border Patrol Northern Border Sector Profiles", "Blaine, Washington", "Sector profile", "Spokane, Washington", "Sector profile", "Havre, Montana", "Sector profile", "Grand Forks, North Dakota", "Sector profile", "Detroit, Michigan", "Sector profile", "Buffalo, New York", "Sector profile", "Swanton, Vermont", "Sector profile", "Houlton, Maine", "Sector profile", "Appendix III: Air and Marine Operations Northern Region Branches", "Overview of Air and Marine Operations’s Northern Region", "Bellingham Air and Marine Branch", "Great Lakes Air and Marine Branch", "Manassas Air Branch", "Appendix IV: Irregular Northbound Migration from the United States to Canada", "Appendix V: Comments from the Department of Homeland Security", "Appendix VI: GAO Contact and Staff Acknowledgements", "GAO Contact", "Staff Acknowledgments" ], "paragraphs": [ "", "CBP is the nation’s largest federal law enforcement agency. CBP’s Border Patrol and AMO are the uniformed law enforcement arms responsible for securing U.S. borders between ports of entry in the air, land, and maritime environments.\nBorder Patrol has primary responsibility for securing U.S. land borders between ports of entry. Its area of responsibility along the northern border is divided among eight sectors: Blaine, Spokane, Havre, Grand Forks, Detroit, Buffalo, Swanton, and Houlton. Each Border Patrol sector is further divided into Border Patrol stations and each station is assigned a certain geographic area of responsibility within a sector. Along the northern border, there are a total of 49 stations or between four to eight stations per sector. For a map of Border Patrol’s northern border sectors, see figure 1. Border Patrol agents secure the border between ports of entry, in part, through patrolling international land borders and waterways to detect and prevent the illegal trafficking of people, narcotics, and contraband into the United States.\nAMO has primary responsibility for securing U.S. borders in the air, marine, and land domains and its operations along the northern border are divided among three branches: Bellingham Air and Marine Branch in Washington, Great Lakes Air and Marine Branch in Michigan, and Manassas Air Branch in Virginia. Each branch is further divided into units to conduct air or maritime missions and there are a total of seven air units and nine marine units along the northern border. For a map of AMO’s northern border operating locations, see figure 2. AMO Air Interdiction Agents are federal law enforcement agents who pilot aircraft, while Marine Interdiction Agents are federal law enforcement agents who operate vessels. Air and Marine Interdiction Agents secure the air and maritime environments along the border, in part, through conducting surveillance and investigative activities to interdict smuggled narcotics and other contraband.\nAdditional offices within CBP that support the activities of Border Patrol and AMO along the northern border include the Office of Facilities and Asset Management, Office of Information and Technology (OIT), and Office of Intelligence.\nThe Office of Facilities and Asset Management is responsible for oversight and management of CBP’s real and personal property portfolios, including managing CBP’s facilities and motor vehicle fleets.\nOIT is responsible for managing CBP’s technology infrastructure and information technology (IT) operations. These, according to OIT, enable CBP mission readiness and improve the ability of all employees, including agents in the field, to be proactive and responsive to new threats. OIT manages all IT networks, computers, systems, data, tactical communications, and other resources to support CBP employees. OIT is also to provide day-to-day field support primarily through Field Technology Officers who provide services to CBP’s offices and components, such as repairing equipment, upgrading systems and networks, restoring system outages, responding to cybersecurity incidents, and deploying new technology and equipment.\nThe Office of Intelligence is to develop, coordinate, and implement CBP’s intelligence capabilities into a cohesive intelligence enterprise that supports CBP’s primary mission to secure the borders while facilitating legitimate trade and travel. The Office of Intelligence’s Field Intelligence Division is to provide CBP law enforcement personnel with current and relevant intelligence to inform decision makers and those who respond to border related crimes, threats, and hazards. In this division, there are two field intelligence groups with areas of responsibility along the northern border—the Pacific Northwest Field Intelligence Group in Washington and the Great Lakes Field Intelligence Group in Michigan. In addition, through CBP’s National Border Geospatial Intelligence Strategy, the Office of Intelligence produces geospatial intelligence products for Border Patrol sectors to identify areas of potential illicit cross-border activity.", "Border Patrol and AMO use a variety of technologies, facilities, and other resources to secure the northern border between ports of entry. Figure 3 illustrates examples of resources used by Border Patrol and AMO, which include the following: surveillance technology, such as Remote Video Surveillance Systems—systems of towers with cameras that transmit information to video monitors at a Border Patrol facility—and unattended ground sensors—remotely monitored sensors placed in or on the ground, or on ground-based platforms, to detect, track, identify, and differentiate humans, animals, and vehicles—used by Border Patrol agents to detect and identify illicit cross-border activity; radar systems to detect and identify aircraft and vessel incursions; IT and communication systems to conduct operations and ensure the safety and security of agents while on duty, including databases and systems for processing detainees, infrastructure to operate surveillance technology, and tactical communication equipment such as land mobile radios; aircraft, including fixed- and rotary-wing aircraft, vehicles, including all- terrain vehicles and snowmobiles, and large and small vessels; tactical infrastructure, including fencing, roads, and border markers and signs; and facilities, including buildings to house workstations and offices for agents and civilian personnel, short-term detention facilities to process and hold individuals arrested by Border Patrol agents, forward operating bases in remote locations to support Border Patrol agent operations, and hangars for aircraft and vessel storage and repair.", "", "CBP participates in a variety of collaborative efforts—including task forces, joint operations, and partnerships with federal, state, and local law enforcement agencies—to support its efforts to secure the northern border between ports of entry. According to CBP officials, collaborative efforts involve sharing intelligence and other information that informs and guides the efficient use of agents and resources to conduct enforcement activities. For example, AMO’s Air and Marine Operations Center coordinates with federal, state, local, and international law enforcement agencies to detect, identify, track, and coordinate interdiction of suspect aviation and maritime activity near and at the borders, including the northern border, and within the United States. Moreover, Border Patrol’s Northern Border Coordination Center serves as a centralized coordination center for information sharing among Border Patrol’s eight northern border sectors, as well as with domestic and international law enforcement partners, focusing primarily on counter-terrorism and illicit criminal networks.\nBorder Patrol also collaborates with county, state, tribal, local, and other law enforcement agencies through administration of the Operation Stonegarden Grant Program, a part of the Homeland Security Grant Program, to support border security activities. The grant program provides funding to state, local, and tribal law enforcement agencies to support joint efforts to secure U.S. borders. For example, grantees may receive reimbursement for operational overtime costs associated with law enforcement activities and equipment purchases, such as sensors, in support of border security activities.\nCBP’s collaborative efforts along the northern border also include participation in various task forces with federal, state, and local law enforcement agencies. Specifically, Border Patrol and AMO agents may be assigned as task force officers to conduct or support casework, investigations, and coordination among federal, state, and local law enforcement agencies. For example, Border Patrol and AMO agents are assigned as task force officers along the northern border on the U.S. Immigration and Customs Enforcement-led Border Enforcement Security Task Force in Washington, Michigan, and New York to identify, investigate, disrupt, and dismantle transnational criminal organizations. According to Border Patrol and AMO officials, task force officers help enhance partnerships, information sharing, and situational awareness along the northern border.\nCBP also partners with other DHS components to support its efforts to secure the northern border between ports of entry. For example, through the Puget Sound Regional Coordinating Mechanism, CBP—including Border Patrol and AMO—and the U.S. Coast Guard coordinate daily and conduct joint operations along the maritime border between the state of Washington and province of British Columbia. CBP also works with DHS’s Science and Technology Directorate to identify, develop, and evaluate technology to address capability gaps across the northern border. For example, DHS’s Science and Technology Directorate, in collaboration with Swanton Border Patrol sector, deployed land surveillance technology along the northern border.", "CBP also collaborates with law enforcement agencies within the government of Canada through the Cross-Border Law Enforcement Advisory Committee and Integrated Border Enforcement Team Program.\nThe Cross-Border Law Enforcement Advisory Committee is a national- level committee—comprised of the Royal Canadian Mounted Police, Canada Border Services Agency, U.S. Immigration and Customs Enforcement, CBP, and U.S. Coast Guard—that provides guidance to initiatives involving partnerships between United States and Canadian law enforcement agencies along the shared border.\nThe Integrated Border Enforcement Team Program includes the Royal Canadian Mounted Police, Canada Border Services Agency, U.S.\nImmigration and Customs Enforcement, CBP, and U.S. Coast Guard. According to CBP, the priority of the program is to seek and identify mutual national security threats and combat illicit cross-border activity. According to CBP and government of Canada officials, program activities may include real-time tactical intelligence sharing between Canadian and U.S. law enforcement agencies and periodic meetings to coordinate operations. These officials stated that the program helps to facilitate timely information sharing in accordance with Canadian and U.S. laws and regulations. For example, through the Integrated Border Enforcement Team Charter, Border Patrol and the Royal Canadian Mounted Police may share information related to cross-border criminal activity—such as suspected or known illegal entries between ports of entry—without delay.", "", "According to DHS’s 2017 Northern Border Threat Analysis Report, the most common threat to U.S. public safety along the northern border continues to be contraband smuggling; specifically, the bidirectional flow of illicit drugs. In its fiscal year 2018 intelligence reports for its eight northern border sectors, Border Patrol also reported contraband smuggling as a significant threat along the northern border between ports of entry, including bidirectional drug smuggling. According to Border Patrol data for fiscal years 2013 through 2017, 2 percent of Border Patrol’s total drug seizures occurred along the northern border. Examples of smuggling activities include criminal groups with known ties to or hired by Mexican drug trafficking organizations suspected of smuggling narcotics into Canada and smuggling bulk currency from Canada into the United States between land border ports of entry.\nBorder Patrol, in its intelligence reports, also identified contraband smuggling for the purpose of evading customs duties, involving products such as tobacco, prohibited fruits, and medicinal products. Further, according to Border Patrol, criminal organizations smuggle contraband between ports of entry because certain items such as tobacco, agricultural, and medicinal products are prohibited for import even if properly declared at a port of entry.\nIn 2017, AMO reported contraband smuggling across the northern border both into and out of the United States between ports of entry. In its 2017 Northern Border Non-Commercial General Aviation Threat Overview, AMO’s Air and Marine Operations Center identified illicit activity along the northern border using general aviation aircraft, including aircraft operating in a suspicious manner at low attitude (low-flying aircraft).", "According to Border Patrol’s annual fiscal year 2018 intelligence report, violations of U.S. immigration and travel controls, which Border Patrol refers to generally as “illegal immigration,” along the northern border is a threat and is frequently bidirectional between the United States and Canada. Additionally, our analysis of Border Patrol data from fiscal years 2013 through 2017 showed that Border Patrol agents apprehended 14,319 potentially removable aliens—foreign nationals who Border Patrol suspected or determined were removable from the United States—along the northern border or approximately 1 percent of its total nationwide apprehensions of potentially removable aliens (1.97 million aliens).\nAccording to DHS’s 2017 Northern Border Threat Analysis Report, known illegal crossings between ports of entry by individuals on the northern border conform to established migration patterns between large population centers. Further, the report states that terrain, weather, and distance are factors that constrain migrant travel between ports of entry in remote areas of the border.\nAccording to Border Patrol officials, the majority of individuals apprehended along the northern border are suspected or known to have illegally entered the United States across the southwest border and traveled to the northern border region before being detected, while a smaller number of individuals are suspected or known to have illegally entered the United States from Canada between ports of entry. Specifically, of the potentially removable aliens apprehended by Border Patrol along the northern border during this period, we found that 61 percent (8,727) were individuals suspected or known to have illegally entered the United States from Mexico, while 19 percent (2,782) were individuals suspected or known to have illegally entered the United States from Canada. The Swanton Border Patrol sector apprehended the highest percentage of individuals who illegally entered the United States from Canada between ports of entry during this period, 43 percent (1,206 individuals) of the total number across all eight northern border sectors.\nBorder Patrol, in its fiscal year 2018 intelligence reports for its eight northern border sectors, also identified alien smuggling—bringing into, or harboring or transporting within, the United States, foreign nationals in violation of U.S. immigration law—organizations operating along the northern border between ports of entry as a threat. Examples of alien smuggling activities include alien smuggling organizations using private residences along international waterways to provide locations for staging an illegal entry.\nAccording to Border Patrol officials, criminal organizations operating along the U.S.-Canada border frequently conduct bidirectional alien smuggling activities between the United States and Canada as agents encounter numerous types of groups being smuggled into Canada.", "CBP identified staffing and resource challenges to its operations and enforcement activities across the northern border and has identified actions to address them, but faces competing priorities. Border Patrol and AMO officials we met with identified agent staffing challenges along the northern border across all sectors and branches that limit enforcement activities, including Border Patrol agent availability to conduct patrol missions and a limited number and frequency of AMO missions due to AMO agent availability. Border Patrol and AMO officials also identified resource challenges along the northern border across all sectors and branches, including radar and surveillance technology used to surveil the air, maritime, and land environments; IT and communication technology, including network infrastructure and bandwidth that allow agents to access CBP systems and tactical communications, such as land mobile radios for agent communication during border security missions; and infrastructure and facilities, including tactical infrastructure—roads, fencing, and border markers—and facilities used by agents to secure the border.\nIt is unknown whether the staffing and resource challenges identified by CBP to secure the northern border between ports of entry will be addressed due to competing southwest border security priorities. CBP identified actions and ongoing efforts to address agent staffing and resource challenges to secure the northern border between ports of entry. In June 2018, DHS released a Northern Border Strategy to establish actions that are intended to, among other things, improve DHS’s efforts to safeguard the northern border against various threats. DHS is developing an implementation plan for its Northern Border Strategy which will, among other things, identify actions to address gaps in capabilities to secure the northern border between ports of entry. However, it is unknown whether CBP’s northern border staffing and resource challenges will be addressed due to competing priorities with southwest border security. For example, instructions in Executive Order 13767 require DHS to obtain complete operational control—prevention of all unlawful entries into the United States, including entries by terrorists, other unlawful aliens, instruments of terrorism, narcotics, and other contraband—of the southwest border, in part through hiring thousands of agents and constructing a physical barrier.", "Border Patrol officials identified staffing challenges across the northern border sectors that have affected enforcement activities. Officials from northern border sectors told us that an insufficient number of agents authorized or onboard at its sectors and stations limits their ability to conduct enforcement activities and may, at times, pose risks to agent safety.\nIn addition, Border Patrol officials from northern border sectors stated that agent availability for enforcement activities is further limited by detainee transportation and supervision duties and requests for law enforcement assistance from other agencies. For example, Border Patrol sector officials stated that detainee transportation duties result in agents being unable to conduct enforcement activities for up to 1 day and duties related to supervision of detainees during court proceedings and meetings with federal prosecutors may result in agents being unable to conduct enforcement activities for up to 1 week. Further, responding to local calls for assistance during assaults may result in agents being unable to conduct enforcement operations for multiple hours.\nAlso, Border Patrol officials from northern border sectors stated that vacancies in civilian Law Enforcement Communication Assistant positions affect enforcement activities. Law Enforcement Communication Assistant duties at each northern border sector are dispatching and officer safety checks, monitoring surveillance camera feeds and unattended ground sensor activation, and conducting intelligence research checks for agents on duty across all stations in the sector.\nBorder Patrol officials told us it is difficult to recruit and retain qualified applicants for vacant positions due to the lower General Schedule grade of the position across Border Patrol, which is not competitive with salaries for similar positions offered through state and local law enforcement agencies. In August 2018, Border Patrol officials stated that they created an additional position, the Law Enforcement Information Specialist, with additional duties and responsibilities at a higher General Schedule grade.", "AMO identified staffing challenges across its northern border branches which, according to AMO officials, have affected the frequency and number of air and maritime missions. Specifically, officials at AMO branches told us that an insufficient number of agents authorized or onboard at its branches and units limits the frequency and number of air and maritime missions AMO is able to conduct along the northern border. For example, AMO officials stated that an insufficient number of Marine Interdiction Agents limits the number of daily and weekly maritime patrol missions. For air missions, AMO officials stated that an insufficient number of Air Interdiction Agents may limit the ability to fulfill immediate or previously unscheduled requests for air support.\nAMO officials from northern border branches also cited agent recruitment, hiring, and retention as a challenge for filling vacant positions. For example, officials stated that AMO faces competition with commercial airline companies for recruitment and retention of qualified individuals with commercial pilot certificates, including higher salaries, as well as delays from CBP’s lengthy application process.\nAMO officials from northern branches also stated that agent availability for air and maritime missions is sometimes limited due to temporary duty assignments to support national missions, which can limit local operations along the northern border. AMO officials stated that these temporary duty assignments involve relocation of Air Interdiction Agents, aircraft, and maintenance staff to other operating locations for multiple weeks. For example, in 2017, Air Interdiction Agents flew missions to support recovery efforts after the hurricanes in Texas, Florida, and Puerto Rico. In 2018, Air Interdiction Agents supported security operations during the Super Bowl in Minneapolis, Minnesota.", "CBP is taking actions to address agent recruitment, hiring, and retention. We reported in June 2018 on CBP’s actions to address challenges for recruitment, hiring, and retention of Border Patrol and AMO agents, such as increased participation in recruitment events and offering relocation opportunities for existing employees. According to CBP’s Fiscal Year 2019 Congressional Budget Justification, newly hired Border Patrol agents will be assigned to the southwest border to allow for the reassignment of more experienced agents to the northern border. As of August 2019, Border Patrol officials expected that all sectors in fiscal year 2019, including the northern border sectors, would receive an increase in the number of authorized agent positions. Border Patrol officials also stated that as of June 2018, they were completing a Personnel Requirements Determination Initiative to analyze agent allocations across its sectors and stations to develop a staffing allocation model to optimally align staff according to workload and area of responsibility conditions.\nIn June 2018, we also reported that AMO had taken steps to address staffing challenges, such as implementing voluntary paid relocation opportunities and pursuing additional human capital flexibilities to address its difficulty in retaining Air Interdiction Agents, including a group retention incentive and a special salary rate. AMO personnel who are non- bargaining unit employees and have served for at least 3 years in their current location are also eligible for noncompetitive paid relocations. According to AMO officials, these opportunities are posted every few months and eligible personnel can apply for transfers to a specific duty station based on the needs of the operational component. In September 2017, AMO submitted an official request for a 10 percent group retention incentive for Air Interdiction Agents staffed to the northern border, among other locations. According to the request, the incentive is intended to help AMO retain qualified pilots in these hard-to-fill locations by raising their salaries to be more competitive with commercial airlines.\nBorder Patrol officials we met with stated that Border Patrol’s Operational Mobility and Resident Agent Programs have helped northern border sectors to address agent staffing challenges. The Operational Mobility Program provides Border Patrol agents with opportunities for a paid relocation to a more desirable location at a lower cost to CBP than an official permanent change of station transfer. Border Patrol officials stated that the use of the Operational Mobility Program resulted in agents electing to relocate to northern border sectors from other duty stations. The Resident Agent Program operates in locations where Border Patrol’s routine presence is extremely limited and is intended to improve situational awareness by the creation of partnerships, expansion of community outreach, and development and dissemination of intelligence. The Resident Agent location is the physical residence of an agent in a location where there is not an official Border Patrol station.", "Officials from Border Patrol sectors and AMO branches stated that there are gaps in air radar coverage along the northern border, limiting their ability to detect and identify aircraft incursions. CBP has taken actions to address these gaps in air radar coverage. In December 2017, CBP completed an AMO-led assessment of air radar capabilities, which identified coverage gaps and needs across the United States, including at the northern border. In May 2018, AMO officials stated that they began working with the Department of Defense to test technology along the northern border to address gaps in air radar coverage.\nOfficials from Border Patrol sectors and AMO branches stated that there are limited maritime radar capabilities to detect and identify vessel incursions along the northern border. CBP has taken actions to address these gaps in maritime radar capabilities. Border Patrol, through its Maritime Detection Project, plans to deploy additional maritime radar technology in Detroit and Buffalo sectors to expand maritime radar coverage on Lake Erie. Also, in 2017, CBP participated in a 1-year DHS pilot project with the government of Canada to share radar information in an area along the northern border to detect vessel incursions. AMO, through its Multi-Role Enforcement Aircraft, conducts maritime radar patrols along portions of the northern border to address gaps in maritime radar coverage on some of the Great Lakes and parts of the Pacific Northwest, to detect and identify vessel incursions.", "Border Patrol sector officials stated that there are challenges with land surveillance technology that is used for agents to detect, identify, and respond to illicit cross-border activity along the northern border. Further, Border Patrol headquarters and sector officials stated that there are gaps in surveillance technology coverage along the northern border to detect and identify illicit cross-border activity. In addition, Border Patrol officials also identified challenges with Legacy Remote Video Surveillance Systems. For example, officials we met with identified system outages due to delays in maintenance and replacement of parts, and poor quality video surveillance camera images.\nIn March 2017, CBP completed a Border Patrol-led assessment of land surveillance capabilities to assess gaps, including gaps in surveillance technology coverage across all Border Patrol sectors.", "Officials from Border Patrol sectors and AMO branches we met with identified inadequate network infrastructure—including network infrastructure and equipment nearing or past its useful life—and bandwidth that have affected enforcement activities and other required tasks along the northern border. For example, Border Patrol officials stated that inadequate network infrastructure and bandwidth has delayed or prevented the processing of detainees at some stations. AMO officials also stated that inadequate bandwidth limits the ability of agents to use BigPipe, a system used to coordinate operations with partner agencies during air and maritime missions. In September 2017, DHS’s Office of Inspector General found that outdated IT infrastructure and equipment contributed to CBP-wide system performance and availability challenges; a considerable portion of IT equipment and infrastructure had reached its useful life; and OIT was unable to replace infrastructure past its useful life because of financial constraints.\nCBP’s Fiscal Year 2019 Congressional Budget Justification identifies actions to improve network infrastructure and bandwidth, including deploying new workstations and replacing network infrastructure components that are past their useful life to provide reliable operations and address vulnerabilities. OIT officials stated that pilot projects using virtual private network connections are being implemented at CBP locations to address bandwidth challenges and reduce costs.", "Officials from Border Patrol sectors and AMO branches we met with identified challenges with tactical communications, including gaps in land mobile radio coverage along the northern border. Border Patrol and AMO agents responsible for securing the northern border depend on land mobile radio systems for secure, reliable, and timely exchanges of critical information to effectively carry out their mission. Border Patrol and AMO officials we met with identified lack of coverage in certain areas, which impacts agent communication during enforcement activities.\nCBP has taken actions to identify coverage gaps and deploy additional equipment to improve communications coverage along the northern border. For example, CBP has deployed additional equipment to improve tactical communication coverage in Border Patrol’s Houlton sector in Maine through its Tactical Communication Modernization Program from fiscal years 2009 through 2017. Border Patrol officials stated that they are deploying repeater tower sites—technology used for retransmitting and extending the range of radio communications—and other technology to mitigate dead spots and gaps in coverage in three sectors. According to CBP’s Fiscal Year 2019 Congressional Budget Justification, updated handheld and mobile radios are being provided to Border Patrol and AMO, including northern border locations, to improve tactical communications and interoperability with law enforcement partners.", "Border Patrol sector officials identified challenges due to limited tactical infrastructure, such as a lack of barriers to impede vehicle incursions and access to roads along the border that make it difficult to impede illegal entries. For example in one sector, officials stated that a lack of vehicle barriers leads to a gap in Border Patrol’s ability to impede illicit vehicle incursions. In other sectors, officials stated that Border Patrol agents face challenges accessing border areas due to a lack of roads or access to maintained roads. Officials from northern border sectors also stated that agents face challenges preventing illegal entries due to a lack of barriers and a lack of signs or markers indicating the location of the international border.", "Officials from Border Patrol sectors and AMO branches we met with noted that certain facilities do not have space to accommodate the number of assigned agents and civilian personnel along the northern border. For example, in one sector, officials stated that there is lack of space to accommodate Law Enforcement Communication Assistants to monitor surveillance technology and direct agents to respond to potential illicit activity. Border Patrol officials in other sectors also stated that certain stations in their sectors do not have adequate facilities to process and house detainees. For example, one station lacks a dedicated processing and interview area and detainees are processed in an open location next to agent workstations, which may pose a safety risk to agents, according to officials.\nIn November 2018, Office of Facilities and Asset Management officials identified 20 new and major construction projects planned for the northern border, including replacement of Border Patrol facilities with identified challenges; however, these projects have been deferred due to lack of funding. Further, according to Office of Facilities and Asset Management officials, CBP has insufficient funds to address deferred maintenance projects and a limited number of maintenance staff to repair facilities.", "Officials from Border Patrol sectors we met with identified aging vehicles that are beyond their expected service life, which affect enforcement activities along the northern border. According to Border Patrol officials, funding is not available to replace aging vehicles across all sectors, but funds are allocated annually to replace a percentage of vehicles in the northern border sectors that are beyond their expected service life. Further, Border Patrol officials stated that the harsh climate along the northern border creates additional burdens on agent vehicles prior to those vehicles reaching the end of their expected service life. Officials from Border Patrol sectors we met with identified agent vehicles that lack the technology needed to complete monthly motor vehicle utilization reports required by the DHS Stop Asset and Vehicle Excess Act. In August 2018, Border Patrol officials stated that CBP was in the process of awarding a contract for installation of vehicle reporting technology in agent vehicles, including across the northern border sectors.", "In addition to the actions identified above by CBP to address northern border staffing and resource challenges, DHS is developing an implementation plan for its Northern Border Strategy, which includes a goal to enhance border security operations. The strategy states that the implementation plan is intended to outline roles, responsibilities, programs, and timelines for accomplishing the strategy’s goals and objectives for fiscal years 2020 to 2024. According to DHS officials, the department plans to use the strategy and corresponding implementation plan to prioritize departmental resources and achieve the specified outcomes over the 5-year period. According to DHS officials, the implementation plan is expected to be completed in 2019 and will identify actions to address gaps in capabilities to secure the northern border between ports of entry; for example, gaps in domain awareness and associated technology, among other things.\nIt is unknown whether the staffing and resource challenges identified by CBP to secure the northern border between ports of entry will be addressed due to competing southwest border security priorities. According to Border Patrol and AMO headquarters officials, resources are allocated across their operating areas based on threats and volume of illicit activity, which are greatest on the southwest border. Further, Border Patrol and AMO headquarters officials stated that resource allocation is prioritized to the southwest border to also meet instructions in Executive Order 13767 to obtain complete operational control—prevention of all unlawful entries into the United States, including entries by terrorists, other unlawful (i.e. inadmissible) aliens, instruments of terrorism, narcotics, and other contraband—of the southwest border. While DHS is implementing its Northern Border Strategy, including developing an implementation plan, addressing CBP’s northern border staffing and resource challenge will compete with its other enforcement priorities along the southwest border.", "While CBP has performance measures (strategic and management) that assess certain border security operations or programs, some of which include data from the northern border, it does not have specific measures to assess its effectiveness at securing the northern border between ports of entry.\nMore specifically, Border Patrol has two strategic measures that include data from the northern border, but these measures do not assess Border Patrol’s effectiveness at securing the northern border between ports of entry. The two measures—the percent of recurring border surveillance implemented in remote, low-risk areas between ports of entry and the percent of time Border Patrol meets its goal of responding to potential illegal activity in remote, low-risk areas—are based on information from CBP’s National Border Geospatial Intelligence Strategy. The measures assess Border Patrol’s use of reports developed using geospatial intelligence technology of potential illicit cross-border activity. However, this technology is not applied in maritime environments, so the measures do not include data from two northern border sectors. Further, Border Patrol’s two strategic measures combine data from the southwest and northern borders.\nBorder Patrol has four management measures that also contain data from the northern border. These measures are (1) the number of joint operations conducted along the northern border by Border Patrol agents and Canadian law enforcement; (2) the percent of apprehensions at Border Patrol checkpoints; (3) the percent of Border Patrol agents who are trained and certified to perform enforcement actions; and (4) the percent of Border Patrol equipment assessed as ready to support law enforcement operations.\nBorder Patrol’s four management measures include data from the northern border, but do not assess Border Patrol’s effectiveness at securing the northern border between ports of entry. Although one management measure tracks the number of joint operations conducted along the northern border by Border Patrol agents and Canadian law enforcement personnel, that measure does not assess Border Patrol’s performance in conducting those joint operations or their effectiveness. Border Patrol’s three additional management measures include data from the northern border combined with other areas, such as the southwest border, and therefore are not specific to the northern border.\nAMO’s one strategic and one management measure include data from the northern border, but do not assess AMO’s effectiveness at securing the northern border between ports of entry in the air and maritime environments. For the strategic measure, AMO reports the percent of detected conventional aircraft incursions resolved. The measure represents the percent of conventional aircraft detected visually or by sensor technology, suspected of illicit cross-border activity, which are brought to a successful resolution by its Air and Marine Operations Center. For the management measure, AMO reports air mission launch rate, which is the percent of all requests made for aircraft to which AMO was able to respond. These two measures include data across all border areas, including the northern border, but are not specific to the northern border.\nBorder Patrol officials stated that they have not developed or implemented performance measures to assess their effectiveness at securing the northern border between ports of entry because of competing priorities related to developing measures for southwest border security. According to Border Patrol officials responsible for developing and implementing performance measures, Border Patrol’s priority is to develop measures to assess the effectiveness of its efforts to secure the southwest border, such as the effort to achieve complete operational control as outlined in the Executive Order 13767 instructions and the fiscal year 2018 DHS agency priority goal. Specifically, Border Patrol is required to implement a measure to assess operational control for all southwest border sectors by the end of fiscal year 2019. Border Patrol defines operational control as its ability to impede or deny illegal border crossings, maintain situational awareness, and apply appropriate, time- bound law enforcement response and resolution between the ports of entry.\nAccording to Border Patrol officials, the ongoing efforts to develop measures for the southwest border will eventually be applied to the northern border, but it is unknown how these ongoing efforts will be implemented to assess Border Patrol’s performance at securing the northern border between ports of entry. Border Patrol officials stated that following the implementation of operational control for the southwest border, Border Patrol plans to implement the operational control measure along the northern border in fiscal year 2020. Border Patrol officials stated that they are in the early stages of this process, and could not provide any information on how operational control will be implemented for its operations along the northern border. Further, Border Patrol officials could not provide information on how operational control will be used to assess Border Patrol’s performance for securing the northern border between ports of entry.\nAdditionally, in 2012 we recommended that Border Patrol establish milestones and time frames for developing performance measures to support implementation of its 2012-2016 Strategic Plan, including assessing progress made in securing the northern border between ports of entry and informing resource identification and allocation efforts. DHS concurred with our recommendations, and Border Patrol made progress in developing new performance measures for border security. However, we closed the recommendations as not implemented in September 2017 because the measures identified did not apply to the entire northern or coastal borders, as well as the remaining uncertainty about when Border Patrol would develop a new strategic plan.\nAMO officials stated that they have not implemented performance measures to assess AMO’s effectiveness at securing the northern border between ports of entry in the air and maritime environments because of difficulties in creating region-specific performance targets. Specifically, AMO officials stated that it is difficult to set performance targets for a specific region, such as the northern border, because the threat environment is constantly changing. Also, the officials stated that AMO is waiting for completion of the Northern Border Strategy implementation plan before developing any performance measures specific to the northern border. Additionally, Border Patrol and AMO have ongoing efforts to develop border security metrics pursuant to the National Defense Authorization Act for Fiscal Year 2017. The act directs DHS to annually report metrics and associated data and methodology, including metrics for border security between ports of entry.\nConsistent with GPRAMA, agencies should establish a balanced set of performance measures, which reinforces the need for agencies to have a variety of measures across program areas. Furthermore, Standards for Internal Control in the Federal Government state that management should determine whether performance measures for the defined objectives are appropriate for evaluating the entity’s performance using targets and milestones. The standards also state that management should track entity achievements and compare actual performance to planned or expected results using established activities such as comparisons and assessments.\nBorder Patrol and AMO could leverage and use their ongoing efforts to develop and implement performance measures to assess effectiveness at securing the northern border between ports of entry. For example, Border Patrol and AMO could use the metrics developed in accordance with the Fiscal Year 2017 National Defense Authorization Act to help inform the development of northern border performance measures. Developing and implementing such measures could help Border Patrol and AMO better assess the effectiveness of their northern border operations between ports of entry, including challenges due to limited staffing and resources, and take corrective actions, as necessary.", "The United States and Canada share the longest common non-militarized border between two countries, spanning nearly 4,000 miles; however, CBP has historically focused attention and resources, including resources to develop and implement performance measures, primarily on the nearly 2,000 mile U.S.-Mexico border. While Border Patrol and AMO have performance measures that assess specific border security operations or programs that include data from the northern border, these measures generally combine data with other border regions and collectively the measures do not assess effectiveness at securing the northern border between ports of entry. Without northern border performance measures, Border Patrol and AMO cannot assess their effectiveness at securing the northern border between ports of entry. Developing and implementing northern border performance measures could help Border Patrol and AMO assess its northern border operations and address identified challenges.", "We are making two recommendations, one to Border Patrol and one to AMO.\nThe Chief of Border Patrol should develop and implement performance measures to assess its effectiveness at securing the northern border between ports of entry (Recommendation 1).\nThe Executive Assistant Commissioner of AMO should develop and implement performance measures to assess its effectiveness at securing the northern border between ports of entry in the air and maritime environments (Recommendation 2).", "We provided a draft of this report to DHS for review and comment. DHS provided written comments, which are reproduced in full in appendix V, and technical comments, which we incorporated as appropriate.\nDHS concurred with both recommendations in the report and described actions Border Patrol and AMO plan to take in response. Border Patrol plans to develop and apply a measure of operational control to its northern border sectors; however, to meet the intent of our recommendation, Border Patrol will also need to use its measure of operational control to assess its effectiveness at securing the northern border between ports of entry. AMO plans to develop a performance measure to assess its effectiveness at securing the northern border between ports of entry and seek DHS approval through completion of a Performance Measure Definition Form. These actions, if effectively implemented by AMO, should address the intent of the recommendation.\nWe are sending copies of this report to the appropriate congressional committees and the Acting Secretary of the Department of Homeland Security. In addition, the report is available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-8777 or [email protected]. Contacts points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix VI.", "This report addresses the following questions: 1. What threats has U.S. Customs and Border Protection (CBP) identified along the U.S.-Canada (northern) border between ports of entry? 2. What challenges, if any, has CBP identified in its staffing and resources to secure the northern border between ports of entry, and what actions, if any, has CBP taken to address those challenges? 3. To what extent has CBP developed and implemented performance measures to assess the effectiveness of securing the northern border between ports of entry?\nTo address all three questions, we interviewed Department of Homeland Security (DHS) and CBP officials from headquarters and field locations. Specifically, we met with headquarters officials from DHS’s Office of Strategy, Policy, and Plans; Office of Program Analysis and Evaluation; Science and Technology Directorate; U.S. Coast Guard; and U.S. Immigration and Customs Enforcement. From CBP, we met with headquarters officials from the Air and Marine Operations (AMO), U.S. Border Patrol (Border Patrol), Office of Information and Technology, Office of Intelligence, Office of Facilities and Asset Management, and Office of Accountability/Performance Management and Analysis Division. We also met with officials from the government of Canada to discuss their views on northern border security. For a list of government agencies and entities interviewed in field locations, see table 1. In addition, we conducted site visits in Michigan, New York, Vermont, Virginia, and Washington, as well as the Canadian provinces of British Columbia, Ontario, and Quebec. We chose these locations based on deployment of CBP resources—surveillance technology such as Remote Video Surveillance Systems—and reported levels of illicit cross-border activity by Border Patrol, including arrests of individuals and seizures of narcotics. Findings from our site visits cannot be generalized to all CBP locations along the northern border, but provide valuable insights into our research questions.\nTo address the first question, we reviewed DHS and CBP policies, procedures, reports, and assessments describing threats along the northern border between ports of entry. Specifically, we reviewed DHS’s 2017 Northern Border Threat Analysis Report and the June 2018 Northern Border Strategy. We reviewed Border Patrol policies and procedures related to identifying and documenting threats and intelligence reports, referred to as Intelligence Estimates, completed in each northern border sector for fiscal years 2017 and 2018. In addition, we reviewed Border Patrol’s national intelligence estimates for fiscal years 2017 and 2018. We also reviewed documents describing the results of Border Patrol’s Threats, Targets, and Operations Assessments and Intelligence Preparation for the Operation Environment process completed for northern border sectors from 2014 through 2017.\nTo analyze the number apprehensions and drug seizures along the northern border, we obtained data from the Enforcement Integrated Database for fiscal years 2013 through 2017, a time period for which complete data were available at the time of our review. We assessed the reliability of apprehension and seizure data by performing electronic testing for obvious errors in accuracy and completeness, reviewing existing information about the data and the systems that produced them, and interviewing agency officials knowledgeable about the data. As a result of our data reliability assessment, we determined that Border Patrol’s apprehension and seizure data were sufficiently reliable for our intended use. From AMO, we reviewed the 2017 Northern Border Non- Commercial General Aviation Threat Overview and information collected by the Air and Marine Operations Center on vessel and aircraft border incursions detected along the northern border from fiscal years 2013 through 2017.\nTo address the second question, we reviewed CBP’s Fiscal Year 2019 Congressional Budget Justification. We also reviewed the results from Border Patrol’s capability gap assessment process for all eight northern border sectors completed for fiscal year 2017 and associated operational plans completed in September 2018; Border Patrol’s Surveillance Capability Assessment completed in April 2017; and AMO’s capability gap assessment completed in fiscal year 2016. We reviewed CBP capability analysis reports which included requirements along the northern border. In addition, we reviewed our relevant past work and DHS Office of Inspector General reports on northern border security.\nTo determine the staffing and resource challenges across all eight northern border sectors and three AMO branches, we also met with officials at each sector and branch and reviewed supporting documentation. Specifically, we analyzed responses provided by officials in all eight northern border sectors and three AMO branches and supporting documentation to determine challenges mentioned by officials at two or more locations. We also reviewed supporting documentation, including inventories of assets such as vehicles, vessels, aircraft, radar and land surveillance technology, tactical communication equipment, and facilities information. We obtained Border Patrol, AMO, and Office of Information and Technology staffing information as of September 1, 2018, the most recent data available at the time of our review, including the number of authorized, onboard, and vacant positions. To assess the reliability of this staffing information, we examined the information for any anomalies and interviewed agency officials knowledgeable about the data. We found the staffing information data were sufficiently reliable for our purposes of reporting the number of authorized, onboard, and vacant positions.\nTo address the third question, we reviewed and analyzed documentation that describes DHS and CBP processes for developing and implementing performance measures, including DHS’s Annual Performance Report for Fiscal Years 2017-2019, CBP’s Fiscal Year 2019 Congressional Budget Justification, and Performance Measure Definition Forms for recently developed performance measures. We reviewed reports, assessments, and strategies that describe current DHS and CBP performance measure initiatives. We also reviewed information from CBP’s National Border Geospatial Intelligence Strategy, including information on reports derived from geospatial intelligence technology, used as the basis for two of Border Patrol’s performance measures that contain data from the northern border. Additionally, we reviewed DHS’s most recent border security metrics report. We compared CBP’s actions to develop and implement performance measures to Standards for Internal Control in the Federal Government and the principles outlined in Government Performance and Results Act (GPRA) Modernization Act of 2010.\nWe compiled the descriptive information in the northern Border Patrol sector profiles in appendix II from a variety of sources. We obtained information on each sector’s geography and area of responsibility from Border Patrol documentation. We obtained information on the number of authorized agents from Border Patrol as of September 1, 2018. We obtained information on the major urban areas within each sector and population estimates from the U.S. Census Bureau and the data are current as of July 1, 2017, the most recent estimates available at the time of our review. Finally, we obtained geographic information on the location of each northern Border Patrol sector and its stations from Border Patrol and located the data geographically using MapInfo.\nTo analyze the number of apprehensions and drug seizures for each northern Border Patrol sector, we obtained data from the Enforcement Integrated Database for fiscal years 2013 through 2017, a time period for which complete data were available at the time of our review. The data fields we obtained included the individual’s immigration status at entry and country of citizenship and the drug type and quantity in pounds seized. Our analysis categorizes the sector’s apprehensions by the top four to six countries of citizenship of the individuals apprehended by Border Patrol and their immigration status at entry. Present without admission from Canada indicates the individual was suspected to be inadmissible for illegally entering the United States from Canada; present without admission from Mexico indicates the individual was suspected to be inadmissible for illegally entering the United States from Mexico; and the other category is a combination of all remaining categories, such as lawful permanent residents or other foreign nationals who may or may not be lawfully present in the United States. Our analysis also categorizes the sector’s number of drug seizures by the top three to six types of drugs that Border Patrol seized most frequently, as well as the quantity in pounds of those seizures.\nWe assessed the reliability of apprehension and seizure data by performing electronic testing for obvious errors in accuracy and completeness, reviewing existing information about the data and the systems that produced them, and interviewing agency officials knowledgeable about the data. As a result of our data reliability assessment, we determined that Border Patrol’s apprehension and seizure data were sufficiently reliable for our intended use.\nWe compiled the descriptive information in the northern region AMO branch profiles in appendix III from information provided by each branch and AMO headquarters. We obtained information on staffing for the three northern border branches as of September 2018. We obtained the geographic information on location of each northern region AMO branch and unit from AMO and located the data geographically using MapInfo.\nFor total flight and float hours across all AMO operating locations and regions, we reviewed CBP data on flight and float hours from fiscal years 2013 through 2017, a time period for which complete data were available at the time of our review. For Border Patrol riverine float hours across all locations, we reviewed and analyzed float hour data from fiscal year 2017, the most recent year for which complete data were available at the time of our review. For data on air and marine missions across AMO’s northern region branches and units, we reviewed CBP data on seizures of narcotics, apprehensions, and arrests from fiscal years 2013 through 2017, a time period for which complete data were available at the time of our review. To determine the reliability of CBP’s data on flight and float hours, and mission information for seizures of narcotics, apprehensions, and arrests data, we examined the data for any anomalies, reviewed CBP guidance and documents for data collection and entry, and interviewed CBP officials to understand their methods for collecting, reporting, and validating the data. We found these data were sufficiently reliable for our purposes of reporting summary data across fiscal years 2013 through 2017.\nTo obtain information on irregular northbound migration in appendix IV, we met with DHS and Border Patrol officials—including the three sectors (Blaine, Grand Forks, and Swanton sectors) with the highest reported levels of irregular northbound migration at the time of our review—and reviewed intelligence reports and assessments. We obtained the descriptive information in appendix IV on irregular northbound migration from a variety of sources.\nFor data from the government of Canada on the number of asylum claimants, we downloaded publicly reported summary data on asylum claimants from the government of Canada for 2012 through 2017.\nFor data on the number of individuals illegally entering Canada between ports of entry known to Border Patrol, we collected and reviewed information from Blaine, Grand Forks, and Swanton sectors for calendar years 2012 through 2017. To determine the reliability of data, we interviewed officials at each sector to understand their methods for collecting, reporting, and validating the data. According to Border Patrol officials at Blaine, Grand Forks, and Swanton sectors, the number of individuals illegally entering Canada between ports of entry was tracked through agent reporting and detection by land surveillance technology, such as surveillance cameras and unattended ground sensors. Based on Border Patrol’s methods for collecting, reporting, and validating the data, we found these data were sufficiently reliable for our purposes of reporting summary-level data.\nThe performance audit upon which this report is based was conducted from October 2017 to March 2019 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 that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. We subsequently worked with DHS from March 2019 to June 2019 to prepare this nonsensitive version of the original sensitive report for public release.", "To provide a descriptive overview of the northern border sectors, we developed a profile for each of the eight U.S. Border Patrol (Border Patrol) sectors located along the U.S.-Canada (northern) border: Blaine, Washington; Spokane, Washington; Havre, Montana; Grand Forks, North Dakota; Detroit, Michigan; Buffalo, New York; Swanton, Vermont; and Houlton, Maine. These profiles are listed in order from the western-most sector to the eastern-most sector and contain an overview of each sector’s geography and area of responsibility and an analysis of apprehensions and drug seizures from fiscal years 2013 through 2017.", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "Within U.S. Customs and Border Protection (CBP), Air and Marine Operations (AMO) conducts multifaceted missions consisting of direct support to U.S. Border Patrol (Border Patrol) and collaborative efforts with U.S. Immigration and Customs Enforcement’s Homeland Security Investigations and other federal, state, and local partner agencies. This includes, but is not limited to, investigative operations, surveillance missions, warrant service, and criminal apprehensions. AMO conducts missions along the U.S.-Canada (northern) border through three branches: Bellingham Air and Marine Branch in Bellingham, Washington; Great Lakes Air and Marine Branch at Selfridge Air National Guard Base, Michigan; and Manassas Air Branch in Manassas, Virginia. Each branch is further divided into units to conduct air or maritime missions.\nAccording to AMO data for fiscal years 2013 through 2017, AMO’s Northern Region accounted for 14 percent and 22 percent of total AMO flight and float hours, respectively, as shown in table 10. AMO implements a requirements determination process for annual aircraft flight and vessel float hours based on known mission requirements, funding levels, available assets, and the needs of law enforcement partners. Further, flight and float hours allocated across AMO’s regions are prioritized through CBP’s Flight and Float Hour Executive Oversight Council, which prioritizes flight and float hour allocations considering Department of Homeland Security and CBP’s strategic objectives and border security requirements, threats, and capacity that will be executed over the course of the upcoming year. In February 2018, CBP also created the Flight and Float Hour Executive Steering Committee comprised of Border Patrol and AMO executive leadership to perform periodic audits of flight hour execution, review changing operational environments, validate planning assumptions, and perform an evaluation on overall return on investment to best ensure that CBP asset utilization is consistently aligned with its priorities and threats.", "AMO’s Bellingham Air and Marine Branch is located in Bellingham, Washington, and is comprised of the Spokane and Montana Air Units and Port Angeles and Bellingham Marine Units. For a map of those operating locations, see figure 20. As of the end of September 2018, Bellingham Air and Marine Branch had 38 authorized Air Interdiction Agent positions and 20 authorized Marine Interdiction Agent positions.\nAccording to data provided by AMO for fiscal years 2013 through 2017, missions completed by Bellingham Air and Marine Branch resulted in:\n51 apprehensions of potentially removable aliens;\n963 arrests of individuals; and\n536 drug seizures, including: 204 methamphetamine seizures (1,033 pounds); 93 cocaine seizures (778 pounds); 155 heroin seizures (305 pounds); 65 marijuana seizures (14,132 pounds); and 19 other drug seizures (608 pounds).", "AMO’s Great Lakes Air and Marine Branch is located at Selfridge Air National Guard Base, Michigan and is comprised of the Buffalo and Chicago Air Units and the Sault Sainte Marie, Port Huron, Trenton, Sandusky, Erie, Buffalo, and Rochester Marine Units. For a map of those operating locations, see figure 21. As of September 2018, Great Lakes Air and Marine Branch had 27 authorized Air Interdiction Agent positions and 49 authorized Marine Interdiction Agent positions.\nAccording to data provided by AMO for fiscal years 2013 through 2017, missions completed by Great Lakes Air and Marine Branch resulted in:\n157 apprehensions of potentially removable aliens;\n2,571 arrests of individuals; and\n1,475 drug seizures, including: 553 marijuana seizures (6,974 pounds); 474 cocaine seizures (4,408 pounds); 296 heroin seizures (425 pounds); 87 methamphetamine seizures (1,347 pounds); and 65 other drug seizures (107 pounds).", "AMO’s Manassas Air Branch is located in Manassas, Virginia, and is comprised of the New York, Plattsburgh, and Houlton Air Units. For a map of those operating locations, see figure 22. As of September 2018, Manassas Branch had 35 authorized Air Interdiction Agent positions.\nAccording to data provided by AMO for fiscal years 2013 through 2017, missions completed by Manassas Air Branch resulted in:\n57 apprehensions of potentially removable aliens;\n1,347 arrests of individuals; and\n472 drug seizures, including: 161 marijuana seizures (12,015 pounds); 141 heroin seizures (141 pounds); 134 cocaine seizures (707 pounds); 25 methamphetamine seizures (39 pounds); and 11 other drug seizures (107 pounds).", "Irregular northbound migration—northbound movement of foreign nationals from the United States across the northern border into Canada between official ports of entry typically to make an asylum claim— increased in 2017. Specifically, in 2017 the Royal Canadian Mounted Police reported approximately 20,000 irregular northbound migrants intercepted between official ports of entry. The majority of interceptions were reported in the province of Quebec (91 percent) with additional interceptions noted in Manitoba (5 percent) and British Columbia (3 percent). In comparison, from 2012 to 2016 the total number of asylum claimants for all of Canada (including at and between official ports of entry) ranged from approximately 10,000 to 24,000 per year. The total number of asylum claimants for all of Canada (including at and between official ports of entry) increased from approximately 24,000 claimants in 2016 to approximately 50,000 claimants in 2017.\nAccording to Border Patrol officials, in 2017 the number of individuals crossing from the United States into Canada, other than those crossing through official ports of entry, increased within 3 of 8 Border Patrol sectors along the northern border: Blaine, Washington; Grand Forks, North Dakota; and Swanton, Vermont.\nBlaine Border Patrol Sector. The number of individuals entering Canada between official ports of entry in British Columbia, north of Blaine sector’s area of responsibility, known to Border Patrol was approximately 1,200 individuals during the 4-year period from 2012 through 2015, according to sector officials. In 2016, the number of individuals known to Blaine sector increased to approximately 1,100 individuals, and then increased again to approximately 1,400 individuals in 2017.\nGrand Forks Border Patrol Sector. The number of individuals entering Canada between official ports of entry in Manitoba, north of Grand Forks sector’s area of responsibility, known to Border Patrol was approximately 580 individuals during the 4-year period from 2012 through 2015, according to sector officials. In 2016, the number of individuals known to Grand Forks sector increased to approximately 400 individuals, and then increased to approximately 1,000 individuals in 2017.\nSwanton Border Patrol Sector. The number of individuals entering Canada between official ports of entry in Quebec, north of Swanton sector’s area of responsibility, known to Border Patrol was approximately 1,000 individuals during the 4-year period from 2012 through 2015, according to sector officials. In 2016, the number of individuals known to Swanton sector increased to approximately 1,100 individuals, and then increased to approximately 16,800 individuals in 2017. According to Swanton Border Patrol Sector officials, the majority of known entries into Canada by irregular northbound migrants between official ports of entry have occurred along Roxham Road in Champlain, New York. For a photo of a facility constructed by the government of Canada to process irregular northbound migrants north of Roxham Road, see figure 23.\nDepartment of Homeland Security (DHS) and Border Patrol officials we met with identified a bi-national agreement associated with the increased number of irregular northbound migrants from the United States to Canada from 2016 through 2017. Irregular northbound migrants entering Canada between official ports of entry are not subject to the framework established by the 2002 Safe Third Country Agreement signed by Canada and the United States, which governs the processing of asylum claims along the shared land border and applies only to those individuals entering at an official port of entry, not between ports of entry. Therefore, individuals who enter Canada by land between official ports of entry to make an asylum claim may be allowed to stay in Canada rather than have their claim handled by the United States. Individuals seeking to travel to Canada to make an asylum claim, whether or not they may have a valid asylum claim, are made aware of the potential ability to enter and remain in Canada pending an asylum decision due to wide sharing of this information through social media and reporting in the press. Otherwise, for those attempting to enter Canada through an official land port of entry to claim asylum, claimants may be returned to pursue their asylum claim in the country of last presence, which would be the United States, unless they qualify for one of the exceptions in the agreement.\nAccording to DHS officials, Canadian data indicates a large percentage of irregular northbound migrants had previously obtained nonimmigrant visas, primarily B1/B2 visas, which authorized their temporary travel to the United States, and subsequently entered Canada between official ports of entry to claim asylum. DHS, in collaboration with the U.S. Department of State, worked to identify, and as appropriate, revoke visas of individuals seeking to enter Canada between official ports of entry. Border Patrol intelligence reporting in 2017 identified visa fraud concerns because individuals obtained visas to enter the United States, when it appeared that their main intention was to enter Canada other than through a port of entry and claim asylum.\nBorder Patrol officials stated that the widespread perception among irregular northbound migrants they encounter is that Canada’s asylum policies are more welcoming than those of the United States, which has also contributed to the increased trend in irregular northbound migration. These officials cited both U.S. and Canadian reporting on the 2016 U.S. Presidential Election, along with a welcoming statement by the government of Canada, and perceived generosity of benefits upon application for asylum in Canada as reasons that migrants seek to enter Canada between official ports of entry and claim asylum.\nAccording to Border Patrol officials, the northbound asylum flows from the United States to Canada could potentially lead to future attempts to enter the United States illegally between ports of entry from Canada by individuals whose asylum claims are rejected by the government of Canada. According to anecdotal reporting to Border Patrol officials, some of the irregular northbound migrants who entered Canada from the United States were unable to gain status in Canada or the process was not what they had anticipated. According to the officials, these individuals subsequently attempted to reenter the United States in an effort to gain legal status in the United States. For example, Swanton Border Patrol Sector reported two incidents in April 2018 in which groups of individuals who were apprehended attempting to illegally enter the United States from Canada stated that they were seeking to reenter the United States after their asylum claims were rejected by the government of Canada.", "", "", "", "In addition to the contact named above, Christopher Ferencik (Assistant Director), David Alexander, Michele Fejfar, Eric Hauswirth, Grant Holyoak, John Mingus, Sasan J. “Jon” Najmi, Claire Peachey, Carl Potenzieri, and Natalie Swabb made key contributions to this report." ], "depth": [ 1, 2, 2, 2, 3, 3, 1, 2, 2, 1, 2, 3, 3, 2, 3, 3, 3, 3, 3, 3, 2, 1, 1, 1, 1, 1, 1, 2, 3, 2, 3, 2, 3, 2, 3, 2, 3, 2, 3, 2, 3, 2, 3, 1, 2, 2, 2, 2, 1, 1, 1, 2, 2 ], "alignment": [ "h0_title", "", "", "h0_title", "", "h0_full", "", "", "", "h0_full h2_full", "h0_full", "h0_full", "", "", "", "", "", "", "", "", "", "h1_full", "", "", "h2_full", "h2_full", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "h0_title", "h0_full", "", "", "", "", "", "", "", "" ] }
{ "question": [ "Why are staffing and resource challenges an issue for CBP on the northern border?", "How do Border Patrol and AMO work together?", "Why is it unknown whether the challenges identified by DHS and CBP will be addressed?", "Why was Executive Order 13767 issued?", "How does CBP assess border security operations?", "What are gaps in CBP's assessment of the northern border?", "How could developing better measures for assessing effectiveness benefit CBP?", "Why did GAO conduct this review?", "What is examined in this review?", "How did GAO gather information for this review?", "How was sensitive information handled in this review?" ], "summary": [ "U.S. Customs and Border Protection (CBP) identified staffing and resource challenges affecting its enforcement activities along the U.S.-Canada (northern) border and actions to address them, but faces competing priorities. The U.S. Border Patrol (Border Patrol) and Air and Marine Operations (AMO) are the components within CBP responsible for securing U.S. borders between ports of entry in the land, air, and maritime environments. Border Patrol identified an insufficient number of agents that limited patrol missions along the northern border. AMO identified an insufficient number of agents along the northern border, which limited the number and frequency of air and maritime missions. Border Patrol and AMO also identified a variety of resource challenges along the northern border, such as limited radar and surveillance technology coverage and inadequate facilities to process and temporarily hold apprehended individuals.", "The U.S. Border Patrol (Border Patrol) and Air and Marine Operations (AMO) are the components within CBP responsible for securing U.S. borders between ports of entry in the land, air, and maritime environments.", "While the Department of Homeland Security (DHS) and CBP identified actions to address staffing and resource challenges, it is unknown whether these challenges will be addressed. This is primarily because CBP's priority is to secure the U.S.-Mexico (southwest) border.", "Issued in January 2017, Executive Order 13767 directed DHS to take actions to secure the southwest border by, among other things, constructing physical barriers and hiring thousands of agents.", "While CBP has performance measures that assess selected border security operations or programs, some of which include data from the northern border, it does not have specific measures to assess its effectiveness at securing the northern border between ports of entry.", "For example, Border Patrol has performance measures that assess security in remote areas on the northern border, but the measures do not include data from maritime border areas.", "Developing and implementing such measures could help Border Patrol and AMO better assess the effectiveness of their northern border operations between ports of entry, including addressing challenges due to limited staffing and resources.", "GAO was asked to review CBP's efforts to secure the northern border between ports of entry.", "This report examines, among other things, (1) the staffing and resource challenges that CBP identified and actions it has taken to address those challenges and (2) the extent to which CBP has developed and implemented performance measures to assess its effectiveness at securing the northern border between ports of entry.", "GAO reviewed agency documentation and met with DHS and CBP officials in headquarters and field locations.", "This is a public version of a sensitive report that GAO issued in March 2019. Information that DHS deemed sensitive has been omitted." ], "parent_pair_index": [ -1, 0, -1, 2, -1, 0, 0, -1, 0, 0, 0 ], "summary_paragraph_index": [ 2, 2, 2, 2, 3, 3, 3, 1, 1, 1, 1 ] }
GAO_GAO-18-245
{ "title": [ "Background", "Federal Banking Supervision", "CRE Lending and Associated Risks", "Regulatory Guidance on CRE Concentrations and Risk Management Practices", "Credit and Other Risks Related to Bank CRE Lending Have Increased over the Past Several Years", "Regulators Examined Risk Management Practices of Banks with CRE Concentrations", "Regulators Examined Whether Banks with Relatively High CRE Concentrations Had Adequate Practices and Capital to Manage Their CRE Concentration Risk", "Capital and Concentration Risk", "Review of CRE-Related Risk Management Practices in Subsequent Examination Cycles", "Regulators Generally Did Not Examine CRE-Related Risk Management Practices of Banks with Concentrations below the CLD or Total CRE Threshold", "Regulators Differed in How They Addressed a Few Supervisory Concerns about Banks’ CRE-Related Risk Management Practices", "FDIC, Federal Reserve, and OCC Have Recently Taken Formal Enforcement Actions against Banks for Not Adequately Managing Their CRE Concentration Risk", "Agency Comments", "Appendix I: Objectives, Scope, and Methodology", "Appendix II: GAO Predictive Models of Aggregate Losses on Bank Commercial Real Estate Loans", "Appendix III: GAO Contact and Staff Acknowledgments", "GAO Contact", "Staff Acknowledgments" ], "paragraphs": [ "", "The purpose of federal banking supervision is to help ensure that banks throughout the financial system are operating in a safe and sound manner and are complying with banking laws and regulations in the provision of financial services. Banks in the United States are supervised by one of the following three federal regulators:\nFDIC supervises all FDIC-insured state-chartered banks that are not members of the Federal Reserve System and insured state savings associations and insured state chartered branches of foreign banks.\nThe Federal Reserve supervises commercial banks that are state- chartered and members of the Federal Reserve System.\nOCC supervises federally chartered national banks and savings associations (also known as federal thrifts).\nFDIC, the Federal Reserve, and OCC are required to conduct a full- scope, on-site examination of each of their supervised banks at least once during each 12-month period. The regulators may extend the examination interval to 18 months, generally for banks and thrifts that have less than $1 billion in total assets and that meet certain conditions, such as satisfactory ratings, are well capitalized, and are not being subject to a formal enforcement action. As part of a full-scope examination, examiners review a bank’s risk exposure within a number of components using the Uniform Financial Institutions Rating System, which also is referred to as the CAMELS rating system (capital adequacy, asset quality, management, earnings, liquidity, and sensitivity to market risk). Evaluations of CAMELS components consider a bank’s size and sophistication, the nature and complexity of its activities, and its risk profile.\nThe end result of a full-scope, on-site examination is a report of examination, which includes the CAMELS ratings and other findings and is provided to the bank’s management and board of directors. A report of examination may include deficiencies or other issues that examiners found and that a bank is expected to address within specific time frames. Such issues generally are called supervisory recommendations by FDIC, supervisory findings by the Federal Reserve, and supervisory concerns by OCC. For purposes of this report, we collectively refer to such issues as supervisory concerns. Supervisory concerns may be designed to correct practices that deviate from sound risk management principles or noncompliance with laws and regulations. Supervisory concerns that involve more significant issues are brought to the attention of a bank’s board of directors and senior management in the report of examination as matters requiring immediate attention (MRIA) or matters requiring attention (MRA) under the Federal Reserve’s policies, matters requiring board attention (MRBA) under FDIC’s policies, and MRAs under OCC’s policies. If a bank were to fail to address a supervisory concern, its regulator could subject the bank to enhanced supervision, downgrade of a component or composite rating, or other supervisory actions, such as informal or formal enforcement actions.", "Under their 2006 guidance, regulators define CRE loans to include construction loans, loans to finance CRE that are not secured by CRE, loans secured by multifamily property, and loans secured by nonfarm, nonresidential property in which the primary source of repayment derives from the rental income associated with the property or the proceeds of the sale, refinancing, or permanent financing of the property. CRE loans in which the primary source of repayment is not the property itself are called owner-occupied loans and can include loans to businesses for working capital purposes that use real estate as collateral. For example, a line of credit for a business’s operating expenses might be secured in part by commercial property, such as an office.\nConstruction and land development (CLD) loans generally are considered to be the riskiest class of CRE, due to their long development times and because they can include properties (such as housing developments or retail space in a shopping mall) that are built before having firm commitments from buyers or lessees. In addition, by the time the construction phase is completed, market demand may have fallen, putting downward pressure on sales prices or rents—making this type of loan more risky.", "Based on concerns about the increase in CRE concentrations at community banks and the risks associated with such concentrations, FDIC, the Federal Reserve, and OCC jointly issued guidance in December 2006 on CRE concentrations and sound risk management practices. The guidance described the regulators’ expectations for sound risk management practices for banks with concentrations in CRE loans. Specifically, the guidance identified seven key elements, or internal control areas, that a bank’s risk management practices should address to identify, monitor, and control its CRE concentration risk (see fig. 1).\nThe 2006 CRE guidance also sets forth three criteria to identify banks with CRE loan concentrations that could be subject to greater supervisory scrutiny. According to the guidance, a bank that has experienced rapid growth in CRE lending, has notable exposure to a specific type of CRE, or is approaching or exceeds the following supervisory criteria may be identified for further supervisory analysis of the level and nature of its CRE concentration risk:\nCLD concentration threshold: CLD loans represent 100 percent or more of a bank’s total capital.\nTotal CRE concentration threshold: Total nonowner-occupied CRE loans (including CLD loans) represent 300 percent or more of a bank’s total capital and total CRE lending increased by 50 percent or more during the previous 36 months.\nAccording to the guidance, the CLD and CRE thresholds do not constitute limits on a bank’s CRE lending activity but rather serve as high-level indicators to identify banks potentially exposed to CRE concentration risk.\nIn 2011, we reported on how the federal banking regulators had responded to the potential risks of growing CRE concentrations at community banks, including by jointly issuing the 2006 CRE concentration guidance. We recommended that the regulators should enhance or supplement the 2006 CRE guidance and take steps to better ensure that such guidance is consistently applied. The regulators have taken steps to address our recommendation.\nOut of the approximately 5,900 banks that had a CRE loan portfolio as of the end of June 2017, a total of 504 banks exceeded either 100 percent in CLD loans as a percentage of total risk-based capital, or 300 percent in CRE loans as a percentage of total-risk based capital and had seen 50 percent CRE portfolio growth during the previous 36 months. Of these 504 banks, a total of 69 banks exceeded both the CLD criteria and the total CRE criteria (including the growth component).\nIn December 2015, federal banking regulators issued a joint statement to remind banks of the 2006 regulatory guidance on prudent risk management practices for CRE lending activity through economic cycles. The regulators noted, among other trends, that many banks’ CRE concentration levels had been rising. According to the statement, regulators would continue to pay special attention to potential risks associated with CRE lending during 2016. Specifically, the regulators stated that when conducting examinations that include a review of CRE lending activities, they would focus on banks’ implementation of the prudent principles in the 2006 CRE guidance and other applicable guidance relative to identifying, measuring, monitoring, and managing concentration risk in CRE lending activities.\nAccording to officials from FDIC, the Federal Reserve, and OCC, their agencies use a variety of formal and informal processes to monitor the condition of banks and identify risks, including CRE concentration risk. For example, The Federal Reserve has a National Risk Council and FDIC and OCC have National Risk Committees that meet routinely to identify and evaluate risks facing banks and are supported by a number of other committees or other groups. FDIC officials told us that analysis done by FDIC’s Regional Risk Committees identified growth in CRE concentrations in 2015 and brought the issue to the National Risk Committee’s attention. OCC began actively monitoring CRE loan growth in the middle of 2014 and began focusing on CRE concentration risk management during bank examinations in 2015. OCC officials also stated that CRE concentration risk has been a key risk issue for the agency’s National Risk Committee since early 2016. Federal Reserve officials told us that the agency, including the Federal Reserve banks, began to monitor bank CRE concentrations more closely around mid-2013 after identifying an increase in CRE concentrations. According to FDIC, Federal Reserve, and OCC officials, they met together in early 2015 to discuss CRE lending growth and the rise in bank CRE loan concentrations and held subsequent meetings throughout the year, in part to discuss policy options for helping to ensure that banks were appropriately managing their CRE concentration risks. One of the outcomes of such interagency coordination was the December 2015 joint statement on CRE concentrations.", "Although the CRE sector has recovered since the 2007–2009 financial crisis, our trend and econometric analyses generally indicate that credit and other risks related to bank CRE lending have increased over the past several years.\nBased on indicators of CRE market conditions and loan performance, the CRE sector has recovered from the 2007–2009 financial crisis. For example, spending on CRE construction projects—a source of demand for bank financing—has rebounded. Vacancy rates for apartments, office buildings, and other CRE properties have declined. Similarly, as shown in figure 2, delinquency and charge-off rates on bank CRE loans have fallen from their post-crisis peaks and are at or below their lowest levels since 2002. Although these rates provide information on the current performance of bank CRE loans, they provide little or no information about potential future risks faced by banks. For example, high-risk loans made to less creditworthy borrowers could perform well when property markets and the economy are doing well but may perform poorly when property markets or the economy begin to slow.\nAt the same time, our analyses of other market, underwriting, and lending data and forecasts from predictive econometric models we developed suggest that banks’ credit and concentration risks related to their CRE lending have increased. As shown in figure 3, according to a Federal Reserve survey, banks lowered their CRE loan underwriting standards— terms and conditions under which banks extend loans—after the financial crisis, but more banks began to tighten their underwriting standards since late 2015. In general, tightening underwriting standards may indicate that loan officers are reevaluating the degree of risk in CRE markets served by banks. According to Federal Reserve data, a larger share of banks has tightened underwriting standards on multifamily properties, such as apartments.\nCRE property prices, particularly for multifamily properties, have increased rapidly in recent years, and CRE property valuations have similarly increased. For example, as shown in figure 4, capitalization rates (the ratio of income generated by a property to the property’s price) on CRE properties have trended downward since around 2010—indicating that borrowers (i.e., property owners) may be earning less of a return on their CRE properties. Capitalization rates can be indicative of expected future price changes—for example, low capitalization rates may reflect expectations of future price increase, but can also be driven by investor sentiment not associated with fundamental aspects of properties.\nIn addition, as shown in figure 5, the number of banks with concentrated portfolios in CLD or total CRE loans has been gradually increasing since around 2014. Greater concentrations in a particular lending sector (e.g., commercial real estate, residential real estate, or business lending) leave banks more vulnerable to a sectoral downturn, all else equal.\nTo further assess risk in bank CRE lending, we developed and estimated several predictive models of aggregate losses on bank CRE loans. The models incorporate measures of CRE property prices, bank lending, and underwriting standards. The models generally found that, historically, higher future losses are predicted when CRE lending and prices are simultaneously high relative to gross domestic product, and when banks are tightening underwriting standards. Based largely on the simultaneous increase in bank CRE lending and CRE prices observed over the last several years, these models suggest that credit risk has increased, though it remains lower than the level of risk associated with the 2007– 2009 financial crisis. As we noted earlier, high property valuations and substantial increases in lending can simultaneously weaken collateral protections and indicate lower borrower quality, both of which can raise the risk of losses should the economy or CRE sector weaken. (See app. II for additional information on our models.)", "We found that regulators generally subjected banks with relatively high concentrations in CRE loans to greater supervisory scrutiny in comparison to banks with relatively lower concentrations in CRE loans in our review of 54 examinations for 40 banks conducted from 2013 through 2016. In all of these examinations, the regulators specifically assessed whether each bank had adequate risk management practices and capital for managing its CRE concentration risk and generally found that the banks had adequate risk management practices and capital. In a few examinations, regulators differed in how they addressed supervisory concerns about a bank’s CRE-related risk management practices.", "In our review of a nongeneralizable sample of 54 examinations conducted from 2013 through 2016, we found that FDIC, Federal Reserve, and OCC subjected banks with relatively high concentrations in CRE loans to greater supervisory scrutiny. In both their 2006 CRE guidance and 2015 CRE statement, the regulators indicated that banks with relatively high CLD or total CRE concentrations should maintain risk management practices commensurate with the level and nature of their concentration risk. The 2006 CRE guidance recognized that the sophistication of a bank’s CRE risk management practices depends on, among other things, the level and nature of its CRE concentrations and associated risk. As noted earlier, the guidance notes that a bank’s risk management practices should address seven internal control areas: (1) board and management oversight; (2) portfolio management; (3) management information systems; (4) market analysis; (5) credit underwriting standards; (6) portfolio stress testing and sensitivity analysis; and (7) credit risk review function. Based on our analyses, we found that the 2006 CRE guidance’s risk management framework is adequately designed to help ensure that banks effectively identify, measure, monitor, and control their CRE concentration risk. For example, the guidance is consistent with credit and concentration risk principles issued by international standard- setting bodies.\nOf the 54 reports of examination that we reviewed, 41 of them covered banks whose CLD or total CRE concentrations exceeded the CLD concentration threshold, total CRE concentration threshold, or both thresholds set forth in the 2006 guidance. In all of these examinations, we found that FDIC, Federal Reserve, and OCC examiners generally assessed whether each bank had implemented adequate risk management practices to manage their concentration risk. As shown in figure 6, in 26 of the 41 examinations, FDIC, Federal Reserve, and OCC examiners did not find any weaknesses in the banks’ CRE risk management practices across the seven internal control areas, but did find weaknesses in the remaining 15 examinations.\nIn 15 of the 41 examinations we reviewed, FDIC, Federal Reserve, and OCC examiners found the banks had CRE-related risk management weaknesses in at least one of the seven internal control areas. Examiners most frequently found risk management weakness in three internal control areas: board and management oversight (11 instances), management information systems (8 instances), and stress testing (7 instances). To a slightly lesser extent, examiners found weaknesses in portfolio management, credit underwriting standards, and credit risk review function. Examiners communicated their supervisory concerns to these 15 banks in their reports of examinations.\nIn 12 of the examinations, examiners included MRAs, MRBAs, or MRIAs in their reports of examination that directed the banks to correct their risk management weaknesses.\nIn the other three examinations, examiners included recommendations or other notes in their reports of examination that generally directed the banks to correct their risk management weaknesses.\nConsistent with the 2006 CRE guidance, we found that examiners generally did not use the CLD or total CRE concentration thresholds as limits on bank CRE lending. With two exceptions, examiners did not direct banks that exceeded the CLD or CRE threshold to reduce their concentrations but rather focused on ensuring that the banks’ risk management practices were commensurate with the nature and level of their concentration risk. In the two exceptions, examiners found the banks’ practices and capital inadequate for managing their CLD or CRE concentration risk and directed the banks to reduce their concentrations and improve their risk management practices.\nWe found that FDIC, Federal Reserve, and OCC examiners varied in the extent to which they documented—in the reports of examination and supporting workpapers—the scope of their review of banks’ CRE-related risk management practices and findings. For example, we were not always able to determine whether examiners found a bank’s practices adequate in one or more of the seven internal control areas based on our review of the report of examination and, if available, supporting workpapers. According to the regulators, reports of examinations are used primarily to document practices found to be inadequate and not practices found to be adequate. Moreover, the regulators told us that their examiners recently have been required to use a CRE examination module to document their assessment and findings of banks with concentrations exceeding the CLD or CRE threshold.", "In the 41 examinations we reviewed where banks exceed one of the concentration thresholds, FDIC, Federal Reserve, and OCC examiners assessed whether the banks generally had capital commensurate with their CRE concentration risk. In 34 of the examinations, examiners determined that the banks’ capital levels were adequate for managing their CLD or total CRE concentration risk. In 7 of the examinations, examiners determined that the banks’ capital levels were inadequate. For six of the seven banks, examiners directed the banks in the reports of examination to reduce or manage their CRE concentrations in light of inadequate capital. In the case of one bank, examiners required the bank to comply with a previous formal enforcement action that addressed the need for the bank to adhere to its board-approved capital plan.", "For banks with relatively high CLD or total CRE concentrations, we found that Federal Reserve and OCC examiners assessed the banks’ CRE- related risk management practices in subsequent examinations. In our review of 41 examinations of banks that exceeded the CLD or CRE threshold, 26 of them covered two examination cycles of 13 banks conducted from 2013 through 2016. We found that examiners assessed the banks’ practices for managing their concentration risk in both examinations.\nIn 14 examinations (covering 7 banks), examiners found that the banks had adequate risk management practices in both examinations.\nIn six examinations (covering three banks), examiners found aspects of the banks’ risk management practices to be inadequate in their 2013 or 2014 examination and noted their supervisory concerns in the reports of examination. In the subsequent examinations, the examiners found that the banks had adequately addressed the previously identified risk management weaknesses.\nIn six examinations (covering three banks), examiners found the banks’ practices for managing their CRE concentration risk to be adequate in the 2013 or 2014 examinations but inadequate in the subsequent examinations. The examiners issued the banks MRAs or MRIAs or took an informal enforcement action.", "For banks with concentrations below the CLD or total CRE threshold, we found that regulators generally did not examine the banks’ CRE-related risk management practices. Thirteen of the 54 examinations we reviewed covered banks that did not exceed the CLD or CRE thresholds. Although the banks did not exceed either threshold, OCC examiners assessed the banks’ CRE-related risk management practices in 3 of the examinations. In 1 examination, examiners determined that the bank’s CRE-related risk management practices were adequate. The other 2 examinations covered subsequent cycle examinations of the same bank. In the first examination, examiners found that the bank had adequate practices for managing risk associated with its CRE loans but directed the bank through an MRA to incorporate stress testing of the loan portfolio into its monitoring. In the subsequent examination, the examiners found that the bank had addressed the MRA. In the other 10 examinations, FDIC, Federal Reserve, and OCC examiners did not mention in the report of examination the banks’ practices for managing the risk associated with their CRE loans.\nFDIC, Federal Reserve, and OCC officials told us that examiners use their professional judgment in determining whether to review a bank’s CRE-related risk management practices if the bank’s concentration is below the CLD and CRE threshold. This approach is consistent with the overall risk-based supervisory process used by the regulators, which focuses examiner resources on assessing bank management’s ability to identify and control risks. For example, FDIC’s examination guidelines note that examiners should focus their resources on a bank’s highest risk areas when assessing risk management programs, financial conditions, and internal controls. According to the guidance, the exercise of examiner judgment to determine the scope and depth of review in each functional area is crucial to the success of the risk-focused supervisory process.", "In a few examinations, we found differences across regulators in how they addressed supervisory concerns about banks’ CRE-related risk management practices because of differences in the regulators’ policies. In our nongeneralizable sample of 54 examinations, Federal Reserve, FDIC, and OCC examiners included CRE-related supervisory concerns, such as recommendations, MRAs, or MRBAs, in 22 of the reports of examinations. Although the regulators have policies for identifying and communicating supervisory concerns, their policies use different criteria. For example, OCC’s policies instruct examiners to use MRAs to describe practices that a bank must implement or correct to address a deficiency and not to use MRAs to require enhancements to bank practices that meet acceptable standards. However, the Federal Reserve’s and FDIC’s policies do not expressly include such criteria. Consistent with their policies, OCC examiners included MRAs in the reports of examination that we reviewed only when they found a bank’s CRE-related risk-management practices to be inadequate. In contrast, in 2 reports of examination, we found that FDIC examiners did not find the banks’ CRE- related risk management practices to be inadequate but included MRBAs to direct the banks to enhance or sustain certain CRE-related risk management practices. Similarly, in 1 report of examination, Federal Reserve examiners found that the bank’s risk management practices and capital were adequate for its CRE concentrations but included an MRA to require the bank to enhance its capital plan to include concentration risk considerations.", "In addition to their examinations, federal banking regulators have taken informal and formal enforcement actions against banks for not adequately managing their CRE concentration risk. In general, initial consideration and determination of whether informal or formal action is required usually results from examination findings. Unlike informal enforcement actions, formal enforcement actions are published or publicly available. From 2013 through 2016, FDIC, the Federal Reserve, and OCC took formal enforcement actions against banks for not adequately managing risks related to their CRE concentrations, including those outlined in the jointly issued 2006 CRE guidance.\nFDIC took 22 formal enforcement actions against banks for matters related to their CRE concentrations during this period.\nThe Federal Reserve took 2 formal enforcement actions against banks for matters related to their risk management of CRE lending.\nOCC took 11 formal enforcement actions against banks for matters related to their CRE concentrations during this same period.\nThe majority of these formal enforcement actions discussed the 2006 CRE guidance and directed the banks to improve their practices for managing their CRE concentration risk. For example, in a number of formal enforcement actions, the regulators ordered the banks to revise their written concentration risk management programs for identifying, monitoring, and controlling risks associated with concentrations of credit, consistent with the 2006 CRE guidance.", "We provided a draft of this report to FDIC, the Federal Reserve, and, OCC for review and comment. The agencies provided technical comments, which we incorporated as appropriate.\nWe are sending copies of this report to the appropriate congressional committees and FDIC, the Federal Reserve, and OCC. This report will also be available at no charge on our website at http://www.gao.gov.\nShould you or your staff have questions concerning this report, please contact me at (202) 512-8678 or [email protected]. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. Key contributors to this report are listed in appendix VII.", "Our objectives in this report were to examine: (1) trends in the commercial real estate (CRE) lending markets, including changes in the level of credit and concentration risk in the markets, and (2) actions federal banking regulators took through their examinations to help ensure that banks with CRE concentrations are effectively managing the related risks.\nTo examine trends in the CRE lending markets, we reviewed academic literature and prior GAO work and interviewed officials from the federal banking regulators and private data providers. Specifically, we interviewed officials at the Board of Governors of the Federal Reserve System (Federal Reserve), the Federal Deposit Insurance Corporation (FDIC), and the Office of the Comptroller of the Currency (OCC) to help identify potential indicators of risk in CRE markets. To further inform our assessment of risk, we reviewed prior GAO work on the lessons learned from prior banking crises and the use of early warning models for monitoring the financial system. We also reviewed academic research on early warning models of banking and real estate-related crises.\nTo report trends and assess risk, we reviewed and analyzed a range of data that we considered to be reflective of various aspects of risk in CRE lending markets. Specifically, we reviewed and analyzed commercial property vacancy data from REIS (a private commercial real estate data provider); commercial property construction data from the U.S. Census Bureau; data on delinquencies and charge-offs on bank CRE loans from the Federal Reserve; data on commercial property prices and capitalization rates from Real Capital Analytics (a private commercial real estate data provider); FDIC data on bank CRE lending; and Federal Reserve data on underwriting standards. We evaluated trends in these data and used a subset of these data to estimate several predictive models of aggregate losses on bank CRE loans. (See app. II for more information on our predictive models.)\nTo examine actions taken by federal regulators to help ensure that banks with high CRE concentrations are effectively managing the related risks, we reviewed and analyzed their relevant guidance and regulations on bank CRE lending, examination policies and procedures (e.g., examination manuals and modules), studies and other publications on risks in the banking industry, and formal enforcement actions taken from 2013 through 2016 for CRE-related matters. In addition, we analyzed Consolidated Reports of Condition and Income data from SNL Financial for the period from 2011 through 2016 to calculate banks’ construction and land development (CLD) and CRE concentrations during the period. Specifically, we used the concentration formulas in the 2006 CRE concentration guidance (jointly issued by the federal banking regulators) to calculate banks’ CLD and CRE concentrations and identify banks whose CRE concentrations exceeded, in full or in part, the guidance’s CRE concentration thresholds during part or all of the time frame. Based on whether the banks’ CRE concentrations exceeded the thresholds and other criteria discussed below, we selected a nongeneralizable sample of 40 banks overseen by FDIC, the Federal Reserve, or OCC. For the banks in our sample, we requested from the regulators copies of the reports of examination and, if available, related workpapers prepared by the regulators based on their full-scope examinations of the banks done from 2013 through 2014, and from 2015 through 2016.\nIn addition to using banks’ CRE concentrations as a basis to select examinations, we judgmentally selected a nonprobability sample of banks based on the following criteria:\nTotal asset size: We considered the size of the banks based on their total assets and selected banks from each of the following three ranges: (1) banks with $1 billion or more in total assets, (2) banks with $100 million or more but less than $1 billion in total assets, and (3) banks with less than $100 million in total assets.\nPrimary regulator: We considered the primarily regulator of the banks and selected a sample of 40 banks that resulted in a total of 20 examinations to review from each regulator.\nGeographic distribution: We selected banks to ensure that at least one bank was from each of the four regions of the U.S. Census and each of the nine divisions within those regions.\nBased on the 40 banks we selected, we reviewed and analyzed 54 reports of examination and, if available, the related workpapers. We analyzed the examinations using criteria or other requirements specified in the 2006 CRE guidance jointly issued by the regulators and their examination policies and procedures. We did not review six examinations of banks supervised by the Federal Reserve. We also interviewed officials from FDIC, Federal Reserve, and OCC, and from a national banking association about bank CRE lending and applicable CRE guidance and requirements.\nFor the data we analyzed under both of our objectives, we took a number of steps to assess the reliability of the data, including interviewing data providers; corroborating trends across multiple data sources; reviewing related documentation; inspecting data for missing values, outliers, or other errors; and reviewing relevant, prior GAO work. We determined that these data were sufficiently reliable for our reporting objectives.\nWe conducted this performance audit from January 2017 to March 2018 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 that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives.", "We developed and estimated several models of aggregate losses on bank commercial real estate (CRE) loans. These models attempt to predict future aggregate charge-offs using contemporary indicators of potential risks. We incorporated indicators of risk based on the cross- country research literature on early warning models of banking risk and prior GAO work on identifying early warning models as tools that could assist financial regulators in assessing risk. One study summarized the overall intuition for models of this class in the following way: “imbalances manifest themselves in the coexistence of unusually rapid cumulative growth in private sector credit and asset prices.” Our results were consistent with this concept and extend the aggregate early warning model literature to a sectoral model. As such, our models incorporate measures of CRE property prices, bank lending volumes, and bank loan underwriting standards.\nThe models predict charge-offs 2–3 years into the future (the dependent variable is the average charge-off rate for 8 through 11 quarters into the future), using commercial bank charge-off rates from the Board of Governors of the Federal Reserve System (Federal Reserve), first quarter 1991 to second quarter 2017. (See below for an illustrative regression equation for one of these models.)\nWe began with two model variations, one based on the levels of key variables and the other based on their growth rates, using the following independent variables, respectively: “Level” model: Level of CRE prices to gross domestic product (GDP), level of bank CRE lending to GDP, the interaction of the level of CRE prices and lending, and the net percentage of banks tightening underwriting standards on CRE loans. “Growth” model: Growth rate of CRE prices over the last year, growth rate of bank CRE lending over the last year, interaction of price and lending growth, and the net percentage of banks tightening underwriting standards on CRE loans.\nBy inspection, the model based on levels also captured key aspects of the evolution of aggregate losses on bank CRE loans in recent decades—for example, low charge-offs prior to the crisis, the rapid increase during crisis, and very low charge-offs in recent years. In this model higher losses are predicted by tightening underwriting standards, and the interaction of (i.e., simultaneous increase in) the level of CRE prices and the level of CRE lending. The bulk of the explanatory power of the model appears to come from the interaction of the level of CRE prices and the level of CRE lending—consistent with Borio and Drehmann’s view that the coexistence of rapidly increasing credit and prices is associated with greater risk. These results are also consistent with a more general theory, for example, that periods of economic stability induce greater risk-taking over time, bidding up asset prices and loosening underwriting standards until ultimately increased valuations become unsustainable, prices fall, and borrowers begin to default.\nWe estimated a number of additional models for robustness, to determine if goodness-of-fit and forecasts could be improved markedly, and to assess the degree of forecast uncertainty. For example we estimated a model with a censored dependent variable and used information criteria to select models that combined elements from our initially separate models based on growth rates and levels as well as a model that includes current charge-offs. In figure 7, we report the general trend in expected future charge-offs as well as convey forecast uncertainty based on differences in the forecasts of three of these models.\nIn figure 8, we convey forecast uncertainty based on the 75 percent confidence interval for a combined model that we selected based on information criteria.\nImplicit in this exercise is the assumption that the data-generating process is reasonably stable—as a result, structural change associated with new financial products, new risk management tools, and new legal and regulatory frameworks could reduce the stability of the data- generating process. We interpret our results and forecasts in light of these potential limitations. Specifically, we do not interpret model results as concrete, precise predictions of aggregate commercial real estate losses but rather as an additional, general indication of the degree of risk in bank CRE lending.\nWe mitigate risks associated with estimating this type of model with appropriate diagnostics, out-of-sample testing, and by developing the model in the context of the well-established early warning literature. That said, some inevitable limitations remain, including the potential omission of important risk factors and other approximations associated with our specification (e.g., our choice of a linear functional form). In addition, diagnostics for detecting nonstationary time series are imperfect, especially with small sample sizes, which may inflate our measures of statistical significance and traditional goodness-of-fit measures like r- squared. These biases may be present, however, in models that still generate useful predictions. In this “small data” context there is also risk of fitting (or over-fitting) the model to predict a particular credit event— though, again, this risk is mitigated somewhat in the context of the broad cross-country early warning literature and the use of out-of-sample testing.", "", "", "In addition to the contact named above, Richard Tsuhara (Assistant Director), Tarek Mahmassani (Analyst in Charge), Abigail Brown, Tarik Carter, M’Baye Diagne, Michael Hoffman, Risto Laboski, Marc Molino, Jessica Sandler, Jennifer Schwartz, and Andrew Stavisky made significant contributions to this report." ], "depth": [ 1, 2, 2, 2, 1, 1, 2, 3, 2, 2, 2, 2, 1, 1, 1, 1, 2, 2 ], "alignment": [ "h0_title h2_title", "", "h0_full", "h2_full", "h0_full", "h2_title h1_full", "h2_full h1_full", "", "", "", "", "", "", "h3_full", "", "", "", "" ] }
{ "question": [ "How has CRE lending changed in recent years?", "What do GAO's analyses suggest about risks in CRE lending?", "How can GAO see that this trend is occurring?", "How do GAO's predictive models back this trend?", "How does a relatively high CRE concentration affect banks?", "How did GAO make these observations?", "How did regulators communicate their findings to banks?", "Why did federal banking regulators issue guidance in 2006?", "How does this guidance identify potentially risk-exposed banks?", "How have concentrations in CRE loans changed over time?", "How did regulators remind banks of their 2006 guidance?", "Why did GAO conduct this examination?", "How did GAO address these issues?", "How did GAO gain information from bank regulators?" ], "summary": [ "While the commercial real estate (CRE) sector has recovered since the 2007–2009 financial crisis, GAO's trend and econometric analyses generally indicate that risk in CRE lending by banks has increased over the past several years. Since the early 2000s, community banks have tended toward providing CRE loans more than other kinds of loans. Indicators of CRE market conditions and loan performance have been improving since 2011.", "At the same time, GAO's analyses of changes in CRE underwriting standards, property prices, and other data suggest that credit and concentration risks have increased in bank CRE lending.", "For example, the number of banks with relatively high CRE concentrations—measured by the ratio of a bank's CRE loans to its total capital—has been increasing. In addition, commercial property prices have been increasing rapidly, and property valuations also have risen in recent years.", "Similarly, GAO's predictive econometric models of CRE loan performance suggest that risk has increased, based largely on the simultaneous increase in bank CRE lending and CRE prices observed over the last several years, but is lower than the level associated with the 2007–2009 financial crisis.", "GAO found that federal banking regulators subjected banks with relatively high CRE concentrations to greater supervisory scrutiny based on its review of a nongeneralizable sample of 54 bank examinations covering 40 banks done by the Federal Deposit Insurance Corporation, Board of Governors of the Federal Reserve System, and Office of the Comptroller of the Currency from 2013 through 2016.", "Of the 54 examinations that GAO reviewed, 41 of them covered banks with relatively high CRE concentrations. In all of these examinations, regulators examined whether the banks had adequate risk management practices and capital to manage their CRE concentration risk. In 26 of the 41 examinations, regulators did not find any risk management weaknesses. However, in 15 of the 41 examinations, regulators found the banks had weaknesses in one or more risk management areas, such as board and management oversight, management information systems, or underwriting.", "The regulators generally communicated their findings to the banks in the reports of examination and directed the banks to correct their risk management weaknesses.", "In 2006, federal banking regulators jointly issued guidance that described their expectations for sound risk management practices for banks with CRE concentrations.", "The guidance includes two CRE thresholds that regulators use to identify banks that are potentially exposed to significant CRE concentration risk and could be subject to greater supervisory scrutiny.", "Concentrations in CRE loans at U.S. banks have been steadily increasing—raising safety and soundness concerns.", "In December 2015, the regulators jointly issued a public statement to remind banks of the 2006 CRE guidance.", "In light of the joint 2015 statement and GAO's ongoing monitoring of regulatory efforts to identify and respond to emerging threats to the banking system, GAO examined (1) trends in the CRE lending market, including changes in risk, and (2) actions taken by regulators to help ensure that banks with CRE concentrations are effectively managing the related risks.", "To address these issues, GAO analyzed CRE-related data; reviewed agency policies and guidance; and reviewed a nongeneralizable sample of 54 bank examinations conducted from 2013 through 2016 based on the banks' CRE concentrations, total assets, primary regulator, and geographic location.", "GAO also interviewed officials from the federal banking regulators." ], "parent_pair_index": [ -1, -1, 1, 1, -1, 0, 0, -1, 0, -1, -1, -1, 0, 1 ], "summary_paragraph_index": [ 2, 2, 2, 2, 3, 3, 3, 0, 0, 0, 0, 1, 1, 1 ] }
CRS_R44095
{ "title": [ "", "Puerto Rico's Fiscal Emergency", "Emergency Moratorium and Financial Rehabilitation Act", "Restructuring the Government Development Bank", "Puerto Rico's Fiscal Strategy", "Puerto Rican Restructuring Act", "Credit Ratings Downgrades and Loss of Market Access", "FY2016 Budget", "Puerto Rican Governor: Debt Unpayable", "Economic and Fiscal Recovery Working Group Plan", "Extraordinary Liquidity Measures Used in Late 2015 and Early 2016", "First Default in August 2015", "Loss of Credit Market Access Prevented Debt Roll-Overs", "Constitutional Limits on Borrowing are Close to Binding", "Puerto Rico Faces Severe Challenges in FY2017", "Structural Initiatives to Address Fiscal Challenges", "Fiscal Challenges Have Been Building for Years", "Debt Accumulation over Time", "Public Corporations Incurred Much of Puerto Rico's Public Debt", "Puerto Rico Electric Power Authority", "Forbearance and Revitalization", "Financial and Operational Challenges", "Government Development Bank for Puerto Rico", "Other Public Corporations", "Highways and Transportation Authority (HTA)", "Puerto Rico Aqueduct and Sewer Authority (PRASA)", "Fiscal Strategy and Outmigration", "Potential Issues for Congress", "Administration Proposals", "Credit Support", "Federal Health and Income Support Programs", "Restructuring and Bankruptcy", "Federalism, Flexibility, and Fiscal Responsibility", "Control Board Proposals", "District of Columbia Control Board and State-Established Control Boards", "Congressional and Administration Proposals for Fiscal Oversight", "PROMESA", "Structural Reforms in the Medium and Long Term", "Revenue Policies", "Jones Act and Transportation", "Labor and Income Support" ], "paragraphs": [ "", "The government of Puerto Rico currently faces a serious fiscal emergency that is the culmination of long-standing budgetary, economic, and financial challenges. While Puerto Rico has made a number of structural reforms and has increased tax rates in the past few years, it had been unable to head off increasingly urgent fiscal challenges. Recent projections estimate the island's economy will shrink by about 1.2% in FY2016 (which ends June 30, 2016) and by about 2% in FY2017.\nDefaults on bonds issued by some components of the Puerto Rican government have already occurred, and credit rating agencies expect others to follow. In August 2015, debt service on bonds issued by the Public Finance Corporation, an arm of the Government Development Bank (GDB), was not paid in full. The Puerto Rico Infrastructure Financing Authority (PRIFA) did pay interest in full on certain bonds due on January 1, 2016. The GDB itself did not pay principal due on May 1, 2016, as described in the next section.\nThe Puerto Rican government's fiscal situation, according to emergency legislation (Act 21 of 2016) enacted on April 6, 2016, \"is more dire than at any other point in its history\" and \"depleted resources and strained liquidity threaten to bind the Commonwealth to a choice between honoring its commitments to bondholders or continuing to provide the residents of Puerto Rico with essential services.\" A federal district judge in late March 2016 held in a case involving the tax treatment of Walmart that the government of Puerto Rico \"is insolvent and no longer able to pay its debts as they become due.\" The Governor of Puerto Rico, Alejandro García Padilla, while signing the emergency act, was quoted as stating that \"Puerto Rico is insolvent.\" The Puerto Rican government has slowed some tax refunds and supplier payments to bolster its liquidity.", "The Puerto Rico Emergency Moratorium and Financial Rehabilitation Act (PREMFRA; Act 21 of 2016) empowers the governor of Puerto Rico to declare a fiscal state of emergency and a moratorium on certain debt service payments that would extend to January 2017. That emergency legislation, according to its preamble, was prompted by impending debt service payments. On May 1, 2016, Governor García Padilla issued an order to declare a moratorium on certain debt payments by the Government Development Bank (GDB), the government's fiscal agent, which was due to make a debt service payment of $423 million on that date. GDB did pay interest and was able to refinance $33 million of that debt, leaving a payment shortfall of about $367 million.\nThe Commonwealth government has stated that even after recapturing or \"clawing back\" revenues from other parts of the public sector that it \"will not have sufficient resources to meet the entire debt service obligation on the Commonwealth's general obligations bonds due on July 1, 2016.\" On that date, the Commonwealth government is due to pay about $1.9 billion, of which, about $800 million are for general obligation debts.", "The GDB has faced serious liquidity issues in recent years. According to documents released in the Walmart case, a local banking regulator, the Puerto Rico Commissioner of Financial Institutions, found that the GDB was insolvent in 2015. Senior GDB officials, however, contested some claims of the Commissioner. Many, however, had considered it likely that a receiver could take control of the GDB, which could complicate financial operations of the Commonwealth. The Puerto Rican government has reportedly moved accounts from the GDB to commercial banks in order to avoid disruptions in public finances. On April 8, Governor García Padilla invoked authorities provided by the act to declare an emergency period for the GDB in order to allow it to continue its operations.\nPREMFRA also allows the governor, once emergency powers are invoked, to \"take any and all actions reasonable and necessary to allow the Bank [GDB or successor bank] to continue performing its operations.\" The act also modifies legal provisions regarding the receivership of the GDB, and allows for the establishment of a bridge bank that would assume many of the responsibilities and assets of the GDB. A new public corporation, Puerto Rico Fiscal Agency and Financial Advisory Authority, would assume the role of the island's fiscal agent and financial advisor. The act also includes a stay on legal actions against the Puerto Rican government while emergency powers are invoked.\nA group of GDB bondholders filed a suit on April 4, 2016, in federal district court in Puerto Rico to halt transfers or other actions that would weaken further the financial condition of the GDB. A federal judge declined to issue a temporary restraining order, but required that the GDB respond by April 15. Plaintiffs withdrew the suit on April 13, 2016, after concluding that the April 8 executive order placed sufficiently stringent conditions on withdrawals from GDB accounts.", "The Puerto Rican government has taken several measures over the past three years to address its deteriorating fiscal situation. Those measures, however, appear to have delayed the current fiscal emergency, but have been insufficient to put public finances on a sustainable path. The Puerto Rican government, in formulating its fiscal strategy, has employed several high-profile restructuring experts.", "High costs of debt service and the precarious financial situation of some public corporations prompted Governor García Padilla and the island's legislature to enact a debt restructuring legislation (Act 71) in June 2014 that would have allowed public corporations to file for debt restructuring through legal structures set up within Puerto Rico. A U.S. district court, however, struck down Act 71 in February 2015, holding that a provision in chapter 9 of the U.S. Bankruptcy Code preempts action by Puerto Rico, even though Puerto Rico is currently barred from authorizing its subunits to file under chapter 9. The U.S. Court of Appeals for the First Circuit upheld that decision on July 6, 2015. The U.S. Supreme Court accepted an appeal and heard oral arguments on March 22, 2016.", "In February 2014, the three major credit ratings agencies downgraded Puerto Rico's public debt to below investment grade. A second round of downgrades followed in late June 2014 after the Puerto Rican government enacted Act 71, which sought to establish a restructuring process for debt issued by the island's public corporations. A further round of downgrades was triggered in late June 2015 when Governor García Padilla said that the island's debts were unpayable. By the spring of 2016, nearly all of the island's public sector debt not covered by bond insurance was rated at levels that indicated a judgement that default is \"a virtual certainty.\" The loss of investor confidence in Puerto Rico's ability to repay its debts cut off access to credit markets, which has intensified financial pressures on the government.\nMarket traded prices for existing Puerto Rican bonds trade well below levels recorded before the current fiscal crisis emerged. Figure 1 shows trading prices for selected Puerto Rican bonds since January 2011.\nAn August 2013 Barron's article highlighted the island's weak fiscal position and high public debt. The first vertical line indicates when the Barron's article appeared, and the second vertical line indicates when Act 71 was enacted. The third vertical line is set at June 29, 2015, when Governor García Padilla stated that \"the debt is not payable\" (see discussion below).", "The Puerto Rican legislature approved an FY2016 budget, which was then sent to the governor; it reportedly set aside $1.5 billion for debt service costs. The governor signed the measure into law on July 1, 2015. The budget calls for total outlays of $9.8 billion, with $4.2 billion in funding for government operations.\nGovernor García Padilla had submitted a FY2016 budget that called for major decreases in public spending, and aimed at achieving a balanced budget. The island's lower chamber passed a budget on June 22, 2015, and the Senate passed its version on June 25, 2015. A measure reported by a conference committee was approved by both chambers on June 29, 2015. Senate President Eduardo Bhatia was quoted as stating that \"it is one of the most difficult budgets in the history of Puerto Rico.\"\nWhether the FY2016 budget for Puerto Rico would actually achieve a balanced budget is unclear. The report of the ex-IMF economists stresses that the structural budget deficit, according to their estimates, is larger than other measures of budget balance used by the Puerto Rican government. A structural budget deficit excludes effects of one-time budget adjustments or cyclical economic effects. That report estimates annual interest and principal costs at $2.8 billion.", "Puerto Rican policymakers then sought other ways to restructure or renegotiate the island's public debt. On June 29, 2015—a day before the end of Puerto Rico's fiscal year 2015—Governor García Padilla stated during a televised address that \"the debt is not payable.\" The governor said that his administration would seek concessions from the island's creditors as part of a new fiscal strategy. Governor García Padilla described the present fiscal crisis, enumerated structural changes implemented or proposed by his administration, declared his intention to start a negotiating process with creditors, and called on federal policymakers to change laws that treated Puerto Rico differently than state governments.\nIn particular, Governor García Padilla called for a comprehensive restructuring of Puerto Rico's fiscal obligations, arguing that the public debt had grown so large that it was impeding economic growth as well as the island's access to credit markets. The governor outlined a fiscal strategy that included\nreestablishment of economic growth through legislation to improve competitiveness, a reform of social insurance programs, and investments in infrastructure; a call for a moratorium on debt payments; creation of a working group for economic recovery composed of financial experts and senior island policymakers; and a long-term fiscal adjustment plan, to be developed by the working group by August 30, 2015.\nThe fiscal adjustment plan, according to the governor, would propose reductions in public outlays, improve tax administration, privatize some publicly provided services, improve budgetary execution and controls, and create a nonpartisan fiscal commission, while guaranteeing the provision of essential services. He also stated that new taxes or additional layoffs of public employees were not being contemplated. The plan does include projected revenues from implementation of tax measures already scheduled to go into effect.\nOn the same day, a report by three former International Monetary Fund (IMF) economists was released that described serious problems with Puerto Rico's fiscal situation, budget execution, public administration, and tax structure.", "Governor García Padilla also appointed an Economic and Fiscal Recovery Working Group comprised of senior executive and legislative policymakers. The Working Group issued a framework plan on September 9, 2015, that outlined a strategy for putting the island's finances on a stable basis. The plan also outlined reforms to bolster long-term economic growth. The working group's plan includes various budgetary and structural economic reforms, as well as the establishment of a control board. The proposed control board would be composed of experts from Puerto Rico and elsewhere.\nPuerto Rico, according to the working group, faces a $27.8 billion financing gap over the next five years that could be reduced to $14 billion through fiscal measures and stronger economic growth. Those gaps, according to the working group, \"could severely impair the Commonwealth's ability to provide essential services to its residents.\" The Working Group issued an updated plan on January 18, 2016, which estimated a five-year (FY2016-FY2020) fiscal gap of $16 billion and a 10-year (FY2016-FY2025) fiscal gap of $23 billion.\nImplementing recommendations of the working group may present serious challenges. The plan calls on the U.S. Congress to make changes in several policy areas, such as the structure of income support programs, reimbursement policies for federal health programs, federal labor and public housing policies, and tax policy. Proposed reforms that would require approval by the Puerto Rican legislature, such as labor code modifications, may prove controversial. Moreover, austerity measures that may improve medium- or long-term fiscal stability may have adverse short-term macroeconomic consequences.", "An August 2015 financial liquidity analysis had projected that the government would likely run out of money by November 2015. A number of extraordinary financial measures, however, including delays in tax refunds, contractor payments, changes in pension funding, and \"clawbacks\" of public corporation funds to the general fund, among others, allowed the government to continue its funding operations. Delayed tax refunds and contractor payments, however, have strained the liquidity of many households and businesses. The Puerto Rican government also sought to delay some bond payments in order to maintain liquidity and ensure continuity of government operations. As of early April 2016, as noted above, the Governor of Puerto Rico and a federal judge both had declared that the island's government was insolvent.", "The Puerto Rican government at the beginning of August 2015 paid $0.63 million of $58 million in interest and principal due on bonds issued by the Public Finance Corporation, a subsidiary of the island's Government Development Bank. Puerto Rico's failure to make full payment on those bonds, which carried a relatively weak \"moral obligation\" guarantee, has raised concerns about future payments on bonds backed by general obligation guarantees.", "The island's ability to meet debt service payments in recent years had depended in part on the willingness of investors to roll over existing debt. Puerto Rico had planned to issue about $2.9 billion in bonds in 2015, but those plans were put on hold. The García Padilla Administration reportedly wanted to prepare the way for that bond issue with a fiscal package consisting of a tax reform to bolster revenues, a balanced budget for FY2016, and a five-year plan to achieve fiscal sustainability.\nOnce Puerto Rico's government was \"virtually shut off from normal [credit] market access\" according to ex-IMF economists, funding government operations became increasingly difficult. The Puerto Rican legislature passed a measure to allow certain public corporations to issue revenue bonds, which may provide some measure of liquidity. The governor signed the measure into law on July 3, 2015, clearing the way for the issuance of about $400 million in tax and revenue anticipation notes (TRANs) by three publicly owned insurance corporations. While those notes helped the Puerto Rican government maintain access to liquidity during the first part of the fiscal year, some policymakers expressed concerns that adding exposure of those insurance companies to governmental credit risks could harm their soundness.", "Constitutional limits on Puerto Rico's borrowing could also present financial hurdles. Puerto Rico's government debt servicing costs—apart from debt servicing costs of public corporations—totaled 13.6% of average annual internal revenues for FY2014 and FY2015, not far below the 15% limit imposed by the Commonwealth's Constitution. If that limit became binding, maintaining operations of the government could then require either further fiscal adjustments or a constitutional amendment, which would require supermajorities in both legislative chambers and a plebiscite.", "Puerto Rico faces severe fiscal challenges in FY2017, which begins on July 1, 2016. As noted above, Puerto Rico is due to pay $1.9 billion in debt service. Both the Puerto Rico government and credit ratings agencies expressed doubts as to whether those payments would be made. In addition, the island government lacks a line of credit that would allow it to manage financing gaps caused by the timing of revenue and outlay cash flows.\nOn May 23, 2016, Governor García Padilla submitted a FY2017 budget, which called for outlays totaling $9.1 billion, approximately $700 million less than recommended the previous year. The budget submission was delayed due to the enactment of an emergency fiscal act in early April 2016 and the possibility of a federal control board, among other uncertainties. The proposed FY2017 budget, submitted on May 23, 2016, comes \"at the hour of choice between paying money to the creditors and providing services to our people,\" according to Governor García Padilla. Proposed payments for debt service in FY2017 are well below amounts due.", "Puerto Rico's government has taken numerous steps over the past few years to realign revenues and outlays, although those efforts have not closed the structural budget deficit. Those measures include cutbacks to public pension systems, tax increases and tax administration reforms, and a reduction in public sector employment. Figure 2 shows trends in public sector employment in Puerto Rico since 1990. Since 2009, public sector employment has dropped by nearly a fifth. Some public employees retired early in 2013 and 2014 in order to mitigate effects of benefit decreases resulting from pension reforms.\nOther fiscal austerity measures include reorganization of public school teaching staffs and school closings, cancellation or postponement of salary and benefit increases, and reductions in transfers to municipalities. The government has also taken steps to bolster the financial condition of its public corporations.\nPuerto Rico has modified its pension systems to increase future employee and employer contributions, moved participants from defined benefit to defined contribution plans, and begun a transition to higher retirement ages. The Supreme Court of Puerto Rico held that the government's rationale for the changes was insufficient to justify abrogation of certain contractual rights of existing or retired teachers under the Teachers Retirement System. The court, however, reaffirmed the government's powers to modify certain aspects of pension programs in order to meet pressing fiscal demands. Independent analysts note that funding ratios for the Puerto Rican retirement systems remain low.\nOn May 26, 2015, the Legislative Assembly passed and sent to the governor a measure to raise the sales and use tax rate from 7% to 11.5%, which the governor signed into law on May 29, 2015. Of that rate, 1% is earmarked for local governments. In addition, the measure would establish a Consumption Tax Transformation Alternatives Commission, which would be charged with evaluating further changes in Puerto Rico's tax system, including a possible transition to a value-added tax (VAT). Previously, a proposal to replace certain sales taxes with a value-added tax was voted down on April 30, 2015. Puerto Rico, as noted above, enacted Act 1 on January 15, 2015, which raised petroleum taxes, contingent on implementation of broader tax changes, and took other measures to strengthen the financial condition of the Authority for Highways and Transportation.", "Puerto Rico has faced fiscal challenges ever since the mid-1970s. The economic effects of the 1973-1974 energy crisis, which caused serious dislocation to the mainland economy, had even more severe consequences for Puerto Rico.", "Once Puerto Rico was able to recommence borrowing in the 1980s, its public debt grew steadily and is now slightly larger than the island's gross national product (GNP). Debt accumulation accelerated in the early 2000s, as expenditure growth outstripped revenues. Figure 3 shows outlays and revenues for Puerto Rico since 1970.\nFigure 4 shows the accumulation of Puerto Rico's gross public debt in inflation-adjusted terms since 1962. By that measure, total debt levels rose until the mid-1970s, then declined gradually until the mid-1980s, after which they again increased until 2013. Puerto Rico's public sector debt stood at $69.9 billion at the end of September 2015. Figure 4 also indicates that public corporations have accounted for the largest portion of public sector debt in recent decades.", "Public corporations, which have played a prominent role in the Puerto Rican economy since the 1930s, are closely linked to the island's fiscal challenges. Some 50 public corporations serve a variety of purposes, ranging from public infrastructure, banking, real estate, insurance, industrial development, health care, transportation, electric power, broadcasting, education, arts, and tourism, among others. Some public corporations resemble public authorities of state governments, although in some cases, have responsibilities more akin to public agencies.\nOff-budget debt issued by public corporations, generally not included in the 15% debt servicing limit, has accounted for much of the buildup in Puerto Rico's public debt since 2000 (see Figure 4 ). Moreover, the central government's financial support for public corporations has weakened its own fiscal situation. In particular, credit and liquidity support provided via the GDB to public corporations was a major factor in the insolvency of the GDB, as noted above.", "The Puerto Rico Electric Power Authority (PREPA), one of Puerto Rico's oldest public corporations, owes over $9 billion—or about one-eighth of Puerto Rico's total public sector debt. PREPA entered into a restructuring and forbearance agreement in August 2014 with major creditors prompted by the need to maintain sufficient financing for fuel purchases. Lisa Donahue, a partner in energy management consultancy, was appointed Chief Restructuring Officer (CRO) in September 2015 as part of that agreement.", "The August 2014 forbearance agreement has been extended numerous times, as negotiations between PREPA and major creditor groups—including mutual funds, bond insurers, hedge funds, and others—have proceeded. PREPA issued a summary of a restructuring plan on June 1, 2015, which calls for $2.3 billion to modernize its operations and stabilize its finances. On September 1, 2015, PREPA announced a preliminary agreement with certain creditors to restructure part of the utility's debt, including bond exchange that would include a 15% writedown of non-insured debt. A tentative agreement was reached in mid-December 2015 between PREPA and holders of about 70% of PREPA's debt. Fulfillment of the agreement was contingent on passage of a PREPA Revitalization Act by the Puerto Rico legislature and participation of additional debtholders. How measures to restructure PREPA's debt and revitalize its operations would affect energy reforms adopted in 2014 (Act 57 of 2014), and the powers of the Energy Commission established as part of those reforms, have raised concerns. Puerto Rico enacted a PREPA Revitalization Act (Act 4 of 2016) on February 16, 2016. The act creates a \"transition\" surcharge that will be added to consumer bills to help PREPA meet its financial obligations.", "PREPA faces major financial and operational challenges. Chief Restructuring Officer Lisa Donahue testified that PREPA could run out of cash in the summer of 2016, which could lead to operational disruptions. The utility's existing oil- and diesel-fired plants are old, inefficient, and unreliable. PREPA also buys some power from one private generation firm that uses coal and from another that uses natural gas. While Caribbean electrical systems typically depend on oil-based power generation, the lack of sufficient modern gas-fired power generation capacity to handle fluctuations in base loads limits the potential of renewable energy on the island. While falling oil prices led to some reductions in PREPA's prices, recent residential electricity prices have been about 50% above average mainland rates, and commercial rates nearly twice as high, which may have hindered economic growth.\nPREPA's revenues have been reduced by unbilled power generation. In recent years, 14% of power generated by PREPA was classified as lost or unaccounted for. In addition, PREPA had not been billing many municipalities and government offices, in part to offset payments to those entities in lieu of taxation. PREPA has also been mandated to subsidize certain non-profit organization and business sectors. In total, PREPA provided $69 million worth of subsidized power in FY2014, according to press accounts. PREPA has, however, become more aggressive in collecting its accounts receivable.", "The Government Development Bank for Puerto Rico, one of the oldest public corporations, serves as bank, fiscal agent, and financial advisor to the Commonwealth and other public corporations. The GDB and its subsidiaries are the main source of short-term financing for the Puerto Rican government and its public corporations and municipalities. The GDB also issues loans and guarantees to private entities and has historically played a leading role in strategic economic investments for Puerto Rico.\nDuring the 1990s and 2000s, the GDB was used to finance investments and even operating costs of other parts of the Puerto Rican government. By June 2013—the date of the last audited financial statement—the public sector accounted for nearly all of the GDB's loan portfolio, which amounted to 48% of its government-wide assets. Credit rating agencies and government financial reports have warned that the restructuring of Puerto Rico's public debt presents serious financial risks to the GDB.\nAt the beginning of August 2015, Puerto Rico did not make a full interest and principal payment due on bonds issued by the Public Finance Corporation, a subsidiary of the island's GDB. In late March 2016, as noted above, a federal district court judge unveiled a 2015 finding of the Puerto Rico Commissioner of Financial Institutions that the GDB was insolvent in 2015. While GDB officials have disputed some claims of the Commissioner, they have acknowledged the precarious financial situation of the bank.\nOn May 1, 2016, as noted above, Governor García Padilla issued an order to declare a moratorium on certain debt payments by the Government Development Bank (GDB), which is due to pay $423 million in debt service on May 2, 2016. Governor García Padilla was quoted previously as stating that the GDB will be unable to make a full payment on that date. The Puerto Rico government has taken steps, noted in the introduction to this report, to shift responsibilities and assets of the GDB to other institutions in order to avoid the consequences of having the island government's fiscal agent come under the control of a receiver.", "Independent analysts argue that a few other large public corporations are insolvent. Island officials, however, have emphasized that the financial condition of various government entities differs in important ways.", "The Highways and Transportation Authority (HTA; or in Spanish, Autoridad de Carreteras y Transportación) has faced serious financial challenges. For instance, cost overruns on the Tren Urbano project in San Juan, constructed between 1996 and 2005, nearly doubled costs (from an initial estimate $1.25 billion to a final $2.4 billion). In addition, HTA has been running operating deficits of about a half a billion dollars in recent years, which has required substantial support from other parts of the Puerto Rico government such as the GDB. At the end of December 2012, HTA owed the GDB $2.2 billion, which it lacked the means to pay. On January 15, 2015, Puerto Rico enacted a tax on petroleum products (Act 1 of 2015) intended to provide HTA with funds to repay its debts, among other aims.", "The island government has contended that the financial situation of the Puerto Rico Aqueduct & Sewer Authority (PRASA; in Spanish, Autoridad de Acueductos y Alcantarillados or AAA) has improved due to increases in water rates, although investors have remained skeptical. PRASA had planned to issue $750 million in new revenue bonds by the end of August 2015, but those plans were postponed indefinitely once the Puerto Rican governor declared the island's public debts to be unpayable. Issuing those bonds would have helped PRASA pay arrears due contractors and make bond payments to the GDB, along with providing funding for infrastructure improvements, including some mandated by a consent decree with the U.S. Environmental Protection Agency. A revitalization bill (P.C. 2786) for PRASA along the lines of PREPA's revitalization act passed both the Puerto Rican House of Representatives and Senate, which have agreed to conference to resolve differences. The measure would create a customer surcharge to support debt service for three years. A severe drought affecting much of the island in 2015 also affected PRASA operations.", "The precarious state of Puerto Rico's public finances stems in part from prolonged economic weakness. Economic growth was sluggish even before the 2007-2009 recession, and official forecasts project continued slow growth. Previous economic analyses of Puerto Rico's economy have pointed to low employment and labor participation rates, an economic structure shaped more by tax advantages than comparative advantages, and intensified global competition.\nThose trends and associated economic challenges have prompted many Puerto Ricans to move to the U.S. mainland, leading to population decline of about 1% per year over the past decade. Figure 5 shows estimated trends for Puerto Rico's resident population since 1950.\nOne study estimated that a third of those born on Puerto Rico now reside on the mainland and found that migrants tended to be younger and less well educated compared to island population averages. Economic growth depends on productivity and the availability of resources such as capital and labor. By reducing the amount of labor available to the island economy, outmigration poses risks to future economic growth. Moreover, outmigration serves as a signal that some island residents perceive that the mainland presents more attractive economic opportunities. Some Puerto Ricans who migrate to the mainland later return to the island. Since the mid-1990s, the number of those moving to the mainland has trended upwards, whereas the number of those returning to Puerto Rico has not shown a distinct trend.", "Possible options for Congress to address the fiscal distress faced by the government of Puerto Rico and its constituent public corporations are framed by the island's status as a territory—something different than a state and different from an independent sovereign country. The federal government has generally been reluctant to offer direct financial assistance to individual states in fiscal distress, although Congress at times has adjusted technical parameters of federal programs to provide direct or indirect support for states. The independence of state governments to set their own fiscal paths has been linked to an expectation that those governments take responsibility for the consequences of their fiscal decisions. In some other fiscal systems, a central government's willingness to cover shortfalls by state governments has been seen as having led to less prudent fiscal behavior. Central governments in some federal systems provide subnational governments with more support, but impose more intrusive fiscal controls.\nThe report of the former IMF economists was framed in terms familiar to typical IMF interventions, in which short-term bridge financing is provided conditional on agreements with governments to address structural economic issues over a longer term. Congressional options might thus be divided between strategies to address imminent liquidity challenges, such as providing credit support or altering bankruptcy laws, and strategies intended to promote economic growth over the longer term.", "The U.S. Department of the Treasury proposed a framework in October 2015 that called on Congress to pass legislation to \"provide the critical tools Puerto Rico needs to restructure its debt, enhance its fiscal governance, fix its healthcare system, and help jumpstart its economy.\" The Obama Administration had earlier indicated that it is not contemplating a federal bailout of Puerto Rico, but provided technical support and has sought to make existing federal resources available. President Obama's FY2017 budget plan called for a \"broad legal framework\" that would allow Puerto Rico's public debt to be restructured and would provide for fiscal oversight for the island.", "Central governments and international organizations have at times stepped in to backstop debts of other governments to lower those governments' borrowing costs. Such support typically has been linked to budgetary or structural reform requirements. For example, the European Central Bank in 2011 acted to support debt offered by Eurozone countries, which dramatically lowered borrowing costs of countries that could have faced severe liquidity challenges. The U.S. government provided credit guarantees for the Mexican government in 1994-1995. The U.S. government also provided indirect credit support for many state government agencies through the Depression-era Reconstruction Finance Corporation (RFC). For instance, in 1941 the RFC acted as an intermediary to roll over $136 million in debt for the state of Arkansas. In the early decades of the 20 th century, the U.S. government took an expansive role in addressing debts of Caribbean and Central American countries.", "Reimbursement and eligibility rules for federal entitlement programs in Puerto Rico often differ from those in effect on the mainland. For example, funding for the federal portion of Medicaid is capped for U.S. territories, but is open-ended for states. The federal matching rate for Medicaid ranges from 50% for states with the highest per capita income to 74% for the state with the lowest per capita income, while the matching rate for Puerto Rico is set at 55%. Congress could revise Medicaid matching fund formulas or eligibility standards. It could also modify reimbursement rules or enrollment standards under Medicare, or adjust rules governing other federal programs, such as the income support programs. Resident Commissioner Pierluisi introduced several bills ( H.R. 1225 , H.R. 1417 , H.R. 1418 , H.R. 1822 , H.R. 2635 ) in the 114 th Congress to modify federal health and income support programs to provide additional resources to Puerto Rico.", "Under current law, Puerto Rico is generally considered a state for most provisions of the Bankruptcy Code; but it is explicitly excluded from that definition for purposes of determining those eligible to file under chapter 9, which sets out a process for consideration of debt relief requests of instrumentalities of state governments. Thus, subunits of Puerto Rico, such as public corporations, are barred from filing under chapter 9.\nThe restructuring law that Puerto Rico enacted in June 2014, which was in part motivated by the financial situation of PREPA and other public corporations, was established with the aim of providing an alternative to processes provided by the Bankruptcy Code. That law, however, was struck down by a U.S. district court. On July 6, 2015, the U.S. Court of Appeals for the First Circuit affirmed the lower court's ruling that federal bankruptcy provisions preempted Puerto Rico's ability to employ its own restructuring law.\nCongress could amend the Bankruptcy Code to permit Puerto Rico to allow its municipalities (which include instrumentalities and subdivisions of the territory) to enter into chapter 9 and proceed with a well-established process for restructuring public debts. To that end, Resident Commissioner Pierluisi introduced H.R. 870 on March 16, 2015. Senator Blumenthal introduced a similar measure ( S. 1774 ) on July 15, 2015. Representative Pelosi introduced the Puerto Rico Emergency Financial Stability Act of 2015 ( H.R. 4290 ) on December 18, 2015, a measure to stay litigation related to the island's public debts, which could provide further time for negotiations between Puerto Rico and its creditors. Senator Warren introduced a companion measure, the Puerto Rico Emergency Financial Stability Act of 2015 ( S. 2436 ), in the Senate on the same day. On March 14, 2016, Senator Menendez introduced two bills ( S. 2675 , S. 2676 ) that would allow adjustments of Puerto Rico's debt.\nGovernor García Padilla has also called for giving Puerto Rico access to chapter 9. Treasury Secretary Lew has also expressed support for allowing Puerto Rico to access chapter 9. Some hedge funds and other holders of Puerto Rican bonds, however, have opposed including the island in chapter 9. Interests of hedge funds with major holdings of general obligation (GO) bonds, however, may differ from those of funds holding bonds of the island's public corporations that are not secured by a general obligation of the Puerto Rican government.\nAccess to chapter 9 might provide limited relief from debt burdens, as the central government of Puerto Rico—like state governments—would presumably be unable to file for bankruptcy relief itself. As Figure 4 indicates, a substantial portion of the island's debt was issued by the central government. Public corporations issued the bulk of their debt as special revenue bonds, which have been generally considered as protected from adjustment.", "Federal systems allow lower level governments to adapt policies to reflect local preferences, while letting the central government focus on programs of national interest and concern. A federal system of government also provides a degree of fiscal insurance to lower-level governments. For example, a central government can respond to mitigate the consequences of disasters or localized economic downturns affecting specific states or regions.\nThe level of support for lower-level governments provided by a central government is typically linked to the stringency of fiscal controls. Federal systems, by and large, can be divided into two types. Some federal governments—such as the United States—allow local governments more autonomy, but maintain an expectation that those governments will manage any budgetary shortfalls largely on their own. Other federal systems provide more extensive support for lower-level governments, but impose more restrictive central control on local decisions. The independence of U.S. state governments to set their own fiscal paths has thus been linked to an expectation that those governments take responsibility for their finances. In some other fiscal systems, the willingness of a central federal government to cover shortfalls by lower-level governments has been seen as having led to fiscal behavior that was less prudent.\nThe U.S. federal system provides substantial implicit fiscal insurance to state and local governments through the automatic stabilization characteristics of income support programs, federal disaster assistance, and by a progressive federal individual income tax. The federal government, however, has been generally reluctant to offer direct financial assistance to states in difficult fiscal situations.", "Some Members have called for some form of control board to oversee Puerto Rico's finances and other aspects of public administration. As noted above, Governor García Padilla has called for establishment of a local control board to oversee fiscal recovery. Representative Jeff Duncan, chairman of the Subcommittee on the Western Hemisphere of the House Foreign Affairs Committee, called for a control board to oversee Puerto Rico's finances along the lines of the financial control board that Congress set up in 1995 to oversee the District of Columbia's government. One federal appeals court judge, however, contended that \"instituting direct Congressional control of Puerto Rico's finances through a financial control board would require fundamentally redefining Puerto Rico's relationship to the United States.\"", "Congress established the District of Columbia Financial Responsibility and Management Assistance Authority, commonly known as the Control Board, by passing the District of Columbia Financial Responsibility and Management Assistance Act of 1995 ( P.L. 104-8 ). That act also created a chief financial officer (CFO) position with authority to administer the District's financial operations. The federal government also assumed certain pension and judicial obligations of the District and reduced the District's share of Medicaid costs. After the District government was able to balance its budget for four years, the Control Board became dormant after September 2001.\nState governments have also established financial control boards for other municipal governments, such as the cities of Philadelphia, Cleveland, and Detroit. The federal government also extended fiscal assistance directly and indirectly to New York City in 1975.", "In October 2015, the U.S. Department of the Treasury set out a reform framework that included a call for fiscal oversight as well as a broad debt restructuring of Puerto Rico's debts.\nSeveral congressional proposals have put forth that include some form of control or oversight board. Representative Sean Duffy introduced H.R. 4199 , the Puerto Rico Financial Stability and Debt Restructuring Choice Act on December 9, 2015. Senator Hatch introduced S. 2381 , the Puerto Rico Assistance Act of 2015, on the same day. The House Natural Resources Committee issued a discussion draft on March 29, 2016, of the Puerto Rico Oversight, Management, and Economic Stability Act.", "On April 12, 2016, Representative Duffy introduced the Puerto Rico Oversight, Management, and Economic Stability Act (PROMESA; H.R. 4900 ), which would set up an Oversight Board for Puerto Rico and create a process to restructure the island's debts, among other provisions. The House Natural Resources Committee held hearings on H.R. 4900 on April 13, 2016. A markup session was started on the same day to hear opening statements, but a continuation of the markup for the next day was postponed.\nRepresentative Duffy introduced H.R. 5278 , a revised version of H.R. 4900 , on May 18, 2016. The House Committee on Natural Resources marked up H.R. 5278 on May 25, 2016. Amendments agreed to include technical corrections, extensions of certain studies on the Puerto Rico government and economy, among others. The major provisions of the bill, however, were unaffected. The committee approved the measure on a 29-10 vote.\nThe Congressional Budget Office (CBO) judged that the Oversight Board that H.R. 5278 would establish should be considered part of the federal budget according to the \"unified budget concept\" set forth in the 1967 President's Commission on Budget Concepts. CBO estimated that operating the Oversight Board for Puerto Rico would cost $370 million over the period FY2017-FY2022. Section 107 of H.R. 5278 mandates that the territory's government designate a dedicated funding source for the board, which (under the unified budget concept) would increase federal revenues by an estimated $370 million. The net effect on the federal budget, therefore, is estimated to be zero.", "Congress could also encourage the Puerto Rican government to pursue economic development strategies more in line with the island's economic comparative advantages rather than its tax advantages.", "Puerto Rico has long relied on special provisions in the U.S. tax code and in its own tax laws to stimulate investment. Many of the tax advantages available to corporations or subsidiaries located in Puerto Rico, such as Internal Revenue Code Section 936, which until it was phased out between 1996 and 2005, essentially exempted income of U.S. firms operating in U.S. possessions, have reduced the U.S. Treasury's receipts. The IRS's unwillingness to challenge the creditability of Puerto Rico's Act 154 taxes against U.S. tax liability provides indirect support for the island's public finances that is nearly offset by the loss of revenues foregone by the U.S. Treasury. Puerto Rico's Act 22, which provides certain tax exemptions to wealthy persons who establish residency in Puerto Rico, may also affect U.S. Treasury receipts.", "Congress could also consider options that might address structural issues that may have hindered Puerto Rico's economic growth. Congress could consider several regulatory policies, such as Jones Act restrictions on shipping between Puerto Rico and the mainland. Congress has already waived Jones Act requirements for the U.S. Virgin Islands and could extend that waiver to Puerto Rico.", "Several past studies have noted that labor participation rates for Puerto Rico are well below those on the mainland. Some have suggested that social insurance may play a role in discouraging employment outside the underground economy. The Economic and Fiscal Recovery Working Group plan of September 2015 proposes establishment of an earned income tax credit, a restructuring of the Nutritional Assistance Program (NAP; the island analogue to the Food Stamps/Supplemental Nutrition Assistance Program), and changes to public housing policies—all designed to bolster incentives to work.\nSome economists have also pointed to the federal minimum wage as a hindrance to labor demand. The Economic and Fiscal Recovery Working Group plan calls for several labor reforms, including limits on severance pay, weakened dismissal protections, and changes in overtime regulations. The plan also calls on Congress to grant a 10-year waiver of minimum wage increases for workers under the age of 25." ], "depth": [ 0, 1, 2, 2, 1, 2, 2, 2, 2, 2, 2, 3, 3, 3, 2, 2, 1, 2, 2, 3, 4, 4, 3, 3, 4, 4, 1, 1, 2, 2, 2, 2, 2, 2, 3, 3, 4, 2, 3, 3, 3 ], "alignment": [ "h0_title h2_title h1_title", "h0_full h1_full", "h1_full", "", "h0_title h1_title", "", "", "", "h1_full", "h1_full", "h1_full", "", "", "", "h0_full", "", "h1_title", "", "h1_full", "", "", "", "h1_full", "", "", "", "", "h2_title", "h2_full", "", "", "h2_full", "", "h2_title", "", "h2_full", "h2_full", "", "", "", "" ] }
{ "question": [ "What types of challenges does the Puerto Rico government face?", "What was reported by the Emergency legislation?", "How has the governor responded to the statement?", "What economic challenges has the Puerto Rican government faced?", "Where do these challenges come from?", "To what extent has Puero Rico paid its recent debts in full?", "How has the government responded to the debt payment crisis?", "What occured a year earlier?", "How does the plan address the financing gap?", "How did the U.S. Department of Treasury help support Puerto Rico?", "What is included in the bill introduced by the Resident Commissioner?", "What other bills have been introduced?", "How did officials control debt-related litigation?", "In addition to bills, what else has been created to aid Puerto Rico?" ], "summary": [ "The government of Puerto Rico faces severe fiscal challenges. A federal district court judge in late March 2016 held that the island's government was insolvent and unable to pay its obligations on time.", "Emergency legislation (Act 21 of 2016) enacted on April 6, 2016, stated that the Puerto Rican government's fiscal condition \"is more dire than at any other point in its history\" and that \"depleted resources and strained liquidity threaten to bind the Commonwealth to a choice between honoring its commitments to bondholders or continuing to provide the residents of Puerto Rico with essential services.\"", "On April 8, 2016, the Puerto Rican governor invoked emergency authorities to maintain essential public services.", "he Puerto Rican government has been facing serious liquidity challenges and has lost normal access to credit markets despite measures taken by the island's government to reduce spending, increase revenues, and restructure its obligations.", "Much of the island's liquidity challenges stem from substantial debt service costs facing the central government and its public corporations.", "In August 2015, debt service on Public Finance Corporation bonds was not paid in full. The Puerto Rico Infrastructure Financing Authority (PRIFA) did pay interest in full on certain bonds due on January 1, 2016.", "On May 1, 2016, Governor Alejandro García Padilla declared a moratorium on certain debt payments by the Government Development Bank (GDB), the government's fiscal agent, due on that date. The Commonwealth government doubts that it can make a larger debt service payment on July 1, 2016.", "On June 29, 2015, Governor García Padilla stated during a televised address that \"the debt is not payable.\" On the same day, a report commissioned from three former International Monetary Fund economists was released, which described severe short-term funding challenges as well as long-standing issues with key parts of the Puerto Rican economy and public sector. On September 9, 2015, a working group appointed by the governor released a plan that outlined its strategy.", "Puerto Rico's financing gap over the coming five years, according to the plan, is nearly $28 billion. The plan's proposals, along with hoped-for improvement in economic growth, were said to halve that gap.", "In October 2015, the U.S. Department of the Treasury set out a reform framework and called on Congress to pass legislation to aid Puerto Rico.", "Resident Commissioner Pierluisi introduced H.R. 870 on March 16, 2015; the bill would restore the island's access to chapter 9 of the Bankruptcy Code.", "Senator Blumenthal introduced a similar measure (S. 1774) on July 15, 2015. On December 9, 2015, Representative Sean Duffy introduced H.R. 4199, a measure to provide fiscal oversight and a debt restructuring process. Senator Hatch introduced a similar measure (S. 2381) on the same day. On March 14, 2016, Senator Menendez introduced two bills (S. 2675, S. 2676) that would allow adjustments of Puerto Rico's debt.", "On December 18, 2015, Representative Pelosi introduced H.R. 4290 and Senator Warren introduced S. 2436, both measures to stay debt-related litigation.", "The House Natural Resources Committee issued a discussion draft on March 29, 2016. Representative Duffy introduced the Puerto Rico Oversight, Management, and Economic Stability Act (H.R. 4900) on April 12, 2016, and a revised version (H.R. 5278) on May 18, 2016, which would set up an Oversight Board for Puerto Rico and create a process to restructure the island's debts, among other provisions." ], "parent_pair_index": [ -1, -1, 1, -1, 0, 0, -1, 3, -1, -1, -1, 1, 1, -1 ], "summary_paragraph_index": [ 0, 0, 0, 1, 1, 1, 1, 1, 1, 3, 3, 3, 3, 3 ] }
CRS_R42873
{ "title": [ "", "", "Introduction", "The Defense of Marriage Act and Federal Benefits", "Executive Branch Actions to Extend Benefits to Same-Sex Partners of Federal Employees", "The First Memorandum", "The Second Memorandum", "Survey of Particular Benefits", "Benefits Expressly Provided to Spouses", "Health Benefits", "Dental and Vision Benefits", "Federal Employment Compensation Act Benefits", "Federal Benefits Provided to Spouses and Others", "Family and Medical Leave Act", "Other Types of Leave", "Life Insurance", "Federal Employee Pensions and Survivor Benefits", "Benefits Under CSRS/FERS Defined Benefit Pension Plan", "Insurable Interest Annuity", "TSP Defined Contribution Pension Plan", "Death Benefits If No Beneficiary Is Named", "Federal Long Term Care", "Legislation to Affect Benefits for the Same-Sex Partners of Federal Employees", "113th Congress", "112th Congress", "H.R. 3485 / S. 1910, Domestic Partnership Benefits and Obligations Act of 2011", "Some Potential Policy Considerations Regarding Same-Sex Benefits and Federal Employees", "Attracting and Hiring the Most Effective Employees", "Domestic Partner Benefits in the Public and Private Sector", "The Bureau of Labor Statistics Data", "Cost Estimates of Providing Domestic Partner Benefits to Federal Employees", "Policy Options and Specific Legislative Issues", "Policy Options in Response to the Administration's Actions", "Defining Same-Sex Partnerships", "Verifying Who Qualifies for Benefits", "Benefits for Domestic Partners", "Taxation of Benefits105" ], "paragraphs": [ "", "", "In 1996, Congress passed the Defense of Marriage Act (DOMA, P.L. 104-199 ) \"[t]o define and protect the institution of marriage.\" DOMA (1) allows states to refuse to recognize same-sex marriages or partnerships and (2) limits the recognition of these same-sex partnerships for purposes of any act of Congress or by any federal bureau or agency. As codified, DOMA has three sections. The first provides the bill's name, the second section allows states to determine whether to recognize same-sex marriage, and the third defines the terms marriage and spouse for the purposes of federal enactments. Specifically, Section 3 of DOMA says the following:\nIn determining the meaning of any Act of Congress, or of any ruling, regulation, or interpretation of the various administrative bureaus and agencies of the United States, the word \"marriage\" means only a legal union between one man and one woman as husband and wife, and the word \"spouse\" refers only to a person of the opposite sex who is a husband or a wife.\nThe federal government provides a variety of benefits to its workforce, including health care, life insurance, pensions, and paid time off for vacation and sick leave. Federal employees are permitted by law to extend certain health, long-term care, and other benefits to their spouses. DOMA prohibits the distribution of these spousal benefits to same-sex partners. The federal government, however, provides other benefits to federal employees that may be extended to those who are associated with a federal employee, but who are not necessarily the employee's spouse. In some cases, these benefits have been extended to the partners of federal employees who are in same-sex relationships.\nOn June 17, 2009, President Obama issued a memorandum directing executive agencies to examine ways to extend benefits to federal employees in same-sex domestic partnerships or same-sex marriages within the authority of existing law. On July 10, 2009, Office of Personnel Management (OPM) Director John Berry issued a memorandum directing all executive-branch agencies to review and report on the benefits offered to opposite-sex partners—whether married or not—of federal employees. OPM and the Department of Justice (DOJ) reviewed these reports and suggested to President Obama actions that would extend some benefits to the same-sex partners of federal employees.\nOn June 2, 2010, President Obama released a second memorandum that extended specific benefits and perquisites to the same-sex partners of federal employees. For certain benefits, the term spouse is either not found in the benefit's authorizing language or the authorizing language widens the scope of eligibility. The benefits that were extended by the memorandum are those whose authorizing statutes do not use the term spouse to define or limit potential recipients of the benefit. The Administration argues that its actions comply with all federal laws, including DOMA. Among other benefits, the memorandum extended certain childcare and sick leave benefits that had previously only been available to opposite-sex spouses—including the authority to take up to 24 hours of unpaid leave when a same-sex partner or a partner's child is ill. The newly extended benefits were made available upon the second memorandum's release.\nIn the 112 th Congress, two bills were introduced that, if enacted, would have permitted a federal employee to provide insurance, travel, and other benefits to his or her same-sex partner. On November 18, 2011, Senator Joseph Lieberman introduced S. 1910 , the Domestic Partnership Benefits and Obligations Act of 2011, and Representative Tammy Baldwin introduced a companion bill, H.R. 3485 . On May 16, 2012, S. 1910 was ordered to be reported favorably from the Committee on Homeland Security and Governmental Affairs. H.R. 3485 was referred to the House Oversight and Government Reform Committee's Subcommittee on Workforce Protections, the House Education and the Workforce's Subcommittee on Workforce Protections, the House Judiciary's Subcommittee on Courts, Commercial and Administrative Law, and the Committee on House Administration. No further action was taken on the bill.\nCongress may elect to examine, prohibit, or enact into law Administration initiatives that made some benefits available to same-sex partners. Congress has the authority to determine if some, all, or none of the benefits that are available to the opposite-sex spouses of federal employees should be made available to the same-sex partners of federal employees.", "The federal government provides a variety of benefits to federal civilian and military employees and retirees. Among these benefits are health insurance; enhanced dental and vision benefits; retirement and disability benefits and plans; survivor benefits; family, medical, and emergency leave; and reimbursement of relocation costs. Various federal laws and regulations determine who is eligible to receive these benefits. A federal employee who is married to someone of the opposite gender can, pursuant to federal law, extend many of these benefits to his or her spouse.\nDOMA affects the application of benefits to the spouses and partners of federal employees. DOMA defines marriage explicitly as \"only a legal union between one man and one woman as husband and wife.\" DOMA defines spouse as \"a person of the opposite sex who is a husband or a wife.\" Pursuant to DOMA, these definitions are to be used when \"determining the meaning of any Act of Congress.\" As such, DOMA prohibits the extension of any federal spousal benefit to the same-sex partners of federal employees. In addition, specific laws or regulations, like the regulations for the Family Medical Leave Act, explicitly define spouse as a member of the opposite sex.\nReport language from the House Committee on the Judiciary in support of H.R. 3396 (104 th Congress; later enacted as DOMA) stated in its introduction that DOMA sought to protect states' rights to determine whether same-sex couples could marry and be eligible for benefits. DOMA, the report argued, anticipated certain legal questions that could arise from this arrangement. The report said the following:\nWith regard to federal law, a decision by one State to authorize same-sex \"marriage\" would raise the issue of whether such couples are entitled to federal benefits that depend on marital status. H.R. 3396 anticipates these complicated questions by laying down clear rules to guide their resolution, and it does so in a manner that preserves each State's ability to decide the underlying policy issue however it chooses.\nAccording to report language, the federal government had four specific interests in mind when drafting DOMA:\ndefending and nurturing the institution of traditional, heterosexual marriage; defending traditional notions of morality; protecting state sovereignty and democratic self-governance; and preserving scarce government resources.\nThe latter governmental interest was described in greater detail later in the report:\nGovernment currently provides an array of material and other benefits to married couples in an effort to promote, protect, and prefer the institution of marriage. While the Committee has not undertaken an exhaustive examination of those benefits, it is clear that they do impose certain fiscal obligations on the federal government. For example, survivorship benefits paid to the surviving spouse of a veteran of the Armed Services plainly cost the federal government money.\nIf Hawaii (or some other State) were to permit homosexuals to \"marry,\" these marital benefits would, absent some legislative response, presumably have to be made available to homosexual couples and surviving spouses of homosexual \"marriages\" on the same terms as they are now available to opposite-sex married couples and spouses. To deny federal recognition to same-sex \"marriages\" will thus preserve scarce government resources, surely a legitimate government purpose.", "Some benefits to federal employees are extended specifically to the spouse of the federal employee, while the laws and regulations governing other benefits may not explicitly use the term spouse. The Obama Administration has extended to the same-sex partners of federal employees some benefits that do not have the term spouse in their governing authorities. The Administration has argued that they have done so within the parameters of DOMA. Some organizations, however, including the non-profit Family Research Council, have argued that the extension of these benefits is both costly and could undermine the federal definition of marriage.\nPresident Obama has issued two memoranda that address the eligibility of same-sex domestic partners for federal employee benefits. The first memorandum directed agencies to determine which benefits could be offered within the parameters of existing law. The second memorandum required agencies to extend specific benefits to the domestic partners of federal employees.", "On June 17, 2009, President Obama released a memorandum directing all executive departments and agencies to review and evaluate their existing employee benefits to determine \"which may legally be extended to same-sex partners.\"\nIn his public statement accompanying the memorandum's release, he said that his Administration \"was not authorized by existing Federal law to provide same-sex couples with the full range of benefits enjoyed by heterosexual married couples.\" The President said many private companies already offer such benefits to same-sex domestic partners, which \"helps them compete for and retain the brightest and most talented employees. The Federal Government is at a disadvantage on that score right now, and change is long overdue.\"\nThe memorandum required each executive department and agency to provide to the Director of OPM a report that included \"a review of the benefits provided by their respective departments and agencies\" in order \"to determine what authority they have to extend such benefits to same-sex domestic partners of Federal employees.\" Agencies were given 90 days to complete their reviews. In addition, the memorandum instructed OPM to issue guidance regarding compliance with anti-discrimination policies in the hiring of federal employees (5 U.S.C. §2302(b)(10)). The memorandum was explicit in stating that all extensions of benefits and protections be \"consistent with Federal law.\" No extension of benefits, therefore, could violate DOMA or any other law prohibiting the extension of benefits to same-sex domestic partners. The agency reports were due on September 15, 2009. OPM reviewed these reports and worked with the Department of Justice (DOJ) to recommend the extension of several federal benefits to the partners of federal employees in same-sex relationships.", "On June 2, 2010, President Obama released a memorandum that detailed the benefits OPM and DOJ recommended for extension to same-sex partners. The memorandum stated that children of same-sex partners fall \"within the definition of 'child' for purposes of [f]ederal child-care subsidies, and, where appropriate, for child-care services.\" Additionally, the memorandum required extension of the following benefits:\nA same-sex partner will be deemed to have an insurable interest in a federal employee with respect to survivor annuities under the Civil Service Retirement System and Federal Employee Retirement System (5 U.S.C. §§8339 and 8420). The employee will no longer have to file an affidavit with OPM certifying that his or her domestic partner is financially dependent on the employee. A federal employee in a same-sex partnership is now eligible for 24 hours of unpaid leave when the child of a same-sex partner is dismissed early from school, a routine medical purpose, or the same-sex partner or his or her child needs medical care. The same-sex partner of a federal employee is now eligible to collect travel and relocation payments incurred as a result of a partner's new job or reassignment. The benefit is also extended to a same-sex partner's children. A same-sex partner and his or her children are now eligible to join a credit union, use a fitness facility, or participate in planning and counseling services that are currently extended to an opposite-sex spouse and family members.\nThe memorandum also required OPM to report annually to the President \"on the progress of the agencies in implementing this memorandum until such time as all recommendations have been appropriately implemented.\" Pursuant to the memorandum, the benefit extensions were effective immediately. Media reports noted \"lukewarm\" reaction from gay rights groups to the extension of \"marginal\" benefits.", "Both federal employees and federal annuitants have access to certain benefits. Some of these benefits can be transferred to spouses or other designated persons. In some cases, a federal employee's spouse may be explicitly authorized to receive a federal benefit. In other cases, a federal employee may designate a particular person to receive a federal benefit.\nThis section reviews benefits that cannot be extended to same-sex partners, others that are available to same-sex partners, and still others that have been made available to same-sex partners by the Obama Administration. These benefits have been mentioned in both current and previous legislation and executive-branch memoranda. Table 1 summarizes some of the benefits provided to federal employees and their spouses. It also provides information on whether these benefits are available to the same-sex partners of federal employees.", "", "The Federal Employees Health Benefits Program (FEHBP; 5 U.S.C. §8909; 5 C.F.R. §890) offers health benefits to qualifying federal employees and encompasses nearly 300 different health care plans. As with health care plans in the private sector, FEHBP provides benefits to enrollees for costs associated with a health checkup, an injury, or an illness. Health care costs are shared between the federal government and the enrollee. According to a 2010 study, the federal government pays, on average, 72% of a health plan's premium and 28% of the premium's cost is paid by the employee.\nPursuant to the Code of Federal Regulations , certain family members of a federal employee are eligible to enroll in FEHBP. Among those eligible are an employee's spouse and children under age 22.\nNeither same-sex domestic partners of federal employees nor the partners' children are eligible to enroll in FEHBP. OPM's website states the following:\nSame sex partners are not eligible family members. The law defines family members as a spouse and an unmarried dependent child under age 22. P.L. 104-199 , Defense of Marriage Act, states, \"the word 'marriage' means only a legal union between one man and one woman as husband and wife, and the word 'spouse' refers only to a person of the opposite sex who is a husband or a wife.\"", "Federal employees may choose to enroll in the Federal Dental and Vision Program (FEDVIP; P.L. 108-496 ; 5 U.S.C. Chapter 89A and 5 U.S.C. Chapter 89B), which provides vision and dental benefits in addition to the limited coverage provided by FEHBP. Unlike FEHBP, however, the enrollee pays all benefit premium costs—the federal government does not contribute to the benefit's premiums.\nLike federal health benefits, federal employees may extend FEDVIP benefits to family members. Eligibility rules are identical to FEHBP's regulations.\nBoth the Enhanced Dental Benefits program (5 U.S.C. §8951) and the Enhanced Vision Benefits program (5 U.S.C. §8981) are not extended to the same-sex partners of federal employees who are eligible for the benefit. OPM states on its website that \"[t]he rules for family members' eligibility are the same as they are for the\" FEHBP for both the dental and the vision programs.", "A federal employee is eligible for up to $100,000 in compensation if he or she is disabled while performing his or her job, pursuant to the Federal Employment Compensation Act (FECA; 5 U.S.C. Chapter §§8101-8193). If an employee is killed while performing his or her job, 5 U.S.C. §8102a requires that payment go to the deceased employee's spouse or children. The federal employee may also designate his or her parents or siblings as the compensation recipient. The same-sex partner of a federal employee is not listed in statute among the eligible recipients of such compensation.", "As noted earlier, for certain benefits, the term spouse is either not found in the benefit's authorizing language or the authorizing language widens the scope of eligibility. This section describes federal benefits that are either explicitly extended to same-sex partners of federal employees or those that allow federal employees to designate same-sex partners as beneficiaries.", "Pursuant to the Family and Medical Leave Act (FMLA; P.L. 103-3 ; 5 U.S.C. Chapter 63), certain federal employees are entitled to use up to 12 weeks of unpaid leave during any 12-month period for any of the following reasons:\nthe birth of a child of the employee and follow-up care related to that birth; the adoption of a child by the employee or placement of a foster child with the employee; the care of an employee's ailing spouse, child, or parent; an illness or condition of the employee that renders him or her unable to work; or the spouse, child, or parent of the employee is on covered active duty or has been notified of an impending call or order to covered active duty in the Armed Forces.\nThe 12 weeks of unpaid leave may be used intermittently throughout the year, when the employee meets statutory and regulatory requirements of FMLA.\nFMLA regulations (5 C.F.R. §630.1201) define spouse explicitly as \"an individual who is a husband or wife pursuant to a marriage that is a legal union between one man and one woman, including common law marriage between one man and one woman in States where it is recognized.\" A federal employee, therefore, may not use leave acquired pursuant to FMLA to care for an ailing same-sex domestic partner.\nA June 22, 2010, Department of Labor (DOL) Administrator Interpretation of FMLA interpreted the act's definition of \"son or daughter\" to permit an employee in a same-sex partnership to use FMLA-approved leave to care for the child of his or her same-sex partner. Prior to the Administrator Interpretation, a federal employee was not permitted to use leave acquired pursuant to FMLA to care for the ailing child of a same-sex domestic partner, unless the employee had legally adopted the child. The DOL interpretation applies to all employees in both the public and private sectors.", "On June 14, 2010, OPM released a final rule clarifying the definitions of family member and immediate relative as they are used in determining eligibility for certain kinds of leave—including sick leave, funeral leave, voluntary leave transfer, voluntary leave bank, and emergency leave transfer. The regulation formerly had defined \"family member\" as any one of the following:\nspouse, and parents thereof; children, including adopted children and spouses thereof; parents; brothers and sisters; and any individual related by blood or affinity whose close association with the employee is the equivalent of a family relationship.\nPursuant to the new regulation, the definition of family member now also includes\ngrandparents and grandchildren, and spouses thereof; and a domestic partner and parents thereof, including the domestic partner of any of the relatives listed above.\nThe new regulation also modified existing or added new definitions to criteria that determine if same-sex partners would be eligible for certain leave benefits. For example, the terms committed relationship , domestic partner , parent , and son or daughter were added into the Code of Federal Regulations. The modified regulation applies to leave benefits for both same-sex and opposite-sex partnerships, and includes but is not limited to partnerships recognized by a state, territory, or district government. The regulation became effective June 14, 2010. The regulation does not appear to affect FMLA.", "In some cases, a federal employee may not choose to enroll a spouse or same-sex partner in a federal benefit program. Instead, the employee may designate any individual as the recipient of a federal benefit. Pursuant to 5 U.S.C. Chapter 87, most federal employees, including part-time employees, are automatically enrolled in the Federal Employees' Group Life Insurance (FEGLI) program, which is administered by Metropolitan Life Insurance Company. Federal employees pay two-thirds of their life-insurance premium, and the federal government pays the remaining third. A federal employee may designate anyone, including a same-sex partner, as their life insurance beneficiary by filing an SF 2823 form. A federal employee's spouse would automatically receive the federal benefit if he or she did not specifically designate a different beneficiary, pursuant to federal law (5 U.S.C. §8705(a)).\nIn 5 U.S.C. §8701, the section of U.S. Code that defines the terms used on statutes that govern federal life insurance, family member includes the phrase spouse of the individual when listing eligible beneficiaries. Title 5 U.S.C. §8705, the section of code that delineates the order of preference in which life insurance benefits would be distributed in the event of a federal employee's death, says life insurance benefits would first be distributed to any person or entity that was selected by the employee using the SF 2823 form. If no form was completed, the benefit would then go to \"the widow or widower of the employee.\" It would appear, therefore, that DOMA would preclude same-sex domestic partners from qualifying as a widow or widower.", "Federal employees with permanent appointments are eligible for retirement and disability benefits under either CSRS or FERS. Employees hired before January 1, 1984, are covered by CSRS unless they chose to switch to FERS during open seasons held in 1987 and 1998. Most federal employees initially hired into permanent federal employment on or after January 1, 1984, are covered by FERS. CSRS and FERS provide (1) a defined benefit pension plan, which pays a monthly dollar amount for the lifetime of the retiree; and (2) access to the Thrift Savings Plan (TSP), which is a defined contribution retirement savings plan in which employee and (for employees covered by FERS) agency contributions accrue tax-deferred investment earnings in a retirement savings account.", "Workers covered by the CSRS or FERS defined benefit pension plan receive a monthly retirement annuity for the lifetime of the retiree if the retiree meets all eligibility requirements. The payment in retirement is determined by a formula that uses the worker's number of years in federal service, an accrual percentage, and salary base. The accrual rate is higher for employees under CSRS than under FERS. Workers covered by CSRS do not participate in Social Security, do not receive Social Security benefits, and do not pay Social Security taxes. Workers covered by FERS fully participate in Social Security.\nUnder CSRS and FERS, an eligible spouse is entitled to receive monthly retirement benefits if (1) the covered worker dies while employed in federal service; or (2) the covered worker dies after retirement. When a federal employee dies, the surviving spouse of the deceased federal employee may be entitled to a survivor's benefit. When a married federal worker retires, the married couple receives a monthly retirement benefit for the longer of the lifetime of the worker or the spouse. The monthly benefit in retirement is reduced to account for the expected longer time period in which the benefit will be paid. The spousal benefit is the default option for married federal employees, unless both the federal worker and spouse provide written consent to waive the benefit.\nTitle 5 of the U.S. Code , which governs benefits under CSRS and FERS, defines the term spouse without reference to the individual's gender. Title 5 does not define the word marriage ; however, the Code of Federal Regulations defines marriage for purposes of determining eligibility for federal retirement benefits under Title 5 as \"a marriage recognized in law or equity under the whole law of the jurisdiction with the most significant interest in the marital status of the employee, member, or retiree unless the law of that jurisdiction is contrary to the public policy of the United States.\" Since DOMA defines a spouse as \"a person of the opposite sex who is a husband or a wife,\" same-sex partners are ineligible to receive spousal benefits entitled to opposite-sex partners.\nIf a federal employee dies, and no survivor annuity is payable to a spouse, former spouse, or a child, then the employee's contributions to CSRS and FERS may be returned as a lump-sum benefit. Under both FERS and CSRS, an employee may designate anyone, including a same-sex partner, as his or her beneficiary for a lump-sum refund of retirement contributions to the retirement system. If anyone qualifies to receive survivor annuity benefits by law (such as a spouse or dependent child), however, retirement contributions cannot be refunded. If no survivor benefit is payable and the employee has not designated a beneficiary, then the return of contributions will be distributed based on the order of precedence. The order of precedence awards the benefits in the following order: widow or widower; child or children equally, and to the descendants of deceased children; parents equally or surviving parent; appointed executor or administrator of estate; or next of kin who is entitled to your estate under the laws of the state in which the employee resided at the time of death.", "Although a federal employee cannot name a domestic partner as his or her surviving beneficiary under either FERS or CSRS, an employee who is applying for a non-disability retirement can elect an Insurable Interest Annuity (IIA), which is a survivor annuity to an individual who is financially dependent on the employee. Only one person may be named as the beneficiary of the IIA, and the election must be made at the time of retirement. The employee must establish, through one or more affidavits from other people, the reasons why the beneficiary might reasonably expect to suffer loss of financial support as a result of the employee's death. The cost of an IIA can range from a 10% reduction in the employee's retirement annuity if the beneficiary is 10 years younger than the employee to a 40% reduction if the beneficiary is 30 or more years younger.", "Both CSRS- and FERS-covered workers may contribute up to $17,000 in 2012 ($22,500 for those age 50 and older) to the Thrift Savings Plan (TSP). Contributions to TSP are excluded from taxable income; taxes are paid when funds are withdrawn in retirement. Employees covered by FERS receive an agency matching contribution of up to 5% to their TSP account. Workers covered by CSRS do not receive agency matching contributions.\nA federal employee can name anyone, including a domestic partner, as the beneficiary under the TSP. The beneficiary will receive the amount in the TSP account following a participant's death. For spouses who are beneficiaries of a deceased TSP participant and the account is $200 or more, TSP establishes a beneficiary participant account. The beneficiary account is automatically invested in the Government Securities Investment (G) Fund until the spouse beneficiary elects different investment options. The spouse may keep the funds in the TSP beneficiary account or elect to withdraw or transfer the funds to an Individual Retirement Account (IRA) or other retirement plan, if the plan allows. Non-spouse beneficiaries cannot retain a TSP account. The funds in a deceased participant's account are either transferred directly to the non-spouse beneficiary or to an inherited IRA.", "If an employee does not designate one or more beneficiaries under FERS, CSRS, or the TSP, the funds will be distributed based on the order of precedence. The order of precedence awards the benefits in the following order: widow or widower; child or children equally, and to the descendants of deceased children; parents equally or surviving parent; appointed executor or administrator of estate; or next of kin who is entitled to the estate under the laws of the state in which the employee resided at the time of death. Thus, the funds from the TSP or CSRS/FERS lump-sum benefit will bypass a same-sex partner unless the federal employee actively designates that person as the beneficiary.", "Federal employees may apply for the Federal Long Term Care Insurance Program (FLTCIP; P.L. 106-265 ; 5 U.S.C. §9001), which provides medical services for enrollees who suffer a chronic medical condition and are unable to care for themselves. Employees may voluntarily opt into FLTCIP, and the entire premium is covered by the enrollee. Pursuant to 5 U.S.C. §9001, qualifying federal employees; members of the uniformed services; federal annuitants; current spouses of federal employees, servicemembers, or annuitants; adult children of federal employees, servicemembers, or annuitants; and parents, parents-in-law, and stepparents of federal employees, servicemembers, or annuitants are eligible to enroll in FLTCIP. In addition, federal law states that OPM may prescribe regulations that permit an \"individual having such other relationship\" to a federal employee, servicemember, or annuitant to enroll in FLTCIP.\nOn June 1, 2010, OPM published in the Federal Register a final rule that expanded the definition of qualified relative to include \"the same-sex domestic partners of eligible Federal and U.S. Postal Service employees and annuitants.\" As of July 1, 2010, same-sex partners of federal employees are eligible for FLTCIP benefits.\nSeveral comments received by OPM during the regulatory review of the definition change of qualified relative requested that opposite-sex domestic partners—in addition to same-sex partners—be made eligible for the long term care benefit. In the final rule, however, OPM wrote that \"opposite-sex domestic partners were not included because they may obtain eligibility to apply for Federal long term care insurance through marriage, an option not currently available to same-sex domestic partners.\"", "", "As a February 28, 2013, no bills have been introduced that would affect the benefits of same-sex partners of federal civilian employees.", "In the 112 th Congress, however, two bills were introduced that, if enacted, would have provided insurance, travel, and other benefits to the same-sex partners of federal employees.", "On November 18, 2011, Senator Joe Lieberman—on behalf of himself and Senator Susan Collins—introduced S. 1910 , the Domestic Partnership Benefits and Obligations Act of 2011. That same day, Representative Tammy Baldwin introduced a companion bill, H.R. 3485 , in the House. S. 1910 was referred to the Committee on Homeland Security and Governmental Affairs. On May 16, 2012, the committee reported S. 1910 favorably with an amendment in the nature of a substitute. H.R. 3485 was referred to the Oversight and Government Reform Committee's Subcommittee on Workforce Protections, the House Education and the Workforce's Subcommittee on Workforce Protections, the House Judiciary's Subcommittee on Courts, Commercial and Administrative Law, and the Committee on House Administration. No further action was taken.\nAmong the benefits the bills sought to extend were the following:\nhealth insurance and enhanced dental and vision benefits (5 U.S.C. Chapters 89, 89A, 89B); retirement and disability benefits and plans (5 U.S.C. Chapters 83, 84; 31 U.S.C Chapter 7; 50 U.S.C. Chapter 38); family, medical, and emergency leave (2 U.S.C. §1312; 3 U.S.C. §412; 5 U.S.C. Chapter 63 – subchapters II, IV, and V; 29 U.S.C. §2601 et seq.); federal group life insurance (5 U.S.C. Chapter 87); long-term care insurance (5 U.S.C. Chapter 90); compensation for work injuries (5 U.S.C. Chapter 81); benefits for disability, death, or captivity (5 U.S.C. §§5569 and 5570; 22 U.S.C. §3973; 42 U.S.C. §3796 et seq.); and travel, transportation, and related payments and benefits (5 U.S.C. Chapter 57; 22 U.S.C. §4981 et seq.; 10 U.S.C. §1599b; 22 U.S.C. Chapter 52; 33 U.S.C. §3071).\nPursuant to S. 1910 , each qualifying federal employee seeking to enroll his or her same-sex domestic partner in a federal benefit program would have been required to file an affidavit of eligibility with OPM. In the affidavit, the employee would have had to \"attest\" that he or she was in a \"committed domestic-partnership,\" which included the following conditions:\nthe partners \"are in a committed domestic-partnership relationship with each other ... and intend to remain so indefinitely\"; the partners \"have a common residence and intend to continue to do so\"; the partners are at least 18 years old and are \"mentally competent to consent to contract\"; the partners \"share responsibility for a significant measure of each other's common welfare and financial obligations\"; the partners are not \"married to or in a domestic partnership with anyone except each other\"; the partners are not related by blood in a way that would prohibit legal marriage between individuals otherwise eligible to marry in the jurisdiction\"; and the partners would be subject to the same ethical standards, financial disclosures, and conflict of interest requirements as those placed on the spouses of federal employees (5 U.S.C. Appendix; 5 U.S.C. §§3110, 7301, 7342(a)(1),7351, 7353; 2 U.S.C. §1602(4)(D); 18 U.S.C. §§205(e), 208(a); 31 U.S.C. §1353; 42 U.S.C. §290b(j)(2)).\nAdditionally, the applicant would have had to attest that he or she understood that \"as a domestic partner, each individual not only gains certain benefits, but also assumes some obligations.\" The bills' language provided for \"criminal and other penalties\" if certain legal obligations were violated.\nBoth S. 1910 and H.R. 3485 would have required a federal employee to file a statement of dissolution within 30 days of the death of his or her same-sex partner or the dissolution of the relationship. Both bills would have provided benefits to the living partner of a deceased federal employee as if he or she were a widow or widower. Additionally, a former partner would have been entitled to benefits identical to that of a former spouse.\nNatural children or adopted step children of a federal employee's same-sex partner would have been entitled to benefits identical to that of a natural or adopted child of a federal employee's spouse, pursuant to the bills.\nSimilar bills to both S. 1910 and H.R. 3485 were introduced in the previous seven Congresses. As of January 31, 2013, similar bills have not been introduced in the 113 th Congress.\nNo bill was introduced in the 112 th Congress that sought to explicitly rescind the benefits extended by the Obama Administration. As of January 31, 2013, no bill has been introduced in the 113 th Congress that would rescind the benefits.", "This section provides analysis of some potential policy considerations Congress may consider that are related to federal employees and the extension of health and other benefits to same-sex partners of federal employees. Congress may choose to examine or modify existing policies related to the extension of benefits to the partners of federal employees in same-sex relationships, or maintain existing policies. Currently benefits like health care, dental care and eye care are not available to the same-sex partner of a federal employee. Other benefits, like FMLA and life insurance, however, are.\nThe Obama Administration has pledged its support for extending federal benefits to the same-sex partners of federal employees. The Administration has extended some benefits to same-sex partners and has argued that its actions are within the parameters of existing laws. DOMA, which was enacted by Congress and signed into law by President William J. Clinton, requires agencies to define spouse as a person of the opposite-sex, for the purpose of distributing federal benefits.", "Some may worry that not providing same-sex partner benefits makes the federal government a less attractive employment option to potential employees who have same-sex partners. They contend that to compete for the most effective and efficient workforce the federal government needs to offer benefits similar to those available in state and local governments and in the private sector. The Obama Administration, for example, has argued that by not extending same-sex benefits, the federal government faces difficulties recruiting and retaining high-performing employees who are in or who may enter into same-sex relationships. Estimates presented at congressional testimony in 2009 indicated that there were 34,000 federal employees in same-sex relationships, including state-recognized marriages, civil unions, or domestic partnerships. Such employees may instead choose to work for state, local, or tribal governments or private companies that provide benefits to same-sex domestic partners. When Congress enacted DOMA, report language that accompanied the legislation did not address whether denying such benefits could impede the federal government's ability to hire the most effective workers. At the time of DOMA's enactment, few employers offered same-sex benefits to their employees. There is no federal data that has tracked, over time, the availability of same-sex partner benefits to either public or private-sector employees. Such data could aid in the determination of whether private-sector employers or other levels of government have been offering benefits that the federal government has not.", "Some private-sector and public-sector employers offer benefits to the domestic partners of their employees. The types and scope of the benefits offered, however, vary: some employers provide only health care benefits to domestic partners while other employers provide additional benefits—such as survivorship benefits under the employer's pension plan. A Congressional Research Service search of academic, legal, and other research databases, found that there appear to be few studies that track, over time, how many employers provide same-sex partner benefits to their employees and the scope of those benefits. Some studies, however, provide benefits data for a single date or over a short time span. This section provides data from these surveys.\nWhen DOMA was enacted, few employers in the private and public sector offered domestic partner benefits of any sort. For example, a study by Hewitt Associates LLC, a global management consulting company, found in 1997 that 10% of 570 large U.S. employers offered domestic partner benefits. In 2000, the percentage of companies surveyed by Hewitt that offered domestic partner benefits increased to 22%. According to the National Survey of Employer-Sponsored Health Plans conducted by Mercer, a global consulting company, 46% of corporations with 500 or more employees included same-sex domestic partners as eligible dependents in 2011, which was an increase from 39% in 2010. In testimony in July 2009 before the House Committee on Oversight and Government Reform, Dr. M.V. Lee Badgett, the research director of the Williams Institute, said that \"[i]n the private sector, almost two-thirds of the Fortune 1000, and 83% of Fortune 100 companies\" provide benefits to the same-sex partners of their employees and that 20 states, the District of Columbia, and \"[m]ore than 250 cities, counties, and other local government entities cover domestic partners of other public employees.\"\nMany employers do not provide domestic-partner benefits. The nation's two largest private-sector employers—Walmart and Exxon Mobil—do not provide benefits to same-sex partners in the United States. Other employers that provide benefits to same-sex partners—including I.B.M., Corning, and Raytheon—reportedly require same-sex couples to marry, if they live in a state where same-sex marriage is legal, to become eligible for health and other benefits.", "In 2011, the Bureau of Labor Statistics (BLS), for the first time in its history, released data on benefits provided to the domestic partners of employees. In March 2012, BLS updated its survey data. The BLS survey asked workers whether (1) they had access to a defined benefit pension plan at their place of employment and whether they had access to survivor benefits for an unmarried domestic partner and (2) they had access to health benefits at their place of employment and whether there was access for unmarried domestic partners. According to the surveys, workers in the public-sector (which would include state, local, and tribal—but not federal government) were more likely to be offered domestic partner benefits than workers in the private sector.\nBLS reported the following:\nAmong private-sector workers with access to a defined benefit pension plan, 35% had access to survivorship benefits for an unmarried domestic partner in 2011 and 42% in 2012. Among private sector, civilian workers with access to health care benefits, 29% had access to health benefits for an unmarried domestic partner in 2011. In 2012, the survey data was more granular. According to the data, 30% of private industry employees had access to health care benefits for a same-sex partner (as opposed to an opposite-sex domestic partner). Among workers who worked for state and local governments, 54% had access to health benefits for an unmarried domestic partner. In 2012, the survey data was more granular. According to the data, 33% of state and local government employees had access to benefits for a same-sex partner (as opposed to an opposite-sex domestic partner).\nGenerally, the 2012 data demonstrated that health care benefits were \"more prevalent for same-sex partners than for [unmarried] opposite-sex partners.\"", "In November 2012, CBO released its score of S. 1910 , which, as described above, sought to extend certain benefits and responsibilities to the same-sex partners of federal employees and annuitants. The score projected that the extension of benefits from FY2013 through FY2022 would cost the federal government $144 million in discretionary dollars over those 10 years. This estimate was $159 million and $211 million less than CBO's score of two similar bills from the 111 th Congress ( H.R. 2517 and S. 1102 , respectively).\nCBO's score of S. 1910 assumed less than 1% of the federal employee and annuitant population would have opted to enroll a same-sex partner in federal benefits programs. The score also estimated that federal government premiums for federal health care would have been reduced by $13 million over ten years if same-sex partners had been eligible to enroll. The savings would have emerged, according to CBO, because the law would have required health care providers to \"recover payments when a third party is liable for the health care costs of a covered enrollee\" and such recoveries would reduce government premiums. The CBO estimates of H.R. 2517 and S. 1102 from the 111 th Congress did not include recovery payment collections in their analyses.\nA 2008 academic study estimated the cost of extending same-sex partner benefits to federal employees and annuitants at $41 million in the first year and $675 million over 10 years. In testimony before the House Oversight and Government Reform Committee's Subcommittee on the Federal Workforce, Postal Service, and District of Columbia on July 8, 2009, Office of Personnel Management Director Berry estimated that extending benefits to the same-sex partners of federal employees and annuitants would have cost the government $56 million in 2010.\nCurrent budgetary circumstances may discourage Congress from extending benefits to the same-sex partners of federal employees and annuitants. As noted earlier in this report, when DOMA was enacted, the House report that accompanied the legislation stated that a primary goal of the law was to \"preserve scarce government resources.\"\nCongress often considers more than the cost or cost savings of a policy when choosing whether to act on it. Extending benefits to the same-sex partners of federal employees is controversial, and may prompt moral or ethical concerns for Members on all sides of the issue. Some Members, for example, may believe that extending benefits to the same-sex partners of federal employees violates a law enacted to require that marriage, for purposes of federal benefit programs, be defined as the union of one man and one woman. Other Members, however, may believe that prohibiting the extension of benefits to same-sex partners results in unequal treatment of federal employees in same-sex relationships. Still other Members may argue that extending benefits to federal employees in same-sex domestic partnerships is unfair to employees in opposite-sex partnerships. For example, at a House Committee on Oversight and Government Reform hearing in July 2009, Representative Chaffetz said the following:\nWhether or not a heterosexual couple is dating and living together can meet all other standards except for the portion ... regarding ... same-sex status is of concern to me. If they ... are not afforded the same rights, this bill is directly discriminatory against heterosexual couples, and that, to me, is one of the unintended consequences that I have a serious concern [about] and question....\nThis report, however, does not address the ethical and legal debates surrounding DOMA and same-sex marriage.", "", "As discussed earlier in this report, President Obama's June 2, 2010, memorandum to the heads of executive branch departments and agencies requires OPM to create and present to the President an annual report on agency progress toward the extension of certain benefits to same-sex domestic partners. Congress may choose to stop the extension of these benefits by enacting legislation explicitly prohibiting their extension. No legislation has been introduced that would scale back the same-sex partner benefits extended by the Obama Administration. Conversely, Congress has the authority to enact into law some, all, or none of the memorandum. Congress may choose to hold hearings to examine the implementation of the memorandum.", "The definition of \"domestic partner\" is in dispute. DOMA defines marriage, for purposes of federal benefit programs, as the union of one man and one woman. For the purposes of distributing federal benefits to the partners of opposite-sex couples, the federal government recognizes a spouse from the date of legal marriage to either divorce or death. State and local governments or companies that wish to provide domestic partner benefits need to define \"domestic partner\" for the purpose of the benefits. Some state and local governments and companies that operate in jurisdictions that recognize same-sex marriage or domestic partnerships have required that same-sex partners be married in order to receive domestic partner benefits. Employees in states that do not recognize same-sex marriage would be required to meet the definition required by the entity that is providing the benefits. It may be difficult to define the start and end of a same-sex partnership and because many same-sex partnerships are recognized in limited circumstances or not at all, the start and dissolution of such unions may vary based on jurisdiction. This could be problematic for the federal government as an employer because the federal government has employees in all 50 states, the District of Columbia, and the territories (as well as international employees)—some of which recognize same-sex marriages, some of which recognize domestic partnerships, and some of which do not recognize any same-sex partnership. If Congress chose to enact a law to extend same-sex partner benefits, it would have to define same-sex partnership to incorporate the various terms states use for such unions as well as capture such unions that exist in states that do not acknowledge same-sex relationships. In addition, Congress would have to specify what would constitute the start of such a partnership and what would qualify as its end.", "Married couples can use a marriage license to verify their committed relationship for legal purposes. Same-sex couples, however, have no license or other type of document to verify their relationship for federal legal purposes. If Congress were to provide benefits to the same-sex partners of federal employees, Congress may also decide that the federal government must verify that benefit applicants are in a committed, same-sex domestic partnership. Congress may determine that each agency should be given authority to verify whether an employee is in a same-sex relationship or if verification of a committed same-sex relationship would be more effective if it were centralized within OPM. Congress may choose to enact legislation that would make OPM the central clearinghouse for affidavits required to qualify for same-sex partner benefits. Designating OPM as the only agency with the authority to maintain those records could increase employee privacy, making it less likely that federal employees' private information is made public. Giving each individual agency the authority to maintain the affidavits could make the documents more susceptible to information leaks, as each agency could have a different system of recordkeeping. In addition, giving individual agencies the authority to file the affidavits makes it more likely that federal employees applying for the benefits may know the person with whom they must file the record, making the process less anonymous. Some federal employees may be less likely to enroll in the program if they must identify themselves as gay or lesbian in front of a co-worker. Moreover, many federal employees may leave one agency to take a temporary or permanent position in another. OPM may provide the most logical clearinghouse for benefits processing because it could remove the need for employees who move from one agency to another to reapply for the same benefits. On the other hand, Congress may determine that OPM's mission does not include this type of government-wide recordkeeping role related to federal benefits. Giving individual agencies the authority to certify employee affidavits would not task OPM with a responsibility it may not have the capacity to undertake. Some have expressed the concerns about the potential for abuse and that some employees may claim to be in a partnership solely for the purpose of receiving benefits. This could be the case if the requirements for obtaining recognition of a domestic partnership were less stringent than the requirements for opposite sex couples to obtain a marriage license.", "Some federal employees may not be married to their domestic partners, whether that partner is of the same or a different gender. As noted above, the domestic partners of these employees are not eligible to receive many federal benefits because they do not qualify as a \"spouse,\" pursuant to federal law. In a House Oversight and Government Reform Committee report that accompanied a bill in the 111 th Congress that sought to extend same-sex partner benefits, the committee wrote the following:\nfederal employees living with opposite sex domestic partners have the option of marriage, which would entitle the employee and his or her spouse to the receipt of these benefits. Same sex partners may only get married in a handful of states. Even in these cases, the federal government does not recognize the marriage because of the Defense of Marriage Act (DOMA). H.R. 2517 does not affect DOMA. Therefore, under current OPM guidelines, same sex partners, even where married, are ineligible to receive these benefits as spousal benefits.\nCongress may choose to extend benefits only to those in legally recognized same-sex domestic partnerships. This limitation would control the costs associated with extending partner benefits by restricting the number of possible beneficiaries. Congress, however, may also consider extending benefits to the domestic partner of any federal employee, regardless of that partner's gender. Such action may attract more candidates to federal jobs. Such action also would permit an employee to qualify for federal benefits without having to identify the gender of his or her domestic-partner. Some employees may be hesitant to identify the gender of their domestic partner, even if the affidavit is confidential. The extension of benefits to such partners regardless of gender, however, could increase the costs of the FEHBP.", "DOMA precludes same-sex partners from being recognized as a married couple under the Internal Revenue Code (IRC). A complete overview and analysis of the tax implications of same-sex marriage is beyond the scope of this report. However, the tax treatment of health benefits may be relevant to federal employees who are in same-sex relationships, particularly when one member of the couple works in the private sector.\nSame-sex couples have a larger tax liability when one partner's health insurance benefits are extended to the other partner. While a federal employee's health plan cannot cover a same-sex partner, certain employers in the private sector choose to extend health insurance coverage to same-sex partners. The extension of this benefit often increases the tax liability of a same-sex couple. Under current law, opposite-sex spouses can exclude from gross income employer contributions to their health insurance plans. As a result of DOMA, same-sex couples must pay taxes on the employer contributions that cover a same-sex partner, sometimes referred to as \"imputed income.\" For example, if an employer contributed $80 per paycheck to the cost of an employee's health insurance plan that covered a same sex partner, the employee would have to include some portion of the $80 in their gross income, increasing their taxable income (including payroll taxes) and ultimately their tax liability.\nIn addition, if federal health benefits were extended to same-sex couples, but DOMA was not repealed, federal employees who extended their health coverage to their same-sex partner would also be subject to additional taxation from the \"imputed income,\" as defined above." ], "depth": [ 0, 1, 1, 1, 1, 2, 2, 1, 2, 3, 3, 3, 2, 3, 3, 3, 2, 3, 3, 3, 3, 3, 1, 2, 2, 3, 1, 2, 3, 3, 1, 1, 2, 2, 2, 2, 2 ], "alignment": [ "h0_title h2_title h4_title h3_title h1_title", "", "h4_full h1_full", "h0_full", "h0_title h2_title", "h0_full h2_full", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "h4_title", "", "h4_full", "h4_full", "h2_title h1_title", "h2_full h1_full", "h1_full", "", "h3_full h2_full", "h1_title", "", "", "", "h1_full", "" ] }
{ "question": [ "What types of benefits are provided by the federal government?", "How many people receive these benefits?", "Who else is eligible for these benefits?", "What was DOMA?", "What was included in the first provision?", "What was included in the second provision?", "How does DOMA affect government employees?", "What is the relationship between Congress and federal employee benefits?", "What is one perspective regarding employee benefits?", "What is the other perspective?", "How did DOMA pertain to this second perspective?", "What did CBO estimate about extending benefits to same-sex partners?", "Why might the federal government benefit from extending benefits?", "How have recent bill proposals addressed same-sex partners?", "What did Senator Lieberman introduce?", "How did stakeholders respond to this bill?", "What did Representative Baldwin introduce?", "What was the trajectory of this bill?" ], "summary": [ "Among these benefits are health insurance; enhanced dental and vision benefits; survivor benefits; retirement and disability benefits; family, medical, and emergency leave; and reimbursement of relocation costs.", "The federal government provides a variety of benefits to its 4.4 million civilian and military employees and 4.7 million civilian and military retirees.", "Pursuant to Title 5 U.S.C. Chapters 89, 89A, 89B, and other statutes, federal employees may extend these benefits to eligible spouses and children.", "In 1996, Congress passed the Defense of Marriage Act (DOMA, P.L. 104-199; 1 U.S.C §7) \"[t]o define and protect the institution of marriage.\" DOMA contains two provisions.", "The first provision allows all states, territories, possessions, and Indian tribes to refuse to recognize an act of any other jurisdiction that designates a relationship between individuals of the same sex as a marriage.", "The second provision prohibits federal recognition of these unions for purposes of federal enactments.", "Pursuant to DOMA, the same-sex partners of federal employees are not eligible to receive federal benefits that are extended to the spouses of federal employees. An estimated 34,000 federal employees are in same-sex relationships—including state-recognized marriages, civil unions, or domestic partnerships.", "Congress has had a long-standing interest in overseeing the benefits provided to federal employees.", "On the one hand, the federal government seeks to attract the most effective, highly trained workforce to address technical and complex issues.", "On the other hand, finite resources can present challenges when considering whether to extend benefits to federal employees.", "When DOMA was enacted, the House report that accompanied the legislation stated that a primary goal of the law was to \"preserve scarce government resources.\"", "The Congressional Budget Office (CBO) estimated that extending benefits to the partners of employees in same-sex relationships pursuant to S. 1910 would cost the federal government $144 million in discretionary spending between 2013 and 2022.", "CBO also estimated, however, that extending the benefits could \"limit future rate increases\" in federal health care costs because health care providers would be required to recover certain health care costs that previously went unrecovered. These recovered costs could lower the federal government's health care premiums.", "In the 112th Congress, two bills were introduced that, if enacted, would have permitted federal employees to extend insurance, long-term care, and other benefits to same-sex partners.", "On November 18, 2011, Senator Joseph Lieberman introduced S. 1910, the Domestic Partnership Benefits and Obligations Act of 2011.", "On May 16, 2012, S. 1910 was ordered to be reported favorably from the Committee on Homeland Security and Governmental Affairs.", "That same day, Representative Tammy Baldwin introduced a companion bill, H.R. 3485, also called the Domestic Partnership Benefits and Obligations Act of 2011, in the House.", "H.R. 3485 was referred to multiple committees, but no further action was taken on the bill." ], "parent_pair_index": [ -1, 0, 0, -1, 0, 0, 0, -1, -1, 1, 2, -1, -1, -1, 0, 1, 0, 3 ], "summary_paragraph_index": [ 1, 1, 1, 2, 2, 2, 2, 5, 5, 5, 5, 6, 6, 7, 7, 7, 7, 7 ] }
GAO_GAO-14-595
{ "title": [ "Background", "DOD’s Actual Costs Differed Considerably from Budget Estimates since Fiscal Year 2009, Due Largely to Fluctuations in Fuel Price", "DOD’s Actual Fuel Costs Differed from Its Budget Estimates", "Differences between Estimated and Actual Fuel Costs Were Largely Due to Fuel Price Fluctuations", "DOD Has Taken Various Actions to Manage the Effect of Differences between Estimated and Actual Fuel Costs", "Cash Balances in the Defense-Wide Working Capital Fund Fluctuate Due to Changing Fuel Prices", "DOD Used Fund Transfers and Adjustments to Its Standard Price to Manage Working Capital Fund Balances", "DOD Has Conducted Studies on Its Management of Working Capital Funds, but Has Not Reevaluated Its Approach or Documented Its Assumptions for Estimating Fuel Costs", "DOD Has Conducted Various Studies on Its Bulk Fuel Program, Including Management of Working Capital Funds", "DOD Has Not Reevaluated Its Approach or Documented its Assumptions for Setting the Standard Price", "Conclusions", "Recommendations for Executive Action", "Agency Comments and Our Evaluation", "Appendix I: Scope and Methodology", "Appendix II: Studies on Department of Defense Bulk Fuel Pricing and Management of the Defense-Wide Working Capital Fund", "Appendix III: Comments from the Department of Defense", "Appendix IV: GAO Contacts and Staff Acknowledgments", "GAO Contacts", "Staff Acknowledgments" ], "paragraphs": [ "In each fiscal year, DOD establishes a standard price per barrel to be charged to its fuel customers. The Office of the Under Secretary of Defense (Comptroller), in coordination with the Defense Logistics Agency (DLA), estimates and sets a standard price for its fuel and other fuel- related commodities that endeavors to closely approximate the actual per barrel price during budget execution, which occurs almost a year later. The Office of the Under Secretary of Defense (Comptroller) sets the standard price annually based on three components.\nCrude Oil—The baseline for setting the standard price is the forecasted price for crude oil, which is provided to DOD by OMB. To estimate the cost of crude oil, the Council of Economic Advisors, the Department of the Treasury, and OMB—referred to as the Troika— jointly prepare a set of economic assumptions for agencies to use in preparing their overall budgets. In developing the crude oil price projections, the Troika uses oil price projections coming from the prices in the futures market for both West Texas Intermediate (WTI) and Brent crude oil prices. DOD uses the WTI projection as its baseline. According to OMB Circular A-11, all baseline estimates used in the budget must be consistent with the economic assumptions provided by OMB.\nRefinement Markup—DOD adds a markup for the cost of refining the crude oil. Because DOD and its customers use refined oil products— such as jet fuel and diesel fuel—DOD has to include the additional cost of refining the fuel in its standard price. This refinement markup is estimated based on the historical price relationship between WTI crude oil and refined product prices.\nNonproduct Costs—DOD adds an estimate for nonproduct costs associated with DLA’s overhead, including facilities sustainment, restoration, and modernization; transportation; and storage costs. Other nonproduct costs include an estimate of product losses and may include cost recovery adjustments for prior year fund losses to the Defense-wide Working Capital Fund, legal judgments, and rounding.\nFigure 1 identifies each of the price components as a percentage of the total standard price for fiscal year 2013.\nIn developing their annual operation and maintenance budget requests, the military services use the standard price and their estimated fuel requirements based on activity levels (such as flying hours, steaming days, tank miles, and base operations). For example, the Air Force as the largest DOD customer for fuel, purchased approximately 49 million barrels in fiscal year 2013, representing 53 percent of all sales to the military services. In determining its Operation and Maintenance funding needs, the Air Force provided an estimate for fuel in its budget request based on an analysis of each aircraft’s fuel usage and future programmed flying hours. Figure 2 below generally illustrates the process and the main organizations involved in budgeting for fuel.\nDOD utilizes its Defense-wide Working Capital Fund to purchase bulk fuel for customers. According to DOD’s Financial Management Regulation, working capital funds were established to satisfy recurring DOD requirements using a businesslike buyer-and-seller approach. The Defense-wide Working Capital Fund is the Working Capital Fund managed by the defense agencies. The fund consists of six activity groups. Three of these activity groups are operated by DLA, two by the Defense Information Systems Agency, and one by the Defense Finance and Accounting Service. The activity group related to DOD’s bulk fuel program is the DLA Energy Management Activity group, which provides worldwide energy support including bulk fuel purchasing, transportation, and storage for the military services and other customers.\nThe fund covers DLA’s costs for purchasing bulk fuel and is reimbursed through its sale of fuel to the military services and other customers at a standard price. The standard price is intended to remain unchanged until the next budget year. This helps to shield the military services from market price volatility by allowing the cash balance in the fund to absorb minor fuel price fluctuations. According to DOD’s Financial Management Regulation, the goal of the fund is to remain revenue-neutral, allowing the fund to break even over time—that is, to neither make a gain nor incur a loss. During the year the budget is executed, the actual price for a barrel of fuel on the world market may be higher or lower than DOD’s standard price. If the actual price is higher, the cash balance in the Defense-wide Working Capital Fund will go down. If the actual price is lower, the cash balance in the fund will go up. These fluctuations in the cash balance are known as a net outlay. To correct for these fluctuations, DOD may adjust the standard price for the following year. For example, DOD may increase the standard price to make up for losses in the previous year and bolster the cash balance in the fund. Alternatively, DOD may decrease the standard price to reimburse the services, which had paid a higher price the previous year. DOD can also cover fund losses during the execution year by obtaining an appropriation from Congress, transferring funds from another DOD account into the fund, or adjusting the standard price out of cycle.", "During fiscal years 2009 through 2013, DOD’s actual costs for bulk fuel differed considerably from its budget estimates, due largely to fluctuations in fuel price. During those years, DOD either under- or overestimated what it would have to pay for bulk fuel. The differences between estimated and actual fuel costs were accounted for primarily by fluctuations in the market price for fuel.", "In each of fiscal years 2010, 2011, and 2012, DOD underestimated its bulk fuel costs by about $3 billion. In 2009, DOD overestimated these costs by about $3 billion and in 2013 by about $2 billion. Table 1 shows the total difference between DOD’s estimated and actual fuel costs for fiscal years 2009 through 2013.", "We identified two primary factors that accounted for the difference between estimated and actual costs—(1) fluctuations in the market price of fuel and (2) differences between the services’ estimated and actual fuel consumption. Our analysis showed that from fiscal years 2009 through 2013, the differences between the price DOD paid for fuel and the price it charged its fuel customers—the standard price—accounted for, on average, 74 percent of the difference between estimated and actual costs. In fiscal year 2012, for example, DOD estimated a standard price of $131.04 per barrel. DOD’s actual costs during that year averaged $167.33 per barrel—an underestimate of $36.29 per barrel—which represented 85 percent of the underestimate for fiscal year 2012.\nFigure 3 compares the actual price DLA paid for fuel with the standard price DOD used to calculate its budget estimates.\nOf the three components that constitute the standard price, crude oil prices and refinement markup costs accounted for most of the difference between the estimated standard price and actual fuel costs during fiscal years 2009 through 2013. In fiscal years 2009 and 2010, differences in the price of crude oil accounted for most of the difference between the estimated and actual prices—in 2009 for 95 percent of the difference and in 2010 for 72 percent. However, during fiscal years 2011 through 2013, the refinement markup became the main driver of the difference, accounting for between 65 and 79 percent of the difference, as shown in table 2.\nFor fiscal years 2009 through 2012, DOD added a markup of 30 percent over the price of WTI to account for refinement costs in setting the standard price. According to DOD officials, the 30 percent markup over the WTI crude oil price had been a generally accurate predictive indicator for the price of DOD’s actual refined fuel costs. However, in fiscal year 2011, actual fuel costs exceeded the price of WTI by an average of 49 percent and in 2012 by an average of 60 percent. Therefore, DOD set the refinement markup too low in those years. According to DOD officials, to account for these differences, DOD increased the markup for refinement costs from 30 percent to 50 percent of the WTI price when developing the standard price for fiscal year 2013.\nAlthough fluctuations in fuel prices were, on average, the primary driver of the differences between estimated and actual fuel costs in fiscal years 2009 through 2013, differences between the services’ estimated and actual fuel consumption levels also contributed to the overall difference. These differences accounted for, on average, 26 percent of the difference between DOD’s estimated and actual fuel costs. In fiscal years 2009 through 2012, the military services’ estimated fuel requirements were within 5 percent of their actual consumption, as shown in figure 4. However, in fiscal year 2013, we found that differences between estimated and actual fuel consumption levels became the main driver of the total difference between estimated and actual fuel costs. In that year, DOD underestimated the cost of fuel but overestimated its consumption by approximately 19 million barrels, or 17 percent. According to DOD officials, actual consumption was much lower as a result of actions DOD took to address sequestration. In November 2013, we reported that for fiscal year 2013, DOD’s Operation and Maintenance accounts were reduced by approximately $20 billion, or 7.2 percent, due to sequestration reductions. We identified several actions DOD took to address these budgetary reductions. For example, in fiscal year 2013, the Air Force initially ceased flight operations from April through June for about one- third of active-duty combat Air Force units. Also, the Army curtailed training for all units except those deployed, preparing to deploy, or stationed overseas, and the Navy limited flight training for nondeploying units.", "DOD has taken actions to manage fluctuations in the cash balance of the Defense-wide Working Capital Fund caused by differences between its estimated and actual fuel costs. These actions included transferring funds into the Defense-wide Working Capital Fund from other accounts and adjusting the standard price DOD charged to its fuel customers.", "The Defense-wide Working Capital Fund provides the cash balance that is used to fund the day-to-day operations for six defense-wide activity groups, including DLA Energy, which provides, among other things, worldwide energy support to the military services and other authorized customers for bulk fuel purchasing, transportation, and storage. According to a DOD report, the volatility of fuel prices has historically posed a challenge to managing the cash balance of the fund. When DLA pays more or less for fuel than the standard price it charges its customers, the cash balance in the Defense-wide Working Capital Fund will go down or up. For instance, if fuel market prices rise significantly relative to the standard price, the cash balance in the fund will go down. On the other hand, if fuel market prices decrease relative to the standard price, the fund will generate excess cash and the balance will go up. In fiscal years 2009 through 2013, the fluctuations in the cash balance of the Defense-wide Working Capital Fund were partially driven by these net outlays for fuel, as shown in figure 5.", "The Defense-wide Working Capital Fund is intended to provide DOD with the flexibility to absorb some fluctuation in fuel prices. However, in some instances, DOD has sought to manage the fluctuations in the fund’s cash balance by transferring money into or out of the fund or by adjusting its standard price. For example, in fiscal years 2012 and 2013, DOD transferred funds into the Defense-wide Working Capital Fund. In 2012, DOD transferred $1 billion into the fund from the Afghanistan Security Forces Fund and in 2013 another $1.4 billion from various accounts, including the Foreign Currency Fluctuations account, to mitigate the cash shortfall caused by an increase in fuel costs over the standard price. DOD also transferred cash out of the fund during the period of our review. Specifically, in fiscal year 2011, Congress reduced funding for several DOD operation and maintenance accounts by about $2 billion to reflect excess cash balances in the Defense-wide Working Capital Fund. In response, DOD transferred almost $1.3 billion out of the Defense-wide Working Capital Fund to fund the reduced operation and maintenance accounts. We found that these transfers into or out of the fund can affect adjustments to the standard price. For example, according to DOD officials, the fiscal year 2013 transfer allowed DOD to maintain the same standard price throughout that year even though actual fuel costs exceeded the standard price. A DOD study noted that the fiscal year 2011 transfer out of the fund required DOD to increase its standard price by almost $40 per barrel because the cash balance in the Defense-wide Working Capital Fund was no longer sufficient to mitigate the increased costs of fuel in that year.\nDOD also used changes to the standard price to manage the cash balance in the Defense-wide Working Capital Fund. From the beginning of fiscal year 2009 through end of fiscal year 2013, DOD adjusted its standard price 13 times—increasing it 6 times and decreasing it 7 times. According to DOD, these price changes were due to changing product costs, approved transfers, and the availability of cash balances in the fund. For example, the fiscal year 2012 President’s Budget estimated a standard price of $131.04. However, in October 2011, DOD raised the standard price to $165.90. It then lowered the price to $160.44 in January 2012, to $151.20 in June 2012 and finally to $97.02 in July 2012, where the price remained for the rest of the fiscal year. Figure 6 shows the transfers and standard prices during fiscal years 2009 through 2013 and the cash balances in the Defense-wide Working Capital Fund.\nStandard price adjustments affect the military services. According to DOD officials, an adjustment to the standard price is not their preferred option for managing the fund’s cash balances because of the potential strain it places on the services’ budgets. For example, a Navy official told us that when the standard price is increased, the Navy must either reduce consumption by curtailing training or request additional funding. Fiscal year 2013 was the first year since 2004 during which DOD maintained its standard price for the entire year.", "DOD has studied various aspects of its bulk fuel program since 2004, but it has not updated its current approach for setting the standard price to reflect current market conditions or documented its rationale for the assumptions it uses in estimating the standard price—even though the differences between its estimated and actual costs have been considerable since that time.", "Since 2004, DOD has completed a number of studies reviewing various aspects of its bulk fuel program, including studies of its management of working capital funds. We identified six studies related to DOD bulk fuel pricing and management of the Defense-wide Working Capital Fund. See appendix II for a description of the purpose of the studies and any identified findings, including the status on any proposed recommendations.\nThe John Warner National Defense Authorization Act for Fiscal Year 2007 required the Secretary of Defense to submit a report on fuel rate and the cost projections used in the DOD budget presentation. In response, DOD completed a study in February 2007 that compared the crude oil forecast provided by OMB with crude oil forecasts developed by the Department of Energy and 38 private forecasting companies. Based on its analysis, DOD elected to maintain its current approach—using OMB’s WTI forecast as its preferred baseline—because the study concluded that OMB’s forecasts were comparable to or better at estimating the actual crude oil price than the alternative forecasts it evaluated.\nMore recently, in January 2012, in response to the Ike Skelton National Defense Authorization Act for Fiscal Year 2011, the Office of the Under Secretary of Defense (Comptroller) reviewed alternatives for managing the balances of the Defense-wide Working Capital Fund. The study found that fuel cost volatility poses a major threat to the fund’s solvency. As a result, the study concluded that DOD may need to request funding transfers that could disrupt investment programs or threaten readiness. The study recommended two alternatives for managing working capital funds. The first would allow DOD to transfer expiring unobligated balances from other appropriation accounts into the fund to build a cash reserve. The study noted that this alternative is similar to authorities provided to other federal agencies’ working capital funds, but that it would require statutory authorization. The second alternative would allow the fund to accumulate and reserve funds in times of positive cash flow—up to $12.5 billion, or two times the largest cash shortfall on record. The Office of the Under Secretary of Defense (Comptroller) identified several concerns with this alternative. For example, according to the study, DOD would need congressional authorization to accumulate positive operating results. Additionally, the study noted that maintaining a large cash balance in the fund to mitigate potential price risk is not a productive use of resources. According to DOD officials, DOD’s Financial Management Regulation is currently being updated with an estimated issuance of summer 2014 to allow for greater flexibility in developing cash balance targets for the Defense-wide Working Capital Fund.\nThe 2012 study also listed other alternatives for managing working capital fund balances, which it did not recommend due to certain limitations, risks, and costs. These included some alternatives that had previously been studied and recommended by the Defense Business Board. For example, the Defense Business Board had previously studied the feasibility of hedging fuel on the open market, which includes purchasing financial instruments to minimize risk in future prices. However, according to the study, DOD has elected not to pursue hedging for a number of reasons including that it is outside of DOD’s current authority, would incur management fees that would increase total costs, and poses additional political and economic risk. The 2012 study also rejected the Defense Business Board’s recommendations to implement firm-fixed- price fuel contracts and to partner with the Department of the Interior to access additional funds when fuel costs increase. The study noted that firm-fixed-price contracts would shift pricing risk to the supplier, which would be likely to result in DOD paying a premium for the contracts.", "According to GAO’s Cost Estimating and Assessment Guide, a cost estimate should be updated regularly to reflect significant changes—such as changes to assumptions—and actual costs, so that it always reflects current conditions. Also, according to the guide, major assumptions should be assessed to determine how sensitive they are to changes, and risk and uncertainty analysis should be performed to determine the level of risk associated with the estimate. Further, OMB guidance states that agencies should consider the effect that demographic, economic, or other changes can have on assumptions for program levels beyond the budget year. However, the assumptions that DOD uses for setting the crude oil component of the standard price do not reflect current market conditions. Specifically, DOD’s assumptions do not consider (1) differences between crude oil benchmarks, (2) differences between domestic and international crude oil prices, and (3) the decreasing relationship between crude oil and refined prices.\nDOD’s approach for establishing the standard price has not accounted for changes in market conditions for crude oil. As discussed earlier in this report, DOD’s process of adding a refinement markup to the price of WTI in setting the standard price has resulted in estimated fuel costs that have been considerably lower than actual fuel costs. We found that, from fiscal years 2010 through 2013, the price for WTI diverged from other crude oil pricing benchmarks. According to a report from the Energy Information Administration, WTI was selling during this period for less than other crude oil pricing benchmarks, such as Brent—a commonly used crude oil benchmark. The price spread between WTI and Brent reached a high of $27 per barrel in September 2011, as shown in figure 7. Energy Information Administration officials also told us that, although the price spread between Brent and WTI has narrowed recently, they believe that the relationship between the pricing of Brent and WTI may remain volatile and that a price spread between the two benchmarks will likely continue. In its April 2014 Short-Term Energy Outlook, the Energy Information Administration estimates that in calendar year 2015 the price of WTI will be about $11 per barrel less than the price of Brent.\nRecognizing this market change, other federal agencies have adjusted their crude oil benchmarks for estimating energy prices because of this price spread. For example, in its 2013 Annual Energy Outlook, the Energy Information Administration shifted from WTI to Brent for estimating energy prices. According to officials from the Energy Information Administration, Brent crude oil prices have become the primary international crude oil benchmark. Furthermore, these officials noted that worldwide petroleum product prices—including in the United States—are typically based on Brent prices. This is consistent with DLA’s analysis, which found that domestic refined fuel products are more closely related with Brent than with WTI prices.\nOMB has also accounted for other crude oil benchmarks in its annual economic assumptions that are provided to federal agencies for budgeting purposes. According to officials from DOD and OMB, beginning with the fiscal year 2014 budget cycle, OMB began providing DOD and other federal agencies with forecasted Brent prices in addition to WTI prices. OMB officials told us that although OMB Circular A-11 requires that federal agencies’ budget estimates be consistent with OMB’s economic assumptions, DOD has discretion over which economic assumptions, such as an appropriate crude oil benchmark, to apply in developing its bulk fuel estimates.\nWe identified other market conditions that DOD has not accounted for with its current approach to determining the crude oil component of the standard price. For example, DLA purchases about half of its fuel from overseas refiners. From fiscal years 2009 through 2013, DLA purchased, on average, 48 percent of its fuel from overseas sources. However, WTI is a pricing benchmark only for domestic crude oil. Because DOD uses WTI, its baseline for setting the standard price does not account for any potential price differences between domestic and overseas purchases. Furthermore, officials at DOD also expressed concerns that crude oil may no longer be a good indicator for refined product prices. According to an official from the Office of the Under Secretary of Defense (Comptroller), in recent years the relationship between crude oil prices and the price of DOD refined products has not been as closely related as it has in the past. This is consistent with our own analysis. Specifically, for fiscal years 2009 through 2013 we compared the actual price DLA paid for fuel with the actual price of other fuel products—including WTI crude oil, Brent crude oil, and commercial jet fuel—to determine the relationship among these prices. Based on our analysis of data from the Energy Information Administration, we found that in each year the prices DLA paid for fuel had a closer relationship with commercial jet fuel prices than with either WTI or Brent crude oil prices.\nTo compensate for the limitations in its crude oil baseline, DOD has adjusted other components of its standard price. For example, as discussed earlier in this report, beginning in fiscal year 2013, DOD increased the refinement markup component of the standard price from 30 percent to 50 percent to account for the divergence between WTI and other crude oil pricing benchmarks. DOD has continued to use the 50 percent refinement markup in setting its standard price for fiscal years 2014 and 2015. This practice means that DOD is using the markup not only to account for refinement costs, but to cover the price spread between WTI and other crude oil pricing benchmarks. By using the increased refinement markup to compensate for the price spread, DOD is not addressing the underlying limitations with its crude oil baseline.\nRather, DOD is adding further risk and uncertainty concerning its estimate, because the estimate must now account for additional price variables.\nEven though in recent years its methodology has been producing estimates that differ significantly from actual costs, DOD has not reevaluated its approach or documented the rationale behind the assumptions it uses for setting the standard price. DOD’s 2007 study found that its forecasting methodology produced results as good as or better than the forecasting models the study compared it with. However, that study focused exclusively on the crude oil component of the standard price. It did not evaluate the accuracy of the standard price methodology as a whole against other potential approaches. Moreover, since that time, DOD has not reevaluated whether using WTI as its baseline assumption—with the corresponding refinement markup—is still appropriate given recent market changes. Further, DOD has not considered whether a crude oil baseline is still reasonable at all. Officials from the Office of the Under Secretary of Defense (Comptroller) told us that they have held internal discussions regarding changing the crude oil pricing baseline used in the standard price, but no final decision has been made.\nFurthermore, DOD has not fully documented its rationale and assumptions for establishing each component of the standard price. GAO’s Cost Estimating and Assessment Guide states that a cost estimate should be supported by detailed documentation that describes how it was derived. According to the guide, the documentation should include, among other things, the estimating methodology used to derive the costs for each element of the cost estimate, and it should also discuss any limitations of the data or assumptions. Further, a well-documented methodology allows decision makers to understand and evaluate the budget request and make proper determinations. According to an official from the Office of the Under Secretary of Defense (Comptroller) responsible for overseeing DOD’s bulk fuel program, DOD’s Financial Management Regulation provides overarching guidance on establishing prices for working capital fund products, including fuel. Specifically, the Financial Management Regulation provides that all business areas of the fund are required to set their prices based upon full cost recovery, including general and administrative support provided by others. This official noted that DOD’s process for setting the standard price is based on this full cost recovery, as described in specific guidance in the Financial Management Regulation. Additionally, federal guidance also governs aspects of the rate-setting process. For example, OMB’s A-11 Circular requires DOD’s budget estimates for fuel to be consistent with OMB’s economic assumptions. For this reason the official stated that the establishment of a more specific methodology could be potentially redundant to the existing process, and could add additional administrative hurdles that may not add value.\nHowever, while DOD’s Financial Management Regulation provides overall principles for working capital funds, it does not require DOD to document its methodology for setting the standard price in a step-by-step process. Therefore, DOD does not have detailed documentation that describes the rationale for the assumptions it uses. For example, DOD has not documented its rationale for continuing to select WTI as a crude oil benchmark in establishing the standard price although OMB now provides more than WTI crude oil forecasts in its economic assumptions. Also, according to the Office of the Under Secretary of Defense (Comptroller) official, DOD determines its refinement markup to account for the fact that DLA purchases refined product and does not buy crude oil and that this factor is developed based on current commodity market experience balanced against DOD priorities. However, DOD has not documented its rationale or assumptions for determining these trade-offs. Reevaluating its approach for estimating the components of the standard price would allow DOD to develop more informed estimates and better position DOD to minimize risks and uncertainty resulting from changing market conditions. Further, documenting the rationale for its assumptions would provide greater transparency and clarify for fuel customers and decision makers the process DOD uses to set the standard price.", "DOD has faced challenges in setting a standard price that closely approximates its actual fuel costs, and in recent years its estimated fuel prices have differed considerably from its actual costs. Actual prices have differed from DOD’s estimates largely because changes in fuel market conditions have not been reflected in the standard price. Additionally, DOD has not documented its rationale for continuing to use the same assumptions. The Defense-wide Working Capital Fund, designed to absorb the effects of price fluctuations, has been insufficient to absorb the significant net outlays for fuel. This has led to large transfers into the fund from other DOD accounts and adjustments to the standard price DOD charges to customers—disrupting other DOD programs and straining the military services’ budgets. Despite the recurring need for these transfers and price adjustments, DOD has not reevaluated its approach to setting the standard price since 2007. Until DOD has reevaluated its approach and documented its assumptions for setting the standard price, it may not be certain that its price reflects current conditions.", "To improve DOD’s process for setting its standard fuel price, we recommend that the Secretary of Defense direct the Office of the Under Secretary of Defense (Comptroller), in coordination with the Defense Logistics Agency (DLA), to take the following two actions: reevaluate the approach for estimating the components of the standard price and document its assumptions, including providing detailed rationale for how it estimates each of these components.", "We provided a draft of this report to DOD, OMB, and the Energy Information Administration for review and comment. DOD provided written comments, which are summarized below and reprinted in appendix III. In its comments, DOD concurred with the first recommendation and partially concurred with the second recommendation. OMB and the Energy Information Administration did not provide comments on the draft report.\nDOD concurred with the first recommendation that the Secretary of Defense direct the Under Secretary of Defense (Comptroller), in coordination with DLA, to reevaluate DOD’s approach for estimating the components of the standard price. In its comments, DOD stated that this is an ongoing effort within the department and that the Office of the Under Secretary of Defense (Comptroller) and DLA are continually evaluating methods to better estimate the price of fuel. DOD stated that this is a challenge because the rate-setting process takes place a budget cycle in advance of execution. DOD noted that fuel-market volatility affects the Working Capital Fund’s ability to budget for, and customers’ ability to buy, fuel at a stabilized price. Additionally, in its comments, DOD stated that the department does not have the storage capacity to hold a year’s worth of fuel in advance, so fuel is purchased in real time throughout the execution year and sold at a price set 18 months prior. We agree that the rate-setting process is challenging, given the timing of DOD’s budget process and when the department actually purchases fuel. However, as stated in the report, DOD’s current approach for establishing the standard price has not accounted for changes in market conditions for crude oil, such as the decreasing relationship between crude oil and refined prices, even though its methodology has been producing estimates that differ greatly from actual costs. Although DOD noted in its comments that it is continually evaluating methods to better estimate the price of fuel, it did not specify any specific initiatives to that end. Moreover, the report did not identify any studies that DOD has undertaken since 2004 that constitute a reevaluation of the department’s approach for estimating the components of the standard price. Reevaluating its approach for estimating the components of the standard price would allow DOD to develop more- informed estimates and better position the department to minimize risks and uncertainty resulting from changing market conditions.\nDOD partially concurred with the second recommendation that the Secretary of Defense direct the Under Secretary of Defense (Comptroller), in coordination with DLA, to document its assumptions, including providing a detailed rationale for how it estimates each of the standard price components. In its comments, DOD stated that the department does not have a “documented” specific, step-by-step process to develop the fuel price. DOD further stated that it prices fuel by using a formal process that has been presented to the department’s leadership, briefed to congressional staffers, discussed with the administration, and reproduced in various instructional and informational briefings and papers. In its comments, DOD stated that the process for setting the fuel price is similar to other Working Capital Fund products and follows the intent of DOD’s Financial Management Regulation and congressional implementing language for full cost recovery. We stated in the report that DOD’s Financial Management Regulation provides overall principles for working capital funds, but it does not require DOD to document its methodology for setting the standard price in a step-by-step process. Therefore, DOD does not have detailed documentation that describes the rationale for the assumptions it uses, such as its rationale for selecting one crude oil benchmark over another benchmark or the factors and other tradeoffs that it considers when establishing the refinement markup. GAO’s Cost Estimating and Assessment Guide states that a cost estimate should be supported by detailed documentation that describes how it was derived. According to the guide, the documentation should include, among other things, the estimating methodology used to derive the costs for each element of the cost estimate, and it should also discuss any limitations of the data or assumptions. Documenting DOD’s assumptions, including the rationale for each component of the standard price, would provide greater transparency and clarify for fuel customers and decision makers the process DOD uses to set the standard price.\nWe are sending copies of this report to appropriate congressional committees and the Secretary of Defense; the Under Secretary of Defense (Comptroller); the Director of DLA; the Director of OMB; and the Administrator of the Energy Information Administration. In addition, this report is available at no charge on GAO’s website at http://www.gao.gov.\nIf you or your staff have questions about this report, please contact Cary Russell at (202) 512-5431 or [email protected], or Asif A. Khan at (202) 512-9869 or [email protected]. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributors to this report are listed in appendix IV.", "To address our objectives, we focused our analysis on fiscal years 2009 through 2013. We focused on these years because this period covered the most recent complete year of the Department of Defense’s (DOD) fuel sales and provided 5 years of cost data to analyze any trends. To determine how estimated bulk fuel costs have compared with actual costs since fiscal year 2009 and identify the factors that contributed to any differences, we compared the estimated budget costs for fuel against actual costs in the budget year of execution and identified any differences. We calculated DOD’s estimated fuel costs by multiplying the standard price per barrel by the number of barrels the military services estimated they would consume. To calculate DOD’s actual fuel costs, we multiplied the actual purchase price per barrel by the number of barrels sold to the military services. We then determined which factors contributed to the overall differences. Specifically, we calculated the percentage of the overall difference explained by either fuel price fluctuations or differences between estimated fuel consumption and actual consumption. Next, we compared each of the three components of the standard price (crude oil price, refinement markup, and nonproduct costs—such as transportation and facilities maintenance) against the actual costs for each component to determine which one contributed most to the difference between the standard price and actual fuel costs. We also interviewed officials from the Office of the Under Secretary of Defense (Comptroller), the Defense Logistics Agency (DLA), the military services, and the Department of Energy’s Energy Information Administration to discuss the factors that contributed to these differences.\nTo determine the extent to which DOD has taken actions to manage the effect of any differences between estimated and actual fuel costs, we reviewed monthly cash balances in the Defense-wide Working Capital Fund for the period October 2008 through September 2013 and determined the effect of bulk fuel purchases and sales on those balances. In doing so, we determined net outlays from the Defense-wide Working Capital Fund and compared them with the cash balance in the fund. We analyzed DOD financial management documents for this same period to determine the number and amount of approved transfer actions related to fuel into and out of the Defense-wide Working Capital Fund and any fuel- related supplemental appropriations received into the fund. In addition, we analyzed DOD budget-justification materials and other documentation to identify all changes to DOD’s standard price. We also interviewed officials from DOD and the military services to determine the effect on the services’ budgets of transfers and changes to the standard price.\nTo determine the extent to which DOD has considered options for adjusting its approach for estimating bulk fuel costs and managing working capital funds, we reviewed related studies and recommendations that we identified through interviews with DOD officials and literature searches that discuss options available to DOD to adjust its approach to managing bulk fuel costs and working capital funds. For this review we focused on relevant studies that have been conducted since 2004. We interviewed DOD officials to determine the status of any findings and recommendations from these studies related to DOD’s bulk fuel pricing or management of the Defense-wide Working Capital Fund. We also reviewed documentation that describes DOD’s current approach for estimating bulk fuel costs, including budget-justification materials and DOD reports, and discussed the department’s approach with officials from the Office of the Under Secretary of Defense (Comptroller), DLA, and the Office of Management and Budget. We compared this information with cost-estimating practices established in GAO’s Cost Estimating and Assessment Guide and Office of Management and Budget and DOD guidance. We also interviewed officials from DOD, the Office of Management and Budget, and the Department of Energy to discuss current fuel market conditions and alternative approaches to estimating bulk fuel costs and reviewed Department of Energy reports describing current fuel market conditions. To better understand the fuel market conditions, we reviewed DLA fuel purchase data for fiscal years 2009 through 2013 and compared the amount of domestic fuel purchases with the amount of international fuel purchases. We also performed analysis on the relationship of the West Texas Intermediate (WTI) crude oil benchmark with other crude oil pricing benchmarks to determine whether DOD’s approach to setting its standard price reflects current market conditions. Further, we conducted an analysis on the relationship of crude oil prices with refined product costs, including the cost of commercial jet fuel.\nTo determine the reliability of the fuel cost data provided to us by DOD, we obtained information on how the data were collected, managed, and used through interviews with and questionnaires to relevant officials. We assessed the reliability of the data collected by analyzing questionnaire responses from Office of the Under Secretary of Defense (Comptroller) and DLA officials, which included information on their data system management, data quality-assurance processes, and potential sources of errors and mitigations of those errors. To determine the reliability of monthly cash balances in the Defense-wide Working Capital Fund, we (1) obtained and analyzed reports containing detailed data on transactions affecting the Working Capital Fund cash balance including collections, disbursements, direct appropriations to the fund, and funds transferred into and out of the fund; (2) reconciled year-end cash balances between DOD reports and Department of the Treasury records; and (3) obtained and analyzed documentation supporting the amount of funds transferred in and out of the Working Capital Fund. To determine the reliability of DLA fuel purchase data, we compared DLA domestic and international fuel purchases against fuel purchase data provided in DOD’s budget- justification materials. To determine the reliability of the Energy Information Administration’s data on Brent, WTI, and commercial jet fuel prices, we reviewed information on its methodology and data quality guidelines in accordance with GAO guidance on assessing data from federal statistical databases. Based on our review of the data, we determined that the data presented in our findings were sufficiently reliable for the purposes of this report.\nWe interviewed officials, and where appropriate obtained documentation, at the following DOD locations:\nOffice of the Under Secretary of Defense (Comptroller);\nOffice of the Assistant Secretary of Defense for Operational Energy\nDefense Logistics Agency, Energy Management Activity Group;\nAir Force Petroleum Agency;\nOffice of the Secretary of the Air Force, Financial Management and\nArmy Petroleum Center;\nNaval Supply Systems Command; and\nHeadquarters, Marine Corps, Programs and Resources, Operations and Maintenance Budget Formulations Branch.\nWe also interviewed other officials from the following federal agencies and other organizations:\nOffice of Management and Budget;\nDepartment of Energy, Energy Information Administration; and\nInstitute for Defense Analyses.\nWe conducted this performance audit from November 2013 to July 2014, 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.", "This appendix contains a list of six studies conducted since 2004 on the Department of Defense’s (DOD) bulk fuel pricing and management of the Defense-wide Working Capital Fund. Table 3 provides information on each study’s name and purpose, as well as any findings and recommendations, and DOD’s response to the recommendations or status of their implementation. Some of the studies listed below included information outside the scope of our review; however, we have only included findings and recommendations related to DOD’s bulk fuel pricing or management of the Defense-wide Working Capital Fund.", "", "", "", "In addition to the contacts named above, Gregory Pugnetti, Assistant Director; Matthew Ullengren, Assistant Director; Pedro Almoguera; Russell Bryan; Virginia Chanley; Stephen Donahue; Adam Hatton; Joanne Landesman; Amie Steele; and Michael Willems made key contributions to this report." ], "depth": [ 1, 1, 2, 2, 1, 2, 2, 1, 2, 2, 1, 1, 1, 1, 1, 1, 1, 2, 2 ], "alignment": [ "h1_full", "", "", "", "h1_full", "", "", "h0_full", "h0_full", "h0_full", "", "", "h0_full", "h2_full", "", "", "", "", "" ] }
{ "question": [ "Why has the DOD conducted reviews on its bulk fuel program?", "What have these reviews omitted?", "What does GAO state about cost estimates?", "How will reevaluating its approach help DOD?", "What is DOD's fuel practice?", "How does DOD set its fuel price?", "What may occur if this price is different than the standard price?", "What did Senate Report 113-44 mandate?", "What is specifically discussed by the report?", "How did GAO conduct its analysis?" ], "summary": [ "Since 2004, DOD has conducted reviews of aspects of its bulk fuel program to determine whether adjustments should be made, including managing acquisition strategies, managing working capital funds, and budgeting for cost fluctuations.", "However, it has not updated its approach to reflect current market conditions or documented its rationale for the assumptions it uses in estimating the standard price.", "GAO's Cost Estimating and Assessment Guide and Office of Management and Budget guidance state that a cost estimate should be updated regularly to reflect changes to assumptions and actual costs, so that it always reflects current conditions. Furthermore, cost estimates should be supported by detailed documentation that describes how they were derived.", "Reevaluating its approach for estimating the standard price would allow DOD to develop more informed estimates and better position it to minimize risks and uncertainty resulting from changing market conditions. Further, documenting the rationale for its assumptions would provide greater transparency and clarify for fuel customers and decision makers the process DOD uses to set the standard price.", "DOD purchases bulk fuel and sells it to customers, including the military services.", "Each fiscal year, DOD sets a standard price for budgeting purposes, endeavoring to closely approximate the price it will pay when it buys the fuel almost a year later.", "If this price is different than the standard price, DOD may need to take actions to manage its working capital funds—funds used to purchase fuel and other commodities that are reimbursed through sales.", "Senate Report 113-44, accompanying a bill for the National Defense Authorization Act for FY 2014, mandated GAO to review DOD's approach for establishing its bulk fuel pricing.", "This report discusses, among other things, (1) how estimated bulk fuel costs have compared to actual costs since FY 2009 and the factors that have contributed to any differences; and (2) the extent to which DOD has considered options for adjusting its approach to estimating bulk fuel costs and managing working capital funds in light of any differences between estimated and actual fuel costs.", "GAO compared estimated and actual fuel costs for FY 2009 through 2013 and analyzed DOD actions to manage working capital funds." ], "parent_pair_index": [ -1, 0, -1, -1, -1, 0, 1, -1, -1, -1 ], "summary_paragraph_index": [ 3, 3, 3, 3, 0, 0, 0, 1, 1, 1 ] }
CRS_R45414
{ "title": [ "", "Introduction", "Expanded Drug Access: FDA Authority and Policy Before the Right to Try Act", "What Is FDA's Standard Drug Approval Procedure?", "How Does FDA Regulate Individual IND Applications?", "Expanded Drug Access: Obstacles", "FDA-Related Issues", "Difficult Process to Request FDA Permission", "FDA as Gatekeeper", "Manufacturer-Related Issues", "Available Supply", "Liability", "Limited Staff and Facility Resources", "Data for Assessing Safety and Effectiveness", "Disclosure", "Federal Legislation Before the Right to Try Act", "The Trickett Wendler, Frank Mongiello, Jordan McLinn, and Matthew Bellina Right to Try Act of 2017 (S. 204, P.L. 115-176)", "Provisions in the Right to Try Act", "Discussion of Selected Provisions in the Right to Try Act", "Eligible Patients", "Informed Consent", "Data to FDA", "Clinical Outcomes", "Adverse Events", "Financial Cost to Patient", "Liability Protections", "Concluding Comments" ], "paragraphs": [ "", "The Trickett Wendler, Frank Mongiello, Jordan McLinn, and Matthew Bellina Right to Try (RTT) Act of 2017 became federal law on May 30, 2018. Over the preceding five years, 40 states had enacted related legislation. The goal was to allow individuals with imminently life-threatening diseases or conditions to seek access to investigational drugs without the step of procuring permission from the Food and Drug Administration (FDA). Another goal—held by the Goldwater Institute, which led the initiative toward state bills, and some of the legislative proponents—was focused more on the process: to eliminate government's role in an individual's choice.\nThe effort to publicize the issue and press for a federal solution involved highlighting the poignant situations of individuals who sought access. For example, in March 2014, millions of Americans heard about the plight of a seven-year-old boy with cancer. He was battling an infection no antibiotic had been able to tame. His physicians thought an experimental drug might help.\nBecause the Food and Drug Administration (FDA) had not yet approved that experimental drug, it was not available in pharmacies. But FDA did have the authority to permit the use of an unapproved drug in certain circumstances—a process referred to as expanded access or compassionate use . For FDA to grant that permission, however, the manufacturer must have agreed to provide the drug. The manufacturer, which was still testing the drug that the boy sought, declined.\nOther stories often pointed toward FDA as an obstacle. Until FDA approves a drug or licenses a biologic, the manufacturer cannot put it on the U.S. market.\nDuring this time, Congress faced pressure to act, encouraged by the Goldwater Institute, which framed the issue as one of individual freedom—a right to try. The institute, which news accounts frequently refer to as a libertarian think tank, circulated model legislation. The bill's preface describes its scope:\nA bill to authorize access to and use of experimental treatments for patients with an advanced illness; to establish conditions for use of experimental treatment; to prohibit sanctions of health care providers solely for recommending or providing experimental treatment; to clarify duties of a health insurer with regard to experimental treatment authorized under this act; to prohibit certain actions by state officials, employees, and agents; and to restrict certain causes of action arising from experimental treatment.\nAfter 33 states enacted legislation reflecting the Goldwater Institute-provided model bill, in January 2017, legislators introduced a bill ( S. 204 ) designed to address the issue. Their Trickett Wendler, Frank Mongiello, Jordan McLinn, and Matthew Bellina Right to Try Act of 2017—named for several individuals facing amyotrophic lateral sclerosis (ALS, Lou Gehrig's disease) or Duchenne muscular dystrophy—sought to remove what proponents saw as FDA obstacles to patient access.\nOn May 30, 2018, President Trump signed the bill into law ( P.L. 115-176 ).\nThis report discusses\nFDA's expanded access program, which many refer to as the compassionate use program, through which FDA allows manufacturers to provide to patients investigational drugs—drugs that have not completed clinical trials to test their safety and effectiveness; obstacles—perceived as the result of FDA or manufacturer decisions—to individuals' access to experimental drugs; a summary of the provisions in the Right to Try (RTT) Act and how they are meant to ease those obstacles; a discussion of selected provisions in the RTT Act and what questions remain unresolved; and comments about the broader implications of the RTT Act.", "", "In general, a manufacturer may not sell a drug or vaccine in the United States until FDA has reviewed and approved its marketing application. That application for a new drug or biologic includes data from clinical trials as evidence of the product's safety and effectiveness for its stated purpose(s).\nAfter laboratory and animal studies have identified a potential drug or vaccine, a sponsor, usually the manufacturer, may submit an investigational new drug (IND) application to FDA. With FDA permission, the sponsor may then start the first of three major phases of clinical—human—trials. ( Figure 1 illustrates the general path of a pharmaceutical product.)\nOnce the IND application is approved, researchers test in a small number of human volunteers the safety they had previously demonstrated in animals. These trials, called Phase I clinical trials, attempt \"to determine dosing, document how a drug is metabolized and excreted, and identify acute side effects.\" If a sponsor considers the product still worthy of investment based on the results of a Phase I trial, it continues with Phase II and Phase III trials. Those trials look for evidence of the product's effectiveness —how well it works for individuals with the particular characteristic, condition, or disease of interest. Phase II is a first attempt at assessing effectiveness and its experience helps to plan the subsequent Phase III clinical trial, which the sponsor designs to be large enough to statistically test for meaningful differences attributable to the drug.\nA manufacturer may distribute a drug or vaccine in the United States only if FDA has (1) approved its new drug application (NDA) or biologics license app lication (BLA) or (2) authorized its use in a clinical trial under an IND. Under standard procedures, individuals outside of the sponsor-run clinical trials do not have access to the investigational new drug. The Federal Food, Drug, and Cosmetic Act (FFDCA), however, permits FDA in certain circumstances to allow access to an unapproved drug or to an approved drug for an unapproved use. One such mechanism is expanded access , commonly referred to as compassionate use , through individual or group INDs.", "The primary route for an individual to obtain an investigational drug is to enroll in a clinical trial testing that new drug. However, an individual may be excluded from the clinical trial because its enrollment is limited to patients with particular characteristics (e.g., in a particular stage of a disease, with or without certain other conditions, or in a specified age range), or because the trial has reached its target enrollment number.\nThrough FDA's expanded access procedure, a person, acting through a licensed physician, may request access to an investigational drug—through either a new IND or a revised protocol to an existing IND—if\na licensed physician determines (1) the patient has \"no comparable or satisfactory alternative therapy available to diagnose, monitor, or treat\" the serious disease or condition; and (2) \"the probable risk to the person from the investigational drug or investigational device is not greater than the probable risk from the disease or condition\"; the Secretary (FDA, by delegation of authority) determines (1) \"that there is sufficient evidence of safety and effectiveness to support the use of the investigational drug\" for this person; and (2) \"that provision of the investigational drug ... will not interfere with the initiation, conduct, or completion of clinical investigations to support marketing approval\"; and \"the sponsor , or clinical investigator, of the investigational drug ... submits\" \"to the Secretary a clinical protocol consistent with the provisions of\" FFDCA Section 505(i) and related regulations.\nFDA makes most expanded access IND and protocol decisions on an individual-case basis. Consistent with the IND process under which the expanded access mechanism falls, it considers the requesting physician as the investigator. The investigator must comply with informed consent and institutional review board (IRB) review of the expanded use. The manufacturer must make required safety reports to FDA. FDA may permit a manufacturer to charge a patient for the investigational drug, but \"only [for] the direct costs of making its investigational drug available\" (i.e., not for development costs or profit).\nExpanded access could apply outside of the clinical trial arena in these situations:\n(1) use in situations when a drug has been withdrawn for safety reasons, but there exists a patient population for whom the benefits of the withdrawn drug continue to outweigh the risks; (2) use of a similar, but unapproved drug (e.g., foreign-approved drug product) to provide treatment during a drug shortage of the approved drug; (3) use of an approved drug where availability is limited by a risk evaluation and mitigation strategy (REMS) for diagnostic, monitoring, or treatment purposes, by patients who cannot obtain the drug under the REMS; or (4) use for other reasons.\nThe widespread use of expanded access is limited by an important factor: whether the manufacturer agrees to provide the drug, which—because it is not FDA-approved—cannot be obtained otherwise. FDA does not have the authority to compel a manufacturer to participate.", "Many highly publicized accounts of specific individuals' struggles with life-threatening conditions and efforts by activists influenced public debate over access. Another development was the model bill circulated in 2014 by the Goldwater Institute. Examples of public attitudes included news accounts of specific individuals' struggles with life-threatening conditions.\nSome found the process of asking FDA for a treatment IND too cumbersome. Others question FDA's right to act as a gatekeeper at all. Some point to manufacturers' refusal to provide their experimental drugs. Most critics, therefore, see solutions as within the control of FDA or pharmaceutical companies.\nThis section lays out key perceived obstacles and issues—both FDA- and manufacturer-related.", "", "Have FDA's procedures discouraged patients and their physicians from seeking treatment INDs? For example: Does FDA ask for so much information that physicians or patients do not begin or complete the application? Does the FDA application process take too much time given the urgent need?\nIn February 2015, FDA issued draft guidance (finalized in June 2016) on individual patient expanded access applications, acknowledging such difficulties. It developed a new form that a physician could use when requesting expanded access for an individual patient. It reduced the amount of information required from the physician by allowing reference (with the sponsor's permission) to the information the sponsor had already submitted to FDA in its IND. When a patient needs emergency treatment before a physician can submit a written request, FDA can authorize expanded access for an individual patient by phone or email, and the physician or sponsor must agree to submit an IND or protocol within 15 working days.\nCoincident with discussions preceding passage of the RTT Act, FDA had commissioned an independent report on its expanded access program. Citing that report, in November 2018, the commissioner announced several actions to improve its program. These include an enhanced webpage to help applicants navigate the application process and establishing an agency-wide Expanded Access Coordinating Committee. Regarding the RTT Act's new pathway to investigational drug access, FDA has established a work group and set up a Right to Try webpage.", "In August 2014, a USA Today editorial called the FDA procedures that patients must follow for compassionate use access \"bureaucratic absurdity,\" \"daunting,\" and \"fatally flawed.\" Echoing much of the criticism that FDA had received regarding the issue, it called for one measure that would \"cut out the FDA, which now has final say.\" The solution the editorial proposed involved what proponents term \"right-to-try\" laws . By January 2018, 3 9 states had passed right to try l aws in the absence of federal legislation. These laws were intended to allow a manufacturer t o provide an investigational drug to a terminally ill patient if the case met certain conditions:\nthe drug has completed Phase I testing and is in a continuing FDA-approved clinical trial; all FDA-approved treatments have been considered; a physician recommends the use of the investigational drug; and the patient provides written informed consent.\nThe state laws account for anticipated obstacles to the new arrangement. For example, they provide that insurers may, but are not required to, cover the investigational treatment, and that state medical boards and state officials may not punish a physician for recommending investigational treatment. The laws vary on the detail required in the informed consent and liability issues of the manufacturer and the patient's estate. However, several experts had suggested that this state law approach is unlikely to directly increase patient access. Before passage of the federal RTT Act, analysts raised questions about how federal law (the FFDCA), which required FDA approval of such arrangements, might preempt this type of state law. With the federal RTT Act now in place, some legal analysts suggest that the issue of federal preemption of state laws \"will likely be determined on a case-by-case basis.\" Second—and also relevant to the federal RTT Act—for a patient who follows FDA procedures, FDA action is not the final obstacle to access. During FY2010 through FY2017, FDA received 10,482 expanded access requests and granted 10,429 (99.5%) of them.\nBefore the passage of the RTT Act, several bills were introduced at the federal level in the 113 th , 114 th , and 115 th Congresses.\nAlthough the stated goal of these laws—allowing seriously ill people to try an experimental drug when other treatments have failed—may be understandable, provisions in the laws may be subject to legal, logistical, ethical, and medical obstacles.\nDo these laws actually increase such access? Provisions in the federal and state right-to-try laws allow certain patients to obtain—without the FDA's permission—an investigational drug that has passed the Phase 1 (safety) clinical trial stage. A key obstacle to patients' obtaining investigational drugs nonetheless remains: FDA does not have \"final say\" because it cannot compel a manufacturer to provide the drug.", "Why would a manufacturer not give its experimental drug to every patient who requests it? The manufacturer faces a complex decision. Certainly profit plays a role: companies think about public relations problems and the opportunity costs of limited staff and facility resources, but companies must also consider the available supply of the drug, liability, safety, and whether adverse event or outcome data will affect FDA's consideration of a new drug application in the future.", "If a manufacturer has only a tiny amount of an experimental drug, that paucity may limit distribution, no matter what the manufacturer would like to do. Sponsors of early clinical research make small amounts of experimental products for use in small Phase I safety trials, and progressively more for Phase II and III trials. Although one or two additional patients may not cause supply problems, a manufacturer does not know how many expanded access requests it will receive. Investment in building up to large-scale production usually comes only after reasonable assurance that the product will get FDA approval. For a company to redirect its current manufacturing capacity involves financial, logistic, and public relations decisions. A solution—though not immediately effective—might be committing additional resources to increase production.", "In discussing expanded access, some manufacturers have raised liability concerns if patients report injury from the investigational products. In the state right-to-try laws, there are some attempts to protect manufacturers or clinicians from state medical practice or tort liability laws. If there are legitimate concerns, Congress could consider acting as it has in past, choosing diverse approaches to protect manufacturers, clinicians, and patients in a variety of situations. Whether these concerns become illustrated by court cases and how any issues may be resolved in future laws are beyond the scope of this discussion.", "Any energy put into setting up and maintaining a compassionate use program could take away from a company's focus on completing clinical trials, preparing an NDA, and launching a product into the market. While this delay would have bottom-line implications, one CEO, in denying expanded access, portrayed the decision as an equity issue, saying, \"We held firm to the ethical standard that, were the drug to be made available, it had to be on an equitable basis, and we couldn't do anything to slow down approval that will help the hundreds or thousands of [individuals].\" Pointing to ways granting expanded access might divert them from research tasks and postpone approval, he said, \"Who are we to make this decision?\"", "By distributing the drug outside a carefully designed clinical trial, it may be difficult, if not impossible, to collect the data that would validly assess safety and effectiveness. Without those data, a manufacturer could be hampered in presenting evidence of safety and effectiveness when applying to FDA for approval or licensure.\nClinical trials are structured to assess the safety of a drug as well as its effectiveness. The trial design may exclude subjects who are so ill from either the disease or condition for which the drug is being tested or another disease or condition. This allows, among other reasons, the analysis of adverse events in the context of the drug and disease of interest. The patients who would seek a drug under a right-to-try pathway are likely to be very ill and likely to experience serious health events. Those events could be a result of the drug or those events could be unrelated. They would present difficulties both scientific and public relations-wise to the manufacturer. A manufacturer would avoid those risks by choosing to not provide a drug outside a clinical trial.", "It is unclear how many people request and are denied expanded access to experimental drugs. This lack of information makes devising solutions to manufacturer-based obstacles difficult. Although FDA reports the number of requests it receives, manufacturers do not (nor does FDA require them to do so). The number of individuals who approach manufacturers is unknown, although some reports suggest that it is much larger than the number of successful requests that then go to FDA. For example, one report indicated that the manufacturer of an investigational immunotherapy drug, which does not have a compassionate use program, received more than 100 requests for it.", "For the past several Congresses, Members have introduced bills with varying approaches to increasing patient access to investigational drugs. Some followed the Goldwater Institute model (to take FDA out of the process) and some proposed requiring manufacturers to publicize their compassionate use policies and decisions or requiring that the Government Accountability Office (GAO) study the patterns of patient requests and manufacturer approvals and denials, barriers to drug sponsors, and barriers in the application process.\nCongress enacted two larger bills that each included sections on expanded access: the 21 st Century Cures Act (Section 3032, P.L. 114-255 ) and the FDA Reauthorization Act of 2017 (Section 610, P.L. 115-52 ).\nIn December 2016, the 21 st Century Cures Act added a new Section 561A to the FFDCA: \"Expanded Access Policy Required for Investigational Drugs.\" It required \"a manufacturer or distributor of an investigational drug to be used for a serious disease or condition to make its policies on evaluating and responding to compassionate use requests publicly available.\" In August 2017, the FDA Reauthorization Act of 2017 amended the date by which a company must post its expanded access policies and required the Secretary to convene a public meeting to discuss clinical trial inclusion and exclusion criteria, issue guidance and a report, issue or revise guidance or regulations to streamline IRB review for individual patient expanded access protocols, and update any relevant forms associated with individual patient expanded access. It also required GAO to report to Congress on individual access to investigational drugs through FDA's expanded access program.", "On January 24, 2017, Senator Johnson introduced S. 204 , the Trickett Wendler Right to Try Act of 2017, and the bill had 43 cosponsors at that time. On August 3, 2017, the Senate Committee on Health, Education, Labor, and Pensions discharged the bill by unanimous consent. The same day, the Senate passed S. 204 , the Trickett Wendler, Frank Mongiello, Jordan McLinn, and Matthew Bellina Right to Try Act with a substantial amendment also by unanimous consent.\nOn March 13, 2018, Representative Fitzpatrick introduced a related bill, H.R. 5247 , the Trickett Wendler, Frank Mongiello, Jordan McLinn, and Matthew Bellina Right to Try Act of 2018, and the bill had 40 cosponsors at that time. On March 21, the House passed the bill (voting 267-149). The House accepted the Senate bill on May 22, 2018 (voting 250-169), and the President signed it into law on May 30, 2018.\nThis section of the report first summarizes the provisions in the Right to Try Act. It then discusses how those provisions address the obstacles described in the previous section.", "The Right to Try Act adds to the FFDCA a new Section 561B, Investigational Drugs for Use by Eligible Patients. It has a separate paragraph that is not linked to an FFDCA section to limit the liability to all entities involved in providing an eligible drug to an eligible patient. It concludes with a \"Sense of the Senate\" section.\nThe new FFDCA Section 561B has several provisions that mirror many steps in FDA's expanded access program. A major difference is that the new section is designed to exist wholly outside the jurisdiction and participation of FDA. These provisions\ndefine an eligible patient as one who (1) has been diagnosed with a life-threatening disease or condition, (2) has exhausted approved treatment options and is unable to participate in a clinical trial involving the eligible investigational drug (as certified by a physician who meets specified criteria), and (3) has given written informed consent regarding the drug to the treating physician; define an eligible investigational drug as an investigational drug (1) for which a Phase 1 clinical trial has been completed, (2) that FDA has not approved or licensed for sale in the United States for any use, (3) that is the subject of a new drug application pending FDA decision or is the subject of an active investigational new drug application being studied for safety and effectiveness in a clinical trial, and (4) for which the manufacturer has not discontinued active development or production and which the FDA has not placed on clinical hold; and exempt use under this section from parts of the FFDCA sections regarding misbranding, certain labeling and directions for use, drug approval, and investigational new drugs regulations;\nThe new FFDCA Section 561B has provisions that had not been necessary when access had been granted under FDA auspices. These provisions\nprohibit the Secretary from using clinical outcome data related to use under this section \"to delay or adversely affect the review or approval of such drug\" unless the Secretary determines its use is \"critical to determining [its] safety,\" at which time the Secretary must provide written notice to the sponsor to include a public health justification, or unless the sponsor requests use of such clinical outcome data; require the sponsor to submit an annual summary to the Secretary to include \"the number of doses supplied, the number of patients treated, the uses for which the drug was made available, and any known serious adverse events\"; and require the Secretary to post an annual summary on the FDA website to include the number of drugs for which (1) the Secretary determined the need to use clinical outcomes in the review or approval of an investigational drug, (2) the sponsor requested that clinical outcomes be used, and (3) the clinical outcomes were not used.\nThe act has an uncodified section titled \"No Liability,\" which does not correspond to actions in FDA's expanded access program. It states that, related to use of a drug under the new FFDCA Section 561B,\n\"no liability in a cause of action shall lie against ... a sponsor or manufacturer; or ... a prescriber, dispenser, or other individual entity ... unless the relevant conduct constitutes reckless or willful misconduct, gross negligence, or an intentional tort under any applicable State law\"; and no liability, also, for a \"determination not to provide access to an eligible investigational drug.\"", "Will the RTT Act result in more patients getting access to investigational drugs? Will it ease hurdles for those who would have gone through FDA's expanded use process? This report discusses several provisions in the RTT Act that Congress could consider as it oversees the law's implementation.", "The RTT Act defines eligibility, in part, as a person diagnosed with a \"life threatening disease or condition.\" That definition differs from many of the state-passed laws, as well as from what FDA preferred: that the definition make clear patients were eligible only if they faced a \"terminal illness.\" The commissioner noted that \"[many] chronic conditions are life-threatening, but medical and behavioral interventions make them manageable.\" Examples of such diseases or conditions are diabetes and heart disease.\nSpeaking in support of right to try bills, supporters told of people facing death who, with no alternatives remaining, would be willing to risk an experimental drug that might even hasten their death. By not limiting eligibility to those at the end of options, the RTT Act could allow people with chronic conditions to take extreme risks rather than live a normal lifespan with treatments now available. Because of the broad eligibility, manufacturers could see a significant increase in requests.\nIf a new Congress revisits the RTT Act, Members might consider the definition and clarify what they want for patients and manufacturers.", "The RTT Act makes it mandatory that before eligible patients receive an investigational drug, they give the treating doctor their informed consent in writing—but it does not define \"informed consent.\"\nOther right-to-try bills, including the House-passed H.R. 5247 , included more specific direction for consent, such as criteria already laid out in 21 CFR Part 50. The new law neither provides nor requires the development of such criteria. It thus may weaken patient protections that FDA's expanded use policy provides. The RTT Act also seems to eliminate the requirement that an IRB review the investigational use of a drug.\nIf Congress decides to revisit RTT, it may seek to create a more explicit informed consent requirement and some outside oversight to reduce the risk to patients either by well-meaning but less knowledgeable physicians or by unscrupulous actors some RTT opponents anticipate.", "Is a drug effective—does it do what it is meant to do? Is a drug safe—do the potential benefits outweigh the potential risks? Neither of these questions can be discussed without data on what happened to those who used the drug.", "It sometimes takes thousands of patients to establish an accurate evaluation of a drug's safety and effectiveness. Researchers exclude from the clinical trial patients who—for reasons other than the drug's efficacy—may not show evident benefit from the drug. Those are the patients who would get access through the RTT pathway.\nThe RTT Act appears to protect the drug sponsor: it prohibits the Secretary from using clinical outcome data related to use under this section \"to delay or adversely affect the review or approval of such drug.\" This might make a sponsor more likely to approve the use of its investigational drug under this RTT pathway. The RTT Act, however, includes an exception. It allows FDA to use those data if the Secretary determines their use is \"critical to determining [the drug's] safety.\" If drug sponsors find that this remains an obstacle to their permitting RTT access to investigational drugs, Congress could work with them, FDA, and patient advocacy groups to devise another approach.", "The RTT Act requires the manufacturer to report once a year to the Secretary, including an account of all serious adverse events that occurred in the preceding 12 months. It does not require immediate reporting of adverse events.\nThis is less than what FDA requires of sponsors of approved and investigational drugs. All must periodically inform FDA of such events—and immediately if the event is \"serious and unexpected.\"\nAn adverse event may not be clearly attributable to a drug. A clustering of such reports, though, could signal FDA that this might be something worth exploring.\nIf Congress were to reconsider the RTT Act, it could explore with stakeholders—FDA, drug sponsors, and physicians and patients who use the RTT pathway—ways to make data available to advance the goal of developing safe and effective drugs while protecting the legitimate business interests of manufacturers and the access of seriously ill individuals to try risky drugs.", "FDA's expanded use process permits a manufacturer to charge a patient for the investigational drug, but \"only [for] the direct costs of making [it] available.\" That means it cannot charge for development costs or to make a profit.\nThe RTT Act does not address what a drug manufacturer may charge such patients. Insurers have not announced whether they would pay for the drug—or pay for doctor office visits or hospital stays associated with its use.\nCongress might examine that question. It might be useful in assessing the effect of the RTT Act to see whether patients could lose coverage for palliative or hospice care because the investigational drug is a potentially curative treatment.", "Manufacturers see liability costs as an obstacle to providing an investigational drug to patients. The no-liability provision in the RTT Act seems to remove that obstacle. It also seems to leave the patient with no legal recourse.\nIn the past, Congress has sometimes tried to protect both recipients and the manufacturer from harm (e.g., the National Childhood Vaccine Injury Act of 1986 and the Smallpox Emergency Personnel Protection Act of 2003). In those cases, where Congress felt the public health benefit to the larger group outweighed the smaller risk to some, the federal government accepted responsibility for compensating injured patients and indemnifying manufacturers from lawsuits. That has not been the motivating force behind the RTT Act.\nDiscussions of earlier versions of RTT liability protections raised concerns that they might not fully protect the manufacturer. As patients begin using drugs under the RTT Act pathway, it is possible that they will test such protections in the courts. This is yet another issue that Congress might pursue.", "What role could Congress play now that the RTT Act is law? It could answer three questions at the core of measuring its effect on FDA, drug manufacturers, and patients.\nFirst: Will more patients get investigational drugs? The RTT Act requires manufacturers to report each year on the number of doses supplied and patients treated as a result of the law. It also reports on what the drugs were used for. It might examine the effect on costs incurred by patients. Over time—and perhaps with requesting other data—Congress could determine whether the law has had the effect its sponsors intended. Second: Has the law removed the obstacles to access to investigational drugs? While the RTT Act achieves proponents' objective of removing the FDA application step in a patient's quest for an investigational drug, it does not address many of the obstacles—such as a limited drug supply or limits on staff and facility resources—that could lead a manufacturer to refuse access to its drugs. And it is not clear whether it sufficiently deals with the obstacles it does address—use of clinical outcomes data and liability protection. The reporting required by the RTT Act was not designed to answer those questions. But Congress could turn to the Government Accountability Office for help. It could also encourage manufacturers, patient advocates, and FDA to collaborate in the search for answers. Third: How will this affect FDA? One news article referred to the RTT Act's \"bizarre twist,\" as FDA must determine its role in implementing a law whose function is to remove FDA from the situation. Commissioner of Food and Drugs Gottlieb and Senator Johnson, the sponsor of the Senate bill, have exchanged statements that potentially foretell conflict if FDA issues rules that would limit the law's scope. Finally, is the RTT Act a harbinger of reduced authority for FDA? Writing in opposition to the bill, four former FDA commissioners warned that it would \"create a dangerous precedent that would erode protections for vulnerable patients.\" That is something future Congresses may choose to address. By trying to help one set of ill patients, does Congress wear down the health of the institution meant to protect the public's health?\nThe RTT Act concludes with a \"Sense of the Senate\" section that appears to acknowledge that this legislation offers minimal opportunity to patients. It is explicit in asserting that the new law \"will not, and cannot, create a cure or effective therapy where none exists.\" The legislation, it says, \"only expands the scope of individual liberty and agency among patients.\" The drafters realistically end that phrase with \"in limited circumstances.\"" ], "depth": [ 0, 1, 1, 2, 2, 1, 2, 3, 3, 2, 3, 3, 3, 3, 3, 1, 1, 2, 2, 3, 3, 3, 4, 4, 3, 3, 1 ], "alignment": [ "h0_title h2_title h1_title", "", "h2_title", "h2_full", "", "h1_full", "", "", "", "h1_full", "", "", "", "", "", "", "h0_title h1_title", "h0_full", "h0_title h1_full", "h1_full", "", "h0_title", "h0_full", "", "", "h0_full", "h2_full" ] }
{ "question": [ "What provisions are listed in the RTT Act?", "Who is affected by the no-liability provision?", "What characterized investigational drugs prior to the RTT Act?", "What are some of these obstacles?", "Why might a manufacture decline to provide an investigational drug?", "How did the RTT respond to these problems?", "How will future Congresses attend to the RTT Act?", "What signals the possible direction of this engagement?", "How has the FDA treated the bill in the past?" ], "summary": [ "The RTT Act also has provisions that limit how the Secretary of Health and Human Services (through the FDA) can use data regarding clinical outcomes of patients who get these drugs through the RTT pathway; require drug sponsors (usually the manufacturers) to report annually to the Secretary on use of the pathway; and require the Secretary to post certain annual summaries. Finally, the RTT Act states that the sponsor or manufacturer has \"no liability\" for actions under the RTT provisions.", "The no-liability provision applies also to a prescriber, dispenser, or \"other individual entity\" unless there is \"reckless or willful misconduct, gross negligence, or an intentional tort.\"", "Before the RTT Act, observers discussed several obstacles to access to investigational drugs.", "These included some that were FDA-related: the difficult process to request FDA permission and the role of FDA as gatekeeper.", "Some related to why a manufacturer might decline to provide an investigational drug: limited available supply, liability, limited staff and facility resources, and concerns about use of outcomes data.", "The RTT directly eliminates some of these concerns, addresses some others, and leaves others alone.", "Future Congresses could look at the RTT Act's effect on FDA, drug manufacturers, and terminally ill patients. Congress could look at whether the law sufficiently removed obstacles to access.", "The first clue may come from how the current commissioner interprets FDA's role in the implementation of the new law.", "Four former FDA commissioners warned that the bill would \"create a dangerous precedent that would erode protections for vulnerable patients.\"" ], "parent_pair_index": [ -1, 0, -1, 0, -1, -1, -1, 0, -1 ], "summary_paragraph_index": [ 3, 3, 4, 4, 4, 4, 5, 5, 5 ] }
CRS_RL34189
{ "title": [ "", "Overview", "Protecting Refugees", "The U.N. Convention Relating to the Status of Refugees", "The United Nations High Commissioner for Refugees (UNHCR)", "Profile of North Korean Refugees10", "Scope of the Problem", "Numbers", "Gender Representation", "Conditions in China", "Crossing Point", "Exploitation at the Border", "Living Situation", "Push and Pull Factors", "Food Shortages", "Human Rights Violations", "DPRK Policy Towards Those Seeking Refuge in China", "Travel Limitations within DPRK", "Border Security and Enforcement", "China's Policy Towards North Koreans Seeking Refuge", "Application of the Refugee Convention and Protocol", "The Status of North Koreans in China", "China's Policy Considerations", "Transit and Final Destinations for Refugees", "The Role of Non-Governmental Organizations (NGOs)", "High-Profile Bids for Asylum", "South Korea", "Escape Routes Through Third Countries", "Southeast Asia", "Mongolia", "Congressional Response", "Human Rights and Refugee Issues in Overall North Korea Policy", "The North Korean Human Rights Act", "Congressional Complaints on Pace of Implementation", "Difficulties of Implementation", "Funding", "Radio Broadcasting into North Korea", "Freedom House Conferences", "The Resettlement of North Korean Refugees in the United States", "Linking Security and Human Rights", "Regime Change as a Motivation?", "Regional Responses to NKHRA", "South Korea", "China", "Japan", "Options for Congress and Other Policymakers", "Encourage Refugee Flows to Destabilize the North Korean Regime", "Provide Protection Versus Status to Refugees", "Resettle Larger Numbers of North Korean Refugees in the United States", "Implement the Responsibility to Protect", "Encourage North Korea and China to Honor International Treaty Obligations", "Call Attention to North Korea's Human Rights Record", "Address Human Rights As Part of a Package Deal", "Conduct Quiet Diplomacy", "Introduce Additional Legislation on Human Rights" ], "paragraphs": [ "", "The increased international attention given to the situation of North Koreans seeking refuge, primarily in China, has led Congress to take a greater interest in the refugee situation and the underlying causes within North Korea and across its borders. Food shortages, persecution, and human rights abuses have prompted thousands and perhaps hundreds of thousands of North Koreans to go to China where they often become victims of further abuse, neglect, and lack of protection. Those who remain in North Korea (formally known as the Democratic Republic of North Korea, or DPRK) also continue to suffer from a lack of food and other basic humanitarian provisions.\nBoth the House and Senate have held hearings and passed resolutions addressing the status of the refugees. Additionally, several Members of Congress have written letters regarding the issue to the U.S. and Chinese governments. In 2004 the 108 th Congress passed, and President Bush signed, the North Korean Human Rights Act ( H.R. 4011 ; P.L. 108-333 ). The North Korean Human Rights Act (NKHRA) authorizes the President new funds to support human rights efforts, improve the flow of information, and to require the President to appoint a Special Envoy on human rights in North Korea. It also identifies the need for humanitarian food assistance and refugee care.\nNorth Korea has been viewed as a threat to U.S. interests for a number of important security reasons that go well beyond refugee concerns and human rights issues. These include the pursuit of nuclear weapons and missile programs; a history of proliferating missiles; reported threats to export parts of its self-declared nuclear arsenal; and possible possession of chemical and biological weapons programs. North Korea is also on the U.S. list of states that sponsor terrorism. Amid an atmosphere of continuing tensions over North Korea's nuclear program, the potential remains for worsening humanitarian conditions and a possible increase in North Koreans fleeing the country. The situation raises the questions of what more, if anything, can and should be done—by the United States and the international community—not only to focus attention on the abuses of the DPRK regime, but to alleviate the suffering of North Koreans. Increasingly, some argue it is the suffering of ordinary North Koreans that brings into sharp relief the continuing violation of fundamental rights—rights pertaining to food security, refugee status, and individual freedoms—and raises questions about how those rights should be protected and by whom.", "China generally refuses international agencies and non-governmental organizations (NGOs) access to the North Koreans who cross its border; this and its periodic practice of deportation, have led many to ask about international law and the protection of refugees in China. China's obligations under international refugee law will be discussed later in the report.", "The international instruments that provide protection to refugees include the 1951 United Nations Convention Relating to the Status of Refugees (Refugee Convention) and the 1967 Protocol to that Convention. A refugee is legally defined in the Refugee Convention as a person fleeing his or her country because of persecution or \"owing to well-founded fear of being persecuted for reasons of race, religion, nationality, membership of a particular social group or political opinion, is outside the country of his nationality and is unable or, owing to such fear, is unwilling to avail himself of the protection of that country....\" Parties to the Refugee Convention have an obligation to abide by the principle of \"non-refoulement,\" which means that \"No contracting State shall expel or return (\"refouler\") a refugee in any manner whatsoever to the frontiers of territories where his life or freedom would be threatened on account of his race, religion, nationality, membership of a particular social group or political opinion.\" China and South Korea are parties to the Refugee Convention and its 1967 Protocol; North Korea is not a party to either instrument.", "The United Nations High Commissioner for Refugees (UNHCR) is the U.N. agency dedicated to the protection of refugees and other populations displaced by conflict, famine, and natural disasters. Its mandate is to lead and coordinate international action for the protection of refugees and the resolution of refugee problems worldwide. Refugees are granted a special status under international law. Once an individual is considered a refugee, that individual automatically has certain rights, and states that are parties to the Refugee Convention and its Protocol are obligated to provide certain resources and protection. UNHCR ensures these rights, works to find permanent, long-term solutions for refugees, and coordinates emergency humanitarian relief for refugees and, increasingly, other persons of concern.\nEnforcement of the Refugee Convention can present challenges. For example, the national laws of a state may not be developed sufficiently to allow full implementation of the provisions of the Refugee Convention. Often becoming a party to the Refugee Convention is a first step and UNHCR serves as an important resource. Sometimes the Refugee Convention may contradict bilateral agreements between states, such as the repatriation agreement between North Korea and China described later in this report. From UNHCR's point of view, international law overrides other bilateral agreements, but governments may not agree. UNHCR may try to assist in creating a solution or states may use ad hoc procedures to determine whether an individual has a well-grounded fear of persecution and thus is protected from deportation. UNHCR often works with governments behind the scenes in asylum cases to push for application of the principles of the Refugee Convention and protection of the rights of the individual, even though there may not be agreement on legal jurisdiction.", "", "", "There is little reliable information on the size and composition of the North Korean population located in China. Estimates range from as low as 10,000 (the official Chinese estimate) to 300,000 or more. Press reports commonly cite a figure of 100,000 - 300,000. In 2006, the State Department estimated the number to be between 30,000 and 50,000, down from the 75,000 to 125,000 range it projected in 2000. UNHCR also uses the 2006 range (30,000 - 50,000) as a working figure. UNHCR has not been given access to conduct a systematic survey. Estimating the numbers is made more difficult because most North Koreans are in hiding, some move back and forth across the border—either voluntarily to bring food and or hard currency from China or North Korea—or because they are forcibly repatriated. Amnesty International has estimated that, on average, each year about 10% of those who cross the border back to North Korea do so as a result of force. A much smaller number is estimated to make their way to third countries. Clearly, the refugees' need to avoid detection, coupled with a lack of access by international organizations, make it difficult to assess the full scope of the refugee problem; however, based on anecdotal reports, the number of people crossing the border does not seem to have overwhelmed the resources of the Chinese economy, in part because the movement has been gradual.", "According to some recent reports, it is thought that nearly 75 percent of the refugees are women. UNHCR says the number of males may be underestimated and they may be in hiding, but the proportion of women among those hoping eventually to resettle in South Korea is striking. Three years ago, reportedly 50 percent of the refugees were women; four to five years ago, 20 percent were women. It has become a trend, but the reasons are unclear. In North Korea the conditions of poverty and failed marriages could also be contributing factors as to why women choose to leave. An element of family reunification for men who left several years ago may also be a factor. Some also believe that men may be more tied to their enterprises, which could make them less mobile.", "", "Most North Koreans are believed to enter China from North Korea's northeastern provinces in search of food and/or employment. The destination favored by most refugees, the Yanbian Korean Autonomous Prefecture of China, is home to an estimated one million Chinese of Korean descent. Many of these ethnic Koreans have assisted their newly arrived North Korean kin, for a mix of reasons, including family connections, financial motivations, a sense of altruism, and a desire to reciprocate the help that North Koreans gave those Korean Chinese who crossed the border during the political turbulence of China's Cultural Revolution in the 1960s and 1970s. It is unlikely that large numbers of North Korean refugees are living elsewhere in China.", "Reports express concern for those exploited at the border, citing organized gangs and intermediaries who target the refugees. Human smuggling, trafficking, extortion and exploitation are thought to be a growing problem. Women are particularly vulnerable to prostitution, rape, arranged marriages, and bride traffickers; many otherwise face the option of imprisonment or hunger in North Korea. The State Department rates North Korea as a Tier 3 country in human trafficking, the poorest rating, due to the fact that it has not implemented international standards or prosecuted trafficking. It has also engaged in forced labor. It is reported that perhaps 80%-90% of North Koreans in China end up as trafficking victims. There appears to be an increase in the numbers, but this could also be attributed to greater awareness of the problem.", "North Koreans who remain in China (and their local protectors) live in danger not only of being discovered by the Chinese authorities, but by anyone who turns them in as undocumented immigrants for payment of a reward. While northeast China is generally far more economically developed and stable than North Korea, some non-governmental organizations (NGOs) report the poverty in the broader region of northern China is extreme and that conditions for the poor in both China and North Korea are roughly similar. Reports indicate that many refugees live in dire conditions, forced to survive by working in menial, low-paying jobs.", "People cross borders for many different reasons—some choose to do so voluntarily, others are forced to leave or flee as a matter of life or death. \"Push\" and \"Pull\" factors are terms used to explain why people move. As in many refugee situations, there are push and pull factors that influence certain people to leave their country. The reasons North Koreans seek refuge in China may vary based on individual circumstances, but despite limited access and information, it is clear that two key elements driving North Koreans across the border into China include deteriorating humanitarian conditions—mainly due to food shortages—and human rights violations.", "Extreme poverty within the DPRK in general, and food shortages in particular, appear to have a significant impact on movement across the border into China. The DPRK began experiencing a food shortage of increasing severity beginning in the early 1990s, after the collapse of the Soviet Union and the resulting cut-off of economic benefits North Korea had received from the communist bloc. Disastrous floods in the summer of 1995 plunged the country into a severe famine that by some estimates was responsible for 600,000 to two million deaths, approximately 5 to10 percent of North Korea's population. Some argue food shortages are inextricably linked to the regime itself, in part because food distribution favors the ruling elite and military and is tied to the government's ongoing broader political and military motivations. In September 1995, North Korea appealed for international food assistance, contradicting its national ideology of juche , or self-reliance. Shortly thereafter, the United Nations World Food Program (WFP) moved into North Korea, and its activities there gradually expanded to become at one point the WFP's largest single-country operation. Until 2005, the United States was by far the largest donor to the WFP's North Korea operation. China and South Korea provided—and continue to provide—even larger amounts of food bilaterally to North Korea.\nThough the famine apparently abated by 1997 and the DPRK made incremental progress in agricultural production, the WFP says that food conditions worsened for most North Koreans after North Korea introduced economic reforms in 2002. By 2005 the WFP estimated that nearly half of North Korea's 24 million people did not have enough to eat and that more than a third of the population was chronically malnourished. According to the WFP, food security continues to be a daily struggle for one third to one half of all North Koreans. In March 2007, the WFP indicated that the government had acknowledged an expected shortfall of one million metric tons of food and the possibility of a willingness to increase food assistance. Flooding and reduced WFP and bilateral food assistance in 2006 only compounded the problems that are ongoing in 2007. Torrential rains between August 7 and 14, 2007 caused significant and widespread flooding in nine provinces in central and northern DPRK. The international community provided emergency relief and conducted needs assessments and continues to monitor the humanitarian impact. According to the United Nations Office for the Coordination of Humanitarian Affairs (UNOCHA), 1 million people were affected, with nearly 454 people killed, 156 missing, and nearly 170,000 displaced. A typhoon between September 17-20 resulted in further loss, including 1,649 people made homeless.", "The State Department's Country Reports on Human Rights Practice for 2006 and reports from private organizations have portrayed a similar pattern of extreme human rights abuses by the North Korea regime for many years. There appears to be no prospect of appreciable change at least in the near future. The reports paint a grim picture of human rights conditions and stress three general categories of abuse:\n(1) A total denial of political, civil, and religious liberties: The regime's list of proscribed offenses is extensive, and severe punishments are established by North Korean laws and the constitution. No dissent or criticism of Kim Jong-il is allowed. The regime totally controls all media organs. Most North Koreans have no access to media sources other than the official media.\n(2) Severe physical abuse meted out to citizens who violate laws and restrictions: The U.S. Committee for Human Rights in North Korea published a lengthy report in 2003, describing a system of concentration camps, organized like the Soviet \"gulag\" system, that houses an estimated 150,000 to 200,000 inmates, including many political prisoners. Reports from survivors and escapees from the camps indicate that conditions in the camps for political prisoners are extremely harsh and that many political prisoners do not survive.\n(3) Other evidence of violations of human rights: The State Department's 2006 report cites \"anecdotal evidence from refugees\" that North Korean refugees who crossed into China for strictly economic reasons \"were generally being treated less harshly than in past years,\" but that the regime continued to inflict severe punishments for repatriated North Koreans who went to China for political reasons, had contacts with South Korean groups (including religious groups), and sought asylum in third countries. Recent reports by Amnesty International and Human Rights Watch confirm the State Department's description of human rights conditions within North Korea. However, Human Rights Watch presents a different description of North Korea's policy toward refugees who went to China for economic reasons. Human Rights Watch asserts that \"North Korea appears to be punishing its citizens with longer sentences in abusive prisons if they are caught crossing the border to China or have been forcibly repatriated by Beijing\" and that this \"ominous hardening of policy\" since the summer of 2004 has been applied to all repatriated North Koreans regardless of their reasons for going to China.\nThe United Nations confirms these findings. The U.N. Special Rapporteur on the DPRK (Special Rapporteur) states that despite some legislative improvements, there are continuing reports of violations of basic freedoms such as security of the person, humane treatment, and justice. According to the Special Rapporteur, \"despite [North Korea's] formal commitment to human rights in various national laws and under the human rights treaties mentioned, the human rights situation remains grave in a number of areas.\" Many violations of rights persist throughout the country, and as well as in countries of first asylum. Some of these rights are the focus of specific international treaties and conventions, to which North Korea and China are each a party, and others are cited in numerous reports and discussions or are part of evolving custom or practice between states. North Korea has not cooperated with the Special Rapporteur despite repeated requests. In its response to the Human Rights Council, China focused mostly on its unwillingness to view illegal migrants as refugees.", "North Korea considers those who cross the border into China to be criminals, though it is difficult to get a fuller sense of how North Korea views the problem. It is possible that North Korean leaders have calculated that the refugee situation poses little threat to the regime. Because the flows of refugees have been going on for years, it is likely that the refugees have already been politically triaged, in that most individuals of any political importance have either already left or been caught. New border-crossers could be considered politically insignificant by North Korea's leadership. Indeed, in some sense, China's provinces have provided North Korea with a useful way to export its economic problems as the migration may have protected thousands more people from starvation.", "Travel by North Koreans within and outside of their country is strictly controlled, and violators who are caught are subject to punishment. Any movement outside an individual's home village requires a travel pass, although in recent years the government has tended to turn a blind eye toward those violating the travel rules in search of food. Officials and trusted celebrities, such as athletes and artists, are the only people granted exit visas.", "According to reports, Article 47 of the 1987 North Korean penal code lists defection or attempted defection as a capital crime, stating that a defector who is returned to North Korea \"shall be committed to a reform institution for not less than seven years. In cases where the person commits an extremely grave concern, he or she shall be given the death penalty.\" It is unclear how \"grave concern\" is defined. Minor offenders appear to be subject to up to six months imprisonment at labor training centers where conditions are extremely harsh and inhumane.\nEnforcement reportedly varies, in part due to rampant bribery and corruption inside North Korea. Some repatriated North Koreans are subjected to brutal treatment, including detention, torture, placement in concentration camps, forced labor, and even execution. North Korean authorities are particularly brutal toward those suspected of making contact with South Koreans, missionary groups, or other foreigners. Returnees who cross the border in search of food reportedly receive milder treatment. Many repatriated pregnant women carrying the children of Chinese men—often husbands to whom the women were sold by human traffickers—are reportedly subjected to forced abortions.\nWhether or not an individual committed crimes in China, what the person has done since leaving North Korea, and what he or she was trying to escape from, all reportedly factor into the punishment of returnees to North Korea. UNHCR has received reports that some people deported one to three times by China back to North Korea receive little punishment while others endure hard labor or beatings. Even if UNHCR could assess who is at risk before deportation, it would be difficult to determine and weigh the risk factors and the seeming arbitrariness of the system in North Korea. Families are classified by loyalty to the regime—those \"blacklisted\" are more at risk. When a person is deported, if China passes along information that indicates he or she was trying to get in touch with an embassy or foreigners, there might be greater consequences.", "", "Despite being a party to the Refugee Convention and Protocol, China has not allowed U.N. agencies, in particular UNHCR, to have access to North Koreans who are residing in China because it views these individuals as economic migrants (rather than political refugees) who cross the border illegally, primarily in search of food. UNHCR has therefore been unable to determine what percentage of these individuals (North Koreans in China) qualify as refugees, but believes a number may meet that definition. In 1995 UNHCR established an office in Beijing under an agreement with China. At the time, issues were focused on limited numbers of refugees coming from Vietnam. During visits to the northeast in the late 1990s, UNHCR determined that some of the newly arrived North Koreans were refugees. But China saw the problem as an internal matter and subsequently prohibited UNHCR from all direct access to the border.\nThe Chinese are suspicious of UNHCR's intentions and have prevented aid agencies from entering the region to monitor the situation and possibly set up refugee camps. Although it continues to push its case for access, UNHCR cannot provide assistance to the refugees in an open, transparent manner. First-hand information is not available to UNHCR, which relies heavily on those \"working on the ground.\" UNHCR officials interviewed for this report say that they have worked behind the scenes with Chinese officials to assist with the challenges posed by refugees and asylum seekers and believe this is the most productive way forward.", "China does not usually allow North Koreans to apply for political asylum. Moreover, China indicates it is obliged under a bilateral1986 repatriation agreement with North Korea to return all border crossers. Despite this agreement Chinese officials have generally ignored the agreement, tolerating the inflows of refugees and the activities of foreign NGOs so long as such activities were carried out quietly.\nDefinitions of status are not always easily determined and motivations—be they economic or political—are not so easily separated. UNHCR recommends that no one be deported until a determination of refugee status can be made. According to UNHCR, even those who arrive in search of food may have a claim to refugee status sur place because they would be at risk of persecution if they returned. Thus, some experts argue that because it is known what might happen to North Koreans who are deported, the North Koreans in essence become refugees. Furthermore, China's deportations raise the question of a violation of international law, that is, China's violation of its obligations to abide by the principle of non-refoulement under the Refugee Convention and Protocol. In March 2006, these issues were raised for the first time in high-level talks between the U.N. High Commissioner for Refugees and the Chinese Foreign Ministry.\nThe creation of a refugee program raises difficulties for China. It does not want to provoke an ally, destabilize the Korean peninsula, or create a \"pull\"factor for individuals wanting to cross into China. UNHCR is concerned, too, about the treatment by North Korea and China of the victims who are repatriated and those who become victims of exploitation at the border.", "In addition to being a formal ally with North Korea, the Chinese government wants to avoid a situation that could destabilize the broader region, such as the collapse of the North Korean regime. It believes such an event would bring thousands of North Koreans across its border and have a huge impact on its economic development, adding to the unemployment problem in its industrial Northeast. Moreover, it could strain China's relations with North Korea, perhaps weakening China's influence over North Korea's behavior in other matters, such as its nuclear weapons program. Given North Korea's ability to destabilize the region quickly through military provocations, China may be reluctant to antagonize its neighbor. Some experts also contend that China wants to maintain distance from the U.S. troops in South Korea with North Korea serving as a buffer. China favors a peaceful resolution to the border issues through dialogue and negotiation with North Korea. Chinese officials undoubtedly are also concerned that allowing international groups access could set an unwanted precedent that could be used in future refugee scenarios involving other ethnic groups in other parts of China, such as Tibetans or Uighurs.\nChina is considered to have significant leverage over North Korea. It is North Korea's most important diplomatic and economic backer, and provides significant food aid annually. China is also North Korea's largest trade partner and supplies the bulk of North Korea's energy imports. However, China's leverage is limited if the DPRK sees any threat of withdrawing aid as empty, for it would only lead to instability in North Korea.", "", "Because the influx of refugees across the border has been gradual, rather than sudden, a network of South Korean, Japanese, U.S., and European NGOs have had time to develop and to provide food, shelter, and employment. Smaller numbers of North Koreans have also surfaced in Cambodia, Mongolia, Thailand, Vietnam, and Laos, suggesting that these groups may have successfully set up escape routes akin to the Underground Railroad in the United States for slaves seeking freedom in the 19 th Century. NGOs assisting the refugees often adopt a low profile to avoid detection by the Chinese authorities.", "According to NGOs assisting the refugees, for reasons that are not clear, beginning in 2001 and away from the public eye, Chinese authorities began cracking down on the North Korean refugee population and those who assisted them. This led some individuals and NGOs, many of which were foreign, to begin orchestrating high-profile rushes of North Koreans into foreign diplomatic compounds and into schools, where the refugees requested asylum, with most seeking resettlement in South Korea. The asylum bids were well publicized. In most of these high-profile asylum cases, China decided on humanitarian grounds to allow the North Koreans to travel to a third country and then transit to Seoul.\nAs a consequence of the asylum bids, reports indicated that the Chinese were arresting Korean-Chinese accused of helping North Koreans. (According to some reports, there are apparently more than 1,000 ethnic Korean-Chinese helping the North Koreans who cross over into China.) From time to time, the press mentioned arrests of NGO workers. China increased roundups, repatriations, border patrols, and security around foreign diplomatic buildings. The goal of this harsh response appeared to be to discourage similar high-profile acts. The publicized actions of the asylum seekers raised the visibility of the issue, but it alarmed China, and the repressive solution on the part of the Chinese may have had a negative impact on a far greater number of refugees than the relative few who sought asylum. At different points like this, China has come under considerable international pressure—felt most keenly by the Chinese Foreign Ministry—to recognize the North Koreans as political refugees and allow the international community openly to assist them.", "South Korea remains the primary destination for North Korean refugees. In addition to granting South Korean citizenship, the South Korean government administers a resettlement program and provides cash and training for all defectors. In February 2007, South Korean government officials announced that the number of North Korean defectors arriving in South Korea since the end of the Korean War in 1953 topped 10,000. What began as a trickle in the decades following the war swelled beginning in the late 1990s due to the North Korea famine. According to the South Korean Unification Ministry, up to 1,578 refugees arrived in 2006, exceeding the previous record of 1,139 in 2002. However, there have also been reports about problems in the integration of North Koreans resettled in South Korea with some wanting to return to North Korea or resettle elsewhere. South Korea is party to the Refugee Convention and its Protocol. UNHCR has an office in Seoul to provide assistance to resettlement programs.\nSome observers say that Seoul adjusted its stance on North Koreans to mollify Pyongyang and that this was reinforced by two new measures announced by the South Korean Unification Ministry in 2004: the traditional lump sum amount provided to North Korean refugees was reduced by two-thirds (with the difference going to job-training incentive programs), and screening of asylum seekers in diplomatic missions was strengthened to identify possible criminals or spies. Critics say the changes in policy are designed to discourage defections, but South Korean officials defend the changes as necessary to discourage exploitative brokers who charge the defectors for facilitating passage from North Korea. In addition, officials claim, the enhanced screening prevents Korean-Chinese from gaining illegal entry into South Korea.", "", "It is believed that only a small percentage of North Koreans in China make their way to third countries in order to seek asylum. North Korean refugees seeking passage to a third country face largely uncooperative governments even if they get through China. Cambodia, Laos, Vietnam and Burma have diplomatic relations with both Seoul and Pyongyang. Fear of offending Pyongyang and, for Vietnam and Laos, the shared characteristic of nominally communist governments make them generally unwilling to assist defectors. After the Vietnamese government allowed 480 North Korean defectors to fly into South Korea on chartered planes in July 2004, the underground network for refugees in Vietnam was reportedly nearly eliminated as an escape route because of Hanoi's unwillingness to upset North Korea again. However, Vietnam reportedly still plays a reduced role in the underground railroad that assists North Korean asylum-seekers. Cambodia is party to the Refugee Convention and its Protocol; Laos, Vietnam, and Burma are parties to neither, which means they are not obligated to provide resources and protection to refugees.\nThailand's reputation for relative tolerance for refugees, as well as crackdowns in other recipient countries, has attracted an increasing number of North Korean asylum-seekers. Media sources say that 1,000 North Koreans were detained in Bangkok, and 500 were sent on to Seoul in 2006. Thailand has traditionally quietly cooperated with sending the North Koreans on to South Korea for resettlement, but by 2006 the rise in volume reportedly had strained the system and led Bangkok authorities to intensify measures to prevent illegal entry by North Koreans. In an indication of the Thai government's fraying patience, the Foreign Ministry complained in December 2006 that international and local NGOs—by shepherding North Koreans to Thailand—were hurting its ability to prevent the illegal entry of North Korean defectors. Activists claim that some North Koreans in Thailand may be seeking resettlement in the United States. Thailand is not a party to the Refugee Convention or its Protocol.", "For some North Korean refugees, traveling north to Mongolia is preferable as an escape route out of China. The Mongolian government maintains a policy of not repatriating North Koreans and its practices are considered humane by international refugee organizations. Although some advocates had been pushing for the establishment of an official refugee camp in Mongolia, experts have since concluded that camps would not be suitable, in part because North Koreans transit through Mongolia so quickly. Mongolia's official relations with both South Korea and North Korea are strong, including a guest worker program with Pyongyang that allows hundreds of North Koreans to work in mine and construction projects. UNHCR maintains regular contact with the Mongolian government. Although Mongolia is not a party to the Refugee Convention or its Protocol, it has been both cooperative and diplomatic in dealing with the North Koreans, an approach that appears to be acceptable to its neighbors.", "", "In general, under the Clinton Administration, security issues with North Korea were explicitly separated from human rights concerns: the 1994 Agreed Framework was limited to economic incentives in exchange for Pyongyang freezing its nuclear weapons program. The Bush Administration policy on North Korea has undergone several shifts, from refusing to meet with the North Koreans to pushing aggressively for a negotiated deal on dismantling the North's nuclear weapons programs. Until the 2007 Six-Party Agreement, the Bush Administration had regularly drawn attention to North Korean human rights violations by supporting resolutions that criticize the North Korean record at the United Nations Human Rights Council and General Assembly. High-level officials, including the President and Secretary of State, also periodically criticized the regime in Pyongyang for its human rights practices. Some observers note that focus on human rights issues appears to have increased during periods when nuclear weapons negotiations have stalled. With a few exceptions, references to the refugee situation have generally been limited to lower-level meetings.\nAs efforts to push forward the Six-Party talks have accelerated in 2007, the Administration has not proposed any negotiations with North Korea over human rights but has asserted that human rights is one of several issues to be settled with North Korea after the nuclear issue is resolved. The Six-Party Agreement of February 13, 2007, calls for the United States and North Korea to \"start bilateral talks aimed at resolving bilateral issues and moving toward full diplomatic relations.\" Prior to the Agreement in 2007, the Bush Administration held that it would not agree to normalization of diplomatic relations with North Korea until there was progress on human rights (presumably including refugees) and other issues. This position was criticized by China and South Korea, which called on the Administration to offer North Korea full diplomatic relations in exchange for a satisfactory nuclear settlement. However, since the signing of the agreement in February 2007, Assistant Secretary of State for East Asian and Pacific Affairs Christopher Hill increasingly has linked normalization of U.S.-North Korean relations solely to a satisfactory settlement of the nuclear issue.", "Congressional attention to North Korean human rights and refugee issues has been consistent and critical. Several hearings specifically devoted to the topics called on expert witnesses as well as executive branch officials to testify about the conditions faced by North Koreans, both those within the country and those attempting to escape. The 108 th Congress passed by voice vote, and President Bush signed, the North Korean Human Rights Act of 2004 (NKHRA). The legislation\nauthorizes up to $20 million for each of the fiscal years 2005-2008 for assistance to North Korean refugees, $2 million for promoting human rights and democracy in North Korea and $2 million to promote freedom of information inside North Korea; asserts that North Koreans are eligible for U.S. refugee status and instructs the State Department to facilitate the submission of applications by North Koreans seeking protection as refugees; and requires the President to appoint a Special Envoy to promote human rights in North Korea.\nThe NKHRA also expresses the sense of the Congress that human rights should remain a key element in negotiations with North Korea; all humanitarian aid to North Korea shall be conditional upon improved monitoring mechanisms for the distribution of food; support for radio broadcasting into North Korea should be enhanced; and that China is obligated to provide UNHCR with unimpeded access to North Koreans inside China.\nSome have hailed the NKHRA as an important message that human rights will play a central role in the formulation of U.S. policy towards North Korea. They believe the issue should be addressed in the U.S.-North Korea normalization working group established by the February 13, 2007 Six-Party Talks agreement. Passage of the legislation was also driven by the argument that the United States has a moral responsibility to stand up for human rights for those suffering under repressive regimes. Advocates claim that, in addition to alleviating a major humanitarian crisis, the NKHRA will ultimately enhance stability in Northeast Asia by promoting international cooperation to deal with the problem of North Korean refugees.\nCritics say the legislation risks upsetting relations with South Korea and China, and ultimately the diplomatic unity necessary to make North Korea abandon its nuclear weapons program through the Six-Party Talks. Further, they insist that the legislation actually worsens the plight of North Korean refugees by drawing more attention to them, leading to crackdowns by both North Korean and Chinese authorities and reduced assistance by Southeast Asian countries concerned about offending Pyongyang. They point to reports that Chinese soldiers nearly shut down the border between China and North Korea following a series of embassy stormings in 2002, preventing any further flow of refugees. Since passage of the NKHRA, it does not appear that China has altered its practices in response to pressure from the United States to deal more humanely with North Korean refugees.", "Critics have complained that implementation of NKHRA has been halting. Most publicly, no North Korean refugees were resettled in the United States until May 2006 and Jay Lefkowitz was not appointed as the Special Envoy for Human Rights in North Korea until August 2005, ten months after President Bush signed the bill into law. At three House hearings in the 108 th Congress devoted to NKHRA, lawmakers repeatedly expressed frustration at the pace and lack of robust implementation of NKHRA. Others complained that the Administration did not request any of the annual $24 million authorized under NKHRA until $2 million was requested for FY2008. When Ambassador Lefkowitz testified at the April 2006 hearing, a Member questioned him on the number of hours he was able to devote to the issue, questioning whether he could fulfill his duties as the Special Envoy as a part-time employee of the State Department. Lawmakers also raised reports that U.S. embassy officials in China had turned away or discouraged North Koreans seeking asylum, an accusation made by a witness at the October 2005 hearing.", "Some observers contend that good-faith implementation of NKHRA's refugee provisions may be counterproductive. They argue that the legislation on North Korean refugee admissions could send a dangerous message to North Koreans that admission to the United States as a refugee is assured, encouraging incursions into U.S. diplomatic missions overseas. State Department officials say that given the tight security in place at U.S. facilities abroad, unexpected stormings could result in injury or death for the refugees. Secondly, granting of asylum status to North Korean refugees involves a complex vetting process that is further complicated by the fact that the applicants originate from a state with which the United States does not have official relations. In congressional hearings, State Department officials have cautioned that effective implementation of the NKHRA depends on close coordination with South Korea, particularly in developing mechanisms to vet potential refugees given the dearth of information available to U.S. immigration officials on North Koreans.", "The State Department has not requested funding explicitly under the NKHRA, but officials assert that the mission of the NKHRA is fulfilled under a number of existing programs. The State Department's Population, Refugees, and Migration (PRM) Bureau provided $7.56 million in FY2006 for UNHCR's annual regional budget for East Asia, which includes assistance for North Korean refugees, among other refugee populations. PRM funds international organizations such as UNHCR or the ICRC. For democracy promotion in North Korea, the State Department's Democracy, Human Rights, and Labor (DRL) Bureau gives grants to U.S.-based organizations: in the FY2008 budget, DRL requested $1 million for North Korea human rights programs, as well as $1 million for media freedom programs. DRL also considers $1 million expended in FY2006 in the National Endowment of Democracy account specific to North Korea as fulfilling part of the NKHRA's mission. In FY2008, the Broadcasting Board of Governors (BBG) requested $2.9 million for increased radio broadcasting into North Korea, according to the BBG Congressional Budget Justification. The authorizations of the NKHRA expire in FY2008.\nSome government officials and NGO staff familiar with providing assistance to North Korean refugees say that funding explicitly associated with the NKHRA is problematic because of the need for discretion in reaching the vulnerable population. Refugees are often hiding from authorities and regional governments do not wish to draw attention to their role in transferring North Koreans, so funding is labeled under more general assistance programs. In addition, many of the NGOs that help refugees do not have the capacity to absorb large amounts of funding effectively because of their small, grass roots nature.", "The NKHRA authorizes the President to \"take such actions as may be necessary to increase the availability of information inside North Korea by increasing the availability of sources of information not controlled by the Government of North Korea, including sources such as radios capable of receiving broadcasting from outside North Korea\" and authorizes the appropriation of $2 million annually for this purpose. In the FY2008 budget request, the Broadcasting Board of Governors requested $2.9 million in order to increase broadcasting into North Korea by establishing a 10-hour coordinated stream of Voice of America (VOA) and Radio Free Asia (RFA) daily programming. The radio broadcasts into North Korea, through medium- and short-wave, were modestly enhanced beginning in 2006, and original programming was added in FY2007. Content includes news briefs, particularly news involving the Korean peninsula, interviews with North Korean defectors, and international commentary on events happening inside North Korea. The BBG cites an InterMedia survey of escaped defectors that indicates that North Koreans have some access to radios, many of them altered to receive international broadcasts.", "In FY2005, $2 million was appropriated to Freedom House to organize international conferences to raise awareness of human rights conditions in North Korea. The second forum, held in Seoul in December 2005, raised political tension between U.S. officials in attendance and the South Korean government. As South Korean ruling party officials maintained a distance from the event, opposition leaders and Special Envoy Lefkowitz called for the Roh Administration to speak out against North Korea's human rights abuses. Lefkowitz also urged the South Korean government to tie its humanitarian aid shipments to improvements in Pyongyang's human rights record. A third conference held in Brussels in March 2006, was attended by Lefkowitz, the Japanese Special Envoy for Human Rights Issues Humiko Saigo, and several North Korean defectors. The Brussels conference coincided with an unprecedented hearing on human rights issues in a European Union parliamentary session, resulting in a resolution condemning human rights conditions in North Korea. A second, similar resolution was passed by the same body after the fourth Freedom House conference was held in Rome in July 2006.", "The NKHRA has as one of its goals the resettlement of North Korean refugees in the United States. Section 302 of the Act states that \"North Koreans are not barred from eligibility for refugee status or asylum in the United States on account of any legal right to citizenship they may enjoy under the Constitution of the Republic of Korea.\" Given the quick availability of citizenship, as well as the presence of historical and cultural ties and the provision of benefits to North Korean arrivals, South Korea historically has been viewed by the United States and other countries as the preferred resettlement country for North Koreans. Section 304 expresses the sense of the Congress that UNHCR and its donor governments, including the United States, \"should persistently and at the highest levels continue to urge the Government of China\" to allow access to North Koreans within China to determine whether they qualify for refugee protection.\nMore general in nature, Section 303 of the NKHRA directs the Secretary of State to \"undertake to facilitate the submission of applications\" under the Immigration and Nationality Act (INA) by prospective North Korean refugees. Some of the challenges to implementing this provision were highlighted in a report the NKHRA required the Secretary of State to submit to Congress. Noting opposition by governments hosting North Korean refugees, particularly China, to U.S. refugee admissions processing on their territory, the report stated:\nWithout cooperation of such governments, the multi-step, often-lengthy admissions procedures leading to the departure of North Koreans for the United States will not be possible in the region.\nThe report suggested, however, that it might be possible to admit some North Korean refugees to the United States from South Korea \"after appropriate vetting.\" This reference to vetting suggests another significant obstacle to North Korean refugee resettlement in the United States—the difficulty in completing security checks. The House International Relations Committee report on the bill that became the NKHRA cited \"genuine security concerns\" related to North Korean refugee resettlement in the United States. Acknowledging \"the Department of Homeland Security's obligation and authority to assess North Koreans ... on a case-by case basis,\" the report stated that \"such requirements may present natural limits to the number and pace of North Korean refugee admissions into the United States.\"\nChallenges to North Korean refugee resettlement in the United States and efforts to address them were discussed at an April 2005 hearing on implementation of the NKHRA by the House International Relations Committee's Subcommittees on Asia and the Pacific, and on Africa, Global Human Rights and International Operations. In written testimony, Arthur E. Dewey, then-Assistant Secretary of State for PRM, described actions being taken to obtain access to North Koreans in China:\nThe State Department continues to fund UNHCR's efforts to obtain access to, protection of, and solutions for North Koreans. The United States consistently and at high levels continues to urge the PRC to adhere to its international obligations....\nAt the same time, Assistant Secretary Dewey emphasized limits on the ability of the United States to provide direct assistance. He maintained that direct U.S. involvement with North Koreans in certain states could increase the vulnerability of those individuals. With respect to security concerns, he noted that the U.S. government lacked ready access to information about individual North Koreans necessary to complete required background checks. He cited the need for a \"reliable mechanism\" to complete these security checks and indicated that consultations with governments in the region were essential to developing viable mechanisms to facilitate applications of North Korean refugees for U.S. resettlement.\nTestifying before the same subcommittees in April 2006, the Special Envoy, Jay Lefkowitz, reported progress in addressing challenges to gain access to North Korean refugees and conduct security screenings. In May 2006, the first six North Korean refugees were admitted to the United States from an unidentified nation in Southeast Asia. In written testimony prepared for a March 1, 2007 hearing of the House Foreign Affairs Committee's Subcommittee on Asia, the Pacific, and the Global Environment, Special Envoy Lefkowitz stated that \"our government has opened America's doors to North Korean refugees.\" He further stated, \"While we expect that most North Korean refugees will continue to choose to resettle in South Korea, we impose no quota or limit on the number we are willing to accept.\"\nAs of December 31, 2007, a total of 37 North Korean refugees had been admitted to the United States from undisclosed transit states.", "The Six-Party Talks remain focused primarily on the nuclear weapons issue and Bush Administration negotiators in 2007 have linked establishing diplomatic relations and facilitating Pyongyang's re-entry into the international community with only the nuclear weapons issue rather than human rights and other issues. The appointment of a special envoy on human rights theoretically allows for a separate track, but, according to many observers, the predominant attitude of the Bush Administration in 2007 reflects the view that raising the profile of North Korea's human rights violations jeopardizes the progress of the nuclear disarmament negotiations.\nThe NKHRA pressures Executive Branch policymakers to link human rights and overall negotiations with Pyongyang. The NKHRA conveys the Sense of Congress that human rights should be a \"key element\" in talks with North Korea and that the United States should pursue a human rights dialogue modeled on the Helsinki process with North Korea and other regional states. In addition to these suggestions, the requirements for admission of refugees and the funds authorized to aid human rights and refugee NGOs alters the diplomatic environment in which the State Department has pursued talks with the North Koreans because of the reactions of other regional powers.\nSome observers disagree that a linkage policy based on the Helsinki process is an effective approach to dealing with North Korea. They argue that several factors that existed in Eastern European countries—a nascent civil society, minority groups, semi-autonomous institutions such as the Catholic Church, dissident organizations, armed uprisings against the rulers, deeper contacts with the outside world, and an overall political \"thaw\"—were necessary prerequisites for the approach to take hold. Few or none of these factors reportedly exist in the closed state of North Korea and, as a result, outside NGOs have very limited local forces with whom to partner to develop political movements.", "Some critics of the NKHRA charge that a desire for regime change in Pyongyang motivated the legislation. Passage of the NKHRA was driven in part by the activities of a network of NGOs devoted to North Korean issues. The network includes groups explicitly committed to precipitating the collapse of the regime in Pyongyang. The predecessor to the NKHRA, the North Korean Freedom Act, proposed language that more harshly criticized South Korea and China, provided less flexibility to the President to negotiate a security agreement, explicitly linked security and human rights issues, and, according to some analysts, associated itself with regime change. Critics of the regime-change approach point to some of Lefkowitz's public statements that characterize Pyongyang as \"a government that inflicts on its citizens repression reminiscent of the most cruel totalitarian rulers of the 20 th century...[and] is today counterfeiting U.S. currency, trafficking in narcotics, building a nuclear arsenal, and threatening other nations.\" In 2005 and 2006 critics questioned whether the Administration was committed to working with the existing North Korean government in the Six-Party Talks if a high-level envoy could describe the regime in Pyongyang in such negative terms. Lefkowitz also criticized aspects of South Korea's \"sunshine policy\" of engaging North Korea, words that some say have periodically strained relations with Seoul. However, in 2007, the Bush Administration entered into bilateral talks with North Korea, and Assistant Secretary of State Hill visited Pyongyang in June 2007. The Administration also resolved financial restrictions against banks in Macau that engaged in activities that were implicated in North Korean counterfeiting operations. Lefkowitz, though still serving as Special Envoy, has kept a lower profile in 2007.\nThe House International Relations Committee report accompanying the NKHRA, however, explicitly disavowed an interest to bring down the Pyongyang government: \"[NKHRA] is motivated by a genuine desire for improvements in human rights, refugee protection, and humanitarian transparency. It is not a pretext for a hidden strategy to provoke regime collapse or to seek collateral advantage in ongoing strategic negotiations.\" Former Chairperson of the Subcommittee of Asia and the Pacific James Leach reiterated at a congressional hearing in 2005 that \"... I would like to affirm that the motivations for the North Korean Rights Act (sic) were and are solely humanitarian, not geo-strategic.... [NKHRA] is agnostic about regime change, but emphatic about behavior change.\"\nDespite this public statement, many observers say that securing cooperation from China and South Korea to deal with North Korean human rights and refugee issues is more difficult because of the distrust of the goals of some U.S. government officials. South Korean Unification Minister Lee Jong-seok, for instance, told a parliamentary committee in July 2006: \"Personally, I oppose a Northeast Asian version of the Helsinki Process.... Because there is a wide perception that the Helsinki Process is premised on regime change, (applying the process to North Korea) would have no effect,\" adding that \"In the U.S., the people who have been calling for a change of the North Korean regime are raising the [human rights] issue.\"", "", "Passage of the NKHRA raised uncomfortable issues for South Korea, adding another irritant to U.S.-South Korea bilateral relationship that grew strained under the Bush and Roh Myoo-hyun Administrations. Many observers say that NKHRA draws sharp attention to the plight of North Korean citizens and refugees and therefore has illuminated the gulf between the U.S. and South Korean approaches to dealing with North Korea. However, the turn of Bush Administration policy in 2007 has brought U.S. policy closer to South Korea's conciliation strategy. According to regional analysts, the December 2007election of Lee Myung-bak as president may further warm ties between Seoul and Washington. Immediately after his election, Lee told a press conference that \"...there will be a change from the previous government's practice of avoiding criticism of North Korea and unilaterally flattering it.... Criticism that comes with affection can help make North Korean society healthy and improve the lives of its people in the long run.\"\nAs part of its policy of increasing economic integration and fostering warm ties with North Korea, South Korea has generally refrained from criticizing Pyongyang's human rights record and downplayed its practice of accepting North Korean refugees. South Korea has abstained from voting on several U.N. resolutions calling for improvement in North Korea's human rights practices. In November 2006, in the wake of Pyongyang's July 2006 missile tests, South Korea for the first time voted in favor of a U.N. General Assembly resolution that criticized North Korea for torture, public executions, past abductions of foreigners, severe prison conditions, and failing to allow access to the Special Rapporteur on North Korean human rights. However, when a nearly identical resolution came up in a United Nations human rights panel in November 2007, Seoul abstained from voting, citing a \"consideration of North-South Korean relations.\"\nThe tension between Washington and Seoul on human rights issues may threaten bilateral cooperation on refugee problems. The admission of North Korean refugees for resettlement in the United States could benefit from information sharing with South Korean intelligence services for vetting purposes. It is unclear if South Korea has been willing to provide cooperation in light of its reluctance to antagonize Pyongyang. Complicating any U.S. effort to \"burden-share\" with South Korea by accepting North Korean refugees is the South Korean law that grants automatic citizenship to all North Korean residents who defect to the South. Shortly before the acceptance of the first six refugees under the NKHRA, another North Korean defector who had settled in South Korea in 1998 was granted asylum by a Los Angeles immigration court. After South Korean officials, including then Foreign Minister Ban Ki-Moon, criticized the ruling, unnamed State Department sources explained that the case did not reflect U.S. refugee policy and did not fall under NKHRA because of the established citizenship of the defector. Seoul officials have chafed at the suggestion by some North Korean defectors that they are discriminated against in South Korea because of their North Korean origins.", "Passage of the NKRHA, and the issue of human rights in general, raises difficult issues with China, the host of the Six-Party Talks and a crucial part of the Administration's strategy to pressure North Korea into giving up its nuclear weapons. NKHRA describes in harsh language the conditions refugees face in China and Beijing's policy of repatriation to North Korea. During hearings on NKHRA's implementation, several Members of Congress strongly criticized Beijing for its policy on North Korean refugees, including the suggestion that the United States should boycott the 2008 Olympics in protest. Beijing fears the NKHRA might serve as a beacon to refugees and encourage a greater number of North Koreans to cross the border into China.\nAlthough the Bush Administration has spoken out on Chinese human rights abuses, some analysts say that the criticism has been muted because of the need for Beijing's cooperation with the war on terrorism, the Six-Party Talks, and Iran. However, the White House elevated one individual's case to an unusually high profile: Kim Chun Hee, a 31-year old North Korean who sought asylum at two Korean schools in China before being deported to North Korea, according to various press reports. With her fate uncertain, the White House issued a statement on March 30, 2006, expressing its grave concern for her and calling on China to honor its obligations as a party to the Refugee Convention and Protocol. Urged on by activist groups, including an influential church from Bush's hometown, President Bush raised the case directly with Chinese president Hu Jintao during their April 2006 summit. According to White House officials, Hu offered no response.", "In the first term of the Bush Administration, the United States and Japan found common ground on the issue of confronting North Korea on human rights violations. Since Kim Jong-il's 2002 admission that the Pyongyang government abducted Japanese nationals in the 1970s and 1980s, the Japanese government has increasingly taken a tougher stance on North Korea, including imposing strict sanctions on Pyongyang after the North's 2006 tests of missiles and then a nuclear device. Former Prime Minister Shinzo Abe rose to prominence based largely on his hardline stance toward North Korea, from insisting on a full accounting of the abductees to stepping up military cooperation with the United States in response to Pyongyang's provocations.\nJapan has maintained pressure on the United States to include the issue of human rights in the ongoing Six-Party Talks. The North Korea-Japan normalization working group, one of five established by the February 13, 2007 Six-Party Talks agreement, focuses on resolution of the abduction issue as well as Pyongyang's historical grievances for the Japanese annexation of the Korean peninsula from 1910-1945. A provision of the agreement that states that the United States will \"begin the process of removing the designation of the DPRK as a state-sponsor of terrorism\" has alarmed Japan, which has urged the United States to keep North Korea on the terrorism list until North Korea resolves Japan's concerns over the kidnappings. In 2004, the Administration noted that the kidnapping of Japanese citizens justified, in part, North Korea's inclusion on the state sponsors of terrorism list.\nJapanese lawmakers passed their own version of the NKRHA in 2006. The Japanese Act calls for greater awareness on North Korean human rights violations in general, with an emphasis on the abductions of Japanese citizens, as well as enhanced international coordination to prevent further human rights abuses by the North Korean government. Solving the plight of North Korean refugees is mentioned, but no specific measures to assist refugees are outlined. The law calls for economic sanctions if human rights violations, specifically the abduction issue, fail to improve, although similar sanctions are already applied for North Korea's missile and nuclear tests.\nThe Japanese abductee issue has been elevated in Congress. The NKHRA includes a sense of the Congress that non-humanitarian aid be contingent on North Korean progress in accounting for the Japanese abductees. A House hearing in April 2006 focused on North Korea's abductions of foreign citizens, with testimony from former abductees and their relatives. Among the witnesses was Sakie Yokota, the mother of Megumi Yokota, abducted at the age of 13. The following day, President Bush met with Yokota and other relatives of abductees, emphasizing the link between U.S. policy and Japan's most pressing priority in its relations with North Korea. Some Members of Congress have been vocal in supporting Japan's call for resolution of the abductions controversy before North Korea is removed from the U.S. state sponsors of terrorism list.", "Formulating policy toward North Korea has been characterized as deciding among a range of bad options. The following outlines some basic approaches to dealing with North Korea's human rights and refugee issues advocated by various constituencies, with an analysis of some of the possible diplomatic and security-related ramifications. United States policy has adopted elements of several of these strategies in the past and future policies will likely be a combination of approaches.", "Putting aside the significant humanitarian concerns about North Korean refugees, some commentators have advocated the use of refugee flows for the political ends of weakening the regime in Pyongyang. Liberal U.S. resettlement policies and official encouragement to North Korean refugees to seek asylum at American diplomatic posts in the region could act as a magnet for drawing larger numbers of North Koreans over the border. If the United States weighed in as an official advocate for fleeing North Koreans, it could arguably foster the underground railroad system by pressuring Beijing to assist in the relocation process. Some calculate that a large outflow could lead to the collapse of the precarious system of political control enforced by the North Korean government. Such advocates argue that regime change in North Korea is the only solution given the scale of human rights abuses in the country. Critics of this approach point out that the more likely response to a massive movement of people across the border would be a bloody crackdown by Chinese and North Korean authorities, not necessarily leading to a regime collapse. In addition, some argue that a sudden political collapse would lead to a chaotic aftermath in which human rights and lives would be direly threatened.", "The United Nations High Commissioner for Refugees has examined the legal aspects of who among the North Koreans in China qualifies for refugee status. South Korea recognizes that once refugees are on South Korean territory, it has an obligation to protect them; however, it cannot protect the North Korean refugees while they are in China. Politically, it is both a domestic and bilateral problem for China to acknowledge refugee status for the North Koreans. And given the circumstances, UNHCR believes there may be overriding, practical reasons not to do so. First, it is possible that there could be relatively few cases that might technically qualify as refugees. Second, it is probable that granting refugee status decreases China's tolerance dramatically for the refugees in general, at least in the short- and medium-term. The question thus becomes whether it is helpful to push the refugee status issue or find another way to achieve the solution being sought: Protect the North Korean refugees in China.\nGranting some form of humanitarian status—rather than refugee status—is one way to provide a broader definition of who can be helped that may be more politically acceptable to China. The UNHCR Department of International Protection, which is responsible for the agency's core protection mandate, in March 2006 proposed a humanitarian program, or enclave, be developed with other humanitarian agencies to make sure the refugees have or gain access to humanitarian services. Discussions between UNHCR and representatives suggest that China could justify a \"good neighbor approach\" on the one hand, without pushing human rights or asylum, or on the other hand, pushing for deportation. China has expressed a willingness to consider the option of protection in the form of such a humanitarian enclave, but no further progress has been made.\nUNHCR also believes there may be too much emphasis on the \"pull factor\" on the part of China and others. Unfettered travel in North Korea is difficult and both countries have demonstrated their ability to control their respective borders. China clearly does not want a political confrontation or fallout with North Korea. UNHCR has been opening the dialogue with China behind the scenes because it also views open confrontation with China as unproductive, given China's current political structure. The proposal to give humanitarian status as a means of increasing protection for the North Koreans in China is seen by some as far less provocative than granting refugee status and as offering a practical solution that can be implemented. Although not necessarily the approach sought by some high-profile NGOs, UNHCR believes it has to minimize its visibility and publicity to make the most progress.", "Some advocates support a program that builds considerably on the past acceptance of a few dozen North Korean refugees. Advocates of granting U.S. asylum to North Koreans say it would help share the burden of accepting the refugees with the South Korean government. Some Korean-American groups have indicated that their community is willing to facilitate increased resettlement in the United States. Other supporters of the NKHRA applaud the admission of refugees but insist that South Korea will remain the primary destination for defectors from the North. Administration officials have cited reluctance by China and Southeast Asian countries to be involved in transferring North Korean refugees to American officials, as well as the complicated vetting procedure required by American immigration officials, particularly for citizens from a country on the state sponsors of terrorism list. Refugee experts have also voiced concern about North Koreans' ability to adjust to an American lifestyle, particularly if language skills are not strong upon arrival.", "While the U.N. Charter obligates U.N. members to promote respect for human rights and asserts as a primary purpose of the Organization is the promotion of human rights and fundamental freedoms for all, it also recognizes the doctrine of non-intervention. Thus, Article 2, Paragraph 7, of the U.N. Charter states that \"nothing in the Charter authorizes the United Nations to interfere in matters which are essentially within the domestic jurisdiction of any state.\" Because of the traditional approach towards human rights as a matter exclusively within the domestic jurisdiction of sovereign states, Article 2(7) has been viewed by some as an obstacle to the implementation of the human rights provisions of the Charter. States accused of human rights violations frequently cite this provision in response to criticisms by other states (or international organizations) relating to human rights conditions within their borders.\nHowever, many advocates argue that there is substantial justification for state responsibility for the protection of the human rights of individuals and for some level of \"interference\" by the international community on behalf of those whose rights have been infringed. Activity for the protection of human rights has been constantly subjected to tension between state sovereignty as protected by the doctrine of non-intervention and state obligations to protect human rights and fundamental freedoms. Increasingly, protection of populations affected by conflict within a country is seen as partly the responsibility of the international community. For example, some observers have more recently argued that the DPRK government is a threat to its own people and that North Korea has violated its responsibility to protect its own citizens from crimes against humanity. They suggest that action by the international community and the U.N. Security Council is warranted.\nAt the 2005 U.N. World Summit, the \"Responsibility to Protect\" was introduced, putting forward the idea that each state has a responsibility to protect its people from genocide, war crimes, ethnic cleansing and crimes against humanity and that human rights violations committed in one state are the concern of all states. It is an agreement in principle that speaks to the obligations of a state to protect its own people and the obligations of all states when that fails, but this U.N. Resolution does not make action easy or even probable. Lee Feinstein, Senior Fellow for U.S. Foreign Policy and International Law at the Council on Foreign Relations, observes that \"Adoption of the responsibility to protect begins to resolve the historic tension between human rights and states' rights in favor of the individual. Where the state had been erected to protect the individual from outsiders, the responsibility to protect erects a fallback where individuals have a claim to seek assistance from outsiders in order to substitute for or protect them from the state.\" Still, as the case of North Korean refugees demonstrates, translating principle into action remains an enormous challenge.", "As members of the United Nations, both China and North Korea are bound by the U.N. Charter. Both China and North Korea have ratified several key international treaties that could be used as leverage to change their human rights practices. China is party to the Refugee Convention and Protocol, which obligates China to cooperate with UNHCR and prohibits China from repatriating refugees to any countries where they are at risk for serious human rights abuses. China also ratified the U.N. Convention Against Torture and Other Cruel Inhuman or Degrading Treatment or Punishment, which states that no government shall repatriate \"a person to another State where there are substantial grounds for believing that he would be in danger of being subjected to torture.\" In addition, China has ratified the Convention on the Elimination of All Forms of Discrimination Against Women, the International Convention on the Elimination of All Forms of Racial Discrimination, the Convention on the Rights of the Child, and the International Covenant on Economic, Social and Cultural Rights.\nNorth Korea is party to two international treaties that prohibit human rights violations: the Convention on the Elimination of All Forms of Discrimination Against Women and the Convention on the Rights of the Child. It is also party to two covenants: the International Covenant on Civil and Political Rights and the International Covenant on Economic, Social, and Cultural Rights. To the extent that Beijing and Pyongyang wish to be acknowledged as legitimate members of the international community, the argument that their governments have a responsibility to uphold widely recognized human rights principles might be invoked.", "Supporters of the NKHRA point out the value of having U.S. officials raise human rights issues to the international community. Special Envoy Jay Lefkowitz has been charged with leading this effort, and insists it can be done on a track parallel to the security negotiations. Some analysts have dubbed this approach a \"name and shame\" strategy that depends on the regime in North Korea feeling sufficient pressure from the international community to curb its human rights practices. An extension of this strategy may involve singling out the Chinese and South Korean governments for their failure to publicly condemn Pyongyang's human rights violations, therefore pressuring officials in Beijing and Seoul to take a more proactive stance. Security analysts warn that the high-profile nature of this approach threatens to derail existing talks on the nuclear weapons issue given North Korea's demonstrated sensitivity to international criticism and past boycotts of the talks based on similar condemnation from State Department human rights reports or statements from U.S. officials. However, others point out that North Korea has used many issues as a pretext for boycotting talks, and that the human rights issue will not be an insurmountable obstacle if Kim Jong-il is committed to a deal.", "The strategy of offering diplomatic recognition and other incentives in exchange for dialogue on human rights and other issues has been adopted by European countries. After establishing normalized relations with North Korea in 2001, the European Union became a significant trade partner with North Korea, in addition to offering food aid and technical and humanitarian assistance. Modest \"human rights dialogues\" between Pyongyang officials and ambassadors from E.U. countries have been held. Supporters of the policy argue that having regular exchanges and embassies on the ground in Pyongyang may eventually build up the trust necessary to make progress on human rights.\nBy most accounts, North Korea's human rights record has not demonstrably improved since relations were established, although supporters of the approach point to isolated cases of progress. Some observers insist that increased contact with North Korean leadership is the only way to improve human rights in the state, and argue as a result for early normalization of relations between the United States and DPRK. However, the U.S. offer is conditional upon thorough and verifiable nuclear disarmament.", "Some advocates argue that behind-the-scenes discussions with Pyongyang and Beijing are the most effective way to improve human rights in North Korea. By staying out of the public eye, the danger of appearing to be interfering in internal affairs could be reduced. Although there were few direct exchanges between high-level North Korean and U.S. officials when the Six-Party Talks stalled, a revival in direct bilateral contact may provide more opportunities to discreetly raise human rights concerns.\nIn terms of protecting individual North Korean refugees, some refugee advocates argue that Beijing is receptive to their appeals to take small humanitarian steps if the exchange remains out of the public eye. For example, China might be convinced to quietly stop deportations and arrests, and perhaps even offer legal resident status to North Koreans who have married Chinese nationals. High-level U.S. officials could raise the issues quietly with their counterparts in bilateral talks. In addition, quiet pressure on other regional countries not to repatriate North Korean refugees and to streamline asylum seekers' cases with the South Korean government and UNHCR could help alleviate humanitarian concerns for fleeing North Koreans.", "The Bush Administration's hope that a normalization of diplomatic relations between the United States and DPRK could begin after the successful elimination of North Korea's nuclear weapons and related programs is further demonstrated by discussion of other plans, such as the negotiation of a permanent peace treaty on the Korean peninsula, development of a multinational security organization for Northeast Asia, and economic aid to North Korea. However, not mentioned in these headlines are humanitarian and human rights issues, at least for the moment. Depending upon the outcome of the current negotiations with North Korea and fulfillment of its obligations, refocusing attention on the humanitarian and human rights issues may support the need for additional legislation and oversight by Congress.\nOne option that Congress might consider is developing legislation that requires North Korea to make progress on addressing human rights conditions in exchange for diplomatic relations and an end to U.S. economic sanctions. For example, although the political situations are very different in these two countries, the Burmese Freedom and Democracy Act of 2003 could provide a useful model for such legislation. Since 1988 the United States has imposed a wide range of sanctions against Burma, which, by 2004, meant that nearly all economic relations with Burma had terminated. The Burmese Freedom and Democracy Act bans imports from Burma into the United States, which affects mainly imports of Burmese textiles. The United States has not had an ambassador to Burma since 1992 when the Senate Foreign Relations Committee refused to confirm the nomination of an ambassador because of the human rights abuses. The conditions set forth in the Burmese Freedom and Democracy Act for the lifting of sanctions show that the sentiment in Congress favors maintaining the full range of U.S. sanctions (once again renewed in August 2007) until the ruling State Peace and Development Council (SPDC) and the Burmese military terminate major human rights abuses and make fundamental political concessions to the democratically elected government. It should be noted, however, that the President has the authority to exercise these options under existing legislation.\nAppendix A. Overview of the U.S. Refugee Program\nThe admission of refugees to the United States and their resettlement here are authorized by the Immigration and Nationality Act (INA), as amended. Under the INA, a refugee is a person who is outside his or her country and who is unable or unwilling to return because of persecution or a well-founded fear of persecution on account of race, religion, nationality, membership in a particular social group, or political opinion. In special circumstances, a refugee also may be a person who is within his or her country and who is persecuted or has a well-founded fear of persecution on account of race, religion, nationality, membership in a particular social group, or political opinion. Excluded from the INA definition of a refugee is any person who participated in the persecution of another.\nEach fiscal year, following consultations with Congress, the President issues a presidential determination setting the refugee admissions ceiling and regional allocations for that year. For FY2008, the worldwide refugee ceiling is 80,000. This total includes 70,000 \"admissions numbers\" allocated among the regions of the world and an unallocated reserve of 10,000 \"numbers.\" An unallocated reserve is to be used if, and where, a need develops for refugee slots in excess of the allocated numbers.\nRefugees are processed and admitted to the United States from abroad. The State Department handles overseas processing of refugees, which is conducted through a system of three priorities for admission. These priorities are separate and distinct from whether such persons qualify for refugee status. Priority assignment, however, reflects an assessment of the urgency with which such persons need to be resettled. Priority One (P-1) covers compelling protection cases and individuals for whom no durable solution exists, who are referred to the U.S. refugee program by UNHCR, a U.S. embassy, or a non-governmental organization (NGO). North Koreans, like all nationalities, are eligible for P-1 processing. Priority Two (P-2) covers groups of special humanitarian concern to the United States. It includes specific groups within certain nationalities, clans, or ethnic groups, such as Iranian religious minorities. North Koreans are not among those eligible for P-2 processing. Priority Three (P-3) comprises family reunification cases involving spouses, unmarried children under age 21, and parents of persons who were admitted to the United States as refugees or granted asylum. Seventeen nationalities, including North Koreans, are eligible for P-3 processing in FY2008. All refugee applicants are checked through the State Department's Consular Lookout and Support System (CLASS). Certain applicants are subject to additional security checks.\nIndividuals who are preliminarily determined to qualify for a processing priority are presented to the Department of Homeland Security's U.S. Citizenship and Immigration Services (DHS/USCIS) for an in-person interview. USCIS makes determinations about whether individuals are eligible for refugee status and are otherwise admissible to the United States.\nAppendix B. Maps of North Korea" ], "depth": [ 0, 1, 1, 2, 2, 1, 2, 3, 3, 2, 3, 3, 3, 2, 3, 3, 2, 3, 3, 1, 2, 2, 2, 1, 2, 2, 2, 2, 3, 3, 1, 2, 2, 3, 3, 3, 3, 3, 3, 2, 2, 1, 2, 2, 2, 1, 2, 2, 2, 2, 2, 2, 2, 2, 2 ], "alignment": [ "h0_title h2_title h1_title", "h0_full", "", "", "", "h0_title h2_title h1_title", "h0_title", "h0_full", "", "h0_title", "h0_full", "", "h0_full", "h2_title h1_title", "", "h2_full h1_full", "", "", "", "h2_title", "", "", "h2_full", "h2_title h1_title", "", "", "h1_full", "h2_title", "h2_full", "", "h0_title h2_title h1_title", "h1_full", "h0_full h2_full h1_full", "", "", "", "", "", "", "h1_full", "h2_full", "", "", "", "", "h1_title", "", "", "", "", "", "", "", "h1_full", "" ] }
{ "question": [ "What is the current situation of North Korean refugees in China?", "What is the situation of those who remain in North Korea?", "How is North Korea generally characterized?", "How has Congress responded to this concern?", "What is the connection between North Korean refugees and human rights issues?", "Why did critics of the North Korean government raise these issues?", "Why are some hesitant to make this link?", "What is the U.S.'s position in this conflict?", "How did the Bush Administration deal with this tension?", "What is the broader importance of the North Korea conflict?", "What is the position of China and South Korea?" ], "summary": [ "North Koreans have been crossing the border into China, many in search of refuge, since the height of North Korea's famine in the 1990s. The State Department estimates that 30,000-50,000 North Korean refugees currently live in China (some non-governmental organizations estimate the number is closer to 300,000) and believes those who are repatriated may face punishment ranging from a few months of \"labor correction\" to execution.", "A number of reports also document the difficult conditions faced by North Koreans who remain in China. The plight of the North Koreans focuses attention not only on those seeking refuge and their refugee status, but also points to the factors driving their decision to leave, primarily food shortages, deteriorating humanitarian conditions, and human rights violations.", "North Korea is generally characterized as one of the world's worst violators of human rights and religious freedom, an issue that some Members of Congress and interest groups say should assume greater importance in the formation of U.S. priorities towards North Korea.", "Congressional concern about human rights in North Korea and conditions faced by North Korean refugees led to the passage of the North Korean Human Rights Act (NKHRA) in 2004.", "North Korean refugees in China and human rights issues are frequently raised simultaneously, particularly in a congressional context. Although the situation for North Koreans seeking to leave their country and for those who remain inside its borders pose different questions and may call for separate responses, both focus on the nature of the regime in Pyongyang.", "Critics of the North Korean government have raised both issues together to put pressure on the regime, particularly when nuclear weapons program negotiations stalled.", "Some advocates do not want to link refugee and human rights issues, claiming that the former calls for a quieter, cooperative approach, while the latter requires a more outspoken response to the North Korean government's practices.", "Although some policy experts insist that the United States has a moral imperative to stand up for the oppressed, others say that this creates obstacles in the nuclear disarmament negotiations.", "In 2007, the Bush Administration entered into bilateral talks with North Korea and linked the prospect of diplomatic relations and Pyongyang's re-entry into the international community with only the nuclear issue, leaving out human rights and refugee concerns.", "Nevertheless, North Korean human rights and refugee issues remain significant concerns and also have broader regional importance. North Korean refugees seeking resettlement often transit through other Asian countries, raising diplomatic, refugee, and security concerns for those governments.", "China and South Korea want to avoid a massive outflow of refugees, which they believe could trigger the instability or collapse of North Korea. South Korea, as the final destination of the vast majority of North Koreans, struggles to accommodate new arrivals and does not want to damage its relations with North Korea." ], "parent_pair_index": [ -1, -1, -1, 2, -1, 0, 0, -1, 3, -1, 0 ], "summary_paragraph_index": [ 0, 0, 0, 0, 1, 1, 1, 1, 1, 2, 2 ] }
CRS_R43377
{ "title": [ "", "Overview", "Current Issues for Policymakers", "Context", "A New Government: Prospects and Challenges", "MINUSCA: Current Issues", "Allegations of Sexual Abuse and Exploitation by Foreign Troops", "The Economy", "Lord's Resistance Army Presence57", "U.S. Policy and Aid", "Recent Legislation", "Outlook and Issues for Congress" ], "paragraphs": [ "", "The Central African Republic (CAR) has struggled to emerge from conflict and state collapse since 2013, when a rebel movement known as the Seleka seized control of the government. Seleka was led by Muslim combatants with ties to CAR's northeastern border region. \"Anti-balaka\" (\"anti- machete\" or \"anti-bullet\") militias were formed in response and fought the Seleka and Muslims in general. The ensuing conflict featured widespread violence against civilians and the disintegration of already weak institutions. Violence has waned since 2013-2014, but periodic flare-ups continue to undermine social cohesion, government stability, and the return of displaced populations. CAR has never had an effective central government exercising authority over its full national territory, and there have been recurrent insurgencies and army mutinies since the 1990s.\nIn early 2016, CAR completed national elections and a transition from an interim government that had led the country since 2014. Faustin Archange Touadéra, a former prime minister who had cultivated a discreet public profile, was elected president. His inauguration marked CAR's second democratic transfer of power since independence from France in 1960, and the convening of a new National Assembly in May 2016 formally brought the political transition period to a close. Donors are now attempting to support the new government while balancing policy concerns (such as ties between the military and anti-balaka groups) and competing global demands for humanitarian and peacekeeping resources.\nAs during past crises in CAR, international forces have deployed since 2013 in an effort to stabilize the country. The U.N. Multidimensional Integrated Stabilization Mission in CAR (MINUSCA), established in 2014, absorbed a previous African-led military force. MINUSCA is mandated to protect civilians, support reconciliation and the extension of state authority, assist security sector reform efforts, facilitate humanitarian aid, and in some situations implement \"urgent temporary measures ... to arrest and detain in order to maintain basic law and order and fight impunity.\" Starting in late 2013, France deployed Operation Sangaris to disarm militias and secure the capital, Bangui. The mission, with over 2,000 troops at its peak, ended in October 2016, but France is expected to maintain a rapid-reaction force and security cooperation program. The European Union (EU) deployed some 750 soldiers to help secure Bangui in 2014-2015, and subsequently established a military advisory mission (\"EUMAM\") to support reforms.\nCAR remains fragile, and President Touadéra has been slow to advance initiatives that could bring greater stability. State institutions remain absent from much of the country. Much of CAR's minority Muslim community has fled to the northeast or to neighboring countries. The Seleka movement has split into factions that have fought each other—and targeted civilians from ethnic communities associated with rival factions. All parties, including the military, have reportedly engaged in racketeering and extortion in their areas of influence. The Lord's Resistance Army (LRA), a small but brutal Ugandan-led militia, is active in the east, where it appears to have benefitted from CAR's recent instability. Domestic opposition to MINUSCA has been stoked by the mission's lack of capacity, by scandals involving alleged sexual abuse and exploitation by foreign troops, and by self-interested efforts by nativist politicians and activists.\nU.N. agencies estimate that some 450,000 Central Africans are refugees in neighboring countries (compared to 152,500 as of mid-2012), while 385,000 are internally displaced—out of a total pre-conflict population of roughly 5 million. Militia attacks on aid personnel have exacerbated an already dire humanitarian situation, in which some 2.4 million residents are reportedly in need of assistance. Economic activity has moderately improved since 2015, but real gross domestic product (GDP) remains below pre-conflict levels, and continued violence threatens to reverse limited gains. CAR was already one of the world's poorest countries before the conflict, and it ranked 187 out of 188 countries on the 2015 U.N. Human Development Index.", "U.S. and other international policymakers are currently considering a range of questions regarding the response to the situation in CAR, including:\nTo what extent should donors transition from emergency humanitarian assistance toward development aid for CAR? What level of support is appropriate? Who should plan and fund the disarmament, demobilization, and reintegration (DDR) of former combatants? Which fighters should be eligible for either integration into the military or assistance with establishing civilian livelihoods? With the end of France's Operation Sangaris, to what extent should other international troops be prepared to fend off a renewed rebel assault on Bangui? How should the U.N. Security Council respond to the CAR government's repeated requests to lift a U.N. arms embargo so as to allow the CAR military (known as the FACA, after its French acronym) to rearm? Given reported links between elements of the FACA and anti-balaka groups, should an end to the embargo be conditioned on requirements for human rights vetting and ethnic/religious balance? (See \" Context ,\" below.) To what extent should U.S. military advisors, who are in CAR to help counter the LRA, work with the FACA—particularly if the primary U.S. partner in counter-LRA operations, the Ugandan military, withdraws in the coming months? (See \" Lord's Resistance Army Presence ,\" below.) Should targeted sanctions designations be expanded or otherwise revised, and for what purposes? (See \" U.S. Policy and Aid ,\" below.) How, if at all, should U.N. Security Council members adjust MINUSCA's mandate in response to changing political and security conditions? What can or should U.N. member states do to improve MINUSCA's effectiveness and commitment to protecting civilians from violence? To improve U.N. efforts to prevent and punish sexual abuse and exploitation by peacekeepers in CAR? (See \" MINUSCA: Current Issues ,\" below.) How should donors balance a desire to support the Touadéra administration with concerns about its ties to sanctioned individuals such as ex-president Bozizé? (See \" A New Government: Prospects and Challenges ,\" below.) How should the CAR government and its international partners respond to recent efforts by some ex-Seleka leaders to reunite the movement? What steps should the CAR government and its international partners take to encourage the return of displaced populations? To what extent should donors work to build up CAR's civilian security forces, such as police and corrections officers? What is the appropriate level of donor support for reconciliation and accountability measures, including a nascent Special Criminal Court designed to prosecute the gravest crimes since 2003? Should stakeholders support new Kimberley Process designations of areas from which diamond exports are cleared to resume? (See \" The Economy ,\" below.)", "The contours of the conflict in CAR reflect complex tensions over access to resources, control over trade and financial networks, and national identity. Prior to the conflict, CAR's population was estimated to be 15% Muslim and 85% Christian or followers of indigenous beliefs. The Seleka (\"alliance\" in the local Sangho language) rebellion was founded in 2012 in northeastern CAR, and that region—home to many Muslim communities with cross-border ties to Chad and Sudan—remains the primary stronghold of ex-Seleka factions following the group's splintering in 2013-2014. At its inception, Seleka leaders appeared united by little other than a desire for power, looting, and revenge. Still, the movement drew on grassroots grievances among Muslims and northeasterners relating to perceived political exclusion, poor governance, and abuse under successive central administrations led by Christians from the south or northwest.\nFor their part, the Christian- and animist-led anti-balaka groups that first organized in Bangui in late 2013, in response to the Seleka takeover, have drawn on popular anger at historic patterns of raiding (including slave-raids) by Muslims from the northeastern border area, and on frustrations with contemporary Muslim traders' prominence in commerce and the mineral sector. Politicization of religious identity rose under former President François Bozizé, who headed an evangelical church as president and has been implicated in supporting anti-balaka mobilization from exile. (Bozizé took power in a rebellion in 2003 and was deposed by the Seleka in 2013.) In a complex twist, Bozizé's reliance on Chadian combatants while in office may have further stoked nativist anger against residents with family ties to Chad, many of whom are Muslim.\nAlthough religious ideology does not appear to have been at the heart of the CAR conflict, one result of these tensions has been brutal collective punishment based on sectarian identity. In 2013, Seleka commanders oversaw attacks on Christian communities, including massacres in the northwest—Bozizé's home region and political stronghold. By mid-2014, after the Seleka had been pushed out of power and the national military had effectively disbanded, anti-balaka groups gained the upper hand in much of the south and west, where they launched assaults on Muslim communities in religiously mixed areas. Ultimately, hundreds of thousands of Muslims fled their homes, Muslim-owned properties and businesses were looted and seized, mosques were destroyed, and Muslim religious practice was reportedly forcibly suppressed, including through forced conversions. In mid-2014, thousands of Muslims who had been forcibly confined to enclaves under international protection were evacuated, with international assistance, to the northeast or to neighboring countries. A U.N. commission of inquiry concluded that abuses by anti-balaka groups amounted to \"ethnic cleansing\" of CAR's Muslim community.\nThe pace of overtly sectarian killings has slowed since 2014, but flare-ups continue to occur. In some cases, violence appears to have been the product of spontaneous events, while in others it appears to have been orchestrated by militia leaders with political ties (e.g., anti-balaka leaders with ties to Bozizé, sometimes with support from elements of the military). In September 2015, a wave of violence set off by the murder of a Muslim man in Bangui reportedly served as cover for an attempted overthrow of the transitional government by an \"alliance of convenience\" among ex-Seleka and anti-balaka hardliners. Members of the national military (FACA)—characterized in a subsequent U.N. investigation as \"dominated by Christians and… generally distrusted by Muslims\"—reportedly participated in the abuses. Clashes among ex-Seleka factions have also increased since 2014, pointing to divergent interests, ethnic identities, and constituencies represented within the movement. Recent sectarian and militia violence has been concentrated in Bangui and in interior areas located at the seams of ex-Seleka and anti-balaka control.\nMore broadly, cycles of violence in CAR are rooted in patterns in which successive governments have coopted rebel leaders by offering them government posts—thereby providing an incentive for rebellion, weakening civilian-led political movements, and contributing to a perception of impunity. Some analysts assert that these practices are, more broadly, linked to systems of patronage and nepotism that have allowed leaders to exercise \"extended personal rule\" over a vast, diverse, and sparsely populated country. Some posit that the recent conflict also reflects a tradition of armed resistance among CAR's rural communities. Overall, the dynamics of violence have rendered it difficult to distinguish between combatant and civilian, and between the stated and \"genuine\" motivations of armed group leaders.\nObservers warn that the recent conflict has calcified ethno-religious identities in CAR, further entrenching the societal cleavages that contributed to the emergence of the crisis. According to the International Crisis Group, the conflict has led to the rise of \"armed communities divided along religious lines,\" and has \"reopened the dangerous question about who has the right to live in CAR.\" Anti-Muslim sentiment appears to remain widespread among Christians, as does the notion that Muslims are foreign invaders. In 2016, U.N. sanctions monitors have documented \"acts of aggression targeting Muslim internally displaced persons and refugees returning to their homes,\" while a MINUSCA investigation reported that CAR's \"complex ethno-political conflict… can increasingly be seen as sectarian or religious in nature.\"", "President Touadéra assumed office in March 2016, having won over 60% of the vote in a February 2016 run-off against Anicet-Georges Dologuélé, following general elections in December 2015. African Union (AU) observers found both polls to be transparent and reported registered voter turnout of 78% and 63% in the first and second rounds, respectively. (There were no Western-funded independent national election observation missions.) Donors praised the election as a relatively open and peaceful contest.\nTouadéra previously served as Prime Minister under former President Bozizé, and before that was a math professor. He cultivated a low profile during the transitional period, ran as an independent, and was not generally seen as a front-runner for the presidency. Some observers have attributed Touadéra's victory to his relative obscurity, which may have allowed him to avoid concerted opposition. As the first president to come to office in a democratic transfer of power since 1993, Touadéra is well positioned to leverage international and domestic goodwill. Donors and CAR residents furthermore heralded the transition from the interim presidency of Catherine Samba-Panza, whose administration, despite initial optimism, had come to be characterized by a lack of initiative and by persistent allegations of corruption and nepotism. While Touadéra has garnered praise for his quiet personal style and broad political coalition, however, his administration may well fall subject to similar pathologies and challenges ahead.\nThe contest between Touadéra and Dologuélé (another former Prime Minister under Bozizé) involved a competition over supporters of the former president—who is designated for multilateral sanctions and was barred from running for reelection by CAR's Constitutional Court. Dologuélé was endorsed both by Bozizé's formerly ruling Kwa na Kwa party and by the self-styled national coordinator of the anti-balaka militias, but these groups' membership may have split between the two candidates. Dologuélé decried \"massive fraud\" in the run-off, but ultimately conceded the election \"for the sake of peace.\" He was, at the same time, elected to parliament, where he leads the opposition bloc.\nTouadéra's close ties to former President Bozizé have raised concerns. He has appointed several Bozizé allies to his cabinet, possibly due to a desire to maintain support from individuals who continue to wield substantial political clout. Some observers warn that perceived under-representation of Muslims in Touadéra's government could stoke tensions: there is only one Muslim in a prominent office, that of Speaker of Parliament, and only three, heading relatively low-power posts, in Touadéra's 23-member cabinet. According to U.N. sanctions monitors, this \"represents a missed opportunity to send a strong signal of inclusion and reconciliation.\"\nObservers have identified disarmament, national reconciliation, military reform, and job creation as key issues on which Touadéra will need to make visible progress in order to retain popular legitimacy and momentum. He arguably must also address CAR's legacy of poor governance, impunity, and corruption, which many see as the root causes of the country's instability. To date, the president's approach to such policy challenges remains uncertain, despite ongoing talks with armed group leaders. A so-called Bangui Forum, held in May 2015 with the participation of a wide range of civic actors and some (but not all) militia commanders, produced notional frameworks on disarmament, reforms, and reconciliation—but the status of these commitments is now uncertain. The means and timeline for their implementation were uncertain from the start.\nSpoilers remain a potent threat. The national government remains largely confined to the capital, while ex-Seleka and anti-balaka factions remain active across swathes of the country. Despite shared ties to Bozizé, powerful anti-balaka leaders in Bangui have criticized Touadéra's leadership since his inauguration, and are increasingly involved in fomenting violent anti-U.N. sentiment. Meanwhile, some ex-Seleka leaders have engaged in an apparent effort to reconstitute the movement in the northeast. Some armed factions have rejected negotiations entirely. A fractious parliament, comprising representatives from 17 parties in addition to 57 independent delegates, may further impede momentum and complicate decision-making. Given the scale of challenges, experts question whether the new government will have the political will and capacity to achieve meaningful progress on stabilization.\nA constitutional referendum held in December 2015 was marred by violence, although the draft constitution was, in the end, backed by a majority of voters and thus adopted. The text of the new constitution appears designed to increase checks on presidential power (including via the creation of a new upper legislative chamber, the Senate), introduce firmer wording on presidential term limits, and improve legislative oversight of natural resource extraction deals signed by the government. It also prohibits from public service anyone found to have been complicit in a coup d'État, rebellion, or mutiny.", "The U.N Security Council authorized the U.N. Multidimensional Integrated Stabilization Mission in CAR (MINUSCA) in 2014. It replaced and largely absorbed an existing African Union (AU) stabilization force, along with a preexisting U.N. political mission. U.N. Security Council Resolution 2212 (2015) increased MINUSCA's troop ceiling from 11,820 total uniformed personnel to 12,870, including 10,750 military personnel and 2,080 police. Resolution 2301 (2016) subsequently extended the operation's mandate through November 2017.\nSince its inception, MINUSCA's effectiveness and conduct have been in question. Although it reached over 95% of its authorized military strength and 84% of its authorized police strength as of August 2016, the mission's ability to deploy effectively in remote areas has been hindered by logistical hurdles (including a lack of national transportation infrastructure and CAR's long rainy season) as well as troop contributor equipment and capacity shortfalls. According to a 2016 U.N. strategic review, air transport to eastern and northern zones is further constrained by \"strong winds and high levels of dust, as well as the scarcity of properly refurbished airstrips, [which] make the majority of airports not fully functional after sunset.\"\nUnder its mandate to protect civilians, MINUSCA has declared \"weapons-free zones\" in key conflict-affected areas, including Bambari and Kaga-Bandoro, two heavily contested towns in central CAR. The implementation of such initiatives remains in question, as anecdotal evidence suggests that armed actors continue to enter such zones unobstructed. Underscoring the challenge of disarmament in CAR, the killing of a Muslim man in Kaga-Bandoro in October 2016 triggered a wave of violence by ex-Seleka, anti-balaka, and armed civilians in the town that claimed nearly 40 lives and displaced thousands.\nForce protection has been a challenge: the U.N. reports that twelve MINUSCA peacekeepers have been killed in \"malicious acts\" since operations began. An internal review by MINUSCA in October 2016 noted \"rising discontent\" with the mission. Continued violence has fueled local frustrations with MINUSCA's perceived ineffectiveness, but public hostility may also be driven by \"demagogic\" rhetoric by some actors who seek to discredit international forces and destabilize the government for their own purposes. In late October 2016, anti-U.N. protests in Bangui turned violent, leading to clashes between peacekeepers and armed demonstrators in which four civilians were reportedly killed and fourteen people injured, including five peacekeepers.", "French, AU, and U.N. troops have been accused of sexual abuse and exploitation in CAR, in many cases involving children. U.N. statistics indicate that there have been 63 allegations against MINUSCA personnel (nearly all of them military troops) since the mission's inception, of which 41 have been made in 2016 to date. Since 2015, MINUSCA has had the highest number of such allegations per year of any U.N. peacekeeping operation. A spate of new claims that were leaked in March 2016 reportedly implicate French forces and MINUSCA peacekeepers in 108 potential additional cases of sexual abuse. An internal U.N. memo leaked to the press in October 2016, however, reportedly suggested that some allegations may have been fabricated by individuals seeking financial compensation. The reportedly high number of abuses by MINUSCA personnel has been attributed to the decision to \"re-hat\" African Union troops as U.N. personnel without sufficient training or, perhaps, vetting—in addition to other factors related to the harsh and violent context in which MINUSCA troops serve in the field.\nRecent questions about the veracity of some allegations notwithstanding, the U.N. has been widely criticized for what has been described as an insufficient response to allegations concerning MINUSCA personnel, and for its handling of allegations concerning other foreign troops in CAR. Notably, it emerged in mid-2015 that evidence of abuses by French forces in CAR had been ignored by U.N. officials for months, despite a mandate to report on human rights abuses. In December 2015, an independent review accused U.N. agencies and MINUSCA of being aware of the allegations but failing to follow up on them appropriately—amounting to \"a gross institutional failure.\" U.N. agencies were also accused of retaliating internally against a career U.N. human rights official based in Geneva who, in 2014, directly informed French authorities of previously unreleased reports of abuses by French troops.\nIn response to these scandals, U.N. Secretary General Ban Ki-moon fired the head of MINUSCA, Senegalese Army General Babacar Gaye, in August 2015. His successor, Parfait Onanga-Anyanga, a Gabonese civilian and longtime U.N. official, has vowed to address abuses, including by providing communities with resources to report misbehavior, bolstering investigative officers, and providing protection for whistleblowers. At a U.N. system-wide level, the Secretary General has also announced increased measures to promote transparent reporting on allegations of abuse, to expand prevention efforts, and to strengthen accountability for troops implicated in abuses.", "CAR is one of the world's least developed countries. Agriculture, forestry, and mining are the most important economic sectors, but all are in disarray. Population displacements have severely disrupted the farming cycle and other livelihoods, leading to \"crisis\"-level food insecurity throughout the country. The exodus of persecuted Muslim communities, who previously dominated trade networks in much of the country, may have contributed to economic collapse.\nIllicit economic networks have flourished in many areas, leading some to describe CAR as a \"warlord\" economy. According to a 2015 report by the Enough Project, armed groups in CAR profit \"from forceful taxation and illicit trade with gold and diamonds that are smuggled across international borders or sold to Central African diamond companies. Moreover, armed groups use violence, attacks, and threats to collect revenue from civilians, businesses, and public institutions and to conduct widespread looting.\" Poaching of elephant ivory is another reportedly lucrative source of revenue for armed groups, including the LRA. Seleka fighters reportedly participated in several large elephant killings in 2013, and while in control of Bangui, Seleka forces reportedly looted the Ministry of Water and Forests for weapons and previously confiscated ivory tusks.\nCAR produces diamonds, but in 2013 it was suspended from exporting them under the Kimberley Process—an international certification-based rough diamond regulation initiative aimed at preventing \"conflict diamonds\" from entering legitimate international trade. Armed groups reportedly control mining sites in central CAR, and U.N. sanctions monitors reported that over $24 million worth of diamonds were smuggled out of the country between May 2013 and October 2014. In July 2015, citing \"progress made to date\" by CAR, the Kimberley Process established a framework for the resumption of rough diamond exports from certain designated \"compliant zones\" deemed free from the control of non-state armed groups. In March 2016, Kimberley Process monitors certified Berbérati, a sub-prefecture of southwestern Mambéré-Kadéï prefecture ( Figure 1 ), as compliant, and exports from that area resumed in June. Three more sub-prefectures—Carnot (Mambéré-Kadéï), Boda (Lobaye), and Nola (Sangha-Mbaéré)—were declared compliant in September 2016; efforts to certify additional zones, particularly in the country's southwest, are underway. However, observers have cautioned against premature certification of mining zones in areas where anti-balaka groups remain active, and an August 2016 U.N. Panel of Experts report documented ongoing violence and restrictions on freedom of movement, particularly of Muslims, in Berbérati and Carnot, among other areas.\nThe International Monetary Fund (IMF) approved a three-year, $115.8 million financial assistance package in 2016 that \"aims to entrench macroeconomic stability and create the conditions for sustained and inclusive growth.\" An early assessment of the program, which is designed to build on previous IMF assistance disbursed under the 2014-2015 interim government, concluded that structural reforms focused on revenue generation were \"broadly on track.\" At the same time, in November 2016, the IMF lowered its GDP growth projections for CAR to 4.5% and 5.0% in 2016 and 2017, respectively, down from July 2016 forecasts of 5.2% and 5.5%. The IMF also noted rising prices for staple goods, and raised its projection of average annual inflation to 5.1%, from 4.0% previously. The IMF staff team attributed the revised estimates to deteriorating security conditions.\nThe World Bank has committed nearly $100 million in grants and concessional loans since 2013 to help restore key government services in CAR. In the meantime, humanitarian organizations remain the country's primary providers of basic services.", "Separate in origin from the 2013-2015 conflict, the Lord's Resistance Army (LRA), a small militia of Ugandan origin founded and led by Joseph Kony, has operated in CAR's southeast since at least 2008. Since 2014, the group has expanded its area of influence into northeastern Haute-Kotto prefecture, though U.N. sanctions monitors report that the group's primary areas of operation remain along CAR's southeastern border with the Democratic Republic of Congo (DRC). LRA attacks on rural communities have displaced hundreds of thousands of people in CAR, DRC, and South Sudan since 2008. CAR appears to have attracted LRA commanders due to its remoteness, lack of an effective military, and location near territory previously familiar to the group. Further, according to non-government reports, the LRA exploits CAR's porous southern and eastern borders to smuggle ivory poached from DRC to Kafia Kingi, a Sudanese enclave where the LRA has reportedly established a presence, for trafficking onward to Asia.\nThe Ugandan military has conducted counter-LRA operations in CAR since 2009. The United States has provided significant support, including logistical and intelligence assistance to Ugandan troops and the deployment of U.S. military advisors to the field since late 2011. The Ugandan-led operations have been re-hatted as an AU Regional Task Force (AU-RTF) since 2012. The United States has also provided funding for assistance to communities in LRA-affected areas, including humanitarian aid, early warning efforts, and reconciliation programs. In 2016, Uganda began pulling back from its forward operating bases in CAR and announced its intentions to fully withdraw its troops from CAR by early 2017 at the latest. The implications for the U.S. military advisory mission, Defense Department-funded logistical support, and civilian LRA-related foreign aid programs remain to be seen.\nLRA fighters appear to have taken advantage of instability in CAR to evade regional military operations. They have also reportedly leveraged opportunistic relationships with ex-Seleka fighters to expand their involvement in illicit trafficking of gold and diamonds from CAR, though such relationships appear to reflect individual agreements, not broader ties between the groups.\nIn January 2015, Dominic Ongwen, a top LRA commander, surrendered to U.S. forces in CAR—reportedly after making contact with ex-Seleka combatants. He was then delivered to the International Criminal Court (ICC) in The Hague, where he faces seven counts of war crimes and crimes against humanity. In April 2015, remains exhumed from a grave in CAR were confirmed to be those of another top LRA commander, Okot Odhiambo. These developments appeared to confirm a gradual weakening of the group's leadership structure in recent years: of five top LRA commanders sought by the ICC since 2005, only Kony remains at large. Recent estimates put the LRA's total strength at fewer than 200 fighters. Advocates of a continued U.S. role in countering the LRA nevertheless warn that the group remains a threat and could rebound.", "U.S. engagement in CAR has historically been limited. The U.S. diplomatic presence prior to the recent conflict consisted of a tiny embassy staff, with no full-time U.S. Agency for International Development (USAID) presence. A small number of U.S. military advisors had deployed to CAR starting in 2011 in support of Ugandan-led counter-LRA operations (discussed above). In December 2012, U.S. diplomatic personnel were evacuated from Bangui as the Seleka rebel movement advanced toward the capital. The U.S. government resumed limited diplomatic operations in Bangui in mid-2014, headed by a Chargé d'Affaires, along with a Washington, DC-based Special Representative for CAR. In October 2015, a new U.S. Ambassador, Jeffrey Hawkins, took up his position in Bangui, marking a return to full embassy operations.\nAs the crisis erupted in 2013, the Obama Administration significantly scaled up U.S. aid and diplomatic efforts to stem the surge of violence. The President issued Executive Order 13667 (2014) authorizing targeted sanctions against actors fueling the conflict; the State Department and Defense Department provided substantial support to African peacekeepers and French troops deploying to CAR; the President and other Administration officials engaged in public diplomacy outreach to the people of CAR; the State Department and USAID identified new funding for conflict mitigation, reconciliation, justice, and governance programs; and in the U.N. Security Council, the Administration supported the establishment of MINUSCA. Top officials portrayed these actions as part of a broader Administration effort to elevate the prevention of \"mass atrocities\" as a core tenet of U.S. foreign policy—and as the product of a related interagency process known as the Atrocities Prevention Board. Visiting Bangui in 2014, U.S. Permanent Representative to the U.N. Samantha Power stated that, \"the Rwandan genocide taught us the price of delay in responding to mass violence… We must do more; and we must do it now.\"\nThe Administration has imposed targeted financial and travel sanctions on 13 individuals (one of whom was subsequently removed from the list after his death), two private companies, and one armed group as a whole for contributing to the conflict in CAR. Those sanctioned include former presidents François Bozizé and Michel Djotodia (the Seleka leader who seized power in 2013); militia leaders affiliated with both the Seleka movement and anti-balaka groups; the Lord's Resistance Army (as a group) along with LRA founder Joseph Kony and two of his sons; and two Belgium-based diamond companies. Not all U.S. designees are on the U.N. sanctions list; for example, the U.N. sanctions committee on CAR has not designated Djotodia to date. Few, if any, designees are known to maintain assets in the United States or to have traveled to the United States. Several on the U.N. list, however, appear to travel relatively freely within the region, despite U.N. member states' purported obligations to implement a multilateral travel ban.\nThe United States has been the leading bilateral humanitarian donor to CAR since 2013, providing over $404 million to help address needs both within CAR and among CAR refugees and host communities in neighboring countries. The United States is also the top financial contributor to MINUSCA's budget (as with all U.N. peacekeeping operations), under the system of assessed contributions for U.N. peacekeeping. U.S. funding for MINUSCA is provided through the State Department's Contributions to International Peacekeeping Activities (CIPA) account. As of early 2016, the anticipated U.S. allocation for MINUSCA from FY2016 funds totaled $286.7 million, and the Obama Administration requested $285 million for FY2017.\nFor FY2017, the State Department also requested $18.1 million in bilateral aid for CAR: $8 million in Peacekeeping Operations (PKO) funds for continuing voluntary support to African troop contributors to MINUSCA and for bilateral support to security sector reform; $5.7 million in International Narcotics Control and Law Enforcement (INCLE) funds to continue efforts to establish a functioning criminal justice system; $4.3 million in Economic Support Fund (ESF) for peacebuilding programs; and $150,000 in International Military Education and Training (IMET) for military professionalization and to promote bilateral military ties. At a major donors' conference for CAR held in Brussels in November 2016, the Administration pledged $11.7 million in U.S. funding to support the justice sector, law enforcement, and economic livelihoods, referring to already budgeted funds. Total donor pledges reached $2.2 billion.\nThe above bilateral aid figures do not include emergency humanitarian aid, which is allocated during the year according to need. The CAR aid figures reported in the State Department's annual Congressional Budget Justification also do not include substantial funding that has been allocated through regionally- and centrally-managed programs, including for conflict-mitigation, security sector reform, and other special initiatives. USAID and the State Department allocated roughly $27 million for development and peacebuilding programs in CAR between FY2013 and FY2016, much of which was not originally budgeted specifically for CAR. Due to such allocations, the State Department-administered INCLE account has become a top source of U.S. aid funding for CAR since 2014, with at least $25 million notified to Congress in FY2015 alone (constituted from reprogrammed funds), to help build, train, and equip CAR's police and judicial sector.\nLegal restrictions on certain aid to the government of CAR under the Trafficking Victims Protection Act of 2000, due to CAR's poor ranking in the State Department's Trafficking in Persons report, were waived by President Obama, who asserted that the provision of otherwise-restricted programs \"would promote the purposes of the Act or is otherwise in the national interest of the United States.\"", "The 114 th Congress helped shape U.S. engagement with CAR through several legislative provisions, primarily enacted through foreign aid appropriations measures. In particular, Congress provided unspecified levels of funding for reconciliation and peacebuilding programs in CAR (most recently, §7042[a], Division K of P.L. 114-113 , the FY2016 Department of State, Foreign Operations, and Related Programs Appropriations Act) and for programs to assist civilians in areas affected by the LRA (§7042[f]). Similar provisions were included in the House version of the FY2017 foreign aid appropriations bill ( H.R. 5912 ), and in report language accompanying the Senate version of the same ( S.Rept. 114-290 , accompanying S. 3117 ). Other relevant legislation enacted in the 114 th Congress included the Eliminate, Neutralize, and Disrupt Wildlife Trafficking Act of 2016 ( P.L. 114-231 ).\nThe House Report accompanying H.R. 5485 (Financial Services and General Government Appropriations Bill, 2017; H.Rept. 114-624 ) recommends \"the use of funds to enhance regional expertise and capacity for sanctions investigations, policy development, and enforcement of sanctions\" in Africa, including, specifically, CAR. Resolutions introduced in the 114 th Congress with potential implications for CAR included H.Res. 310 and S.Res. 211 (regarding genocide and mass atrocities), S.Res. 237 and H.Res. 394 (on the Lord's Resistance Army), and S.Res. 204 (on \"World Refugee Day\"). In the 113 th Congress, S.Res. 375 , concerning the crisis in CAR and international efforts to address it, passed the Senate.\nIn the 113 th Congress, Senate appropriators expressed concern that violence between Christians and Muslims in CAR \"could result in genocide\" and required the Secretary of State to report \"on an interagency strategy to help promote stability\" in the country, including funding estimates ( S.Rept. 113-195 , accompanying S. 2499 ). The State Department submitted a strategy document in April 2015 that defined U.S. \"national interests\" in CAR as \"first, to prevent mass atrocities and genocide,\" and \"second, to help CAR become a stable regional partner able to exercise effective governance throughout its territory, thereby preventing the use of CAR territory for international criminal or terrorist networks.\"", "Some observers assert that U.S. response to the conflict in CAR helped avert a much larger crisis. The situation nonetheless remains extremely challenging, leading others to characterize it as an example of the limits of international commitments to protect civilians. Despite domestic political progress, international troop deployments, aid, and diplomatic engagement, residents of CAR continue to suffer armed attacks by militias. Few root causes of the conflict have been successfully addressed. Looking ahead, Congress may influence the funding levels, duration, and mechanisms of U.S. humanitarian assistance and U.S. support for stabilization efforts. Congress may also weigh the relative priority of the CAR crisis in the context of competing priorities elsewhere in Africa and beyond.\nSome observers have examined MINUSCA's performance in the context of an ongoing debate regarding the relative merits of African Union versus U.N.-conducted stabilization missions. This debate has been at play in Mali, Somalia, and elsewhere. In short, neighboring states may have greater political commitment to resolving a crisis in their backyard, but regional operations are often hampered by a lack of capacity and handicapped by political rivalries and competing interests. On the other hand, U.N. peacekeeping operations, while more consistently funded and vetted, can be slow to fully deploy and, often, risk-averse to a point that can inhibit effectiveness. They, too, may rely on troop contributors that exhibit limited capacity and accountability.\nIn the long term, the internal political and security arrangements that could allow for stability and improved governance in CAR may prove elusive. International actors have repeatedly attempted military interventions, peace processes, state-building, and security sector reform efforts in CAR—with mixed results, at best. Despite agreements at the 2015 Bangui Forum and ongoing consultations with armed groups by the new government, the disarmament, demobilization, and reintegration (DDR) of combatants, the investigation and prosecution of human rights abusers, and the creation of functional and representative state security forces in CAR have not significantly advanced. The conflict appears to have created new, harmful dynamics among communities at the grassroots level that may prove durable and difficult to contain.\nThe potential impact of the CAR crisis on regional stability is of concern to U.S. policymakers, particularly as conflicts and political crises in nearby countries, such as South Sudan, Burundi, and DRC, persist. To date, little violence has been reported among border communities in neighboring states, despite refugee flows from CAR and the fact that CAR's demographics are mirrored elsewhere in Central Africa. Still, CAR refugees have taxed scarce local resources, while insecurity has hindered cross-border trade and humanitarian aid delivery. Neighboring states have limited capacity to respond to these problems or to contain violence should it erupt.\nRegional crises also have the potential to spill in to CAR or otherwise affect stabilization efforts there. For example, in January 2016, U.N. headquarters officials decided not to renew the Burundian police contingent in MINUSCA when its current tour of duty ends, citing police abuses within Burundi. Further turmoil in Burundi, a top MINUSCA troop contributor, could lead the country to withdraw its military personnel as well (or the U.N. to reject them). Concerns about whether transnational violent extremist organizations could seek safe havens in CAR or radicalize local populations affected by the conflict are also likely to persist." ], "depth": [ 0, 1, 2, 1, 1, 1, 2, 1, 1, 1, 2, 1 ], "alignment": [ "h0_title h2_title h1_title", "h0_full h1_title", "h1_full", "h0_full", "", "h0_full", "", "", "", "h2_title h1_title", "h2_full h1_full", "h1_full" ] }
{ "question": [ "From crisis is the Central African Republic emerging?", "What is the nature of the political transition?", "What is the status of continued violence?", "What are the effects of the violence?", "What are the key issues introduced in the 115th Congress with regards to CAR?", "On what is the context for the consideration of these issues dependent?", "What else has resulted from the CAR situation?", "What does the Consolidated Appropriated Act provide?", "How does this act compare to other provisions?", "How is the funding being distributed according to the FY 2016 Act?", "What other relevant legislation has been passed?", "How has 113th Congress aided the 114th Congress?" ], "summary": [ "The Central African Republic (CAR) is emerging from a crisis that began when rebels overthrew the national government in 2013, ushering in a chaotic and violent period.", "A new president, Faustin Archange Touadéra, was elected in 2016, but gains remain fragile.", "Militias that have targeted civilians on the basis of religious and ethnic identity continue to operate in much of the country, posing challenges to governance, reconciliation, and accountability.", "Violence has caused large population displacements, weakening an already tiny economy and placing strains on finite international aid and peacekeeping resources.", "Key issues for the 115th Congress include the authorization, appropriation, and oversight of U.S. aid and peacekeeping funding and of U.S. policy toward CAR.", "The context for these considerations will depend to some extent on the approach of the incoming Donald Trump Administration to CAR and regional issues.", "The situation in CAR also has implications for several broad policy challenges in which Congress has displayed interest:", "The FY2016 Consolidated Appropriations Act (P.L. 114-113) provided that funding appropriated for aid to CAR \"shall be made available for reconciliation and peacebuilding programs, including activities to promote inter-faith dialogue at the national and local levels, and for programs to prevent crimes against humanity.\"", "A similar provision is included in H.R. 5912 (Department of State, Foreign Operations, and Related Programs Appropriations Act, 2017), and similar provisions were enacted in prior foreign aid appropriations measures.", "The FY2016 Act also provided funding for assisting civilians in LRA-affected areas, such as southeastern CAR, as did prior aid appropriations measures.", "Other relevant legislation enacted in the 114th Congress includes the Eliminate, Neutralize, and Disrupt Wildlife Trafficking Act of 2016 (P.L. 114-231).", "The 113th Congress held several hearings on CAR in the House and Senate." ], "parent_pair_index": [ -1, -1, -1, 2, -1, 0, 0, -1, 0, 0, 0, 0 ], "summary_paragraph_index": [ 0, 0, 0, 0, 3, 3, 3, 5, 5, 5, 5, 5 ] }
CRS_R43892
{ "title": [ "", "Introduction", "Reasons for the Removal of a Foreign National", "Grounds of Inadmissibility", "Grounds of Deportability", "Consequences of an Order of Removal", "Removal Processes", "Standard Removal Process (INA §240)", "Stipulated Removal (INA §240(d))", "Streamlined Removal Processes", "Expedited Removal of Arriving Aliens (INA §235(b))52", "Expedited Removal of Aliens Convicted of Aggravated Felonies (INA §238)", "Reinstatement of Removal (INA §241(a)(5))", "Alternative Forms of Removal (i.e., Returns)", "Voluntary Departure (INA §240B)", "Withdraw of Application (INA §235(a)(4))", "Statistics on Removals and Returns", "Aliens Removed and Returned Since 1995", "Removal Statistics Since FY2002", "Removals by Type", "OIS Data", "ICE Data", "Removals by Country", "Outcomes of Immigration Proceedings", "Relief from Removal", "Permanent Relief from Removal", "Cancellation of Removal", "Defensive Asylum106", "Adjustment to LPR Status", "Temporary Types of Relief from Removal", "Withholding of Removal", "Convention Against Torture", "Temporary Protected Status124", "Deferred Enforced Departure", "Deferred Action", "Conclusion" ], "paragraphs": [ "", "Regardless of how a country regulates its immigration, some lawfully admitted foreign nationals may violate the conditions proscribed for being in the country, and some foreign nationals may enter the country illegally. Thus, in the United States, as in other countries, the removal of unauthorized aliens and other aliens who violate the conditions under which they were admitted (e.g., overstaying their authorized period of stay, committing a crime while in the country) is central to immigration enforcement.\nThe removal and return of aliens to their country of nationality have become important policy issues for Congress, and tend to be key issues in debates about immigration reform. In 2012, there were an estimated 11.4 million resident unauthorized aliens in the United States; estimates of other removable aliens, such as lawful permanent residents (LPRs) who commit crimes, are elusive. More than 600,000 foreign nationals were repatriated from the United States in FY2013—including about 440,000 formal removals.\nThe Immigration and Nationality Act (INA) provides broad authority to the Department of Homeland Security (DHS) and the Department of Justice (DOJ) to remove certain aliens from the United States, including unauthorized aliens and lawfully present foreign nationals who commit certain crimes. The different removal processes are spelled out in several sections of the INA, which identifies two overarching reasons aliens may be removed from the United States: on the basis of inadmissibility or on the basis of deportability (see \" Reasons for the Removal of a Foreign National \"). The Illegal Immigration Reform and Immigrant Responsibility Act of 1996 (IIRIRA, P.L. 104-208 ), established new mechanisms by which to effectuate the removal of aliens who have violated the nation's immigration laws—including several streamlined processes. An alien's immigration status and whether the alien has engaged in certain specified activities (e.g., committed a particular criminal offense) determines which process is used. Lawful permanent residents are generally subject to the standard removal process where foreign nationals have their cases decided by an immigration judge. However, arriving aliens who have not been admitted into the country, as well as aliens within the United States who have committed specified criminal offenses, may be subject to more streamlined removal processes such as reinstatement of removal or expedited removal of criminal aliens.\nThis report provides an overview of the statutory framework for removal and briefly describes the standard removal process. It also describes several streamlined forms of removal, and two alternative forms of removal (often referred to as returns) that exempt aliens from certain penalties associated with formal removal: voluntary departure and withdrawal of petition for admission. In addition, the report discusses recent trends in removals and returns, and concludes with a summary of potential avenues for relief from removal.\nThis report does not provide any legal analysis on these topics and does not discuss court cases related to removal. It also does not discuss how removable foreign nationals are identified and located (e.g., the Criminal Alien Program), or how the government chooses which removable aliens to initiate removal proceedings against (i.e., prosecutorial discretion).", "The INA identifies two overarching reasons aliens may be removed from the United States: on the basis of inadmissibility or on the basis of deportability . Prior to the implementation of the IIRIRA, the INA included separate provisions governing the \"exclusion\" of aliens who were ineligible to enter the country (i.e., \"excludable\" persons) and the \"deportation\" of certain aliens within the United States (i.e., \"deportable\" persons). The IIRIRA created a single proceeding to cover both types of removable aliens. Nonetheless, the INA retains two separate grounds for removal: (1) for aliens who have not been admitted to the United States and are inadmissible under INA §212, and (2) for aliens who have been admitted to the United States (i.e., entered legally) and are deportable under INA §237(a). Taken together the grounds of inadmissibility and deportability form the grounds for removal (i.e., the statutory reason that an alien may be removed from the United States). The grounds of inadmissibility and deportability are similar but not identical, as outlined below. Whether foreign nationals facing removal are subject to the grounds of inadmissibility or the grounds of deportability depends upon their immigration statuses.\nAny alien found to be inadmissible under INA §212 or deportable under INA §237 may be ordered removed. The INA describes procedures for making and reviewing such a determination, and specifies conditions under which some of these provisions may be waived. DHS officials may exercise certain forms of discretion in pursuing removal orders, and certain removable aliens may be eligible for permanent or temporary relief from removal. Nonetheless, some grounds for removal (e.g., criminal grounds, terrorist grounds) render aliens ineligible for most forms of relief and may make the alien eligible for a streamlined removal process (see \" Streamlined Removal Processes \").", "Section 212(a) of the INA specifies broad classes of inadmissible aliens, including those who\nhave a \"communicable disease of public health significance,\" have committed certain criminal offenses, are terrorists or national security concerns, are likely at any time to become a public charge (i.e., become indigent), are seeking to work without proper labor certification, are attempting to enter illegally or have previously violated immigration law, are ineligible for citizenship, or have been removed previously or were unlawfully present in the United States.\nGenerally, the grounds of inadmissibility are applied to foreign nationals found in the country who have not been admitted (e.g., those who entered illegally/without inspection). In addition, certain streamlined removal processes (such as expedited removal) can only be applied to aliens who have not been admitted to the United States.", "In order for a lawfully admitted alien to be ordered removed, the government has to prove that the noncitizen has violated a ground of deportation (e.g., overstaying his or her term of admittance). The INA §237(a) specifies six broad classes of deportable aliens, including those who\nare inadmissible at time of entry or violate their immigration status; commit certain criminal offenses, including crimes of moral turpitude, aggravated felonies, alien smuggling, and high-speed flight from an immigration checkpoint; fail to register (if required under law) or commit document fraud; are security risks (including aliens who violate any law relating to espionage, engage in criminal activity that endangers public safety, partake in terrorist activities, or assisted in Nazi persecution or genocide); become a public charge within five years of entry; or vote unlawfully.", "INA §241 describes the general consequences of an order of removal, including what must occur after one has been issued. Aliens under a final order of removal normally are required to depart the United States within 90 days and may be detained until the removal order is executed. Usually, the Secretary of DHS must remove an alien within 90 days of the alien receiving a final order of removal (also see \" Removal Process \"). Under most circumstances, INA §241 requires that aliens under a final order of removal be detained until the removal order is executed (i.e., until the alien is removed from the country). In addition, aliens who are not detained and cannot be removed within 90 days face other supervision requirements.\nFollowing an order of removal, an alien is inadmissible to the United States for a minimum of five years after the date of the removal, and therefore is generally ineligible during the period of inadmissibility to return to the United States in the absence of an applicable exception. The period of inadmissibility is determined by the reason for the removal and the type of removal process used. For example, an alien who is ordered removed based on removal proceedings initiated upon the alien's arrival is inadmissible for five years, while an alien ordered removed after being apprehended within the United States is inadmissible for 10 years. The length of inadmissibility increases to 20 years in the case of an alien's second or subsequent removal order, and is indefinite in the case of an alien convicted of an aggravated felony.", "Absent additional factors, unlawful presence in the United States is a civil violation, not a criminal offense, and removal and its associated administrative processes are civil proceedings. Thus, aliens in removal proceedings generally have no right to appointed counsel (though they may be represented by counsel at their own expense). In addition, Congress may pass legislation that imposes immigration consequences retroactively.\nCertain DHS personnel may initiate a removal process against an alien by presenting the alien with a notice to appear (NTA). The NTA outlines the INA provisions that the alien is charged with violating (i.e., one of the grounds of inadmissibility or deportability discussed in \" Reasons for the Removal of a Foreign National \").\nUpon the receipt of an NTA, foreign nationals may be detained during removal proceedings, and certain foreign nationals are subject to mandatory detention. Foreign nationals who are not subject to mandatory detention may be released on bond or their own recognizance. An alien who is eligible to be released on bond may request a bond redetermination hearing before an immigration judge to have the bond lowered, or to be given bond if it was denied by DHS. During the bond hearing, the alien must prove that he or she is not a flight risk or a danger to society. Bond hearings are not considered part of the removal process.\nThe standard removal process under INA §240 is a trial-like proceeding in which an attorney from DHS presents the government's case for why the alien should be removed and an immigration judge from the Department of Justice's Executive Office for Immigration Review (EOIR) determines whether the alien should be removed. The standard removal process is only one of several ways aliens may be removed from the United States. An alien may concede removability (i.e., accept stipulated removal) rather than undergoing the standard removal proceeding. In addition, an alien may be subject to one of several types of streamlined removal procedures, which generally include more-limited opportunities for relief and review than the standard removal process (see \" Streamlined Removal Processes \").", "The standard removal process is a civil administrative proceeding in which an EOIR immigration judge determines whether an alien is removable. Immigration judges may grant certain forms of relief (see \" Relief from Removal \") during the removal proceeding, and their removal decisions are subject to certain forms of review.\nApart from a possible bond hearing related to detention, generally an alien first appears in immigration court at a preliminary hearing. An alien who fails to appear for a removal hearing (absent exceptional circumstances) can be removed in absentia and becomes inadmissible for five years, as well as ineligible for relief from removal for 10 years. Some cases—such as i n absentia cases, cases where the respondent concedes removability, and cases where both the government and the alien agree to the relief—can be decided at the preliminary hearing stage. Otherwise, a time may be set for an individual merits hearing.\nDuring the individual merits hearing, the government's attorney attempts to prove the charges on the NTA. The government and the alien can present witnesses, and the judge rules on whether the foreign national is removable from the United States and is eligible for relief from removal if requested by the foreign national. Generally, within 30 days after the decision, the government's attorney or the foreign national may appeal the decision to the Board of Immigration Appeals (BIA). After the BIA decision, the alien may appeal to a federal court.", "INA §240(d) allows for an immigration judge to enter a removal order for an alien who concedes removability without the alien undergoing a standard removal proceeding in front of an immigration judge. The foreign national must fill out a detailed form, which must be approved by DHS. Generally, only those who have no possibility of relief from removal accept stipulated removal. A stipulated removal order generally has the same repercussions as a removal order issued at the end of an immigration proceeding in terms of triggering the grounds of inadmissibility.", "In 1996, Congress amended the INA to establish several streamlined removal procedures though which an alien could be removed with limited or no review by the immigration courts. These removal procedures tend to limit the types of relief available (see \" Relief from Removal \") and judicial review, compared to hearings under the standard removal process. In recent years, these streamlined removal processes have accounted for a higher percentage of total removals than standard removals, and are responsible for most of the growth in the overall number of removals (see Figure 3 ).", "Under expedited removal (INA §235(b)), an alien who lacks proper documentation or has committed fraud or willful misrepresentation of facts to gain admission into the United States is inadmissible and may be removed without any further hearings or review, unless the alien indicates an intention to apply for asylum or another form of removal based on a fear of persecution. Aliens from Western Hemisphere countries with which the United States does not have full diplomatic relations (e.g., Cuba) are excluded from expedited removal. In addition, under policy, unaccompanied minors are placed in expedited removal in very limited circumstances.\nAliens subject to expedited removal must be detained until they are removed and may only be released due to a medical emergency or, if necessary, for law enforcement purposes. Although under law the Secretary of Homeland Security may apply expedited removal to any alien who has not been admitted or paroled into the United States and who cannot show that he or she has been continuously present for two years, expedited removal has only been applied to aliens\narriving at ports of entry; arriving by sea who are not admitted or paroled; and who are present in the United States without being admitted or paroled, are encountered by an immigration officer within 100 air miles of the U.S. international land border, and have not established to the satisfaction of an immigration officer that they have been physically present in the United States continuously for the 14-day period immediately preceding the date of encounter.\nThe INA provides immigration protections to aliens who have a well-founded fear of persecution, most notably in the form of asylum status. Aliens who are in expedited removal and request asylum are given a \"credible fear\" hearing to determine if there is support for their asylum claim. Those who pass the credible fear hearing are placed into standard removal proceedings under INA §240. In addition, aliens who receive negative \"credible fear\" determinations may request that an immigration judge review the case. Aliens who have been subject to expedited removal are barred from reentering the United States for at least five years.", "Aliens who have been convicted of certain crimes are barred from most types of relief from removal, and, partially as a result of this, the INA contains provisions to accelerate the removal of noncitizens who have been convicted of such crimes. Generally, those who are removable because of a criminal act are subject to mandatory detention while awaiting removal. Aliens removed on criminal grounds are generally subject to bars on reentering the United States ranging from 10 years to indefinite, depending on the nature of the offense committed and whether they had been removed previously.\nINA §238(a)(1) allows for removal proceedings for aliens convicted of certain crimes to be conducted at federal, state, and local correctional facilities. The goal of this provision is to be able to expeditiously remove the alien when the alien has completed his criminal sentence, and limit the amount of time that an alien must remain in DHS custody pending removal.\nIn addition, INA §238(b) authorizes the government to determine that certain noncitizens are deportable without having the decision on removability made by an immigration judge. To be eligible for removal under INA §238(b), an alien cannot be an LPR and must have been convicted of an aggravated felony. Although the alien is not entitled to a hearing before an immigration judge, the alien is entitled to\n\"reasonable\" notice of the charges and an opportunity to inspect the evidence and rebut the charges; counsel, at no expense to the government; a determination that the foreign national is in fact the person named in the notice; and a record of the proceedings for judicial review.\nBecause foreign nationals removed under this provision have been convicted of at least one aggravated felony, they are indefinitely barred from reentering the United States.", "Another streamlined removal process is for the government to reinstate a previously issued removal order. A foreign national who is found to have reentered the United States illegally after being removed or leaving under voluntary departure (see \" Voluntary Departure (INA §240B) \") can have their prior removal order reinstated by DHS. The reinstatement order is not subject to review by an immigration judge and the foreign national is ineligible for all types of relief from removal with the exception of withholding of removal and a claim based on the Convention Against Torture (see \" Temporary Types of Relief from Removal \"). A person who was ordered removed but reentered the country legally is not subject to reinstatement of removal.", "Until FY2013, the majority of aliens apprehended along the Southwest border were not subject to the standard removal procedures or expedited removal (see \" Statistics on Removals and Returns \"); instead, the majority of these aliens were allowed to either undergo voluntary departure or withdraw their applications. Voluntary departure and withdraw of application are often referred to as types of returns rather than removals. In addition, some aliens within the country accept voluntary departure either as an alternative to having a judge render a decision regarding their removability or at the conclusion of their removal proceeding.", "Some consider voluntary departure a type of relief from removal because it does not carry the same consequences (i.e., the same time bars for reentering the country or criminal consequences for those who reenter) as other types of removal. Nonetheless, unlike those who receive other types of relief from removal, aliens who are granted voluntary departure are not permitted to remain in the United States for an extended period of time.\nThe INA authorizes voluntary departure at two distinct times—before the conclusion of removal proceedings and at the conclusion of removal proceedings—with different requirements and restrictions. However, regulations implementing voluntary departure created three periods for seeking voluntary departure and established conditions for voluntary departure at each juncture. The periods are (1) before the initiation of removal proceedings, (2) after the initiation of removal proceedings but before the proceedings are concluded, and (3) at the conclusion of removal proceedings. An alien must request voluntary departure in order to receive it. Aliens who are removable because of a conviction for an aggravated felony or on terrorist grounds are ineligible for voluntary departure. Those who were granted voluntary departure but failed to depart within the specified time are ineligible for 10 years for voluntary departure and most types of relief from removal.\nAt the border, voluntary departure is available only to aliens from contiguous territories (i.e., Canada and Mexico), and aliens are escorted to the point of departure. DHS Customs and Border Patrol (CBP) inspectors can also permit aliens traveling through a point of entry (POE) to withdraw their applications for admission and return to their points of origin. Voluntary departure costs less than most types of removal procedures since, in most cases, the government does not have to pay for the foreign nationals' return to their home countries.", "At the discretion of the government, an applicant for admission to the United States may be permitted to withdraw his or her application and depart immediately from the United States without being subject to the five-year bar on reentry. An alien may be permitted to withdraw the application if it is determined that it is in the best interest of justice that a removal (or expedited removal) order not be issued, and that the alien has both the intent and means to depart immediately from the United States. The alien's decision to withdraw the application must be made voluntarily. In general, an alien who has withdrawn an application for admission must be detained, either by DHS or the owner of the vessel (e.g., airline) on which he or she arrived, until departure.", "There are two sets of statistics regarding removals and returns of aliens from the United States. The first set is from DHS' Office of Immigration Statistics (OIS) and include removals and returns by both Immigration and Customs Enforcement (ICE) in the interior of the country and by CBP at the borders. Additionally, ICE produces its own statistics on removals that do not include CBP's statistics. CRS presents both sets of data because different information can be obtained from the manner in which each maintains and presents its data. For example, ICE is able to provide data on the grounds (i.e., main reason) for removal, which is not captured in data from OIS.\nOverall, both sets of data present a similar picture of removals. The data show an increase in the total number of removals, driven mostly by an increase in the use of expedited removal processes and a decrease in the use of returns (i.e., voluntary departure and withdraw of application). The decrease in returns is most likely attributable to a policy change that places more aliens in removal processes rather than allowing them to withdraw their applications, and to a decrease in the total number of apprehensions along the Southwest border.", "In FY1995 the number of removals was significantly less than the number of returns, but since FY2011 the number of removals has outpaced the number of returns. In FY1995 there were just 50,924 removals compared to over 1.3 million returns. Between FY1996 and FY1998 the number of removals increased 151%, from 69,680 to 174,813, corresponding to changes made in IIRIRA that expanded the grounds for removal and tightened the standards for relief from removal. In addition, the changes made to the grounds for removal (i.e., the statutory reasons a foreign national can be removed) were retroactive. For example, some aliens had committed crimes prior to 1996 that were not removable offenses at the time, but the changes made in 1996 made these aliens removable. Although the number of returns remained relatively constant between FY1996 and FY1998 (about 1.5 million a year), and the number of removals more than doubled during the same period, the number of returns remained significantly higher than the number of removals.\nWith the exception of one year (FY2002), the number of removals increased between FY1997 and FY2009. The number of removals remained relatively stable between FY2009 and FY2011, and then increased again between FY2011 and FY2013. The number of removals declined between FY2013 and FY2014. Some of the overall growth in removals since FY2002 may be related to enforcement efforts in response to the terrorist attacks of September 11, 2001. In addition, funding for immigration enforcement increased during this period. The highest number of removals occurred in FY2013 (438,421).\nIn contrast, the number of returns has fluctuated over the past 25 years, and is at its lowest level since the late 1960s. Because returns are mostly of Mexican nationals who have been apprehended by the Border Patrol, they are closely tied with border patrol apprehensions ( Figure 1 ). The divergence between the number of returns and border patrol apprehensions since FY2012 may be partially attributable to the rise in the number of apprehensions of persons from countries other than Mexico. For example, foreign nationals from countries other than Mexico accounted for 47% of all border patrol apprehensions in FY2013, compared to 13% in FY2010. Another factor may be CBP's effort in recent years to promote \"high consequence\" enforcement for unauthorized Mexicans apprehended at the border (this is known as the Consequence Delivery System). Historically, immigration agents permitted most Mexicans apprehended at the border to voluntarily return to Mexico without any penalty. Since 2005, CBP has limited voluntary returns in favor of formal removals (e.g., standard removal proceedings, expedited removal) and criminal changes (e.g., for illegal entry or re-entry after deportation).\nWith the exception of FY2003, the number of returns exceeded 1 million persons a year between FY1997 and FY2006. Since FY2004 the number of returns has steadily decreased to a low of 162,814 in FY2014. Notably, FY2011 was the first year since FY1941 that the number of returns was less than the number of removals.", "With certain exceptions, a removal proceeding under INA §240 is, according to the statute, the \"exclusive procedure\" for determining whether an alien should be removed from the United States. However, as discussed in this section, there has been a recent trend toward using expedited procedures.\nOIS data show that the number of removals more than doubled between FY2002 and FY2009, from 165,168 to 393,457. The number of removals then decreased by approximately 8,000 between FY2009 and FY2010, and then increased more than 30,000 between FY2010 and FY2012. According to OIS, the highest number of removals occurred in FY2013.\nAs Table 1 shows, statistics provided by ICE present a slightly different picture. According to ICE data, total removals increased more than threefold between FY2002 and FY2012, from 122,587 to 409,849, and then decreased in FY2013 and FY2014. The largest proportional increases in removals occurred between FY2005 and FY2008. Removals increased 15% between FY2005 and FY2006, 40% between FY2006 and FY2007, and 27% between FY2007 and FY2008. Between FY2012 and FY2014, the number of removals decreased 23%, to the lowest level since FY2007.\nInterestingly, ICE appears to have accounted for the overwhelming majority of all DHS' removals between FY2007 and FY2012; this was not the case between FY2002 and FY2006 or in FY2013 and FY2014. In other words, the growth in removals between FY2002 and FY2006 and between FY2012 and FY2013 was driven by removals of those aliens apprehended at or between ports of entry. The decline in removals between FY2013 and FY2014 was solely a result of the decline in those removed by ICE.", "OIS and ICE data show similar trends regarding the increasing use of more streamlined removal processes and the decrease in the number of removals processed by the immigration courts.", "As shown in Figure 2 , the numbers of all types of removals increased between FY2004 and FY2013. The numbers of expedited removals of arriving aliens and reinstatements have increased significantly since FY2004, reaching their highest levels in FY2013. There were 193,032 expedited removals and 170,247 reinstatements in FY2013. Since FY2004, the number of aliens subject to expedited removal increased approximately threefold and the number of reinstatements of removal orders more than doubled. The number of standard removals, voluntary departures, and expedited removals of criminal aliens (\"other removals\") increased between FY2004 and FY2011, and then decreased in FY2012 and FY2013. Thus, since FY2010 the increase in the total number of removals has been driven exclusively by the increases in expedited removals of arriving aliens and reinstatements.\nStandard removals, voluntary departures, and expedited removals of criminal aliens (\"other removals\") accounted for 17% of all removals in FY2013, while expedited removals comprised 44% of those removed and reinstatements accounted for almost 39% of all removals (see Figure 3 ). Comparatively, approximately 44% of all removals were other removals in FY2004; since then these types of removals have comprised a smaller and shrinking proportion of the removed population. Expedited removals accounted for approximately 21% of those removed in FY2004, but 35.7% of all removals in FY2005. The increase in the proportion (and overall numbers) of expedited removals at that time may be attributable to the expansion of the categories of aliens subject to expedited removal. Reinstatements declined as a percentage of removals between FY2004 and FY2005, and then steadily increased. Thus, as discussed, the increase in removals during the past decade has been driven by an increase in the use of expedited removals and reinstatements of removal orders.", "The data from ICE are presented differently than those from OIS simply by way of how the entities maintain their data. As shown in Figure 4 , more than 90% of those repatriated in FY2013 were subject to removal, while approximately 10% were classified as returns. Of the 332,538 aliens formally removed (i.e., not given voluntary departure or allowed to withdraw their application) by ICE in that year, 35% (115,940) were removed under the INA grounds of deportability and 65% (216,598) were removed under the INA grounds of inadmissibility.\nReturns (e.g., voluntary departure, voluntary return witnessed by ICE), as both a percentage of all removals (i.e., removals and formal returns together) and an absolute number, decreased between FY2008 and FY2012. Notably, the overall decrease in removals between FY2012 and FY2013 was driven by a decrease in the number of returns (see Figure 4 ).\nIn addition, of the aliens formally removed (as opposed to returned) since FY2008, the overwhelming majority have been removed under the grounds of inadmissibility rather than the grounds of deportability. Nonetheless, there has been an increase in the proportion of those removed under the grounds of deportability over the six years, from 21% in FY2008 to 35% in FY2013.", "Over the 10-year period from FY2004 through FY2013, the majority of removals were of Mexican nationals (70.5%) (see Figure 5 and Table A-1 ). In FY2013, four countries accounted for approximately 96% of all removals: Mexico (71.8%), Guatemala (10.7%), Honduras (8.3%), and El Salvador (4.8%). No other country represented more than 1% of all removals in FY2013. Over the 10-year period there was a significant increase in the number of people removed to those countries. The number of people removed from El Salvador more than doubled over the 10-year period, while the number of people removed from Honduras more than tripled, and the number of people removed from Guatemala increased more than four-fold. (See Table A-1 .) The number of those removed from Mexico increased by 79%, much less of a percentage increase than for the three Central American countries.", "In an immigration proceeding, an immigration judge must decide as part of the standard removal process whether the charges against an alien should be sustained. If the charges are not sustained or the alien establishes eligibility for naturalization, the judge terminates the case. If the charges are sustained, the judge determines whether to order the alien removed, grant voluntary departure, or grant relief (discussed in the next section). In addition, there are some cases that are completed without the immigration judge rendering a decision. Most of these cases are administrative closures. As Figure 6 shows, in FY2013 the majority of completed cases resulted in removals (voluntary departures are included in removals), while 18% of the completions were other (mostly administrative) closures. In addition, approximately 13% of the decisions were terminations, and 15% were grants of relief.", "There are mechanisms under the INA that allow certain removable aliens to remain in the United States, either permanently or temporarily. This section provides an overview of the types of relief from removal available under the INA. It begins with a discussion of the types of relief that confer or can lead to lawful permanent resident (LPR) status for an alien. The discussion then shifts to types of relief from removal that allow aliens to remain in the United States but do not confer an immigration status that would allow them to remain in the country permanently. Aliens in removal proceedings may apply for more than one type of relief. Among the proceedings initially decided by an immigration judge in FY2013, 40% of aliens had applications for some type of relief from removal.", "Some types of relief from removal allow an alien to adjust to LPR status either immediately or at a later time. LPRs, also known as immigrants, are foreign nationals who come to live permanently in the United States.", "Cancellation of removal confers LPR status on certain removable noncitizens who have substantial ties to the United States or are of humanitarian concern (i.e., battered aliens). In general, an alien applying for cancellation of removal must have substantial ties to the United States, be of good moral character, and not have been convicted of a crime that makes him or her removable. Requirements differ for aliens who are LPRs and aliens who are nonimmigrants or unauthorized aliens. For example, nonimmigrants or unauthorized aliens have to demonstrate that their removal would cause extreme and unusual hardship to their families in the United States. This requirement does not apply to LPRs. (For a discussion of the different types of cancellation of removal, see Appendix B .) In addition, the criminal offenses that make an alien ineligible for cancellation of removal are generally broader for nonpermanent residents than for permanent residents.\nApplications for cancellation of removal can only be made in removal proceedings, and decisions to grant relief are made on a case-by-case basis. Because cancellation of removal is a discretionary form of relief (i.e., it is granted at the discretion of an immigration judge), there is no fixed standard of who merits relief. The burden is on the alien to show that he or she is eligible for and deserves the relief. With few exceptions, grants of cancellation of removal are limited to 4,000 LPRs and 4,000 nonpermanent residents each fiscal year. There were 3,542 LPRs and 3,922 non-LPRs who received cancellation of removal in FY2013.", "Foreign nationals seeking asylum must demonstrate a well-founded fear that if they were returned home they would be persecuted based upon one of five characteristics: race, religion, nationality, membership in a particular social group, or political opinion. Foreign nationals arriving or present in the United States may apply for asylum with U.S. Citizenship and Immigration Services (USCIS) after arrival into the country (affirmative claims), or they may seek asylum before an immigration judge during removal proceedings (defensive claims). This section focuses on defensive claims for asylum since those only occur once someone is placed into removal proceedings.\nDefensive applications for asylum are raised when a foreign national in removal proceedings asserts a claim for asylum as a defense to his or her removal. Generally, the alien raises the issue of asylum at the beginning of the removal process. Aliens who are granted asylum may apply for LPR status after one year.\nForeign nationals who participated in the persecution of other people are excluded from receiving asylum. The INA outlines other conditions for mandatory denials of asylum claims, including the following cases: the alien has been convicted of a serious crime and is a danger to the community; there are reasons for believing that the alien has committed a serious nonpolitical crime outside the United States; the alien has been firmly resettled in another country; or \"there are reasonable grounds for regarding the alien as a danger to the security of the United States.\" Under statute, an alien who has been convicted of an aggravated felony is considered to have been convicted of a serious crime.\nThere were 21,717 foreign nationals who requested asylum before an immigration judge during removal proceedings in FY2013. During the same year, immigration judges rendered decisions in 8,833 removal cases where a foreign national requested asylum, and the judges granted asylum in 30% of those cases.", "Adjustment of status is another type of permanent relief from removal. This is the process of becoming an LPR in the United States without having to go abroad to apply for a visa. At their discretion, immigration judges may adjust the status of a non-lawful permanent resident alien if certain requirements are met: (1) the alien is the beneficiary of an approved visa petition for LPR status based on family or employment ties; (2) an immigrant visa is immediately available; and (3) the alien is not otherwise inadmissible. There were 3,868 foreign nationals in immigration proceedings who received adjustment of status in FY2013.", "Several types of relief from removal permit an alien to remain in the United States for a temporary, but unspecified, period of time. These types of relief are generally given to foreign nationals until conditions in their home countries change so that it is safe for them to return.", "Withholding of removal is closely related to, but different from, asylum. The INA prevents the U.S. government from removing an alien to a country where the government has determined that the alien's life would be threatened because of his or her race, religion, nationality, membership in a particular social group, or political opinion. Whereas asylum is a discretionary form of relief, an immigration judge must grant withholding if the alien meets the requirements. Under INA §241(b)(3) an applicant for asylum is also an applicant for withholding of removal. An alien is ineligible for withholding of removal if\nthe alien ordered, incited, assisted, or otherwise participated in the persecution of another individual; the alien was convicted of a particularly serious crime and is a danger to the community; there is serious reason to believe that the alien committed a serious nonpolitical crime before arriving in the United States; or there are reasonable grounds to believe that the alien presents a security risk to the United States.\nUnlike asylum, withholding of removal is not a pathway to LPR status, as the relief is temporary. Foreign nationals granted withholding of removal may be removed to a third country provided that the country will allow their entry. There were 1,518 grants and 9,983 denials of withholding of removal (i.e., a 13% grant rate) in FY2013.", "The United States is a party to the United Nations Convention Against Torture and Other Cruel, Inhuman, or Degrading Treatment or Punishment (CAT). CAT Article 3 requires that no State Party shall expel, return, or extradite a person to another country where \"there are substantial grounds for believing that he would be in danger of being subjected to torture.\" The regulations implementing CAT prohibit the removal of aliens to countries where they would more likely than not be subjected to torture.\nIf country conditions change and the U.S. government believes the foreign national would no longer face torture in the country, the foreign national can be removed. Although some categories of foreign nationals are generally ineligible to receive asylum or withholding of removal (e.g., those aliens removable on security-related grounds or who have been convicted of certain criminal offenses), CAT protections prevent the removal of any foreign national to a country where he or she would be more likely than not to face torture. Of the cases where a decision on the aliens' applications for CAT protections was made by an immigration judge, CAT was granted in 506 cases and denied in 9,575 cases.", "Temporary Protected Status (TPS) is blanket relief that may be granted, provided that doing so is consistent with U.S. national interests, under the following conditions: there is ongoing armed conflict posing serious threat to personal safety; a foreign state requests TPS because it temporarily cannot handle the return of nationals due to environmental disaster; or there are extraordinary and temporary conditions in a foreign state that prevent aliens from returning.\nThe Secretary of Homeland Security can issue TPS for periods of 6 to 18 months and can extend these periods if conditions do not change in the designated country. To receive TPS, eligible foreign nationals must register with USCIS. TPS is not an immigration status, and aliens who receive TPS are not on an immigration track that leads to LPR status. As of December 2014, 11 countries have TPS.", "Deferred Enforced Departure (DED) does not confer an immigration status. The granting of DED is not based upon any specific statutory authority, but instead is typically premised upon the Executive Branch's independent constitutional authority. The discretionary procedures of DED are used to provide relief the Administration feels is appropriate by balancing judgments regarding foreign policy, humanitarian, and immigration concerns. Aliens covered by DED are usually not subject to removal from the United States for a designated period of time. Unlike TPS, aliens do not register with USCIS, but receive DED when they are in removal proceedings. The President sets the parameters of DED. For example, the President may authorize that aliens with DED receive work authorization. Only Liberians currently have DED, which is set to expire on September 30, 2016.", "Deferred action is not an immigration status nor does it have a statutory authority; it is a form of administrative discretion. DHS may decline to institute removal proceedings, terminate proceedings, or decline to execute a final order of removal. Approval of deferred action means that no action will be taken (for a specified time or indefinitely) against an apparently removable alien. For example, under an initiative known as Deferred Action for Childhood Arrivals (DACA) certain individuals without a lawful immigration status who were brought to the United States as children and meet other criteria may be granted deferred action for two years, subject to renewal.", "The Immigration and Nationality Act contains several different processes to effectuate the removal of aliens, as well as mechanisms to allow select aliens to remain in the United States either temporarily or permanently. During the previous two Administrations there has been a concerted effort to increase the number of removals by increasing the use of streamlined removal processes and decreasingly allowing voluntary departure and withdraws of application. If Congress considers reforms to the immigration system, the criteria and mechanisms for removing aliens from, and authorizing aliens to remain in, the United States may become central issues.\nAppendix A. Removals by Country: Top 10 Countries\nAppendix B. Types of Cancellation of Removal\nCancellation of removal was created in the Illegal Immigration Reform and Immigrant Responsibility Act of 1996 (IIRIRA, P.L. 104-208 ). It replaced two other forms of relief from removal, and the eligibility requirements are generally tighter for those who do not have LPR status than they were in the forms of relief it replaced. Certain aliens are ineligible for cancellation of removal, including those who are removable on security or terrorism grounds and those who have previously received cancellation of removal.\nINA §240A(a) gives the Attorney General the ability to cancel the removal of an alien who is inadmissible or deportable and adjust the alien's status to LPR if the alien\nhas been an LPR for at least five years, has resided in the United States continuously for seven years after being admitted as an LPR, and has not been convicted of an aggravated felony.\nThe Attorney General may also cancel the removal of an alien who is inadmissible or deportable and adjust the alien's status to LPR if the alien\nhas been physically present in the United States for a continuous period of 10 years prior to the date of application for relief; has been a person of good moral character; has not been convicted of a criminal offense that would make the alien inadmissible or deportable, or convicted of an offense related to document fraud or falsely claiming citizenship; and establishes that removal would result in exceptional and extremely unusual hardship to the alien's spouse, parent, or child who is a U.S. citizen or LPR (i.e., the hardship cannot be to the alien).\nThere are special rules for battered alien spouses and children. Specifically, the Attorney General may cancel the removal of a battered alien spouse or child who is inadmissible or deportable and adjust the alien's status to LPR if the alien\nhas been physically present in the United States for a continuous period of at least three years immediately preceding the date of such application ; has been a person of good moral character; is not inadmissible on criminal or security grounds, or deportable for marriage fraud, criminal offenses, false documents, or security grounds; and has not been convicted of an aggravated felony; and establishes that the removal would result in extreme hardship to the alien, the alien's child, or the alien's parent.\nExtreme hardship is evaluated on an individual basis, taking into account the particular facts and circumstances of each case. To establish extreme hardship, an applicant must demonstrate that deportation would result in a degree of hardship beyond that typically associated with deportation. Under regulation, applicants are encouraged to cite and document all applicable factors in their applications for cancellation of removal, as the presence or absence of any one factor may not be determinative in evaluating extreme hardship. Adjudicators should weigh all relevant factors presented and consider them in light of the totality of the circumstances.\nThe Nicaraguan Adjustment and Central American Relief Act (NACARA) created a special cancelation of removal provision for certain Central Americans and Eastern Europeans. This provision generally mirrors the suspension of deportation relief that was available before the enactment of IIRIRA in 1996. Reportedly, USCIS believes that nearly all qualifying NACARA applications have been adjudicated." ], "depth": [ 0, 1, 1, 2, 2, 1, 1, 2, 3, 2, 3, 3, 3, 1, 2, 2, 1, 2, 2, 2, 3, 3, 2, 2, 1, 2, 3, 3, 3, 2, 3, 3, 3, 3, 3, 1 ], "alignment": [ "h0_title h2_title h4_title h3_title h1_title", "h0_full h2_full h1_full", "h1_full", "", "", "h3_full", "h4_full h2_full", "h2_full", "", "", "", "", "", "", "", "", "h2_title", "h2_full", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "" ] }
{ "question": [ "What role does alien removal play in the U.S. immigration system?", "Who is subject to removal?", "What was the proportion of identified unauthorized aliens in 2012?", "Why is the removal of such aliens important for Congress?", "What does the INA provide to the DHS and DOJ?", "What may occur to foreign nationals that are found to be inadmissible?", "How does the INA make these decisions?", "What is the role of DHS officials in terms of these removal orders?", "How do certain. grounds for removal alter this process?", "What is included in the standard removal process?", "In what cases would immigration judges grant relief?", "What other more streamlined processes exist?", "What other forms of removal exist?", "What follows an order of removal?", "How is the period of inadmissibility determined?", "What are some examples of these terms?", "Why might the length of inadmissibility increase to 20 years?", "What legal processes deal with unlawful presence in the United States?", "How does this affect aliens in removal proceedings?" ], "summary": [ "The ability to remove foreign nationals (aliens) who violate U.S. immigration law is central to the immigration enforcement system.", "Some lawful migrants violate the terms of their admittance, and some aliens enter the United States illegally, despite U.S. immigration laws and enforcement.", "In 2012, there were an estimated 11.4 million resident unauthorized aliens; estimates of other removable aliens, such as lawful permanent residents who commit crimes, are elusive.", "With total repatriations of over 600,000 people in FY2013—including about 440,000 formal removals—the removal and return of such aliens have become important policy issues for Congress, and key issues in recent debates about immigration reform.", "The Immigration and Nationality Act (INA) provides broad authority to the Department of Homeland Security (DHS) and the Department of Justice (DOJ) to remove certain foreign nationals from the United States, including unauthorized aliens (i.e., foreign nationals who enter without inspection, aliens who enter with fraudulent documents, and aliens who enter legally but overstay the terms of their temporary visas) and lawfully present foreign nationals who commit certain acts that make them removable.", "Any foreign national found to be inadmissible or deportable under the grounds specified in the INA may be ordered removed.", "The INA describes procedures for making and reviewing such a determination, and specifies conditions under which certain grounds of removal may be waived.", "DHS officials may exercise certain forms of discretion in pursuing removal orders, and certain removable aliens may be eligible for permanent or temporary relief from removal.", "Certain grounds for removal (e.g., criminal grounds, terrorist grounds) render foreign nationals ineligible for most forms of relief and may make them eligible for more streamlined (expedited) removal processes.", "The \"standard\" removal process is a civil judicial proceeding in which an immigration judge from DOJ's Executive Office for Immigration Review (EOIR) determines whether an alien is removable.", "Immigration judges may grant certain forms of relief during the removal process (e.g., asylum, cancellation of removal), and the judge's removal decisions are subject to administrative and judicial review.", "The INA also describes different types of streamlined removal procedures, which generally include more-limited opportunities for relief and grounds for review.", "In addition, two alternative forms of removal exempt aliens from certain penalties associated with formal removal: voluntary departure (return) and withdrawal of petition for admission. These are often called \"returns.\"", "Following an order of removal, an alien is inadmissible for a minimum of five years after the date of the removal, and therefore is generally ineligible to return to the United States during this time period.", "The period of inadmissibility is determined by the reason for and type of removal.", "For example, a foreign national ordered removed based on removal proceedings initiated upon the foreign national's arrival is inadmissible for five years, while a foreign national ordered removed after being apprehended within the United States is inadmissible for 10 years.", "The length of inadmissibility increases to 20 years for an alien's second or subsequent removal order, and is indefinite for a foreign national convicted of an aggravated felony.", "Absent additional factors, unlawful presence in the United States is a civil violation, not a criminal offense, and removal and its associated administrative processes are civil proceedings.", "As such, aliens in removal proceedings generally have no right to counsel (though they may be represented by counsel at their own expense). In addition, because removal is not considered punishment by the courts, Congress may impose immigration consequences retroactively." ], "parent_pair_index": [ -1, 0, 0, 0, -1, -1, 1, 1, 1, -1, 0, 0, 0, -1, 0, 1, 1, -1, 0 ], "summary_paragraph_index": [ 0, 0, 0, 0, 1, 1, 1, 1, 1, 2, 2, 2, 2, 3, 3, 3, 3, 4, 4 ] }
CRS_R41868
{ "title": [ "", "Introduction", "The Automotive Supply Chain", "Automobiles and Domestic Content", "Automotive Rules of Origin in U.S. Free Trade Agreements", "Rules of Origin for Vehicles and Parts in the Proposed KORUS FTA", "Alternative Ways to Calculate Regional Value Content", "Build-Down", "Build-Up", "Net Cost", "Has the European Union Won a Better Deal?", "North Korean Components and the KORUS FTA Rules of Origin", "KORUS FTA in the Broader Context of U.S.-South Korean Automobile Trade" ], "paragraphs": [ "", "On June 30, 2007, the United States and South Korea signed the U.S.-South Korea Free Trade Agreement (KORUS FTA). If approved by Congress, it would be the second-largest U.S. free-trade agreement in terms of the value of trade affected, next to the North American Free Trade Agreement, NAFTA.\nThe provisions concerning automobiles and auto parts are among the most controversial elements of the KORUS FTA. On December 3, 2010, the United States and South Korea reached a further agreement that modified the auto sector provisions. Nonetheless, these provisions have continued to generate considerable debate in Congress. One prominent issue in that discussion is the agreement's specific rules of origin (ROO) for automobiles and auto parts. These rules will be used to determine if automotive goods imported from South Korea are eligible to receive duty-free or reduced tariff benefits under the KORUS FTA, and whether automotive goods from the United States are eligible for corresponding benefits upon export to South Korea.\nThis report begins with a discussion of the complex supply chains that now underlie automotive production. It then explains the procedures established in the KORUS FTA for determining whether an automotive product qualifies as being of South Korean or United States origin and compares those procedures to the rules established in the free trade agreement between South Korea and the European Union. Finally, it discusses whether the domestic content rules in the KORUS FTA could enable circumvention of the rules of origin by allowing automotive components produced in North Korea's Kaesong Industrial Complex (KIC) to enter the United States duty-free in assembled motor vehicles, and thereby receive the benefits provided by the agreement.", "Motor vehicle assemblers, such as Ford, Chrysler, General Motors, Honda, and Hyundai, build vehicles at final assembly plants using parts and subassemblies from an extensive global network of suppliers. Roughly 15,000 components are needed to assemble a motor vehicle. Typically, the assemblers purchase entire systems, such as seats or cooling systems, from Tier 1 suppliers, which are often multinational companies such as Denso, Robert Bosch, Continental AG, and Magna International. The Tier 1 suppliers, in turn, obtain components and subassemblies from Tier 2 suppliers, which tend to be smaller and less well known. Tier 3 auto parts companies generally supply relatively simple products, from bolts to plastic moldings, to the suppliers of more complex products. Figure 1 provides a graphic example of the diversity of parts in a typical 2011 Hyundai Sonata, which is manufactured at the company's first U.S. assembly plant in Montgomery, AL.\nToday, few, if any, vehicles are built entirely from parts made in any one country. More than one-quarter of the parts in vehicles assembled in the United States are imported from other countries. Due to the high level of global competition in the automobile market, automakers source parts as inexpensively and efficiently as possible. Rules of origin matter to automobile assemblers because they determine what tariffs, or tariff concessions, apply to imported inputs, and therefore can be decisive in shaping trade patterns.\nThe leading suppliers of parts to the United States are Mexico and Canada, whose producers have free access to the U.S. market under NAFTA. In recent years, as shown in Figure 2 , a greater share of imported parts has come from China. Parts imports from South Korea account for only 5% of U.S. auto parts imports by value. The South Korean share has grown due to the establishment of South Korean-owned assembly plants in the United States, as these plants make extensive use of South Korean components.", "The fact that a car is assembled by a U.S. automaker does not mean that the majority of its components are made in the United States. Even the percentage of U.S. content in vehicles manufactured by the Detroit Three varies widely from model to model.\nCongress mandated under the American Automobile Labeling Act (AALA) that the U.S. Department of Transportation's National Highway Traffic Safety Administration (NHTSA) annually document and list the percentage by value of a vehicle's parts that originate in the United States and Canada. NHTSA also names any countries that individually supply 15% or more of the content of a vehicle model sold in the United States. Since the AALA counts U.S. and Canadian parts together, it is not possible to know the percentage of U.S. content alone. Examples of U.S./Canadian and foreign parts content in selected models appear in Table 1 .\nU.S. motor vehicle assembly has become increasingly international, and domestic carmakers rely more on imported parts than in the past. By one estimate for cars that were assembled in the United States, the percentage of auto parts that were imported increased from 20% in 1997 to 29% in 2005. At the same time, foreign carmakers are using more parts produced in the United States, and many foreign auto parts companies have established production in North America to be closer to their U.S. and Canadian customers.\nAs shown in Table 1 , the domestic content of some cars sold in the United States is less than 5%, while the domestic content of others is 80% or more. For example, 60% of the parts in the Ford F-Series pickup truck, assembled in Kansas City, MO, and Dearborn, MI, are from the United States or Canada. U.S. and Canadian content in South Korean carlines range from 2% in the Hyundai Accent to 41% in the Hyundai Sonata.", "A free trade agreement (FTA) is a pact between two or more countries to eliminate tariff or non-tariff barriers affecting trade among these countries. Each country applies its own independent schedule of tariffs on imports from countries that are not members. An important objective of any FTA is to ensure that only products of signatory countries receive preferential tariff treatment. Rules of origin are included in all FTAs to make certain that transshipment and light processing, such as simple assembly or repackaging, are not used by third-country suppliers to circumvent higher duties.\nDetermining the country of origin is fairly straightforward when a product is \"wholly obtained\" from one country. When a finished product's component parts are manufactured in many countries, however, determining origin can be a complex process. For goods to receive the more favorable tariff treatment provided by an FTA, importers must demonstrate that their products meet the eligibility criteria to receive it.\nEach free trade agreement to which the United States is a party has distinct rules of origin, which may differ greatly from those in other FTAs. Within an FTA, there may be different rules of origin for different industry sectors. Specific rules of origin are associated with the motor vehicle and motor vehicle parts industry, as with other industry sectors.\nTo determine the origin of assembled autos and of auto parts such as gearboxes and steering wheels, most U.S. FTAs apply a test of regional value content (RVC). An RVC test requires that a certain percentage of the value of a manufactured product (as determined by the cost of inputs, labor, and other direct costs of processing operations) originate in the FTA region. When calculating RVC, specific equations are required to determine the value of the materials originating within the FTA countries and the value of inputs not originating within one of the FTA countries, and other costs, such as processing and shipping.\nOver the past two decades, the United States has concluded 11 bilateral and regional FTAs. As with other provisions, RVC requirements for automotive products vary among free trade agreements.\nIn general, the tariff benefits provided by an FTA may create incentives for automakers, part suppliers, and all other manufacturers to source from the agreement region. Therefore, when FTAs are negotiated, representatives of the auto industry, as well as other manufacturers, consult with their respective country's trade negotiators to ensure that they will be able to meet the rules of origin established in these agreements while still maintaining their global sourcing patterns.\nAt the same time, it is also possible that an FTA's tariff incentives may not provide sufficient inducement to alter an already-established supply chain. For example, the U.S. normal trade relations (NTR) tariff rate for imported passenger cars is an already low 2.5%, so it is not likely that an exemption from this tariff level alone would prompt manufacturers to build cars for the U.S. market within the FTA region rather than outside it. The substantially higher U.S. light truck tariff of 25%, however, could result in significant cost savings for manufacturers that build trucks for U.S. sale in the United States or in a U.S. FTA partner country. This high tariff on imported light trucks is one reason why nearly all pick-up trucks sold in the United States are manufactured in North America.\nSince tariff rates on automobiles tend to be higher in the markets of the United States' FTA partners than in the United States, tariff savings in the foreign market could provide an even greater incentive for U.S. automakers to meet the preferential rules of origin requirements when exporting to these trading partners. For example, NTR tariffs for automobiles in the countries that are parties to the Dominican Republic-Central America-United States (CAFTA-DR) FTA run as high as 20%. This underscores the asymmetrical benefits that can accrue to producers of vehicles in the United States if other countries' tariffs are reduced or eliminated through a free trade agreement.\nNAFTA has the highest RVC requirement for automotive products at 62.5%, meaning that nearly two-thirds of the value of the vehicle must originate in the United States, Mexico, or Canada for an assembled vehicle to receive the NAFTA tariff benefit. This high regional content requirement reflects the fact that the North American auto market was already highly integrated at the time of the agreement's negotiation.\nRegional value content rules for auto products in other FTAs vary from 30% to 50%. Older free trade agreements such as the 1989 U.S.-Canada FTA considered a vehicle to be domestic if it had at least 50% U.S. or Canadian content. Value can be calculated in various ways, such as \"building down\" from the value of the finished product or \"building up\" from the value of the originating materials. The specific, and often complicated, rules of origin for automotive products under selected FTAs are shown in Table 2 .", "Current U.S. NTR tariffs are 2.5% for autos and most auto parts, with some auto parts already duty-free. In South Korea, tariffs for comparable products can be as high as 8% (see Table 3 ). Light truck tariffs are higher in both countries at 25% and 10%, respectively. If the KORUS FTA were enacted, both countries' tariffs on passenger cars, light trucks, and auto parts would be phased out. Ultimately, all auto and auto parts tariffs would be eliminated 10 years following implementation of the agreement.\nU.S. and South Korean car tariffs would be eliminated five years after the KORUS FTA enters into force. The U.S. light truck tariff would remain at its current level for seven years and would be phased out completely by year 10. South Korea would eliminate its 10% tariff on U.S. light trucks immediately upon KORUS FTA implementation. Auto parts tariffs would be eliminated immediately after KORUS FTA implementation by both the United States and South Korea.\nThe KORUS FTA has two specific rule of origin requirements. First, all products must be produced in either the United States or South Korea. Second, the product must meet the applicable rule of origin, which in the case of autos is a regional content requirement. Simple automotive assembly operations alone would not be sufficient to confer origin under the KORUS FTA, as industry sources indicate that only 15% of the cost of an automobile, on average, is associated with assembly. An auto manufacturer thus would be unlikely to meet the ROO requirements without obtaining a significant number of components from either the United States or South Korea.", "Under the proposed KORUS FTA, automakers and most component manufacturers can select one of three options for calculating regional value content. They thus have a certain amount of flexibility in demonstrating that a vehicle or component qualifies for preferential treatment. RVC is calculated as a percentage of the \"adjusted value\" of the product, which, in general terms, can be thought of as the import price less freight costs. The three options vary in the required percentage of RVC because the methodologies used to calculate RVC are different. For finished automobiles and light trucks, and for engines, transmissions, and most other components, the three options are:\n55% under the build-down method; 35% under the build-up method; or 35% under the net-cost method.", "The build-down method determines the regional value content by subtracting the value of the non-originating merchandise from the adjusted value of the finished product. The adjusted value includes all costs, profit, general expenses, parts and materials, labor, shipping, marketing, and packing. Since the build-down method allows manufacturers to count all of the costs involved in building and marketing the final automobile or the component, a higher percentage (55%) is associated with this calculation in comparison to the other two allowable methods of calculating regional value content.\nFigure 3 provides an example of regional value content calculations using the build-down method, which is one of the two methods reportedly preferred by automakers based on the adjusted value of an automobile. The other is net cost and is discussed below. Similar methodologies would be applied by auto parts suppliers when they import an automotive part or component, such as an engine, gear box, axle, or shock absorber.", "The build-up method starts with the value of originating materials. The value of inputs from South Korea and the United States is added together, and if their total value exceeds 35% of the adjusted value of the vehicle or the component, the product would qualify for the benefits of the KORUS FTA. The build-up method is included in the KORUS FTA principally to benefit manufacturers of exports other than automobiles. According to auto industry representatives, U.S. manufacturers do not use the build-up method and are not expected to do so under the KORUS FTA.", "The net cost method captures only the costs involved in manufacturing, such as factory labor, materials, and direct overhead, as shown in Figure 3 . Other costs, such as sales promotion, marketing, royalties, and profit, are excluded from the calculation. The use of a small, easily identifiable set of input costs is thought to make the net cost method easier to use in calculating RVC. This method was reportedly preferred by U.S. automakers and its inclusion in the KORUS FTA was a major negotiating priority for them, because it better reflects their production, accounting, and record-keeping methods. As the net cost method excludes selling, general, and administrative (SG&A) costs, profits, expenses, royalties, and promotional costs, its 35% RVC requirement is approximately equivalent to the 55% RVC requirement under the build-down method described above.\nThe KORUS FTA allows motor vehicle producers to average their content over their fiscal year when calculating their regional value content under the net cost method for automotive goods. Automotive materials, which cover engines, chassis, bodies, and other motor vehicle parts, can also be averaged. Auto manufacturers claim that averaging regional value content is easier administratively than determining the RVC of each individual vehicle or model, as RVC varies with vehicle options.", "In addition to the KORUS FTA, the South Korean government has negotiated a trade agreement with the European Union, referred to as the KOREU FTA. This agreement enters into force on July 1, 2011.\nThe KOREU FTA requires importers of automotive products to use a different method for calculating regional value content than is allowed under the KORUS FTA, known as the ex-works price method . The ex-works price is defined in the agreement as \"the price paid or payable for the product ex-works to the manufacturer in a Party in whose undertaking the last working or processing is carried out, provided that the price includes the value of all the materials used, minus any internal taxes which are, or should be, repaid when the product obtained is exported.\"\nThe foreign (non-originating) content level for autos under KOREU FTA should not exceed 45% of the ex-works price of the product (see Figure 4 ). Therefore, if the KOREU FTA allows 45% foreign content under the ex-works method, it follows that 55% of the content must come from either the European Union or South Korea. This roughly corresponds to the 55% regional value content rule in the KORUS FTA build-down method described above, which incorporates a similar subset of costs to the ex-works price method.\nThe ex-works calculations under the KOREU FTA are different from the build-up and net cost calculations allowed under the KORUS FTA, because these methods include a different subset of costs. Notwithstanding these differences, Administration experts assert that the regional value content requirements in the KORUS and KOREU FTA are roughly equivalent. What differs are the methodologies used to calculate RVC.", "The proposed KORUS FTA does not require that 100% of an automobile or auto component be sourced from parts produced in the United States or South Korea in order to receive preferential tariff treatment. A certain percentage of the product's value, as discussed above, must originate in either the United States or South Korea. Enforcement of the automotive rules of origin therefore depends upon the ability of U.S. and South Korean officials to identify and determine how much of an automotive product's value was produced in the two countries.\nA number of South Korean manufacturers use inputs produced at the Kaesong Industrial Complex (KIC), an industrial park located in North Korea just across the demilitarized zone from South Korea. At present, U.S. law prohibits any \"direct or indirect\" imports from North Korea to the United States without approval of the Office of Foreign Assets Control (OFAC) of the Department of the Treasury. One enforcement issue is whether the KORUS FTA could encourage manufacturers in South Korea to incorporate goods produced in the KIC into products exported to the United States, effectively circumventing the U.S. restrictions on goods from North Korea and also enabling North Korea to obtain duty-free access to the U.S. market, to which it is not entitled under the agreement. This issue is important with respect to automotive imports, as the KIC's low labor costs may make it an attractive future location to make labor-intensive products that could be used in more complex products assembled in South Korea.\nAnnex 22-B of the proposed KORUS FTA, titled \"Committee on Outward Processing Zones (OPZ) on the Korean Peninsula,\" establishes a process under which the United States and South Korea might ultimately decide that certain goods produced on the Korean Peninsula should be deemed to be \"originating goods\" and thus be accorded the preferential tariff treatment and other benefits extended to such goods under the KORUS FTA. The Committee on OPZ on the Korean Peninsula (shorthand for Kaesong and any other similar zones that might be created in the future within North Korea) would be established by the United States and South Korea. It would initially meet on the first anniversary of the entry into force of the KORUS FTA, and at least once annually thereafter, or at any other time mutually agreed upon by the committee. The committee's purpose is to consider whether KIC products should receive duty-free treatment. Its consideration would be based on various criteria, such as environmental standards, labor standards, or progress on denuclearization of the Korean Peninsula.\nAlthough current U.S. regulations effectively prohibit any North Korean goods, including auto parts, from being incorporated into South Korean products that are exported to the United States, if OFAC were to approve a license application, then the KORUS FTA rules of origin for automobiles would apply. As North Korea is not a party to the KORUS FTA, the North Korean inputs would not be counted as regional value content under the rules discussed in a previous section of this report.\nThere is a significant question whether automotive products from the KIC that are incorporated into finished U.S.-bound products in South Korea can be detected by U.S. authorities. As vehicles have thousands of components, it is not possible for U.S. Customs and Border Protection (CBP) to identify the origin of every component. Even the auto manufacturer may be unaware of the origin of every input used by the many companies in its supply chain. Given these complexities, the United Steelworkers, a labor union, recently asked that the \"long-term potential of products or components from the KIC entering the U.S. and receiving preferential trade benefits under the KORUS FTA\" be taken into account in considering the agreement's possible impact.\nCBP officials assert that their agency's targeting, verification, and enforcement processes help to mitigate the risk of illicit products from North Korea entering the United States. However, the number of laws that CBP enforces, combined with the need to swiftly assess millions of individual entries of merchandise entering the United States, make this a challenging task. While CBP monitoring and assurances from South Korean officials may indicate that no North Korean content will be incorporated into goods destined for the United States and imported under the KORUS FTA, it is impossible to ascertain with 100% certainty that no illicit North Korean parts or components will enter U.S. commerce.\nHowever, it is important to note that these goods could be imported into the United States illegally whether or not the KORUS FTA enters into force. According to CBP and USTR officials, the customs cooperation and trade facilitation chapter (Chapter 7, \"Customs Administration and Trade Facilitation\") in the KORUS FTA will make the detection of unauthorized North Korean products simpler than at present, in part, because U.S. officials will be permitted to inspect South Korean factories and shipment documentation to detect any circumvention. CBP and USTR officials also report that the mandated sharing of information and intelligence when unlawful activity is suspected will help to significantly reduce unlawful trade.\nThe Korean Customs Service has recently announced new measures to better identify and stop possible circumvention of the rules of origin. For example, it is establishing an office of 157 customs officers to track the entire shipment process, including entry, unloading, transportation, shipping, and departure. These new procedures would apply to all products; it is not specific to the auto industry. There will also be targeted inspections of high-risk cargoes, which could include auto parts shipments. U.S. customs officials also believe that additional targeting information can be gained through CBP's online trade reporting system, known as \"e-Allegations,\" which is designed to encourage companies to report on competitors which they believe to be using inputs that may be illegal or fraudulently labeled.", "Bilateral trade in automobiles has been a major point of contention in U.S.-South Korean trade relations for decades. Thus, it is not surprising that automotive-related issues are prominent in the KORUS FTA. The sensitivity of the issue has grown as South Korea has become a major producer and exporter of vehicles, especially small cars, in competition with U.S. manufacturers. In 2010, South Korea produced 4.3 million cars and commercial vehicles, making it the fifth-largest producer, behind, in order, China, Japan, the United States, and Germany. Two South Korean automobile assemblers—Hyundai and Kia, which is partially owned by Hyundai—have assembly operations in the United States.\nThe export orientation of the South Korean motor vehicle industry, the high quality of South Korean cars, and the relatively low U.S. tariff on imported cars has made the United States a market of opportunity for South Korean automobile exporters. Combined light vehicle sales by Hyundai and Kia in the United States, including both imports and domestic production, totaled nearly 895,000 cars and light trucks in 2010. This represented a 22% increase over 2009 sales.\nSome 90,562 imported cars were sold in South Korea in 2010, according to data from the Korea Automobile Importers and Dealers Association. Of these, 7,450 were vehicles imported from the United States. In addition, Daewoo Motors, a subsidiary of U.S.-based General Motors, sold over 125,000 vehicles in South Korea in 2010.\nIf the KORUS FTA is to play a role in increasing U.S. automotive exports to South Korea, the rules of origin may be less important than other provisions of the agreement. Reduction of South Korea's non-tariff barriers and changes to the environmental and safety rules applied to imported vehicles could become more prominent issues affecting the future bilateral trade relationship in automobiles.\nAppendix A. Sample Regional Value Content Calculation" ], "depth": [ 0, 1, 1, 2, 1, 2, 2, 3, 3, 3, 1, 1, 1 ], "alignment": [ "h0_title h2_title h1_title h3_title", "h0_full h2_full", "h1_full", "", "h0_full", "", "", "", "", "", "h3_full h2_full", "h3_full h1_full", "" ] }
{ "question": [ "How has the Congress treated the KORUS FTA?", "What is the significance of the rules of origin?", "What is a regional value content test?", "To what extent are vehicles today built in a single country?", "What is an example of this dynamic?", "What are the implications of this complex origin?", "What constitutes a vehicle to be eligible as duty-free?", "Why must a vehicle primarily be built by KORUS FTA countries?", "How does the KORUS FTA compared to other trade agreements?", "How might trade between the US and North Korea affect trade with South Korea?", "What challenges will remain regarding trade with South Korea?", "What is the current trade relationship between North Korea and the United States?" ], "summary": [ "The agreement's effect on the automotive sector has drawn particular scrutiny as Congress considers implementation of the KORUS FTA. In particular, the specific rules of origin (ROO) for automobiles and auto parts have become a matter of debate.", "These rules determine whether the products imported into an FTA participating country are eligible to receive the duty-free or reduced tariff benefits of the agreement. For autos and auto parts, a certain percentage of the parts, labor, and other associated costs must come from the region.", "For autos and auto parts, a certain percentage of the parts, labor, and other associated costs must come from the region. This is known as a regional value content (RVC) test.", "Few vehicles built today are built of parts made in any one country.", "The roughly 15,000 parts needed to produce a single motor vehicle are typically supplied by a complex web of manufacturers located throughout the world.", "This makes it challenging to determine whether a particular vehicle or a complex component, such as an engine or a transmission, qualifies for duty-free access to the U.S. or South Korean markets under the KORUS FTA.", "Based on analysis of the regional value content required under the KORUS FTA rules of origin, a significant proportion of a vehicle's value would need to originate in South Korea or the United States for that vehicle to enter the United States duty-free.", "Simply assembling a product from inputs obtained from other countries would likely result in insufficient regional value content for a product to qualify for the tariff benefits of the KORUS FTA.", "It appears that the requirements under the KORUS FTA are roughly equivalent to those imposed upon South Korean and European Union vehicles under the South Korea-European Union Free Trade Agreement, which takes effect July 1, 2011.", "If at some future time the United States were to ease trade restrictions on North Korea, U.S. and South Korean negotiators would then need to discuss the treatment of North Korean inputs to South Korean products under the agreement.", "The KORUS FTA contains provisions to promote cooperation between the two countries' customs officials. Nonetheless, ensuring that North Korean parts are not used in South Korean products exported to the United States will remain a challenge, whether or not the KORUS FTA takes effect.", "Content produced in North Korea is not presently allowed into the United States, a situation that the KORUS FTA would not change." ], "parent_pair_index": [ -1, 0, -1, -1, 0, 0, -1, 0, -1, -1, 0, 0 ], "summary_paragraph_index": [ 1, 1, 1, 2, 2, 2, 3, 3, 3, 4, 4, 4 ] }
GAO_GAO-13-784T
{ "title": [ "Background", "The Coast Guard Has Made Progress in Adding Data Sources and the Availability of COP Information to Users", "The Coast Guard Has Experienced Challenges in Developing and Implementing COP- related Systems", "GAO Contact and Staff Acknowledgments" ], "paragraphs": [ "According to the Coast Guard, the COP became operational in 2003 and is comprised of four elements:\nTrack data feeds: The primary information included in the Coast Guard’s COP is vessel and aircraft position information—or tracks— and descriptive information about the vessels, their cargo, and crew. Track information may be obtained from a variety of sources depending on the type of track. For example, the COP includes track information or position reports of Coast Guard and port partner vessels.\nInformation data sources: The information data sources provide supplementary information on the vessel tracks to help COP users and operational commanders determine why a track might be important. The COP includes data from multiple information sources that originate from the Coast Guard as well as from other government agencies and civilian sources.\nCommand and control systems: These systems collect, fuse, disseminate, and store information for the COP. Since the COP became operational in 2003, the Coast Guard has provided COP users with various systems that have allowed them to view, manipulate and enhance their use of the COP. These systems have included the Global Command and Control System (GCCS), Command and Control Personal Computer (C2PC), and Hawkeye. In addition to the technology needed to view the COP, the Coast Guard has also developed technology to further enhance the information within the COP and its use to improve mission effectiveness. This has occurred in part through its former Deepwater Command, Control, Communications, Computers, Intelligence, Surveillance, and Reconnaissance (C4ISR) program system improvements.\nCOP management procedures: These procedures address the development and the use of the COP. This would include, for example, the Concept of Operations document, which identifies the basic components, use, and exchange of information included in the COP and the requirements document, which identifies the essential capabilities and associated requirements needed to make the COP function. These procedures also include other documents such as standard operating procedures on how the Coast Guard uses the COP, agreements with others using the COP on how information is to be shared or exchanged, and rules for how data are correlated and how vessels are flagged as threats or friends.\nFigure 1 depicts the Coast Guard’s vision of the COP with Coast Guard internal and external users.", "In April 2013, we reported that since the COP became operational in 2003, the Coast Guard has made progress in adding useful data sources and in increasing the number of users with access to the COP. In general, the COP has added internal and external data sources and types of vessel-tracking information that enhance COP users’ knowledge of the maritime domain. Vessel tracking information had been available previously to Coast Guard field units located in ports through a Vessel Tracking Service—that is, a service that provides active monitoring and navigational advice for vessels in confined and busy waterways to help facilitate maritime safety. However, adding it to the COP provided a broader base of situational awareness for Coast Guard operational commanders. For example, before automatic identification system (AIS) vessel-tracking information was added to the COP, only Coast Guard units specifically responsible for vessel-tracking, were able to easily track large commercial vessels’ positions, speeds, courses, and destinations. According to Coast Guard personnel, after AIS data were added to the COP in 2003, any Coast Guard unit could access such information to improve strategic and tactical decision making. In 2006, the ability to track the location of Coast Guard assets, including small boats and cutters, was also added to the COP. This capability—also known as blue force tracking—allows COP users to locate Coast Guard vessels in real time and establish which vessels are in the best position to respond to mission needs. Similarly, blue force tracking allows the Coast Guard to differentiate its own vessels from commercial or unfriendly vessels.\nAnother enhancement to the information available in the COP was provided through the updating of certain equipment on Coast Guard assets that enabled them to collect and transmit data. Specifically, the Coast Guard made some data collection and sharing improvements, including the installation of commercial satellite communications equipment and AIS receivers, onboard its older cutters. This added capability made the COP information more robust by allowing Coast Guard vessels at sea to receive, through AIS receivers, position reports from large commercial vessels and then transmit this information to land units where it would be entered into the COP. This equipment upgrade on older Coast Guard cutters added information into the COP that is generally not available through other means.\nAccording to Coast Guard officials, in addition to adding information to the COP, the Coast Guard has also made the information contained in the COP available on more computers and on more systems, which, in turn, has increased the number of users with access to the COP. One of the key steps toward increasing the number of users with COP access occurred in 2004 with the implementation of C2PC, which made both the classified and unclassified COP available to additional Coast Guard personnel. According to Coast Guard officials, the advent of C2PC allowed access to the COP from any Coast Guard computer connected to the Coast Guard data network. Prior to C2PC, Coast Guard personnel had access to the COP through Coast Guard GCCS workstations.", "We previously reported that the Coast Guard has experienced challenges with COP-related technology acquisitions that resulted from the Coast Guard not following its own information technology acquisition guidance and processes. These challenges included poor usability and the inability to share information as intended, and ultimately resulted in the Coast Guard not meeting its goals for multiple COP-related systems. For example, four COP-related systems have been affected by the Coast Guard not closely following its acquisition processes.\nC4ISR project. The C4ISR project was designed to allow the Coast Guard’s newly acquired offshore vessels and aircraft to both add information to the COP using their own sensors as well as view information contained within the COP, thereby allowing these assets to become both producers and consumers of COP information. However, in July 2011, we reported that the Coast Guard had not met its goal of building the $2.5 billion C4ISR system. Specifically, we reported that the Coast Guard had repeatedly changed its strategy for achieving C4ISR’s goal of building a single fully interoperable command, control, intelligence, surveillance, and reconnaissance system across the Coast Guard’s new vessels and aircraft. Further, we found that not all aircraft and vessels were operating the same C4ISR system, or even at the same classification level, and hence could not directly exchange data with each other. For example, an aircraft operating with a classified system had difficulty sharing information with others operating on unclassified systems during the Deepwater Horizon oil spill incident. In addition, we reported at that time that the Coast Guard may shift away from a full data- sharing capability and instead use a system where shore-based command centers serve as conduits between assets while also entering data from assets into the COP. This approach could increase the time it takes for COP information, for example, gathered by a vessel operating with a classified system to be shared with an aircraft operating with an unclassified system. Because aircraft and vessels are important contributors to and users of COP information, a limited capability to quickly and fully share COP data could affect their mission effectiveness. We concluded that given these uncertainties, the Coast Guard did not have a clear vision of the C4ISR required to meet its missions.\nWe also reported in July 2011 that the Coast Guard was managing the C4ISR program without key acquisition documents. At that time, the Coast Guard lacked an acquisition program baseline that reflected the planned program, a credible life-cycle cost estimate, and an operational requirements document for the entire C4ISR acquisition project. According to Coast Guard information technology officials, the abundance of software baselines could increase the overall instability of the C4ISR system and complexity of the data sharing among assets. We recommended, and the Coast Guard concurred, that it should determine whether the system-of-systems concept for C4ISR is still the planned vision for the program, and if not, ensure that the new vision is comprehensively detailed in the project documentation. In response to our recommendation, the Coast Guard reported in 2012 that it was still supporting the system-of-systems approach, and was developing needed documentation. We will continue to assess the C4ISR program through our ongoing work on Coast Guard recapitalization efforts.\nDevelopment of WatchKeeper. Another mechanism that was expected to increase access to COP information was the DHS Interagency Operations Center (IOC) program, which was delegated to the Coast Guard for development. This $74 million program began providing COP information to Coast Guard agency partners in 2010 using WatchKeeper software. The IOCs were originally designed to gather data from sensors and port partner sources to provide situational awareness to Coast Guard sector personnel and to Coast Guard partners in state and local law enforcement and port operations, among others. Specifically, WatchKeeper was designed to provide Coast Guard personnel and port partners with access to the same unclassified GIS data, thereby improving collaboration between them and leveraging their respective capabilities in responding to cases. For example, in responding to a distress call, access to WatchKeeper information would allow both the Coast Guard unit and its local port partners to know the location of all possible response vessels, so they could allocate resources and develop search patterns that made the best use of each responding vessel.\nIn February 2012, we reported that the Coast Guard had increased access to its WatchKeeper software by allowing access to the system for Coast Guard port partners. However, the Coast Guard had limited success in improving information sharing between the Coast Guard and local port partners and did not follow its established guidance during the development of WatchKeeper—a major component of the $74 million Interagency Operations Center acquisition project. By not following its guidance, the Coast Guard failed to determine the needs of its users, define acquisition requirements, or determine cost and schedule information. Specifically, prior to the initial deployment of WatchKeeper, the Coast Guard had made limited efforts to determine port partner needs for the system. For example, we found that Coast Guard officials had some high level discussions, primarily with other DHS partners, but that port partner involvement in the development of WatchKeeper requirements was primarily limited to Customs and Border Protection because WatchKeeper had grown out of a system designed for screening commercial vessel arrivals—a Customs and Border Protection mission. However, according to the Interagency Operations Process Report: Mapping Process to Requirements for Interagency Operations Centers, the Coast Guard identified many port partners as critical to IOCs, including other federal agencies (e.g., the Federal Bureau of Investigation) and state and local agencies.\nWe also determined that because few port partners’ needs were met with WatchKeeper, use of the system by port partners was limited. Specifically, of the 233 port partners who had access to WatchKeeper for any part of September 2011 (the most recent month for which data were available at the time of our report), about 18 percent had ever logged onto the system and about 3 percent had logged on more than five times. Additionally, we reported that without implementing a documented process to obtain and incorporate port partner feedback into the development of future WatchKeeper requirements, the Coast Guard was at risk of deploying a system that lacked needed capabilities, which would continue to limit the ability of port partners to share information and coordinate in the maritime environment. We concluded, in part, that the weak management of the IOC acquisition project increased the program’s exposure to risk. In particular, fundamental requirements-development and management practices had not been employed; costs were unclear; and the project’s schedule, which was to guide program execution and promote accountability, had not been reliably derived. Moreover, we reported that with stronger program management, the Coast Guard could reduce the risk that it would have a system that did not meet Coast Guard and port partner user needs and expectations. As a result, we recommended, and the Coast Guard concurred, that it collect data to determine the extent to which (1) sectors are providing port partners with WatchKeeper access and (2) port partners are using WatchKeeper; then develop, document, and implement a process to obtain and incorporate port-partner input into the development of future WatchKeeper requirements; and define, document, and prioritize WatchKeeper requirements. As of April 2013, we had not received any reports of progress on these recommendations from the Coast Guard.\nCoast Guard Enterprise Geographic Information System (EGIS). In April 2013, we also reported that Coast Guard personnel we interviewed who use EGIS--an important component, along with its associated viewer, for accessing COP information—stated that they had experienced numerous challenges with the system after it was implemented in 2009. Our site visits to area, district, and sector command centers in six Coast Guard field locations, and discussions with headquarters personnel, identified numerous examples of user concerns about EGIS. Specifically, the Coast Guard personnel we interviewed who used EGIS stated that it was slow, did not always display accurate and timely information, or degraded the performance of their computer workstations—making EGIS’s performance generally unsatisfactory to them. For example, personnel from one district we visited reported losing critical time when attempting to determine a boater’s position on a map display because of EGIS’s slow performance. Similarly, personnel at three of the five districts we visited described how EGIS sometimes displayed inaccurate or delayed vessel location information, including, for example, displaying a vessel track indicating a 25-foot Coast Guard boat was located off the coast of Greenland—a location where no such vessel had ever been. Personnel we met with in two districts did not use EGIS at all to display COP information because doing so caused other applications to crash.\nIn addition to user-identified challenges, we reported in April 2013 that Coast Guard information technology (IT) officials told us they had experienced challenges largely related to insufficient computational power on some Coast Guard work stations, a lack of training for users and system installers, and inadequate testing of EGIS software before installation. For example, according to Coast Guard IT officials, Coast Guard computers are replaced on a regular schedule, but not all at once, and EGIS’s viewer places a high demand on the graphics capabilities of computers. They added that this demand was beyond the capability of the older Coast Guard computers used in some locations. Moreover, Coast Guard IT management made EGIS available to all potential users without performing the tests needed to determine if capability challenges would ensue. In regard to training, Coast Guard officials told us that they had developed online internal training for EGIS, and classroom training was also available from the software supplier. However, Coast Guard IT officials stated that they did not inform users that this training was available. This left the users with learning how to use EGIS on the job. Similarly, the installers of EGIS software were not trained properly, and many cases of incomplete installation were later discovered. These incomplete installations significantly degraded the capabilities of EGIS. Finally, the Coast Guard did not pre-test the demands of EGIS on Coast Guard systems in real world conditions, according to Coast Guard officials. Tests conducted later, after users commented on their problems using EGIS, demonstrated the limitations of the Coast Guard network in handling EGIS. According to Coast Guard officials, some of these challenges may have been avoided if they had followed established acquisition processes for IT development. If these problems had been averted, users may have had greater satisfaction and the system may have been better utilized for Coast Guard mission needs.\nPoor communication by, and among, Coast Guard IT officials led to additional management challenges during efforts to implement a simplified EGIS technology called EGIS Silverlight. According to Coast Guard officials, the Coast Guard implemented EGIS Silverlight to give users access to EGIS data without the analysis tools that had been tied to technical challenges with the existing EGIS software. Coast Guard personnel from the Office of the Chief Information Officer (CIO) stated that EGIS Silverlight was available to users in 2010; however, none of the Coast Guard personnel we spoke with at the field units we visited mentioned awareness of or use of this alternative EGIS option when asked about what systems they used to access the COP. According to CIO personnel, it was the responsibility of the system sponsor’s office to notify users about the availability of EGIS Silverlight. However, personnel from the sponsor’s office stated that they were unaware that EGIS Silverlight had been deployed and thus had not taken steps to notify field personnel of this new application that could have helped to address EGIS performance problems. These Coast Guard officials were unable to explain how this communication breakdown had occurred.\nCoast Guard One View (CG1V). In April 2013, we reported that the Coast Guard had not followed its own information technology development guidance when developing its new COP viewer, known as Coast Guard One View, or CG1V. The Coast Guard reported that it began development of CG1V in April 2010 to provide users with a single interface for viewing GIS information, including the COP, and to align the Coast Guard’s viewer with DHS’s new GIS viewer. However, in 2012, during its initial development of CG1V, the agency did not follow its System Development Life Cycle (SDLC) guidance which requires documents to be completed during specific phases of product development. Specifically, 9 months after CG1V had entered into the SDLC the Coast Guard either had not created certain required documents or had created them outside of the sequence prescribed by the SDLC. For example, the SDLC-required tailoring plan is supposed to provide a clear and concise listing of SDLC process requirements throughout the entire system lifecycle, and facilitate the documentation of calculated deviations from standard SDLC activities, products, roles, and responsibilities from the outset of the project. Though the SDLC clearly states that the tailoring plan is a key first step in the SDLC, for CG1V it was not written until after documents required in the second phase were completed. Coast Guard officials stated that this late completion of the tailoring plan occurred because the Coast Guard’s Chief Information Officer had allowed the project to start in the second phase of the SDLC because they believed CG1V was a proven concept. However, without key phase one documents, the Coast Guard may have prematurely selected CG1V as a solution without reviewing other viable alternatives to meet its vision, and may have dedicated resources to CG1V without knowing project costs. In October 2012, Coast Guard officials acknowledged the importance of following the SDLC process and stated their intent to complete the SDLC-required documents. Clarifying the application of the SDLC to new technology development would better position the Coast Guard to maximize the usefulness of the COP. In our April 2013 report, we recommended that the Commandant of the Coast Guard direct the Coast Guard Chief Information Officer to issue guidance clarifying the application of the SDLC for the development of future projects. The Coast Guard concurred with the recommendation and reported that it planned to mitigate the risks of potential implementation challenges of future technology developments for the COP by issuing proper guidance and clarifying procedures regarding the applicability of the SDLC. The Coast Guard estimated that it would implement this recommendation by the end of fiscal year 2013.\nChairman Hunter, Ranking Member Garamendi, and Members of the Subcommittee, this completes my prepared statement. I would be happy to respond to any questions.", "For questions about this statement, please contact Stephen L. Caldwell at (202) 512-9610 or [email protected]. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this statement. Individuals making key contributions to this statement include Dawn Hoff (Assistant Director), Jonathan Bachman, Jason Berman, Laurier Fish, Bintou Njie, Jessica Orr, Lerone Reid, and Katherine Trimble.\nThis is a work of the U.S. government and is not subject to copyright protection in the United States. The published product may be reproduced and distributed in its entirety without further permission from GAO. However, because this work may contain copyrighted images or other material, permission from the copyright holder may be necessary if you wish to reproduce this material separately." ], "depth": [ 1, 1, 1, 1 ], "alignment": [ "h2_full", "h0_full h3_full h2_full", "h1_full", "" ] }
{ "question": [ "How has the Coast Guard progressed in developing the Common Operational Picture?", "What is the effect of these developments?", "How has the COP improved locating vessels?", "How has the developments to the COP affected how information is shared?", "In what ways has challenges in the development process affected the COP?", "How have these challenges affected the Coast Guard in 2011?", "How have these challenges affected the Coast Guard in 2012?", "How have these challenges affected the Coast Guard in 2001?", "Why did the Coast Guard develop the COP?", "What is the purpose of the COP?", "How is the COP utilized by the Coast Guard?", "What are COP-relates systems?", "What does the statement summarize?", "On what is the statement based?", "How did GAO conduct the selected updates?" ], "summary": [ "The Coast Guard, a component of the Department of Homeland Security (DHS), has made progress in developing its Common Operational Picture (COP) by increasing the information in the COP and increasing user access to this information. The Coast Guard has made progress by adding internal and external data sources that allow for better understanding of anything associated with the global maritime domain that could affect the United States.", "The COP has made information from these sources available to more COP users and decision makers throughout the Coast Guard.", "For example, in 2006, the ability to track the location of Coast Guard assets, including small boats and cutters, was added to the COP. This capability--also known as blue force tracking--allows COP users to locate Coast Guard vessels in real time and establish which vessels are in the best position to respond to mission needs.", "In addition to adding information to the COP, the Coast Guard has also made the information contained in the COP available on more computers and on more systems, which, in turn, has increased the number of users with access to the COP.", "The Coast Guard has also experienced challenges in developing and implementing COP-related systems and meeting the COP's goals for implementing systems to display and share COP information. These challenges have affected the Coast Guard's deployment of recent COP technology acquisitions and are related to such things as the inability to share information as intended and systems not meeting intended objectives.", "For example, in July 2011, GAO reported that the Coast Guard had not met its goal of building a single, fully interoperable Command, Control, Communications, Computers, Intelligence, Surveillance, and Reconnaissance program (C4ISR) system--a $2.5 billion project intended to enable the sharing of COP and other data among its new offshore vessels and aircraft. Specifically, GAO noted that the Coast Guard: (1) repeatedly changed its strategy for achieving the goal of the C4ISR system and (2) that not all vessels and aircraft were operating the same C4ISR system, or even at the same classification level and hence could not directly exchange data with one another as intended.", "GAO found similar challenges with other Coast Guard COP-related systems not meeting intended objectives. For example, in February 2012, GAO reported that the intended information-sharing capabilities of the Coast Guard's WatchKeeper software--a major part of the $74 million Interagency Operations Center project designed to gather data to help port partner agencies collaborate in the conduct of operations and share information, among other things--met few port agency partner needs, in part because the agency failed to determine these needs when developing the system.", "Further, in April 2013, GAO reported that, among other things, the Coast Guard experienced challenges when it deployed its Enterprise Geographic Information System (EGIS), a tool for viewing COP information that did not meet user needs. The challenges Coast Guard personnel experienced with EGIS included system slowness and displays of inaccurate information.", "To facilitate its mission effectiveness through greater maritime situational awareness, the Coast Guard developed its COP--a map-based information system shared among its commands.", "The COP displays vessels, information about those vessels, and the environment surrounding them on interactive digital maps.", "COP information is shared via computer networks throughout the Coast Guard to assist with operational decisions.", "COP-related systems include systems that can be used to access, or provide information to, the COP.", "This statement summarizes GAO's work on (1) the Coast Guard's progress in increasing the availability of data sources and COP information to users and (2) the challenges the Coast Guard has experienced in developing and implementing COP-related systems.", "This statement is based on GAO's prior work issued from July 2011 through April 2013 on various Coast Guard acquisition and implementation efforts related to the COP, along with selected updates conducted in July 2013.", "To conduct the selected updates, GAO obtained documentation on the Coast Guard's reported status in developing COP-related acquisition planning documents." ], "parent_pair_index": [ -1, 0, -1, -1, -1, 0, 0, 0, -1, -1, 1, -1, -1, 0, 1 ], "summary_paragraph_index": [ 2, 2, 2, 2, 3, 3, 3, 3, 0, 0, 0, 0, 1, 1, 1 ] }
GAO_GAO-13-176
{ "title": [ "Background", "Drug Wholesalers", "Independent Pharmacies and PSAOs", "Third-Party Payers and PBMs", "At Least 22 PSAOs Contracted with over 20,000 Pharmacies in 2011 or 2012, the Majority of Which Were Independent Pharmacies", "PSAOs Provide Independent Pharmacies with a Range of Services Intended to Achieve Administrative Efficiencies, and Most PSAOs Are Paid a Monthly Fee for These Services", "PSAOs Provide a Range of Services to Independent Pharmacies Including Contract Negotiation, Communication, and Help- Desk Services", "PSAOs Provide Services Intended to Achieve Administrative Efficiencies for Independent Pharmacies and Third- Party Payers or Their PBMs", "Most PSAOs Charge a Monthly Fee for Bundled Services and Additional Fees for Other Services", "Wholesalers and Independent Pharmacy Cooperatives Owned the Majority of PSAOs; Requirements to Use Non-PSAO Services Varied by Owner", "Wholesalers and Independent Pharmacy Cooperatives Owned the Majority of PSAOs", "PSAO Owners Vary As to Whether They Require Member Pharmacies to Use Their Non-PSAO Services", "Appendix I: GAO Contact and Staff Acknowledgments", "GAO Contact", "Staff Acknowledgments" ], "paragraphs": [ "The distribution of and payment for prescription drugs involves interactions among multiple entities. These entities include drug wholesalers, independent pharmacies, PSAOs, and third-party payers and their PBMs. Interactions among these entities facilitate the flow of and payment for drugs from manufacturers to consumers.", "Drug wholesalers (hereafter referred to as wholesalers) purchase bulk quantities of drugs from pharmaceutical manufacturers and then distribute them to pharmacies, including independent pharmacies. For example, a wholesaler may fill an order from an independent pharmacy for a specified quantity of drugs produced by manufacturers and deliver the order to the pharmacy. In addition to supplying drugs, some wholesalers offer ancillary services to independent pharmacies such as helping them manage their inventory. Three wholesalers—AmerisourceBergen Corporation, McKesson Corporation, and Cardinal Health Inc.— accounted for over 80 percent of all drug distribution revenue in the United States in 2011.", "Independent pharmacies are a type of retail pharmacy with a store-based location—often in rural and underserved areas—that dispense medications to consumers, including both prescription and over-the- counter drugs. In this report, we define independent pharmacies as one to three pharmacies under common ownership. Approximately 21,000 independent pharmacies constituted almost 34 percent of the retail pharmacies operating in the United States in 2010. Although independent pharmacies offer other products such as greeting cards and cosmetics, prescription drugs account for the majority of independent pharmacy sales. These sales accounted for almost 17 percent of the $266 billion in prescription drug sales in the United States in 2010. In addition to products, independent pharmacies provide patient-care services such as patient education to encourage patients’ appropriate use of medications. According to a 2009 survey of pharmacists, independent pharmacies spend the majority of their time dispensing prescription drugs and providing patient-care services.\nIndependent pharmacies primarily purchase drugs from wholesalers (although they may also purchase them directly from manufacturers) and represented slightly over 15 percent of wholesalers’ total sales to retail pharmacies in 2010. Independent pharmacies are an important part of a wholesaler’s customer portfolio because, in addition to purchasing drugs, independent pharmacies may also pay the wholesaler to provide logistical functions and ancillary services such as direct delivery of drugs to individual stores and inventory management. Thus, a wholesaler’s relationship with an independent pharmacy may result in multiple business opportunities for the wholesaler and administrative efficiencies for the pharmacy. After receipt of drugs from a wholesaler or manufacturer, pharmacies then fill and dispense prescriptions to consumers, such as health plan enrollees. These latter prescriptions are dispensed according to contractual terms agreed upon with each enrollee’s health plan, that is, with each third-party payer or its PBM.\nAccording to the National Community Pharmacists Association (NCPA), payments based on the contractual terms of third-party payers or their PBMs significantly affect the financial viability of independent pharmacies. Consequently, these pharmacies must carefully choose which contracts to accept or reject. Accordingly, most independent pharmacies rely on PSAOs to negotiate directly, or to make recommendations for negotiating contracts on their behalf with third-party payers or their PBMs. When a PSAO enters into a contract with a third-party payer or its PBM, the pharmacies in its network gain access to the third-party payer or PBM contract—and the individuals it covers—by virtue of belonging to the PSAO’s network.", "Third-party payers accounted for almost 80 percent of drug expenditures in 2010, which represents a significant shift from 30 years ago when payment from individual consumers accounted for the largest portion of expenditures. Third-party payers include private and public health plans such as those offered by large corporations and the federal government through Medicare and the FEHBP, many of which use PBMs to help them manage their prescription drug benefits. As part of the management of these benefits, PBMs assemble networks of retail pharmacies, including independent pharmacies, where the health plan’s enrollees can fill prescriptions.or its PBM’s network by entering into an agreement with the third-party payer or its PBM. It does so either directly or through a PSAO that has negotiated with that third-party payer or its PBM on the pharmacy’s behalf. Contract terms and conditions may include specifics about A pharmacy becomes a member of a third-party payer’s reimbursement rates (how much the pharmacy will be paid for dispensed drugs), payment terms (e.g., the frequency with which the third-party payer or its PBM will reimburse the pharmacy for dispensed drugs), and audit provisions (e.g., the frequency and parameters of audits conducted by the third-party payer, its PBM, or designee), among other things.\nThe reimbursement rate that third-party payers or their PBMs pay pharmacies significantly affects pharmacy revenues. Retail pharmacies participating in a PBM’s network are reimbursed for prescriptions below the level paid by cash-paying customers (those whose prescriptions are not covered by a third-party payer). In addition, pharmacies must undertake additional administrative tasks related to transactions for customers who are covered by third-party payers that are not required for cash-paying customer transactions. For example, for customers covered by third-party payers, pharmacy staff must file claims electronically and may be required to counsel them on their health plan’s benefits. However, most retail pharmacies participate in PBM networks because of the large market share PBMs command, which represents potential pharmacy customers. The five largest PBMs operating in the first quarter of 2012 represented over 330 million individuals.benefit from the prescription and nonprescription sales generated by customers that PBMs help bring into their stores. (See fig. 1 for a diagram of the network of entities in the distribution of and payment for pharmaceuticals.)", "At least 22 PSAOs, which varied in the number and location of pharmacies to which they provided services, were in operation in 2011 or 2012. In total, depending on different data sources, these 22 PSAOs represented or provided other services to between 20,275 and 28,343 pharmacies in 2011 or 2012. (See table 1.) The number of pharmacies contracted with each PSAO across these sources ranged from 24 to 5,000 pharmacies; however, according to NCPDP data most contracted with fewer than 1,000 pharmacies. The largest 5 PSAOs combined contracted with more than half of all pharmacies that were represented by a PSAO in 2011 or 2012. Because pharmacies may change their PSAO, the number of pharmacies contracting with each PSAO fluctuates as For example, according to one PSAOs enroll and disenroll pharmacies.PSAO, member pharmacies will change PSAOs whenever they think that another PSAO can negotiate better contract terms with third-party payers or their PBMs. Some PSAOs contracted primarily with pharmacies located in a particular region. These PSAOs generally represented fewer pharmacies than PSAOs representing pharmacies across the United States. For example, the Northeast Pharmacy Service Corporation represented 250 independent pharmacies while the RxSelect Pharmacy Network represented from 451 to 569 independent pharmacies.\nAccording to NCPDP data, PSAOs provide services primarily to independent pharmacies. Of the 21,511 pharmacies associated with PSAOs in the 2011 NCPDP database, 18,103 were identified as independent pharmacies. These independent pharmacies represent nearly 75 percent of the total number of independent pharmacies in the 2011 NCPDP database. This is close to an estimate reported by NCPA and the HHS OIG, both of which conducted surveys in which approximately 80 percent of responding independent pharmacies were represented by PSAOs. In addition to independent pharmacies, some PSAOs also contracted with small chains and franchise pharmacy members.small chain pharmacies ranging in size from 25 to 150 pharmacies under For example, Managed Care Connection provides services to common ownership, and the Medicine Shoppe only offers its PSAO services to its franchise pharmacies.", "PSAOs provide a broad range of services to independent pharmacies including negotiating contractual agreements and providing communication and help-desk services. These and other services are intended to achieve administrative efficiencies for both independent pharmacies and third-party payers or their PBMs. Most PSAOs charge a monthly fee for a bundled set of services and separate fees for additional services.", "While PSAOs provide a broad range of services to independent pharmacies and vary in how they offer these services, we found that PSAOs consistently offer contract negotiation, communication, and help- desk services. Several entities, including industry experts, trade associations, and PSAOs we spoke with, referred to one or all of these services as a PSAO’s “key service(s)”—meaning that a PSAO can be distinguished from other entities in the pharmaceutical industry by its provision of these services. In addition, PSAOs may provide many other services that assist their member pharmacies—the majority of which are independent pharmacies—in interacting with third-party payers or their PBMs, although those PSAOs we spoke with did not provide these other services as consistently as their key services.\nOn behalf of pharmacies, PSAOs may negotiate and enter into contracts with third-party payers or their PBMs. Both the HHS OIG and an industry study reported that small businesses such as independent pharmacies generally lack the legal expertise and time to adequately review and negotiate third-party payer or PBM contracts, which can be lengthy and complex.independent pharmacies that we reviewed indicated, and all of the PSAOs we spoke with stated, that the PSAO was explicitly authorized to negotiate and enter into contracts with third-party payers on behalf of member pharmacies. By signing the agreement with the PSAO, a member pharmacy acknowledges and agrees that the PSAO has the right to negotiate contracts with third-party payers or their PBMs on its behalf.\nAll of the model agreements between PSAOs and PSAOs we spoke with had different processes for negotiating and entering into contracts with third-party payers or their PBMs. These processes included following guidance or parameters established by a governing body such as a board of directors composed partially or entirely of representatives from the PSAO’s member pharmacies. In addition, some PSAOs’ decisions about entering into contracts are made by their contracting department or executive staff that base the decision on factors such as analyses of the contract’s proposed reimbursement rate and the efficiencies and value that the PSAO’s member pharmacies would provide to the particular market in which the contracts are offered. Decisions about entering into contracts may also include consultation with a PSAO’s advisory board composed of representatives from the PSAO’s member pharmacies.\nWhile PSAOs may review and negotiate a wide range of contract provisions, PSAOs we spoke with reported negotiating a variety of provisions including reimbursement rates, payment terms, audits of pharmacies by third-party payers or their PBMs, price updates and appeals, and administrative requirements.areas, PBMs and PSAOs we spoke with reported that audits and reimbursement rates were of particular concern to pharmacies. One Regarding these contract PSAO reported that its negotiations about a contract’s audit provisions were intended to minimize member pharmacies’ risks and burdens as audit provisions can include withholding reimbursement on the basis of audit findings. In addition, according to some PSAOs that we spoke with, reimbursement rates to pharmacies have decreased over time, and PSAOs and other sources we spoke with reported that PSAOs’ ability to negotiate reimbursement rates has also decreased over time.\nOver half of the PSAOs we spoke with reported having little success in modifying certain contract terms as a result of negotiations. This may be due to PBMs’ use of standard contract terms and the dominant market share of the largest PBMs. Many PBM contracts contain standard terms and conditions that are largely nonnegotiable. According to one PSAO, this may be particularly true for national contracts, in which third-party payers or their PBMs have set contract terms for all pharmacies across the country that opt into the third-party payer’s, or its PBM’s network. For example, a national contract exists for some federal government programs, such as TRICARE. In addition, several sources told us that the increasing consolidation of entities in the PBM market has resulted in a few PBMs having large market shares, which has diminished the ability of PSAOs to negotiate with them, particularly over reimbursement rates.\nIn contrast, PBMs we spoke with reported that PSAOs can and do negotiate effectively. PBMs and PSAOs reported that several factors may affect negotiations in favor of PSAOs and their members, including the number and location of pharmacies represented and the services provided by those pharmacies in relation to the size and needs of the third-party payer or its PBM. For example, a third-party payer or its PBM may be more willing to modify its contract terms in order to sign a contract with a PSAO that represents pharmacies in a rural area in order to expand the PBM’s network in that area. In addition, a third-party payer or its PBM may be more willing to negotiate in order to add pharmacies in a PSAO’s network that offer a specialized service such as diabetes care needed by a health plan’s enrollees. One PSAO also reported that small PBMs wishing to increase their network’s size may be more willing to negotiate contract terms.\nWe found that PSAOs vary in their requirements for their member pharmacies. Two PSAO-pharmacy model agreements that we reviewed stated that member pharmacies must participate in all contracts in which the PSAO entered on behalf of members. These PSAOs and six additional PSAOs we spoke with reported that their member pharmacies must participate in all contracts between the PSAO and third-party payers or their PBMs. The remaining two PSAOs we spoke with reported that they build a portfolio of contracts from which member pharmacies can choose. These PSAOs negotiate contracts with various third-party payers or their PBMs and member pharmacies review the terms and conditions of each contract and select specific contracts to enter into. Most of the PSAO-pharmacy model agreements we reviewed contained provisions expressly authorizing member pharmacies to contract with a third-party payer independent of the PSAO. Two additional PSAOs we spoke with confirmed that they do not restrict member pharmacies from entering into contracts independent of the PSAO. All three PBMs we spoke with confirmed that pharmacies may contract with them if their PSAO did not sign a contract with them on the pharmacies’ behalf.\nPSAOs serve as a communication link between member pharmacies and third-party payers or their PBMs. Such communication may include information regarding contractual and regulatory requirements as well as general news and information of interest to pharmacy owners. All of the PSAOs we spoke with provided communication services to pharmacies such as reviewing PBMs’ provider manuals to make member pharmacies Communication with pharmacies was provided aware of their contents.by means of newsletters and the PSAOs’ Internet sites. In addition to communicating contractual requirements, PSAOs may also communicate applicable federal and state regulatory updates. For example, one PSAO we spoke with told us that it provides its member pharmacies with regulatory updates from the Centers for Medicare & Medicaid Services by publishing this information in its newsletter. Another PSAO we spoke with provided regulatory analyses that included examining and briefing its member pharmacies on durable medical equipment accreditation requirements, and fraud, waste, and abuse training requirements. According to the PSAO, this was to ensure that its member pharmacies were taking the right steps to comply with applicable regulations.\nPSAOs provide general assistance to pharmacies and assistance with issues related to third-party payers and their PBMs such as questions about claims, contracting, reimbursement, and audits. PSAOs may provide such assistance by means of a help-desk (or customer service department) or a dedicated staff person. For example, one PSAO we spoke with reported that it provides general pharmacy support services to help pharmacies with any needs they may have in the course of operating their businesses. This PSAO also had a staff person responsible for providing support services to member pharmacies including answering their questions about claims and each contract’s reimbursement rate or payment methodology. A PSAO may also help a pharmacy identify why a certain claim was rejected.\nPSAOs provide many other services that assist member pharmacies in interacting with third-party payers or their PBMs. For example, PSAOs may provide services that help the pharmacy with payment from a third- party payer or its PBM, comply with third-party payer requirements, or develop services that make the pharmacy more appealing to third-party payers or their PBMs. (See table 2 for a list and description of these services.)\nThe PSAOs we spoke with varied in their provision of these other services although 9 of the 10 PSAOs we spoke with provided central payment and reconciliation services or access to reconciliation vendors that provided the service. However, other services were not provided as consistently across PSAOs. For example, only 1 PSAO reported that it provided inventory management or front store layout assistance.\nPSAO services have changed over time to meet member pharmacies’ interests. In some cases, this has meant adding new services, while in other cases PSAOs have expanded existing services. Several PSAOs we spoke with reported adding services intended to increase cost efficiencies and member pharmacies’ revenues. For example, three PSAOs we spoke with reported that they began offering central pay services and two of these PSAOs and an additional PSAO reported that they began offering reconciliation services. PSAOs we spoke with also reported expanding existing services. For example, one PSAO reported adding electronic funds transfers, while two other PSAOs reported that although they were already providing electronic funds transfers, they increased the frequency of transfers to five days per week. This increase was made to improve pharmacies’ cash flow by giving them quicker access to funds owed them by third-party payers or their PBMs. Two PSAOs we spoke with reported adding certification programs, particularly vaccination/immunization certification programs, because of the needs of third-party payers or their PBMs for this service to be provided through their network pharmacies.", "PSAOs provide services intended to achieve administrative efficiencies for both independent pharmacies and third-party payers or their PBMs. PSAO services enable pharmacy staff, including pharmacists, to focus on patient-care services rather than administrative issues that pharmacists may not have the time to address. PSAO services also reduce the number of resources that PBMs must direct toward developing and maintaining relationships with multiple independent pharmacies.\nPSAO services are intended to help independent pharmacies achieve efficiencies particularly in contract negotiation. For example, independent pharmacies and PBMs we spoke with told us that PSAO contract negotiation services eased their contracting burden and allowed them to expand the number of entities with which they contracted. As a member of a PSAO, pharmacies may no longer have to negotiate contracts with multiple third-party payers or their PBMs operating in any given market. Independent pharmacies also told us that PSAOs provide other services that create both administrative and cost efficiencies for them. For example, one pharmacist told us that the marketing services provided by his PSAO relieved him of advertising costs because the PSAO provided advertising circulars to its PSAO-franchise members. Another independent pharmacy reported that its PSAO provides services such as claims reconciliation less expensively than the pharmacy could perform on its own.\nSimilar to independent pharmacies, PBMs we spoke with reported that PSAO services create administrative efficiencies for them, including efficiencies in contracting, payment, and their call centers. PSAO services create contracting efficiencies because they provide PBMs with a single point through which they can reach multiple independent pharmacies. For example, the PBMs we spoke with each had over 20,000 independent pharmacies in their networks, however, each PBM only negotiated contracts with 15 to 19 PSAOs, representing a majority of the pharmacies in its network. PBMs also reported that PSAO services create payment efficiencies when PSAOs provide central payment services. One PBM reported that instead of mailing checks to hundreds of individual pharmacies, the PBM made one electronic funds transfer to the PSAO, which then distributed the payments to its members. Finally, PBMs benefit from reduced call center volume because PSAOs often provide similar support directly to member pharmacies. For example, a call that may have gone to the PBM about a claim that was not paid may instead go to the pharmacy’s PSAO, which will help the pharmacy understand any issues with the claim. PSAOs may also aggregate member pharmacies’ issues and contact the PBM to discuss issues on behalf of multiple pharmacies and relay pertinent information back to those pharmacies.\nWhile creating efficiencies by acting on behalf of multiple pharmacies, PSAOs must ensure that their arrangements do not unreasonably restrain trade, thereby raising antitrust concerns. The FTC and the Antitrust Division of the Department of Justice (DOJ) are the federal agencies responsible for determining whether a particular collaborative arrangement may be unlawful and for enforcing applicable prohibitions.\nAccording to FTC officials, such a determination is dependent on multiple factors including the geographic region that a PSAO is operating in and the health care program (e.g., Medicare Part D) with which a PSAO is contracting. These factors affect the PSAO’s ability (and the abilities of the pharmacies the PSAO represents) to affect the terms of a contract or the pricing of a good. For example, a group of rural pharmacies may more effectively influence contract negotiations than a single pharmacy operating in an urban area with many competitors. PSAOs we spoke with were aware of potential antitrust issues and reported taking measures to minimize them. For example, two of the PSAOs we spoke with reported developing their PSAO’s organizational structure to ensure compliance with antitrust laws.", "Although PSAOs’ charges to member pharmacies for their services may vary depending on how the services are provided, 8 of the 10 PSAOs we spoke with charged a monthly fee for a bundled set of services. For example, 1 PSAO charged $40 to $80 per month for a bundle of services that included contract negotiation, communication with member pharmacies, help-desk services, business advice, and limited audit support. In comparison, another PSAO’s monthly fee ranged from $59 to $149 per month depending on the combination of services that the pharmacy requested. One of the remaining PSAOs we spoke with charged an annual fee rather than a monthly fee, while the other PSAO did not charge any fees for its PSAO services. The latter PSAO provided PSAO services as a value-added service to members of its group purchasing organization, for which it charged a monthly fee. Other services that are offered by most, but not all, PSAOs we spoke with are either provided within the bundle or as separate add-on services. PSAOs may also charge fees for individual services that are based on the type or value of that service.\nVirtually all of the fees for PSAO services are paid for by member pharmacies. All of the PSAOs we spoke with reported that they did not receive any type of fees from other entities such as an administrative fee from a third-party payer or its PBM. Similarly, all of the PBMs we spoke with told us that they did not pay PSAOs for their services. However 1 of the 3 PBMs we spoke with reported that it paid part of a pharmacy’s dispensing fee to 1 of the 16 PSAOs with which it contracted rather than to the pharmacy.", "The majority of PSAOs in operation in 2011 or 2012 were owned by wholesalers and independent pharmacy cooperatives.PSAO owners varied as to whether they require member pharmacies to also use the non-PSAO services they offer.", "Wholesalers and independent pharmacy cooperatives owned the majority of the PSAOs in operation in 2011 or 2012. Specifically, of the 22 PSAOs we identified, 9 PSAOs were owned by wholesalers, 6 were owned by independent pharmacy cooperatives (“member-owned”), 4 were owned by group purchasing organizations, and 3 were stand- alone PSAOs owned by other private entities. (See table 3.) Three of the 5 largest PSAOs were owned by the 3 largest wholesalers in the U.S.: AmerisourceBergen Corporation, Cardinal Health Inc., and McKesson Corporation. Across all sources included in our review, the PSAOs owned by these wholesalers represented 9,575 to 12,080 pharmacies, and PSAOs owned by independent pharmacies represented 4,883 to 8,882 pharmacies. According to one industry report, the services provided by member-owned PSAOs are similar to those offered by wholesaler-owned PSAOs. One PBM we spoke with noted that because of the financial backing of wholesaler-owned PSAOs, their PSAOs generally offer central payment services more often than PSAOs owned by other types of entities. This strong financial backing is necessary to offer these services because there is a considerable liability and risk in providing a central payment service.\nPSAO owners may operate PSAOs for a number of reasons, including to benefit another, non-PSAO line of their business. The wholesalers we spoke with provided various reasons for offering PSAO services, such as wanting to assist independent pharmacies in gaining access to third-party payer or PBM contracts, or to help pharmacies operate more efficiently. Additionally, one wholesaler noted that it created its PSAO because third- party payers and independent pharmacies indicated there was a need for PSAO services in the market. These third-party payers wanted a sole source for reaching multiple pharmacies, while independent pharmacies wanted a facilitator to assist them with reviewing third-party payer contracts. Other pharmaceutical entities noted that wholesalers may have an interest in developing relationships with independent pharmacies, which are potential customers of the wholesaler’s drug distribution line of business. By obtaining multiple services from a wholesaler, an independent pharmacy may be less likely to switch wholesalers. Additionally, by having their PSAOs assist independent pharmacies with entering multiple third-party payer or PBM contracts, wholesalers may benefit from the increased drug volume needed by independent pharmacies to serve the third-party payer’s or PBM’s enrollees. Other types of PSAO owners also provided a number of reasons for providing PSAO services, for instance, a number of these owners stated that they began offering PSAO services as a market-driven response to the growth of third-party payers and PBMs. In fact, one PSAO owner we spoke with stated that it reluctantly began offering these services at the request of customers of its group purchasing services, who wanted help navigating the issues and complexities of third-party payer and PBM contracting.", "The owners of PSAOs we spoke with varied as to whether they require PSAO member pharmacies to also use services from a separate non- PSAO line of their business. Of the nine PSAO owners we spoke with that had a separate non-PSAO line of business (e.g., drug distribution or group purchasing), six did not require their PSAO member pharmacies to use services from that non-PSAO line of business. Of the remaining three, one wholesaler-owned PSAO limited its offer of services to pharmacies that were existing customers of its drug distribution line of business, while two member-owned PSAOs reported requiring their PSAO member pharmacies to join their group purchasing organizations. Officials from the wholesaler-owned PSAO stated that their limiting the availability of PSAO services to existing customers ensures that their PSAO already has basic information about their member pharmacies and a salesperson who serves as each member pharmacy’s point of contact.\nWhile most PSAO owners do not require their member pharmacies to use services from their primary line of business, member pharmacies may choose to do so. In this case, a pharmacy must contract and pay for PSAO and other services separately. In fact, according to one wholesaler we spoke with, approximately 36 percent of its drug distribution customers were also members of its PSAOs. required to submit an application to join a PSAO network. PSAO applications we reviewed requested information about the pharmacy’s licensing, services provided, and insurance. Additionally, applications asked pharmacies to indicate whether they had been investigated by the HHS OIG, had filed for bankruptcy, or had their pharmacy’s state license limited, suspended, or revoked. PSAOs stated they used the information provided in applications to verify that the pharmacies applying for membership in their network are licensed by their state and in good standing.\nPharmacies may choose to obtain PSAO services from their wholesaler, but not all do so. Instead, some pharmacies may choose to join another PSAO.\nMost PSAOs we spoke with operated their PSAO separately from any separate non-PSAO line of business. For example, most wholesalers we spoke with stated their PSAO staff and drug distribution staff are distinct and do not interact. One of these wholesalers reported its PSAO has a distinct corporate structure, management team, sales organization and financial component from its drug distribution line of business. However, nearly all of the PSAO owners we spoke with operate their PSAO as a subsidiary of their non-PSAO line of business. For example, two PSAOs were organized as subsidiaries of a member-owned buying group, while another PSAO operated as a branded service under the owner’s non- PSAO line of business.\nMost PSAO owners reported that PSAO services are not a profitable line of business. Only 1 of the 10 PSAO owners we spoke with stated that its PSAO service was profitable. Other PSAO owners reported little to no profit earned from the PSAO services they provided. For those PSAOs that are not profitable, the cost of operating them may be subsidized by the owner’s non-PSAO lines of business. As previously noted, it may be the case that offering PSAO services may benefit the owner’s non-PSAO line of business even if the PSAO service itself is not profitable. For example, one member-owned PSAO we spoke with also owned a group purchasing organization to which its members must belong in order to obtain PSAO services. The group purchasing organization may benefit from increased membership driven by pharmacies that want to obtain its PSAO services.\nAs agreed with your offices, unless you publicly announce the contents of this report earlier, we plan no further distribution until 30 days from the report date. At that time, we will send copies to the Secretary of Health and Human Services, the Chairman of the Federal Trade Commission, and interested congressional committees. In addition, the report will be available at no charge on the GAO website at http://www.gao.gov.\nIf you or your staff have questions about this report, please contact John E. Dicken at (202) 512-7114 or [email protected]. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff members who made key contributions to this report are listed in appendix I.", "", "", "In addition to the contact named above, Rashmi Agarwal and Robert Copeland, Assistant Directors; George Bogart; Zhi Boon; Jennel Lockley; Laurie Pachter; and Brienne Tierney made key contributions to this report." ], "depth": [ 1, 2, 2, 2, 1, 1, 2, 2, 2, 1, 2, 2, 1, 2, 2 ], "alignment": [ "", "", "", "", "h0_full h2_full", "h2_title", "h2_full", "", "", "h0_title h1_full", "h1_full", "h0_full h1_full", "", "", "" ] }
{ "question": [ "To what extent did PSAOs have contracts with pharmacies in 2011/2012?", "What was the range of contracts?", "What was the geographical reach of the contracts?", "What kind of groups owned PSAOs in 2011/2012?", "How did these owners vary?", "What are the benefits of PSAO ownership?", "What does GAO describe in their report?", "How did GAO conduct their review?" ], "summary": [ "At least 22 pharmacy services administrative organizations (PSAO), which varied in the number and location of the pharmacies to which they provided services, were in operation in 2011 or 2012. In total, depending on different data sources, these PSAOs represented or provided other services to between 20,275 and 28,343 pharmacies in 2011 or 2012, most of which were independent pharmacies.", "While the number of pharmacies with which each PSAO contracted ranged from 24 to 5,000 pharmacies, most PSAOs represented or provided other services to fewer than 1,000 pharmacies.", "Additionally, some PSAOs contracted with pharmacies primarily located in a particular region rather than contracting with pharmacies located across the United States.", "The majority of PSAOs in operation in 2011 or 2012 were owned by drug wholesalers and independent pharmacy cooperatives. Of the 22 PSAOs we identified, 9 PSAOs were owned by wholesalers, 6 were owned by independent pharmacy cooperatives, 4 were owned by group purchasing organizations, and 3 were stand-alone PSAOs owned by other private entities.", "These owners varied in their requirements for PSAO member pharmacies to also use services from their separate, non-PSAO line of business. Three PSAO owners GAO spoke with required PSAO members to also use their non-PSAO services. For example, one wholesaler-owned PSAO limited its offer of PSAO services to existing customers of its drug distribution line of business.", "All but one PSAO owner GAO spoke with reported that their PSAO line of business earned little to no profit. However, PSAO owners may operate PSAOs for a number of reasons, including helping pharmacies gain access to third-party payer contracts and to provide benefits to the owner's non-PSAO line of business.", "GAO was asked to review the role of PSAOs. In this report, GAO describes: (1) how many PSAOs are in operation and how many pharmacies contract with PSAOs for services; (2) the services PSAOs offer and how they are paid for these services; and (3) entities that own PSAOs and the types of relationships that exists between owners and the pharmacies they represent.", "GAO analyzed data on PSAOs in operation in 2011 and 2012, reviewed literature on PSAOs and model agreements from 8 PSAOs, and interviewed federal agencies and entities in the pharmaceutical industry." ], "parent_pair_index": [ -1, 0, 0, -1, 0, -1, -1, 0 ], "summary_paragraph_index": [ 2, 2, 2, 4, 4, 4, 1, 1 ] }
CRS_R43667
{ "title": [ "", "Introduction", "Background", "Marriage Postponement", "Cohabitation", "Trends in Nonmarital Births: 1940-2013", "Number of Nonmarital Births", "Percentage of All Births That Are Nonmarital", "Birth Rates of Unmarried Women", "Composition of Nonmarital Births", "Characteristics of Unwed Mothers", "Race and Ethnicity", "Age", "Educational Attainment", "Income Status", "Additional Children", "Subsequent Marriage of Unwed Mothers", "Fathers of Children Born Outside of Marriage", "Race and Ethnicity", "Age", "Educational Attainment", "Paternity Establishment", "Summary Remarks", "Appendix. Data Table" ], "paragraphs": [ "", "In the United States, births to unmarried women (i.e., nonmarital births) are widespread, including families of varying income class, race, ethnicity, and geographic area. Many analysts attribute this to changed attitudes over many years about fertility and marriage. They find that many adult women and teenage girls no longer feel obliged to marry before, or as a consequence of, having children. During the period from 1940 to 2008, the percentage of births to unmarried women increased from 3.8% in 1940 to 40.6% in 2008, and has remained at about 41% each subsequent year through 2013. This represented 1.6 million children in 2013 (see Table A-1 .).\nAlthough nonmarital childbearing is not a new phenomenon, the relatively recent factors associated with historically high levels of nonmarital childbearing are that women are marrying later in life and more couples are cohabiting. Other factors include decreased childbearing of married couples, increased marital dissolution, increased sexual activity outside of marriage, participation in risky behaviors that often lead to sex, improper use of contraceptive methods, and lack of marriageable partners.\n\"Nonmarital births\" can be first births, second births, or higher-order births; they can precede a marriage or occur to a woman who has never married. \"Nonmarital births\" can occur to divorced or widowed women. Moreover, a woman with several children may have had one or more births within marriage and one or more births outside of marriage.\nA majority of nonmarital births now are to cohabiting parents. Between 2006 and 2010, 58% of nonmarital births were to cohabiting parents, compared with 40% in 2002. Unlike in years past, although most of the children born outside of marriage are raised by a single parent (who may or may not have a \"significant other\"), many, especially during their infancy, live with both of their biological parents who are not married to each other.\nParents and family life are the foundation that influences a child's well-being throughout the child's development and into adulthood. The family also is the economic unit that obtains and manages the resources that meet a child's basic needs while also playing an instrumental role in stimulating the child's cognitive, social, and emotional development.\nMost children who grow up in mother-only families, father-only families, step-parent families, or families in which the mother is cohabiting with a male partner become well-adjusted, productive adults. However, a large body of research indicates that children who grow up with only one biological parent in the home are more likely to be financially worse off and have worse socioeconomic outcomes (even after income differences are taken into account) compared to children who grow up with both biological parents in the home. To emphasize, this research indicates that all family situations in which both biological parents are not living together (regardless of whether the mother is divorced, separated, widowed, or was never married) are more likely to result in less favorable outcomes for children than a family situation in which the child is living in a household with both biological parents. It is also noteworthy that some researchers conclude that even among children living with both biological parents, living with married parents generally results in better outcomes for children than living with cohabiting parents, mainly because marriage is a more stable and longer lasting situation than cohabitation.\nIn 2012, 70% of the children under age 18 who lived with both of their married parents were in households with incomes at least 200% above the poverty level, whereas 44%-46% of children who lived with their mother only, two unmarried parents, or no parents were living below the poverty level.\nThe federal concern about nonmarital childbearing generally centers on its costs via claims on public assistance. These federal costs primarily reflect the fact that many of these \"nonmarital children\" are raised in single-parent families that are financially disadvantaged. Federal concern also arises because of the aforementioned research indicating that children living in single-parent families are more likely to face negative outcomes (financially, socially, and emotionally) than children who grow up with both of their biological parents in the home. As mentioned earlier, many children born outside of marriage are raised in single-parent families.\nThis report analyzes the trends in nonmarital childbearing in the United States, discusses some of the characteristics of unwed mothers, addresses some issues involving the fathers of children born outside of marriage, and offers some concluding remarks.", "Declining marriage rates, increased childbearing among unmarried women, an increased number of unmarried women in the childbearing ages (i.e., 15-44), and decreased childbearing among married women have contributed to the rising share of children being born to unwed women.\nMany social science analysts attribute the increase in nonmarital births to the decades-long decline of \"shotgun marriages,\" rather than to an increased incidence of nonmarital conceptions. They contend that when the social pressure to get married once pregnancy became obvious lessened, the likelihood that women would marry between conception and birth decreased substantially. The entry of more and more women into the paid labor force also made childbearing outside of marriage more economically feasible.\nThrough the 1960s, most Americans believed that parents should stay in an unhappy marriage for the sake of the children. By the 1970s, this view was not as prominent. Divorce and not getting married to the father of a child—which were generally considered not to be in the best interest of the child—became more acceptable if they resulted in the happiness of the adult. Thus, many observers and analysts agree that marriage is now more likely to be viewed through a framework of adult fulfillment rather than through a framework of child well-being.", "On average, those who marry are marrying later. The age at which persons in the United States first marry has increased significantly since the 1950s. The typical age of first marriage in the United States is currently 27 for women and 29 for men. It is now not uncommon for first births to precede first marriage. The difference between the average age of first intercourse (17) and the age at first marriage (25) for women is eight years. For the majority of adult women, living without a spouse does not mean living without sex, nor in many cases does it mean living without having children.\nThe report entitled \"Knot Yet: The Benefits and Costs of Delayed Marriage in America,\" indicates that \"at the age of 24, 44 percent of women have had a baby, while only 38 percent have married; by the time they turn 30, about two-thirds of American women have had a baby, typically out of wedlock.\"", "Cohabitation has now become a common method of family formation. Based on data covering the period 2006-2010, the first union of women (ages 15 through 44) was more likely to be cohabitation than marriage. According to the survey data, 48% of the women interviewed in 2006 through 2010 cohabited as a first union as compared to 23% who married as a first union (29% were single/unattached). The same survey data also indicated that by age 30, 74% of women had lived with a male partner without being married to him.\nAccording to a report entitled Household Change in the U nited States :\nOne of the major trends driving the growth in nonfamily households with two or more people is the increase in cohabitation among unmarried adults. In 1970, less than 1 percent of all households included unmarried couples, yet by 2010, this share had increased to nearly 7 percent. This share may seem too low given that the majority of young adults today cohabit at some point, and that more than half of recent marriages were preceded by cohabitation. This apparent anomaly is due to the fact that most cohabiting unions in the United States don't last long, either transitioning to marriage or ending within a few years. Therefore, the number of unmarried-partner households counted at one point in time, such as in the 2010 Census, is relatively small.\nThe long‐term trend toward nonmarital births may be attributed, in part, to an increase in cohabiting unions and in births within such relationships. According to several studies, a majority of nonmarital births now occur to cohabiting parents. During the period 2006-2010, it was estimated that 58% of nonmarital births were to cohabiting parents.\nRecent data indicate that the notion that unmarried births equal mother-only families is no longer fully correct. The decline in the percentage of births to married women has in large measure been in tandem with the increase in births to parents who are living together but who are not married (in cohabiting relationships).\nSome children live with cohabiting couples who are either their own unmarried parents or a biological parent and a live-in partner. The Census Bureau data do not indicate the number of newborns by the marital status of their parents, but data are available for children under age one by parents' marital status. In 2012, 16.7% of the 3.9 million children under age one were living with their biological mothers who had never married, 1.4% were living with their biological fathers who had never married, and 12.4% were living with both biological parents who were not married to each other (67.6% of those children under age one were living with both of their biological parents who were married to each other). Another view of the data indicates that of the 1.2 million children under age one who were living with parents who had never married or were not married to each other, 55.6% lived with their mothers, 4.6% lived with their fathers, and 39.8% lived with both parents.\nSome analysts contend that the increase in nonmarital childbearing could be seen as less of an issue if viewed through a framework that portrays out-of-wedlock births as babies born to cohabiting couples rather than to \"single\" women.\nOthers point out that cohabitation is a complex phenomenon that has an array of meanings. Some view it as a precursor to marriage while others view it as an alternative to marriage. According to one study:\ncohabitation is a continuous rather than a dichotomous variable. At both ends of the continuum, there is substantial agreement across measures about who is (not) cohabiting. In the middle of the continuum, however, there is considerable ambiguity, with as much as 15% of couples reporting part-time cohabitation. How we classify this group will affect estimates of the prevalence of cohabitation, especially among African Americans, and may impact the characteristics and outcomes of cohabitors.\nIt is estimated that two-fifths of all children in the United States will live in a cohabiting household by age 12.\nCohabiting relationships are generally considered less stable than marriages. According to several sources, cohabiting relationships are fragile and relatively short in duration. Survey data covering the period 2006-2010 indicated that the length (i.e., median duration) of first premarital cohabitation (among women ages 15 through 44) was a little less than two years (22 months). The median length of marriage before divorce was eight years.", "In this report, births to unmarried women are termed nonmarital births. Data on nonmarital births are usually expressed by three measures: the number of nonmarital births, the percent of births that are nonmarital, and the rate of nonmarital births per 1,000 unmarried women.\nThe number of nonmarital births provides the total count of babies who are born to women (including adolescents) who are not married. The percent of all births that are nonmarital is the number of all nonmarital births divided by all births (both nonmarital births and marital births). The nonmarital birth rate is defined as the number of nonmarital births (to females of any age) per 1,000 unmarried women ages 15-44.", "The number of nonmarital births reached a record high in 2008 with 1,726,566 births to unmarried women. As mentioned above, the number of births to unmarried women has generally increased over the years, with some downward fluctuations. Nonmarital births rose 17-fold from 1940-2013, from 89,500 in 1940 to 1,605,643 in 2013. (See Figure 1 and Table A-1 .)\nThe average annual increase in nonmarital births has slowed substantially from earlier decades. The average annual increase in nonmarital births was 4.9% from 1940-1949; 5.6% from 1950-1959; 6.1% from 1960-1969; 5.0% from 1970-1979; and 6.4% from 1980-1989. The 1990s showed a marked slowing of nonmarital births, dropping from an average increase of 6.4% a year in the 1980s to an average of 1.2% a year in the 1990s. Nonmarital births increased an average of 2.6% per year from 2000-2009. During the four years from 2010 through 2013, nonmarital births decreased , on average, 0.2% per year. In 2013, there were 1.6 million nonmarital births.", "The percent of births to unmarried women increased substantially during the period from 1940-2013 (see Figure 2 and Table A-1 ). (However, from 1994-2000, there was almost no change in this measure.) In 1940, 3.8% of all U.S. births were to unmarried women. By 2009, a record 41.0% of all U.S. births were to unmarried women. In 2013, the percent of births to unmarried women had decreased slightly to 40.6%.", "The birth rate is the total number of births per 1,000 of a population each year. The nonmarital birth rate provides a measure of the likelihood that an unmarried woman will give birth in a given year. The nonmarital birth rate is defined as the number of births to unmarried women (regardless of the age of the mother) per 1,000 unmarried women ages 15 through 44. The nonmarital birth rate reflects both overall fertility and the percentage of births that are nonmarital. The birth rate for unmarried women increased dramatically during the 1940-2013 period, with many upward and downward fluctuations. (However, during the years 1995-2002, the nonmarital birth rate remained virtually unchanged. ) The nonmarital birth rate increased from 7.1 births per 1,000 unmarried women ages 15 through 44 in 1940 to a record high of 51.8 births per 1,000 unmarried women ages 15 through 44 in 2007 and 2008 (a six-fold increase). In 2013, the nonmarital birth rate was 44.8 births per 1,000 unmarried women ages 15 through 44. (See Figure 3 and Table A-1 .)", "The composition of nonmarital births reflects the size of the population of women of childbearing age, overall fertility, and the percent of births that are nonmarital. The share of unmarried births for a group can increase, for example, through a decline in the marital birth rate, an increase in the nonmarital birth rate, or both. In addition, the share of nonmarital births for a group can increase through a shift in the proportion of women of childbearing age who are not married.\nTeen marriage and birth patterns have shifted from a general trend of marrying before pregnancy, to marrying as a result of pregnancy, to becoming pregnant and not marrying. Early nonmarital childbearing remains an important issue, especially in the United States, because young first-time mothers are more likely to have their births outside of marriage than within marriage, and because women who have a nonmarital first birth are more likely to have all subsequent births outside of marriage, although often in cohabiting unions.\nUntil recently, a commonly held view was that teenagers had the highest share of nonmarital births. However, as Figure 4 shows, women in their 20s had the greatest share of nonmarital births. In 2013, 15% of the 1.6 million nonmarital births in the U.S. were to teenagers (under age 20), 37% were to women ages 20 through 24, 25% were to women ages 25 through 29, 15% were to women ages 30 through 34, 6% were to women ages 35 through 39, and 2% were to women ages 40 and above.\nThe largest share of children born to unmarried women are white; however, minority children, particularly black children and Hispanic children, are overrepresented. Of the 1.6 million children who were born outside of marriage in 2013, 39% were white (whites constituted 64% of the U.S. population), 26% were black (blacks constituted 13% of the population), 2% were American Indian/Alaskan Native (American Indians or Alaskan Natives constituted 1% of the population), 3% were Asian or Pacific Islander (Asians or Pacific Islanders constituted 6% of the population), and 30% were Hispanic (Hispanics constituted 17% of the population).\nMoreover, the age and nonmarital birth data for 1990 and 2013 displayed in Figure 5 show that for all age groups a growing share of women are having nonmarital births.", "This section discusses some of the characteristics of unmarried mothers. Some of the highlights include the following:\nblack women are more likely to have children outside of marriage than other racial or ethnic groups; it is not teenagers but rather women in their early twenties who have the highest percentage of births outside of marriage; single motherhood is more common among women with less education than among well-educated women; a substantial share of nonmarital births (44%) were to women who had already given birth to one or more children; a significant number of unwed mothers are in cohabiting relationships; and women who have a nonmarital birth are less likely than other women to eventually marry.", "The rate at which unmarried women have children varies dramatically by race and ethnicity. As mentioned earlier, in 2013 the nonmarital birth rate for all U.S. women was 44.8 births per 1,000 unmarried women (in 2012, it was 45.3). In 2012, Hispanic women had the highest nonmarital birth rate at 72.6 births per 1,000 unmarried Hispanic women. The nonmarital birth rate in 2012 was 62.6 for black women, 32.1 for non-Hispanic white women, and 22.9 for Asian or Pacific Islander women.\nIn 2013, 40.6% of all U.S. births were to unmarried women. In that year, 71.4% of births to black women were nonmarital births. The percentage of nonmarital births for American Indians or Alaska Natives was 66.4%. The nonmarital birth percentage was 53.2% for Hispanic women, 29.3% for non-Hispanic white women, and 17.0% for Asian or Pacific Islander women. (See Table 1 .)\nIn 2013, the percentage of nonmarital births to black women (71%) was more than three times the 22% level of the early 1960s that so alarmed Daniel Patrick Moynihan, then President Johnson's Assistant Secretary of Labor. Moynihan addressed the issue in a report called \"The Negro Family: The Case for National Action.\" One theory that attempts to explain the disproportionate share of nonmarital births to black women hypothesizes that the universe of males (ages 15 and above) who are unmarried is disproportionately lower for blacks. For example, in 2012 there were 75 black unmarried males for every 100 black unmarried females; 88 white non-Hispanic unmarried males for every 100 white non-Hispanic unmarried females; 90 Asian unmarried males for every 100 Asian unmarried females; and 105 Hispanic unmarried males for every 100 Hispanic unmarried females. Supporters of this theory argue that if the universe of possible marriage partners is reduced even further to desirable marriage partners (e.g., heterosexual men, men with steady jobs, men without a criminal record, and men with a similar educational background), the black \"male shortage\" is drastically increased.", "In recent years, most teenagers who give birth are not married. For example, 13% of the 419,535 babies born to teens (ages 15 through 19) in 1950 were born to females who were not married. By 2013, 89% of the 274,641 babies born to teens (ages 15 through 19) were born to unwed teens. (See Table 1 .) There are two reasons for this phenomenon. The first is that marriage in the teen years, which was not uncommon in the 1950s, has become quite rare. The second is that this general trend of marriage postponement has extended to pregnant teens as well. In contrast to the days of the \"shotgun marriage,\" very few teens who become pregnant nowadays marry before their baby is born.", "One of the factors that causes economic disadvantage, especially among unmarried mothers, is low educational attainment. Single motherhood has always been more common among women with less education than among well-educated women. In 2011, among unmarried women (ages 15 to 50) who had a child in the last year, those with less education had higher percentages of nonmarital births. For instance, among those who had not completed high school, 57% had a nonmarital birth. In contrast, among those who had a bachelor's degree or more, 9% had a nonmarital birth.", "An examination of never-married mothers shows that in 2012, 45.5% of never-married mother families (with children under age 18) had income below the poverty level. With respect to the various income categories, 23.9% of never-married mother families had income below $10,000, 43.3% had income below $20,000, and 80.2% had income below $50,000; and 19.8% had income above $50,000.", "Some studies have found that a woman is most likely to have a second birth while in the same type of situation (single, cohabiting, or married) as she was in for the first birth.\nThe public perception is that nonmarital births are first births. The reality is that in recent years fewer than half of all nonmarital births were first births. According to a Child Trends report, over 50% of nonmarital births were second- or higher-order births. In 2013, of the one-parent unmarried family groups maintained by a never-married mother, 41.5% had more than one child.", "Several studies indicate that nonmarital childbearing is associated with reduced rates of marriage. A study based on retrospective life histories found that girls who had a nonmarital birth at age 17 were 69% more likely to have never married by age 35 than 17-year old girls who did not have a nonmarital birth (i.e., 24% vs. 14%). Women who had a nonmarital birth at ages 20 to 24 were more than twice as likely not to be married at age 35 than women who did not have a nonmarital birth at ages 20 to 24 (i.e., 38% vs. 19%). The reported implication of these findings is that there probably is a causal relationship between nonmarital childbearing and subsequent marriage.\nAnother study points out the racial differences associated with the eventual marriage of many women who had a nonmarital birth. The study found that white women were more likely to be married than their minority counterparts. Some 82% of white women, 62% of Hispanics, and 59% of blacks who had a nonmarital first birth had married by age 40; the corresponding proportions among those who avoided nonmarital childbearing were 89%, 93%, and 76%, respectively.\nBy some estimates, having a child outside of marriage decreases a woman's chances of marrying by 30% in any given year. Even when they do marry, women who have had a nonmarital birth generally are less likely to stay married. Analysis of data from the 2002 National Survey of Family Growth indicates that women ages 25 to 44 who had their first child before marriage and later got married are half as likely to stay married as women who did not have a nonmarital birth (42% compared to 82%).", "This section highlights several demographic factors associated with the fathers of children born outside of marriage. It also discusses the importance of establishing paternity for children born outside of marriage.\nIt has been pointed out that fathers are far too often left out of discussions about nonmarital childbearing. It goes without saying that fathers are an integral factor in nonmarital childbearing. It appears that one result of the so-called sexual revolution was that many men increasingly believed that women could and should control their fertility via contraception and abortion. As a result, many men have become less willing to marry the women they impregnate.\nThere are myriad reasons why so many children live in homes without their fathers. Some reasons are related to choices people make about fertility, marriage, and cohabitation. But others are the result of unexpected events, such as illness, or incarceration. Some noncustodial fathers are active in the lives of their children, whereas others are either unable or unwilling to be involved in their children's lives. Whatever the reason, a father's absence from the home results in social, psychological, emotional, and financial costs to children and economic costs to the nation. A 2008 report maintains that the federal government spends about $99.8 billion per year in providing financial and other support (via 14 federal social welfare programs) to father-absent families.\nThis section of the report discusses the race and ethnicity of fathers to children born outside of marriage, age of fathers, educational attainment of fathers, and the importance of establishing paternity for children born outside of marriage. One of the prominent, but perhaps not unexpected, findings related to fathers and nonmarital births is that when older men have sexual relationships with young women it often results in nonmarital births.", "Data from the Fragile Families and Child Well-Being study indicate that 18% of white men, 44% of black men, and 35% of Hispanic men were unmarried at the time of their first child's birth.\nAccording to the 2002 National Survey of Family Growth, 33% of unmarried Hispanic men and 33% of unmarried non-Hispanic black men have had a biological child, compared with 19% of unmarried non-Hispanic white men.", "In the United States, it is not unusual for a man to be several years older than his female partner. Some data indicate that the man is three or more years older than the woman in almost 4 in 10 relationships today. However, such age differences often have adverse consequences for young women. Several studies have found that the unequal power dynamic that is often present in relationships between teenage girls and older men is more likely to lead to sexual contact not wanted by the female, less frequent use of contraceptives, and a greater incidence of sexually transmitted diseases (STDs) among the adolescent females.\nAccording to a couple of older studies, a significant share of teenagers in relationships with older men have children outside of marriage. According to one study, about 20% of births to unmarried, teenage girls are attributed to men at least five years older than the mother. According to another report, unmarried teenagers younger than 18 were especially likely to become pregnant when involved with an older partner: 69% of those whose partner was six or more years older became pregnant, compared with 23% of those whose partner was three to five years older and 17% of those whose partner was no more than two years older.", "Data from the Fragile Families and Child Well-Being study indicate that at the time of their first child's birth, 37% of unwed fathers had less than a high school education, 39% had a high school diploma, 20% had some college, and 4% had a B.A. degree or more.", "Paternity is presumed if a child is conceived within marriage. In other words, the husband is presumed to be the father of a child born to his wife. In cases in which the child is born outside of marriage, paternity can be voluntarily acknowledged or it can be contested. It would be contested in cases in which (1) the mother does not want to establish paternity, thereby forcing the father to take his case to court to assert his rights, (2) the biological father does not want to pay child support and denies paternity to delay establishment of a child support order, or (3) the alleged father has genuine doubt about his paternity. If paternity is contested it is generally resolved through either an administrative process or a judicial proceeding.\nA child born outside of marriage has a biological father but not necessarily a legal father. Paternity establishment refers to the legal determination of fatherhood for a child. In 2013, 40.6% of children born in the United States were born to unmarried women. Data from the federal Office of Child Support Enforcement (OCSE) indicate that in 2013 the total number of children in the Child Support Enforcement (CSE) caseload who were born outside of marriage amounted to about 11 million. Paternity has been established or acknowledged for about 9.7 million (88%) of these children (1.6 million were established or acknowledged during FY2013). Most of the children in the CSE caseload without a legally identified father are primarily older children (not newborns).\nPaternity establishment is not an end in itself, but rather a prerequisite to obtaining ongoing economic support (i.e., child support) from the other (noncustodial) parent. Once paternity is established legally (through a legal proceeding, an administrative process, or voluntary acknowledgment), a child gains legal rights and privileges. Among these may be rights to inheritance, the father's medical and life insurance benefits, and social security and possibly veterans' benefits. It also may be important for the health of the child for doctors to have knowledge of the father's medical history. The child also may have a chance to develop a relationship with the father and to develop a sense of identity and connection to the \"other half\" of his or her family.\nThe public policy interest in paternity establishment is based in part on the dramatic increase in nonmarital births over the last several decades and the economic status of single mothers and their children. The poorest demographic group in the United States consists of children in single-parent families. Paternity establishment generally is seen as a means to promote the social goals of (1) providing for the basic financial support of all minor children regardless of the marital status of their parents, (2) ensuring equity in assessing parental liability for the financial support of their children, and (3) promoting responsibility for the consequences of one's actions.\nMany observers maintain that the social, psychological, emotional, and financial benefits of having one's father legally identified are irrefutable. They suggest that paternity should be established, regardless of the ability of the father to pay child support. They argue that the role of both parents is critical in building the self-esteem of their children and helping the children become self-sufficient members of the community.\nCurrent literature and studies suggest that in most cases visitation with the noncustodial parent is important to the healthy emotional development of children. It is now widely accepted that positive, engaged fathering together with child support are associated with lower levels of behavioral problems and improved academic achievement among children. Children with regular contact with their noncustodial parent often adjust better than those denied such contact. Moreover, generally it is in the best interest of the child to receive the social, psychological, and financial benefits of a relationship with both parents. Visitation (i.e., contact with one's children) is the primary means by which noncustodial parents carry out their parenting duty.", "The language regarding births to unmarried women has changed in significant ways. What once were referred to as \"bastard\" or \"illegitimate\" children are now termed \"out-of-wedlock,\" \"outside of marriage,\" or \"nonmarital\" births. The stigma and shame that was once attached to these children is generally no longer recognized by the public. Some commentators in fact claim that our nation has gone too far and that now the media, in particular, tends to glorify unwed mothers, especially if they are famous. Others contend that it is often the case that adults pursue individual happiness in their private relationships, which may be in direct conflict with the needs of children for stability, security, and permanence in their family lives.\nIt also is recognized that most people, especially unmarried parents, have a positive attitude towards marriage. Most unmarried parents value marriage but may be reluctant to marry because of real or perceived barriers. Based on information from the Fragile Families and Child Wellbeing study, at the time of their child's birth 72% of unmarried mothers said that their chances of getting married were 50/50 or better and 65% said that marriage is better for children (the comparable percentages for unmarried fathers were 90% and 78%). Some researchers maintain that many couples, to a certain extent, put marriage on a pedestal and are thus reluctant to marry until everything is perfect (e.g., they have a middle-class income, can afford a nice wedding, can afford a house).\nSome observers contend that the problem is not the weakening of marriage (about 80% of all women ages 15 and older eventually marry), but rather the de-linking of marriage and having children and the abdication of the traditional view of marriage as a life-long commitment. Some researchers and policymakers argue that although couple relationships are a private matter, an overwhelming body of evidence suggests that not all family structures produce equal outcomes for children. They maintain that there is widespread agreement that a healthy, stable (i.e., low-conflict) family with two biological parents is the best environment for children. Finally, some observers assert that we as a society have not strayed too far, and that it is not too late to return to the somewhat old-fashioned, but not simplistic, precept of falling in love, getting married, and having a baby, in that order.\nAn examination of nonmarital births from a demographic perspective is perhaps the only analysis that does not view nonmarital births as a negative phenomenon. Having the birth rate reach the replacement rate is generally considered desirable by demographers and sociologists because it means a country is producing enough young people to replace and support aging workers without population growth being so high that it taxes national resources. The replacement rate is the rate at which a given generation can exactly replace itself. The fertility level required for natural replacement of the U.S. population is about 2.1 births per woman (i.e., 2,100 births per 1,000 women). The nation's total fertility rate—the number of children the average woman would be expected to bear in her lifetime—generally has been below the replacement level since 1972. In 2006 and 2007, the U.S. total fertility rate reached the replacement rate. However, the total fertility rate has steadily declined over the last six years. The total fertility rate for the United States was 1,869.5 births per 1,000 women in 2013. Given that the marital birth rate has been decreasing over time, if the birth rate of unmarried women significantly decreased, the U.S. population would cease growing (if immigration is excluded). This means that those who support policies to lower nonmarital fertility do so at the risk of lowering overall U.S. fertility that has been hovering near replacement levels.\nAlthough marriage and family life are generally considered private issues, they have become part of the public arena primarily because of public policies that help families affected by negative outcomes associated with nonmarital births to maintain a minimum level of economic sufficiency. The abundance of research on the subject of the impact on children of various living environments also raises the stakes, in that it is now almost unanimously agreed that children living with married biological parents fare better on a host of measures—economic, social, psychological, and emotional—than children living with a single parent or in a step-parent or cohabiting situation.\nSome observers contend that although women of all age groups are having children outside of marriage, given the scarcity of resources in most areas of public finance, it may be wiser to pursue a strategy that focuses primarily on reducing nonmarital births of adolescents and women in their early twenties.\nOne of the trends that this report highlights is that although there has been a rise in nonmarital births, it does not mean that there has been a subsequent rise in mother-only families. Instead, it reflects the rise in the number of couples who are in cohabiting relationships. Because the number of women living in a cohabiting situation has increased substantially over the last several decades, many children start off in households in which both of their biological parents reside. Nonetheless, cohabiting family situations are disrupted or dissolved much more frequently than married-couple families.\nGiven the patterns of swift transitions into and out of marriage and the high rate of single parenthood, a family policy that relies too heavily on marriage will not help the many children who will live in single-parent and cohabiting families—many of them poor—during most of their formative years. Moreover, national data from the 2002 panel of the National Survey of Family Growth indicate that 14% of white men, 32% of black men, and 15% of Hispanic men had children with more than one woman. Thus, children in the same family may potentially face different outcomes. For example, children with the same mother and different fathers may potentially face less desirable outcomes if their mother marries the biological father of their half-brothers or half-sisters.\nThe large number of nonmarital births has added to the complexity of families. Children now live in a myriad of living situations. Some may live with both biological parents who may or may not be married, some live with a mom and her cohabiting partner or a dad and his cohabiting partner, others live with a mom and another adult who may or may not be related to the child, or a dad and another adult who may or may not be related to the child. Others live with their mothers only or with their fathers only. Moreover, in each of the family living arrangements mentioned there may or may not be other children, some full siblings, some half-siblings, some step-siblings or perhaps unrelated. Nonmarital childbearing, cohabitation, divorce, re-partnering, and multi-partner fertility (i.e., adults who have biological children by more than one partner) significantly impact children, and public policies that may work for less complicated families may not work for them.", "" ], "depth": [ 0, 1, 1, 2, 2, 1, 2, 2, 2, 2, 1, 2, 2, 2, 2, 2, 2, 1, 2, 2, 2, 2, 1, 2 ], "alignment": [ "h0_title h1_title", "h0_full h1_full", "", "", "", "h0_title", "", "", "", "h0_full", "", "", "", "", "", "", "", "h1_full", "", "", "", "", "", "" ] }
{ "question": [ "How does the amount of nonmarital births compare to all births in the US?", "What characterizes most nonmarital births?", "How might this living situation affect the child in the long run?", "To what extent are nonmarital births common in the US?", "What have researchers concluded about the recent increase in nonmarital births?", "How might men factor into this societal shift?" ], "summary": [ "For the past six years (2008-2013), the percentage of all U.S. births that were nonmarital births remained unchanged at about 41% (1.6 million births per year), compared with 28% of all births in 1990 and about 11% of all births in 1970.", "Many of these children grow up in mother-only families.", "Although most children who grow up in mother-only families or step-parent families become well-adjusted, productive adults, the bulk of empirical research indicates that children who grow up with only one biological parent in the home are more likely to be financially worse off and have worse socioeconomic outcomes (even after income differences are taken into account) compared to children who grow up with both biological parents in the home.", "In the United States, nonmarital births are widespread, touching families of varying income class, race, ethnicity, and geographic area.", "Many analysts attribute this to changed attitudes over the past few decades about fertility and marriage. They find that many adult women and teenage girls no longer feel obliged to marry before, or as a consequence of, having children.", "With respect to men, it appears that one result of the so-called sexual revolution is that many men now believe that women can and should control their fertility via contraception or abortion and have become less willing to marry the women they impregnate." ], "parent_pair_index": [ -1, -1, 1, -1, -1, 1 ], "summary_paragraph_index": [ 1, 1, 1, 2, 2, 2 ] }
GAO_GAO-17-29
{ "title": [ "Background", "The JIAC Includes Elements of Three Joint Intelligence Operations Centers and Supports Other Intelligence-Related Functions", "DOD Organizations Involved in the JIAC Consolidation Process and Related Efforts", "Lajes Field, Azores, Portugal", "Air Force’s February 2015 Cost Estimate for the JIAC Military Construction Project Did Not Fully Meet Best Practices", "DOD Conducted Multiple Reviews of Lajes Field as a Possible JIAC Location", "DOD Has Conducted Multiple Reviews of Lajes Field as a Possible Location for the JIAC", "DOD’s Multiple Reviews of Lajes Field Produced Different Cost Estimates Because They Were Based on Different Assumptions", "Assumptions for Communications Infrastructure Costs Differed", "Assumptions for Housing Costs Differed", "DOD Responded to Statutory Requirements by Certifying that RAF Croughton is the Optimal Location for the JIAC", "Conclusions", "Recommendation for Executive Action", "Agency Comments and Our Evaluation", "Appendix I: Assessment of the Air Force’s February 2015 Cost Estimate for the Joint Intelligence Analysis Complex", "Appendix II: Information on Communications Infrastructure Requirements for the Joint Intelligence Analysis Complex", "Appendix III: Comments from the Department of Defense", "Appendix IV: GAO Contact and Staff Acknowledgments", "GAO Contact", "Staff Acknowledgments" ], "paragraphs": [ "", "The JIAC includes elements of three intelligence operations centers—one supporting EUCOM, a second supporting U.S. Africa Command, and a third supporting the North Atlantic Treaty Organization—as well as several other organizations that perform intelligence-related functions. According to DOD guidance, joint intelligence operations centers support the geographical combatant commands and other defense organizations, serving as focal points for intelligence planning, collection management, analysis, and production.\nEUCOM Joint Intelligence Operations Center Europe executes intelligence operations that are synchronized and integrated with theater component, national, and partner nation organizations; enables EUCOM planning and execution; and enhances senior leaders’ decision-making across the entire spectrum of military operations.\nU.S. Africa Command Directorate for Intelligence at RAF Molesworth manages and executes defense intelligence for U.S. Africa Command, including protecting U.S. personnel and facilities, preventing and mitigating conflict, and building defense capabilities in order to promote regional stability and prosperity.\nNorth Atlantic Treaty Organization Intelligence Fusion Center provides intelligence to warn of potential crises and to support the planning and execution of the North Atlantic Treaty Organization’s operations.\nRegional Joint Intelligence Training Facility trains students from EUCOM, U.S. Africa Command, and the North Atlantic Treaty Organization nations, including the United Kingdom.\nUnited States Battlefield Information Collection and Exploitation Systems plans, builds, and operates the Coalition Intelligence and Information Enterprise to provide on-demand coalition information- sharing solutions for both episodic and enduring missions.", "A number of DOD organizations have been involved in the JIAC consolidation process. Overall guidance for DOD’s military construction efforts was provided by the Office of the Assistant Secretary of Defense for Energy, Installations, and Environment. This office is responsible for overseeing various aspects of the department’s military construction efforts. These responsibilities include, among other things, monitoring the execution of the military construction program to ensure the most efficient, expeditious, cost-effective accomplishment of the program, and issuing guidance for the implementation of DOD military construction policy.\nOther DOD organizations—including U.S. Air Force Headquarters, the Basing Office of the Office of the Secretary of Defense, and the headquarters of both EUCOM and U.S. Africa Command—made up the team that conducted the JIAC analysis of alternatives. The participating organizations provided subject matter experts who were involved in the team’s day-to-day work and developed the analysis that is the foundation of the decision to consolidate the JIAC at RAF Croughton. DOD’s team conducted work from the initial concept proposal in the fall of 2009 to the Resource Management Decision issued by the Secretary of Defense in April 2013.\nIn July 2016, we reported on DOD’s analysis of alternatives process and recommended that the Secretary of Defense direct the Assistant Secretary of Defense for Energy, Installations, and Environment to develop guidance requiring the use of best practices for analysis of alternatives—including those practices we identified in the report—and that in this guidance, the Assistant Secretary should define the types of military construction decisions for which use of these best practices should be required. DOD did not agree with our recommendation, stating that the best practices do not wholly apply to decision-making processes for military construction projects.\nTable 1 lists the roles and responsibilities of DOD components related to the JIAC consolidation, including their involvement in preparing information in response to congressional requests for information on the analysis of alternatives process and on Lajes Field as a possible location for the JIAC.", "In response a statutory requirement, DOD issued a memorandum that certified that Lajes Field, Azores (Portugal) was not the optimal location for the JIAC, based on an analysis of U.S. operational requirements and an evaluation of key criteria. The Azores is an autonomous region of Portugal situated about 850 miles west of continental Portugal. There are nine major Azorean islands, including Terceira, home of Lajes Field. Lajes Field is a dual military and civilian airfield and is also a Portuguese military base; the 65th Air Base Group, a U.S Air Force unit, is also stationed there. The 65th Air Base Group’s mission supports DOD, allied nations, and other authorized aircraft in transit; its core mission is to service in-transit aircraft en route to eastern and southern destinations.\nIn 2010, the Air Force recommended a plan to reduce personnel and operations at Lajes Field and divest approximately 500 U.S. military and civilian billets, leaving approximately 165 U.S. personnel at Lajes Field to support the mission requirements. The Secretary of Defense approved the recommendation and announced his decision to streamline Lajes Field in October 2012. According to the Secretary of Defense, the frequency and volume of flights using Lajes Field had decreased, and the base was operating well below its capacity. The Air Force recommended reducing U.S. operations at Lajes from 24 hours, 7 days a week to 8 hours, 7 days a week and downsizing the 65th Air Base Wing to an Air Base Group. According to the Secretary of Defense, the presence at Lajes Field exceeded mission requirements, and the mission requirements at Lajes Field could be supported with a smaller force. DOD has estimated that the streamlined footprint would yield approximately $35 million in annual savings. This Secretary of Defense’s October 2012 decision was subsequently reaffirmed by the European Infrastructure Consolidation assessment, which the Secretary of Defense initiated on January 25, 2013, to perform a comprehensive review of DOD facilities in Europe.\nThe National Defense Authorization Act for Fiscal Year 2014 required that the Secretary of Defense provide Congress with certification that the actions taken to realign military forces at Lajes Field were supported by the European Infrastructure Consolidation assessment. The act required that DOD’s certification include an assessment of the efficacy of Lajes Field in support of the United States’ overseas force posture. On January 6, 2015, the Secretary of Defense issued a memorandum certifying that the European Infrastructure Consolidation assessment supported DOD’s plan to adjust its presence at Lajes Field. Further, the Secretary of Defense noted that DOD had conducted a comprehensive review and determined that the reduction of U.S. personnel at Lajes Field supported the U.S. military’s European force posture.\nDOD officials said that they will continue to provide 24-hour-a-day, 7-day- a-week tower operations at Lajes Field after the base personnel are reduced, along with crash, fire, and rescue services and attendant airfield operations for the joint Portuguese military and civilian airfield. Air Force officials told us that, as of July 2016, U.S. flights to Lajes Field average two per day. Air Force officials told us that, as part of this effort to streamline and reduce the personnel at Lajes Field, they have identified various excess buildings, facilities, and housing units that are no longer needed. Specifically, Air Force officials have identified 350 housing units as excess and are in the process of returning those units back to the Portuguese government; the remaining housing will be used to support unaccompanied personnel at Lajes Field. In July 2016, Air Force officials said that they were in negotiations with the Portuguese government on the return of excess facilities per the personnel streamlining efforts. Specifically, the officials stated that there was disagreement on how the United States and Portugal interpret the technical agreement and policy on the return of excess facilities—the United States’ position was that all property excess to the needs of the United States would be turned over to Portugal in useable condition, while Portugal sought for the United States to demolish a majority of the facilities rather than returning them. According to these officials, Portugal also sought environmental remediation commitments from the United States. According to DOD officials, the demolition and environmental remediation of these facilities was contrary to long-standing DOD policy.", "Our assessment of the Air Force’s February 2015 cost estimate for JIAC consolidation showed that it did not fully meet cost estimation best practices. According to the GAO Cost Estimating and Assessment Guide, a cost estimate created using best practices exhibits four characteristics—it is comprehensive, well documented, accurate, and credible. Each of the four characteristics is associated with a specific set of best practices. Our assessment found that the JIAC cost estimate partially met three and minimally met one of the four characteristics of a reliable cost estimate. If any of these characteristics is not substantially or fully met, then the cost estimate does not reflect the characteristics of a high-quality estimate and cannot be considered reliable. Table 2 lists each of the four characteristics, along with our summary assessment of the JIAC cost estimate.\nThe following summarizes our analysis of the JIAC cost estimate for each of the four characteristics. Appendix I provides greater detail on our assessment.\nComprehensiveness (Partially Met). According to best practices, agencies should develop accurate life-cycle cost estimates. Further, a life-cycle cost estimate should encompass all past (or sunk), present, and future costs for every aspect of the program, regardless of funding source—including all government and contractor costs. However, the JIAC cost estimate included only MILCON costs and did not include costs associated with the life cycle of the project. Air Force and Office of the Secretary of Defense officials said they do not consider the JIAC cost estimate a life-cycle cost estimate and that the estimate’s scope is in line with DOD guidance on the development of budget requests for MILCON projects. According to DOD officials, the department does not have a full life-cycle cost estimate for the entire JIAC consolidation effort. DOD and Air Force officials further stated that the estimate covers the costs of infrastructure for the JIAC’s facilities, other supporting infrastructure (e.g., utilities serving the JIAC facilities), and certain other facilities for functions related to JIAC, such as family support (e.g., expanded capacity of the child development center). The associated Operation and Maintenance costs (e.g., family support costs like living allowances) were not included in the estimate, because they were considered out of scope, according to DOD and Air Force officials. However, without fully accounting for life- cycle costs, management may have difficulty successfully planning and programming resource requirements for the JIAC consolidation and making sound decisions.\nDocumentation (Partially Met). According to best practices, documentation is essential for validating and defending a cost estimate. The JIAC cost estimate is generally consistent with the sizing assumptions included in DOD documentation, laying out requirements for the JIAC’s facilities, inputs from appropriate experts, and relevant DOD guidance, such as the DOD Facilities Pricing Guide. Also, DOD documented both the data sources and the methodology used for the JIAC cost estimate in an Excel spreadsheet model and a parametric cost engineering estimate summary. However, the documentation for the JIAC cost estimate is not complete. Specifically, the cost estimate does not provide sufficient documentation so that a cost analyst unfamiliar with the program could understand what had been done and replicate it. The cost estimate uses the DOD Facilities Pricing Guide (heretofore referred to as the Pricing Guide), which provides planning assumptions and prices for a variety of types of facilities, such as office buildings. In the cost calculation spreadsheet for the JIAC cost estimate, the cost estimators’ judgements regarding which type of facility to use from the Pricing Guide were not always consistent with the categories listed in the Pricing Guide. For example, there is no mention of intelligence facilities in the Pricing Guide, and we were unable to independently trace all of the unit costs from the JIAC cost estimate back to it. Air Force officials were able to show where in the Pricing Guide these numbers were drawn from; however, this is not documented in the estimating model, and there is no rationale provided to show that an intelligence facility would be the same as a communications center. Without a well-documented cost estimate, the Air Force may not be able to present a convincing argument for the validity of the JIAC cost estimate and answer decision makers’ and oversight groups’ questions.\nAccuracy (Partially Met). According to best practices, the cost estimate should provide results that are unbiased, and it should not be overly conservative or overly optimistic. An estimate is accurate when it is based on an assessment of most likely costs, adjusted properly for inflation, and contains no more than a few minor mistakes—if any. In addition, a cost estimate should be updated regularly to reflect changes in the program, for example when schedules or other assumptions change or actual costs change, so that it always reflects the current status. The JIAC estimate used historical data, did not contain mathematical errors, showed evidence of being updated, underwent a review process before final approval, and follows DOD construction cost estimation guidance on how to account for inflation. However, while the JIAC cost estimate has been updated, it has not been updated regularly. Specifically, the April 2013 estimate was updated in June 2013 to align with an update to the Pricing Guide but was not updated to align with the two subsequent updates to the Pricing Guide that occurred before the February 2015 JIAC cost estimate was submitted. Air Force officials said that the JIAC cost estimate was updated to reflect foreign currency fluctuations. According to these officials, the MILCON process assumes flexibility in the project timeline to allow adjustments to the estimate and focuses on establishing the project’s scope (e.g., the square feet or square meters associated with a project) in the Air Force’s project development justification forms. These Air Force officials also stated that the costs associated with MILCON projects are updated only with significant changes to the program and are typically permitted to be adjusted by as much as plus or minus 25 percent of the total costs— even after funding has been appropriated—without needing to be reprogrammed. While updating an estimate in this way may be permissible within the established MILCON process, it is not consistent with cost estimating best practices, because the estimate is not updated regularly. Without updating the JIAC cost estimate on a regular basis, DOD and the Air Force may have difficulty analyzing changes in program costs for the consolidation project and may hinder the collection of up-to-date cost and technical data to support future JIAC cost estimates.\nCredibility (Minimally Met). According to best practices, a cost estimate should discuss any limitations of the analysis resulting from uncertainty or biases surrounding data or assumptions. Major assumptions should be varied, and other outcomes recomputed, to determine how sensitive the cost estimates are to changes in the assumptions. Also, risk and uncertainty analysis should be performed to determine the level of risk associated with the estimate. Without a sensitivity analysis that reveals how a cost estimate is affected by a change in a single assumption, the cost estimator will not fully understand which variable most affects the cost estimate. The use of a sensitivity analysis is not specified in cost estimation guidance for MILCON projects from either DOD or the Air Force, and the JIAC cost estimate did not include such an analysis. According to Office of the Secretary of Defense and Air Force officials, a sensitivity analysis is part of the underlying unit cost development, because costs are developed through the use of both historical data and industry averages. These officials further stated that the Office of the Secretary of Defense uses actual data underpinned by relevant sensitivity and range analyses to develop its cost estimates. For example, Office of the Secretary of Defense and Air Force officials said that the Office of the Secretary of Defense uses the DOD Selling Price Index—which averages three commonly accepted national indexes for construction price escalation—to calculate actual project award cost data. However, for sensitivity analysis to be useful in informing decisions, careful assessment of the underlying risks and supporting data related to a specific MILCON project is also necessary. In addition, the sources of the variation should be well documented and traceable. Without conducting sensitivity analysis for the JIAC cost estimate to identify the effect of uncertainties associated with different assumptions, DOD and the Air Force increase the risk that decisions will be made without a clear understanding of the effects of these assumptions on costs.\nAnother key to establishing an estimate’s credibility is its review process. According to best practices, the estimate’s cost drivers should be crosschecked, and an independent cost estimate conducted by a group outside the acquiring organization should be developed to determine whether other estimating methods produce similar results. While the Air Force has a review process, the review it conducted for the JIAC cost estimate did not include the use of a checklist provided as a sample in DOD MILCON cost estimation guidance. The sample checklist, while not required, could have helped the Air Force to confirm the validity of assumptions and the logic used in estimating the cost of the JIAC construction tasks. Air Force officials stated that their review primarily looks at the numbers provided and the ranges from the Pricing Guide to see whether the estimate is within those ranges. These officials added that they would use the checklist only if there was a difference from the Pricing Guide.\nHowever, the first phase of the JIAC cost estimate did not identify the stage of the estimate; did not separate costs for labor, equipment, or material; and did not calculate prime and subcontractor profit by the weighted guidelines method, which are items listed in the sample checklist.\nWhen we shared the results of our analysis with officials from the Office of the Secretary of Defense, they said that they did not agree our best practices for cost estimating were entirely applicable to the JIAC cost estimate, since the estimate focused on MILCON costs. Furthermore, Office of the Secretary of Defense and Air Force officials said that construction is discussed in our Cost Estimating and Assessment Guide as a subsidiary cost to be included in the life-cycle cost estimate. For example, these officials said that construction costs are to be considered as part of the overall ground rules and assumptions for a cost estimate. However, the methodology outlined in our Cost Estimating and Assessment Guide is a compilation of best practices that federal cost estimating organizations and industry use to develop and maintain reliable cost estimates, and this methodology can be used across the federal government for developing, managing, and evaluating capital program cost estimates, including military construction estimates. Furthermore, DOD guidance for estimating construction costs states that in the MILCON program, construction cost estimates are prepared throughout the planning, design, and construction phases of a construction project. These construction cost estimates are categorized as follows: programming estimate, concept estimate, final estimate, and government estimate. The Air Force provided us with the JIAC consolidation programming estimate for analysis, because it was the most complete and updated estimate at the time of our review. Even though our analysis shows that the programming estimate did not meet all of the four characteristics of a high-quality, reliable estimate, the Air Force will have opportunities to incorporate our best practices as it prepares future cost estimates for subsequent phases of the JIAC consolidation program. Without incorporating a methodology that is more closely aligned with our best practices for cost estimation and incorporates all four characteristics of a high-quality, reliable estimate, the Air Force will not be providing comprehensive and high-quality information for decision makers to use.", "After its 2013 decision to consolidate the JIAC at RAF Croughton, DOD conducted multiple reviews to provide information on Lajes Field as a potential alternative location for the JIAC, in response to congressional interest and inquiries. These reviews were developed by different organizations within DOD during 2015 and 2016 and included both one- time and recurring costs. The reviews produced different cost estimates, in particular for communications infrastructure and housing, because the DOD organizations that developed the reviews used different assumptions. However, all of the reviews found that consolidating the JIAC at Lajes Field would be more costly than consolidating it at RAF Croughton. Additionally, in response to statutory requirements, DOD issued a memorandum certifying that the department had determined that RAF Croughton was the optimal location for the JIAC and, conversely, that Lajes Field was not the optimal location, given the JIAC’s operational requirements.", "From 2015 through 2016, DOD conducted multiple reviews of Lajes Field as a potential location for the JIAC, in response to congressional interest and inquiries. Lajes Field was not originally included in DOD’s analysis of alternatives for the consolidation of the JIAC. DOD officials told us that the reviews of 2015 and 2016 were not conducted with the same level of rigor as a formal cost estimate, because DOD had already completed its analysis of alternatives, and the decision to consolidate JIAC at RAF Croughton had already been made. DOD officials also told us that no credible new evidence had been produced to indicate the department should revisit its initial decision. Figure 1 includes the key events and reviews related to DOD’s analysis of the JIAC, including reviews related to Lajes Field, the European Infrastructure Consolidation study, JIAC consolidation, authorization, and appropriations, and the execution of the JIAC consolidation project.\nAccording to officials from the Office of the Secretary of Defense, DOD did not alter or change its original decision to consolidate the JIAC at RAF Croughton based on the results of these reviews and found that consolidating the JIAC at Lajes Field would be more costly than consolidating it at RAF Croughton. Additionally, according to the Deputy Secretary of Defense, DOD’s reviews determined that Lajes Field was not a suitable location for the JIAC, based both on operational requirements and costs including housing availability and the lack of adequate secure communications infrastructure. These reviews were led by EUCOM, CAPE, and DISA.\nEUCOM’s September 2015 review. EUCOM developed an analysis comparing RAF Croughton with Lajes Field as potential locations for the JIAC. EUCOM officials told us that this review was in response to congressional interest and requests, and it included inputs from U.S. Air Forces Europe and officials at Lajes Field. The review compared cost estimates associated with locating JIAC at RAF Croughton with those associated with locating it at Lajes Field. These cost estimates included one-time costs, such as construction costs for the JIAC facilities, communications infrastructure, and housing, as well as recurring costs—including sustainment costs for base and communications infrastructure. The review estimated the one-time costs associated with locating the JIAC at RAF Croughton at $357 million and the one-time costs associated with locating it at Lajes Field at $1.65 billion. For recurring costs, the review estimated that RAF Croughton would cost approximately $68 million annually and Lajes Field approximately $94 million annually. The largest differences between the cost estimates were in the one-time costs for the communications and housing infrastructure necessary to support the JIAC. Officials from the Office of the Secretary of Defense told us that DOD had provided this review, with its appendixes, to the House and Senate Armed Services Committees and the House and Senate Appropriations Committees in September 2015.\nThis review included two appendixes developed by DISA and DIA on the communications infrastructure needed to support the JIAC. DISA’s July 2015 Azores Telecommunications Feasibility Report provided an analysis of the telecommunications infrastructure on the Azores Islands. This report indicated that the Azores did not have sufficient communications infrastructure to be a feasible location for a DISA telecommunications hub. The DIA Azores Communications Cost Estimate provided a brief summary on the current and proposed communications systems within the Azores Islands, as well as the costs associated with modernizing the systems. The appendix noted that it was developed in response to a request from the DIA Office of Congressional Affairs. For communications infrastructure, the DIA estimated that locating the JIAC at Lajes Field would require approximately $449 million in one-time costs and $32.7 million in recurring annual sustainment costs.\nCAPE’s April 2016 cost verification for the JIAC. CAPE conducted an independent review of the cost estimates presented in EUCOM’s September 2015 review and those developed by the House Permanent Select Committee on Intelligence for its July 2015 review. CAPE developed its own cost assumptions, which included housing and communications infrastructure costs, among other things, in its review of the cost calculations in the EUCOM and House Permanent Select Committee on Intelligence reviews, which produced alternative cost totals. CAPE officials told us that this review was in response to direction from the Deputy Secretary of Defense and that they briefed this review to the House Permanent Select Committee on Intelligence in May 2016 and the House and Senate Armed Services Committees in April 2016. CAPE’s review estimated the one-time costs associated with locating the JIAC at RAF Croughton at $356 million and one-time costs associated with locating it at Lajes Field at $1.43 billion (compared with EUCOM’s estimates of $357 million and $1.65 billion respectively). For recurring costs, CAPE’s review estimated that RAF Croughton would cost approximately $53 million annually and Lajes Field approximately $59 million annually (compared with EUCOM’s estimates of $68 million and $94 million, respectively).\nDISA’s May 2016 review on the JIAC communications infrastructure requirements. In this update to its July 2015 review, DISA assessed and compared the communications infrastructures at RAF Croughton and Lajes Field with the intelligence mission support requirements, including the communications and technical requirements for the JIAC. DISA officials told us that this review included more refined cost estimates for the communications infrastructure than prior estimates and reflected new technical standards, such as operational bandwidth requirements. The review found that the communications infrastructure at Lajes Field did not meet technical and critical infrastructure requirements. To upgrade the communications infrastructure at Lajes Field, the review estimated a minimum of $267.7 million in one-time costs to procure and install three undersea cables and $6.8 million in annual sustainment costs. For locating the JIAC at RAF Croughton, the review determined that no procurement would be required and estimated sustainment costs for the communications infrastructure at $5.5 million annually. DOD officials told us that they briefed the results of this review to the House Armed Services Committee in September 2016.", "DOD’s multiple reviews of Lajes Field as an alternative location for the JIAC produced different cost estimates, because these reviews relied on different assumptions in developing the cost estimates for communications infrastructure and housing.", "DOD’s multiple reviews provide different cost estimates for the communications infrastructure that would be needed to support the JIAC at Lajes Field, because the reviews relied on different assumptions. Specifically, the reviews varied in the costs they included and the number of annual fiber cable breaks they expected would occur, among other details. The three reviews all assumed that three new fiber cables would be needed for Lajes Field. However, the distribution of these fiber cables differs in the reviews. Specifically, the September 2015 EUCOM review and the May 2016 DISA review assume one fiber cable from Lajes Field to mainland Portugal, one fiber cable to the United Kingdom, and one fiber cable to the United States, while the April 2016 CAPE review assumes two fiber cables from Lajes Field to the United States and one fiber cable to the United Kingdom. DOD officials told us that the cable distribution cited in the September 2015 EUCOM and the May 2016 DISA reviews reflect the current JIAC operational requirements, based on a May-June 2015 DIA operational assessment and that the CAPE review reflects a different JIAC operational design. Officials from DIA said that this change in operational requirements was made in various discussion sessions conducted among subject matter experts, and that the decision was not documented. Figure 2 shows the current cable configuration at Lajes Field and the new cables that would be necessary based on the September 2015 EUCOM review, the May 2016 DISA review, and the April 2016 CAPE review.\nThe May 2016 DISA review had the lowest estimate for communications costs of the three reviews. DISA officials told us that these cost estimates were deliberately built on assumptions that would generate the lowest possible costs. However, DOD officials told us that DISA has not been able to validate all of its assumptions. Table 3 shows the cost estimates and supporting assumptions included in DOD’s multiple reviews for communications infrastructure associated with locating the JIAC at Lajes Field.\nAppendix II contains additional information on the requirements for the communications capabilities related to the JIAC.", "Two of DOD’s reviews provided cost estimates for the housing needed to support the JIAC at Lajes, but the estimates were based on different assumptions. Specifically, EUCOM estimated the one-time housing costs for locating the JIAC at Lajes Field at $390.5 million, while CAPE estimated these costs at $188 million. EUCOM’s review assumed that 1,031 new housing units would be needed on the base at Lajes Field, and CAPE’s review assumed that as few as 385 new units would be needed on base. Additionally, EUCOM’s estimate assumes that there would be a 252-person dorm unit shortfall for unaccompanied military personnel, and CAPE assumed a shortfall of 368 dorm units. Table 4 shows the two cost estimates for the housing and the assumptions that each review used.\nEUCOM and CAPE used different assumptions when developing their cost estimates for the number of housing units needed to support the JIAC at Lajes Field. Specifically, EUCOM reported that 1,812 housing units were needed to support the JIAC and that those units would include not only housing for the accompanied personnel working at the JIAC (around 1,200 personnel) but also housing units for the additional base operations and support personnel to support the JIAC (around 330 personnel) and personnel associated with the reversal of the personnel streamlining initiative at Lajes Field (around 751 personnel). EUCOM determined its estimate for accompanied housing units required for the JIAC at Lajes Field by using Air Force personnel standards and JIAC planning factors. On the other hand, CAPE’s estimates assumed that 1,260 accompanied housing units would be needed, that dorm units would be used, and unaccompanied civilians would live off base to minimize the effect on military family housing. A factor in the difference between EUCOM’s and CAPE’s housing cost estimates is the addition of 751 personnel (resulting in a need for 451 additional accompanied housing units) that EUCOM included in its cost estimate when the Lajes personnel streamlining initiative was reversed. CAPE officials told us that their estimate did not assume that reversing the personnel streamlining initiative would result in the addition of so many personnel, and that therefore there would be a reduced need for additional housing. However, CAPE assumed that more base operations and support personnel would be needed (CAPE assumed that 500 support personnel would be needed, while EUCOM assumed 330) to support the JIAC at Lajes Field.\nBoth reviews also provided housing estimates for unaccompanied military personnel. EUCOM’s review assumed that 469 unaccompanied military personnel would reside in the existing 217 dorm spaces at Lajes Field, and there would be a shortfall of 252 dorm spaces (32 of those dorm units would be built using the JIAC military construction funds and the other 220 units represent the shortfall). CAPE’s review assumed that unaccompanied military personnel would reside in the existing 217 dorm units at Lajes Field and that DOD would build two additional dorms (for 168 and 200 personnel) to accommodate the unaccompanied military personnel. Additionally, EUCOM’s review assumed that 204 unaccompanied civilians would live on base and CAPE’s review assumed that 91 unaccompanied civilians would live off base in small family housing.\nEUCOM’s review used the military family housing inventory of the U.S. Air Forces in Europe to determine the number of housing units on the base (456 housing units), while CAPE’s estimate assumes that there were 550 housing units at Lajes Field. In July 2016, Air Force personnel at Lajes Field confirmed that there were 456 available housing units at Lajes Field. Also, both CAPE’s and EUCOM’s reviews used the January 2007 Housing Requirements Market Analysis for Lajes Field to determine the number of housing units that were available for rent off base (approximately 229 housing units). However, according to information provided by Terceira’s municipalities, there are currently 1,693 houses in the Island of Terceira available for rent, and almost 400 were recently occupied by U.S. military personnel and their families. According to the 2007 Housing Requirements and Market Analysis DOD conducted at Lajes Field, the Lajes rental market is separated into two areas—housing units that are specifically marketed to U.S. military personnel, have been inspected for suitability, and are listed in the Lajes Field housing rental database, and housing units that are part of the local rental market but not of sufficient quality and without the amenities required by U.S. military and civilian personnel. Further, EUCOM officials told us that the 1,693 housing units available on the Island of Terceira may not all be suitable for U.S. military forces. Air Force officials told us that there were only 225 rental properties in their off-base referral database. Both EUCOM’s and CAPE’s estimates assumed that there were 225 rental properties on the island and that another 100 would be built (for a total of 325) to support the personnel for the JIAC.\nBoth reviews assumed that no additional housing units would be necessary at RAF Croughton, based on the 2016 Housing Requirements Market Analysis for RAF Croughton. According to Air Force officials, past housing and United Kingdom basing trends indicate that personnel associated with the JIAC would live off base in the private rental market, and the private rental market could sufficiently absorb the housing needs of the JIAC personnel. Further, EUCOM reported that the United Kingdom had the capacity to absorb the number of personnel associated with the JIAC move and that they would not need to build additional military family housing at RAF Croughton. The 2016 Housing Requirements Market Analysis for RAF Croughton reported that the private rental market was very active, that there was a total private rental stock of 69,364 rental units, and that the housing supply was projected to grow to 72,905 units by 2020.", "In addition to its multiple reviews, DOD issued a memorandum in March 2016 stating that the department had determined that RAF Croughton remained the optimal location for the JIAC and that Lajes Air Field is not an optimal location for the JIAC. Specifically, the Deputy Secretary of Defense issued a memorandum in response to several requirements in Section 2310 of the National Defense Authorization Act for Fiscal Year 2016; House Report 114-144 accompanying HR 2596, the Intelligence Authorization Act for Fiscal Year 2016; and Section 8114 of the DOD Appropriations Act for Fiscal Year 2016 (division C). The memorandum states that DOD’s decision was based on an analysis of U.S. operational requirements and an evaluation of multiple locations using five criteria: effect on intelligence operations (critical criterion); impact on bilateral and multinational intelligence collaboration (critical criterion); impact on international agreements and relationships; impact on community quality of life; and business case analysis. According to officials from the Office of the Secretary of Defense, DOD reviewed existing analysis and did not conduct new in-depth analysis to support the certification memorandum. The analysis DOD used to support the memorandum was based on the original analysis of alternatives process that DOD developed for the JIAC consolidation—which did not include Lajes Field as an alternative location—and on subsequent comparisons of Lajes Field and RAF Croughton. The officials stated that no additional in-depth analysis was warranted because no credible new evidence had been produced to indicate the department should revisit its initial decision.", "To address costly sustainment challenges and instances of degraded theater intelligence capabilities associated with the current JIAC facilities at RAF Molesworth, DOD plans to spend almost $240 million for the Air Force to consolidate and relocate the JIAC’s facilities at RAF Croughton. However, the Air Force’s cost estimate did not fully meet cost estimating best practices that are intended, when followed, to produce high-quality, reliable estimates. For example, the JIAC cost estimate included only MILCON costs and did not include costs associated with the life cycle of the project. Without fully accounting for life-cycle costs, management may have difficulty successfully planning and programming resource requirements for the JIAC consolidation and making sound decisions. Furthermore, the JIAC cost estimate lacked a sensitivity analysis, which would assess the underlying risks and supporting data. Without identifying the effects of uncertainties associated with different assumptions for the JIAC consolidation project, there is an increased risk that decisions will be made without a clear understanding of these effects on costs. Unless DOD uses best practices as it prepares future cost estimates for the remaining design and construction phases of the JIAC consolidation project, decision makers will not receive complete and reliable information on the total anticipated costs for the JIAC consolidation efforts for which they need to conduct oversight and make informed funding decisions. Furthermore, addressing limitations in future JIAC cost estimates can provide DOD better information to predict costs and make informed decisions about the JIAC consolidation.", "To better enable DOD to provide congressional decision makers with complete and reliable information on the total anticipated costs for the JIAC consolidation efforts, we recommend that the Office of the Assistant Secretary of Defense for Energy, Installations, and Environment’s Basing Office—in coordination with the Office of the Assistant Secretary of the Air Force Installations, Environment and Energy—update future construction cost estimates for consolidating the JIAC at RAF Croughton using best practices for cost estimating as identified in the GAO Cost Estimating and Assessment Guide. Specifically, cost estimates for the JIAC consolidation should fully incorporate all four characteristics of a high-quality, reliable estimate.", "We provided a draft of this report to DOD for review and comment. DOD provided written comments on our recommendation, which are reprinted in appendix III. The department also provided technical comments that we incorporated as appropriate.\nIn its written comments, DOD did not concur with our recommendation. DOD agreed that many components in the GAO Cost Estimating and Assessment Guide are broadly applicable in the decision process leading up to a military construction budget request. However, DOD further stated that once military construction funds are authorized and appropriated by Congress, the department transitions to a project management mode, and it would be a waste of resources to continue to generate cost estimates once they have transitioned to managing project execution using actual cost data. However, as we note in the report, DOD guidance for estimating construction costs, DOD’s Unified Facilities Criteria 3-740- 05, states that in the MILCON program, construction cost estimates are prepared throughout the planning, design, and construction phases of a construction project to account for the refinement of the project’s design and requirements. The final estimate should document the department’s assessment of the program's most probable cost and ensure that enough funds are available to execute it. As of October 2016, the military construction funds had not been authorized by Congress for the third phase of the JIAC construction project. According to DOD officials, construction is not scheduled to begin until fall of 2017, and the contract has not yet been awarded.\nFurther, the GAO Cost Estimating and Assessment Guide states that regardless of whether changes to the program result from a major contract modification or an overtarget budget, the cost estimate should be regularly updated to reflect all changes. This is also a requirement outlined in OMB’s Capital Programming Guide. The purpose of updating the cost estimate is to check its accuracy, defend the estimate over time, and archive cost and technical data for use in future estimates. After the internal agency and congressional budgets are prepared and submitted, it is imperative that cost estimators continue to monitor the program to determine whether the preliminary information and assumptions remain relevant and accurate. Keeping the estimate updated gives decision makers accurate information for assessing alternative decisions. Cost estimates must also be updated whenever requirements change, and the results should be reconciled and recorded against the old estimate baseline.\nTherefore, we continue to believe that DOD’s implementation of our recommendation to update future JIAC cost estimates using the best practices identified in the GAO Cost Estimating and Assessment Guide would assist in ensuring that decision makers have complete and reliable information about costs associated with the JIAC consolidation and as the third phase of the JIAC project is authorized. Implementing our recommendation would also ensure that DOD develops a reliable historical record for the cost of the JIAC that can be used to estimate other similar projects in the future.\nAs agreed with your offices, unless you publicly announce the contents of this report earlier, we plan no further distribution until 30 days from the date of this report. At that time, we will send copies of this report to the appropriate congressional committees and to the Secretaries of Defense, the Army, the Navy, and the Air Force; the Commandant of the Marine Corps; and the Assistant Secretary of Defense for Energy, Installations, and Environment. In addition, this report will be available at no charge on the GAO website at http://www.gao.gov.\nIf you or your staff have any questions about this report, please contact me at (202) 512-4523 or [email protected]. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix IV.", "According to the GAO Cost Estimating and Assessment Guide, a cost estimate is a critical element in any acquisition process to help decision makers evaluate resource requirements at milestones and other important decision points. Cost estimates establish and defend budgets and drive affordability analysis. The guide identifies four characteristics of a high-quality, reliable cost estimate: it is comprehensive, well documented, accurate, and credible. A cost estimate is considered comprehensive when it accounts for all possible costs associated with a project, details all cost-influencing ground rules and assumptions, is technically reasonable, is structured in sufficient detail to ensure that costs are neither omitted nor double-counted, and the estimating teams’ composition is commensurate with the assignment; well documented when supporting documentation for the estimate is accompanied by a narrative explaining the process, sources, and methods used to create the estimate and contains the underlying data used to develop the estimate; accurate when the estimate is neither overly conservative nor too optimistic and is based on an assessment of the costs most likely to be incurred; and credible when the estimate has been cross-checked with independent cost estimates, the level of confidence associated with the point estimate—the best guess at the cost estimate given the underlying data—has been identified, and a sensitivity analysis has been conducted. During the sensitivity analysis, the project will have examined the effect of changing one assumption related to each project activity while holding all other variables constant in order to identify which variable most affects the cost estimate.\nOur analysis of the Air Force’s February 2015 cost estimate for the Joint Intelligence Analysis Complex (JIAC) showed that, when compared with best practices, it minimally met one and partially met three of the four characteristics of a reliable cost estimate (see table 1). According to the GAO Cost Estimating and Assessment Guide, a cost estimate is considered reliable if the overall assessment ratings for each of the four characteristics are substantially or fully met. If any of the characteristics is not met, minimally met, or partially met, then the cost estimate does not fully reflect the characteristics of a high-quality estimate and cannot be considered reliable.", "The May 2016 review by the Defense Information Systems Agency (DISA) discussed technical requirements and developed minimum standards for developing its cost estimates for communications infrastructure associated with locating the Joint Intelligence Analysis Complex (JIAC) at Lajes Field. The standards support the Department of Defense’s (DOD) position that locating the JIAC at Lajes Field would require the procurement and installation of three undersea cables. The DISA review stated that capabilities for global intelligence telecommunications at the JIAC must be secure, highly available, reliable, and redundant. The review also listed technical requirements based on these four characteristics, none of which—according to the review—the infrastructure at Lajes Field currently meets. One of these requirements is a critical infrastructure protection practice from the DOD Director of National Intelligence, which prohibits the use of communication paths that could result in denial of service or could compromise the integrity of information. The review characterizes DOD’s meeting this requirement at Lajes Field as a high risk, noting that non-DOD personnel from Huawei, a Chinese telecommunications company, could disconnect one fiber of the two-fiber ring at Lajes Field, which would eliminate the redundancy of the two cables and increase the risk that JIAC personnel would not be able to use the communications infrastructure to meet their operational requirements. The DISA review also listed a technical requirement that the communications infrastructure be able to operate at 56 gigabits per second, which the review noted is the minimum operational requirement for Non-classified Internet Protocol Router Network; Secret Internet Protocol Router Network; Joint Worldwide Intelligence Communications System; and voice, video, and data. According to the review, the current capabilities at Lajes Field do not meet this requirement. In comparison, the capacity at RAF Croughton allows for 800 gigabits per second, the capacity at U.S. Central Command also allows for 800 gigabits per second, and the capacity at U.S. Pacific Command allows for 100 gigabits per second. According to the review, DOD technical requirements also specify that the communications cables must be available at 99.999 percent or higher, which equates to just a few minutes of downtime per year. As indicated by DISA in its review, this level of availability requires sufficient redundancy. The capabilities at Lajes Field do not meet this requirement, according to DISA’s review. DISA officials provided us data on the number of average fiber cable outages per week in 2015—6.8 average outages per week for transatlantic cables and 4.4 average outages per week for Pacific cables. The frequency with which the cables experience outages highlights the need for redundancy in fiber cable routes. Without procuring and installing three undersea cables, Lajes Field would not have the availability, redundancy, capacity, and security necessary to house the JIAC.\nThe September 2015 review by U.S. European Command (EUCOM) also references standards; however, it did not discuss these standards in detail. Its appendix on communications infrastructure, developed by DIA, says that the minimum threshold for fiber cables is two protected pathways to mainland Europe and one to the continental United States. Additionally—similar to the May 2016 DISA review—the EUCOM review indicated that three new undersea systems would have to be installed at Lajes Field to meet DOD requirements. DIA officials also told us that their assessment was based on DOD guidance and requirements, such as the Joint Intelligence Operations Center Enterprise Functional Requirements document and the Chairman of the Joint Chiefs of Staff Instruction 6211.02D Defense Information Systems Network (DISN) Responsibilities, (Jan. 24, 2012).\nThe review by the Office of Cost Assessment and Program Evaluation (CAPE) did not discuss requirements or standards for the communications infrastructure, because it relied on DISA’s previous cost estimates. CAPE officials stated that they had deferred to DISA’s estimate, because DISA is the authoritative source for communications infrastructure design.", "", "", "", "In addition to the contact named above, Brian Mazanec (Assistant Director), Jennifer Andreone, Tracy Barnes, Jennifer Echard, Justin Fisher, Joanne Landesman, Jennifer Leotta, Amie Lesser, Jamilah Moon, Carol Petersen, and Sam Wilson made key contributions to this report." ], "depth": [ 1, 2, 2, 2, 1, 1, 2, 2, 3, 3, 2, 1, 1, 1, 1, 1, 1, 1, 2, 2 ], "alignment": [ "", "", "", "", "h0_full", "h1_full", "", "", "", "", "", "", "h0_full h2_full", "h2_full h1_full", "h0_full", "", "", "", "", "" ] }
{ "question": [ "What did GAO conclude in their assessment?", "What is one example of this finding?", "Why is it unlikely for DOD to improve its estimates?", "What is the purpose of GAO's analysis?", "How did GAO conduct their analysis?", "What recommendation did GAO make for DOD?", "How did DOD react to GAO's recommendation?", "How did GAO react to this response?" ], "summary": [ "GAO assessed the cost estimate for the military construction project to consolidate and relocate the Joint Intelligence Analysis Complex (JIAC) at Royal Air Force (RAF) base Croughton and found that it partially met three and minimally met one of the four characteristics of a reliable cost estimate defined by GAO best practices, as shown in the table below.", "For example, it minimally met the credibility standard because it did not contain a sensitivity analysis; such analyses reveal how the cost estimate is affected by a change in a single assumption, without which the estimator will not fully understand which variable most affects the estimate.", "Unless the Department of Defense's (DOD) methodology incorporates all four characteristics of a high-quality, reliable estimate in preparing future cost estimates for the JIAC construction project, it will not be providing decision makers with reliable information.", "GAO was asked to review analysis associated with consolidating and relocating the JIAC. This report (1) assesses the extent to which DOD's cost estimate for the JIAC consolidation at RAF Croughton aligns with best practices and (2) describes key reviews DOD has conducted since spring of 2013 related to an alternative location for JIAC consolidation.", "GAO compared the Air Force's February 2015 JIAC cost estimate with GAO best practices for developing federal cost estimates, reviewed key DOD analysis of Lajes Field as a potential alternative location for the JIAC, and interviewed DOD officials.", "GAO recommends that DOD update its future construction cost estimates for consolidating the JIAC at RAF Croughton to comply with best practices for cost estimating identified by GAO.", "DOD did not agree, stating it would waste resources to continue to generate cost estimates once DOD transitions to managing the project with actual cost data.", "GAO continues to believe that its recommendation is valid, as discussed in this report." ], "parent_pair_index": [ -1, 0, -1, -1, 0, -1, 0, 1 ], "summary_paragraph_index": [ 2, 2, 2, 1, 1, 8, 8, 8 ] }
CRS_RL30840
{ "title": [ "", "Introduction", "Pre-NSC Coordination Methods", "The Need for Interdepartmental Coordination", "Past Modes of Policy Coordination", "The Creation of the NSC5", "Introduction", "Proposals", "Congressional Consideration", "The NSC as Created in 1947", "The National Security Council, 1947-2009", "The Truman NSC, 1947-1953", "The Eisenhower NSC, 1953-1961", "The Kennedy NSC, 1961-1963", "The Johnson NSC, 1963-1969", "The Nixon NSC, 1969-1974", "The Ford NSC, 1974-1977", "The Carter NSC, 1977-198132", "The Reagan NSC, 1981-1989", "The George H. W. Bush NSC, 1989-1993", "The Clinton NSC, 1993-2001", "The George W. Bush NSC, 2001-2009", "The Obama NSC, 2009-", "Overview of Current NSC Functions", "NSC Executive and Congressional Liaison", "The NSC and International Economic Issues", "Increased Importance of Law Enforcement Issues", "The Role of the National Security Adviser", "Selected Bibliography" ], "paragraphs": [ "", "The National Security Council (NSC) has been an integral part of U.S. national security policymaking since 1947. Of the various organizations in the Executive Office of the President that have been concerned with national security matters, the NSC is the most important and the only one established by statute. The NSC lies at the heart of the national security apparatus, being the highest coordinative and advisory body within the government in this area aside from the President's Cabinet. The Cabinet has no statutory role, but the NSC does.\nThis study reviews the organizational history of the NSC and other related components of the Executive Office and their changing role in the national security policy process. It is intended to provide information on the NSC's development as well as subsequent usage. This study is not intended to be a comprehensive organizational history of all components of the national security policy process nor of the process itself as a whole. Moreover, the high sensitivity and security classification of the NSC's work and organization limit available sources. It is also important to keep in mind the distinction between the NSC's statutory membership (i.e., the President, Vice President, Secretary of State, Secretary of Defense, and Secretary of Energy) and its staff (i.e., the National Security Adviser and his assistants). These two groups have very different roles and levels of influence.", "", "Successful national security policymaking is based on careful analysis of the international situation, including diplomatic, economic, intelligence, military, and morale factors. Based on a comprehensive assessment, effective government leaders attempt to attain their goals by selecting the most appropriate instrument of policy, whether it is military, diplomatic, economic, based on the intelligence services, or a combination of more than one. Although this approach has been an ideal throughout the history of international relations, prior to World War II, U.S. Presidents focused primarily on domestic matters and lacked organizational support to integrate national security policies. They relied instead on ad hoc arrangements and informal groups of advisers. However, in the early 1940s, the complexities of global war and the need to work together with allies led to more structured processes of national security decision making to ensure that the efforts of the State, War, and Navy Departments were focused on the same objectives. There was an increasingly apparent need for an organizational entity to support the President in looking at the multiplicity of factors, military and diplomatic, that had to be faced during wartime and in the early postwar months when crucial decisions had to be made regarding the future of Germany and Japan and a large number of other countries.\nGiven continuing worldwide responsibilities in the postwar years that involved active diplomacy, sizable military forces, sophisticated intelligence agencies, in addition to economic assistance in various forms, the United States established organizational mechanisms to analyze the international environment, identify priorities, and recommend appropriate policy options. Four decades later, the end of the Cold War saw the emergence of new international concerns, including transnational threats such as international terrorism and drug trafficking, that have continued to require the coordination of various departments and agencies concerned with national security policies.", "Coordinative mechanisms to implement policy are largely creations of the executive branch, but they directly influence choices that Congress may be called upon to support and fund. Congress thus takes interest in the processes by which policies and the roles of various participants are determined. Poor coordination of national security policy can result in calls for Congress to take actions that have major costs, both international and domestic, without the likelihood of a successful outcome. Effective coordination, on the other hand, can mean the achievement of policy goals with minimal losses of human lives while providing the opportunity to devote material resources to other needs.\nThroughout most of the history of the United States, until the 20 th century, policy coordination centered on the President, who was virtually the sole means of such coordination. The Constitution designates the President as Commander-in-Chief of the Armed Forces (Article II, Section 2) and grants him broad powers in the areas of foreign affairs (Article II, Section 2), powers that have expanded considerably in the 20 th century through usage. Given limited U.S. foreign involvements for the first 100 or so years under the Constitution, the small size of the Armed Forces, the relative geographic isolation of the nation, and the absence of any proximate threat, the President, or his executive agents in the Cabinet, provided a sufficient coordinative base.\nHowever, the advent of World War I, which represented a modern, complex military effort involving broad domestic and international coordination, forced new demands on the system that the President alone could not meet. In 1916, the Council of National Defense was established by statute (Army Appropriation Act of 1916). It reflected proposals that went back to 1911 and consisted of the Secretaries of War, Navy, Interior, Agriculture, Commerce and Labor. The statute also allowed the President to appoint an advisory commission of outside specialists to aid the Council. The Council of National Defense was intended as an economic mobilization coordinating group, as reflected by its membership—which excluded the Secretary of State. His inclusion would have given the Council a much wider coordinative scope. Furthermore, the authorizing statute itself limited the role of the Council basically to economic mobilization issues. The Council of National Defense was disbanded in 1921, but it set a precedent for coordinative efforts that would be needed in World War II.\nThe President remained the sole national security coordinator until 1938, when the prewar crisis began to build in intensity, presenting numerous and wide-ranging threats to the inadequately armed United States. The State Department, in reaction to reports of Axis activities in Latin America, proposed that interdepartmental conferences be held with War and Navy Department representatives. In April 1938, Secretary of State Cordell Hull, in a letter to President Franklin Roosevelt, formally proposed the creation of a standing committee made up of the second ranking officers of the three departments, for purposes of liaison and coordination. The President approved this idea, and the Standing Liaison Committee, or Liaison Committee as it was also called, was established, the members being the Under Secretary of State, the Chief of Staff of the Army, and the Chief of Naval Operations. The Standing Liaison Committee was the first significant effort toward interdepartmental liaison and coordination, although its work in the area was limited and uneven. The Liaison Committee largely concentrated its efforts on Latin American problems, and it met irregularly. Although it did foster some worthwhile studies during the crisis following the fall of France, it was soon superseded by other coordinative modes. It was more a forum for exchanging information than a new coordinative and directing body.\nAn informal coordinating mechanism, which complemented the Standing Liaison Committee, evolved during the weekly meetings established by Secretary of War Henry L. Stimson, who took office in June 1940. Stimson arranged for weekly luncheons with his Navy counterpart, Frank Knox, and Cordell Hull, but these meetings also did not fully meet the growing coordinative needs of the wartime government.\nIn May 1940 President Roosevelt used the precedent of the 1916 statute and established the National Defense Advisory Council (NDAC), composed of private citizens with expertise in specific economic sectors. As with the earlier Council of National Defense, NDAC was organized to handle problems of economic mobilization; and by the end of the year it had given way to another organization in a succession of such groups.\nDuring the war, there were a number of interdepartmental committees formed to handle various issues, and, while these did help achieve coordination, they suffered from two problems. First, their very multiplicity was to some degree counter-productive to coordination, and they still represented a piecemeal approach to these issues. Second, and more important, these committees in many cases were not advising the President directly, but were advising his advisers. Although their multiplicity and possible overlapping fit Roosevelt's preferred working methods, they did not represent coordination at the top. Roosevelt ran the war largely through the Joint Chiefs of Staff (JCS), who were then an ad hoc and de facto group, and through key advisers such as Harry Hopkins and James F. Byrnes, and via his own personal link with British Prime Minister Winston Churchill.\nThe weekly meetings arranged by Stimson evolved, however, into a significant coordinative body by 1945, with the formal creation of the State, War, Navy Coordinating Committee (SWNCC). SWNCC had its own secretariat and a number of regional and topical subcommittees; its members were assistant secretaries in each pertinent department. The role of SWNCC members was to aid their superiors \"on politico-military matters and [in] coordinating the views of the three departments on matters in which all have a common interest, particularly those involving foreign policy and relations with foreign nations.\" SWNCC was a significant improvement in civilian-military liaison, and meshed well with the JCS system; it did not, however, concern itself with fundamental questions of national policy during the early months of the Cold War. SWNCC operated through the end of the war and beyond, becoming SANACC (State, Army, Navy, Air Force Coordinating Committee) after the National Security Act of 1947. It was dissolved in 1949, by which time it had been superseded by the NSC.\nThe creation of SWNCC, virtually at the end of the war, and its continued existence after the surrender of Germany and Japan reflected the growing awareness within the federal government that better means of coordination were necessary. The World War II system had largely reflected the preferred working methods of President Roosevelt, who relied on informal consultations with various advisers in addition to the JCS structure. However, the complex demands of global war and the post-war world rendered this system inadequate, and it was generally recognized that a return to the simple and limited prewar system would not be possible if the United States was to take on the responsibilities thrust upon it by the war and its aftermath.", "", "The NSC was not created independently, but rather as one part of a complete restructuring of the entire national security apparatus, civilian and military, including intelligence efforts, as accomplished in the National Security Act of 1947. Thus, it is difficult to isolate the creation of the NSC from the larger reorganization, especially as the NSC was much less controversial than the unification of the military and so attracted less attention.", "As early as 1943, General George C. Marshall, Army Chief of Staff, had proposed that the prospect of a unified military establishment be assessed. Congress first began to consider this idea in 1944, with the Army showing interest while the Navy was opposed. At the request of the Navy these investigations were put off until 1945, although by then it was clear to Secretary of the Navy James Forrestal that President Truman, who had come to the White House upon the death of President Roosevelt in April 1945, favored some sort of reorganization. Forrestal believed that outright opposition would not be a satisfactory Navy stance. He also realized that the State Department had to be included in any new national security apparatus. Therefore, he had Ferdinand Eberstadt, a leading New York attorney and banker who had served in several high-level executive branch positions, investigate the problem.\nWith respect to the formation of the NSC, the most significant of the three questions posed by Forrestal to Eberstadt, was:\nWhat form of postwar organization should be established and maintained to enable the military services and other governmental departments and agencies most effectively to provide for and protect our national security?\nEberstadt's response to this question covered the military establishment, where he favored three separate departments and the continuation of the JCS, as well as the civilian sphere, where he suggested the formation of two new major bodies \"to coordinate all these [civilian and military] elements.\" These two bodies he called the National Security Council (NSC), composed of the President, the Secretaries of State and of the three military departments, the JCS \"in attendance,\" and the chairman of the other new body, the National Security Resources Board (NSRB). Eberstadt also favored the creation of a Central Intelligence Agency (CIA) under the NSC.\nEberstadt's recommendations clearly presaged the eventual national security apparatus, with the exception of a unified Department of Defense. Furthermore, it was a central point in Forrestal's plans for holding the proposed reorganization to Navy desires, bringing in the State Department, as he desired, and hopefully obviating the need for some coalescence of the military services. The NSC was also a useful negotiating point for Forrestal with the Army, as Eberstadt had described one of its functions as being the \"building up [of] public support for clear-cut, consistent, and effective foreign and military policies.\" This would appeal to all the service factions as they thought back on the lean and insecure prewar years.\nWar-Navy negotiations over the shape of the reorganization continued throughout 1946 and into 1947. However, some form of central coordination, for a while called the Council of Common Defense, was not one of the contentious issues. By the end of May 1946, agreement had been reached on this and several other points, and by the end of the year the two sides had agreed on the composition of the new coordinative body.", "The creation of the NSC was one of the least controversial sections of the National Security Act and so drew little attention in comparison with the basic concept of a single military department, around which most of the congressional debate centered.\nThe concept of a regular and permanent organization for the coordination of national security policy was as widely accepted in Congress as in the executive. When the NSC was considered in debate, the major issues were the mechanics of the new organization, its membership, assurances that it would be a civilian organization and would not be dominated by the new Secretary of the National Military Establishment, and whether future positions on the NSC would be subject to approval by the Senate.", "The NSC was created by the National Security Act, which was signed by the President on July 26, 1947. The NSC appears in Section 101 of Title I, Coordination for National Security, and its purpose is stated as follows:\n(a) ... The function of the Council shall be to advise the President with respect to the integration of domestic, foreign, and military policies relating to the national security so as to enable the military services and the other departments and agencies of the Government to cooperate more effectively in matters involving the national security.\n(b) In addition to performing such other functions as the President may direct, for the purpose of more effectively coordinating the policies and functions of the departments and agencies of the Government relating to the national security, it shall, subject to the direction of the President, be the duty of the Council\n(1) to assess and appraise the objectives, commitments, and risks of the United States in relation to our actual and potential military power, in the interest of national security, for the purpose of making recommendations to the President in connection there with; and\n(2) to consider policies on matters of common interest to the departments and agencies of the Government concerned with the national security, and to make recommendations to the President in connection therewith....\n(d) The Council shall, from time to time, make such recommendations, and such other reports to the President as it deems appropriate or as the President may require.\nThe following officers were designated as members of the NSC: the President; the Secretaries of State, Defense, Army, Navy, and Air Force; and the Chairman of the National Security Resources Board. The President could also designate the following officers as members \"from time to time:\" secretaries of other executive departments and the Chairmen of the Munitions Board and the Research and Development Board. Any further expansion required Senate approval. The NSC was provided with a staff headed by a civilian executive secretary, appointed by the President.\nThe National Security Act also established the Central Intelligence Agency under the NSC, but the Director of Central Intelligence (DCI) was not designated as an NSC member. The act also created a National Military Establishment, with three executive departments (Army, Navy, and Air Force) under a Secretary of Defense.\nImplicit in the provisions of the National Security Act was an assumption that the NSC would have a role in ensuring that the U.S. industrial base would be capable of supporting national security strategies. The Chairman of the National Security Resources Board, set up by the same act to deal directly with industrial base and civilian mobilization issues, was provided a seat on the NSC. Over the years, however, these arrangements proved unsatisfactory and questions of defense mobilization and civil defense were transferred to other federal agencies and the membership of the NSC was limited to the President, Vice President, the Secretary of State and the Secretary of Defense. Thus, the need for a coordinative entity that had initially been perceived to center on economic mobilization issues during World War I had evolved to one that engaged the more permanent themes of what had come to be known as national security policy.\nThe creation of the NSC was a definite improvement over past coordinative methods and organization, bringing together as it did the top diplomatic, military, and resource personnel with the President. The addition of the CIA, subordinate to the NSC, also provided the necessary intelligence and analyses for the Council so that it could keep pace with events and trends. The changeable nature of its organization and its designation as an advisory body to the President also meant that the NSC was a malleable organization, to be used as each President saw fit. Thus, its use, internal substructure, and ultimate effect would be directly dependent on the style and wishes of the President.", "", "Early Use . The NSC first met on September 26, 1947. President Truman attended the first session, but did not attend regularly thereafter, thus emphasizing the NSC's advisory role. In his place, the President designated the Secretary of State as chairman, which also was in accord with the President's view of the major role that the State Department should play. Truman viewed the NSC as a forum for studying and appraising problems and making recommendations, but not one for setting policy or serving as a centralized office to coordinate implementation.\nThe NSC met irregularly for the first 10 months. In May 1948, meetings twice a month were scheduled, although some were canceled, and special sessions were convened as needed.\nThe Hoover Commission . The first review of NSC operations came in January 1949 with the report of the Hoover Commission (the Commission on Organization of the Executive Branch of the Government), which found that the NSC was not fully meeting coordination needs, especially in the area of comprehensive statements of current and long-range policies.\nThe Hoover Commission recommended that better working-level liaison between the NSC and JCS be developed, that the Secretary of Defense become an NSC member, replacing the service secretaries, and that various other steps be taken to clarify and tighten roles and liaison.\n1949 Amendments . In January 1949, President Truman directed the Secretary of the Treasury to attend all NSC meetings. In August 1949, amendments to the National Security Act were passed (P.L. 81-216), changing the membership of the NSC to consist of the following officers: the President, Vice President, Secretaries of State and Defense, and Chairman of the National Security Resources Board. This act also designated the JCS as \"the principal military advisers to the President,\" thus opening the way for their attendance, beginning in 1950, even though the Service Secretaries were excluded. In August 1949, by Reorganization Plan No. 4, the NSC also became part of the Executive Office of the President, formalizing a de facto situation.\nSubsequent Usage and Evaluation . The outbreak of the Korean War in June 1950 brought greater reliance on the NSC system. The President ordered weekly meetings and specified that all major national security recommendations be coordinated through the NSC and its staff. Truman began presiding regularly, chairing 62 of the 71 meetings between June 1950 and January 1953. The NSC became to a much larger extent the focus of national security decision making. Still, the NSC's role remained limited. Truman continued to use alternate sources of information and advice. As one scholar has concluded:\nThroughout his administration Truman's use of the NSC process remained entirely consistent with his views of its purpose and value. The president and his secretary of state remained completely responsible for foreign policy. Once policy decisions were made, the NSC was there to advise the president on matters requiring specific diplomatic, military, and intelligence coordination.", "President Dwight Eisenhower, whose experience with a well-ordered staff was extensive, gave new life to the NSC. Under his Administration, the NSC staff was institutionalized and expanded, with clear lines of responsibility and authority, and it came to closely resemble Eberstadt's original conception as the President's principal arm for formulating and coordinating military, international, and internal security affairs. Meetings were held weekly and, in addition to Eisenhower himself and the other statutory members, participants often included the Secretary of the Treasury, the Budget Director, the Chairman of the JCS, and the Director of Central Intelligence.\nOrganizational Changes. In his role as chairman of the NSC, Eisenhower created the position of Special Assistant for National Security Affairs, who became the supervisory officer of the NSC, including the Executive Secretary. The Special Assistant—initially Robert Cutler, a banker who had served under Stimson during World War II—was intended to be the President's agent on the NSC, not an independent policymaker in his own right, and to be a source of advice.\nEisenhower established two important subordinate bodies: the NSC Planning Board, which prepared studies, policy recommendations, and basic drafts for NSC coordination, and the Operations Coordinating Board, which was the coordinating and integrating arm of the NSC for all aspects of the implementation of national security policy.\nBy the end of the Eisenhower Administration, the NSC membership had changed slightly. The National Security Resources Board had been abolished by Reorganization Plan No. 3 in June 1953, and this vacancy was then filled by the Director of the Office of Civil and Defense Mobilization.\nIn 1956, President Eisenhower, partly in response to recommendations of the second Hoover Commission on the Organization of the Executive Branch of Government, also established the Board of Consultants on Foreign Intelligence Activities in the Executive Office. This board was established by Executive Order 10656 and was tasked to provide the President with independent evaluations of the U.S. foreign intelligence effort. The Board of Consultants lapsed at the end of the Eisenhower Administration, but a similar body, the President's Foreign Intelligence Advisory Board (PFIAB), was created by President Kennedy after the Bay of Pigs failure. PFIAB was itself abolished in 1977, but was resurrected during the Reagan Administration in 1981. Members are selected by the President and serve at his discretion.\nEvaluation . The formal structure of the NSC under Eisenhower allowed it to handle an increasing volume of matters. Its work included comprehensive assessments of the country's basic national security strategy, which were designed to serve as the basis for military planning and foreign policymaking. The complexity of NSC procedures under Eisenhower and its lengthy papers led to charges that quantity was achieved at the expense of quality and that the NSC was too large and inflexible in its operations. Critics alleged that it was unable to focus sufficiently on major issue areas. Some observers also held that NSC recommendations were often compromises based on the broadest mutually acceptable grounds from all the agencies involved, leading to a noticeable lack of innovative national security ideas. The Eisenhower NSC did, nonetheless, establish national security policies that were accepted and implemented throughout the government and that laid the basis for sustained competition with the Soviet Union for several decades.\nIt may be that the NSC process became overly bureaucratic towards the end of the Eisenhower Administration, perhaps affected by the President's declining health. Hearings by the Senate Government Operations Committee in 1960-1961, led by Senator Henry Jackson, produced proposals for a substantial reorientation of this \"over-institutionalized\" structure, and its replacement by a smaller, less formal NSC that would offer the President a clear choice of alternatives on a limited number of major problems.\nSome scholars have noted that Eisenhower himself found the lengthy NSC procedures burdensome and argue that many key decisions were made in the Oval Office in the presence of only a few advisers. Nonetheless, Eisenhower saw the NSC process as one which produced a consensus within the Administration which would lead to effective policy implementation. According to this view, the process was largely one of education and clarification. A recent analysis has concluded, that NSC meetings\nbrought Eisenhower's thinking into sharper focus by forcing him to weigh it against a range of alternatives that were presented and defended by individuals whose opinions the president took seriously and whose exposure to requisite information and expertise he assured. These individuals, in turn, were educated about the problems in the same way as Eisenhower.", "President John Kennedy, who did not share Eisenhower's preference for formal staff procedures, accepted many of the recommendations of the Jackson Committee and proceeded to dismantle much of the NSC structure, reducing it to its statutory base. Staff work was carried out mainly by the various departments and agencies, and personal contacts and ad hoc task forces became the main vehicles for policy discussion and formulation. The NSC was now one among many sources of advice.\nKennedy's National Security Adviser, McGeorge Bundy, played an important policy role directly under the President. The nature of this position was no longer that of a \"neutral keeper of the machinery\"; for the first time, the Adviser emerged in an active policymaking role, in part because of the absence of any definite NSC process that might preoccupy him.\nKennedy met regularly with the statutory NSC members and the DCI, but not in formal NSC sessions. Studies and coordination were assigned to specific Cabinet officers or subordinates in a system that placed great emphasis on individual responsibility, initiative and action. The Secretary of State, Dean Rusk, was initially seen as the second most important national security official in the President's plans, and Kennedy indicated that he did not want any other organizations interposed between him and Rusk. However, Kennedy came to be disappointed by the State Department's inability or unwillingness to fill this role as the leading agency in national security policy.\nAt the beginning of the Kennedy Administration, the NSC was reportedly cut from seventy-one to forty-eight and \"in place of weighty policy papers, produced at regular intervals, Bundy's staff would produce crisp and timely National Security Action Memoranda (NSAMs). The new name signified the premium that would be placed on 'action' over 'planning.'\" With an emphasis on current operations and crisis management, special ad hoc bodies came into use. The outstanding example of this was the Executive Committee (ExCom), formed in October 1962 during the Cuban Missile Crisis, which orchestrated the U.S. response to Soviet moves to introduce missiles in Cuba.\nOrganizational Changes. Kennedy added the Director of the Office of Emergency Planning to the NSC, replacing the Director of the Office of Civil and Defense Mobilization. It was planned that the new appointee would fill the role originally envisioned for the National Security Resources Board in coordinating emergency management of resources.\nThe Planning Board and the Operations Control Board were both abolished (by Executive Order 10920) in order to avoid the Eisenhower Administration's distinction between planning and operations. The NSC staff was reduced, and outside policy experts were brought in. Bundy noted that they were all staff officers:\nTheir job is to help the President, not to supersede or supplement any of the high officials who hold line responsibilities in the executive departments and agencies. Their task is that of all staff officers: to extend the range and enlarge the direct effectiveness of the man they serve. Heavy responsibilities for operation, for coordination, and for diplomatic relations can be and are delegated to the Department of State. Full use of all the powers of leadership can be and is expected in other departments and agencies. There remains a crushing burden of responsibility, and of sheer work, on the President himself; there remains also the steady flow of questions, of ideas, of executive energy which a strong President will give off like sparks. If his Cabinet officers are to be free to do their own work, the President's work must be done—to the extent that he cannot do its himself—by staff officers under his direct oversight. But this is, I repeat, something entirely different from the interposition of such a staff between the President and his Cabinet officers.\nEvaluation . Some critics attacked the informality of the system under Kennedy, arguing that it lacked form and direction, as well as coordination and control, and that it emphasized current developments at the expense of planning. As noted, Kennedy himself was disappointed by the State Department, on which he had hoped to rely. In retrospect, Kennedy's system was designed to serve his approach to the presidency and depended upon the President's active interest and continuous involvement. Some critics, both at the time and subsequently, have suggested that the informal methods that the Kennedy Administration adopted contributed to the Bay of Pigs debacle and the confusion that surrounded U.S. policy in the coup against President Diem of South Vietnam in 1963.", "President Lyndon Johnson's sudden accession to power, the need for a show of continuity, and pressures from the upcoming presidential election all forced Johnson, at least until 1965, to rely heavily on Kennedy's system and personnel, especially as Johnson was less familiar with national security than domestic affairs.\nOrganizational Changes . Johnson, like Truman, sought out advice from a number of sources other than the NSC and its member departments, although he relied heavily on the Secretaries of State and Defense, Dean Rusk and Robert McNamara.\nThe institutional system that evolved under Johnson depended heavily on the ability of the State Department to handle the planning and coordination process. This system came about from a study headed by General Maxwell Taylor in 1966 that led to National Security Action Memorandum (NSAM) 341 which concluded that it was necessary to enhance the State Department's role in the policy process and to improve \"country team expertise\" in Washington, which was felt to be far below that in the various embassies. NSAM 341 led to a new system of interagency committees. The most important of these was the Senior Interdepartmental Group (SIG), whose members were: the Under Secretary of State, Deputy Secretary of Defense, Administrator of the Agency for International Development, DCI, JCS Chairman, Director of the U.S. Information Agency, and the National Security Adviser. In support of the SIG were a number of Interdepartmental Regional Groups (IRGs), each headed by the appropriate Assistant Secretary of State.\nWithin the NSC itself, structure and membership remained what they had been under Kennedy (with the Office of Emergency Planning changing title to the Office of Emergency Preparedness in 1968), although the title Special Assistant to the President for National Security Affairs was shortened to Special Assistant when Walt W. Rostow replaced Bundy in 1966. This reflected the frequent diversion of the occupant of this position away from NSC affairs to more general concerns.\nEvaluation . Johnson's NSC system barely existed as such. The role of the NSC staff was more restricted, and budget and personnel both declined. Key decisions, those especially regarding the war in Vietnam, were made during Tuesday lunches attended by the President, the Secretaries of State and Defense, and a few other invited officials.\nJohnson's informal system was not a wholly successful replacement for the highly structured system developed in the Eisenhower Administration. The SIG/IRG system fulfilled neither old functions nor the objectives set forth in NSAM 341. Although this new structure was dominated by the State Department, there was little enthusiasm for the system as a whole on the part of the department's leadership. The State Department did not provide decisive leadership and settled for a system of consensus opinions. Vagueness as to authority in the SIG/IRG system reduced its effect on the bureaucracies. Moreover, there was an insufficient allocation of resources for staff support for the new organization. By 1969, the NSC existed largely in name. Johnson conferred constantly with a wide number of advisers within and outside government; while he respected institutional responsibilities, his own decision making was an intensely personal process.", "Experience in the Eisenhower Administration clearly had a formative effect on President Richard Nixon's approach to national security organization. Wanting to switch White House priorities from current operations and crisis management to long-range planning, Nixon revived the NSC. Nixon's NSC staff structure resembled Eisenhower's, with an emphasis on examining policy choices and alternatives, aiming for a number of clear options reaching the highest level, where they would be treated systematically and then effectively implemented. Nixon made it clear that he wanted distinct options presented to him from which he could choose, rather than consensus opinions requiring only acceptance or rejection. Nixon used an NSC framework similar to that set in place by Eisenhower but intended, as much as Kennedy, to give the NSC staff a powerful policy role.\nOrganizational Changes . While adopting the basic form of the Eisenhower NSC, Nixon streamlined its procedures. The position of Assistant for National Security Affairs was revived, and Henry Kissinger, a Harvard professor and occasional government adviser, was named to fill it. NSC meetings were limited to the statutory members, with Kissinger and the JCS Chairman also sitting in and the DCI attending for intelligence matters. In January 1973, the Office of Emergency Preparedness was abolished along with the NSC seat that originally had belonged to the Chairman of the National Security Resources Board.\nSix interdepartmental groups, similar to Johnson's IRGs, formed the NSC's support network, preparing basic studies and developing policy options. However, the influence of the State Department was reduced, and Kissinger's influence soon predominated. Four major new bodies were created:\nWashington Special Action Group (WASAG): headed by Kissinger and designed to handle contingency planning and crises. NSC Intelligence Committee: chaired by Kissinger and responsible for providing guidance for national intelligence needs and continuing evaluations of intelligence products. Defense Program Review Committee: chaired by Kissinger and designed to achieve greater integration of defense and domestic considerations in the allocation of natural resources. This committee was intended to allow the President, through the NSC, to gain greater control over the defense budget and its implications and policy requirements. As a result of opposition by Defense Secretary Melvin Laird, its role was, however, significantly circumscribed. Senior Policy Review Group: chaired by Kissinger, this group directed and reviewed policy studies and also served as a top level deliberative body.\nThis system had two principal objectives: the retention of control at the top, and the development of clear alternative choices for decisionmakers.\nEvaluation . Most of the criticism of the Nixon NSC centered on the role played by Kissinger. His position in a number of the key committees gave him control over virtually the entire NSC apparatus, leading to charges that the system, for all its efficiency, now suffered from over centralization, and later from domination by one man.\nDuring Nixon's first term, Kissinger competed with the State Department for control of foreign policy, and soon overshadowed Secretary of State William Rogers. Critics felt that Kissinger stifled dissent within the NSC and the rest of the national security apparatus. Kissinger's venture into \"shuttle diplomacy\" and the unique circumstances of the Watergate scandal further emphasized his key role. Kissinger's accession to Rogers' position in September 1973, while retaining his National Security Council post, brought renewed criticism of his role. The direct involvement of the NSC Adviser in diplomatic negotiations set a precedent that some observers have criticized as undercutting the established responsibilities of the State Department and as an attempt to orchestrate national security policy beyond the reach of congressional oversight.\nKissinger's predominance derived from his unique intellectual abilities, skill at bureaucratic maneuvering, and the support of a President determined to act boldly in international affairs without being restrained by bureaucratic or congressional inhibitions. It was achieved at a time of profound political differences over foreign policy in which Administration and congressional goals were, on occasion, diametrically opposed. However, under President Nixon, the NSC was restored to a central role in the policy process, acting as the major vehicle and conduit for the formation of national security policy.", "President Gerald Ford, who inherited his predecessor's NSC, took no major steps to change the system per se, although Kissinger was replaced as National Security Adviser by Air Force Lieutenant General Brent Scowcroft in November 1975. The national security policy process continued to be dominated by Kissinger, who retained his position as Secretary of State, an indication of the preeminence he had achieved, as well as a reflection of Ford's limited experience in the conduct of foreign policy prior to his sudden accession.\nIn June 1975, the Commission on the Organization of the Government for the Conduct of Foreign Policy, also known as the Murphy Commission, issued a report on ways to more effectively formulate and implement foreign policy. Its recommendations dealt in part with the Executive Office of the President and the NSC structure.\nImplicitly criticizing the expansive role of the NSC staff under Kissinger, the Commission recommended that only the President should have line responsibility in the White House; that staff officials should not themselves issue directives to departmental officials; that, in the future, the National Security Adviser have no other official responsibilities; that the Secretary of the Treasury be made a statutory member of the NSC and that the NSC's scope be expanded to include major international economic policy issues; and that senior officials concerned with domestic policy be invited to NSC meetings when issues with domestic implications were discussed.\nThe Commission also considered general alternative structures and pointed out their basic advantages and disadvantages. It also noted that,\nPolicymaking is not a branch of mechanics; however wisely designed or carefully utilized, no machinery is adequate to assure its results. The selective use of various mechanisms and forums in ways which fit the particular issues, positions, and personalities involved is as much a part of the President's responsibility as is the necessity, finally, to decide the substantive issues.\nThere were no immediate steps taken to implement the Report's recommendations.\nOrganizational Changes . In February 1976, President Ford issued Executive Order 11905 reorganizing the intelligence community, in response to ongoing investigations in that area. This order, among other things, reaffirmed the NSC's overall policy control over the foreign intelligence community. Some changes were made in the NSC sub-structure, including the abolition of the NSC Intelligence Committee. The so-called 40 Committee of the NSC, which was responsible for covert operations and certain sensitive foreign intelligence operations, was replaced by the Operations Advisory Group. This Executive Order also created the Intelligence Oversight Board in the Executive Office (subsequently disbanded in 1993). It was composed of three civilians and was tasked with reviewing the propriety and legality of the intelligence agencies' operations. In December 1975, Ford vetoed a bill that would have made the Secretary of the Treasury a statutory member of the NSC, saying that the Treasury Secretary is invited to participate in NSC affairs having significant economic and monetary implications, but that there is no need to involve him in all NSC activities.\nEvaluation . These changes did not detract from the central role that the NSC had achieved under President Nixon. Kissinger's loss of his dual position did not seem to lessen his influence over the policy process, leading critics to charge that this change was largely cosmetic. The new National Security Adviser, Brent Scowcroft, had previously served as Kissinger's deputy on the NSC staff, and was unlikely to challenge Kissinger's pre-eminence. The Ford NSC reflected the close relationship between the President and the Secretary of State, a relationship that itself became a source of controversy both in the Republican primaries of 1976 as well as the ensuing general election. Critics continued to maintain that the Ford Administration decision making was secretive, impervious to congressional input, and out of touch with public opinion.", "Under President Jimmy Carter, steps were taken to end the dominant role of the NSC staff and make it a more coequal and cooperating partner with the Departments of State and Defense. The NSC underwent a major reorganization in the new Administration.\nOrganizational Changes . Upon taking office in January 1977, President Carter issued a directive (PD-2) reorganizing the NSC staff. The avowed purpose of the reorganization was \"to place more responsibility in the departments and agencies while insuring that the NSC, with my Assistant for National Security Affairs, continues to integrate and facilitate foreign and defense policy decisions.\"\nThe number of NSC staff committees was reduced from seven to two, the Policy Review Committee (PRC) and the Special Coordination Committee (SCC). The functions of these two committees were as follows:\nPolicy Review Committee: the PRC had responsibility for subjects which \"fall primarily within a given department but where the subject also has important implications for other departments and agencies.\" Examples were \"foreign policy issues that contain significant military or other interagency aspects; defense policy issues having international implications and the coordination of the annual Defense budget with foreign policy objectives; the preparation of a consolidated national intelligence budget and resource allocation for the Intelligence Community...; and those international economic issues pertinent to the U.S. foreign policy and security.\" Executive Order 12036 of January 24, 1978, added responsibility for the establishment of national foreign intelligence requirements and priorities, and periodic reviews and evaluations of national foreign intelligence products. The Vice President, the Secretaries of State and Defense, and the Assistant for National Security Affairs were members of the PRC; the DCI and the Chairman of the JCS also attended. The Secretary of the Treasury, the Chairman of the Council of Economic Advisers, and other officials attended when pertinent topics were being considered. Appropriate Cabinet officers chaired the PRC in accordance with matters being considered; the DCI was chairman when the PRC considered intelligence matters as specified in E.O. 12036. NSC Interdepartmental Groups, which dealt with specific issues at the direction of the President, were under the PRC. Special Coordination Committee: the SCC dealt with \"specific, cross-cutting issues requiring coordination in the development of options and the implementation of Presidential decisions.\" These included \"oversight of sensitive intelligence activities ... arms control evaluation; ... and crisis management.\" E.O. 12036 gave the SCC responsibility for sensitive foreign intelligence collection operations and counterintelligence. The SCC thus replaced WASAG and the Operations Advisory Group. Unlike the PRC, the SCC was chaired by the Assistant for National Security Affairs; other members were the Vice President, the Secretaries of State and Defense, and the DCI—or their deputies—and other officials attended when appropriate. When intelligence \"special activities\" were being considered, the members had to attend, as had the Attorney General, the Chairman of the JCS, and the Director of the Office of Management and Budget (OMB); for counterintelligence activities, the Director of the FBI attended. The initial emphasis of the NSC's role as a policy coordinator and \"think tank\" represented a clear reversal of the trend that had developed under Presidents Nixon and Ford. The staff of the NSC was reduced under the Carter Administration, and National Security Adviser Zbigniew Brzezinski established a number of regional and topical offices on the NSC staff that aimed at a more \"collegial\" approach to staff procedures. Although the PRC had a wider charter than the SCC, as a result of the growing importance of crisis management functions and the increasing influence of the National Security Adviser, initiative passed to the SCC and there were fewer PRC meetings.\nEvaluation . A rumored rivalry between Brzezinski and Secretary of State Cyrus Vance was not publicly evident during the first year of the Carter Administration, but reports of differences between the two men later increased dramatically as senior Administration officials advised different responses to such questions as Soviet and Cuban activities in Africa and the Iranian hostage question. Towards the end of the Administration, differences between Vance and Brzezinski became pronounced and were widely perceived as contributing to weak and vacillating policies. Carter's Director of Central Intelligence Stansfield Turner later wrote:\nNational Security Advisers and Secretaries of State and Defense had clashed before, notably under President Nixon when Henry Kissinger was the Adviser. But because Nixon tended to follow Kissinger's advice more often than not, there was no stalemate, and foreign policy moved ahead in innovative ways. However, Jimmy Carter vacillated between Brzezinski and Vance, and they often canceled each other out.\nVance, who had strongly opposed the ill-fated effort to rescue the U.S. hostages in Iran, finally resigned and was succeeded by Senator Edmund Muskie in April 1980. Brzezinski's outspokenness and his public role in policymaking became an issue, and led to calls for Senate confirmation of NSC advisers and closer congressional oversight of the NSC staff. There were also reports of infighting between Carter loyalists on the NSC staff and those who had worked for Vice President Walter Mondale, who had been given a major policy role.", "Campaigning for the presidency in 1980, Ronald Reagan criticized the divisions of the Carter Administration and promised to restore Cabinet leadership (as, in the 1976 campaign, he had criticized Henry Kissinger's predominant influence in the Ford Administration). Substituting Cabinet leadership for an active NSC proved, however, to be a significant challenge.\nOrganizational Changes. After extensive delays and bureaucratic infighting, President Reagan signed a Presidential Directive (NSDD-2), which enhanced the role of the State Department in national security policymaking and downgraded that of the National Security Adviser. The various NSC sub-committees were to be chaired by State, Defense, and CIA officials, not NSC staff. The Reagan NSC included three Senior Interagency Groups (SIGs)—one for foreign policy, chaired by the Deputy Secretary of State; one for defense, chaired by the Deputy Secretary of Defense; and one for intelligence, chaired by the Director of Central Intelligence. There were also regional and functional interagency groups, chaired by representatives of various Cabinet departments. Crisis management formally became the direct responsibility of the Vice President.\nThis structure, however, had major limitations. Observers and participants portray an absence of orderly decision making and uncertain lines of responsibility. As the Special Review Board (known as the Tower Board) appointed by the President to assess the proper role of the NSC system in the wake of the Iran-Contra revelations, pointedly noted:\nA President must at the outset provide guidelines to the members of the National Security Council, his National Security Adviser, and the National Security Council staff. These guidelines, to be effective, must include how they will relate to one another, what procedures will be followed, what the President expects of them. If his advisors are not performing as he likes, only the President can intervene.\nThe Reagan Administration had a total of six National Security Advisers. Their history is poignant. The first, Richard Allen, did not have direct access to the President, but reported to him through Presidential Counselor Edwin Meese. Allen's tenure was brief; after accusations of influence peddling, he was replaced in January 1982 by Judge William Clark, a longtime Reagan associate who had served since the beginning of the Administration as Deputy Secretary of State. Clark, in turn, resigned in October 1983 to become Secretary of the Interior and his deputy, Robert McFarlane, became National Security Adviser. McFarlane was replaced in January 1986 by his deputy, Vice Admiral John Poindexter, and subsequently pleaded guilty to withholding information from Congress. Poindexter himself was relieved in the context of the Iran-Contra scandal in November 1986, and eventually went on trial for obstructing justice. An effort was made to restore NSC effectiveness under former Ambassador Frank Carlucci, who succeeded Poindexter in December 1986. When Carlucci was appointed Secretary of Defense, he was replaced by Army General Colin Powell in November 1987.\nEvaluation. Until the arrival of Carlucci, the Reagan NSC structure lacked a strong, politically attuned National Security Adviser that had characterized Administrations since 1961. It also lacked the administrative structure that existed under Eisenhower, Nixon, Ford, and Carter. The absence of either influential NSC Advisers or effective administrative machinery has been seen by many critics as a major factor contributing to the Iran-Contra misadventures. Allowing NSC committees to be chaired by Cabinet officials tended to reduce the possibility that all sides of a given issue would be laid before the full NSC or the President. The Tower Board noted:\nMost presidents have set up interagency committees at both a staff and policy level to surface issues, develop options, and clarify choices. There has typically been a struggle for the chairmanship of these groups between the National Security Adviser and the NSC staff on the one hand, and the cabinet secretaries and department officials on the other.\nOur review of the operation of the present system and that of other administrations where committee chairmen came from the Departments has led us to the conclusion that the system generally operates better when the committees are chaired by the individual with the greatest stake in making the NSC system work.\nWe recommend that the National Security Adviser chair the senior-level committees of the NSC system.\nThe Reagan Administration, in its efforts to avoid the dominant influence wielded by previous NSC Advisers, fell victim to perpetual bureaucratic intrigues. The efforts of politically weak NSC Advisers, especially McFarlane and Poindexter, to undertake White House initiatives covertly over the strong opposition of senior Cabinet officials and congressional leaders called into question the basic competence of the Administration.\nAnother aspect of the Reagan NSC that came under heavy criticism was the involvement of NSC staff in covert actions. Although NSC staff efforts to manage certain crises, such as the capture of the Achille Lauro hijackers, were successful, the participation of NSC personnel, especially Lieutenant Colonel Oliver North, in operations run apart from the traditional intelligence apparatus, including efforts to gain the release of American hostages and to supply Nicaraguan insurgents, has been widely censured. Such efforts have been criticized as undercutting the agencies with responsibilities for such operations and which are accountable to congressional oversight committees; secondly, failing to take full advantage of the professional expertise available to the Intelligence Community, and potentially involving the country in misguided ventures. The Iran-Contra Committee recommended that \"the members and staff of the NSC not engage in covert actions.\"\nReagan's final two NSC Advisers, Carlucci and Powell, brought a period of greater stability to NSC operations and both eschewed participation in covert actions. After Poindexter's departure, Carlucci created a Senior Review Group that he himself chaired and that was composed of statutory NSC members (besides the President and Vice President). He also established a Policy Review Group that was chaired by his deputy and composed of second-ranking officials of NSC agencies.\nPresident Reagan's own role in the details of national security policymaking remains unclear. His policies on U.S.-Soviet relations, support for an aggressive struggle against international communism, and the need for strong military forces, including strategic defenses were well-known; such positions provided the overall goals for Administration officials. It is generally acknowledged, however, that unlike some of his predecessors, President Reagan did not himself engage in detailed monitoring of policy implementation. Some maintain that his NSC structure and the absence of strong NSC Advisers led directly to bureaucratic gridlock and ill-advised involvement of the NSC staff in covert actions. Others have concluded that the experience of the Reagan Administration demonstrates that a strong and efficient National Security Adviser and staff has become essential to national security policymaking, especially if the President himself does not provide detailed direction. The absence of such an Adviser, it is argued, will undermine the development and implementation of effective national security policies. Some subsequent historians, however, give Reagan higher marks for overall national security policy even if his NSC staff was often in flux.", "The Bush Administration saw the return of Brent Scowcroft as National Security Adviser. His tenure was marked by the absence of public confrontations with Cabinet officers and a close working relationship with the President. National Security Directive 1 (NSD-1) established three NSC sub-groups. The NSC Principals Committee, was composed of the Secretaries of State and Defense, the DCI, the Chairman of the JCS, the Chief of Staff to the President, and the National Security Adviser, who was the chairman. The NSC Deputies Committee, chaired by the Deputy National Security Adviser, was composed of second-ranking officials. There were also a number of NSC Policy Coordinating Committees, chaired by senior officials of the departments most directly concerned with NSC staff members serving as executive secretaries.\nThe Bush NSC structure most closely resembled that of the Nixon and Ford Administrations in providing for a National Security Adviser chairing most of the key committees. The key differences lay in the personalities involved and the fact that political divisions over foreign policy, while important, lacked some of the emotional heat caused by controversies over Vietnam and Nicaragua. Secretary of State James Baker was a powerful figure in the Administration and a longtime political associate of the President; similarly, Secretary of Defense Dick Cheney himself had White House experience as chief of staff in the Ford Administration and served in a leadership post in the House of Representatives. On occasion, however, Bush did formulate policy within a narrow circle of White House aides.\nEvaluation. Whether because of the personalities of NSC principals, the structure of NSC committees or the determination among political opponents to concentrate on the domestic economy, the Bush NSC did not come in for the heavy criticisms that were levied against most of its predecessors. Most observers would probably judge that the Bush Administration created a reasonably effective policymaking machinery and avoided the mistakes of some of its predecessors. Arguably, a standard NSC organization had been created. The Administration successfully addressed most issues that resulted from the breakup of the Soviet Union and the unification of Germany along with the conduct of Desert Storm.", "President Clinton came into office with a determination to focus on domestic issues. His Administration sought to emphasize connections between international concerns and the domestic economy in such areas as trade, banking, and environmental standards. Anthony Lake, who had resigned in protest from the NSC Staff in the Nixon Administration and later served in the State Department in the Carter Administration, was appointed National Security Adviser, and continued in office until he resigned in March 1997. Lake's deputy, Samuel R. Berger, succeeded him, remaining until the end of the Clinton Administration.\nWith the end of the Cold War, it was widely acknowledged that there was a need for closer integration of national security policy and international economic policy. A major Clinton Administration initiative was the establishment of a National Economic Council (NEC) to coordinate international economic policy which, many observers believed, had usually received short shrift from NSC staffs focused narrowly on diplomatic and security issues. The NEC, initially headed by Robert Rubin, who would subsequently become Treasury Secretary in 1995, was charged with coordinating closely with the NSC. To facilitate coordination some NEC staff were \"double-hatted\" as NSC officials. The close relationship has been credited with enhancing policy coordination at senior White House levels, although, according to some observers, the original promise was not realized as many aspects of international economic and trade policies became parts of major political disputes such as the North American Free Trade Agreement and most-favored-nation status for China.\nSome observers would have preferred to include a stronger international economic component within the NSC itself, but others have raised strong objections to such an approach on the grounds that national security policymaking, in significant measure the province of diplomats and military officers, is not as closely related to domestic political concerns as international economic policy. Proponents of the latter view argue that economic issues inevitably involve concerns of various domestic groups and the NSC is ill-suited to integrate them into its policymaking processes.\nPresidential Decision Directive (PDD) 2, Organization of the National Security Council, issued on January 20, 1993, expanded the NSC to include, in addition to statutory members and advisers, the Secretary of the Treasury, the U.S. Representative to the United Nations, the Assistant to the President for Economic Policy, and the Chief of Staff to the President. The Attorney General attended relevant meetings including those that discuss covert actions. The National Security Adviser determined the agenda of NSC meetings and ensured the preparation of necessary papers.\nThe Clinton NSC continued the practice of designating the National Security Adviser as chairman of the Principals Committee of Cabinet-level officers. At a lower level, a Deputies Committee was chaired by the Deputy Assistant to the President for National Security Affairs and included representatives of the key Cabinet departments (as well as the Assistant to the Vice President for National Security Affairs). The Deputies Committee was also responsible for day-to-day crisis management.\nIn addition, provision was made for a system of Interagency Working Groups, (IWG) some permanent, some ad hoc , to be established by the direction of the Deputies Committee and chaired by representatives of the relevant departments, the NEC or the NSC staff. The IWGs convened on a regular basis to review and coordinate the implementation of presidential decisions in their policy areas.\nEvaluation. In general, the Clinton NSC did not see the internecine bureaucratic warfare that had surfaced in earlier administrations. PDD 2 provided for a strong NSC staff. Lake, in his writings on national security policymaking prior to becoming National Security Adviser, reflected a keen appreciation of the disadvantages of bureaucratic infighting. He subsequently recalled that when he came into office, \"My model for a national security adviser was that of the behind-the-scenes consensus builder who helped present the communal views of senior advisers to the President.\" After some months, nonetheless, Lake\ndecided to change my approach. I would stay behind the scenes.... And I would do my best always to try to achieve consensus and to make sure that my colleagues' views always had a fair hearing with the President. But I would be less hesitant in voicing my own views when they differed from those of my colleagues, even if it prevented consensus or put me more at odds with them–whether on NATO enlargement, Bosnia, Haiti, or other issues.\nIn 1999, the Clinton NSC staff played an important and influential role in shaping policy regarding Kosovo. Carefully attuned to shifts in U.S. public opinion, Berger, who succeeded Lake as National Security Adviser in March 1997, reportedly focused on the political dimension of policymaking and sought to avoid options that might lead to paralyzing debate in this country or other NATO states. He is reported to have helped the Administration steer a middle course between those who recommended a ground campaign against Serbia and those more ready to compromise with the Yugoslav leadership and, as a result, the Administration maintained a strong sense of unity throughout the Kosovo campaign. One press account suggested that \"What may be Berger's distinctive accomplishment is to have put himself so preeminently at the center of decision-making while minimizing the historic antagonisms between national security advisers and secretaries of state and defense.\"", "In February 2001, President George W. Bush issued National Security Presidential Directive-1, Organization of the National Security Council System.\" The NSPD indicated that the NSC system was to advise and assist the President and \"coordinate executive departments and agencies in the effective development and implementation\" of national security policies. Among the statutory and other officials to be invited to attend NSC meetings, the Attorney General was to be asked to attend meeting pertaining to his responsibilities, both matters within the Justice Department's jurisdiction and those matters arising under the Attorney General's responsibilities in accordance with 28 U.S.C. 511 to give advice and opinion on questions of law. The National Security Adviser was charged with determining the agenda, ensuring necessary papers are prepared and recording NSC actions and presidential decisions.\nAs had been the custom, the Principals Committee of the NSC consisted of relevant department heads and relevant advisory officials, and was chaired by the National Security Adviser. When economic issues were on the agenda the National Security Adviser and the Assistant to the President for Economic Policy were to work in concert. The NSC Deputies Committees was composed of deputy department heads, advisory officials and was chaired by the Deputy National Security Adviser. Lower-level coordination was effected by Policy Coordinating Committees, which were chaired by appointees of the Secretary of State, another Cabinet-level official, or the National Security Adviser.\nSubsequent to 9/11, the Intelligence Reform and Terrorism Prevention Act ( P.L. 108 - 458 ) abolished the position of Director of Central Intelligence and established a new position of Director of National Intelligence (DNI) with enhanced authorities over the entire Intelligence Community. The DNI replaced the DCI in NSC-level deliberations.\nSeveral accounts have described the key role of the NSC in undertaking a review of U.S. options in Iraq in late 2006 that resulted in the changes in tactics and force levels that have come to be known as the Surge. Although senior officials in DOD and the State Department were known to be skeptical of increasing troop levels, NSC staffers are reported to have argued that increased numbers of U.S. forces could provide the security to the Iraqi population that would encourage political stabilization. According to these reports, in the end President Bush adopted this approach.\nEvaluation. Although some observers have argued that Condoleezza Rice, as National Security Adviser in President Bush's first term, allowed the Defense Department to dominate policymaking, especially in regard to Iraq, most acknowledged that she had a good working relationship with the President and was an effective public spokesman for the Administration. Hadley made fewer public appearances but emphasized the importance of the NSC staff monitoring the implementation of NSC decisions. As noted above, he is also credited with organizing a review of Iraq policy that resulted in major changes.", "At the beginning of his Administration, President Obama designated retired Marine General James L. Jones to serve as National Security Adviser. Jones had previously served as Marine Corps Commandant and as NATO's Supreme Allied Commander. On February 13, 2009, the President signed Presidential Policy Directive-1, Organization of the National Security Council System. The directive lists those who will participate in NSC deliberations, including the Attorney General, the Secretary of Homeland Security, the U.S. Representative to the U.N., and the Counsel to the President. It also makes reference to officials who will be specifically invited to sessions dealing with international economic affairs, homeland security, counterterrorism, and science and technology issues. It describes the membership and duties of the Principals and Deputies Committees, which are to be chaired by the National Security Adviser and the Deputy National Security Adviser, respectively. The Principals Committee will be the \"senior interagency forum for consideration of policy issues affecting national security\" while the Deputies Committee will \"review and monitor the work of the NSC interagency process\" and \"shall be responsible for day-to-day crisis management.\" The use of the term \"monitor\" may indicate a determination to enhance the NSC's ability to oversee implementation of presidential decisions on national security issues. Further management of the development and implementation of national security policies will be overseen by interagency policy committees that can be established to address specific issues.\nIn May 2009 the Administration announced the integration or the staffs of the National Security Council and the Homeland Security Council into a single National Security Staff (NSS), with the goal of ending \"the artificial divide between White House staff who have been dealing with national security and homeland security issues.\" New directorates and positions were established to deal with cybersecurity, terrorism involving weapons of mass destruction, border security, information sharing and resilience policy, including preparedness and response. The position of Assistant to the President for Homeland Security, currently filled by John Brennan, will be retained \"with direct and immediate access\" to the President, but the incumbent would organizationally report to the National Security Advisor.\"\nGeneral Jones' tenure was marked by his efforts to manage collaboration among major agencies in pursuit of Administration goals. Some media commentators have suggested that he was less focused on crisis management. In October 2010, General Jones resigned as National Security Adviser and was replaced by his deputy, Tom Donilon, who had earlier served in the State Department during the Clinton Administration.\nEvaluation. In the initial months of the Obama Administration, several steps were taken to modify and enhance the role of the National Security Council. The integration of NSC and Homeland Security Council staffs may work to overcome the intelligence and law enforcement divide that many observers believe existed prior to 9/11. It may also facilitate closer cooperation of Federal agencies and state, local, and tribal entities in dealing with homeland security issues. These relationships are, however, complex and derive from separate statutory missions; observers suggest that establishing new organizational entities can affect, but not determine the ability of different agencies to share information and cooperate on operational planning and programs. The relationships among the relevant senior officials and the role of the President will remain crucial. The Obama Administration has not had to contend with major public disputes between the NSC and the State and Defense Departments, but there have been some complaints that Mr. Brennan has exercised an influence on intelligence activities that more properly belongs to the Director of National Intelligence.", "Largely because of the major influence in policymaking exerted by Kissinger and Brzezinski, the position of National Security Adviser has emerged as a central one. Brzezinski was even accorded Cabinet status—the only National Security Adviser to be thus designated. Some observers over the years have argued that the position should be subject to Senate confirmation and that the National Security Adviser should be available to testify before congressional committees as are officials from other government departments and agencies. Others argue that a President is entitled to confidential advice from his immediate staff. They further suggest that making the position subject to confirmation would create confusion in the eyes of foreign observers as to which U.S. officials speak authoritatively on national security policy. This latter argument is arguably undercut, however, by the practice of some recent National Security Advisers of appearing on television news programs.\nNational Security Advisers have come from various professions; not all have had extensive experience in foreign and defense policy. The report of the Committees Investigating the Iran-Contra Affair recommended that the National Security Adviser not be a military officer on active duty, although no rationale was given for this recommendation.\nMost NSC staff members over the years have been career military officers, foreign service officers, or civil servants with backgrounds in foreign policy and defense issues. A considerable number have been detailed to the NSC staff from various federal agencies, which continue to pay their salaries. Although occasionally criticized as allowing the expansion of the White House staff beyond congressional authorization; nonetheless, the practice has continued with annual reports of the number of personnel involved being made to Appropriations Committees.\nBeginning with the Kennedy Administration, a concerted effort was made to bring outside experts into the NSC staff in order to inject fresh perspectives and new ideas into the policymaking process. This effort has been continued to varying extents by successive Administrations. Henry Kissinger made a particular effort to hire academic experts, although some would eventually resign and become bitter critics. The Reagan NSC was occasionally criticized for filling NSC staff positions with political activists. Most of the NSC staff positions in the George H. W. Bush Administration were filled with government officials. Anthony Lake, President Clinton's first National Security Adviser, argues that the NSC staff\nshould be made up of as many career officials as possible, with as much carryover between administrations as can be managed. Its experts should be good (but not necessarily gray) bureaucrats who know how to get things done and how to fight for their views, and who are serving the national interest more than the political interests of their President.\nHe cautioned that:\na political appointee whose main credential is work on national security issues in political campaigns will have learned to think about national security issues in a partisan context. The effect of his or her advice is likely to be to lengthen the period of time during which a President, at the outset of a term, tries to make policy on the basis of campaign rhetoric rather than international reality.", "The very composition of the NSC, its statutory members, and those who attend meetings on occasion serve to identify those agencies and departments with which the NSC has a regular working relationship. These are the Departments of State and Defense (both the civilian and military staffs), the CIA, the Treasury Department, the Council of Economic Advisers, and a number of other departments as needed. The Director of National Intelligence (DNI), who is under the NSC, is responsible for coordinating the nation's foreign intelligence effort. His regular contacts include the CIA, as well as the Defense Intelligence Agency (DIA), the National Security Agency (NSA), the State Department's Bureau of Intelligence and Research (INR), and other elements of the intelligence community. However, these groups are not represented individually in the current NSC structure.\nAs part of the Executive Office of the President, the NSC does not have the same regular relationship with Congress and its committees that the member departments and agencies have. Most briefings on intelligence matters are undertaken by the CIA and DIA or by the DNI; information on diplomatic and military matters comes primarily from the Departments of State and Defense. As noted above, the National Security Adviser is not subject to confirmation by the Senate.\nOver the years there has been a considerable number of congressional hearings and reports relating to the NSC. However, many have had to do with topics peculiar to a given period: wiretaps against NSC staff members allegedly ordered by Dr. Kissinger, the unauthorized transfer of NSC documents to officials in the Joint Chiefs of Staff, and information on Al Qaeda prior to 9/11. Annual hearings are held concerning the NSC budget, and there have been occasional hearings concerning NSC organization and procedures. Very few of these hearings and reports have served as briefings for Congress on current issues which the NSC might have been considering. NSC appropriations are handled by the Subcommittees on Financial Services and General Government of the House and Senate Appropriations Committees.\nAs has been noted, Congress's role in NSC matters and its relationship with the NSC are limited. The Senate does not approve the appointment of the National Security Adviser, although it does confirm statutory NSC members. Congress does have authority over the designation of those positions that are to have statutory NSC membership, as well as budgetary authority over the NSC. In 2007, as part of the Energy Independence and Security Act of 2007 ( P.L. 110 - 140 , §932) Congress added the Secretary of Energy to the NSC. However, Congress has little direct say in matters of NSC organization, procedure, role, or influence, although a number of hearings on these topics have been held.\nThe NSC is not a primary and regular source of national security information for Congress. National security information is for the most part provided by those departments and agencies that are represented on the NSC. The NSC, as a corporate entity, rarely testifies before or briefs Congress on substantive questions, although in some Administrations informal briefings have been provided.\nThe NSC is an organ devoted to the workings of the executive branch in the broad area of national security. Its role is basically that of policy analysis and coordination and, as such, it has been subject to limited oversight and legislative control by Congress. Both in its staff organization and functioning, the NSC is extremely responsive to the preferences and working methods of each President and Administration. It would be difficult to design a uniform NSC structure that would meet the requirements of chief executives who represent a wide range of backgrounds, work styles, and policy agendas although some observers believe that the general pattern established in the final years of the Reagan Administration and followed by successive Presidents is likely to endure. There is unlikely to be a desire to drastically reduce the role of the NSC staff and most observers suggest that elevating the policymaking role of the National Security Adviser at the expense of the Secretary of State has left Presidents subject to strong criticism.", "The NSC has traditionally focused on foreign and defense policy issues. In the aftermath of the end of the Cold War, many observers argue that the major national security concerns of the United States may no longer be centered on traditional diplomatic and military issues. They suggest, further, that international economic, banking, environmental, and health issues, among others, will be increasingly important to the country's national security. These types of concerns, however, have not been regularly part of the NSC's primary areas of responsibility. The heads of federal agencies most directly concerned with such issues have not been members of the NSC.\nIn the 1970s, Maxwell Taylor, who President Kennedy had appointed Chairman of the JCS, argued that a National Policy Council should replace the NSC and concern itself with broad areas of international and domestic policy. William Hyland, an NSC official in the Reagan Administration, argued in 1980 that\na bad defect in the [NSC] system is that it does not have any way of addressing international economic problems. The big economic agencies are Treasury, to some extent OMB, the Council of Economic Advisers, Commerce, Labor, and Agriculture. They are not in the NSC system, but obviously energy problems, trade, and arms sales are foreign policy issues. Every Administration tries to drag them in, usually by means of some kind of a subcommittee or a separate committee. The committee eventually runs up against some other committee. There is friction, and policies are made on a very ad hoc basis by the principal cabinet officers.\nIn early 1992, Professor Ernest May of Harvard University testified to the Senate Select Committee on Intelligence:\nIn the early 1980s, the greatest foreign threat was default by Mexico and Brazil. That could have brought down the American banking system. Despite good CIA analysis and energetic efforts by some NSC staffers, the question did not get on the NSC agenda for more than two years. And then, the policy issues did not get discussed. The agencies concerned with money and banking had no natural connection with either the NSC or the intelligence community. We have no reason to suppose that agencies concerned with the new [post Cold War] policy issues will be any more receptive.\nIn the George H. W. Bush Administration, there remained a strong conviction that defense and foreign policy issues would remain vital and somewhat separate from other interests and that the NSC was the proper forum for them to be addressed. Before he became President Bush's National Security Adviser, Brent Scowcroft stated at a forum on national security policy organization:\nFirst of all, if there is a consensus ... that the NSC net ought to be spread ever wider, I am not a part of it. There are many things that the NSC system can do better, and it has enough on its plate now. I would not look toward its spreading its net wider.\nAs noted above, the Clinton Administration implemented its determination to coordinate foreign and domestic economic policies more closely. The National Economic Council, established by Executive Order 12835 on January 25, 1993, was designed to \"coordinate the economic policy-making process with respect to domestic and international economic issues.\" Close linkage with the NSC were to be achieved by having the Assistant to the President for Economic Policy also sit on the NSC, supplemented by assigning staff to support both councils. The goal was to ensure that the economic dimensions of national security policy would be properly weighed in the White House decision-making process. Observers consider that cooperation between the NSC and the NEC was productive and contributed to the enhancement of both national security and economic policymaking although one senior NSC official has noted that efforts to deal with the 1997 Asian financial crisis were initially coordinated by U.S. international economic policymakers with little input from national security and foreign policy agencies.", "The post-Cold War era has seen a much closer relationship between traditional national security concerns with international issues that have a significant law enforcement component such as terrorism and narcotics smuggling. The increasing intermingling of national security and law enforcement issues could cause major difficulties for the NSC staff and the National Security Adviser who is not a law enforcement official. The Justice Department will inevitably view with concern any incursion into what is regarded as the Attorney General's constitutional responsibilities. The NSC also coordinates with the Office of Drug Control Policy whose responsibilities also encompass both law enforcement and foreign policy considerations.\nIn dealing with international terrorism or narcotics production and transport from foreign countries, however, diplomatic and national security issues are often involved. Apprehending a terrorist group may require cooperation from a foreign government that has its own interests and concerns. Narcotics production may be entwined in the social and economic fabric of a foreign country to an extent that precludes the country from providing the sort of cooperation that would be expected from a major ally. During the Clinton Administration, the Attorney General's representatives have been included in NSC staff deliberations when law enforcement concerns were involved. Nonetheless, observers note public disagreements between Justice Department and State Department, for instance, regarding cooperation (or the lack thereof) from Saudi Arabia or Yemen. Clearly, the President has constitutional responsibilities for both national security and law enforcement, but the status of any other official to make necessary trade-offs is unclear. Observers suggest that in some future cases the need to establish a single U.S. position may require different ways of integrating national security and law enforcement concerns. The Obama Administration took a significant step in this direction by establishing a single National Security Staff composed of the staffs of both the National Security Council and the Homeland Security Council.\nToday's international terrorist threat can encompass not only physical attacks on U.S. physical structures such as the World Trade Center, but also cyber-attacks on critical infrastructures, the computerized communications and data storage systems on which U.S. society has become reliant. Since such systems are in most cases owned and operated by corporations and other commercial entities, the role of the NSC is necessarily constrained. Much depends on law enforcement as well as voluntary cooperation by the private sector. The Clinton Administration created the position of National Coordinator for Security, Infrastructure Protection, and Counterterrorism who reported to the President through the National Security Adviser. The Intelligence Reform Act of 2004, however, established the National Counterterrorism Center (NCTC) outside the NSC structure. In the Obama Administration, the role of the Assistant to the President for Homeland Security and Counterterrorism, John Brennan, has proven to be an influential one.\nIn dealing with policies related to the protection of critical infrastructures, the National Security Adviser will have an important role, but one inherently different from the traditional responsibilities of the office. The position could involve in coordination of responses to threats both in the United States and from abroad and among the federal government, the states, and the private sector. It is clear to all observers that such coordination involves much uncharted territory, including a concern by some that the National Security Adviser might become overly and inappropriately involved in law enforcement matters.", "The NSC was created by statute, and its membership has been designated and can be changed by statute. The NSC has also been subject to statutorily approved reorganization processes within the executive branch, as when it was placed in the Executive Office by a Reorganization Plan in August 1949. Nonetheless, the NSC has been consistently regarded as a presidential entity with which Congress is rarely involved. The internal organization and roles of the NSC have been changed by Presidents and by National Security Advisers in response to their preferences and these changes have not usually been subject to congressional scrutiny.\nThe role of the National Security Adviser has, however, become so well established in recent years that Congress has been increasingly prepared to grant the incumbent significant statutory responsibilities. The Foreign Intelligence Surveillance Act and other legislation provides for statutory roles for the National Security Adviser. Executive Orders provide other formal responsibilities. The position has become institutionalized and the exercise of its functions has remained an integral part of the conduct of national security policy in all recent administrations.\nSome observers believe that these established duties which extend beyond the offering of advice and counsel to the President will inevitably lead to a determination to include the appointment of a National Security Adviser among those requiring the advice and consent of the Senate. Advice and consent by the Senate is seen as providing a role for the legislative branch in the appointment of one of the most important officials in the federal government. Another cited advantage of this proposal would be the increased order, regularity, and formalization that are involved in making appointments that are sent to the Senate. Proponents argue that this would ultimately provide greater accountability for NSC influence and decisions. Opponents on the other hand, might point to the danger of unnecessary rigidity and stratification of organization and the potential that appointments might be excessively influenced by political considerations. There is also a potential that the NSC staff might become irrelevant if it loses the trust of a future President or if its procedures become so formalized as to stultify policymaking. Should the Adviser be subject to Senate confirmation, it is argued that an important prerogative of the President to choose his immediate staff would be compromised. In addition, the incumbent could be required or expected to make routine appearances before congressional oversight committees, arguably undermining the primary purpose of the National Security Adviser which is to provide the President with candid advice on a wide range of issues, often on an informal and confidential basis.\nOne historian has summed up the role of the National Security Adviser:\nThe entire national security system must have confidence that the [National Security Adviser] will present alternate views fairly and will not take advantage of propinquity in the coordination of papers and positions. He must be able to present bad news to the president and to sniff out and squelch misbehavior before it becomes a problem. He must be scrupulously honest in presenting presidential decisions and in monitoring the implementation process. Perhaps most important, he must impart the same sense of ethical behavior to the Staff he leads.\nIn a recent assessment, two informed observers listed tasks for which the Adviser and staff uniquely are responsible:\nStaffing the president's daily foreign policy activity: his communications with foreign leaders and the preparation and conduct of his trips overseas; Managing the process of making decisions on major foreign and national security issues; Driving the policymaking process to make real choices, in a timely manner; and Overseeing the full implementation of the decision the president has made.\nThe increasing difficulties in separating national security issues from some law enforcement and international economic concerns has led some observers to urge that the lines separating various international staffs at the White House be erased and that a more comprehensive policymaking entity be created. It is argued that such reforms could most effectively be accomplished without legislation. President Obama put one major recommendation into practice in May 2009 when he combined the staffs of the National Security Council and the Homeland Security Council. Such initiatives raise complex questions, including the role of congressional oversight. Whereas Congress has traditionally deferred to White House leadership in national security matters, to a far greater extent than in international economic affairs, there might be serious questions about taking formal steps to place resolution of a wide range of international policies, including economic and law enforcement issues, in the hands of officials who receive little congressional oversight. It is likely, in any event, that Congress will continue to monitor the functioning of the staff and the Adviser in the context of U.S. policymaking in a changing international environment.\nThe Project for National Security Reform (PNSR) was established with congressional support to study the adequacy of the organization of the government for dealing with national security issues. Its membership was initially comprised of former officials with extensive national security experience, including former National Security Adviser Brent Scowcroft. The November 2008 report, Forging a New Shield , addressed the functions of the NSC along with other parts of the \"national security system.\" PNSR argued that the current organizational structure is ill-coordinated and is placing the nation at risk in an international environment that requires agile and coordinated efforts by all instruments of power. To replace the National Security Council and the Homeland Security Council, PNSR recommended the creation of a President's Security Council and a Senate-confirmed Director of National Security who would have broader responsibilities than the existing National Security Adviser. The Director would \"direct the implementation of national security missions identified by the present as inherently interagency.\" The office of the new Director of National Security would be comprised of some 500 people. A number of members of the PNSR effort joined the Obama Administration, including National Security Adviser James Jones and DNI Dennis Blair although both subsequently departed. Some of the principal PNSR initiatives would require legislative changes, but, as yet, a broad consensus has not emerged that would result in substantial realignments of organizational authorities in the executive branch or committee jurisdictions in the legislative branch.", "The most comprehensive source concerning the genesis and development of the NSC through 1960 is contained in a collection of hearings, studies, reports and recommendations complied by Senator Henry M. Jackson and published as U.S. Congress. Senate. Committee on Government Operations. Subcommittee on National Policy Machinery. Organizing for National Security , 3 Vols. 86 th and 87 th Congress. Washington, Government Printing Office. [1961]. Presidential memoirs are also valuable.\nOther useful sources are:\nAnderson, Dillon. \"The President and National Security.\" Atlantic Monthly , January 1966.\nBock, Joseph G. \"The National Security Assistant and the White House Staff: National Security Policy Decisionmaking and Domestic Political Considerations, 1947-1984.\" Presidential Studies Quarterly , Spring 1986. Pp. 258-279.\nBowie, Robert R. and Richard H. Immerman. Waging Peace: How Eisenhower Shaped an Enduring Cold War Strategy . New York: Oxford University Press.1998.\nBrown, Cody M. The National Security Council: A Legal History of the President's Most Powerful Advisers . Washington: Project for National Security Reform.2008.\nBrzezinski, Zbigniew. Power and Principle: Memoirs of the National Security Adviser, 1977-1981 . New York: Farrar, Straus, Giroux. 1983.\n——\"The NSC's Midlife Crisis\". Foreign Policy , Winter 1987-1988. Pp. 80-99.\nBock, Joseph G., and Clarke, Duncan L. \"The National Security Assistant and the White House Staff: National Security Policy Decisionmaking and Domestic Political Considerations, 1947-1984.\" Political Science Quarterly , Spring 1986. Pp. 258-279.\nBrown, Cody M. The National Security Council: A Legal History of the President's Most Powerful Advisers . Washington: Project for National Security Reform. 2008.\nBumiller, Elisabeth. Condoleezza Rice: An American Life: A Biography . New York: Random House. 2007.\nBurke, John P. Honest Broker: the National Security Advisor and Presidential Decision Making . College Station, TX: Texas A & M University Press. 2009.\nCaraley, Demetrios. The Politics of Military Unification . New York: Columbia University Press. [1966].\nClark, Keith C., and Laurence S. Legere, eds. \"The President and the Management of National Security\". Report for the Institute for Defense Analyses. New York: Praeger. [1966]. See especially pp. 55-114.\nCommission on the Organization of the Executive Branch of the Government. National Security Organization . Washington: Government Printing Office. [1949].\nCommission on the Organization of the Government for the Conduct of Foreign Policy. Report . Washington: Government Printing Office. [1975].\nCutler, Robert. No Time for Rest . Boston: Little, Brown. 1966.\n——\"The Development of the National Security Council\". Foreign Affairs , April 1956. Pp. 441-58.\nDaalder, Ivo H., and Destler, I.M. In the Shadow of the Oval Office: Profiles of the National Security Advisers and the Presidents They Served—from JFK to George W. Bush. New York: Simon and Schuster. 2009.\nDestler, I.M. \"Can One Man Do?\" Foreign Policy , Winter 1971-72. Pp. 28-40.\n——\"National Security Advice to U.S. Presidents: Some Lessons from Thirty Years.\" World Politics , January 1977. Pp. 143-76.\n—— Presidents, Bureaucrats and Foreign Policy: The Politics of Organization . Princeton: Princeton University Press. [1972].\n——Lake, Anthony; and Gelb, Leslie H. Our Own Worst Enemy: The Unmaking of American Foreign Policy . New York: Simon and Schuster. 1984.\nFalk, Stanley L., and Theodore W. Bauer. \"The National Security Structure.\" Washington: Industrial College of the Armed Forces. [1972].\nGates, Robert M. From the Shadows: the Ultimate Insider's Story of the Five Presidents and How They Won the Cold War . New York: Simon & Schuster. 1996.\nGreenstein, Fred I. and Richard H. Immerman. \"Effective National Security Advising: Recovering the Eisenhower Legacy.\" Political Science Quarterly , Fall 2000. Pp. 335-345.\nHaig, Alexander M., Jr. Caveat: Realism, Reagan, and Foreign Policy . New York: Macmillan. 1984.\nHammond, Paul Y. \"The National Security Council as a Device for Interdepartmental Coordination: An Interpretation and Appraisal\". American Political Science Review , December 1960. Pp. 899-910.\nHumphrey, David C. \"NSC Meetings during the Johnson Presidency\". Diplomatic History , Winter 1994. Pp. 29-45.\nHunter, Robert E. Organizing for National Security . Washington: Center for Strategic and International Studies. 1988.\nInderfurth, Karl F. and Johnson, Loch K., eds. Decisions of the Highest Order: Perspectives of the National Security Council . Pacific Grove, CA: Brooks/Cole Publishing Co. 1988.\nJohnson, Robert H. \"The National Security Council: The Relevance of its Past to its Future\". Orbis , Fall 1969. Pp. 709-35.\nKissinger, Henry A. White House Years . Boston: Little, Brown. 1979.\n—— Years of Renewal . New York: Simon & Schuster. 1999.\n—— Years of Upheaval . Boston: Little, Brown. 1982.\nKolodziej, Edward A. \"The National Security Council: Innovations and Implications\". Public Administration Review . November/December 1969. Pp. 573-85.\nKorb, Lawrence J. and Hahn, Keith D., eds. National Security Policy Organization in Perspective . Washington: American Enterprise Institute. 1981.\nLaird, Melvin R. Beyond the Tower Commission . Washington: American Enterprise Institute. 1987.\nLake, Anthony. 6 Nightmares . Boston: Little, Brown. 2000.\n—— Somoza Failing . Boston: Houghton Mifflin. 1989.\nLay, James S., Jr. \"National Security Council's Role in the U.S. Security and Peace Program\". World Affairs , Summer 1952. Pp. 33-63.\nLeacacos, John P. \"Kissinger's Apparat\". Foreign Policy , Winter 1971-72. Pp. 3-27.\nLord, Carnes. \"NSC Reform for the Post-Cold War Era,\" Orbis , Summer 2000. Pp. 433-450.\nMcFarlane, Robert C. \"Effective Strategic Policy.\" Foreign Affairs , Fall 1988. Pp. 33-48.\n——with Richard Saunders and Thomas C. Shull. \"The National Security Council: Organization for Policy Making.\" Proceedings of the Center for the Study of the Presidency . Vol. 5. 1984. Pp. 261-273.\n——Head, Richard G., and Frisco W. Short. Crisis Resolution, Presidential Decision Making in the Mayaguez and Korean Confrontations . Boulder, CO: Westview Press. 1978.\nMenges, Constantine C. Inside the National Security Council: The True Story of the Making and Unmaking of Reagan's Foreign Policy . New York: Simon and Schuster. 1988.\nMulcahy, Kevin V. and Crabb, Cecil V. \"Presidential Management of National Security Policy Making, 1947-1987\". In The Managerial Presidency , ed. by James P. Pfiffner. Pacific Grove, CA: Brooks/Cole. 1991. Pp. 250-264.\nNelson, Anna Kasten. \"President Truman and the Evolution of the National Security Council.\" Journal of American History , September 1985. Pp. 360-378.\n——\"The 'Top of the Policy Hill': President Eisenhower and the National Security Council.\" Diplomatic History , Fall 1983. Pp. 307-326.\nNixon, Richard M. U.S. Foreign Policy for the 1970's: A New Strategy for Peace . Washington: Government Printing Office. [1970].\n—— U.S. Foreign Policy for the 1970's: The Emerging Structure of Peace . Washington: Government Printing Office. [1971].\n—— U.S. Foreign Policy for the 1970's: Building for Peace . Washington: Government Printing Office. [1972].\nPowell, Colin L. \"The NSC System in the Last Two Years of the Reagan Administration\". The Presidency in Transition . Ed. by James P. Pfiffner and R. Gordon Hoxie. New York: Center for the Study of the Presidency, 1989. Pp. 204-218.\nPrados, John. Keepers of the Keys: A History of the National Security Council from Truman to Bush . New York: William Morrow. 1991.\nRice, Condoleezza. No Higher Honor: A Memoir of My Years in Washington . New York: Crown Publishers, 2011.\nRothkopf, David. Running the World: the Inside Story of the National Security Council and the Architects of American Power . New York: Public Affairs.2004.\nRostow, Walt Whitman. The Diffusion of Power: An Essay in Recent History . New York: Macmillan. 1972.\nSander, Alfred D. \"Truman and the National Security Council, 1945-1947\". Journal of American History , September 1972. Pp. 369-388.\nSchlesinger, Arthur, Jr. \"Effective National Security Advising: A Most Dubious Precedent.\" Political Science Quarterly , Fall 2000. Pp. 347-351.\nShoemaker, Christopher C. The NSC Staff: Counseling the Council . Boulder, CO: Westview Press. 1991.\nSouers, Sidney W. \"Policy Formulation for National Security\". American Political Science Review , June 1949. Pp. 534-43.\nSteiner, Barry H. \"Policy Organization in American Security Affairs: An Assessment\". Public Administration Review , July/August 1977. Pp. 357-67.\nThayer, Frederick C. \"Presidential Policy Process and 'New Administration': A Search for Revised Paradigms\". Public Administration Review , September/October 1971. Pp. 552-61.\nU.S. Congress. Senate. Committee on Government Operations. Subcommittee on National Security and International Operations. The National Security Council: New role and structure . 91 st Congress, 1 st session. Washington: Government Printing Office. 1969.\n——Select Committee on Secret Military Assistance to Iran and the Nicaraguan Opposition. House of Representatives. Select Committee to Investigate Covert Arms Transactions with Iran. 100 th Congress, 1 st session. Report of the Congressional Committees Investigating the Iran-Contra Affair with Supplemental, Minority, and Additional Views , Senate Report 100-216/House Report 100-433. Washington: Government Printing Office. 1987.\n——Committee on Government Operations. Subcommittee on National Security and International Operations. The National Security Council: Comment by Henry Kissinger . March 3, 1970. 91 st Congress, 2d Session. Washington: Government Printing Office. 1970.\nU.S. Department of State. \"The National Security System: Responsibilities of the Department of State.\" Department of State Bulletin , February 24, 1969. Pp. 163-66.\nU.S. President's Special Review Board. Report of the President's Special Review Board . Washington: Government Printing Office. 1987.\nWest, Bing. The Strongest Tribe: War, Politics and the Endgame in Iraq . New York. Random House. 2008.\nYost, Charles W. \"The Instruments of American Foreign Policy,\" Foreign Affairs , October 1971. Pp. 59-68.\nZegart, Amy B. Flawed by Design: the Evolution of the CIA, JCS, and NSC . Stanford, CA: Stanford University Press, 1999.\nNote: Many of the above entries contain numerous footnotes that identify a wealth of primary and secondary sources too numerous to include here. Of special interest are the oral interviews of former NSC staff personnel conducted from 1998 to 2000 as part of the National Security Council Project undertaken by the Center for International and Security Studies at Maryland and the Brookings Institution; transcripts are available at http://www.cissm.umd.edu/projects/nsc.php . Also useful is the transcript of \"A Forum on the Role of the National Security Adviser,\" cosponsored by the Woodrow Wilson International Center for Scholars and the James A. Baker III Institute for Public Policy of Rice University, available at http://wwics.si.edu/news/docs/nsa.pdf .\nAppendix A. National Security Advisers" ], "depth": [ 0, 1, 1, 2, 2, 1, 2, 2, 2, 2, 1, 2, 2, 2, 2, 2, 2, 2, 2, 2, 2, 2, 2, 1, 2, 2, 2, 2, 1 ], "alignment": [ "h0_title h2_title h1_title", "", "", "", "", "h0_title h1_title", "", "", "", "h0_full h1_full", "h2_title h1_title", "h1_full", "", "", "", "", "", "", "", "", "h2_full", "", "h2_full", "h0_title h2_title h1_full", "h0_full", "", "h2_full", "", "" ] }
{ "question": [ "Why was the NSC established?", "What figures participate in the NSC?", "What power does the President hold?", "How has the role of the NSC evolved?", "What is the purpose of this report?", "What characterizes the NSC in the contemporary moment?", "How did the Clinton Administration alter the NSC?", "How did the Homeland Security Council become established?", "How did the Obama Administration alter the NSC and HSC?" ], "summary": [ "The National Security Council (NSC) was established by statute in 1947 to create an inter-departmental body to advise the President with respect to the integration of domestic, foreign, and military policies relating to the national security so as to enable the military services and the other departments and agencies of the government to cooperate more effectively in matters involving the national security.", "Currently, statutory members of the Council are the President, Vice President, the Secretary of State, the Secretary of Defense, and, since 2007, the Secretary of Energy; but, at the President's request, other senior officials participate in NSC deliberations. The Chairman of the Joint Chiefs of Staff and the Director of National Intelligence are statutory advisers.", "The President clearly holds final decision-making authority in the executive branch.", "Over the years, however, the NSC staff has emerged as a major factor in the formulation (and at times in the implementation) of national security policy. Similarly, the head of the NSC staff, the National Security Adviser, has played important, and occasionally highly public, roles in policymaking.", "This report traces the evolution of the NSC from its creation to the present.", "The post-Cold War world has posed new challenges to NSC policymaking. Some argue that the NSC should be broadened to reflect an expanding role of economic, environmental, and demographic issues in national security policymaking.", "The Clinton Administration created a National Economic Council tasked with cooperating closely with the NSC on international economic matters.", "In the wake of the 9/11 attacks, the George W. Bush Administration established a Homeland Security Council.", "The Obama Administration has combined the staffs of the Homeland Security Council and the National Security Council into a single National Security Staff, while retaining the two positions of National Security Adviser and Homeland Security Adviser. Although the latter has direct access to the President, the incumbent is to report organizationally to the National Security Adviser." ], "parent_pair_index": [ -1, 0, -1, -1, -1, -1, -1, -1, -1 ], "summary_paragraph_index": [ 0, 0, 1, 1, 1, 4, 4, 4, 4 ] }
GAO_GAO-12-1018T
{ "title": [ "Background", "NTIA’s Processes for Managing Federal Spectrum Lack Governmentwide Focus and Accountability", "NTIA’s Spectrum Management Efforts", "NTIA Focuses on Interference Mitigation Rather than on Best Use of Spectrum across Government", "NTIA’s Current Data Management System Is of Limited Usefulness", "NTIA Has Taken Steps to Identify Spectrum for Future Wireless Broadband Use", "NTIA Efforts to Identify Spectrum for Broadband", "Industry Concerns with the Usefulness of the Identified Spectrum", "Some Users Lack Incentives and Face Several Barriers to Sharing Spectrum, and Cannot Easily Identify Available Spectrum to Share", "Some Users Lack Economic Incentives to Share Spectrum", "Several Barriers Can Deter Users from Sharing Spectrum", "Users May Be Unable to Easily Identify Spectrum Suitable for Sharing", "Incentives and Opportunities to Share Could Be Expanded", "Conclusions and Recommendations", "GAO Contact and Staff Acknowledgments" ], "paragraphs": [ "The radio frequency spectrum is the part of the natural spectrum of electromagnetic radiation lying between the frequency limits of 3 kilohertz (kHz) and 300 gigahertz (GHz). Not all spectrum has equal value. The spectrum most highly valued generally consists of frequencies between 225 MHz and 3700 MHz, as these frequencies have properties well suited to many important wireless technologies, such as mobile phones, radio, and television broadcasting. According to NTIA, as of September 2012, federal agencies had exclusive access to about 18 percent of these high- value frequencies, and nonfederal users had exclusive licenses to about 33 percent. The remainder of this spectrum is allocated to shared use. However, in many cases in these shared bands, federal or nonfederal uses may dominate and actual sharing is nominal. NTIA has concluded that overall, approximately 43 percent of these high-value frequencies are predominantly used by federal operations.\nFederal agencies use spectrum to help meet a variety of missions, including emergency communications, national defense, land management, and law enforcement. Over 60 federal agencies and departments combined have over 240,000 frequency assignments. Agencies and departments within the Department of Defense have the most assignments, followed by the Federal Aviation Administration, the Department of Justice, the Department of Homeland Security, the Department of the Interior, the Department of Agriculture, U.S. Coast Guard, the Department of Energy, and the Department of Commerce, respectively. These federal agencies and departments hold 94 percent of all federally assigned spectrum. Nonfederal entities (which include commercial companies and state and local governments) also use spectrum to provide a variety of services. For example, state and local police departments, fire departments, and other emergency services agencies use spectrum to transmit and receive critical voice and data communications, while commercial entities use spectrum to provide wireless services, including mobile voice and data, paging, broadcast radio and television, and satellite services (see fig. 1).\nIn the United States, responsibility for spectrum management is divided between NTIA and FCC. NTIA and FCC jointly determine the amount of spectrum allocated for federal, nonfederal, and shared use. After this allocation occurs, in order to use spectrum, nonfederal users must follow rules and obtain authorizations from FCC to use specific spectrum frequencies, and federal users must follow rules and obtain frequency assignments from NTIA. In order for nonfederal users to share federal spectrum, NTIA and FCC are jointly involved in the process. The nonfederal party petitions FCC, and FCC in turn coordinates rulemakings and licenses with NTIA through IRAC. NTIA manages sharing between federal users on a day-to-day basis. If federal users are requesting frequency assignments in exclusive nonfederal or shared bands, that request is coordinated through IRAC with FCC. If sharing is solely between nonfederal users in exclusive nonfederal bands, sharing is generally governed by FCC rules and does not go through NTIA, unless there could be out-of-band interference. In addition to its spectrum allocation and authorization duties, NTIA serves as the President’s principal advisor on telecommunications and information policy and manages federally assigned spectrum, including preparing for, participating in, and implementing the results of international radio conferences, as well as conducting extensive research and technical studies through its research and engineering laboratory, the Institute for Telecommunication Sciences. NTIA has authority to issue rules and regulations as may be necessary to ensure the effective, efficient, and equitable use of spectrum both nationally and internationally. It also has authority to develop long-range spectrum plans to meet future spectrum requirements for the federal government.\nSpectrum sharing can be defined as the cooperative use of common spectrum. In this way, multiple users agree to access the same spectrum at different times or locations, as well as negotiate other technical parameters, to avoid adversely interfering with one another. For sharing to occur, users and regulators must negotiate and resolve where (geographic sharing), when (sharing in time), and how (technical parameters) spectrum will be used (see fig. 2).\nSpectrum sharing also occurs with unlicensed use of spectrum, since it is accessible to anyone using wireless equipment certified by FCC for those frequencies. Equipment such as wireless microphones, baby monitors, and garage door openers typically share spectrum with other services on a non-interference basis using low power levels to avoid interference with higher priority uses. In contrast with most licensed spectrum use, unlicensed spectrum users have no regulatory protection against interference from other licensed or unlicensed users in the band. However, unlicensed use is regulated to ensure that unlicensed devices do not cause undue interference to operations with a higher priority. For example, in the 5 GHz band, wireless fidelity (Wi-Fi) devices share a band with military radar subject to the condition that the Wi-Fi devices are capable of spectrum sensing and dynamic frequency selection; if radar is detected, the unlicensed user must immediately vacate the channel.", "", "As the federal agency authorized to develop national spectrum policy, NTIA has been directed to conduct several projects focused on reforming governmentwide federal spectrum management and promoting efficiency among federal users of spectrum; however, we reported in 2011 that its efforts in this area had resulted in limited progress toward improved spectrum management. NTIA has authority to, among other things, establish policies concerning assigning spectrum to federal agencies, coordinate spectrum use across federal agencies, and promote efficient use of spectrum by federal agencies in a manner which encourages the most beneficial public use. As such, NTIA has a role in ensuring that federally allocated spectrum is used efficiently. According to NTIA’s Redbook and agency officials, efficient use includes ensuring that federal agencies’ decisions to use spectrum to support government missions have been adequately justified and that all viable tradeoffs and options have been explored before making the decision to use spectrum- dependent technology, and ensuring that these tradeoffs are continuously reviewed to determine if the need for spectrum has changed over time. NTIA’s primary guidance to federal agencies is technical guidance provided through NTIA’s Redbook concerning how to manage assigned spectrum.\nIn 2003, the Bush Administration directed NTIA to develop strategic plans, and in March 2008, NTIA issued its report on federal spectrum use entitled the Federal Strategic Spectrum Plan. While the intent of the Federal Strategic Spectrum Plan was to identify the current and projected spectrum requirements and long-range planning processes for the federal government, we reported in 2011 that the final plan is limited in these areas. For example, the plan does not identify or include quantitative governmentwide data on federal spectrum needs. Instead, NTIA’s plan primarily consists of a compilation of the plans submitted by 15 of the more than 60 agencies that use federal spectrum. Additionally, due to the fact that they contained limited information regarding future requirements and technology needs, NTIA concluded that its “long-range assumptions are necessarily also limited.” Furthermore, NTIA’s plan did not contain key elements and best practices of strategic planning.", "NTIA’s primary spectrum management operations include authorizing federal frequency assignments and certifying spectrum-dependent equipment for federal users; however, these processes are primarily focused on interference mitigation as determined by IRAC and do not focus on ensuring the best use of spectrum across the federal government. In 2011, we found that the process as established by federal regulations for review and approval of frequency assignment and system certification was technical in nature, focusing on ensuring that the new frequency or system that an agency wants to use would not interfere with another agency’s operations. According to NTIA officials, this focus on day-to-day spectrum activities, such as interference mitigation, is due to the agency’s limited resources. This focus, while important, makes limited consideration about the overall best use of federally allocated spectrum. Therefore, NTIA’s current processes provide limited assurance that federal spectrum use is evaluated from a governmentwide perspective to ensure that decisions will meet the current and future needs of the agencies, as well as the federal government as a whole.", "NTIA’s data management system is antiquated and lacks transparency and internal controls. In 2011, we reported that NTIA collects all federal spectrum data in the Government Master File (GMF), which according to NTIA officials is an outdated legacy system that was developed primarily to store descriptive data. These data are not detailed enough to support the current analytical needs of NTIA or other federal users, as the system was not designed to conduct such analyses. NTIA does not generate any data, but maintains agency-reported spectrum data in the GMF, which are collected during the frequency assignment and review processes.\nNTIA’s processes for collecting and verifying GMF data lack key internal controls, including those focused on data accuracy, integrity, and completeness. Control activities such as data verification and reconciliation are essential for ensuring accountability for government resources and achieving effective and efficient program results. In 2011, we reported that NTIA’s data collection processes lack accuracy controls and do not provide assurance that data are being accurately reported by agencies. Rather, NTIA expects federal agencies to supply accurate and up-to-date data submissions, but it does not provide agencies with specific requirements on how to justify that the agencies’ spectrum assignments will fulfill their mission needs.\nNTIA is developing a new data management system—the Federal Spectrum Management System (FSMS)—to replace the GMF. According to NTIA officials, the new system will modernize and improve spectrum management processes by applying modern information technology to provide more rapid access to spectrum and make the spectrum management process more effective and efficient. NTIA projects that FSMS will improve existing GMF data quality, but not until 2018. According to NTIA’s FSMS transition plan, at that time data accuracy will improve by over 50 percent. However, in the meantime it is unclear whether important decisions regarding current and future spectrum needs are based on reliable data.", "", "In response to the government initiatives to make a total of 500 MHz of spectrum available for wireless broadband, in 2010 NTIA (1) identified 115 MHz of federally allocated spectrum to be made available for wireless broadband use within the next 5 years, referred to as the Fast Track Evaluation, and (2) developed an initial plan and timetable for repurposing additional spectrum for broadband, referred to as the 10-Year Plan.\nFast Track Evaluation. NTIA and the Policy and Plans Steering Group (PPSG) identified and recommended portions of two frequency bands, totaling 115 MHz of spectrum within the ranges of 1695–1710 MHz and 3550–3650 MHz to be made available for wireless broadband use. For each of these bands, NTIA reviewed the number of federal frequency assignments within the band, the types of federal operations and functions that the assignments support, and the geographic location of federal use. Since clearing these bands of federal users and relocating incumbent federal users to new bands was not an option in the given time frame, the bands that NTIA recommended be made available will be opened to geographic sharing by incumbent federal users and commercial broadband. 10-Year Plan. By a presidential memorandum, NTIA was directed to collaborate with FCC to make available 500 MHz of spectrum over the next 10 years, suitable for both mobile and fixed wireless broadband use, and complete by October 1, 2010, a specific plan and timetable for identifying and making available the 500 MHz for broadband use. publicly released this report in November 2010. In total, NTIA and the National Broadband Plan identified 2,264 MHz of spectrum to analyze for possible repurposing, of which 639 MHz is exclusively used by the federal government and will be analyzed by NTIA. Additionally, NTIA will collaborate with FCC to analyze 835 MHz of spectrum that is currently located in bands that are shared by federal and nonfederal users. Furthermore, NTIA has stated that it plans to seek advice and assistance from CSMAC, its federal advisory committee comprised of industry representatives and experts, as it conducts analyses under the 10-Year Plan.\nUnleashing the Wireless Broadband Revolution, 75 Fed. Reg. 38387. previously evaluated for reallocation, and in 2001, we reported that at the time adequate information was not currently available to fully identify and address the uncertainties and risks of reallocation.", "Industry stakeholders, including wireless service providers, representatives of an industry association, and a think tank representative we contacted in 2011 expressed concerns over the usefulness of the spectrum identified by NTIA in the Fast Track Evaluation, since most of the spectrum identified (100 of the 115 MHz) is outside the range considered to have the best propagation characteristics for mobile broadband. Overall, there has been limited interest in the bands above 3 GHz for mobile broadband use because, according to industry stakeholders, there has been minimal development of mobile broadband in bands above 3 GHz and no foreseeable advances in this area at this time.\nAccording to industry representatives, the 1755–1780 MHz band that NTIA considered as part of the Fast Track Evaluation has the best characteristics for mobile broadband use, and it is internationally harmonized for this use. NTIA did not select this band to be made available in the 5-year time frame due to the large number of federal users currently operating there. However, NTIA identified it as the first band to be analyzed under the 10-Year Plan to determine if it can be made available for commercial broadband use. An industry stakeholder has stated that the 1695–1710 MHz band identified by NTIA in the Fast Track Evaluation is the second-best alternative for wireless broadband if the 1755–1780 MHz band were not made available; however, the 1695– 1710 MHz band is not currently used internationally for wireless broadband, which may reduce device manufacturers’ incentive for developing technology that can be used in these frequencies.", "", "While federal spectrum users often share spectrum among themselves, they may have little economic incentive to otherwise use spectrum efficiently, including sharing it with nonfederal users. From an economic perspective, when a consumer pays the market price for a good or service and thus cannot get more of it without this expense, the consumer has an incentive to get the most value and efficiency out of the good as possible. If no price is attached to a good—which is essentially the case with federal agencies’ use of spectrum—the normal market incentive to use the good efficiently may be muted. In the case of federal spectrum users, obtaining new spectrum assignments may be difficult, so an agency may have an incentive to conserve and use the spectrum it currently has assigned to it or currently shares efficiently, but the extent of that incentive is likely weaker than if the agency had had to pay a market price for the all of their spectrum needs. As such, federal spectrum users do not fully face a market incentive to conserve on their use of spectrum or use it in an efficient manner. The full market value of the spectrum assigned to federal agencies has not been assessed, but, according to one expert, would most likely be valued in the tens of billions of dollars. Similarly, many nonfederal users, such as television broadcasters and public safety entities, did not pay for spectrum when it was assigned to them and do not pay the full market price for their continuing use of spectrum so, like federal agencies, they may not fully have market-based incentives to use spectrum efficiently.\nWhile licensed, commercial users who purchased spectrum at auction generally have market incentives to use their spectrum holdings efficiently, these users also have incentives that work against sharing spectrum, except in those instances where the incumbent licensee is unlikely to build out its network or offer services to a particular area, such as in certain remote, sparsely populated areas. FCC officials and industry stakeholders and experts told us that these users may prefer not to share their unused spectrum because they are concerned about the potential for interference to degrade service quality to their customers. Also, they may prefer to not give potential competitors access to spectrum. Industry stakeholders and experts also said that companies seeking spectrum may prefer obtaining exclusive spectrum licenses over sharing spectrum that is licensed to another company or federal user, given uncertainties about regulatory approvals, interference, and enforcement if interference occurs.", "There are several barriers that can deter sharing. One such barrier is that federal agencies will not risk mission failure, particularly when there are security and public safety implications. According to the agency officials we contacted, federal agencies will typically not agree to share spectrum if it puts achieving their missions at risk. The officials stressed that when missions have security and safety implications, sharing may pose unacceptable risks. For example, the military tests aircraft and trains pilots over test ranges that can stretch hundreds of miles, maintaining constant wireless contact. The ranges, according to officials, cannot share the communication frequencies because even accidental interference in communications with an aircraft could result in catastrophic mission failure. Further, sharing information about such flights could expose particular pilots and aircraft, or the military’s larger mission, to increased risk.\nAccording to FCC officials, concerns about risk can drive conservative technical standards that can make sharing impractical. In general, the technical analyses and resulting standards are based on worst-case scenarios, and not on assessments of the most likely scenario or a range of scenarios. Moreover, in contrast to FCC’s open rulemaking process, there is little opportunity for public input to the standards setting process. Stakeholders may meet or have discussions with NTIA and the relevant federal agencies, but this occurs without any formal public process. Nor do stakeholders have any effective means to appeal other than by asking FCC to reject NTIA’s analysis or standards.\nAnother barrier is that spectrum sharing can be costly. Stakeholders told us that sharing federal spectrum can be costly for both the nonfederal and federal users seeking to share for the following reasons:\nMitigation of potential interference can be costly in terms of equipment design and operation.\nUsers applying to share federal frequencies may find that those frequencies are being used by more than one federal agency or program. As a result of needing to mitigate inference for multiple users, costs to share spectrum in that band could increase.\nFederal users often use and rely on proven older technology that was designed to use spectrum to meet a specific mission and typically is not conducive to operating as efficiently or flexibly as the state-of-the- art technologies might now allow. Limited budgets may prevent them from being able to invest in newer technology which can facilitate easier sharing.\nAdditionally, we found that spectrum sharing approval and enforcement processes can be lengthy and unpredictable. FCC and NTIA processes can cause two main problems when nonfederal users seek to share federal spectrum, or when nonfederal users share with one another, according to stakeholders:\nThe spectrum-sharing approval process between FCC and NTIA can be lengthy and unpredictable, and the risk associated with it can be costly for new entrants. FCC officials told us that its internal processes can potentially last years if requiring a rulemaking to accommodate shared use of spectrum. In addition to that time, NTIA officials said that IRAC’s evaluation of potential harmful interference could take months. In one example, the Department of Defense, along with other federal agencies and nonfederal entities, currently shares a spectrum band between 413-457 MHz with a nonprofit medical devices provider for use in implant products for veterans. It took approximately 2 years (from 2009 to 2011) for FCC and NTIA to facilitate this arrangement, as FCC required a rulemaking and NTIA required a lengthy evaluation of potential interference. This nonprofit is funded by an endowment and was not dependent on income from the device to sustain itself during this process, but such delays, and the potential for a denial, could discourage for-profit companies from developing and investing in business plans that rely on sharing federal spectrum.\nStakeholders we interviewed told us that when federal or nonfederal users share spectrum, both parties have concern that harmful interference may affect their missions or operations if the other party overreaches or does not follow the agreement. They also fear that the enforcement actions that are taken by FCC will happen too slowly to protect their interests or that enforcement outcomes can be unpredictable.", "Besides lacking incentives and overcoming other barriers, users may also have difficulty identifying spectrum suitable for sharing because data on available spectrum is incomplete or inaccurate, and information on some federal spectrum usage is not publicly available. According to NTIA officials, coordinating spectrum sharing requires accurate data on users, frequencies, locations, times, power levels, and equipment, among other things. We recently reported that both FCC’s and NTIA’s spectrum databases may contain incomplete and inaccurate data. Further, federal agency spectrum managers told us that agencies have not been asked to regularly update their strategic spectrum plans, in which they were required to include an accounting of spectrum use.\nAs mentioned, NTIA is developing a new data system that officials believe will provide more robust data that will enable more accurate analysis of spectrum usage and potential interference, which may in turn identify more sharing opportunities. In addition, recently proposed legislation would require in part that FCC, in consultation with NTIA and the White House Office of Science and Technology Policy, prepare a report for Congress that includes an inventory of each radio spectrum band they manage. The inventory is also to include data on the number of transmitters and receiver terminals in use, if available, as well as other technical parameters—coverage area, receiver performance, location of transmitters, percentage and time of use, a list of unlicensed devices authorized to operate in the band and description of use—that allow for more specific evaluation of how spectrum can be shared. However, experts and federal officials we contacted told us that there may be some limitations to creating such an inventory. For instance, measuring spectrum usage can be difficult because it can only be accomplished on a small scale and technologies to measure or map widespread spectrum usage are not yet available. Additionally, FCC and NTIA officials told us that information on some federal spectrum bands may never be made publicly available because of the sensitive and classified nature of some federal spectrum use.", "We have previously reported that to improve spectrum efficiency among federal agencies, Congress may wish to consider evaluating what mechanisms could be adopted to provide incentives and opportunities for agencies to move toward more efficient use of spectrum, which could free up some spectrum allocated for federal use to be made available for sharing or other purposes. Federal advisors and experts we talked to identified several options that could provide incentives and opportunities for more efficient spectrum use and spectrum sharing by federal and nonfederal users, which include, among others: (1) assessing spectrum usage fees; (2) expanding the availability of spectrum for unlicensed uses; and (3) increasing the federal focus on research and development of technologies that can enable spectrum sharing and improve spectral efficiency.\nAssessing spectrum usage fees. Several advisory groups and spectrum industry experts, including those we interviewed, have recommended that spectrum fees be assessed based on spectrum usage. As previously mentioned, with the exception of administrative fees for frequency assignments, federal users incur no costs for using spectrum. As such, federal users may have little incentive to share spectrum assigned to them with nonfederal users or identify opportunities to use spectrum more efficiently—except to the extent that sharing or more efficient use helps them achieve their mission requirements. In 2011, the CSMAC Incentives Subcommittee recommended that NTIA and FCC study the implementation of spectrum fees to drive greater efficiency and solicit input from both federal and nonfederal users who might be subject to fees. The National Broadband Plan has also recommended that Congress consider granting FCC and NTIA authority to impose spectrum fees on unauctioned spectrum license holders—such as TV broadcasters and public safety entities—as well as government users. Fees may help to free spectrum for new uses, since licensees who use spectrum inefficiently may reduce their holdings or pursue sharing opportunities once they bear the opportunity cost of letting it remain fallow or underused. Further, FCC officials told us that they have proposed spectrum usage fees at various times, including in FCC’s most recent congressional budget submission, and requested the legislative authorities to implement such a program.\nWhile noting the benefits, the CSMAC Incentives Subcommittee report mentions specific concerns about the impact of spectrum fees on government users. For instance, some CSMAC members expressed concern that fees do not fit into the federal annual appropriations process and new appropriations to cover fees are neither realistic nor warranted in the current budget environment. Other members suggested that fees will have no effect because agencies will be assured additional funds for their spectrum needs. Similarly, the National Broadband Plan notes that a different approach to setting fees may be appropriate for different spectrum users, and that a fee system must also avoid disrupting public safety, national defense, and other essential government services that protect human life, safety, and property.\nTo address some of the concerns regarding agency budgets, the recent PCAST report recommended the use of a “spectrum currency” process to promote spectrum efficiency. Rather than using funds to pay for spectrum, federal agencies would each be given an allocation of synthetic currency that they could use to “buy” their spectrum usage rights. Usage fees would be set based on valuations of comparable private sector uses for which the market has already set a price. Agencies would then have incentive to use their assignments more efficiently or share spectrum. In the PCAST proposal, agencies would also be rewarded for making spectrum available to others for sharing, by being reimbursed for their investments in improving spectrum sharing from a proposed Spectrum Efficiency Fund.\nExpanding the availability of spectrum for unlicensed use. Unlicensed spectrum use is inherently shared spectrum access, and according to spectrum experts we interviewed and other stakeholders, unlicensed use of spectrum is a valuable complement to licensed spectrum and more spectrum could be made available for unlicensed use. Spectrum for unlicensed use can be used efficiently and for high value applications, like Wi-Fi, for example. Increasing the amount of spectrum for unlicensed use may allow more users to share without going through lengthy negotiations and interference mitigations, and also allow for more experimentation and innovation.\nMore recently, FCC has provided unlicensed access to additional spectrum, known as TV “white spaces,” to help address spectrum demands. The white spaces refer to the buffer zones that FCC assigned the television broadcasters to mitigate unwanted inference between adjacent stations. With the more efficient TV transmission capabilities that resulted from the digital television transition, the buffer zones are no longer needed and FCC approved the previously unused spectrum for unlicensed use. To identify available white space spectrum, devices must access a database which responds with a list of the frequencies that are available for use at the device’s location. As an example, one local official explained that his city uses TV white space spectrum to provide a network of public Wi-Fi access and public safety surveillance functions.\nIncreasing the federal focus on research and development of technologies. Several technological advances promise to make sharing easier, but are still at early stages of development and testing. For example, various spectrum users and experts we contacted mentioned the potential of dynamic spectrum access technology. If made fully operational, dynamic spectrum access technology will be able to sense available frequencies in an area and jump between frequencies to seamlessly continue communication as the user moves geographically and through the spectrum. According to experts and researchers we contacted, progress has been made but there is no indication of how long it will be before this technology is fully deployable. Such new technologies can obviate or lessen the need for extensive regulatory procedures to enable sharing and can open up new market opportunities for wireless service providers. If a secondary user or sharing entity employs these technologies, the incumbent user or primary user would theoretically not experience harmful interference, and agreements and rulemakings that are currently needed may be streamlined or unnecessary to enable sharing.\nAlthough industry participants indicated that extensive testing under realistic conditions is critical to conducting basic research on spectrum efficient technologies, we found that only a few companies are involved in such research and may experience challenges in the testing process. Companies tend to focus technology development on current business objectives as opposed to conducting basic research that may not show an immediate business return. For example, NTIA officials told us that one company that indicated it would participate in NTIA’s dynamic spectrum access testing project removed its technologist from the testing effort to a project more closely related to its internal business objectives. Furthermore, some products are too early in the development stage to even be fully tested. For example, NTIA officials also said six companies responded to NTIA’s invitation to participate in the previously mentioned dynamic spectrum access testing project. However, only two working devices were received for the testing, and a third device received did not work as intended. Other companies that responded told NTIA that they only had a concept and were not ready to test an actual prototype.\nRecent federal advisory committee recommendations emphasize the importance of funding and providing incentives for research and development endeavors. For example, to promote research in efficient technologies, PCAST recommended that (1) the Research and Development Wireless Innovation Fund release funds for this purpose and (2) the current Spectrum Relocation Fund be redefined as the Spectrum Efficiency Fund. As discussed, this adjustment would allow for federal agencies to be reimbursed for general investments in improving spectrum sharing. Similarly, CSMAC recommended the creation of a Spectrum Innovation Fund. Unlike the Spectrum Relocation Fund, which is strictly limited to the actual costs incurred in relocating federal systems from auctioned spectrum bands, the Spectrum Innovation Fund could also be used for spectrum sharing and other opportunities to enhance spectrum efficiency.", "Radio frequency spectrum is a scarce national resource that enables wireless communications services vital to the U.S. economy and to a variety of government functions, yet NTIA has not developed a strategic, governmentwide vision for managing federal use of this valuable resource. NTIA’s spectrum management authority is broad in scope, but NTIA’s focus is on the narrow technical aspects of spectrum management, such as ensuring new frequency assignments will not cause interference to spectrum-dependent devices already in use, rather than on whether new assignments should be approved based on a comprehensive evaluation of federal spectrum use from a governmentwide perspective. Lacking an overall strategic vision, NTIA cannot ensure that spectrum is being used efficiently by federal agencies. Furthermore, agencies are not required to submit justifications for their spectrum use and NTIA does not have a mechanism in place to validate and verify the accuracy of spectrum-related data submitted by the federal agencies. This has led to decreased accountability and transparency in how federal spectrum is being used and whether the spectrum-dependent systems the agencies have in place are necessary. Without meaningful data validation requirements, NTIA has limited assurance that the agency-reported data it collects are accurate and complete.\nIn our April 2011 report, we recommended that NTIA (1) develop an updated plan that includes key elements of a strategic plan, as well as information on how spectrum is being used across the federal government, opportunities to increase efficient use of federally allocated spectrum and infrastructure, an assessment of future spectrum needs, and plans to incorporate these needs in the frequency assignment, equipment certification, and review processes; (2) examine the assignment review processes and consider best practices to determine if the current approach for collecting and validating data from federal agencies can be streamlined or improved; and (3) establish internal controls for management oversight of the accuracy and completeness of currently reported agency data. With respect to our first recommendation, NTIA has not developed an updated strategic plan and previously noted that the Presidential Memorandum of June 28, 2010, and the Wireless Innovation Initiative provide significant strategic direction for NTIA and the other federal agencies. In September 2012, NTIA officials told us that NTIA intends to update its strategic plan by October 2013. NTIA concurred with our other two recommendations and is taking action to address them. For example, NTIA has proposed approaches to implement new measures to better ensure the accuracy of agency- reported data, and is taking steps to implement internal controls for its data management system in a cost efficient manner.\nWith respect to spectrum sharing, there are currently insufficient incentives to encourage more sharing, and even if incentives were created, several barriers to sharing will continue. Options to address these issues in turn create new challenges, and may require further study.\nChairman Walden, Ranking Member Eshoo, and Members of the Subcommittee, this concludes my prepared statement. I will be happy to respond to any questions you may have at this time.", "For further information on this testimony, please contact me at (202) 512- 2834, or by e-mail at [email protected]. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this statement. Individuals making key contributions to this testimony include Sally Moino and Andrew Von Ah, Assistant Directors; Amy Abramowitz; Colin Fallon; Bert Japikse; Elke Kolodinski; Maria Mercado; Erica Miles; and Hai Tran.\nThis is a work of the U.S. government and is not subject to copyright protection in the United States. The published product may be reproduced and distributed in its entirety without further permission from GAO. However, because this work may contain copyrighted images or other material, permission from the copyright holder may be necessary if you wish to reproduce this material separately." ], "depth": [ 1, 1, 2, 2, 2, 1, 2, 2, 1, 2, 2, 2, 1, 1, 1 ], "alignment": [ "h4_full", "h0_title h1_title h4_title", "h0_full h4_full h1_full", "h0_full", "h0_full", "h1_title h4_title", "h4_full h1_full", "", "h2_title h4_title", "h2_full", "h2_full", "h4_full h2_full", "h3_full h4_full", "h3_full h2_full h4_full", "" ] }
{ "question": [ "What did GAO report about the NTIA's efforts in spectrum management?", "What was the NTIA directed to do in 2003?", "How successful was NTIA in this task?", "What is the state of NTIA's data management system?", "What is being done to address this?", "What has NTIA taken steps to do in spite of its limitations?", "What is an example of one of these steps?", "How did NTIA get input from major stakeholders?", "How did NTIA review each identified band?", "What do industry stakeholders suggest regarding spectrum?", "What barriers are there that limit sharing?", "What is the benefit of paying market price for a good or service?", "Why is this not true of federal agencies?", "Why is this also not true of nonfederal users?", "Why is users' ability to identify spectrum suitable or sharing limited?", "What does GAO's ongoing work regarding spectrum use suggest?", "What could these actions include?", "How is demand for spectrum changing?", "Why is it hard to meet the current demand?", "How are federal initiatives attempting to solve this issue?", "What does this statement discuss?", "How is this testimony connected with GAO's ongoing work with spectrum sharing?", "How did GAO conduct their assessment?" ], "summary": [ "The National Telecommunications and Information Administration (NTIA) is responsible for governmentwide federal spectrum management, but GAO reported in 2011 that NTIA’s efforts in this area had been limited.", "In 2003, the President directed NTIA to develop plans identifying federal and nonfederal spectrum needs, and in 2008, NTIA issued the federal plan.", "GAO found it did not identify governmentwide spectrum needs and did not contain key elements and conform to best practices for strategic planning. Furthermore, NTIA’s primary spectrum management operations do not focus on governmentwide needs. Instead, NTIA depends on agency self-evaluation of spectrum needs and focuses on mitigating interference among spectrum users, with limited emphasis on overall spectrum management.", "Additionally, NTIA’s data management system is antiquated and lacks internal controls to ensure the accuracy of agency-reported data, making it unclear if reliable data inform decisions about federal spectrum use.", "NTIA is developing a new data management system, but implementation is years away.", "Despite these limitations, NTIA has taken steps to identify spectrum that could potentially be made available for broadband use.", "For example, in 2010 NTIA evaluated various spectrum bands and identified 115 megahertz of spectrum that could be repurposed within the next 5 years.", "In doing so, NTIA worked with a special steering group consisting of the Assistant Secretaries with spectrum management oversight in agencies that were the major stakeholders in the spectrum bands under consideration.", "For each of the identified bands, NTIA reviewed the number of federal frequency assignments within the band, the types of federal operations and functions that the assignments support, and the geographic location of federal use.", "In addition to efforts to repurpose spectrum, industry stakeholders have also suggested that sharing spectrum between federal and nonfederal users be considered to help make spectrum available for broadband.", "Our ongoing work has identified several barriers that limit sharing. Primarily, many users may lack incentives to share assigned spectrum.", "Typically, paying the market price for a good or service helps to inform users of the value of the good and provides an incentive for efficient use.", "But federal agencies pay only a small fee to NTIA for spectrum assignments, and may, in some contexts, have little incentive to conserve or share it. Federal agencies may also have limited budgets to upgrade to more spectrally-efficient equipment that would better enable sharing.", "Nonfederal users are also reluctant to share spectrum. For instance, license holders may be reluctant because of concerns that spectrum sharing could encourage competition.", "A lack of information on federal spectrum use may limit users’ ability to easily identify spectrum suitable for sharing.", "GAO’s ongoing work suggests that some actions might provide greater incentives and opportunities for more efficient spectrum use and sharing.", "These actions could include assessing spectrum usage fees to provide economic incentive for more efficient use and sharing, expanding the availability of unlicensed spectrum, and increasing the federal focus on research and development of technologies that can enable spectrum sharing and improve spectral efficiency. However, all of these actions also involve challenges and may require further study.", "Demand for spectrum is increasing rapidly with the widespread use of wireless broadband devices and services.", "However, nearly all usable spectrum has been allocated either by NTIA for federal use or by the Federal Communications Commission (FCC) for commercial and nonfederal use.", "Federal initiatives are under way to identify federal spectrum that could be repurposed or possibly shared by federal users or wireless broadband providers and other nonfederal users.", "This statement discusses how NTIA manages spectrum to address governmentwide spectrum needs and the steps NTIA has taken to repurpose spectrum for broadband. As part of an ongoing review, the statement also discusses preliminary information on the factors that prevent spectrum sharing and actions that can encourage sharing and efficient spectrum use.", "This testimony is based on GAO's prior work on federal spectrum management and ongoing work on spectrum sharing.", "GAO analyzed NTIA processes, policies and procedures, and interviewed relevant government officials, experts, and industry stakeholders." ], "parent_pair_index": [ -1, -1, 1, -1, 3, -1, 0, 1, 1, -1, 0, -1, 2, 2, -1, -1, 0, -1, 0, 1, -1, 3, 3 ], "summary_paragraph_index": [ 1, 1, 1, 1, 1, 2, 2, 2, 2, 3, 3, 3, 3, 3, 3, 4, 4, 0, 0, 0, 0, 0, 0 ] }
CRS_RL32843
{ "title": [ "", "Introduction", "Filibusters and Limits on Consideration", "\"Nuclear\" and \"Constitutional\" Options", "Synopsis", "The \"Entrenchment\" of Senate Procedure", "Lack of Overall Consideration Limits", "Effects of the Continuing Body Doctrine", "The Continuity of the Senate", "Practical Implications of Continuity", "Contrast with the House of Representatives", "Entrenchment in Practice Only", "Requisites of a \"Nuclear Option\"", "Overcoming Entrenchment", "Consideration Limits Under Existing Procedures", "Motion to Table", "Point of Order", "Nested Point of Order", "Precedential Force of Parliamentary Rulings", "Rulings of the Chair", "Decisions by the Senate", "The \"Constitutional Option\"", "Rulemaking Power as Basis", "\"Advice and Consent\" Power as Basis", "Consideration Limits on Submitted Questions", "Possible Proceedings in a Contemporary \"Nuclear Option\"", "Point of Order Sustained by Chair", "Adverse Ruling in Accordance With Precedent", "Point of Order Submitted", "Point of Order by Opponents", "Nested Points of Order", "Implications of Using Extraordinary Action to Overcome Entrenchment", "Peremptory Departure from Established Procedure", "Extraordinary Action and the Standing of Precedent", "Attempts to Amend the Cloture Rule, 1953-1975", "Asserting the Non-Continuity of Rules", "Majority Cloture on Rules Changes", "Presumptively Non-Debatable Motion to Proceed", "Corresponding Considerations in the House", "Procedural Stability and Procedural Control", "Prospective Effects on Senate Practice", "Procedural Change Under Established Constraints", "For Further Reading" ], "paragraphs": [ "", "", "In recent years, final Senate action on several presidential nominations for federal judgeships has been impeded by filibusters or threatened filibusters. In response, some leading Senators have called for the Senate to change its procedures to prevent filibusters, or make them harder to sustain, at least on this class of business. Filibusters are possible largely because for most matters, including nominations, existing Senate procedures establish neither limits on the time available for consideration nor means by which a voting majority may impose such limits. In this sense, existing Senate rules largely lack provision for effective majoritarian consideration limits. Accordingly, advocates of change in this area have focused on procedural changes that would afford more effective means for a majority to limit consideration.\nExisting Senate rules and procedures, however, also place potentially substantial obstacles in the way of adopting changes in these rules and procedures. In particular, the lack of effective majoritarian consideration limits also applies to the procedures under which the Senate normally considers proposals for procedural change. As a result, advocates of more effective consideration limits have sought alternative means of instituting procedural changes that would not be subject to these difficulties.", "Beginning in the 108 th Congress (2003-2004), the term \"nuclear option\" has often been used to refer to a procedural course of action that would meet this requirement of bypassing the obstacles posed by the usual procedures for considering procedural changes. Critics of this form of action, however, have used this term also to connote that unilateral resort to such a course by a majority might undermine \"traditional\" practices of comity within the Senate, especially the expectations of predictability through consensual arrangements that have hitherto been held to characterize the body. Because of this connotation, some advocates of this form of action have come to prefer the term \"constitutional option.\" This designation appears to connote that most of the courses of action currently under consideration would rely on an appeal to constitutional requirements as grounds for instituting consideration limits.\nThis report reserves the term \"constitutional option\" for those courses of action that depend specifically on constitutional points of order, as explained in the section on \" The \"Constitutional Option\" .\" The term \"nuclear option\" is here used only to indicate that such a course of action would constitute an alternative to \"conventional\" proceedings because of its capacity to cut comprehensively through the normal difficulties of achieving procedural change. In this usage, any form of \"nuclear option\" would afford the Senate means to circumvent the obstacles to change posed by the usual forms of proceeding.\nThis usage leaves open whether a course of action could achieve its result without compelling the Senate to set aside requirements of its existing procedures in the process. A course that did require action at variance with established principles underlying the system of Senate procedure might be considered \"nuclear\" in a more fundamental sense. The reason, as explained in the section on \" Overcoming Entrenchment ,\" is that it would presumably constitute precedent for subsequent departures of the same kind. It is one purpose of the following discussion to identify the extent to which various courses of action described would or would not be \"nuclear\" in this strong sense.", "The chief intent of this examination is to identify some specific courses of procedural action that might be used to carry out a \"nuclear option\" in the broad sense just defined. It focuses on clarifying the specific features of each course that might enable the Senate to avoid the obstacles to change posed by more conventional ways of proceeding. It indicates what provisions of existing procedures might pose difficulties for implementing various courses of action, as well as possible procedural responses by which proponents of such action might address these difficulties.\nThe discussion also identifies the features that specifically distinguish some of these courses of action as \"constitutional options.\" In addition, however, it identifies points at which the courses of action might require proceedings at variance with existing requirements. On the basis of this examination, it is possible in conclusion to identify some implications that resort to a \"nuclear option\" might have for the subsequent condition of Senate procedure.\nShowing how a course of procedural action represents a \"nuclear option\" involves identifying the ways in which it may bypass or overcome the obstacles posed by the usual procedures. To enable this examination, the discussion begins by describing the nature of these obstacles and indicating how they are grounded in the existing structure of Senate procedure. These observations make it possible to explain more specifically not only what a \"nuclear option\" must accomplish, but also why resort to proceedings of this kind may appear attractive or necessary in the first place.", "The question of enhancing the ability of the Senate to limit consideration of matters has dominated the procedural history of the body for well over a century. Part of the reason for this persistence is that Senate procedures have always lacked effective limits on consideration. This lack of consideration limits may often enable opponents of a proposal to block its approval, even if it is supported by a majority, by extending its consideration indefinitely, thereby preventing the Senate from ever being able to reach a vote on it. It is delaying actions of this kind that are colloquially, but universally, known as filibustering.\nThis lack of effective consideration limits also applies to the procedures normally used for consideration of proposals for procedural change. In particular, it extends to the consideration of any proposal to institute additional consideration limits. Proposals to constrain filibustering can be filibustered. In this way, the existing lack of consideration limits operates as a continuing obstacle to the establishment of new consideration limits.\nThe persistence in the Senate of the question of limiting consideration, however, also arises from a second cause. Certain elements of the Senate's procedural system have the effect of requiring that its established procedures remain continuously in effect. As a result, a proposal to institute more effective means of limiting consideration would have to be considered in accordance with the already existing procedures. The principle that existing Senate procedures remain always in effect then combines with the lack of consideration limits under existing procedures to make it hard for the Senate to adopt more effective consideration limits. It is in this sense that Senate rules have been described as \"entrenched\" against their own change.\nThis section considers more specifically these two features of Senate procedure, which together bring about its entrenchment. It examines first the procedural provisions that result in the general lack of consideration limits, then the principles that result in the continuous force of the existing system of procedure. On the basis of this discussion it will be possible to consider what characteristics a \"nuclear option\" would have to possess in order to succeed in overcoming the entrenchment of Senate procedure so as to permit the adoption of additional limits on consideration.", "Senate procedure is governed not only by the Standing Rules of the chamber, but also by standing and special orders, pertinent provisions of the Constitution and of statute, the body of precedent formed by past rulings on procedural questions, and informally accepted practices. For most matters, none of these procedural standards either places any restrictions on how long consideration may last, or explicitly establishes any means for a simple majority of Senators voting to impose such restrictions. In general, only by a super-majority may the Senate apply the limits on consideration specified in Senate Rule XXII, an action known as invoking cloture. Otherwise, the Senate may in general place agreed restrictions on consideration of a question only by unanimous consent.\nSome accounts suggest that the most likely purpose of resort to a \"nuclear option\" under current conditions would be to permit the Senate to limit consideration of a nomination by a simple majority vote, rather than a super-majority. In fact, however, Senate procedures already require only a simple majority for the approval of almost any substantive proposal, including a nomination. (The requisite number has often lately been referred to as \"51 votes\" although, in fact, it is smaller when not all Senators vote.) The effect of Senate procedures, in general, is to require a super-majority not for the approval of items of business, but only for the imposition of limits on their consideration, so as to ensure that votes on their approval can occur.\nUnder these arrangements, even if a proposal is supported by a majority, opponents may be able, by filibuster, to prevent the Senate from reaching a vote on it, unless supporters are numerous enough to invoke cloture. It is from desire to avoid possible filibusters that Senate practice has historically fostered the settlement of issues through collegial processes of seeking consensual agreement.\nInasmuch as filibusters are defined by the intent of the participants to block action, their conduct is not limited to the use of any specified form of procedure. Although filibusters are commonly thought of as carried out through extended debate, they may also be conducted by a wide variety of other procedural means. Correspondingly, although cloture is widely understood as a motion for bringing debate to a close, it also restricts certain other actions that could be used for purposes of delay.\nSenate procedure also permits debate on many procedural motions. In particular, a motion that the Senate proceed to consider a bill or resolution is debatable under most circumstances (by contrast, however, present practice permits the Senate to proceed to consider a nomination on a non-debatable motion). For this reason, if opponents of a matter persist in a filibuster, reaching a final vote may require supporters to secure super-majority support for cloture or other limits on consideration multiple times, on each of several essential questions that may arise in the course of consideration. For a few specific questions, nevertheless, Senate rules or other procedures do establish limits on consideration, and, as discussed in the next section, some of these might play a role in the implementation of a \"nuclear option,\"\nAll these conditions of consideration apply to the conduct of Senate business generally; they are not specific to the consideration of proposals for procedural change. Only because the Senate's general rules of procedure also apply specifically to the consideration of proposed changes in procedure do they contribute to the entrenchment of the existing procedures. Specifically, the lack of effective majoritarian consideration limits in existing procedure tends to entrench itself by constituting the chief obstacle to its own change.\nIn certain respects, moreover, the system of Senate procedure places greater obstacles in the way of bringing the Senate to a vote on a proposal to amend the Standing Rules than for other matters. As with most other matters, the Senate can adopt amendments to its Standing Rules by a simple majority of those voting. On most matters, however, the vote required to invoke cloture is three-fifths of the full Senate membership (60 votes, if no vacancies exist), while for amendments to the Standing rules it is two-thirds of Senators voting (67, if there are no vacancies and all Senators vote). This more demanding requirement contributes specifically to the entrenchment of the Standing Rules against change.", "The lack of consideration limits in Senate procedures would not suffice to entrench those procedures unless the Senate also required that existing procedures are to govern consideration of proposals for their own change. The chief embodiment of this requirement is the Senate's practice of treating its rules as remaining continuously in effect, even from one Congress to the next, and even in the absence of any action to reaffirm them. This practice arises largely as a consequence of the way the Senate understands its status under what has been called the \"continuing body doctrine.\"", "To say that Senate is a continuing body is, in itself, to state not a doctrine, but merely a fact. Under the Constitution, a majority of the Senate constitutes a quorum, and only one-third of senatorial terms expire at the end of each Congress. Even at the beginning of a new Congress, as a result, and even before newly elected Senators are sworn in for new terms of office, a quorum of the Senate remains in being, and the body remains capable of functioning and acting. By this criterion, a Senate, with membership sufficient to do business, has been in continuous existence ever since the body first achieved a quorum on April 6, 1789. That the Senate is a \"continuing body\" in this sense was explicitly enunciated at least as early as 1841.", "At various times in its history, however, the Senate has understood the implications of the fact of its continuity in different ways, and it is the understanding of these implications that may be considered the \"continuing body doctrine.\" Under current practice of long standing, the Senate regards itself not only as a continuing body, but as a continuously organized one. The elected officers of the Senate appear always to have been regarded as continuing in office from one Congress to the next unless replaced by affirmative action of the body. In current practice, the Senate appoints its committees at the beginning of each Congress, but assignments are regarded as carrying over in the new Congress until changed (or renewed) by action of the Senate. When the Senate first established standing committees, however, its initial practice was to regard assignments as expiring at the end not only of each biennial Congress, but of each annual session.\nIt appears, by contrast, that the Senate has always regarded its Standing Rules as continuing in effect from Congress to Congress without affirmative action on its own part. The Senate implicitly decided this question by not acting to re-adopt, revise, or replace its original rules of 1789 at the convening of the first session of the Second Congress in October 1791. Since then, the Senate has amended its rules on numerous occasions and has adopted several comprehensive recodifications, not always at the beginning of a Congress. It has generally done so with at least the tacit understanding that it was acting pursuant to the procedures established in the already existing rules.\nThis understanding reflects a presumption that the continuity of the Senate entails the continuity of its rules. In 1959, the Senate explicitly incorporated this principle into its Standing Rules by providing that \"The rules of the Senate shall continue from one Congress to the next Congress unless they are changed as provided in these rules.\" This action, which accompanied certain changes making cloture easier to obtain, had the effect of giving the force of rule to an interpretation of the continuing body doctrine that supports the entrenchment of Senate rules.\nThe Senate also treats other components of its system of procedure as maintaining continuity. Standing orders, like the Standing Rules, are accepted as remaining perpetually in force unless their terms specify otherwise. No doubt exists that provisions of the Constitution having procedural force remain continuously effective, and the Senate implicitly accords the same treatment to provisions of statute that operate procedurally. Finally, it is implicit in the precedential character of procedural rulings by the chair and the full Senate that, once made, they continue to guide proceedings subject only to subsequent decisions and actions of the body. All these understandings also contribute to the tendency of the system of Senate procedures toward its own entrenchment.", "The status of the Senate as a continuing body, and the implications it draws from that status, may be highlighted by contrast with corresponding practices of the House of Representatives. In just the sense that the Senate is a continuing body, the House is not, for the terms of all House Members expire with the biennial expiration of the constitutional term of a Congress. Consistent with this circumstance, the House adheres to the principle that one House cannot bind a subsequent House, and consequently the organizational arrangements of the House in one Congress do not automatically carry over to the next. When a new House of Representatives convenes after an election, it understands itself as an inchoate, unorganized body that must proceed to its own organization as its first order of business. Its initial proceedings include the election of its Speaker and other officers, the adoption of rules, and the approval of committee assignments for all Members.\nThe rules the House adopts typically consist of an amended version of the code in effect in the previous Congress. That code includes effective means for limiting consideration of measures, especially in admitting the motion for the previous question as a device for concluding consideration and proceeding to an immediate vote. While considering the adoption of rules, however, the House regards itself as proceeding not under its previously existing rules, but under \"general parliamentary law.\" The House recognizes the motion for the previous question as a part of general parliamentary law, thereby affording itself a means of concluding consideration and proceeding to a vote on the resolution to adopt the rules.\nAs with the Senate, however, the House implicitly accepts the principle that present procedural rulings should conform to previous precedent. The House treats this principle itself as a part of the general parliamentary law; it could even be said that the House justifies its adherence to general parliamentary law before the adoption of rules by appealing to the precedent of its having done so in the past. On similar grounds, the House has long continued the practice of having the Clerk of the previous House call the new House to order and preside until the election of a Speaker. By these means the House enables itself to maintain a continuity of practice without entrenching its rules against their own change. In particular, these practices enable the House to maintain effective means of limiting consideration while still observing the principle that it is not bound by the rules adopted by the House in a previous Congress.", "One implication of the preceding discussion is that the principles and provisions that bring about the entrenchment of Senate procedures do not suffice to render that entrenchment absolute. No imperative mandate purports to declare Senate procedures immune from change or positively to prevent the Senate from altering them. Instead, Senate procedures are entrenched in practice only, as a consequence of a combination of certain provisions they contain and principles on which they rest. Even pursuant to procedures as they now stand, the Senate could in practice alter any of those procedures (except, of course, for constitutional requirements) unless opponents were able to prevent the Senate from reaching a vote. If, furthermore, the Senate did alter its procedures so as to provide for limits on the consideration of proposals for procedural change, it would thereby enable a voting majority, in general, thereafter to adopt whatever additional change proposals it favored. Under those conditions Senate procedures would cease to be entrenched in the sense just described.\nThe conditions that entrench existing procedures come into play only when opponents of a proposed change that commends majority support are able to prevent a vote. As a result, Senate procedures are entrenched only to the extent that, because of the lack of majoritarian consideration limits, a voting majority may still be unable to achieve procedural changes. A number of legal and constitutional arguments might be raised against the propriety even of this entrenchment in practice. Yet any such argument might afford the Senate no concrete assistance in overcoming the practical condition of entrenchment, unless it could be brought to bear in an effective way in the context of actual Senate proceedings—meaning, presumably, that it would be invoked as an element of a \"nuclear option.\"", "", "In light of the preceding discussion, resort to a \"nuclear option\" may be understood as an attempt to overcome the existing entrenchment of Senate procedures and enable a voting majority to institute desired procedural changes (specifically, provisions for limits on consideration). To achieve this purpose, it appears, a \"nuclear option\" would have to afford some means of ensuring that the Senate could reach a vote on a procedural change proposal, which would evidently mean providing some way to overcome at least one of the two conditions that combine to bring about entrenchment. A course of action could provide a \"nuclear option\" either by (1) overcoming the scarcity of majoritarian consideration limits afforded by existing procedures or (2) departing from the principle that the existing system of procedure as a whole remains always in effect.\nFrom this perspective, it appears that a \"nuclear option\" might achieve its effects by engaging in either (1) an innovative or unorthodox use of some existing procedures or (2) proceedings not governed by the existing system of Senate procedure. Roughly speaking, proceedings of the first kind would involve means of overcoming the existing scarcity of consideration limits; those of the second kind would disregard the principle that established procedures remain continuously applicable. Successful action in either form would result in the institution of changes from the system of Senate procedure as previously established, and either approach would represent a \"nuclear option\" in the sense that it would overcome the obstacles to procedural change presented by the Senate's existing procedural system.\nSetting aside existing procedures in the course of considering procedural changes, however, might be considered \"nuclear\" in an additional sense as well. A course of action of this kind would not only result in the alteration of established procedure, but engaging in it would, in itself, already constitute an alteration from established procedure. Under these conditions, change would be realized not only as an outcome of a process of considering proposals for change, but in the very occurrence of the process. This form of \"nuclear option\" would, by definition, constitute an extraordinary proceeding, in the strict sense of taking place outside the ordinary conditions of proceeding. Its occurrence, in itself, would already constitute peremptory, ad hoc action to remove the Senate from regulation by its previously established procedures. As a result, the subsequent effects of this form of action on the system of Senate procedure would come through not only the changes it would institute, but also those that would occur simply through carrying it out.\nThe remainder of this section examines some specific forms of action that have recently been discussed as possible elements of a \"nuclear option.\" It assesses whether a successful \"nuclear option\" could be constructed through novel or alternative uses of some established elements of procedure, or would require extraordinary proceedings. These considerations will permit subsequent examination of some specific courses that a \"nuclear option\" might take. On this basis, potential implications of carrying out proceedings that would be \"nuclear\" in the \"strong\" sense of involving peremptory departure from existing procedures will be discussed.", "The previous discussion of entrenchment suggests that the chief requisites of a feasible \"nuclear option\" would be (1) that a proposal for procedural change be subject to adoption with the support of a simple majority of Senators voting; and (2) that its consideration be subject to limitation also by a simple voting majority, so as to ensure that a vote can be reached. The first requirement is easily met by the regular procedures of the Senate; it is the second that presents difficulties. To meet the second requirement, it appears that applicable procedures would have to either (1) permit a voting majority to impose limits on the time available for consideration of a matter; or (2) provide generally for such limits, including by making the matter non-debatable.\nIn addition, if an existing procedure does not impose an overall time limit on consideration of a proposal, but only permits a majority to limit consideration, it can assure a vote on the underlying proposal only if it assures that the Senate can reach a vote on the question of limiting consideration. Such a procedure, accordingly, would also have to include some effective means of limiting consideration of the question of limiting consideration. As with the underlying matter itself, the procedure could limit consideration of this new question either by imposing a general limit or by permitting a vote to impose one. If it does so only by permitting a vote to impose a limit, however, the same requirement would again apply to the procedure for considering the question of imposing the limit.\nIt follows that any effective procedure for limiting consideration must include some provision establishing a general consideration limit for some question involved in the process. If it provides for no such limit, the Senate could be prevented from getting to the point at which it could begin the series of votes that would ultimately result in imposing consideration limits on the underlying substantive matter. In addition, each of the series of questions involved in limiting consideration of the matter, and not only the final vote on the matter itself, would have to be subject to the decision of a simple voting majority.", "The motion to table constitutes a partial exception to earlier generalizations about the lack of majoritarian consideration limits in the Senate. The motion to table a matter is not debatable, may be adopted by majority vote, and, if adopted, has the same effect as a vote to defeat the proposal. As a result, it can, in a sense, be used to impose consideration limits on the underlying question. For example, if opponents of a proposal offer a series of amendments in an attempt to protract consideration, a voting majority can dispose of each amendment by moving, and immediately agreeing, to table it.\nThe motion to table, however, terminates consideration of a proposal only by defeating it. Rejection of the motion leaves the proposal pending before the Senate and still open to further consideration. Accordingly, the motion to table cannot directly be used to expedite approval of a proposal. For this reason, it might be possible for a \"nuclear option\" to benefit from the use this motion, while still remaining consistent with previously established procedure, only if the Senate could be brought to consider a question whose defeat would either result in adopting the desired procedural change, or at least facilitate its adoption by limiting its consideration.", "The process by which the Senate decides parliamentary questions also involves elements that can have the effect of limiting consideration. Typically, a parliamentary question, or question of order, comes before the Senate in the form of a point of order. A point of order is a claim, raised from the floor by a Senator, that some pending procedural action is inconsistent with pertinent rules or other procedural standards. Under most circumstances, the presiding officer may settle a point of order by ruling on whether the claim it raises is procedurally correct. A question of order may also be presented, without any point of order being raised, if an ambiguous or unsettled situation arises in the course of proceedings. Most questions arising in this way also may be settled by a ruling of the chair. In either case, the ruling of the chair becomes final unless any Senator appeals it to the full Senate. An appeal is settled by a simple majority of Senators voting, and this vote either confirms or reverses the initial ruling of the chair.\nThe initial action of the chair on a point of order is, in effect, subject to limits on consideration, because Senate practice permits debate on a pending point of order only at the discretion of the chair. Under most circumstances, on the other hand, appeals of a ruling by the chair are debatable. As a result, opponents of the decision that the Senate seems likely to make on an appeal may be able to filibuster to prevent the Senate from reaching a vote on the appeal. If insufficient support exists to invoke cloture on the appeal, the Senate might be able to limit its consideration only by tabling it.\nTabling an appeal, however, confirms the initial ruling of the chair. If the Senate wishes to reverse the chair's ruling, it can do so only by voting directly on the appeal itself. For Senators wishing to establish a position contrary to the ruling of the chair, accordingly, it appears that the motion to table would afford no aid. In the face of a filibuster, indeed, the Senate might have no effective means to reach a vote on an appeal that would reverse an initial ruling. Under these circumstances, the Senate may be able to limit consideration of an appeal only with the effect of simultaneously confirming an initial ruling of the chair.\nA parliamentary question, accordingly, is like a motion to table in that effective consideration limits are usually available only for one of its possible dispositions. For parliamentary questions, however, the protected disposition is the one consistent with the initial ruling of the chair. Under these conditions, it appears that raising a parliamentary question could be an effective part of a \"nuclear option,\" without departure from the requirements of already established procedure, only when an initial ruling of the chair would be favorable to the adoption of the desired procedural change, or at least to limiting consideration of the proposal for change.", "Senate rules, however, also establish certain additional conditions under which it might be possible to impose limits on the consideration of parliamentary questions. In particular, Senate Rule XX, dealing with \"Questions of Order,\" includes a provision that \"when an appeal is taken [from a decision of the chair], any subsequent question of order which may arise before the decision of such appeal shall be decided by the Presiding Officer without debate; and every appeal therefrom shall be decided at once, without debate....\" Under suitable conditions, this provision could permit consideration of a parliamentary question to be limited, whether or not the initial ruling was favorable.\nSuppose, for example, that proponents of a \"nuclear option\" raised a point of order intended to establish consideration limits, and the chair overruled it. Proponents of consideration limits might appeal this unfavorable ruling, then raise a new point of order claiming that consideration limits should apply to the appeal. Even if the chair overruled this new point of order as well, its proponents could again appeal. Inasmuch as the second point of order would be nested within the first, the prohibition of Rule XX against debate on the nested appeal would ensure that the Senate could reach a vote on that question.\nThrough its vote on the nested appeal, the Senate could then impose limits on consideration of the initial appeal and enable itself to reach a vote thereon. Through its vote on the initial appeal the Senate could then affirm the consideration limits asserted by the original point of order. Under these circumstances it might be possible to construct a way of pursuing a successful \"nuclear option\" that did not require either an initial favorable ruling by the chair or any peremptory departure from established procedures.", "The possibility that limits could be brought to bear on the consideration of parliamentary questions makes them attractive as a vehicle for securing changes in Senate procedure. They are attractive for this purpose also, however, because rulings on parliamentary questions are, specifically, decisions about procedure: they may have the effect of establishing standards for subsequent proceedings. For this reason they may potentially afford an alternative to formal amendment of the rules as a means of procedural change.\nExactly because rulings on parliamentary questions are procedural decisions, however, their use as a means of achieving procedural change also presents certain potential obstacles. The procedural standards that regulate these questions not only prescribe the process by which they may be settled, but also place certain constraints on their substantive content. The principles behind Senate procedural practice do not enfranchise the body to settle parliamentary questions according to its own preferences in the immediate circumstances in the same way that it may decide ordinary questions of policy that come before it. Instead, Senate procedure implicitly presumes that rulings on parliamentary questions will represent interpretations of the meaning and force of some existing rules or other procedural standards, and that those made by the chair, at least, will accord with previous interpretations embodied in established precedent. To the extent that a course of action aimed at enhancing consideration limits required proceedings at variance with these principles, it would involve peremptory departure from established procedure.", "The Senate treats rulings on parliamentary questions as establishing precedent for subsequent action in comparable situations. Although a parliamentary ruling brings about no actual amendment of Senate Rules, its standing as a precedent renders it, in effect, a part of the overall system of Senate procedure. It is in large measure this precedential force of parliamentary rulings that makes the use of parliamentary questions appear attractive as an element of a \"nuclear option.\" If the chair ruled that limits applied to the consideration of a pending matter, advocates of limiting consideration would presumably invoke the ruling as a precedent for applying comparable limits to the consideration of similar matters in corresponding future circumstances. To the extent that this precedent modified the way in which the system of Senate procedure was applied and implemented, it would operate as a \"nuclear option\" to bring about procedural change.\nThe implicit justification for according precedential force to parliamentary rulings, however, is the presumption that such rulings will reflect authoritative interpretations of established rules and other procedural standards. The Senate can consider it appropriate for earlier rulings to guide later action precisely because it can expect those rulings to be made in conformance with established procedural standards (including previous interpretations embodied in precedent). For this reason, it is an established presumption of Senate procedure that the chair is to rule on parliamentary questions in ways consistent with already established procedural standards.\nThe precedential force of parliamentary rulings, accordingly, entails not only that present rulings establish guidelines for future ones, but also that previous rulings guide present ones. If the success of a \"nuclear option\" required the chair to rule in a way at variance with existing procedure, the course of action involved would appear to exemplify not an innovative or unorthodox use of existing procedures, but an extraordinary proceeding at variance with established standards.\nSpecifically, if a parliamentary situation arose requiring the chair to rule whether some existing procedural standard mandated limits on consideration, the principle of precedent would presumably require the chair to rule consistently with past rulings on comparable questions in similar situations. A ruling by the chair that imposed consideration limits not previously recognized in Senate procedure might be considered as involving a violation of this principle. If previous precedent recognized no limits on consideration applicable to the instant situation, and the chair ruled in favor of consideration limits, its action would appear to constitute an extraordinary proceeding involving peremptory departure from the established system of Senate procedure.\nIn this respect, the scarcity of consideration limits in existing Senate procedure sets the problem not only for the process by which a \"nuclear option\" could be carried out, but also for the substantive result it might achieve. A key impediment to the effective use of parliamentary rulings in a \"nuclear option\" might be the difficulty of finding a procedural basis for the chair to rule in favor of limits on consideration while remaining consistent with existing procedural standards.\nIn some circumstances, nevertheless, the constraint on the chair to conform parliamentary rulings to established precedent might not prevent the use of such rulings to accomplish procedural change. Where existing precedents are ambiguous, conflicting, or silent, a new ruling by the chair or the Senate may appropriately affirm an interpretation that alters the precedential basis for subsequent decisions. This principle opens up the possibility that a point of order might enable the chair to interpret existing procedures in a way that would either increase the capacity of the Senate to place limits on consideration or facilitate subsequent efforts to do so, while yet avoiding peremptory departure from existing standards in the process of doing so.", "When the Senate itself settles a parliamentary question, it is not constrained by precedent in the same way as the chair is. Pursuant to the constitutional provision that \"each House may determine the Rules of its proceedings,\" the Senate understands itself as the ultimate authority over the meaning and intent of its own rules. Senate procedure accordingly permits the body always to make a final decision on a parliamentary question through its own vote, and rulings by the full Senate are considered the most authoritative form of precedent. For the same reason, the Senate has not regarded itself as constrained in its rulings by previous precedent in the same way as is the chair, which operates only as an agent of the Senate. The Senate's handbook of procedural practice explains:\nAny ruling by the chair not appealed or which is sustained by vote of the Senate, or any verdict by the Senate on a point of order, becomes a precedent of the Senate which the Senate follows just as it would its rules, unless and until the Senate in its wisdom should reverse or modify that decision.\nUnder these standards, procedural interpretations established by rulings of the Senate not only may constitute precedents to govern subsequent procedural action, but may also embody actual changes in the procedural basis of Senate practice. By means of such rulings, the Senate has, on occasion, established interpretations of parliamentary questions that were not simply implicit in, and might even be at variance with, previous interpretations. A parliamentary decision by the Senate might permit a \"nuclear option\" to achieve the effect of altering Senate procedural standards while yet avoiding any proceedings inconsistent with procedures already in effect.\nThe Senate may exercise its authority to settle parliamentary questions about its own procedures in several different ways. Perhaps the most generally applicable way is through the right of any Senator to appeal an initial ruling of the chair to a decision of the full Senate. Senate practice also sets forth, however, that the chair, instead of ruling on a point of order, may always submit the question it presents to the Senate for a decision. The chair does not often exercise this option, but appears to have done so especially when presented with a \"question of first impression,\" that is, a situation in which no previous precedent has established any interpretation of the point at issue. The apparent rationale of this practice is that, inasmuch as the authority of a rule rests ultimately on the constitutional power of the Senate to adopt it, the initial decision on its interpretation is appropriately left to the same body.\nIn addition, however, Senate practice also holds that the chair ought to submit to the Senate any question of order raised on constitutional grounds. The possibility of a constitutional point of order exists because the Senate understands the constitutional provisions that operate to regulate aspects of its procedure as integral components of its procedural system. The Senate nevertheless considers that, although its procedural system accords the chair authority to interpret the Standing Rules, it grants no such authority in relation to the Constitution. The Senate itself, by contrast, stands as a coequal component of one of the three separate branches of the federal government. It is accordingly appropriate for the Senate to exercise authority in relation to the Constitution.", "The authority of the Senate to alter precedent in settling any parliamentary question may afford a means of securing procedural change without requiring any proceedings inconsistent with precedent. At the same time, the possibility of grounding a parliamentary question in a provision of the Constitution may offer supporters of consideration limits a means of pursuing their goal without having to appeal to procedural requirements not already in being. Proceedings invoking these principles would be characteristic of what may appropriately be called a \"constitutional option\" for procedural change.\nSupporters of consideration limits might raise a parliamentary question proposing that some identified provision of the Constitution be interpreted as entailing a requirement for limits on the consideration of business then pending. The Senate might then settle this constitutional question in a way that sustained the proposed interpretation even in the absence of previous precedent supporting it.\nAction of this kind might offer greater possibilities than other forms of \"nuclear option\" for securing procedural change without requiring extraordinary proceedings. A decision of the Senate instituting consideration limits for specified matters, based on an interpretation of constitutional provisions and representing the settlement of a constitutional question, could be viewed as harmonious with existing procedural standards both in substance and in process. In these respects, the course of action resulting in this decision might be considered not to involve any extraordinary proceedings outside the bounds of established procedure. The chief requisite for the feasibility of such a course of action might be identifying a provision of the Constitution that could appropriately be interpreted as supporting the desired limitations. In addition, as the next section discusses, Senate procedures governing action on constitutional points of order impose additional impediments to the effective use of this approach.", "Proceedings exemplifying a form of \"constitutional option\" have actually occurred in the Senate at earlier periods, especially in connection with Senate consideration of proposals to make cloture easier to obtain between 1949 and 1975. During this period, proponents of consideration limits persistently argued that the constitutional power of the Senate to determine its own rules cannot be regarded as exhausted by its exercise on any past occasions. Instead, they held, this power can be effective only if the capacity for its exercise remains continuously and effectively available to the Senate in practice. The effective exercise of the rulemaking power, they contended, requires that the Senate be able to proceed to a vote on proposals to change the rules, and therefore that it must be able to limit the consideration of these proposals.\nOn this view, any mechanisms that operate to entrench the Rules of the Senate against change, including pertinent interpretations of the continuing body doctrine, tend to operate in derogation of the constitutional rulemaking power. To the extent that entrenchment prevents the Senate from making decisions about its own rules, advocates of change argued, it is unconstitutional in its effects. Through this argument, proponents of consideration limits attempted to use the constitutional grant of rulemaking power as a means to overcome the entrenchment of Senate procedure and enable it to proceed to a vote on amendments to the cloture rule. For reasons discussed in the section on \" Attempts to Amend the Cloture Rule, 1953-1975 \" below, however, the Senate ultimately always drew back from affirming that the Constitution implicitly imposed any limits on the consideration of rules change proposals.\nThe principle that the chair does not rule on constitutional points of order, however, was illustrated several times during the proceedings on these proposals. Vice Presidents Richard Nixon (in 1957), Hubert Humphrey (in 1967), and Nelson Rockefeller (in 1975) each declined to rule whether the Constitution required the Senate to be able to reach a vote on rules change proposals. In 1969, on the other hand, Vice President Humphrey announced that cloture had been invoked on a rules change proposal by the vote of a simple majority. He justified his making this ruling by arguing that he thereby vindicated the constitutional power of the Senate to act on the rules change proposal, yet did not arrogate from the Senate its authority to interpret the Constitution, because the Senate could exercise that authority through an appeal.", "Current discussion, by contrast, seems more often to presume that a \"constitutional option\" might be attempted in connection with Senate consideration not of a proposed procedural change, but of a judicial nomination. It would, accordingly, appeal to a different clause of the Constitution, namely, the provision of Article II, section 2, that the President \"shall nominate, and by and with the Advice and Consent of the Senate, shall appoint\" officers in the executive and judiciary branches. Advocates of this form of \"constitutional option\" propose to infer that the responsibility of the Senate to \"advise and consent\" to nominations must entail its ability to vote on them. To be effective in practice, they contend, the ability to vote must entail the capacity to proceed to a vote, and therefore the capacity to limit consideration.", "In the respects just discussed, the requirement that the Senate itself settle parliamentary questions raised under the Constitution, together with the authority of the Senate to revise precedent in settling parliamentary questions, may offer greater possibilities for securing procedural change without requiring extraordinary proceedings. Courses of action involving the submission of a point of order to the Senate, nevertheless, may be subject to difficulty in bringing the Senate to the vote that would accomplish procedural change except through preemptive departure from established procedures.\nWhen the chair submits a parliamentary question to the Senate for decision, only a majority of Senators voting is required to settle the matter. Under these conditions, however, because the chair is no longer to rule, the principle that debate occurs only at the chair's discretion no longer applies. Instead, the question is then subject to debate pursuant to the general rules of the Senate, and accordingly to filibuster. The Senate may table a submitted point of order, but whereas tabling an appeal upholds the initial ruling of the chair, tabling a submitted question has the effect of rejecting the claim it makes. If, for example, a point of order claimed that limits should apply to consideration of a matter, tabling it would reject imposing such limits. Rejecting a motion to table, however, would leave the point of order open for further debate, so that a determination by the Senate might be prevented by filibuster.\nThese considerations suggest that the precedent for submitting constitutional points of order to the Senate might pose an obstacle to the achievement of change through a \"constitutional option.\" The earlier discussion suggested that a \"nuclear option\" could be successfully achieved through raising a non-constitutional parliamentary question only if the chair initially made a favorable ruling on the question. In the case of a constitutional point of order, the chair's immediate submission of the question to the Senate would preclude any initial favorable ruling. The Senate could limit consideration of the submitted question only by adopting a motion to table it, which would have the effect of rejecting the procedural claim the question raised. Under these conditions, it appears, a \"constitutional option\" might be able to succeed within the constraints of existing procedure only if rejection of the submitted point of order would secure new consideration limits.\nIn addition, it is not clear how Rule XX might apply to a nested point of order raised under the Constitution. No available precedent appears to illuminate whether or not the precedential principle against the chair's ruling at all on a constitutional question would override the requirement of Rule XX that the chair rule immediately on a nested point of order. Moreover, if the chair submitted a nested constitutional point of order, no available precedent appears to clarify whether the requirement of Rule XX for an immediate vote on an appeal would be interpreted as extending also to the vote on the submitted question.\nIf the chair could rule on a nested constitutional point of order, a successful \"constitutional option\" might not require an initial favorable ruling. Even if the chair considered itself bound to overrule the point of order, in accordance with existing precedents on the subject, proponents of change could appeal, and Rule XX would presumably enable them to secure an immediate vote on the appeal. The Senate could then achieve the goals of the \"constitutional option\" by settling the question in a way that altered precedent. If, on the other hand, the precedent for submitting constitutional questions would be controlling, but Rule XX were to be applied to submitted questions as well as to appeals, proponents of the \"constitutional option\" might be able to achieve their ends, because the rule would permit the Senate to reach a vote on the submitted question, and thereby allow a majority to settle it in a way that altered precedent. If Rule XX were held neither to permit the chair to rule on a nested constitutional question nor to limit Senate consideration of the submitted questions, however, the difficulty of imposing limits on consideration of the submitted question would pose an obstacle to success of the \"constitutional option.\"", "The considerations advanced in the preceding section may be summarized by examining how they might be brought to bear in a contemporary attempt to institute more effective consideration limits through a \"nuclear option.\" Recent public accounts most often contemplate a course of events in which supporters of change would raise a point of order with the intent of securing a ruling that would have the effect of establishing consideration limits for a pending matter. Specifically, this point of order might claim that further debate on a pending judicial nomination would be dilatory and therefore that an immediate vote was required.", "If the chair were to sustain such a point of order, the effect would presumably be to impose consideration limits on the pending nomination (or other pending question, such as a rules change proposal). This action would presumably assure that the Senate could reach a vote on the underlying question and decide it by a simple majority. In addition, the ruling would constitute a precedent for imposing similar limits on consideration in similar subsequent situations.\nAt the time the chair made this ruling, however, opponents of limits on consideration might appeal it to the full Senate. The appeal would be debatable, but even if supporters of change were unable to limit its consideration by invoking cloture, they might do so by moving to table it. The motion to table could be approved without debate and by a simple majority of Senators. Approval of the motion would confirm the initial ruling of the chair and the precedent thereby established for new means of limiting consideration of the specified type of business.\nIn this way proponents of change could establish new consideration limits by using ones already built into the practices of the Senate that govern proceedings on points of order. To the extent that existing Senate procedure does not provide for the limits on consideration that the ruling would establish, however, it might be possible to implement this form of \"nuclear option\" only with the cooperation of a chair willing to engage in extraordinary proceedings, at variance with existing Senate practice, by making a ruling counter to previous precedent. To that extent, this course of action would be \"nuclear\" in the emphatic sense of involving peremptory changes in procedure outside the regulations of existing procedures.", "If the chair instead determined to adhere to the established principle that it rule in accordance with precedent, it might find itself obliged to rule against the point of order, thereby rejecting the claim that consideration limits should apply to the underlying business. Supporters of change might respond by appealing the ruling, and if a majority supported the appeal, the Senate would overrule the chair and establish in precedent the consideration limits claimed in the original point of order.\nAgain, however, the appeal would be debatable, so that opponents might be able by filibuster to prevent the matter from reaching a vote. In these circumstances, a motion to table the appeal would afford supporters of change no assistance. If the motion to table were adopted, the action would affirm the original adverse ruling; if it were rejected, the filibuster could continue. This sequence of events exemplifies how existing Senate rules can be used to effect their own entrenchment against change.", "A third possibility is that the chair might decline to rule on the point of order, and instead submit it to the decision of the Senate. A point of order contending that the \"advice and consent\" clause of the Constitution requires the Senate to be able to reach a vote might well be held to constitute a question of first impression. In addition, both this point of order and one based on the rulemaking power would appear explicitly to involve constitutional questions. For the chair to rule on either point of order would accordingly seem to require action in disregard of the line of precedent supporting the submission of certain parliamentary questions.\nIn this situation, as with an appeal, supporters of consideration limits might obtain their ends if a majority voted to sustain the submitted point of order. Once submitted to the Senate, however, the point of order would be debatable. Opponents might, through filibuster, be able to prevent a vote on the submitted point of order, and thereby forestall establishment of the desired precedent. Under these conditions, supporters could not advance their cause by moving to table their submitted point of order, for Senate agreement to this motion would have the effect of overruling the point of order, while its rejection would leave the point of order before the Senate in debatable form.\nThis difficulty would presumably arise only for a point of order that presented a constitutional claim or a question of first impression. Yet it is not easy to see what grounds, other than the constitutional, would afford a viable basis for asserting an implicit mandate for limits on consideration not already recognized in the system of Senate procedure, yet would not entail an appeal to any previously unrecognized principle. Even if such grounds could be found, the state of previous precedent would still have to permit the chair to sustain the required interpretation without contravening existing standards. Otherwise, once again, the attempt to secure change could succeed only through the willingness of the chair to render a favorable ruling counter to precedent.", "It is also possible that advocates of consideration limits could construct a situation in which opponents would have to raise a point of order in order to forestall the establishment of new consideration limits. Even under these conditions, however, it appears that the success of a \"nuclear option\" would still depend on the willingness of the chair to provide an initial ruling favorable to limits on consideration, even if counter to precedent. The only difference might be that in these circumstances, the favorable ruling would be one overruling, rather than sustaining, the point of order.\nFor example, supporters of change might begin by offering not a point of order, but a motion that the Senate vote at once on the underlying question before the Senate. If the Senate entertained and adopted this motion, its action would apply limits to consideration of the pending question, and also would constitute precedent for admitting similar motions on similar questions on subsequent occasions. Opponents might be able to prevent this result only by raising a point of order against the proposed motion on grounds that existing Senate procedure authorizes no such motion.\nWhatever ruling the chair made on this point of order, opponents of the ruling could appeal. The Senate could limit consideration of the appeal only by tabling it, which would also affirm the initial ruling. If the chair overruled the point of order, accordingly, opponents of consideration limits might be compelled to press their position by appealing the ruling, which would enable supporters to vindicate theirs by tabling the appeal. As already noted, however, such a ruling might necessarily constitute an extraordinary proceeding not sanctioned by established precedent. If the initial ruling remained consistent with existing practice by sustaining the point of order against the motion to proceed to a vote on the underlying matter, the Senate could not achieve consideration limits by tabling the appeal, but only by reversing the chair on appeal. Reaching this result would require an up-or-down vote on the appeal itself, and, as above, opponents of consideration limits could attempt to prevent this vote from occurring by filibuster.\nThe only evident means of avoiding such a result, without requiring peremptory departure from existing procedure, might arise if the chair determined to admit the motion to proceed to a vote on constitutional grounds. In that case, opponents' point of order against the motion would presumably present a constitutional question, and Senate practice would presumably require the chair to submit it to the Senate. The Senate might then be able to establish a precedent supporting consideration limits by tabling the submitted point of order. Even in this case, however, unless some existing non-constitutional procedural standards could appropriately be interpreted as admitting a motion to proceed to a vote, the action of the chair in entertaining such a motion in the first place would already appear to constitute an extraordinary proceeding outside the bounds of established practice.", "Few published discussions of the \"nuclear option\" appear to consider whether the Senate Rule on nested points of order might alter the considerations so far presented. The previous section suggested that, if a nested point of order were raised on constitutional grounds, the precedents directing the submission of constitutional points of order would appear to conflict with the provisions of Rule XX mandating immediate settlement. On the other hand, if the nested point of order were raised on non-constitutional grounds, the additional restrictions on consideration provided for by Rule XX might affect the outcome.\nOne example of a possible non-constitutional nested point of order could be one addressing whether a pending constitutional point of order should be submitted to the Senate. For example, if the chair submitted a point of order claiming constitutional warrant for limits on consideration of a judicial nomination, supporters of such limits might raise a nested point of order claiming that the chair should proceed to rule, in order to forestall a possible filibuster that could prevent the Senate from reaching a vote on the initial point of order. Conversely, if the chair offered to rule on the constitutional point of order, opponents of consideration limits might contest this action by raising a nested point of order on grounds of the precedent that constitutional points of order are to be submitted to the Senate for decision.\nIn either of these cases, the nested point of order might be held to present not a constitutional issue, but only a question about the precedent for submitting constitutional points of order. Without departure from the standards embedded in previous practice, accordingly, the chair might be able to rule on the nested point of order. Also consistently with established precedent, the chair could sustain this point of order, ruling that the initial, constitutional, point of order must be submitted. Supporters of the initial point of order would then be able to appeal this ruling, and under Rule XX, the appeal would be subject to an immediate vote, inasmuch as it was nested within the initial point of order. By reversing the chair's ruling on appeal, the Senate would authorize the chair to rule on the original constitutional point of order.\nIn this situation, however, the chair would still have to rule favorably on the initial point of order, for otherwise the Senate would remain unable to secure consideration limits by voting to table any appeal. Yet such a ruling might entail a peremptory departure from precedent on the part of the chair. Moreover, if the sequence of events required that the chair initially attempt to rule on a constitutional question, this action, too, could be considered to involve an extraordinary proceeding at variance with established procedure.\nUnder some circumstances, in addition, these proceedings might require the Senate to establish a new principle that the prohibition of Rule XX against debate on an embedded point of order applied to questions submitted as well as to appeals. Finally, this course of events would also require the Senate to concede to the chair authority to make rulings on constitutional questions. Although both decisions would lie within the plenary power of the Senate to interpret its own rules, the last, at least, would alter a historic practice that the Senate has always treated as being solidly anchored in its constitutional standing as a branch of Congress.\nA nested non-constitutional point of order might also arise in a more complicated way if the chair submitted to the Senate a point of order claiming that the Constitution required consideration limits for judicial nominations. If a filibuster prevented the Senate from reaching a vote on this submitted point of order, supporters of the point of order might then raise a second point of order, claiming that this filibuster was unconstitutionally preventing the Senate from exercising either its \"advice and consent\" power or its authority to determine the meaning of its own rules. Either of these new points of order would clearly also appear to involve a constitutional question, so that the chair might feel compelled to submit it also to the Senate. Supporters of the new point of order, however, might then raise a third point of order that this new (second) submitted question should be held nondebatable under Rule XX, on the grounds that its consideration was nested within that of the original (first) point of order. The chair might not have to submit this third point of order to the Senate, because it would be raised not under the Constitution, but under Rule XX. Instead, the chair could rule on the matter.\nWhichever way the chair ruled, opponents of the ruling could appeal, but Rule XX would presumably apply to prevent debate of this nested appeal on a non-constitutional question. Under these conditions the Senate would be assured of reaching a vote on the appeal, and by this means a voting majority could sustain the third point of order. This action would have the effect of limiting consideration of the previous (second) point of order. By sustaining the second point of order, in turn, the Senate could impose limits on consideration of the first, and by sustaining the first it would institute limits on the consideration of the underlying nomination.\nUltimately, as a result, this course of action would assure the Senate of reaching a vote on the question of imposing consideration limits and of settling that question by a voting majority. It might thereby enable the Senate to secure alterations in its effective procedure without either having to obtain a super-majority vote or requiring action contrary to precedent. The Senate would decide the claim raised by the original point of order, and the chair would not be required to decide questions either that precedent holds should be submitted nor in a way contrary to established precedents. In this situation, the only peremptory action to change Senate procedure would occur through the Senate's own exercise of its essentially plenary discretion under its constitutional power to determine the sense of its own rules.\nThe result of these proceedings might remain indeterminate only if the chair submitted the third point of order to the Senate as question of first impression. It might well be held a question of first impression whether a submitted nested point of order was subject to the same consideration limits provided by Rule XX for appeals. Under these conditions, a filibuster might then prevent a vote on the submitted question. Supporters of change might be able to respond to this filibuster only by offering a further (fourth) point of order claiming the same applicability of Rule XX with respect to the newly submitted (third) point of order. In that case it does not appear how a regress, in which the same question was repeatedly raised, and repeatedly submitted as a question of first impression, might be cut off.", "", "The possible courses of action examined in the previous section all represent variations of a \"nuclear option\" in the broadest sense defined at the outset. Each might succeed in overcoming the obstacles to change in Senate procedure presented by the requirements of that procedure itself. Most of these courses of action, however, appear also to require proceedings that would be \"nuclear\" in the emphatic sense of not being regulated by established procedure. Only certain courses of action involving a nested point of order seem to allow for the possibility of a process in which a procedural question might be decided by the Senate, in accordance with its plenary constitutional power over its own rules, without requiring any departure from established procedure governing the decision of procedural questions.\nMost of the courses of action examined in the last section, nevertheless, involve proceedings at variance with existing procedure at least to the extent of initial action by the chair on a parliamentary question in disregard of procedural principles well established in Senate practice. The action typically required is a ruling by the chair, on a parliamentary question, that would have the effect of imposing limits on consideration of a pending matter. In the proceedings under consideration, such a ruling appears requisite for placing the question of imposing limits before the Senate in a form on which established practice already permits limits on debate.\nIn some of these cases, it is the substance of the chair's ruling that might have to disregard precedent, for the requisite ruling would run counter to established interpretations of procedure that the Senate had previously taken as governing practice in the area. If the chair ruled consistently with established precedent, the \"nuclear\" result of instituting new consideration limits could be reached only through a vote of the Senate. In other cases, the disregard of precedent would arise from the process of making the ruling, for the proceedings would require the chair to depart from the established practices that would mandate the question to be submitted to the Senate for a decision. If the chair conformed to established practice by submitting a constitutional question to the Senate, the \"nuclear\" result could be reached only through a Senate vote in favor of the submitted point of order.\nA ruling that ran counter to precedent either in its substance or in its process would represent \"nuclear\" action not only in the sense of overcoming the usual obstacles to procedural change, but also in the sense that the act of making the ruling would occur at variance with previous Senate practice. Extraordinary proceedings of these kinds, accordingly, would not only result in change, but would themselves constitute a change from previous practice introduced through peremptory action.", "Resort by the Senate to proceedings involving peremptory departure from established standards might have sweeping consequences for the overall operation of the system of Senate procedure. By making use of extraordinary means of proceeding such as those discussed, the Senate would establish precedent for its subsequent use of similar courses of action to achieve further procedural change. The effects of this form of action on the role of precedent and on the entrenchment of the rules might summarily alter the procedural conditions governing any subsequent proceedings aimed at further procedural change. The effective procedural practice of the Senate for the future could be altered, not simply pursuant to Senate approval of a proposal having this purpose, but as a summary effect of proceedings in considering such a proposal (or, for that matter, some other business).\nA precedent for peremptory action to alter procedures might even have the potential to occasion lasting disruptions of the capacity of the Senate for orderly deliberation. The presence of such a precedent might, in principle, enable a voting majority of the Senate to alter any procedure at will by raising a point of order and either securing a favorable ruling or being able to limit debate on the appeal or submitted question. By such means a voting majority might subsequently impose limitations on the consideration of any item of business, prohibiting debate or amendment to any desired degree. Such a majority might even alter applicable procedures from one item of business to the next, from one form of proceeding to a contrary one, depending on immediate objectives.\nIn a similar way, the occurrence of a ruling by the chair in disregard of precedent might be taken as precedent permitting the chair to rule counter to precedent in the future. This discretion might conceivably be assumed even by a Vice President occupying the chair and acting on behalf of a President with political views contrary to that of a Senate majority.\nPossibilities like these indicate that Senate acceptance of extraordinary proceedings as a means of procedural change could have effects entirely vitiating the entrenchment of Senate Rules. These consequences might not only make it possible for voting majorities to exercise effective control over the content and interpretation of Senate procedures, but also raise the possibility of altogether eliminating any regularity of proceedings in the practice of the Senate. Realization of this possibility would be inconsistent with Jefferson's principle that \"it is much more material\" to the good order of a deliberative body \"that there may be a uniformity of proceeding in business not subject to the caprice of the Speaker or the captiousness of the Members.\"\nUnder some circumstances, on the other hand, the Senate may be able to achieve procedural change without resort to extraordinary proceedings. For example, if the parliamentary question that brings about a ruling favorable to consideration limits rests on an ambiguous or unsettled point of procedure, the implications of the process by which change is achieved may not be as sweeping. On several previous occasions, the Senate has engaged in procedural actions that had the effect of changing the practice of the body by establishing novel interpretations of Senate procedure. It does not appear that these past occurrences have had the effect of rendering the body of Senate procedure as a whole volatile or subject to capricious change. In contrast to some of the courses of action described above, nevertheless, at least some of these past proceedings involved the settlement of a procedural question by action of the full Senate, and few appear to have involved direct appeal to a constitutional principle in ways that ran counter to existing practice. In these respects, past occurrences of \"nuclear options\" may not be entirely comparable with those now under discussion.", "The potential implications of resort to proceedings not governed by established procedural standards may be illustrated by considering the attempts made by supporters of consideration limits to amend the cloture rule after the middle of the 20 th century. From the late 19 th century onward, opponents of consideration limits had often been able to prevent their establishment in the Senate by filibustering or threatening to filibuster. These events afford concrete illustrations of how the entrenchment of Senate rules may be maintained by preventing the Senate from reaching a vote on change proposals. The difficulties they presented, however, also led advocates of consideration limits to seek new means to enabling the Senate to reach a vote on their proposals, and their recurrent efforts illustrate many of the procedural possibilities examined in the previous section.\nMost prominently, supporters of change engaged in attempts to contest the entrenchment of Senate Rules by some form of appeal to the constitutional rulemaking power. From 1953 through 1975, advocates of the amendments to the cloture rule attempted in various ways to establish the principle that, pursuant to the rulemaking power, at least at the beginning of a Congress, a simple voting majority of the Senate should be able to impose limitations on the consideration of amendments to the rules. These proceedings accordingly may accordingly be viewed as examples of a \"constitutional option,\" and may illuminate some considerations that a contemporary \"constitutional option,\" as well as a \"nuclear option\" more generally, might face.", "In the 1950s, advocates of change expressed their constitutional claim by arguing that, in order to allow the Senate to exercise its rulemaking power, its rules should be regarded as not continuing automatically in effect in a new Congress. At the opening of Congress in 1953, 1957, and 1959, supporters embodied this argument in a motion that the Senate, pursuant to the Constitution, proceed to consider the adoption of rules. In each year, however, the Senate rejected this motion by tabling it. Presenting the constitutional claim in this form, accordingly, permitted the Senate to reach a decision on it, but only to the extent of rejecting it. In 1959, moreover, the Senate then proceeded, under the rules already in place, to adopt a resolution that amended the cloture rule, but also added to Senate Rules the statement that those Rules remain continuously in effect in a new Congress.", "This new statement in Senate Rules posed an obstacle to continued use of the same approach to achieve further change. In the following years, as a result, advocates of change developed other means of challenging the entrenchment of Senate Rules. These relied more explicitly than before on the rulemaking power. At the opening of Congress in 1967, 1969, and 1971, supporters of consideration limits began by moving that the Senate proceed to consider a resolution amending the cloture rule. Under existing Senate rules, this motion is in order, but debatable. Proponents accordingly went on to ask that the rulemaking power be interpreted as authorizing a voting majority to limit consideration of a motion to consider rules changes at the beginning of a Congress. If the Senate had accepted this interpretation, and had gone on to adopt the motion to consider, proponents could have repeated similar proceedings in order to limit consideration of the resolution itself.\nIn 1967, the motion of proponents was that, pursuant to the rulemaking power, the Senate vote immediately on the pending motion to proceed. Opponents of this motion raised a point of order against it, which Vice President Humphrey submitted to the Senate as a constitutional question. Proponents then moved to table the submitted point of order, which would have affirmed that the rulemaking power authorized a majority to limit consideration of rules change proposals. The Senate, however, defeated the tabling motion, then sustained the point of order, thereby declining to affirm the constitutional claim in this form.\nIn 1969 and 1971, accordingly, change advocates instead moved for cloture on the motion to proceed, but also raised the contention that, pursuant to the rulemaking power, a simple voting majority should be held sufficient to invoke cloture on a rules change proposal at the beginning of a Congress. In both years, cloture was supported by a simple majority, but not by the two-thirds required by Rule XXII on rules changes. In 1969, Vice President Humphrey then announced that consideration would proceed under cloture. Opponents, however, appealed this decision, and the Senate reversed it, thereby again declining to affirm that the rulemaking power authorized a majority to limit consideration of a rules change. In 1971, the chair ruled that, under the 1969 precedent, the support of a simple majority did not suffice to invoke cloture. Change advocates appealed this decision, but the Senate tabled the appeal, thereby sustaining the chair and reaffirming the precedent against limiting debate under authority of the rulemaking power.", "After these occurrences, change advocates abandoned the approach of moving first for an immediate vote, then for a procedural ruling that would permit that vote. Instead, in 1975, they combined these efforts into a single motion that the Senate both proceed to consider a resolution to amend the cloture rule and vote immediately on this motion to proceed.\nThe second part of this motion proposed treating the entire motion as non-debatable and subject to adoption by a simple majority. Combining both propositions in this way overtly manifests the \"nuclear\" character of the proposed action, in that the second part of the motion proposed to prescribe terms for the consideration of the motion as a whole. If the motion were to be considered pursuant to the previously existing rules, it presumably could not make such a prescription. The prescription could become effective only through adoption of the motion, yet the proceedings that this prescription would regulate would have to have taken place already, during consideration of the motion. Instead, a motion of this kind can be effective only if its own offering is accepted as bringing about a summary, peremptory change in the rules under which its consideration will occur. Its offering, in itself, accordingly, amounts to an attempt to bring about a tacit settlement of the procedural claim it raises.\nAlthough little subsequent commentary appears to have addressed this self-referential character of the 1975 motion, it became an important determinant of the outcome. Because the second part of the motion in effect embodied the procedural claim supporters sought to establish, opponents had to counter that claim by raising a point of order that the motion as a whole was out of order, on grounds that existing rules did not permit a simple majority to close consideration. When Vice President Rockefeller submitted this point of order to the Senate as a constitutional question, proponents moved to table it. The tabling motion enabled proponents to place before the Senate in non-debatable form the basic claim that a voting majority should be able to limit consideration of a rules change proposal.\nThe Senate initially adopted the motion to table the point of order, thereby endorsing the position that a majority could limit debate in relation to a rules change proposal. By this action the Senate, in effect, accepted for the first time the procedural claim of proponents under the rulemaking power. This action might be expected to have led to an immediate vote on the motion that had been held in order. Opponents, however, then demanded a division of the question on the combined motion, so that its first part, the motion to proceed, would be considered separate from its second part, embodying the procedural prescription that the motion be decided by a simple majority without debate. This division destroyed the self-referential character of the procedural prescription. As a result, the Vice President held the motion to proceed, the first part of the original package motion, to be debatable. Opponents then undertook extended debate on this motion to proceed.\nTo overcome this difficulty, supporters of change ultimately agreed to accept a proposal under which the Senate would vote on a compromise proposal to strengthen the cloture rule, but also on reconsidering the tabling of the original point of order. The Senate adopted the motion to reconsider, and, on reconsideration, rejected the motion to table, thereby bringing the original point of order back before the Senate. The Senate then voted to sustain the point of order, thereby reversing its endorsement of the claim that a simple majority had authority to limit consideration of rules change proposals.", "At an earlier period in its development, the House of Representatives confronted potential conflicts between securing the exercise of its constitutional rulemaking power and maintaining stability in its proceedings that were similar to those addressed by current discussions in the Senate. By the early years of the 20 th century, the development of House procedures had centralized control of the floor agenda in the Speaker, in part through his ex officio chairmanship of the Committee on Rules. So nearly absolute was this control that not only the minority party, but dissident factions in the majority party as well, became severely disaffected. The leadership, however, was able to use the Speaker's control of the floor to prevent consideration of proposed changes that would mitigate that control.\nDissidents attempted to obtain consideration for rules changes in part by arguing that constitutional rulemaking power of the House made measures to change the rules \"constitutionally privileged\" for consideration. This argument bears strong resemblance to that advocated by supporters of procedural change in the Senate in the mid-20 th century, even though the issue in the Senate was the procedural control exercised by a minority rather than by an agent of the majority. In 1910, Representative George Norris seized a parliamentary opportunity to offer, as \"privileged under the Constitution,\" a proposal to reconstruct the Committee on Rules. Speaker Joseph Cannon ruled, consistently with established House practice, that no such privilege attached to measures to change the rules, and that the measure would have to be referred to his Committee on Rules. The House reversed the ruling on appeal and proceeded to consider and adopt the resolution.\nThe reconstructed Committee on Rules subsequently proposed, and the House adopted, several important and enduring innovations in House rules, including the discharge rule. As initially written, however, the discharge rule proved not only ineffective, but also susceptible to dilatory use. In the following session of the same Congress (1911), therefore, Representative Charles Fuller offered, as constitutionally privileged, a resolution to amend this rule. In accordance with the 1910 precedent, Speaker Cannon ruled this resolution privileged, but his ruling was appealed and the House reversed it.\nThe House thereby not only vindicated the Speaker's earlier initial ruling of 1910, but restored the previous principle that the constitutional power to make rules did not entail any right to consider every possible proposal to do so. Cannon ' s Precedents accordingly recounts these events under the heading: \"A proposition to amend the rules is not privileged.... In exercising its constitutional privilege to change the rules the House has confined itself within certain limitations.\" In re-establishing this principle, the House seems to have judged that according constitutional privilege to rule change proposals could permit the chamber to be tied up continually with such measures, irrespective of merit and perhaps for dilatory purposes. It could also have resulted in continual and possibly capricious changes in procedure instituted by temporary majorities for their immediate benefit. Some Members who voted both to overturn the precedent in 1910 and to restore it in 1911 explained their action on the grounds that the first vote was a \"revolutionary act\" that was necessitated by circumstance, but that the principle involved was not sustainable as a settled doctrine.", "", "The events of 1910 may be seen as representing the House's historic attempt to come to grips with one of the most fundamental problems of a free government under law: that of how to provide effectively by law for change in law, and specifically of how to proceed when the law that prevents change is the law whose change is sought. It is the reflexive, or \"catch-22,\" character of entrenchment that often makes it appear soluble only by going \"outside the system\" to cut through the dilemma.\nCurrent proposals for action by \"nuclear option\" have a form that resembles that of the action taken by the House in 1910, because the dilemma they address has a reflexive form similar to that of the House in 1910. As do contemporary advocates of consideration limits in the Senate, supporters of change in the House argued that the autonomy of a deliberative body requires it to be able to entertain proposals to change rules when it deems necessary. As do Senate advocates today, House reformers presented their claim as a shift from an inappropriate to a more correct principle of action. But the House in 1911 concluded that unrestricted floor access for rules changes was subject to such abuses as to be unworkable as a settled principle.\nThe events of 1975 in the Senate could be viewed as representing a corresponding development of thought in that body. In order to promote the attempt of that year to change the cloture rule, the Senate initially affirmed the propriety of permitting a simple majority to close consideration of a rules change at the beginning of a Congress, by tabling a point of order against a motion that would have had that effect. These proceedings enabled the Senate to adopt amendments to the cloture rule that tended to facilitate limiting consideration. At that point, however, the Senate accepted a reconsideration of the original point of order, and decided to sustain it, thereby rejecting the principle that a voting majority could close consideration of rules changes and consequently reaffirming the entrenchment of Senate rules.\nUltimately, as a result, although the Senate had on some occasions seemed prepared to accept some version of the claim based on the rulemaking power, it always drew back in the end from ultimately confirming this claim, instead affirming principles that supported entrenchment. It is possible to see this course of events as manifesting the willingness of Senators to accept resort to the constitutional rulemaking power as a \"revolutionary\" principle, but their unwillingness to maintain it as a permanent possibility in the practice of the Senate.\nIn present circumstances, before the Senate makes a departure from accepted principles in favor of ones that might be unsustainable in the long run, in order to achieve certain specific goals, the body might wish to satisfy itself that the magnitude of the problem to be addressed genuinely warranted, and its intractability genuinely required, such action. If consideration of this question concludes that the Senate could not successfully regulate itself in the long run on the basis of the proposed principle, then invoking that principle to meet immediate needs would presumably have to be justified instead on the grounds of something like \"revolutionary expediency.\" Like the House in 1910, the Senate might have to justify its action on the grounds that the situation precluded any other means of amelioration. It is, of course, a concept that lies squarely at the heart of the American tradition that in such circumstances, \"revolutionary\" action may appropriately be justified by appeals to explicitly stated arguments of exactly the kind just sketched—a concept both articulated in and exemplified by the Declaration of Independence itself.", "The preceding reflections suggest that, if a \"nuclear option\" involved abandonment of the practice of adherence to precedent in parliamentary rulings, it could have the effect of replacing the current almost impenetrable resistance of Senate procedure to change (if the change is controversial) with a nearly uncontrollable volatility. Establishment of a more sustainable balance between procedural stability and the Senate's control of its own rules might require action by other than extraordinary means.\nPresumably, the Senate would wish to have effective means of changing its rules at need and to adapt them to the needs of the times, but it might not wish to foster continual change on an ad hoc basis in response to shifting immediate demands. If a rule regulating the consideration of proposals for change could be crafted in a way that afforded an appropriate balance between these values, the Senate might be able to adopt it through its regular processes for amending its rules. A procedure adopted in this way could respond to considerations about what specific ways of proceeding would effectively permit action while still securing the possibility of meaningful exchange of views as the basis for finding broadly acceptable solutions.\nIf a procedure were established by these means, the Senate might also be able to frame it in a way that would take account, in an explicit and appropriate way, of the status of the Senate as a continuing body. It might provide, for example, that a change supported by a majority too small to invoke cloture could be adopted, but could not take effect until six years after its adoption. Such an arrangement would permit change in the long run while inhibiting changes by a temporary majority for immediate purposes.", "Sarah Binder and Steven Smith. \"This Battle Isn't New: The Filibustering of Judicial Nominations.\" St. Louis Post-Dispatch , March 8, 2005, p. 6.\nRobert C. Byrd. \"In Defense of Senate Tradition.\" Remarks in the Senate. Congressional Record , daily edition, vol. 151, March 20, 2005, pp. S3100-S3103.\nJohn Cornyn. \"Our Broken Judicial Confirmation Process and the Need for Filibuster Reform.\" Harvard Journal of Law and Public Policy , vol. 27, fall 2003, pp. 181-230.\nMartin B. Gold and Dimple Gupta. \"The Constitutional Option to Change Senate Rules and Procedures: A Majoritarian Means to Overcome the Filibuster.\" Harvard Journal of Law and Public Policy , vol. 28, fall 2004, pp. 205-272.\nJim McClure and Malcolm Wallop. \"Don't Go Nuclear.\" The Wall Street Journal , March 15 2005, p. A20." ], "depth": [ 0, 1, 2, 2, 2, 1, 2, 2, 3, 3, 3, 2, 1, 2, 2, 3, 3, 3, 2, 3, 3, 2, 3, 3, 2, 1, 2, 2, 2, 2, 2, 1, 2, 2, 2, 3, 3, 3, 2, 2, 3, 3, 1 ], "alignment": [ "h0_title h2_title h1_title h3_title", "h0_title", "h0_full", "", "", "h0_full h2_title h1_full", "h0_full", "h0_full h2_title", "", "", "h2_full", "", "h2_title h1_title", "h1_full", "", "", "", "", "", "", "", "h2_title", "h2_full", "", "h2_full", "h2_title h1_title h3_title", "h3_full", "h1_full", "h2_full h1_full", "h1_full", "h3_full", "h3_title", "", "", "", "", "", "", "h3_full", "", "", "", "h3_full" ] }
{ "question": [ "What does senate procedure permit?", "What does it lack?", "What is the result of this lack?", "What have filibuster opponents long sought to do?", "How has the senate responded to these proposed limits?", "Why is the senate prevented from considering a change proposal under limits more stringent than those already in effect?", "What does this mean for existing procedures?", "What have advocates of majority consideration limits often sought?", "What is a nuclear option?", "How has it most often been discussed?", "What would happen if the chair sustained such an order?", "What could an opponent do about this?", "Under established procedure, what is the relationship between the federal government and the Constitution?", "What is the chair supposed to do in ruling?", "How can a point of order be sustained?", "What effect would tabling the question have in this case?", "What is the path to overcome this difficulty?", "What must the Senate sometimes set aside when voting on procedural question which would institute consideration limits?", "After this principle is set aside, what becomes possible?", "How has the House and Senate reacted in the past?" ], "summary": [ "Senate procedure permits most matters to be decided by a simple majority of Senators voting (with a quorum present).", "Yet Senate procedure generally lacks means for a simple majority to limit consideration and proceed to a vote.", "As a result, Senate minorities can attempt to block proposals by preventing a vote from occurring, a practice known as filibustering.", "Filibuster opponents have long sought to institute rules permitting a voting majority to limit consideration, most recently, in relation to judicial nominations.", "The Senate has seldom been able to adopt such limits, however, because any such proposal is itself subject to filibuster. In addition, the Senate has held that its existing procedures remain continuously in effect, which prevents it from considering a change proposal under limits more stringent than those already in effect.", "In addition, the Senate has held that its existing procedures remain continuously in effect, which prevents it from considering a change proposal under limits more stringent than those already in effect.", "In this way, the existing procedures that lack consideration limits tend to entrench themselves against their own change.", "Advocates of majority consideration limits have often sought ways to assure the ability of the Senate to reach a vote on procedural changes.", "Inasmuch as such a course of action would break through the obstacles posed by existing procedures, it has been called a \"nuclear option.\" A \"nuclear option\" would presumably either make novel use of existing procedures or engage in ones previously not recognized in Senate practice.", "The plan most often discussed has been to raise a point of order asserting that the Senate must be able to reach a vote on nominations (or procedural changes) in order to exercise effectively its constitutional \"advice and consent\" power (or rulemaking power).", "By sustaining such a point of order, the chair would establish precedent for limiting consideration of those matters.", "Opponents of the ruling could appeal, and could attempt to filibuster to prevent a vote on the appeal, but the Senate could confirm the ruling by adopting a nondebatable motion to table the appeal.", "Under established procedure, however, only the Senate itself has authority to settle points of order in ways that alter precedent or interpret the Constitution.", "The chair is to follow precedent in ruling, and is to submit points of order raised under the Constitution, or where no precedent exists.", "If a point of order is submitted, however, or a ruling against a point of order is appealed, the point of order can be sustained only by vote, and the vote might be blocked by filibuster.", "Tabling the question in this situation would have the effect of affirming previous practice.", "Only certain additional limits on consideration of a point of order raised while another is pending might afford means of overcoming this difficulty.", "Under most conditions, the Senate might be unable to reach a vote on a procedural question that would institute consideration limits, except by setting aside the principle that the chair adheres to precedent, or that the rules remain always in effect.", "Once these principles were set aside, however, it might become possible for any voting majority of the Senate to institute further procedural changes in other subsequent situations.", "In the past, both the Senate and the House have ultimately always declined to institute change by accepting standards that would permit this result. This report will not be updated." ], "parent_pair_index": [ -1, 0, 1, -1, 3, -1, 5, -1, -1, 1, 1, 3, -1, 0, 1, 1, 3, -1, 0, -1 ], "summary_paragraph_index": [ 0, 0, 0, 0, 0, 0, 0, 1, 1, 1, 1, 1, 2, 2, 2, 2, 2, 3, 3, 3 ] }
CRS_R42772
{ "title": [ "", "Introduction", "The U.S. Textile Industry and Its Markets", "The Textile Manufacturing Process", "Domestic Textile Production", "Global Textile Trade Shifts", "U.S. Trade in Textile Products", "Sourcing in the Western Hemisphere", "TPP and Sourcing from Vietnam", "Textiles and the TPP Negotiations", "Conclusion" ], "paragraphs": [ "", "The Trans-Pacific Partnership Agreement (TPP) is a proposed regional free trade agreement (FTA) currently under negotiation among 12 Pacific Rim countries. Initiated under President George W. Bush, the TPP concept has wide bipartisan support. As the negotiations progress, provisions concerning textile trade have become a major point of contention, attracting considerable congressional attention and debate. This report examines the potential implications of a TPP agreement, if one is reached, for the U.S. textile manufacturing industry.\nIn 2013, the United States exported about $14 billion in yarns and fabrics worldwide. More than half of this output was shipped to Western Hemisphere nations that are members of the North American Free Trade Agreement (NAFTA), the Dominican Republic-Central America Free Trade Agreement (CAFTA-DR), and the Caribbean Basin Initiative (CBI). These FTAs provide that certain exports from member countries may enter the U.S. market duty-free only if they are made from textiles produced in the region. This has encouraged manufacturers in Mexico and Central America to use U.S.-made yarns and fabrics in apparel, home furnishings, and other products. Exports to the NAFTA and CAFTA-DR countries contributed to a U.S. trade surplus of $2.4 billion in yarns and fabrics in 2013.\nThe TPP marks the first FTA negotiation for the United States initiated since the complete end of quotas on textile and apparel trade. Duty-free access to the U.S. market under TPP could be of considerable benefit to Asian manufacturers, which now face U.S. import duties on textiles and apparel of up to 32%. Textile industry trade groups have warned that, if approved, the TPP could lead to domestic job loss if it results in apparel producers in the Western Hemisphere, which often use U.S.-made textiles, losing U.S. market share to producers in Vietnam and other TPP countries. Aligned against them are retailers and apparel companies that want to be able to import apparel from producers wherever they are located, regardless of whether U.S. textiles are used; they urge full inclusion of textiles and apparel in any TPP agreement and favor preferential access for apparel cut and sewn from fabric made in countries not included in the TPP, such as China.", "With nearly $57 billion in industry shipments in 2013, textile manufacturing, which produces yarns and fabrics from raw materials such as cotton and various man-made fibers, is a supplier industry to three industrial sectors. The apparel industry, which transforms textiles into clothing, consumed only 12% of U.S.-manufactured fibers in 2012. About 40% of textile output went into home textiles and floor coverings, while almost half was used in technical textiles such as conveyor belts and automotive floor coverings.\nTextile manufacturing occurs largely in highly automated factories, whereas apparel manufacturing is characterized by decentralized, globally dispersed production networks that are coordinated by lead firms that control design, branding, and other activities. Many of the world's largest apparel retailing and marketing firms are headquartered in the United States, but because it typically costs less to manufacture apparel abroad, the United States imports far more clothing than it makes domestically. U.S. apparel shipments totaled more than $13 billion, and apparel manufacturers directly employed 143,600 workers in 2013 (see Appendix A ).\nUnlike textile manufacturers, most U.S.-headquartered apparel firms have limited or no U.S. manufacturing capabilities. Some manufacture through a combination of facilities they own and third-party arrangements, often with foreign factories. Others rely entirely on arrangements with third-party suppliers, mostly in Asia. Large retailers frequently contract directly with apparel sourcing companies, which in turn portion out the production work to independent manufacturers. The United States was responsible for approximately 1% of the $460 billion of global apparel exports in 2013, according to statistics from the World Trade Organization. China, Vietnam, Indonesia, Bangladesh, and Mexico rank as the top apparel suppliers to the United States. Beyond apparel manufacturing, countless other functions related to apparel are done domestically, such as design, branding, and marketing of finished products.\nThe U.S. home furnishings industry has fared far better against import competition than the apparel industry, mainly because manufacturing of carpets, curtains, and tablecloths is highly automated. For example, the development of larger, faster carpet-tufting machines contributed to a decline in employment at U.S. carpet and rug mills, from 49,000 workers in 2003 to 31,200 in 2013. Shipments from U.S. carpet and rug mills totaled $8.9 billion in 2012. The health of the carpet and rug mills industry is tied in large part to conditions in the domestic housing and commercial building markets, raw material prices, and competition from foreign producers.\nThe output of technical textile mills is used across various industrial sectors. According to one recent estimate, automotive manufacturers use more than 200,000 tons of textiles for automotive interior fabrics, including upholstery, headliners, and door panels, excluding textiles for carpets, floor mats, tire cords, seat belts, or air bags. The Industrial Fabrics Association International (IFAI) estimated that in 2013 about 160,000 workers in the United States produced fabrics specifically for the technical textile market.", "Textile manufacturing begins with fiber, which can be harvested from natural resources (e.g., cotton, wool, silk, or ramie), manufactured from cellulosic materials (e.g., rayon or acetate), or made of man-made synthetic materials (e.g., polyester, nylon, or acrylic). After the raw fibers are shipped from the farm or the chemical plant, they pass through four main stages of processing (see Figure 1 ):\nyarn production, in which fiber is spun into filament or yarn; fabric production, which can take place at very small mills or large textile mill operations, and involves primarily either weaving or knitting; finishing, which prepares the textiles for further use by processes such as bleaching, printing, dyeing, and mechanical or wet finishing; and, fabrication, where the finished cloth is converted into apparel, household, or industrial products.\nWorldwide, in 2013, the textile industry produced 86.6 million metric tons of textiles. Man-made fibers accounted for more than two-thirds of total production, compared to the share of natural to man-made fibers at about half in the 1990s. Most of the global growth in man-made textile manufacturing has taken place in China, which by 2013 accounted for about two-thirds of total production. The United States was responsible for 5% of global production of man-made fibers in 2013. No other country produced more than 4% of the global total in 2013.\nCotton is the most important natural fiber. In the 2013-2014 marketing year, China ranked as the world's largest producer of cotton at 7 million metric tons, followed by India and the United States. Other large cotton producers include Pakistan, Brazil, Uzbekistan, and Turkey. Many of the leading cotton producers are also leading mill users of raw cotton. The top four consumers of cotton are China, India, Pakistan, and Turkey, which together account for more than two-thirds of world consumption. Consumption of cotton by U.S. textile mills peaked in 1997. Since then, due to the decrease in domestic textile production caused by competition from imported textile and apparel products, U.S. mill use of cotton has dropped about 70%. As for other natural fibers, two TPP negotiating partners, Australia and New Zealand, are among the world's leading wool-growing nations. Vietnam is a top 10 producer of silk, but accounts for only a small portion of global production. China and India are the world's two largest silk producers.", "U.S. textile output has not recovered from the severe downturn in 2008 and 2009. Production at textile mills remains about 25% below the 2007 level, and production at textile product mills is approximately 30% less than in 2007. The value of shipments totaled nearly $57 billion in 2013, a 5% increase over 2012. This amounted to 1% of total U.S. manufacturing shipments (see Appendix A ).\nAccording to government data, there were 2,555 fewer establishments manufacturing textiles in 2012 than in 2003. Appendix B provides an overview of selected U.S.-headquartered textile manufacturers. Although the National Council of Textile Organization (NCTO) reported in recent congressional testimony that \"the textile industry has invested over $3 billion in new technologies, machinery, and manufacturing facilities since 2010,\" the most recent data, for 2012, show a continued drop in the number of establishments producing textiles.\nDomestic textile manufacturers have invested heavily in technology to reduce operating costs. For example, modern industrial looms incorporate air-jets to weave at speeds of 2,000 picks per minute (compared with 200 picks in 1980, which at the time was considered fast). Some modern textile mills have become almost completely automated, churning out thousands of square yards every hour with as few as 10 or 20 employees. According to the U.S. Census Bureau, the U.S. textile industry invested $18.9 billion in new plants and equipment between 2001 and 2012. Since then, several manufacturers, including Gildan Activewear, Parkdale Mills, Zagis USA, and Keer, have announced plans to increase U.S. production of yarns, nonwoven and technical fabrics, and other types of textiles by building new textile plants or expanding current facilities.\nBecause yarn and fabric production are capital- and scale-intensive, they demand higher worker skills than apparel production. As a consequence, the textile industry has been less prone to relocation to lower-wage countries than apparel manufacturing. Significant production remains in the United States, Japan, and South Korea, where skilled labor is available and manufacturers can raise the capital to finance weaving mills costing an estimated $12 million to $25 million and spinning mills costing $50 million to $70 million.\nAmong all U.S. manufacturing industries, textiles rank near the top in productivity increases. This can be attributed both to automation and to the closure of less efficient mills. While imports of textiles and apparel undoubtedly have contributed to lower industry employment, over the past decade more than 200,000 textile manufacturing jobs have been lost due to automation, according to private estimates.\nAt the end of 2013, the domestic textile industry employed about 230,700 workers, accounting for fewer than 2% of the nearly 12 million domestic factory jobs (see Appendix A ). Average annual pay was $39,000 in 2013, far below the average of $61,096 for all manufacturing. Figure 2 shows employment has declined by two-thirds since 1990. Over time, employment has fallen most rapidly during economic downturns, but has failed to return to prerecession levels during the ensuing recoveries. The Bureau of Labor Statistics predicts overall textile manufacturing employment will shrink to around 180,000 by 2022.\nDomestic textile production is primarily located in the southeastern states and in California, although every state has some textile manufacturing. In 2013, more than one-third of all textile jobs were located in Georgia and North Carolina. Appendix C compares textile employment in the top 10 states, which accounted for more than two-thirds of all textile jobs, in 2003 and 2013.\nIn related apparel manufacturing, employment has shrunk every year for more than two decades, resulting in 800,000 fewer U.S. apparel manufacturing jobs in 2013 than in 1990 as clothing manufacturers have transferred much of their production abroad. Some industry analysts assert that a \"Made in the USA\" label is being sought by more consumers, and a small and select group of apparel retailers, such as Brooks Brothers, has responded by resuming a portion of their manufacturing in the United States. In aggregate, however, apparel work has continued to diminish. Industry employment in 2013 dropped to nearly 144,000, representing a reduction of more than 55,000 jobs since 2008.", "For more than 40 years, developed countries, including the United States and the European Union, sought to protect their textile and apparel sectors from developing countries' exports through two multilateral agreements, the Multi-Fiber Arrangement (MFA) and the Agreement on Textiles and Clothing (ATC). Quotas on imports from more than 70 countries limited the quantities of textiles (such as cotton yarns and synthetic fabrics) and particular garments (such as t-shirts and sweaters) that could enter the United States and the European Union each year. This system made it necessary for buyers of textile and apparel products to source from countries for which quotas for particular products were available. This spread manufacturing to an ever-increasing number of countries, instead of concentrating it where production was cheapest.\nThe expiry of the ATC on January 1, 2005, eliminated all textile and apparel quotas for members of the World Trade Organization (WTO). Since then, buyers have been able to source from any WTO member country, subject only to tariffs. However, U.S. tariffs on textile and apparel imports vary considerably from country to country, governed by bilateral and regional arrangements discussed in greater detail below. The average U.S. tariff rate in 2012 was 7.9% for textiles and 11.4% for clothing, but rates on particular products could be as high as 32% (see Appendix D ).\nAccording to the WTO, China was by far the world's largest exporter of textiles in 2013, with about a 35% global market share at $107 billion. China has been a major force in textiles for decades, but its export growth accelerated following its 2001 accession to the WTO and the expiration of the ATC. Now, more than 50,000 textile mills operate in China. China's textile exports have risen more than 550%, from $16 billion, since 2000 ( Figure 3 ). The European Union and India ranked as the world's second- and third-largest exporters of textiles in 2013. The European Union (based on extra-EU imports), the United States, China, Vietnam, and Hong Kong were the world's top five importers of textiles in 2013.\nApparel trade is more diversified than textile trade, as many nations have been able to develop export-oriented apparel industries on the basis of imported fabrics, without having large domestic textile production. China, the EU-28, Bangladesh, Hong Kong, and Vietnam ranked as the top clothing exporters in 2013. Central America, the Caribbean, and Africa, and countries throughout Asia, including Malaysia, also export large quantities of apparel.", "In 2013, approximately one-third of U.S. textile production was exported, with a value of $17.8 billion (see Table 1 ). The United States has posted a modest trade surplus in fabrics and yarns for 19 years, but when made-up textile articles (e.g., sheets and towels) are included, the United States ran a textile trade deficit of $17.2 billion in 2013. Import penetration—the share of U.S. demand met by textile imports—reached 37% in 2013, from 31% in 2008 (see Appendix A ).\nAs Table 2 shows, the majority of yarns and fabrics exported from the United States are sold to NAFTA and CAFTA-DR countries. U.S. exports are often more expensive than those from other countries. Despite this cost differential, apparel producers in the NAFTA, CAFTA-DR, and CBI countries use U.S.-made textiles in products that are exported to the United States because the goods are free of U.S. tariffs. Mexico is the U.S. textile industry's largest foreign market, with exports of $4.2 billion in 2013. However, textile exports to Mexico have shrunk as a share of total U.S. yarn and fabric exports compared with 2000, as rising labor costs have made it a less attractive place to manufacture apparel and production has shifted to Central America. Less than $400 million of U.S.-made yarns and fabrics was exported to other prospective TPP member countries such as Japan, Malaysia, and Vietnam in 2013.\nChina, Canada, and the EU-28, with a combined total of $6.2 billion, provided more than half of the yarns and fabrics imported by the United States in 2013. Textile imports are sensitive to the economy: between 2008 and 2009, imports of yarns and fabrics shrank by 24%, but they rose 26% in 2010 and another 14% in 2011 as the economy improved. They increased only 1% in 2012 and again by 1% in 2013.\nIn the apparel sector, import penetration reached almost 90% of U.S. demand in 2013, up from 83% in 2008 (see Appendix A ). The U.S. trade deficit in apparel products was $77 billion in 2013. Nearly 40% of imported apparel came from China. Vietnam, a fast-growing source of apparel for the U.S. market, furnished 10% of imports, and Mexico accounted for 5%, but the other TPP participants shipped only small quantities of apparel to the United States. Almost all U.S. apparel imports from Central America, the Caribbean, Mexico, and Canada are made with textiles produced in the United States. Collectively, they accounted for 16% of U.S. apparel imports in 2013, down from a third in 2000.", "Central America, Mexico, and the Caribbean have limited textile production, but ample cut, make, and trim apparel assembly capacity, or CMT production as it is known in the industry. CMT is a low-value-added production system, whereby a manufacturer produces garments for a customer by cutting fabric provided by the customer, sewing the cut fabric, trimming the thread, and packaging the garments according to the customer's specifications. Canada's higher-value-added textile sector differs substantially from the CMT operations in Latin America. U.S. textile exports to Canada, mainly specialty and industrial fabrics, totaled $1.8 billion in 2013.\nIn Central America, virtually all fibers are imported. The Central America-Dominican Republic Apparel and Textile Council reports that the CAFTA-DR region has more than 600 apparel companies. About 90 textile mills produce knit and woven fabrics, man-made fibers, and mixtures. Several U.S. textile manufacturers have manufacturing capabilities in Central America, as have companies from South Korea, Taiwan, and China.\nMexico is home to approximately 30 mills producing yarns and knitted and woven fabrics. U.S.-based firms produce significant amounts of denim there. Among the regional apparel suppliers that have free-trade agreements with the United States, Mexico is the only significant producer of fabric and the only significant source of yarn.\nMexico's apparel industry relies almost entirely on the U.S. market for exports. Its cut and assembly operations often use U.S.-made fabrics to produce basic garments such as denim jeans and T-shirts, which are then exported to the United States. Mexico ranked as the largest yarn and fabric market for the United States in 2013 at $4.2 billion, with significant purchases of impregnated fabrics, felt and specialty yarns, and man-made fibers and filaments (see Figure 4 ). Competition from countries with lower wages appears to be reducing the competitiveness of Mexican apparel. U.S. clothing imports from Mexico dropped to $3.8 billion in 2013, from $6.3 billion in 2005.\nFor U.S. textile exporters, Honduras, the Dominican Republic, El Salvador, and Guatemala represent the biggest yarn and fabric markets in the CAFTA-DR region. At $1.3 billion, Honduras was the largest of the four in 2013, absorbing 9% of total U.S. yarn and fabric exports. Cotton (yarn/woven fabric), man-made fibers, and man-made filaments, which are used to make basic apparel such as T-shirts, socks, and underwear, are among the top export categories from the United States to Honduras. The Dominican Republic, El Salvador, and Guatemala are also major assemblers of basic apparel for the U.S. market.\nNicaragua benefits from a unique feature of the CAFTA-DR agreement: the inclusion of a tariff preference level (TPL) provision. The TPL allows U.S. trade preferences for Nicaraguan apparel that uses non-U.S. or non-CAFTA yarns and fabrics in limited amounts. Even with the TPL, which is scheduled to expire at the end of 2014, U.S. exports of yarns and fabrics to Nicaragua remain relatively tiny at less than $100 million in 2013. Costa Rica also has a TPL provision applicable to wool and certain women's swimwear.\nApparel manufacturers in the Caribbean region also have preferential access to the U.S. market under the Caribbean Basin Initiative (CBI), now called the Caribbean Basin Trade Preference Act (CBTPA) program. Because production of yarn and fabric in the Caribbean is extremely limited, the region's cut and assembly factories mostly rely on U.S.-made fabrics and yarns, with U.S. exports totaling $75 million in 2013. Most textile production in the Caribbean is located in the Dominican Republic (also a CAFTA member). Other Caribbean countries such as Haiti have no domestic textile industries, but use U.S.-made textiles to produce apparel for the U.S. market.\nU.S. retailers buy most of their garments from Asia and tend to use Western Hemisphere producers for quick replenishment, especially if time is a critical factor. The major products sourced within the region are basic, low-value knitwear garments, such as shirts, pants, underwear, and nightwear, with a focus on men's and boys' wear. U.S. imports of industrial fabrics from the CAFTA-DR region are relatively minimal at $1.5 million in 2013.\nApparel producers in the Western Hemisphere have two main comparative advantages in serving the U.S. market. One is geographic proximity, which confers lower transportation costs and faster delivery; transit times from the CAFTA-DR region to a U.S. port range from two to seven days, rather than about two weeks to a month from Asia. The other advantage is duty-free access for apparel manufactured from U.S. textiles. For example, manufacturers of cotton T-shirts or cotton twill trousers can avoid a 16.5% import duty if U.S. inputs are used.\nOn the other side of the ledger, Mexico, Central America, and the Caribbean Basin have much higher wage rates than some Asian apparel suppliers, such as Vietnam, Cambodia, and Bangladesh. A 2010 study, for example, found the apparel industry's average hourly cost of labor to be $2.06 in Mexico, but only $0.51 in Vietnam.\nTariff preferences appear to be important in keeping apparel producers in the Western Hemisphere competitive in the U.S. market, and thereby preserving export markets for U.S.-made textiles. A TPP agreement, if one is reached, has the potential to upset this situation. If apparel produced in Asian TPP countries gains duty-free access to the U.S. market, it could displace apparel manufactured with U.S. fabric in the Western Hemisphere, adversely affecting U.S. textile exports. Also, should Vietnam develop a larger textile industry, U.S. textile exports could be hurt if the TPP were to allow Western Hemisphere apparel producers to use textiles made in any TPP member country and still enjoy duty-free access to the U.S. market.", "Vietnam, which had a negligible garment manufacturing sector a decade ago, is now the second-largest exporter of garments to the United States, behind China. As shown in Figure 5 , apparel imports to the United States from China, which is not involved in the TPP negotiations and is unlikely to enter the TPP in the near future, reached more than $31 billion in 2013. U.S. apparel imports from Vietnam, although far smaller, have grown even faster, rising from near zero in 2000 to $8.2 billion in 2013. U.S. imports of clothing from Vietnam in 2013 were more than twice the value of apparel imports from Mexico. U.S. imports of technical fabrics from Vietnam have also expanded in recent years, totaling $186 million in 2013, but are still far smaller than apparel imports. Among the Asian and Pacific countries in the TPP, Vietnam is the only one with significant textile and apparel trade with the United States.\nGenerally, the main competitors to Vietnam in the U.S. clothing market are not Mexico and the CAFTA-DR nations, but China and other Asian nations. Vietnam tends to sell fewer basic apparel products (e.g., T-shirts and trousers) and more shirts, suits, and overcoats in the United States than do Western Hemisphere trading partners. For example, in 2013, Vietnam provided 18% of total U.S. imports of women's or girls' blouses, shirts, and suits, both knitted and woven.\nVietnam's apparel sector buys the majority of its yarns and fabrics regionally, from China and other Asian suppliers such as South Korea and Taiwan, and purchases only a limited amount from the United States. The country does have a growing textile industry, comprising 145 spinning mills, 401 weaving mills, 105 knitting mills, 94 dyeing and finishing mills, and 7 non-woven mills. However, Vietnam has yet to develop a broad textile supply base and imports are estimated to account for the overwhelming majority of the fibers, fabrics, and yarns required by its apparel industry. One press report mentions that Vietnamese garment producers obtain only about 12%-13% of fabrics and other input materials, including raw materials such as cotton, from local textile manufacturers.\nThe Vietnam National Textile and Garment Group, or Vinatex, is Vietnam's largest textile and garment producer. Vinatex, partially state owned, is one of several groups that are investing to increase fiber and fabric production in Vietnam. In 2013, Vinatex's exports were valued at $2.95 billion, with the aim of reaching $5 billion by 2016. Nationally, Vietnam's Ministry of Trade and Industry has set a development strategy for the textile and garment sector, aiming to increase fabric production to 2 million metric tons by 2020. Fiber production is targeted to increase to 500,000 metric tons in 2015 and 650,000 metric tons by 2020. Fiber factories to help reduce Vietnam's dependence on imported materials include a joint venture between Vinatex and PetroVietnam Petrochemical & Textile Fiber Joint Stock Company to build a polyester fiber plant at Dinh Vu. Additional Vinatex projects include a new textile complex for spinning, weaving, sewing, dyeing, and finishing, and a partnership with two Chinese companies to build a large garment and textile industrial park in Vietnam. Investments in chemical plants to generate the basic feedstocks required for the production of synthetic fabrics may follow.\nAccording to Vietnam Investment Review , \"a new wave of foreign investments in the spinning, weaving, and dyeing sectors has been kicked off, since investors can see the profits they can gain from the TPP.\" According to one estimate, foreign manufacturers have invested more than $1 billion in Vietnam's textile and apparel sector in anticipation of a TPP agreement. For example, major Chinese companies, such as Texhong and Pacific Textile, are opening new textile plants in Vietnam, partly attracted by lower labor costs and lower tariffs under a potential TPP. Textile and garment manufacturers based in Japan, Hong Kong, South Korea, Taiwan, Austria, and Australia are also setting up new production or have expanded current production in Vietnam.\nArguably, preferential access to the Vietnamese market under a TPP agreement could result in new business opportunities for U.S. fiber, yarn, and fabric producers. To date, however, Vietnam is not a significant market for U.S. yarn and fabric exporters, importing $59 million of such products in 2013. The United States' main textile-related export to Vietnam is raw cotton: U.S. exports supply about 60% of the cotton used in Vietnamese textile mills.", "Textile and apparel trade is governed by very specific rules. Extensive stipulations for textiles and apparel are included in most of the bilateral and regional FTAs and trade preference programs negotiated by the United States over the past two decades. The key issue is typically rules of origin (ROOs), which specify how much of the content of textile and apparel products must come from the region in order for the products to qualify for duty-free access. ROO requirements for textile and apparel products are usually based on the production process as shown in Figure 6 .\nPossible rules of origin generally stipulate how much processing must occur within the region if a product is to obtain trade benefits. The major distinctions are:\nFiber Forward : Fiber must be formed in the FTA member territory. Natural fibers such as wool or cotton must be grown in the territory. Man-made fibers must be extruded in the trading area. Yarn Forward : Fibers may be produced in any country, but each component starting with the yarn used to make the textiles or apparel must be formed within the free trade area. This rule is sometimes called \"triple transformation,\" as it requires that spinning of the yarn or thread, weaving or knitting of the fabric, and assembly of the final product all occur within the region. Fabric Forward : Producers may use fibers and yarns from any country, but fabric must be knitted or woven in FTA member countries. Cut and S ew : Only the cutting and sewing of the finished article must occur in FTA member countries, providing maximum flexibility for sourcing.\nThe United States, most often, has applied the \"yarn forward\" standard for textiles and apparel, with the notable exceptions of agreements with Jordan and Israel. Most U.S. FTAs also include exceptions allowing limited quantities of fibers, yarns, and fabrics to be sourced from outside the FTA partner countries under certain conditions.\nAppendix D lists textile and apparel tariff rates of various countries. In general, U.S. tariffs increase with each stage of manufacturing, such that duty rates are usually higher on apparel than on its yarn or fabric inputs. The United States' TPP negotiating partners also tend to maintain steep tariffs. Vietnam's apparel tariffs range from 5% to 20%.\nU.S. negotiators have proposed that the TPP agreement incorporate a unified yarn-forward ROO, with perhaps some exemptions for inputs considered to be in short supply, or \"not commercially available,\" in the region to assure that duty-free preferences only benefit countries that are part of the agreement. Press reports indicate that several TPP negotiating countries, including Vietnam, oppose U.S. demands for a \"yarn forward\" rule. Vietnam publicly supports a \"cut and sew\" rule that would allow it, and other TPP participants, to enjoy preferential access for apparel that has been cut and sewn from fabric made in China or other countries not included in the TPP.\nU.S. domestic interests disagree over what ROOs should be included in any TPP agreement. On one side are fiber, yarn, and fabric manufacturers who want rules that would require more U.S. or TPP content. Organized as the Textile and Apparel Alliance for TPP (TAAT), they have endorsed a basic \"yarn forward\" rule applicable to all TPP countries. They warn that without such a rule Vietnamese apparel manufacturers could use Chinese textiles, thereby giving Chinese textile manufacturers duty-free access to the U.S. market and undermining U.S. textile production. More than 165 Members of Congress have endorsed TAAT's position, sending a letter in support to the U.S. Trade Representative recommending a yarn-forward rule.\nOn the other side are U.S. retailers and importers of apparel, many with no domestic manufacturing, along with the National Retail Federation (NRF) and the U.S. Chamber of Commerce. These interests formed the Trans-Pacific Partnership Apparel Coalition, which opposes the \"yarn forward\" ROO and calls for a \"flexible, liberal, 21 st century ROO standard\" for textiles and apparel. Their preferred rule would require only that the sewing of a garment be done in a TPP country to get duty-free status. This would permit use of yarns and fabrics from China and other countries in garments qualifying for duty-free access to all TPP countries. The TPP Apparel Coalition recommends that apparel qualify for preferential treatment if it meets a regional value content threshold, making it easier to switch sources of supply as fashions and relative costs change. Some Members of Congress support this position, and they asked President Obama in May 2012 to pursue \"a flexible general rule of origin for apparel that maximizes the incentive to grow U.S. exports, value, and jobs in the TPP.\"", "Concerns about the health of domestic textile manufacturing have influenced many past trade negotiations, and they now figure prominently in the regional TPP negotiations. For textile manufacturers, the inclusion of a significant apparel producer such as Vietnam in a free trade agreement holds the potential to dramatically shift global trading patterns.\nDepending upon its provisions, it is imaginable that a TPP agreement could result in apparel made in Vietnam displacing apparel from the Western Hemisphere in the U.S. market, weakening the export markets now served by U.S. textile producers in Mexico and Central America. An alternative scenario might allow apparel manufacturers in Mexico, a TPP participant, to use textiles made in any TPP country and still enjoy duty-free access to the U.S. market; while no Asian TPP participant currently has the textile production capacity to supply Western Hemisphere producers in this way, it is conceivable that such capacity could be installed in the future.\nU.S. textile manufacturing interests have urged U.S. negotiators to insist on a \"yarn forward\" rule in the TPP. This would require that for apparel, home furnishings, or technical textiles to benefit from duty-free access, they would have to be assembled in a TPP country from fabric manufactured in a TPP country out of yarn produced in a TPP country. Such a rule would severely limit the ability of countries such as Vietnam to use Chinese or Indian yarns and fabrics in apparel, home furnishings, or technical textile products for the U.S. market, although it would not constrain imports if Vietnam were to develop a more fully integrated textile industry. However, a \"yarn forward\" rule would also affect U.S. apparel consumers and the household textiles and specialty textiles markets, as these products made in TPP countries from yarns and fabrics produced elsewhere would not qualify for duty-free treatment.\nDomestic manufacturers of household and technical textiles seem less likely to be immediately affected by any TPP agreement. U.S. manufacturers appear to be internationally competitive in these sectors, and Vietnam's low labor costs will provide little comparative advantage in areas where production is highly automated. In the case of technical textiles, U.S. manufacturers also benefit from proximity to their industrial customers. Domestic technical textile manufacturers point out that Vietnam has been expanding its reach into industrial fabrics and higher-end textiles in recent years, including tire cord and coated fabrics, but Vietnam will probably not be a significant global competitor in the near future.\nAppendix A. Textile Industry Overview\nAppendix B. Selected U.S. Textile Manufacturers\nAppendix C. Top 10 States in Textile Employment\nAppendix D. Selected Apparel and Textile Duties" ], "depth": [ 0, 1, 1, 2, 1, 1, 2, 2, 1, 1, 1 ], "alignment": [ "h0_title h2_title h1_title", "h0_full h2_full", "", "", "", "h0_title h1_title", "h0_full", "h1_full", "h0_full h1_full", "h2_full", "h2_full h1_full" ] }
{ "question": [ "How have the ongoing Trans-Pacific Partnership negotiations handled textiles?", "What is the main focus of these negotiations?", "Why does the agreement have the potential to shift global trading patterns?", "What is the significance of Canada, Mexico, and Japan in the negotiations?", "What is the first way that the TPP could affect U.S. textile exporters?", "What would result from this?", "What is the second way that the TPP could affect U.S. textile exporters?", "What is the United States being urged to do regarding the textile industry?", "What have U.S. negotiators proposed in addition?", "What is the other side to this argument?", "What has Congress said about both sides of this issue?" ], "summary": [ "Textiles are a contentious and unresolved issue in the ongoing Trans-Pacific Partnership (TPP) negotiations to establish a free-trade zone across the Pacific.", "Textiles are a contentious and unresolved issue in the ongoing Trans-Pacific Partnership (TPP) negotiations to establish a free-trade zone across the Pacific.", "Because the negotiating parties include Vietnam, a major apparel producer that now mainly sources yarns and fabrics from China and other Asian nations, the agreement has the potential to shift global trading patterns for textiles and demand for U.S. textile exports.", "Canada and Mexico, both significant regional textile markets for the United States, and Japan, a major manufacturer of high-end textiles and industrial fabrics, are also participants in the negotiations.", "First, it could enable Asian apparel producers, principally Vietnam, to export clothing to the United States duty-free.", "This would eliminate much of the advantage now enjoyed by Western Hemisphere apparel producers in the U.S. market and, because Vietnamese manufacturers make little use of U.S.-made textiles, could reduce demand for U.S. textile exports.", "Second, if the TPP were to allow Western Hemisphere apparel manufacturers to use yarn and fabric made anywhere in the TPP region and still enjoy preferential access to the U.S. market, an enlarged Vietnamese textile industry could, at some future time, compete with U.S. exporters in Mexico and Central America.", "Textile industry trade groups have urged the United States to insist on a strict \"yarn forward\" rule that allows a garment to enter the United States duty-free only if yarn production, fabric production, and cutting and sewing of the finished garment all occur within the TPP region.", "U.S. negotiators have also proposed that certain textile inputs \"not commercially available\" in TPP-member countries could be sourced from outside the region, including China.", "On the other side, retailers and apparel companies with extensive global supply chains want maximum flexibility for sourcing and are less concerned about whether textiles manufactured in the United States are used; they urge textiles and apparel to be treated like other products in any TPP agreement, and they want any apparel cut and sewn within the TPP area, regardless of where the fabric originates, to be eligible for duty-free entry.", "Members of Congress have voiced their support for both sides." ], "parent_pair_index": [ -1, 0, 0, 0, -1, 0, -1, -1, 0, 1, -1 ], "summary_paragraph_index": [ 0, 0, 0, 0, 2, 2, 2, 3, 3, 3, 3 ] }
GAO_GAO-14-485
{ "title": [ "Background", "Most Newly Registered Lobbyists Filed Disclosure Reports as Required", "For Most LD-2 Reports Lobbyists Provided Documentation for Key Elements, but for Some LD-2 Reports Lobbyists Rounded Their Income or Expenses Incorrectly", "For Most LD-2 Reports, Lobbyists Filed LD-203 Reports for All Listed Lobbyists", "For Some LD-2 Reports, Lobbyists Failed to Disclose Covered Positions", "Some Lobbyists Amended Their Disclosure Reports After We Contacted Them", "Most LD-203 Contribution Reports Disclosed Political Contributions Listed in the FEC Database", "Most Lobbying Firms Found It Easy to Comply with Disclosure Requirements and Understood Lobbying Terms", "U.S. Attorney’s Office Actions to Enforce LDA", "The Office’s Authorities, Processes, and Resources to Enforce LDA Compliance", "Status of LD-2 Enforcement Efforts from 2009 through 2013 Reporting Periods", "Status of LD-203 Enforcement Actions from 2009 through 2013 Reporting Periods", "Status of Enforcement Settlement Actions", "Concluding Observations", "Agency Comments", "Appendix I: Objectives, Scope, and Methodology", "Appendix II: List of Registrants and Clients for Sampled Lobbying Disclosure Reports", "Appendix III: List of Sampled Lobbying Contribution Reports with and without Contributions Listed", "Appendix IV: GAO Contact and Staff Acknowledgments", "GAO Contact", "Staff Acknowledgments" ], "paragraphs": [ "The LDA, as amended by HLOGA, requires lobbyists to register with the Secretary of the Senate and the Clerk of the House and file quarterly reports disclosing their lobbying activity. Lobbyists are required to file their registrations and reports electronically with the Secretary of the Senate and the Clerk of the House through a single entry point. Registrations and reports must be publicly available in downloadable, searchable databases from the Secretary of the Senate and the Clerk of the House. No specific statutory requirements exist for lobbyists to generate or maintain documentation in support of the information disclosed in the reports they file. However, guidance issued by the Secretary of the Senate and the Clerk of the House recommends that lobbyists retain copies of their filings and supporting documentation for at least 6 years after they file their reports.\nThe LDA requires that the Secretary of the Senate and the Clerk of the House provide guidance and assistance on registration and reporting requirements and develop common standards, rules, and procedures for LDA compliance. The Secretary and the Clerk of the House review the guidance semiannually. It was last reviewed December 12, 2013, and revised February 15, 2013. The guidance provides definitions of LDA terms, elaborates on the registration and reporting requirements, includes specific examples of different scenarios, and explains why certain scenarios prompt or do not prompt disclosure under the LDA. The Secretary of the Senate and Clerk of the House told us they continue to consider information we report on lobbying disclosure compliance when they periodically update the guidance. In addition, they told us they send quarterly e-mails to registered lobbyists that address common compliance issues as well as reminders to file reports by the due dates.\nThe LDA defines a lobbyist as an individual who is employed or retained by a client for compensation, who has made more than one lobbying contact (written or oral communication to a covered executive or legislative branch official made on behalf of a client), and whose lobbying activities represent at least 20 percent of the time that he or she spends on behalf of the client during the quarter. Lobbying firms are persons or entities that have one or more employees who lobby on behalf of a client other than that person or entity.\nOrganizations employing in-house lobbyists file only one registration. An organization is exempt from filing if total expenses in connection with lobbying activities are not expected to exceed $12,500. Amounts are adjusted for inflation and published in LDA guidance. reported income (or expenses for organizations with in-house lobbyists) related to lobbying activities during the quarter (rounded to the nearest $10,000).\nThe LDA also requires lobbyists to report certain political contributions semiannually in the LD-203 report. These reports must be filed 30 days after the end of a semiannual period by each lobbying firm registered to lobby and by each individual listed as a lobbyist on a firm’s lobbying report. The lobbyists or lobbying firms must: list the name of each federal candidate or officeholder, leadership political action committee, or political party committee to which they made contributions equal to or exceeding $200 in the aggregate during the semiannual period; report contributions made to presidential library foundations and presidential inaugural committees; report funds contributed to pay the cost of an event to honor or recognize a covered official, funds paid to an entity named for or controlled by a covered official, and contributions to a person or entity in recognition of an official or to pay the costs of a meeting or other event held by or in the name of a covered official; and certify that they have read and are familiar with the gift and travel rules of Congress and that they have not provided, requested, or directed a gift or travel to a member, officer, or employee of Congress that would violate those rules.\nThe Secretary of the Senate, the Clerk of the House, and the Office are responsible for ensuring compliance with the LDA. The Secretary of the Senate and the Clerk of the House notify lobbyists or lobbying firms in writing that they are not complying with reporting requirements in the LDA and subsequently refer those lobbyists who fail to provide an appropriate response to the Office. The Office researches these referrals and sends additional noncompliance notices to the lobbyists or lobbying firms, requesting that they file reports or terminate their registration. If the Office does not receive a response after 60 days, it decides whether to pursue a civil or criminal case against each noncompliant lobbyist. A civil case could lead to penalties up to $200,000, while a criminal case—usually pursued if a lobbyist’s noncompliance is found to be knowing and corrupt—could lead to a maximum of 5 years in prison.", "Of the 3,034 new registrants we identified for the time periods corresponding to our review, we matched 2,925 reports (96 percent) of registrations filed in the first quarter in which they were first registered. These results are consistent with prior reviews. To determine whether new registrants were meeting the requirement to file, we matched newly filed registrations in the third and fourth quarters of 2012 and the first and second quarters of 2013 from the House Lobbyists Disclosure Database to their corresponding quarterly disclosure reports. We did this using an electronic matching algorithm that allows for misspellings and other minor inconsistencies between the registrations and reports. Figure 1 shows that most newly registered lobbyists filed their disclosure reports as required from 2010 through 2013.", "For selected elements of lobbyists’ LD-2 reports that can be generalized to the population of lobbying reports, unless otherwise noted, our findings were consistent from year to year. We used tests that adjusted for multiple comparisons to assess the statistical significance of changes over time.\nMost lobbyists reporting $5,000 or more in income or expenses provided written documentation to varying degrees for the reporting elements in their disclosure reports. For this year’s review, lobbyists for an estimated 96 percent of LD-2 reports (98 out of 102) provided written documentation for the income and expenses reported for the third and fourth quarters of 2012 and the first and second quarters of 2013. The most common forms of documentation provided included invoices for income and internal expense reports for expenses. Figure 2 shows that for most LD-2 reports, lobbyists provided documentation for income and expenses for sampled reports from 2010 through 2013.\nFigure 3 shows that for some LD-2 reports, lobbyists rounded their income or expenses incorrectly. We identified 33 percent of reports as having rounding errors. On 13 percent of those reports, lobbyists reported the exact amount of lobbying income or expenses instead of rounding to the nearest $10,000 as required. Rounding difficulties has been a recurring issue from 2010 through 2013.\nThe LDA requires lobbyists to disclose lobbying contacts made to executive branch agencies on behalf of the client for the reporting period. This year, of the 102 LD-2 reports in our sample, 42 LD-2 reports disclosed lobbying activities at executive branch agencies. Of those, lobbyists provided documentation for all lobbying activities at executive branch agencies for 30 LD-2 reports.\nFigures 4 through 7 show that lobbyists for most LD-2 reports were able to provide documentation for selected elements of their LD-2 reports from 2010 through 2013.", "Lobbyists for an estimated 92 percent of LD-2 reports filed year-end 2012 or midyear 2013 LD-203 reports for all lobbyists and lobbying firms listed on the report as required. Figure 8 shows that lobbyists for most lobbying firms filed contribution reports for lobbyists and lobbying firms as required for LD-2 reports from 2010 through 2013. All individual lobbyists and lobbying firms reporting lobbying activity are required to file LD-203 reports semiannually, even if they have no contributions to report, because they must certify compliance with the gift and travel rules.", "The LDA requires a lobbyist to disclose previously held covered positions when first registering as a lobbyist for a new client. This can be done either on the LD-1 or on the LD-2 quarterly filing when added as a new lobbyist. This year, we estimate that 17 percent of all LD-2 reports did not properly disclose one or more previously held covered positions as required. Figure 9 shows the extent to which lobbyists failed to properly disclose one or more covered positions as required from 2010 through 2013.", "As of April 10, 2014, lobbyists amended 18 of the 104 disclosure reports in our original sample to make changes to previously reported information. One of the 18 reports was amended twice—once after we notified the lobbyists of our review and again after we met with them. An additional 7 of the 18 reports were amended after we notified the lobbyists of our review, but before we met with them. Finally, an additional 10 of the 18 reports were amended after we met with the lobbyists to review their documentation. We cannot be certain how lobbyists not in our sample would have behaved had they not been contacted by us. However, the notable number of amended LD-2 reports in our sample each year following notification of our review suggests that sometimes our contact spurs lobbyists to more closely scrutinize their reports than they would have without our review.\nTable 1 lists reasons lobbying firms in our sample amended their LD-1 or LD-2 reports.", "As part of our review, we compared contributions listed on lobbyists’ and lobbying firms’ LD-203 reports against those political contributions reported in the FEC database to identify whether political contributions were omitted on LD-203 reports in our sample. The sample of LD-203 reports we reviewed originally contained 80 reports with contributions and 80 reports without contributions. We estimate that overall, for 2013, lobbyists failed to disclose one or more reportable contributions on 4 percent of reports. Table 2 illustrates that most lobbyists disclosed FEC reportable contributions on their LD-203 reports as required from 2010 through 2013.", "As part of our review, 92 different lobbying firms were included in our 2013 sample. Consistent with prior reviews, most lobbying firms reported that they found it very easy or somewhat easy to comply with reporting requirements. Of the 92 different lobbying firms in our sample, 20 reported that the disclosure requirements were “very easy,” 59 reported them “somewhat easy,” and 9 reported them “somewhat difficult” or “very difficult” (see figure 10).\nMost lobbyists we interviewed rated the terms associated with LD-2 reporting requirements as “very easy” or “somewhat easy” to understand with regard to meeting their reporting requirements. This is consistent with prior reviews. Figures 11 through 15 show how lobbyists reported ease of understanding the terms associated with LD-2 reporting requirements from 2010 through 2013.", "", "The Office stated it continues to have sufficient personnel resources and authority under the LDA to enforce LD-2 reporting requirements, including imposing civil or criminal penalties for noncompliance of LD-2 reporting. Noncompliance refers to a lobbyist’s or lobbying firm’s failure to comply with LDA requirements. According to the Office, it has one contract paralegal specialist assigned full time, as well as five civil attorneys and one criminal attorney assigned part time for LDA compliance work. In addition, the Office stated that it participates in a government-wide program that provides temporary access to attorneys to assist with LDA compliance. The temporarily assigned attorneys work with the contract paralegal specialist to contact referred lobbyists or lobbying firms who do not comply with the LDA.\nAccording to the Office, it has sufficient authority to enforce LD-203 compliance with the LDA for lobbying firms and certain individual lobbyists. However, it has difficulty pursuing hundreds of LD-203 referrals that arise when a lobbying firm does not maintain or a lobbyist does not leave forwarding contact information upon leaving the firm. The LD-203 report does not provide contact information. It only provides the name of the lobbyist and lobbying firm. As a result, the Office does not have contact information to find the referred lobbyist to bring him or her into compliance. Office officials reported that many firms have assisted them by providing contact information for lobbyists, and only a few firms have not been willing to provide contact information for noncompliant lobbyists. Additionally, the Office stated that because the current structure of the LDA requires registered lobbyists to file their LD-203 reports and does not require lobbying firms to ensure that their registered lobbyists have complied with LD-203 filing requirements, the Office has no authority to hold lobbying firms responsible for a registered lobbyist who fails to comply with LD-203 requirements. Accordingly, when the Office does not have contact information to find a lobbyist who left the firm and it cannot hold the lobbying firm responsible for the lobbyist’s noncompliance with lobbying disclosure requirements, the Office has no recourse to pursue enforcement action.\nIn a prior report, we recommended that the Office develop a structured approach for tracking and recording its enforcement actions. The Office developed the LDA database to track the status of referrals and enforcement actions it takes to bring lobbyists and lobbying firms into compliance with the LDA. To enforce compliance, the Office has primarily focused on sending letters to lobbyists who have potentially violated the LDA by not filing disclosure reports as required. The letters request lobbyists to comply with the law by promptly filing the appropriate disclosure reports and inform lobbyists of potential civil and criminal penalties for not complying. In addition to sending letters, a contractor sends e-mails and calls lobbyists to inform them of their need to comply with LDA reporting requirements. Not all referred lobbyists receive noncompliance letters, e-mails, or phone calls because some of the lobbyists have terminated their registrations or filed the required financial disclosure reports before the Office received the referral.\nOffice officials stated that lobbyists resolve their noncompliance issues by filing the reports or terminating their registration. Resolving referrals can take anywhere from a few days to years depending on the circumstances. During this time, the Office monitors and reviews all outstanding referrals and uses summary reports from the database to track the overall number of referrals that become compliant as a result of receiving an e-mail, phone call, or noncompliance letter. In addition, more referred lobbyists are being contacted by e-mail and phone calls, which has decreased the number of noncompliance letters the Office sends to lobbyists. Officials from the Office stated that the majority of these e-mails and calls result in the registrant becoming compliant without sending a letter. In our last report, the Office told us that its system collects information on contacts made by e-mail and phone calls in the notes section of its database, but the database does not automatically tabulate the number of e-mails and phone calls to lobbyists, as it does for letters sent. In March 2013 as a part of closing discussions with the Office about the findings of our last lobbying disclosure report, as part of its enforcement efforts we urged the Office to develop a mechanism to track e-mails and telephone contacts to individual lobbyists. Since then, the Office has started tracking the number of e-mails and telephone contacts that are associated with its enforcement efforts to bring lobbyists and lobbying firms into compliance. These actions are now included in the number of enforcement actions taken to bring lobbyists and lobbying firms into compliance.", "As of January 16, 2014, the Office has received 2,722 referrals from both the Secretary of the Senate and the Clerk of the House for failure to comply with LD-2 reporting requirements cumulatively for calendar years 2009 through 2013. Figure 16 shows the number and status of the referrals received and the number of enforcement actions taken by the Office in its effort to bring lobbying firms into compliance. Enforcement actions include the number of letters, e-mails, and calls made by the Office. About 66 percent (1,787 of 2,722) of the total referrals received are now compliant because lobbying firms either filed their reports or terminated their registrations. In addition, some of the referrals were found to be compliant when the Office received the referral, and therefore no action was taken. This may occur when lobbying firms respond to the contact letters from the Secretary of the Senate and Clerk of the House after the Office has received the referrals. About 34 percent (922 of 2,722) of referrals are pending action because the Office was unable to locate the lobbying firm, did not receive a response from the firm, or plans to conduct additional research to determine if it can locate the lobbying firm. According to the Office, resolving referrals can take anywhere from a few days to years depending on the circumstances. Referrals may remain in pending status and may be monitored by the Office until it determines whether to pursue legal action against the registrant or dismiss certain referrals or until the registrant files the disclosure report or terminates his or her registration. The remaining 13 referrals did not require action or were suspended because the lobbyist or client was no longer in business or the lobbyist was deceased. The Office suspends enforcement actions against lobbyists or lobbying firms that are repeatedly referred for not filing disclosure reports but that do not have any current lobbying activity. The suspended lobbying firms are periodically monitored to determine whether they actively lobby in the future. As a part of this monitoring, the Office checks the lobbying disclosure databases maintained by the Secretary of the Senate and the Clerk of the House.", "LD-203 referrals consist of two types: LD-203(R) referrals represent lobbying firms that have failed to file LD-203 reports for the firm, and LD- 203 referrals represent the lobbyists at the lobbying firm who have failed to file their individual LD-203 reports as required. As of January 16, 2014, the Office had received 1,350 LD-203(R) referrals and 3,042 LD-203 referrals from the Secretary of the Senate and Clerk of the House cumulatively for calendar years 2009 through 2013. For LD-203 referrals, the Office sends noncompliance letters for the lobbyists to the registered lobbying firms listed on the LD-203 report because the lobbyist’s personal contact information is not listed on the LD-203 report.\nFigure 17 shows the status of LD-203(R) referrals received and the number of enforcement actions taken by the Office in its effort to bring lobbying firms into compliance. About 43 percent (581 of 1,350) of the lobbyists who were referred by the Secretary of the Senate and Clerk of the House for noncompliance during the 2009 through 2013 reporting periods are now considered compliant because lobbying firms either have filed their reports or have terminated their registrations. About 57 percent (768 of 1,350) of the referrals are pending action because the Office was unable to locate the lobbyist, did not receive a response from the lobbyist, or plans to conduct additional research to determine if it can locate the lobbying firm.\nFigure 18 shows that as of January 16, 2014, the Office had received 3,042 LD-203 referrals from the Secretary and Clerk for lobbyists who failed to comply with LD-203 reporting requirements for calendar years 2009 through 2012. Figure 18 shows the status of the referrals received and the number of enforcement actions taken by the Office in its effort to bring lobbyists into compliance. Figure 18 shows that 55 percent (1,676 of 3,042) of the lobbyists either have come into compliance by filing their reports or are no longer registered as a lobbyist. About 44 percent (1,352 of 3,042) of the referrals are pending action because the Office was unable to locate the lobbyists, did not receive a response from the lobbyists, or plans to conduct additional research to determine if it can locate the lobbyists.\nThe Office said that many of the pending LD-203 referrals represent lobbyists who no longer lobby for the lobbying firms affiliated with the referrals, even though these lobbying firms may be listed on the lobbyist’s LD-203 report. In addition, Office officials stated that they continue to experience challenges with increasing LD-203 compliance because the Office has little leverage to bring certain individual lobbyists into compliance. Many of the LD-203 referrals remain open in an attempt to locate lobbyists who are no longer employed by the lobbying firm and do not leave a forwarding address. As a result, it may take years to resolve the referrals and bring the lobbyists into compliance.", "Since the 2012 reporting period, the Office has identified nine registrants on its chronic offenders list for failure to comply with reporting requirements. Of the nine registrants, five filed the outstanding reports or terminated their registration after being contacted by an Assistant U.S. Attorney. The Office reached settlement agreements with two of the registrants for $50,000 and $30,000, respectively, in civil penalties for repeatedly failing to file disclosure reports. In December 2013, the Office filed a default judgment for $200,000 against a registrant for repeated failure to file his LDA reports as required. In March 2014, the Office filed a civil complaint in the U.S. District Court for the District of Columbia for a registrant’s failure to comply with LDA reporting requirements.\nThe Office continues to monitor and review chronic offenders to determine appropriate enforcement actions, which may include considering legal actions or dismissing certain cases.", "Over the past several years of reporting on lobbying disclosure, we have found that lobbyists reported understanding terms and requirements, but their disclosure filings demonstrated some compliance difficulties. For example, a number of lobbyists had rounding errors in their reports, failed to disclose covered positions, and did not accurately disclose their lobbying activity with the House, the Senate, or executive agencies. As a result, after being contacted by us, lobbyists amended their reports to address these types of compliance difficulties. In our first lobbying disclosure report in September 2008, we concluded that the lobbying community could benefit from creating an organization to share examples of best practices of the types of records maintained to support filings; use this information gathered over an initial period to formulate minimum standards for recordkeeping; provide training for the lobbying community on reporting and disclosure requirements intended to help the community comply with the LDA; and report annually to the Secretary of the Senate and the Clerk of the House on opportunities to clarify existing guidance and ways to minimize sources of potential confusion for the lobbying community.\nThe continuing difficulties that some lobbyists have demonstrated in their disclosure reports, coupled with the sustained public and congressional attention on lobbyists and their interactions with government officials, underscores the importance of accurate and public disclosure of such activities. In that regard, we continue to believe that creating the type of organization we described in our first report could still be beneficial to the lobbying community and the public interest. The activities of such an organization could help enhance the enforcement and compliance with the LDA as amended by HLOGA and improve the accuracy and value of the information reported to Congress.", "We provided a draft of this report to the Attorney General for review and comment. The Assistant U.S. Attorney for the District of Columbia responded on behalf of the Attorney General that the Department of Justice had no comments.\nWe are sending copies of this report to the Attorney General, Secretary of the Senate, Clerk of the House of Representatives, and interested congressional committees and members. In addition, this report is available at no charge on the GAO website at http://www.gao.gov.\nIf you or your staff have any questions about this report, please contact me at (202) 512-4749 or [email protected]. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made major contributions to this report are listed in appendix IV.", "Consistent with the mandate in the Honest Leadership and Open Government Act (HLOGA), our objectives were to determine the extent to which lobbyists are able to demonstrate compliance with the Lobbying Disclosure Act of 1995, as amended (LDA) by providing documentation to support information contained on registrations and reports filed under the LDA; identify challenges and potential improvements to compliance, if any; and describe the resources and authorities available to the U.S. Attorney’s Office for the District of Columbia (the Office) and the efforts the Office has made to improve enforcement of the LDA.\nTo respond to our mandate, we used information in the lobbying disclosure database maintained by the Clerk of the House of Representatives (Clerk of the House). To assess whether these disclosure data were sufficiently reliable for the purposes of this report, we reviewed relevant documentation and spoke to officials responsible for maintaining the data. Although registrations and reports are filed through a single web portal, each chamber subsequently receives copies of the data and follows different data cleaning, processing, and editing procedures before storing the data in either individual files (in the House) or databases (in the Senate). Currently, there is no means of reconciling discrepancies between the two databases caused by the differences in data processing. For example, Senate staff told us during previous reviews that they set aside a greater proportion of registration and report submissions than the House for manual review before entering the information into the database. As a result, the Senate database would be slightly less current than the House database on any given day pending review and clearance. House staff told us during previous reviews that they rely heavily on automated processing. They added that while they manually review reports that do not perfectly match information on file for a given registrant or client, they will approve and upload such reports as originally filed by each lobbyist, even if the reports contain errors or discrepancies (such as a variant on how a name is spelled). Nevertheless, we do not have reasons to believe that the content of the Senate and House systems would vary substantially. For this review, we determined that House disclosure data were sufficiently reliable for identifying a sample of quarterly disclosure (LD-2) reports and for assessing whether newly filed registrants also filed required reports. We used the House database for sampling LD-2 reports from the third and fourth quarters of 2012 and the first and second quarters of 2013, as well as for sampling year-end 2012 and midyear 2013 political contributions (LD-203) reports and finally for matching quarterly registrations with filed reports. We did not evaluate the Offices of the Secretary of the Senate or the Clerk of the House, both of which have key roles in the lobbying disclosure process. However, we did consult with officials from each office and they provided us with general background information at our request.\nTo assess the extent to which lobbyists could provide evidence of their compliance with reporting requirements, we examined a stratified random sample of 104 LD-2 reports from the third and fourth quarters of 2012 and the first and second quarters of 2013. We excluded reports with no lobbying activity or with income less than $5,000 from our sampling frame. We drew our sample from 65,489 activity reports filed for the third and fourth quarters of 2012 and the first and second quarters of 2013 available in the public House database, as of our final download date for each quarter. One LD-2 report was removed from the sample because we could not contact the firm and it appears the firm has gone out of business. We treated this report as a nonrespondent for the purposes of analysis and adjusted our sampling weights accordingly for analysis. Another LD-2 report was excluded because the lobbyist amended the LD- 2 to reflect no lobbying activity after being notified of the review. This report was treated as out of scope.\nWe adjusted for three comparisons to account for the three pairwise tests for each item examined. may also be related to the nature of our sample, which was relatively small and was designed only for cross-sectional analysis.\nOur sample is based on a stratified random selection and is only one of a large number of samples that we may have drawn. Because each sample could have provided different estimates, we express our confidence in the precision of our particular sample’s results as a 95 percent confidence interval. This interval would contain the actual population value for 95 percent of the samples that we could have drawn. The percentage estimates for 2013 have a 95 percent confidence interval of within plus- or-minus 10.1 percentage points or less of the estimate itself, unless otherwise noted. For 2010 through 2012, the percentage estimates have a 95 percent confidence interval with a maximum of 11 percentage points. the amount of income reported for lobbying activities, the amount of expenses reported on lobbying activities, the names of those lobbyists listed in the report, the houses of Congress and federal agencies that they lobbied, and the issue codes listed to describe their lobbying activity.\nAfter reviewing the survey results for completeness, we conducted interviews with the lobbyists and lobbying firms to review documentation they reported as having on their online survey for selected elements of their LD-2 reports.\nPrior to each interview, we conducted an open source search to identify lobbyists on each report who may have held a covered official position. We reviewed the lobbyists’ previous work histories by searching lobbying firms’ websites, LinkedIn, Leadership Directories, Legistorm, and Google. Prior to 2008, lobbyists were only required to disclose covered official positions held within 2 years of registering as a lobbyist for the client. HLOGA amended that time frame to require disclosure of positions held 20 years before the date the lobbyists first lobbied on behalf of the client. Lobbyist are required to disclose previously held covered official positions either on the client registration (LD-1) or on the first LD-2 report when the lobbyist is added as “new.” Consequently, those who held covered official positions may have disclosed the information on the LD-1 or a LD-2 report filed prior to the report we examined as part of our random sample.\nTherefore, where we found evidence that a lobbyist previously held a covered official position and it was not disclosed on the LD-2 report under review, we then conducted an additional reviewed the publicly available Secretary of the Senate or Clerk of the House database. This was done to determine whether the lobbyist properly disclosed the covered official position on a prior report or LD-1. Finally, if a lobbyist appeared to hold a covered position that was not disclosed, we asked for an explanation at the interview with the lobbying firm to ensure that our research was accurate. In previous reports, we reported the lower bound of a 90- percent confidence interval to provide a minimum estimate of omitted covered positions and omitted contributions with a 95 percent confidence level. We did so to account for the possibility that our searches may have failed to identify all possible omitted covered positions and contributions. As we have developed our methodology over time, we are more confident in the comprehensiveness of our searches for these items. Accordingly, this report presents the estimated percentages for omitted contributions and omitted covered positions rather than the minimum estimates. As a result, percentage estimates for these items will differ slightly from the minimum percentage estimates presented in prior reports In addition to examining the content of the LD-2 reports, we confirmed whether year-end 2012 or midyear 2013 LD-203 reports had been filed for each firm and lobbyist listed on the LD-2 reports in our random sample. Although this review represents a random selection of lobbyists and firms, it is not a direct probability sample of firms filing LD-2 reports or lobbyists listed on LD-2 reports. As such, we did not estimate the likelihood that LD-203 reports were appropriately filed for the population of firms or lobbyists listed on LD-2 reports.\nTo determine if the LDA’s requirement for registrants to file a report in the quarter of registration was met for the third and fourth quarters of 2012 and the first and second quarters of 2013, we used data filed with the Clerk of the House to match newly filed registrations with corresponding disclosure reports. Using an electronic matching algorithm that includes strict and loose text matching procedures, we identified matching disclosure reports for 2,925, or 96 percent, of the 3,034 newly filed registrations. We began by standardizing client and registrant names in both the report and registration files (including removing punctuation and standardizing words and abbreviations, such as “company” and “CO”). We then matched reports and registrations using the House identification number (which is linked to a unique registrant-client pair), as well as the names of the registrant and client. For reports we could not match by identification number and standardized name, we also attempted to match reports and registrations by client and registrant name, allowing for variations in the names to accommodate minor misspellings or typos. For these cases, we used professional judgment to determine whether cases with typos were sufficiently similar to consider as matches. We could not readily identify matches in the report database for the remaining registrations using electronic means.\nTo assess the accuracy of the LD-203 reports, we analyzed stratified random samples of LD-203 reports from the 31,482 total LD-203 reports. The first sample contains 80 of the 10,227 reports with political contributions. The second contains 80 of the 21,255 reports listing no contributions. Each sample contains 40 reports from the year-end 2012 filing period and 40 reports from the midyear 2013 filing period. The samples allow us to generalize estimates in this report to either the population of LD-203 reports with contributions or the reports without contributions to within a 95 percent confidence interval of plus or minus 9.5 percentage points or less. Although our sample of LD-203 reports was not designed to detect differences over time, we conducted tests of significance for changes from 2010 to 2013 and found no statistically significant differences after adjusting for multiple comparisons. While the results provide some confidence that apparent fluctuations in our results across years are likely attributable to sampling error, the inability to detect significant differences may also be related to the nature of our sample, which was relatively small and designed only for cross-sectional analysis. We analyzed the contents of the LD-203 reports and compared them to contribution data found in the publicly available Federal Elections Commission’s (FEC) political contribution database. We interviewed FEC staff responsible for administering the database and determined that the data reliability is suitable for confirming whether a FEC-reportable disclosure listed in the FEC database had been reported on an LD-203 report.\nWe compared the FEC-reportable contributions reporting on the LD-203 reports with information in the FEC database. The verification process required text and pattern matching procedures, and we used professional judgment when assessing whether an individual listed is the same individual filing an LD-203. For contributions reported in the FEC database and not on the LD-203 report, we asked the lobbyists or organizations to explain why the contributions were not listed on the LD- 203 report or to provide documentation of those contributions. As with covered positions on LD-2 disclosure reports, we cannot be certain that our review identified all cases of FEC-reportable contributions that were inappropriately omitted from a lobbyist’s LD-203 report. We did not estimate the percentage of other non-FEC political contributions that were omitted because they tend to constitute a small minority of all listed contributions and cannot be verified against an external source.\nTo identify challenges to compliance, we used a web-based survey and obtained the views from 92 different lobbying firms included in our sample on any challenges to compliance. The number of different lobbying firms total 92 and is less than our sample of 102 reports because some lobbying firms had more than 1 LD-2 report included in our sample. We calculated our responses based on the number of different lobbying firms that we contacted rather than the number of interviews. Prior to our calculations, we removed the duplicate lobbying firms based on the most recent date of their responses. For those cases with the same response date, we kept the cases with the smallest assigned case identification number. To obtain their views, we asked them to rate their ease with complying with the LD-2 disclosure requirements using a scale of “very easy,” “somewhat easy,” “somewhat difficult,” or “very difficult.” In addition, using the same scale we asked them to rate the ease of understanding the terms associated with LD-2 reporting requirements.\nTo describe the resources and authorities available to the Office and its efforts to improve its LDA enforcement, we interviewed officials from the Office and obtained updated information on the capabilities of the system they established to track and report compliance trends and referrals, and other practices established to focus resources on enforcement of the LDA. The Office provided us with updated reports from the tracking system on the number and status of referrals and chronically noncompliant lobbyists and lobbying firms.\nThe mandate does not include identifying lobbyists who failed to register and report in accordance with LDA requirements, or whether for those lobbyists who did register and report, that all lobbying activity or contributions were disclosed.\nWe conducted this performance audit from June 2013 through May 2014 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 that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives.", "The random sample of lobbying disclosure reports we selected was based on unique combinations of registrant lobbyists and client names (see table 3).", "See table 4 for a list of the lobbyists and lobbying firms from our random sample of lobbying contribution reports with contributions. See table 5 for a list of the lobbyists and lobbying firms from our random sample of lobbying contribution reports without contributions.", "", "", "In addition to the contact named above, Bill Reinsberg, Assistant Director; Shirley Jones, Assistant General Counsel; Crystal Bernard; Stuart Kaufman; Lois Hanshaw; Sharon Miller; Anna Maria Ortiz; Anthony Patterson; Robert Robinson; Stewart Small; and Katherine Wulff made key contributions to this report.\nAssisting with lobbyist file reviews were Vida Awumey and Patricia Norris." ], "depth": [ 1, 1, 2, 2, 2, 2, 2, 1, 1, 2, 2, 2, 2, 1, 1, 1, 1, 1, 1, 2, 2 ], "alignment": [ "h2_full", "h0_title", "", "", "", "h0_full", "", "h0_full", "h1_title", "h1_full", "", "", "h1_full", "h0_full", "h2_full", "h2_full", "", "", "", "", "" ] }
{ "question": [ "How were the terms associated with LD-2 reporting rated?", "What compliance difficulties were demonstrated by disclosed reports?", "What is an example of these difficulties?", "What authority and resources does the U.S. attorneys office have to enforce LD-2 and LD-203 compliance?", "What resources are currently allocated?", "How is the office continuing its efforts to followup on referrals?", "Why did the office file a complaint against a lobbyist in 2014?", "What is required of lobbyists by the LDA?", "What do they require of GAO?", "How had GAO fulfilled these requirements?" ], "summary": [ "Most lobbyists in GAO's sample rated the terms associated with LD-2 reporting as “very easy” or “somewhat easy” to understand with regard to meeting reporting requirements.", "However, some disclosure reports demonstrate compliance difficulties, such as failure to disclose covered positions or misreporting of income or expenses.", "In addition, lobbyists amended 18 of 104 original disclosure reports in GAO's sample to change previously reported information.", "The U.S. Attorney's Office for the District of Columbia (the Office) stated it has sufficient authority and resources to enforce LD-2 and LD-203 compliance with the LDA for lobbying firms and certain individual lobbyists.", "It has one contract paralegal working full time and six attorneys working part time on LDA enforcement issues.", "The Office continues its efforts to follow up on referrals for noncompliance with lobbying disclosure requirements by contacting lobbyists by e-mail, telephone, and letter.", "In March 2014, the Office filed a civil complaint against a lobbyist for failure to comply with LDA reporting requirements.", "The LDA requires lobbyists to file quarterly lobbying disclosure reports and semiannual reports on certain political contributions.", "The LDA also requires that GAO annually (1) audit the extent to which lobbyists can demonstrate compliance with disclosure requirements, (2) identify challenges to compliance that lobbyists report, and (3) describe the resources and authorities available to the Office in its role in enforcing LDA compliance and the efforts the Office has made to improve enforcement.", "This is GAO's seventh report under the mandate." ], "parent_pair_index": [ -1, -1, 1, -1, 0, -1, -1, -1, 0, 1 ], "summary_paragraph_index": [ 10, 10, 10, 11, 11, 11, 11, 0, 0, 0 ] }
GAO_GAO-12-509T
{ "title": [ "DHS Employees Indicated Less Job Satisfaction Than the Rest of the Federal Government", "DHS Has Ongoing Actions to Address Job Satisfaction, but Has Not Yet Improved Employee Satisfaction Results", "DHS Has Taken Action to Address Employee Satisfaction Problems", "Several Issues Can Contribute to Employee Dissatisfaction", "GAO Contact and Staff Acknowledgments", "Appendix I: Comparison of DHS and Non- DHS Responses to Key Survey Questions", "Related GAO Products" ], "paragraphs": [ "Over time, federal surveys have consistently found that DHS employees are less satisfied with their jobs than the governmentwide average. Shortly after DHS was formed, 2004 federal survey data indicated a disparity between DHS and governmentwide averages in job satisfaction. At that time, 56 percent of DHS employees responded that they were satisfied with their jobs, compared to the 68 percent governmentwide.subsequent years when comparative data were available using the job satisfaction index, the disparity continued—ranging from a difference of 8 percentage points in 2006 to a 4 percentage point difference in 2008, 2010, and 2011.\nIn 2011, DHS employees also consistently indicated less satisfaction on key items in OPM’s 2011 FEVS than employees in the rest of the federal government. On the basis of its analysis of its FEVS, OPM determined that responses to these items—called impact items— make a difference in whether people want to come, stay, and contribute their fullest to an agency. Specifically, DHS employees were less positive on 14 of the 16 impact items. In some key areas, DHS’s percentage of positive responses was lower than the rest of the federal government averages. For example:\nSlightly less than half of the DHS employees surveyed reported positive responses to the statement “My talents are used well in the workplace,” nearly 12 percentage points less than the rest of the federal government average of 61.6 percent.\nDHS employees had nearly 10 percentage points fewer positive responses to the statements “I am given a real opportunity to improve my skills in my organization” and “Managers communicate the goals and priorities of the organization” than the rest of the federal government averages of 66.0 and 65.3 percent respectively.\nIn two areas, DHS’s percentage of positive responses was nearly the same or higher than the rest of the federal government average. Specifically:\nDHS’s percentage of positive responses to the statement “Considering everything, how satisfied are you with your pay?” was not statistically different than the rest of the federal government average, with responses of 62 percent for DHS and 63 percent for the rest of the federal government.\nDHS was nearly 2 percentage points higher than the rest of the federal government average for the statement “My workload is reasonable.”\nThe percentage of DHS respondents with positive responses on each of 16 impact items and the difference between DHS and the rest of the federal government appear in appendix I. OPM calls for federal leaders to pay attention to the 16 impact items as key indicators of engagement and commitment to continued service. While improvement in any of the impact items that OPM identified could help DHS improve its attractiveness as an employer of choice, the items for which DHS is farthest behind the rest of the federal government could provide a focus for targeting improvement efforts.\nThe 2011 job satisfaction data also indicate that satisfaction levels vary across components within DHS. For example, as shown in table 1, job satisfaction index results for the 2011 FEVS show the Transportation Security Administration (TSA) as 11 percentage points below governmentwide averages while other large components, such as U.S. Customs and Border Protection (CBP) and the U.S. Coast Guard (Coast Guard), posted above average results. Identifying this variation across components could help target efforts to improve employee satisfaction.\nTSA performed analysis of its 2011 FEVS results to gain a better understanding of whether employee satisfaction varies across location, program office, or level. This analysis identified variation in job satisfaction within the component; specifically, with Federal Security Director staff at airports providing more positive responses for job satisfaction (69 percent positive) than the airport screening workforce (54 percent positive), as shown in figure 1.", "DHS has taken steps to identify where it has the most significant employee satisfaction problems and has developed plans for addressing those problem areas. DHS has conducted some analysis of employee survey results and developed action plans to address some employee satisfaction problems, but it has not yet addressed the key goals related to job satisfaction—to improve DHS’s scores on OPM’s job satisfaction index, among other indexes, and to improve its ranking on the Partnership’s Best Places to Work in the Federal Government. The results from our prior work at DHS and other departments identify a wide variety of issues that can lead to employee morale problems. Thus, conducting an analysis of the root causes of employee satisfaction problems and developing plans to address them are important.", "DHS’s job satisfaction scores could pose challenges to DHS in recruiting, motivating, and retaining talented employees that DHS needs to meet its mission requirements. Specifically, an agency’s reputation is a key factor in recruiting and hiring applicants. A Partnership for Public Service report published in 2010 noted that a good reputation is the most frequently mentioned factor in choosing potential employers, and agencies with high satisfaction and engagement scores were seen as desirable by college graduates seeking employment. Similarly, the Merit Systems Protection Board (MSPB) reported that employees’ willingness to recommend the federal government or their agency as a place to work can directly affect an agency’s recruitment efforts, the quality of the resulting applicant pool, and the acceptance of employment offers. In addition, MSPB noted that prospective employees would rather work for an agency billed as one of the best places to work compared to an agency at the bottom of the list.\nDHS has taken or has a variety of actions under way or planned to address employee satisfaction problems, including analyzing the results of employee surveys and developing action plans to improve employee satisfaction.\nComponents and DHS have used a variety of approaches to analyze survey results to gain insight about employee satisfaction. As part of our ongoing work on employee morale, we reviewed survey analyses conducted by DHS’s Office of the Chief Human Capital Officer, TSA, and U.S. Immigration and Customs Enforcement (ICE).\nDHS. DHS completed an evaluation of the 2008 Federal Human Capital Survey results to determine root causes of job satisfaction departmentwide, according to DHS officials. In that analysis, DHS determined that the drivers of employee satisfaction across DHS included the DHS mission, senior leadership effectiveness, and supervisor support. According to DHS officials, DHS is currently working with a contractor on a departmentwide analysis of root causes of employee morale. As of March 2012, this analysis was not complete.\nTSA. TSA’s analysis focused on areas of difficulty across groups, such as pay and performance appraisal concerns, and also provides insight on which employee groups within TSA may be more dissatisfied with their jobs than others. The analysis results are descriptive, showing where job satisfaction problem areas may exist, and do not identify the causes of dissatisfaction within employee groups. For the 2011 FEVS, TSA benchmarked its results against CBP results, as well as against DHS and governmentwide results. When comparing CBP and TSA scores, TSA found that the greatest differences in scores were on questions related to satisfaction with pay and with whether performance appraisals were a fair reflection of performance. TSA scored 40 percentage points lower on pay satisfaction and 25 percentage points lower on performance appraisal satisfaction. In comparing TSA results to DHS and governmentwide results, TSA found that TSA was below the averages for all FEVS dimensions. TSA also evaluated FEVS results across employee groups by comparing dimension scores for headquarters staff, the Federal Air Marshals, Federal Security Director staff, and the screening workforce. TSA found that the screening workforce scored at or below scores for all other groups across all of the dimensions.\nICE. ICE analyzed the 2011 FEVS results by identifying ICE’s top FEVS questions with high positive and negative responses. ICE found that its top strength was employees’ willingness to put in the extra effort to get a job done. ICE’s top negative result was employees’ perception that pay raises did not depend on how well employees perform their jobs. ICE did not perform demographic analysis of the survey results or identify the roots causes of employee satisfaction problems, but did benchmark its results against DHS and governmentwide results, identifying those questions and Human Capital Assessment and Accountability Framework ICE (HCAAF) indices where ICE led or trailed DHS and the government. found, among other things, that employee views on the fairness of its performance appraisals were above DHS’s average but that views on employee preparation for potential security threats were lower. When comparing ICE’s results with governmentwide figures, ICE found, among other things, that ICE was lower on all of the HCAAF indices, including job satisfaction.\nThe HCAAF indices provide metrics for measuring progress toward OPM goals for federal agencies, which include employee job satisfaction, leadership effectiveness and knowledge management, a results-oriented performance culture, and effective talent management.\nDHS and the components are taking actions that could improve employee satisfaction, with a focus on improving components’ positive responses to selected survey items.\nDHS’s Integrated Strategy for High Risk Management. In December 2011, DHS provided us with its updated Integrated Strategy for High Risk Management (Integrated Strategy), which summarized the department’s plans for addressing its implementation and transformation high-risk designation. In the Integrated Strategy, DHS identified corrective actions to improve employee job satisfaction scores, among other things. The corrective actions include the Secretary issuing guidance to component heads to address gaps in the 2011 FEVS results; launch of an Employee Engagement Executive Steering Committee, which held its first meeting in February 2012; implementation in June 2009 of an online reporting and action planning tool for components; and execution of a DHS-wide exit survey in January 2011 for departing employees to gain additional insight into why employees are leaving the department. According to the Integrated Strategy, DHS has begun implementing corrective actions but has not yet achieved its key outcome related to job satisfaction—to improve DHS’s scores on OPM’s job satisfaction index, among other indexes, and to improve its ranking on the Partnership’s Best Places to Work in the Federal Government. According to the Integrated Strategy, FEVS index scores did not improve appreciably relative to governmentwide averages from 2010 to 2011. DHS’s Partnership ranking also remains near last among federal agencies.\nWithin the Integrated Strategy action plan for improving job satisfaction scores, DHS reported that three of six efforts were hindered by a lack of resources. For example, fewer resources were available than anticipated for DHS’s Office of the Chief Human Capital Officer to consult with components in developing action plans in response to 2011 FEVS results. Similarly, fewer resources were available than planned to deploy online focus discussions on job satisfaction-related issues. Sufficient resource planning to address the key high-risk human capital outcome of enhanced employee satisfaction scores is essential as DHS works to transform itself into a high-performing department.\nDHS and component action plans. We reviewed the most recent DHS action plans to address 2011 FEVS outcomes departmentwide as well as component plans for TSA, the Coast Guard, CBP, and ICE. The plans state objectives and identify actions to be taken, among other things. Examples of initiatives from the plans are listed in table 2.\nAs part of our ongoing work, we are comparing DHS and component action plans with OPM guidance for action planning and will report on our results in September 2012.", "Our prior work at DHS and other departments and agencies illustrates the variety of issues that can lead to morale problems.\nIn July 2009, we reported that the funding challenges FPS faced in fiscal year 2008 and its cost savings actions to address them resulted in adverse implications for its workforce, primarily low morale among staff and increase attrition.\nIn June 2011, we reported that the Federal Emergency Management Agency’s (FEMA) human capital plan did not have strategies to address retention challenges, among other things.experienced frequent turnover in key positions and divisions that could result in lost productivity, a decline in institutional knowledge, and a lack of continuity for remaining staff. We recommended that FEMA develop a comprehensive workforce plan that addressed retention issues, among other things. FEMA concurred with the recommendation and noted that a contractor had begun work on a new human capital plan.\nIn August 2011, we reported that the Forest Service’s centralization of human resources management and information technology services contributed to several agencywide improvements, but it has also had widespread, largely negative effects on field-unit employees. Under centralization, the agency relies on a self-service approach whereby employees are generally responsible for independently initiating or carrying out many related business service tasks. Field-unit employees consistently told us that these increased administrative responsibilities, coupled with problems with automated systems and customer support, have negatively affected their ability to carry out their mission work and have led to lower employee morale.\nIn June 2009, we reported that employees from a number of different agencies and pay systems worked overseas in proximity to one another. Each of these pay systems was authorized by a separate statute that outlines the compensation to which employees under that system are entitled, certain elements of which are set without regard to the location in which the employees are working. We reported that when these employees are assigned overseas and serve side by side, the differences in pay systems may become more apparent and may adversely affect morale.\nIn September 2008, we reported that the 2004 and 2006 employee survey results for the Small Business Administration (SBA) showed a lack of respect for and trust in SBA leadership and a concern about training opportunities. The SBA Administrator’s efforts to address the survey results included soliciting information from employees and visiting field locations to obtain their input on how to improve agency operations and morale.\nThe variation in potential issues that can result in morale problems underscores the importance of looking beyond survey scores to understand where problems, such as low employee satisfaction, are taking place within the organization, along with the root causes of those problems. Effective root cause analysis can help agencies better target efforts to develop action plans and programs to address the key drivers of employee satisfaction.\nGiven the critical nature of DHS’s mission to protect the security and economy of our nation, it is important that DHS employees are satisfied with their jobs so that DHS can retain and attract the talent required to complete its work. We will continue to monitor and assess DHS’s efforts to address employee job satisfaction through our ongoing work and expect to issue a report on our final results in September 2012.\nChairman McCaul, Ranking Member Keating, and Members of the Subcommittee, this concludes my prepared statement. I would be pleased to respond to any questions that you may have at this time.", "For questions about this statement, please contact David C. Maurer at (202) 512-9627 or [email protected]. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this statement. Individuals making key contributions to this statement include Sandra Burrell, Assistant Director; Ben Atwater, Analyst-in- Charge; and Jean Orland. Other contributors include Alice Feldesman, Tracey King, Kirsten Lauber, Margaret McKenna, Lara Miklozek, and Jeff Tessin. Key contributors for the previous work that this testimony is based on are listed in each product.", "Survey question My talents are used well in the workplace.\nI am given a real opportunity to improve my skills in my organization.\nManagers communicate the goals and priorities of the organization.\nEmployees have a feeling of personal empowerment with respect to work processes.\nHow satisfied are you with your involvement in decisions that affect your work?\nHow satisfied are you with the policies and practices of your senior leaders?\nMy work gives me a feeling of personal accomplishment.\nHow satisfied are you with the information you receive from management on what’s going on in your organization?\nHow satisfied are you with the recognition you receive for doing a good job?\nI have a high level of respect for my organization’s senior leaders.\nHow satisfied are you with your opportunity to get a better job in your organization?\nHow satisfied are you with the training you receive for your present job?\nOverall, how good a job do you feel is being done by your immediate supervisor/team leader?\nConsidering everything, how satisfied are you with your pay?", "Department of Homeland Security: Continued Progress Made Improving and Integrating Management Areas, but More Work Remains. GAO-12-365T. Washington, D.C.: March 1, 2012.\nForest Service Business Services: Further Actions Needed to Re- examine Centralization Approach and to Better Document Associated Costs. GAO-11-769. Washington, D.C.: August 25, 2011.\nFEMA: Action Needed to Improve Administration of the National Flood Insurance Program. GAO-11-297. Washington, D.C.: June 9, 2011.\nHigh-Risk Series: An Update. GAO-11-278. .Washington, D.C.: February 2011.\nDepartment of Homeland Security: Progress Made in Implementation and Transformation of Management Functions, but More Work Remains. GAO-10-911T. Washington, D.C.: September 30, 2010.\nHomeland Security: Preliminary Observations on the Federal Protective Service’s Workforce Analysis and Planning Efforts. GAO-10-802R. Washington, D.C.: June 14, 2010.\nHomeland Security: Federal Protective Service Should Improve Human Capital Planning and Better Communicate with Tenants. GAO-09-749. Washington, D.C.: July 30, 2009.\nHuman Capital: Actions Needed to Better Track and Provide Timely and Accurate Compensation and Medical Benefits to Deployed Federal Civilians. GAO-09-562. Washington, D.C.: June 26, 2009.\nSmall Business Administration: Opportunities Exist to Build on Leadership’s Efforts to Improve Agency Performance and Employee Morale. GAO-08-995. Washington, D.C.: September 24, 2008.\nHigh-Risk Series: Strategic Human Capital Management. GAO-03-120. Washington, D.C.: January 2003.\nHigh-Risk Series: An Update. GAO-03-119. Washington, D.C.: January 2003.\nThis is a work of the U.S. government and is not subject to copyright protection in the United States. The published product may be reproduced and distributed in its entirety without further permission from GAO. However, because this work may contain copyrighted images or other material, permission from the copyright holder may be necessary if you wish to reproduce this material separately." ], "depth": [ 1, 1, 2, 2, 1, 1, 1 ], "alignment": [ "h1_full", "h0_full h1_full", "h0_full h1_full", "h0_full", "", "", "h1_full" ] }
{ "question": [ "How has DHS addressed employee satisfaction issues?", "How did DHS determine the root factors in job satisfaction in the department?", "What factors were found to have the greatest impact on employee satisfaction?", "How is DHS seeking to determine the root factors of employee morale in the department?", "What is the status of the new analysis?", "How is DHS attempting to improve survey results for specific questions?", "What were GAO's previous findings related to DHS employee satisfaction?", "Why does GAO believe it is important to look beyond the survey to understand root problems?", "How will GAO continue to assess DHS employee satisfaction?", "Why is it important that DHS employees are satisfied with their jobs?", "What is the role of DHS in the federal government?", "What problems have faced DHS since its creation in 2003?", "Why did GAO designate the implementation and transformation of DHS as high risk?", "What information is presented in this testimony?", "What information did GAO use as the basis for its observations?", "How is GAO conducting its ongoing work related to DHS?" ], "summary": [ "DHS has taken steps to identify where it has the most significant employee satisfaction problems and developed plans to address those problems, but has not yet improved DHS employee satisfaction survey results.", "For example, to determine root causes of job satisfaction department-wide, DHS conducted an evaluation of the 2008 Federal Human Capital Survey results, according to DHS officials.", "In that analysis, DHS determined that the drivers of employee satisfaction across DHS included the DHS mission, senior leadership effectiveness, and supervisor support.", "According to DHS officials, DHS is working with a contractor on a new department-wide analysis of root causes of employee morale.", "As of March 2012, this analysis was not complete.", "DHS and its components are also taking steps to improve components’ positive response rates to selected survey items. For example, DHS’s Integrated Strategy for High Risk Management identified corrective actions to improve employee job satisfaction scores, such as the launch of the Employee Engagement Executive Steering Committee.", "GAO has previously reported on a variety of issues, including concerns about pay and a lack of trust in leadership that can lead to morale problems.", "GAO has previously reported on a variety of issues, including concerns about pay and a lack of trust in leadership that can lead to morale problems. This variation in potential issues that can result in morale problems underscores the importance of looking beyond survey scores to understand the root causes of those problems and developing plans to address them.", "GAO will continue to assess DHS’s efforts to address employee job satisfaction and expects to issue a report on its results in September 2012.", "Given the critical nature of DHS’s mission to protect the security and economy of the United States, it is important that DHS employees are satisfied with their jobs so that DHS can attract and retain the talent required to complete its work.", "DHS is the third largest cabinet-level agency in the federal government, employing more than 200,000 employees in a broad range of jobs.", "Since its creation in 2003, DHS has faced challenges implementing its human capital functions, and its employees have reported having low job satisfaction.", "GAO designated the implementation and transformation of DHS as high risk because it represented an enormous and complex undertaking that would require time to achieve in an effective and efficient manner.", "This testimony presents preliminary observations regarding: (1) how DHS’s employees’ workforce satisfaction compares with that of other federal government employees, and (2) the extent to which DHS is taking steps to improve employee job satisfaction.", "GAO’s comments are based on ongoing work on DHS’s employee job satisfaction survey results and its actions and plans to improve them, as well as reports issued from January 2003 through February 2012 on high-risk and morale issues in the federal government and at DHS.", "To conduct its ongoing work, GAO analyzed DHS and component planning documents, interviewed relevant DHS officials about employee morale, and analyzed 2011 federal employee job satisfaction survey results." ], "parent_pair_index": [ -1, 0, 1, 0, 3, 0, -1, 6, 6, -1, -1, 0, 1, -1, 3, -1 ], "summary_paragraph_index": [ 2, 2, 2, 2, 2, 2, 2, 2, 2, 2, 0, 0, 0, 0, 0, 0 ] }
GAO_GAO-12-845
{ "title": [ "Background", "Effluent Guidelines Program", "EPA’s Two-Phase Screening and Review Process Has Identified Few Industrial Categories for New or Revised Effluent Guidelines", "EPA’s Screening Phase Results in a Subset of Industrial Categories for Further Review", "EPA’s Further Review Phase Results in Few Industrial Categories to Consider for Potential New or Revised Effluent Guidelines", "Focus on Limited Hazard Data to the Exclusion of Technology Information May Have Led EPA to Overlook Industrial Categories for Pollution Reduction", "Limitations in Hazard Data May Have Caused EPA to Overlook Industrial Categories", "EPA’s Screening Phase Does Not Consider Treatment Technologies, Omitting Some Industrial Categories from Further Review", "EPA Is Adding Hazard Data Sources but Is Not Fully Using Potential Sources of Information on Treatment Technologies", "Conclusions", "Recommendations for Executive Action", "Agency Comments and Our Evaluation", "Appendix I: Scope and Methodology", "Appendix II: Survey of State Water Quality Permit Writers and Analysis of Views about Whether EPA Should Revise Effluent Guidelines", "Questionnaire Design", "Survey Respondents", "Survey Administration", "Summary of Survey Responses", "Relationships between Key Decision-Making Factors and States’ Views about Whether EPA Should Revise Effluent Guidelines", "Industrial Categories for Which States Thought Effluent Guidelines Should Be Revised", "Appendix III: Additional Details on Industrial Categories with Effluent Guidelines", "Appendix IV: Comments from the Environmental Protection Agency", "Appendix V: GAO Contact and Staff Acknowledgments", "GAO Contact", "Staff Acknowledgments" ], "paragraphs": [ "Tens of thousands of industrial facilities directly discharge wastewater into the waters of the United States and are subject to permit limits on their discharges, which for certain industries are determined by effluent guidelines set by EPA under the Clean Water Act. For certain industries, EPA issues a similar type of regulation—pretreatment standards— applicable to facilities that are indirect dischargers; that is, their effluent goes to wastewater treatment plants, which then discharge the collected and treated wastewater into a water body. To establish pollutant control limits for different pollutants in these guidelines or standards, EPA groups industrial facilities into categories that have similar products or services. To date, EPA has issued effluent guidelines or pretreatment standards for 58 industrial categories. EPA has issued effluent guidelines for 57 of the 58 categories and pretreatment standards for 35 of the 58 categories.Table 1 lists industrial categories that are regulated by effluent guidelines and pretreatment standards. According to EPA, there are approximately 35,000 to 45,000 direct dischargers covered by effluent guidelines and about 10,000 facilities that discharge indirectly to wastewater treatment plants.\nBefore an industrial facility discharges pollutants, it must receive a permit that is to, at a minimum, incorporate any relevant pollutant limits from EPA’s effluent guidelines. Where needed to protect water quality as determined by standards set by individual states, NPDES permits may include limits more stringent than the limits in the guidelines. NPDES permits for direct dischargers are issued by 1 of the 46 states authorized by EPA to issue them and by EPA elsewhere. Unlike direct dischargers, indirect dischargers, which do not discharge to surface waters, do not require an NPDES permit. Instead, an indirect discharger must meet EPA’s national pretreatment standards and may have to meet additional pretreatment conditions imposed by its local wastewater treatment plant.Under the national pretreatment standards and conditions, an indirect discharger is required to remove pollutants that may harm wastewater treatment plant operations or workers or, after treatment and discharge, cause violations of the wastewater treatment plant’s permit. Figure 1 illustrates both types of facilities subject to regulation.\nTo get an NPDES permit, industrial facilities’ owners—like any source discharging pollutants as a point source—must first submit an application that, among other things, provides information on their proposed discharges. Water quality officials in authorized states and EPA regional offices responsible for the NPDES program in the four nonauthorized states review these applications and determine the appropriate limits for the permits. Those limits may be technology-based effluent limits, water quality-based effluent limits, or a combination of both. Technology-based limits must stem from either effluent limitation guidelines, when applicable, or from the permit writer’s best professional judgment when no applicable effluent limitation guidelines are available. Using best professional judgment, permit writers are to develop technology-based permit conditions on a case-by-case basis, considering all reasonably available and relevant information, as well as factors similar to those EPA uses in developing guidelines for national effluent limitations. A permit writer should also set water quality-based limits more stringent than technology-based limits if necessary to control pollutants that could cause or contribute to violation of a state’s water quality standards. To support each permit, permit writers are supposed to develop a fact sheet, or similar documentation, briefly summarizing the key facts and significant factual, legal, methodological, and policy questions considered. The fact sheet and supporting documentation also serve to explain to the facility, the public, and other interested parties the rationale and assumptions used in deriving the limitations in the permit.\nFacilities with NPDES permits are required to monitor their discharges for the pollutants listed in their permits and to provide monitoring reports with their results to their permitting authority (the relevant state, tribal, or territorial agency authorized to issue NPDES permits or, in nonauthorized locations, EPA). For facilities designated by EPA regional administrators and the permitting authorities as major facilities, the permitting authorities are in turn required to transfer the monitoring report data to EPA headquarters. These reports, known as discharge monitoring reports, are transmitted electronically and stored in an electronic database or reported in documents and manually entered into the electronic database for use by EPA in reviewing permit compliance. required to report the discharge monitoring results from all remaining facilities, known as minor facilities, to EPA but may do so. According to EPA, there are about 6,700 major and 40,500 minor facilities covered by NPDES permits.\nEPA and the states are making a transition from one national database, known as the Permit Compliance System, to another known as the Integrated Compliance Information System: NPDES. The states are divided in their use of the two databases. Consequently, two databases contain discharge-monitoring reports. In our report, however, we refer to them collectively as “the database.”\nFacilities may also be required to report data to EPA’s Toxics Release Inventory on their estimated wastewater discharges. This inventory contains annual estimates of facilities’ discharges of more than 650 toxic chemicals to the environment. One of the inventory’s primary purposes is to inform communities about toxic chemical releases to the environment, showing data from a wide range of mining, utility, manufacturing, and other industries subject to the reporting requirements. As such, although the inventory is unrelated to the NPDES program, the Toxics Release Inventory contains estimated discharges of toxic pollutants for many NPDES-permitted facilities. Not all industrial categories covered by effluent guidelines—the oil and gas industrial category, for example—are necessarily required to report to the inventory.", "Under the Clean Water Act, EPA must establish effluent guidelines for three categories of pollutants—conventional, toxic, and nonconventional pollutants—and several levels of treatment technology. As defined in EPA’s regulations, conventional pollutants include biological oxygen demand, total suspended solids, fecal coliform bacteria, oil and grease, and pH.\nThe Clean Water Act designates toxic pollutants as those chemicals listed in a key congressional committee report, which contains 65 entries, including, arsenic, carbon tetrachloride, and mercury, as well as groups of pollutants, such as halomethanes. Nonconventional pollutants are any pollutants not designated as a conventional or toxic pollutant; for example, EPA has developed limitations for such nonconventional pollutants as chemical oxygen demand,carbon, and the nutrients nitrogen and phosphorus.\nThe act authorizes EPA to establish effluent limits for these three pollutant categories according to several standards; the standards generally reflect increasing levels of treatment technologies. A treatment technology is any process or mechanism that helps remove pollutants from wastewater and can include filters or other separators, biological or bacteria-based removal, and chemical neutralization. Legislative history of the Clean Water Act describes the expectation of attaining higher levels of treatment through research and development of new production processes, modifications, replacement of obsolete plans and processes, and other improvements in technology, taking into account the cost of treatment. Under the act, the effluent limits do not specify a particular technology to be used but instead set a performance level based on one or more particular existing treatment technologies. Individual facilities then have to meet the performance level set but can choose which technology they use to meet it.\nUnder the act, EPA was to issue initial guidelines for existing facilities on the basis of the “best practicable control technology currently available” for conventional, toxic, and nonconventional pollutants—guidelines to be achieved by 1977—followed by guidelines set on the basis of “best available technology economically achievable” for toxic and nonconventional pollutants and “best conventional pollutant control technology” for conventional pollutants. The act also called for guidelines known as “new source performance standards,” which would apply to new facilities starting operations after such standards were proposed. When permitting authorities develop a permit, they apply standards most appropriate to a given facility: For example, a new facility would receive a permit with limits reflecting the new source performance standards. Existing facilities would generally receive permits with limits reflecting the best conventional technology and best available technology, but where those standards have not been issued, permit limits would reflect best practical treatment. Table 2 shows the different levels of treatment established in the act and the category of pollutant to which they apply.\nThe Clean Water Act requires EPA to annually review all existing effluent guidelines and revise them if appropriate, and also to review existing effluent limitations at least every 5 years and revise them if appropriate. The Water Quality Act of 1987 added two related requirements to EPA’s reviews. First, EPA is to identify, every 2 years, potential candidates for new effluent guidelines, namely, industries that are discharging significant, or nontrivial, amounts of toxic or nonconventional pollutants that are not currently subject to effluent guidelines. Second, every 2 years beginning in 1988, EPA is required to publish a plan establishing a schedule for the annual review and revision of the effluent guidelines it has previously promulgated. In response to these two requirements, EPA published its first effluent guidelines program plan in 1990, which contained schedules for developing new and revised effluent guidelines for several industrial categories.\nFrom the start of the effluent guidelines program in the early 1970s, EPA has faced considerable litigation, with industry challenging most of the industry-specific effluent guidelines. As the agency implemented the program, EPA also faced challenges from environmental groups over its failure to issue guidelines and the process EPA used to screen and review industrial categories. For example, the Natural Resources Defense Council, an environmental organization, brought two suits, each seeking to compel EPA to meet its duties to promulgate effluent limitations for listed toxic pollutants, among other actions. As a result, EPA operated under two key consent decrees establishing court-approved schedules for it to develop and issue effluent guidelines regulations. In addition, under one of the consent decrees, EPA established a task force that operated from 1992 through 2000 and advised the agency on various aspects of the effluent guidelines program. In particular, the task force issued several reports advising EPA on changes to its screening and review process for the effluent guidelines program and recommended that EPA hold a workshop to discuss improvements to the process.\nIn 2002, after considering the recommendations made by both the task force and the workshop, EPA developed an approach to guide its post- consent decree screening and review, issued in a document called A Strategy for National Clean Water Industrial Regulations. Under this draft strategy, EPA was to evaluate readily available data and stakeholder input to create an initial list of categories warranting further examination for potential effluent guidelines. The strategy identified the following four key factors for EPA to consider in deciding whether to revise existing effluent guidelines or to develop new ones: the extent to which pollutants remaining in an industrial category’s discharge pose a substantial risk to human health or the environment; the availability of a treatment technology, process change, or pollution prevention alternative that can effectively reduce the pollutants and risk; the cost, performance, and affordability of the technology, process change, or pollution prevention measures relative to their benefits; and the extent to which existing effluent guidelines could be revised, for example, to eliminate inefficiencies or impediments to technological innovation or to promote innovative approaches.\nThe draft strategy also indicated that EPA would apply nearly identical factors to help determine whether it should issue effluent guidelines for industrial categories for which it had not yet done so. The document noted that EPA intended to revise and issue the strategy in early 2003, but EPA has chosen not to finalize it.agency made this choice because its implementation of the process was likely to evolve over time.\nEPA officials stated that the Since EPA issued its draft strategy, the agency has faced litigation challenging the use of technology in its screening process. In 2004, EPA was sued by Our Children’s Earth, a nonprofit environmental organization, which alleged that EPA failed to consider technology-based factors during its annual review of industrial categories. On appeal, the Ninth Circuit Court decided in 2008 that the statute did not establish a mandatory duty for EPA to consider such factors. The court found that the statute’s use of the phrase “if appropriate” indicated that decisions on whether to revise guidelines are discretionary but are also constrained by the statute’s mandate as to what effluent guidelines regulations are to accomplish. Further, the court stated that the overall structure of the Clean Water Act strongly suggests that any review to determine whether revision of effluent guidelines is appropriate should contemplate technology-based factors.", "EPA uses a two-phase process to review industrial categories potentially in need of new or revised effluent guidelines; from 2003 through 2010, the agency identified few such categories. Since 2003, EPA has annually screened all industrial categories subject to effluent guidelines, as well as other industrial categories that could be subject to new guidelines; it has identified 12 categories for further review and selected 3 categories to update or to receive new effluent guidelines.", "EPA’s screening phase starts with a review of industrial categories already subject to effluent guidelines—as well as industrial categories that are not—to identify and rank those whose pollutant discharges pose a substantial hazard to human health and the environment.and ranks industrial categories using pollutant data from facilities in similar industrial classifications. Before it ranks industrial categories in this screening phase, EPA excludes from consideration any industrial categories where guidelines are already undergoing revision or have been revised or developed in the previous 7 years. For example, EPA EPA analyzes announced in its 2010 final effluent guideline program plan that it excluded the steam electric power-generating category from the screening phase because the agency had already begun revising effluent guidelines for this industry. Also in 2010 EPA excluded the concentrated aquatic animal production category (e.g., fish farming) from screening because the agency issued effluent guidelines in 2004.\nIn ranking industrial categories during the screening phase, EPA considers the extent to which discharged pollutants threaten human health and the environment—the first factor identified in EPA’s 2002 draft strategy. EPA compiles information from two EPA sources on the facilities within these industrial categories that discharge wastewater, the pollutants they discharge, and the amount of their discharge: (1) the discharge monitoring report database and (2) the Toxics Release Inventory. relative toxicity of pollutant discharges from screened industrial categories, converts these estimates into a single “score” of relative toxicity for each industrial category, and uses this score to rank the industrial categories according to the reported hazard they pose. To determine the relative toxicity of a given pollutant, EPA multiplies the amount (in pounds) of that pollutant by a pollutant-specific weighting factor to derive a “toxic weighted pound equivalent.” EPA’s ranking of one industrial category relative to other categories can vary depending on the amount of the pollutants it discharges or the toxicity of those pollutants. For example, an industrial category, such as pesticide chemicals, may discharge fewer pounds of pollutants than another category, such as canned and preserved seafood processing, but have a higher hazard ranking because of the relative toxicity of the pollutant chemicals it discharges.\nAs explained above, an industrial direct discharger is required to have an NPDES permit regardless of whether there are effluent guidelines for the industry. NPDES permits require monitoring for specific pollutants to determine compliance with permit limits. Some industries may also be subject to requirements under another EPA program to report toxic releases to the Toxics Release Inventory. These requirements are independent of whether an industry is regulated by effluent guidelines.\nAfter ranking industrial categories, EPA identifies those responsible for the top 95 percent of the total reported hazard, which is the total of all industrial categories’ hazard scores. EPA assigns these industrial categories a high priority for further review in the second phase of its review process. As the relative amounts of their discharges change, the number of industrial categories making up this 95 percent can vary each year with each screening EPA performs. From 2003 through 2009, for example, 10 to 13 industrial categories composed the top 95 percent of reported hazard, whereas in 2010, 21 categories made up the top 95 percent. Figure 2 shows the number of industrial categories that EPA considered for possible further review on the basis of its hazard screening.\nAfter it identifies the industrial categories contributing to 95 percent of reported hazard, EPA takes additional steps to exclude industrial categories before beginning the further review phase. Specifically, the agency may exclude industrial categories on the basis of three criteria:\nData used in the ranking process contained errors. After completing its ranking, EPA verifies the pollutant discharge data from the discharge monitoring reports and Toxics Release Inventory and corrects any errors. For example, according to EPA, the agency has found that facilities have reported the wrong unit of measurement in their discharge monitoring reports, or states have transferred data into the EPA database incorrectly. In such cases, a pollutant discharge may, for example, be reported at a concentration of 10 milligrams per liter but in fact be present at a concentration of 10 micrograms per liter—a thousand-fold lower discharge.\nVery few facilities account for the relative toxicity of an industrial category. EPA typically does not consider for further review industries where only a few facilities account for the vast majority of pollutant discharges and the discharges are not representative of the category as a whole. In such cases, EPA states in its effluent guideline program plans that revising individual NPDES permits may be more effective than a nationwide regulation to address the discharge. For example, in 2004, EPA determined that one facility was responsible for the vast majority of discharges of dioxin associated with the inorganic chemicals industrial category. In its effluent guideline program plan for that year, EPA indicated that it would work through the facility’s NPDES permit to reduce these discharges as appropriate.\nOther factors. EPA considers other factors in addition to those described above to determine if an industrial category warrants further review. According to EPA, one such factor is inadequate data from which to make a clear determination. For example, in its 2010 screening phase, EPA excluded several industrial categories from the further review phase because it did not have conclusive data but said that it would “continue to review” the categories’ discharges to determine if they were properly controlled. These industries included pulp, paper, and paperboard; plastic molding and forming; and waste combustors.\nFigure 3 illustrates the exclusion process EPA applies in its initial screening phase.\nDuring the screening phase, EPA uses existing industry classifications as the basis for identifying industrial categories. EPA groups these industry classifications, which are identified by one of two standardized coding schemes, into industrial categories that it then considers for effluent guidelines. If EPA identifies an industrial category that does not have effluent guidelines but has discharges that present a potential hazard, it decides whether the category produces a product or performs a service similar to one subject to existing effluent guidelines. If so, EPA generally considers the former category to be a subcategory of the latter. Conversely, if the products or services differ from categories subject to existing guidelines, EPA considers the category as a potential new category. In either case, EPA may decide that the industrial category warrants further review and, possibly, new effluent guidelines.\nThroughout the screening phase, EPA also obtains stakeholder and public input, which may identify industrial categories warranting new or revised effluent guidelines that were not identified by their hazard ranking. Stakeholder and public input comes from EPA’s solicitation of comments on its biennial preliminary and final effluent guidelines program plans. For example, in 2004 stakeholders raised concerns about discharges from dental facilities of mercury used in dental fillings; in response, EPA later identified the dental category for further review. On completing the screening phase, the agency lists in its preliminary or final effluent guidelines program plans the industrial categories it has identified for further review. Alternatively, EPA may decide on the basis of its screening criteria that no industrial categories warrant further review.", "In its further review phase, EPA conducts detailed studies of any industrial categories identified in its screening phase, using the four factors listed in its November 2002 draft strategy to determine whether the categories need new or revised effluent guidelines. Since issuing its draft strategy, EPA has selected 12 industrial categories to move beyond the screening phase to the further review phase. Seven of the categories—for example, the pulp, paper, and paperboard category and the petroleum refining category—were identified for further review on the basis of the risk or toxicity of the pollutants they discharge, and 5 were identified for review on the basis of stakeholder concerns. If the categories are already subject to effluent guidelines that EPA set, the agency studies the need to revise effluent limits in the existing guidelines; if the categories are not subject to existing guidelines, EPA studies the need to develop effluent limits and apply them for the first time. Of the 12 categories selected for further review, 8 were already subject to existing effluent guidelines, and 4 were not.\nDuring its further review phase, according to EPA documents, EPA gathers and analyzes more information on the factors identified in its draft strategy. During this phase, EPA typically analyzes information on the hazards posed by discharged pollutants, which corresponds to the first factor in its draft strategy. The data on hazards that EPA obtains and analyzes include: (1) characteristics of wastewater and of facilities; (2) the pollutants responsible for the industrial category’s relative toxicity ranking; (3) geographic distribution of facilities in the industry; (4) trends in discharges within the industry, and (5) any relevant economic factors related to the industry.\nDuring the further review phase, EPA also begins to gather and analyze information on the availability of pollution prevention and treatment technology for the industrial categories reviewed, which corresponds to the second factor identified in its draft 2002 strategy. Through this analysis, EPA identifies current technologies that industry is using to reduce pollutants, potential new technologies that could be used to reduce pollutants, or both. Table 3 summarizes EPA’s consideration of treatment technologies for the 12 industrial categories that proceeded to the further review phase. For example, EPA studied one technology used by the ore mining and dressing industrial category and several current technologies for the coalbed methane category.\nDuring its further review phase, EPA also obtains and analyzes information related to the cost, affordability, and performance of technologies, the third factor in its strategy. To do so, EPA examines the cost and performance of applicable technologies, changes in production processes, or prevention alternatives that may reduce pollutants in the industrial category’s discharge. As part of its cost analysis, the agency considers the affordability or economic achievability of any identified technologies, production processes, or prevention alternatives. To assess the performance of technologies, EPA considers the results of the treatment technologies used in tests or actual operations—information the agency obtains from published research papers and internal and external sources, including site visits and surveys of industrial facilities.its further review of the steam electricity power-generating industry, for example, EPA sampled wastewater directly at power plants, surveyed plant operators about which technologies they were using to minimize pollutant discharges and at what cost, and sought information on other potential treatment technologies.\nAt the conclusion of its further review of an industrial category, EPA decides whether it is feasible and appropriate to revise or develop effluent guidelines for the category, a decision that includes gathering information on whether an effluent guideline is the most efficient and effective approach to manage the discharges, the fourth factor in EPA’s draft strategy. As shown in table 3, for example, EPA decided that the drinking water treatment industrial category did not require effluent guidelines but that the agency’s study could act as a resource for state permit writers as they issue permits for drinking water facilities. Or, as also shown in table 3 for coalbed methane, EPA decided to develop guidelines that it plans to propose in 2013. Some of the information EPA can consider during this decision making, and some of the information related to the fourth factor in its strategy, is the extent to which existing effluent guidelines could be revised to eliminate inefficiencies or impediments to technological innovation or to promote innovative approaches. Specifically, EPA considers whether another way exists—either regulatory or voluntary—to decrease pollutant discharges. For example, after the further review of the dental facility category in 2008, EPA decided not to develop effluent guidelines but to instead work with the American Dental Association and state water agencies on a voluntary reduction program to reduce pollutant discharges from dental facilities. It later changed its decision because the voluntary effort was shown to be ineffective, and the agency plans to issue effluent guidelines in 2012.\nIt takes EPA, on average, 3 to 4 years to complete the further review phase for an industrial category. As of July 2012, EPA had identified three industrial categories for which it had decided to revise effluent guidelines—steam electric power generating—or to develop new effluent guidelines—coalbed methane extraction and dental facilities. According to agency documents and officials, EPA has chosen to take no action on the other 9 of the 12 categories it has further reviewed since 2002.", "Limitations in the screening phase of EPA’s review process may have caused the agency to overlook some industrial categories that warrant new or revised effluent guidelines and thus hinder the effectiveness of the effluent guidelines program in advancing the goals of the Clean Water Act. First, the data EPA uses in the screening phase has limitations that may cause the agency to omit industrial categories from further review or regulation. Second, EPA has chosen to focus its screening phase on the hazards associated with industrial categories, without considering the availability of treatment technologies or production changes that could reduce those hazards. The screening phase of the process may thus exclude some industrial categories for which treatment technologies or production changes may be available to serve as the basis for new or revised effluent guidelines.", "The two sources EPA relies on during its initial screening process— discharge monitoring reports and the Toxic Release Inventory—have limitations that may affect the agency’s ability to accurately rank industrial categories for further review on the basis of the human health and environmental hazards associated with those categories. Data from industrial facilities’ discharge monitoring reports have the benefit of being national in scope, according to EPA documents, but according to agency officials and some experts we spoke with, these data have several limitations that could lead the agency to underestimate the hazard caused by particular industries. Specifically:\nThe reports contain data only for those pollutants that facilities’ permits require them to monitor. Under NPDES, states and EPA offices issue permits containing limits for pollutant discharges, but those permits may not include limits for all the pollutants that may be discharged, as for example, if those pollutants are not included in the relevant effluent guidelines or need not be limited for the facility to meet state water quality standards. If a pollutant is not identified in a permit, and hence not reported on discharge monitoring reports, it would not be part of EPA’s calculation of hazard and would not count toward the ranking of industrial categories.\nThe reports do not include data from all permitted facilities.\nSpecifically, EPA does not require the states to report monitoring results from direct dischargers classified as minor. According to EPA, the agency in 2010 analyzed data for approximately 15,000 minor facilities, or about 37 percent of the 40,500 minor facilities covered by NPDES permits. As a result, the pollutants discharged by the remaining 25,500 minor dischargers would not be counted as part of the relative toxicity rating and could contribute to undercounting of pollutants from those industrial categories. For example, most coal mining companies in Pennsylvania and West Virginia are considered minor dischargers whose pollutants would not count toward the ranking of that industrial category.\nThe reports include very limited data characterizing indirect discharges from industrial facilities to wastewater treatment plants, according to EPA documents. Thus, the data do not fully document pollutants that, if not removed by a wastewater treatment plant, are discharged. These data are not incorporated into EPA’s calculations of hazard for each industrial category, and thus result in underestimated hazards.\nEPA documents and some experts we contacted also stated that data collected in the Toxics Release Inventory are useful to identify toxic discharges. Nevertheless, according to the agency and experts, these inventory data have limitations that may cause EPA to either overestimate or underestimate the relative toxicity of particular industrial categories. The limitations they identified include the following:\nThe data reported are sometimes estimates and not actual monitored data. In some cases, the use of an estimate may overreport actual pollutant discharges. For example, some industry experts said that to be conservative and avoid possible liability, some facilities engaging in processes that produce particularly toxic pollutants, such as dioxin, may report the discharge of a small amount on the basis of an EPA- prescribed method for estimating such discharges even if the pollutant had not been actually monitored.\nNot all facilities are required to report to the inventory, which may lead to undercounting the discharges for the industrial categories of which the facilities are a part. Facilities with fewer than 10 employees are not required to report to the inventory, and neither are facilities that do not manufacture, import, process, or use more than a threshold amount of listed chemicals. For example, facilities that manufacture or process lead or dioxin do not need to report to the inventory unless the amount of chemical manufactured or processed reaches 10 pounds for lead or 0.1 grams for dioxin.\nDespite the limitations of these data sources, EPA officials said that discharge monitoring reports and the Toxic Inventory Release are the best available data on a national level. Experts we interviewed also generally supported the continued use of these data sources despite their limitations. An EPA official responsible for the screening and review process said that EPA could not quantify the effect of the missing data on its ranking and setting of priorities for industries without time-consuming and expensive collecting of data directly from industrial facilities. Still, agency officials agreed that the data limitations can lead to under- or overestimating the hazard of discharges from industrial categories, which could in turn affect the rankings of these categories and potentially result in different categories advancing for further review and potential regulation.", "EPA’s primary focus during its screening phase is the relative hazard posed by industrial categories, without consideration of available treatment technologies that could be used as the basis for revised effluent guidelines to help reduce pollutant discharges. Because EPA sets the cutoff point in its screening process as industrial categories contributing to 95 percent of total reported hazard, the agency does not consider for further review the categories contributing to 5 percent of the total reported hazard. Although this percentage is low, the categories involved constitute the majority of all industrial categories with effluent guidelines. EPA does not conduct a further review for these and other industrial categories that it has excluded for other reasons, meaning that EPA does not examine them for the availability of more-effective treatment technologies. As previously noted, the Ninth Circuit Court held in 2008 that EPA does not have a mandatory duty to consider technology in its screening process but stated that the act strongly suggests that any review to determine whether revision of effluent guidelines is appropriate should contemplate technology-based factors. Regardless of whether EPA is required to do so, the agency is not considering technology for these industrial categories, and hence EPA cannot ensure that the facilities in these categories are using the best available treatment technology.", "EPA has begun to take actions to improve the hazard data it uses in its screening of industrial categories, but it is not fully using potential sources of information on treatment technologies for consideration in this screening. According to program officials, EPA has recognized that its screening phase has resulted in the same industries rising repeatedly to the top of its hazard rankings. Program officials said that they are considering changes to their screening approach to identify additional industrial categories for further review. The primary change, the officials told us, would be to rank categories according to toxicity every 2 years, rather than annually, and to supplement that ranking with a targeted analysis of additional sources of data. To develop such revisions, officials from EPA’s effluent guidelines program engaged in an informal “brainstorming” exercise within the agency and identified several sources of data on new and emerging pollutants, sources that officials think could help target industrial categories for further review. EPA officials said they will propose revisions to the review process in the 2012 preliminary effluent guidelines program plan they expect to issue late in 2012.\nTo mitigate the limitations with hazard data that EPA currently experiences, the agency has taken several steps to obtain new sources of information and to improve existing sources. Using additional sources of data is consistent with suggestions made to us by several academic and governmental experts we interviewed that other sources of hazard data may be useful to the agency, including additional monitoring data and data on the quality of water bodies receiving wastewater discharges. The new data sources would broaden the hazard data considered in the screening phase. Among the sources EPA intends to pursue for future use are the following: a 2009 EPA survey of sludge produced by wastewater treatment plants to identify pollutants entering these plants, indicating that they are not being treated by an industrial facility and might need regulation; a review of action plans prepared under EPA’s Office of Pollution Prevention and Toxic Substances for specific chemicals of emerging concern to identify pollutants that are likely to be discharged to waters by industrial point sources; a review of all EPA air pollution regulations issued within the last 10 to15 years to identify new treatment processes that could add to or change the pollutants in wastewater streams; and a review of data and information available concerning industries that EPA is considering for a proposed expansion of required reporting for the Toxics Release Inventory.\nEPA is also drafting a rule that would increase the information EPA receives electronically from discharge monitoring reports from NPDES permittees and permitting authorities. According to officials with the effluent guidelines program, increased electronic reporting would result in a more complete and accurate database and improve their access to the hazard data from facilities’ discharge monitoring reports, thereby improving the screening of industrial categories. For example, according to EPA officials, data on minor facilities that are not currently reported into the discharge monitoring database used in the screening process would be reported under the electronic reporting rule, as sent to the Office of Management and Budget for review.\nEPA recognizes the need to use information on treatment technologies in the screening phase to improve its process and has taken some initial steps to develop a database of such information, but it has not made full use of potential data sources. EPA started to gather information on treatment technology in 2011, contracting with consultants to obtain relevant literature for the database. In its comments on a draft of this report, the agency said that it will expand on this work in 2013 and 2014 once new fiscal year operating plans are in place. According to agency officials, a thorough analysis of the literature would give the program an updated technology database, which would help in identifying advances in technologies in use or with potential use in industrial categories, which, on the basis of these advances, may in turn warrant further review. They noted that in the 1980s and 1990s, the program used such information from an agency database but that the database had become outdated.\nIn more than half of our interviews (10 of 17), experts told us that EPA should consider technology in its screening phase, and some of them suggested the following two approaches for obtaining this information:\nStakeholder outreach. Experts suggested that key stakeholders could provide information on technology earlier in the screening process. Currently, EPA solicits views and information from stakeholders during public comment periods following issuance of preliminary and final effluent guidelines plans. According to experts, EPA could obtain up-to-date information and data from stakeholders beyond these formal comment periods. For example, EPA officials could (1) attend annual workshops and conferences hosted by industries and associations, such as engineering associations, or host their own expert panels to learn about new treatment technologies and (2) work with industrial research and development institutes to learn about efforts to reduce wastewater pollution through production changes or treatment technologies.\nNPDES permits and related documentation. Experts suggested that to find more information on treatment technologies available for specific pollutants, EPA could make better use of information in NPDES permit documentation. For example, when applying for NPDES permits, facilities must describe which pollutants they will be discharging and what treatment processes they will use to mitigate these discharges. Such information could help EPA officials administering the effluent guidelines program as they seek technologies to reduce pollutants in similar wastewater streams from similar industrial processes. Similarly, information from issued NPDES permits containing the more stringent water quality-based limits— which may lead a facility to apply more advanced treatment technologies—could suggest the potential for improved reductions. Further, information in fact sheets prepared by the permitting authority could also furnish information on pollutants or technologies that could help EPA identify new technologies for use in effluent guidelines.\nAccording to EPA officials, these two sources of information have not been extensively used. They said that they would like to obtain more stakeholder input during screening and review, but they have limited time, resources, and ability to work with stakeholders. They noted that the effluent guidelines program does assign staff members responsibility for keeping up with technologies and developments in specific industrial categories. They also said that the NPDES information suggested by experts is not current or readily available for use by the program.\nOur analysis of NPDES information, however, showed that EPA has not taken steps to make the information available for use by the effluent guidelines program. For example, the standard list of treatment processes on the NPDES application form has not been updated since 1980, and EPA officials said it was out of date. Yet EPA has not updated this information or provided it to the effluent guidelines program for use in screening available technologies. EPA could have done so through a second rulemaking effort under way to improve NPDES data—in which EPA is updating NPDES application forms to make them more consistent with NPDES regulations and current program practices—but chose not to. Agency documents about this rulemaking described it as modifying or repealing reporting requirements that have become obsolete or outdated over the past 20 years and modifying permit documentation procedures to improve the quality and transparency of permit development. Nonetheless, effluent guidelines program officials said that they did not request potential NPDES permit updates relevant to their program because the scope of this rulemaking was too narrow. EPA’s Office of Wastewater Management, which is responsible for the rulemaking, confirmed that the scope of the proposed rule is to be narrow and not call for states or permittees to provide new information.\nFurther, fact sheets or similar documentation that NPDES permit writers develop describing the basis for permit conditions are not stored in EPA’s electronic NPDES database and are therefore difficult to obtain and analyze, according to program officials. Instead, these NPDES documents are now maintained by the authorized states or EPA regions and are not readily accessible to the effluent guidelines program.\nProgram officials said that electronic transmission of fact sheets or information about the basis for permit limits could be useful in identifying treatment technologies, although the scope of the electronic reporting rulemaking did not include such documents or information. Officials from the Office of Enforcement and Compliance Assurance, the office responsible for this rulemaking, told us that they discovered such wide variability among the states’ practices for gathering and managing NPDES information like fact sheets or the basis for permit limits that it would be difficult to call for electronic reporting of such information.", "EPA and the nation have made great strides in reducing the pollutants in wastewater discharged from point sources, such as industrial facilities, since the Clean Water Act was passed. EPA’s effluent guidelines program has been key in contributing to these results by establishing national uniform limits on pollutant discharges for various industrial categories. Progress within the program has slowed, however, and numerous effluent guidelines for particular industrial categories have not been revised for 2 or 3 decades, although the act calls for EPA to routinely review its effluent guidelines and update or add to them as appropriate. EPA’s approach for screening and further reviewing industrial categories, as currently implemented, has not identified many categories for the agency to consider for new or revised guidelines, and the screening process has identified many of the same industrial categories year after year. EPA’s approach focuses its resources on the most hazardous sources of pollution, but its reliance on incomplete hazard data during the screening phase has limited the results of the approach, as has EPA’s inability to thoroughly collect treatment technology data within its resource constraints. Under EPA’s current approach, most industrial categories have not received a detailed further review examining the availability of more-effective treatment technologies. According to some experts, consideration of treatment technologies is especially important for older effluent guidelines because changes in either the industrial categories or the treatment technologies are more likely to have occurred, making it possible that new, more advanced and cost-effective treatment technologies have become available. EPA has recently taken steps to obtain more information on treatment technologies for use in its screening phase—which could help make up for limitations in the hazard data it currently uses—but it has not taken steps to improve and gain access to technology information from the NPDES program. Further, EPA is reconsidering its approach to its screening and review process—initially documented in its draft strategy that was never finalized—but has not analyzed a range of possible sources of data to improve the program, including taking full advantage of the NPDES database, obtaining relevant stakeholder input, and reviewing older effluent guidelines for changes in either the industry or available treatment technologies. Without evaluating a range of new sources of relevant information, officials with the effluent guidelines program cannot ensure that the reconsidered approach can be implemented or that it optimizes the agency’s ability to consider technology in the screening process. Most important, without a more thorough and integrated screening approach that both improves hazard information and considers treatment technology data, EPA cannot be certain that the effluent guidelines program is reflecting advances in the treatment technologies used to reduce pollutants in wastewater.", "To improve the effectiveness of EPA’s efforts to update or develop new effluent guidelines, we recommend that the Administrator of EPA direct the effluent guidelines program to take the following three actions, as it considers revisions to its screening and review process: Identify and evaluate additional sources of data on the hazards posed by the discharges from industrial categories.\nIdentify and evaluate sources of information to improve the agency’s assessment in the screening phase of treatment technologies that are in use or available for use by industrial categories, including better use of NPDES data.\nModify the screening phase of its review process to include thorough consideration of information on the treatment technologies available to industrial categories.", "We provided a draft of this report to EPA for review and comment. In its written comments, which are reproduced in appendix IV, EPA said that our report adequately describes the agency’s effluent guidelines program and agreed in principle with two of the report’s recommendations but disagreed with the third recommendation. EPA also provided several technical comments, which we have incorporated as appropriate.\nRegarding our first recommendation, that EPA identify and evaluate additional sources of data on the hazards posed by industrial discharges and factor these into its annual reviews, EPA agreed that additional sources of such data are valuable. For this reason, EPA said, it began collecting new sources of hazard information in 2011, which the agency is using in its 2012 annual review. EPA also said that its preliminary 2012 effluent guideline program plan will solicit additional ideas for new hazard data sources from the public and industry stakeholders. We described EPA’s ongoing and planned efforts in our report, but because the agency has not yet published its preliminary 2012 effluent guideline program plan, we cannot determine the extent to which these efforts address the limitations we identified in its hazard data. Likewise, we are not able at this time to confirm that EPA will solicit additional sources of such data from stakeholders. We support EPA’s stated intent to identify and evaluate additional sources of hazard data and retain our recommendation, reinforcing the need for the agency to continue the efforts it has begun.\nRegarding our second recommendation, that EPA should identify and evaluate additional sources of information to improve its assessment of treatment technologies for industrial dischargers, EPA agreed that treatment technology information is useful to its program. The agency added that, given the importance of new treatment technology information, in 2011 it initiated efforts to gather more treatment information across all industry categories and will be expanding on this work in 2013 and 2014, once new fiscal year operating plans are in place. We described EPA’s initiative to obtain and review technical literature on treatment technology in our report. We nevertheless believe that EPA could use other sources of information on treatment technology, including information associated with NPDES permits, as described in the report. We continue to believe that EPA should identify and evaluate these and other sources of information on treatment technologies, with the goal of ensuring that the agency’s effluent guidelines reflect the best available treatment technologies that are economically achievable.\nRegarding our third recommendation, that EPA modify the screening phase of its review process to include a thorough consideration of information on the treatment technologies available to industrial categories, EPA agreed that factoring treatment technology information into its reviews is valuable. The agency said, however, that the recommendation was not workable in the context of the agency’s current screening phase, noting that such an effort would be very resource intensive. Our concern is that EPA’s current screening phase, while targeted toward high-risk industries, does not ensure that effluent guidelines incorporate the best available treatment technologies that are economically achievable. We acknowledge that evaluating technologies for all existing industrial categories could be difficult for EPA to accomplish on an annual basis under its current approach. Our recommendation, however, did not specify that such an evaluation be done every year. For example, EPA could commit to a detailed study of the technologies in use and available to an industrial category on a periodic basis (i.e., every 5-10 years). As noted in our report, EPA’s 2002 draft strategy recognized the importance of evaluating treatment technologies in its screening phase, and the Court of Appeals for the Ninth Circuit held that, while not mandatory, the Clean Water Act strongly suggests that in determining whether the revision of effluent guidelines is appropriate—which begins with the screening phase—the agency should contemplate technology-based factors. However, we are not aware of any detailed EPA evaluation of options for considering technology during the screening phase since the agency announced in 2003 that performing a meaningful screening-level analysis of the availability of treatment technologies as planned in the draft strategy was “much more difficult than anticipated.” We believe that, nearly a decade later, EPA should, within the constraints of available resources, evaluate current options to consider such technologies in its screening phase. Furthermore, given its efforts to develop and update its technology information, we believe that EPA should clarify how it plans to incorporate this information in its screening phase.\nAs agreed with your offices, unless you publicly announce the contents of this report earlier, we plan no further distribution until 30 days from the report date. At that time, we will send copies to the Administrator of EPA, the appropriate congressional committees, and other interested parties. In addition, the report will be available at no charge on the GAO website at http://www.gao.gov.\nIf you or your staff members have any questions about this report, please contact me at (202) 512-3841 or [email protected]. Contact points for our Office of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made major contributions to this report are listed in appendix V.", "To examine the process the Environmental Protection Agency (EPA) follows to screen and review industrial categories and the results of that process, we reviewed the Clean Water Act and relevant court decisions and agency documents, interviewed agency officials and experts, and documented the steps EPA has taken to screen particular industrial categories for possible new or revised effluent guidelines. Specifically, we reviewed relevant portions of the Clean Water Act to determine EPA’s responsibilities regarding the effluent guidelines and pretreatment programs. We analyzed several court decisions that ruled on challenges to EPA’s effluent guidelines program to determine what, if any, impact they had on the agency’s screening and review process. Further, we interviewed officials in EPA’s Engineering and Analysis Division to learn how the agency has used the process to screen and review industries. We focused our review on the results of the process EPA used from 2003 through 2010 in order to examine the approach it developed after the publication in November 2002 of its draft Strategy for National Clean Water Industrial Regulations: Effluent Limitation Guidelines, Pretreatment Standards, and New Source Performance Standards. By the end of our review, EPA had not yet published a preliminary or final effluent guideline program plan for the 2011-2012 planning cycle.\nTo document the results of EPA’s process, we examined the agency’s screening decisions for all industrial categories from 2003 through 2010. Specifically, we examined EPA’s final effluent guideline plans and technical support documents for 2004, 2006, 2008, and 2010 and the agency’s website to identify screening decisions and subsequent studies associated with particular industries. We examined these studies to identify those industries that EPA subjected to further review, which included an examination of available treatment technologies. Specifically, we examined preliminary and detailed studies for the 12 industries that EPA advanced beyond the screening phase into further review and selected 7 of them for more robust analysis to document how EPA had applied the process to those industries. The 7 industries were ore mining and dressing, coalbed methane extraction, steam electric power generation, chlorine and chlorinated hydrocarbon, drinking water treatment, pharmaceuticals management, and dental facilities. That analysis included in-depth interviews with EPA staff assigned to those industrial categories. These 7 industrial categories met our selection criteria that they be active or recently active, that is, that EPA was reviewing them or had made a decision to proceed or not to proceed with a rulemaking as recently as 2011 or 2012. We also documented the current status of any regulatory actions or other steps that EPA had taken with the other 5 industries that received a further review. We also examined the planning documents for 2 industrial categories—airport deicing and construction and development—that did not go through EPA’s 2003-2010 screening and review process but were the subject of regulatory activity during our study period.\nTo examine limitations to EPA’s screening and review process, if any, that could hinder the effectiveness of the effluent guidelines program in advancing the goals of the Clean Water Act, we pursued three separate methodologies: we (1) interviewed a cross section of experts on EPA’s effluent guidelines program, (2) surveyed the water quality permit directors of the 46 states that are authorized to issue permits for the National Pollutant Discharge Elimination System (NPDES), and (3) analyzed information about the hazard data sources EPA uses in its screening process.\nWe identified individuals for possible “expert” interviews by compiling a list of approximately 50 people from a variety of sources relevant to the effluent guideline program, including referrals from EPA, the Association of Clean Water Agencies, and the National Association of Clean Water Agencies and by consulting other knowledgeable individuals, relevant academic literature, and litigation documents. We classified the individuals by their affiliation with a particular stakeholder category (academia, industry, nongovernmental organization, or state and local water quality agencies). We then excluded from consideration 13 individuals for whom we could not obtain contact information. We called or sent an electronic message to those individuals for whom we had contact information to ask if they were familiar with EPA’s current effluent guidelines screening and review process. We excluded from consideration those individuals who told us that they were not familiar with these processes, those who could not speak with us during the time frame of our review, and those who said they were not interested in contributing to our review. From our larger list of approximately 50 experts, we selected 22 individuals to interview whom we determined to be experts on the basis of their familiarity with the program and their affiliation with a particular stakeholder category. We conducted 17 interviews including these 22 individuals from February 2012 to April 2012. Six of these interviews were with officials from industry, 4 from academia, 4 from state and local government, and 3 from nongovernmental organizations. In 4 cases, more than one expert participated in an interview. We prepared and asked a standard set of questions about the overall effectiveness of the effluent guidelines program and EPA’s use of hazard data, stakeholder input, and information on treatment technology in the screening process. We then reviewed their responses to identify common themes. The sample of experts is a nonprobability sample, and we therefore cannot generalize their opinions across all experts on the effluent guideline program.\nTo assess the extent to which effluent guidelines might need to be revised, we conducted a web-based survey of state water quality directors, and we statistically analyzed the data. Appendix II presents a complete description of our survey and our data analysis.\nTo obtain information about an industry that EPA had not analyzed in a further review phase, we selected one of the nine industries that states in our survey said presented a risk to human health or the environment, had treatment technology available to reduce that risk, and warranted revision. We asked officials from the five states whose responses for the metal finishing industry met all three of the above criteria a standard set of questions about the risk the metal finishing industrial category posed, the technology available to mitigate this risk, and the likely effect of a revised effluent guideline.\nWe further interviewed experts about their views on the adequacy of the hazard data that EPA uses in its screening process—discharge monitoring reports and the Toxics Release Inventory—and whether the experts had suggestions for alternative data sources. We also reviewed EPA’s own examinations of the benefits and limitations associated with the two data sources. EPA reports on these examinations of data quality in the technical support documents that accompany its effluent guideline program plans. In addition, we interviewed officials from EPA’s Office of Enforcement and Compliance Assurance to learn about the management of the databases that store discharge monitoring data. We also interviewed officials from the Engineering and Analysis Division in EPA’s Office of Water about possible effects that incomplete or inaccurate data could have on the screening process. We did not perform an independent assessment of data quality, although we concluded from the information we gathered that the data do have limitations that could affect EPA’s screening process.\nTo examine the actions EPA has taken to address any limitations in its screening and review process, we interviewed effluent guideline program officials from the Engineering and Analysis Division about their plans to modify the biennial screening and review process. We also reviewed papers prepared for the division by a contractor, which describe new sources of data that the division could use to identify industrial categories potentially posing environmental hazards and warranting further review for possible new or revised effluent guidelines. In addition, we interviewed officials from the Engineering and Analysis Division, the Office of Wastewater Management, and the Office of Enforcement and Compliance Assurance about agency efforts to revise the NPDES permitting process and the database that contains NPDES permit information. We conducted these interviews to determine what steps EPA has taken or could take to use these activities to improve the hazard and treatment technology data available for the screening process.\nWe conducted this performance audit from September 2011 to September 2012, 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 that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives.", "To assess the extent to which effluent guidelines might need to be revised, and to better understand the reasons for any such revisions, we conducted a web-based survey of state water quality officials, and we statistically analyzed patterns in the survey data. Our analysis identified numerous industries in numerous states for which state officials think that EPA should revise its guidelines. Furthermore, our analysis suggests that a few key factors—particularly, the significance of risk posed by effluent and the availability of pollution control technology—largely influence these officials’ views about whether guidelines should be revised. Details about our survey and our data analysis follow.", "We designed our survey to ask respondents both (1) whether they thought EPA should revise effluent guidelines for certain industrial categories and (2) whether they thought the major factors that EPA considers when revising effluent guidelines were present for these industrial categories in their state. We reviewed EPA’s 2002 draft Strategy for National Clean Water Industrial Regulations and identified the four key factors that the agency uses to determine whether effluent guidelines should be revised. These factors include (1) whether the effluent from a particular industrial category poses a significant risk to human health or the environment; (2) whether technology is available to substantially reduce the risk; (3) whether industry could adopt the technology without experiencing financial difficulty; and (4) whether other factors are present, such as whether current effluent guidelines for that industrial category are difficult to administer and whether revised guidelines could promote innovative regulatory approaches. We summarized these factors, using the exact language from EPA’s guidance wherever possible, and wrote survey questions that were simple enough to yield valid responses. We determined that the fourth factor was too complicated to be expressed as a single survey question, and we divided it into two simpler questions. By designing the questionnaire in this way, we sought to increase the reliability of our survey data in two ways: First, asking respondents to assess each of the factors that EPA considers for revision before providing their views about whether EPA should revise effluent guidelines focused their attention on providing an informed opinion. Second, by obtaining data on both the decision-making factors and the need for effluent guideline revisions, we were able to conduct a statistical analysis to identify how these factors appear to influence states’ views about the need for guideline revisions.\nOur survey was divided into three sections. In the first section, we asked states to respond to a series of questions about each of the five industrial categories that release the greatest amount of toxic effluent in their state. We originally considered surveying states about each of the 58 industrial categories regulated by effluent limitation guidelines. During initial interviews with state officials, however, we determined that this approach would be burdensome and impractical. Therefore, we used data on pollutant discharges from EPA’s Toxics Release Inventory and discharge monitoring reports to select the five industries that discharged the greatest amount of toxic effluent in each state in 2010. For each of these five industrial categories, we asked states six questions, the first five of which pertain to EPA’s decision-making factors and the last of which pertains to the need for revised effluent guidelines. The six questions we asked about each industry are as follows:1. Are the existing effluent guidelines for this industry sufficient on their own—that is, without additional water quality-based effluent limits—to protect your state from significant risks to human health or the environment? 2. Is there a technology, process change, or pollution prevention action that is available to this industry that would substantially reduce any risks that remain after the state applies existing effluent limits?\nIn the online version of the questionnaire, we customized the survey questions by inserting the name of each of the specific industries for each state.\n3. Do you think this industry can afford to implement this risk-reducing technology, process change, or pollution prevention action without experiencing financial difficulty? 4. Are the current effluent guidelines for this industry difficult to understand, implement, monitor, or enforce? 5. Do you think the current effluent guidelines for this industry could be revised to promote innovative approaches, such as water quality trading or multimedia benefits? 6. Given your responses to the previous questions, do you think EPA should revise the current effluent guidelines for this industry?\nIn addition to asking about the top five industrial categories in each state, we asked states about two other sets of industrial categories. First, we asked state officials to list up to three other categories that were not among the top five in their state but for which they thought the effluent guidelines should be revised. Second, we asked these officials to list up to three categories that are not regulated by effluent guidelines but for which they think EPA should consider developing guidelines. To be confident that our questions would yield reliable data, we conducted four pretests with state officials. During these pretests, we sought to determine whether the questions were clear, could be reliably answered, and imposed a reasonable burden on respondents.", "We administered our survey to the directors of the water quality programs in the 46 states that are authorized to implement NPDES. These state officials are largely responsible for issuing permits to industrial facilities and for incorporating effluent guidelines into those permits. They have regular, firsthand experience with the guidelines, and their experience may supplement EPA’s information on effluent. We determined that these officials were therefore sufficiently knowledgeable to answer our survey questions. We obtained a list of these officials and their contact information from EPA and verified this list through Internet searches and phone calls with state officials. We identified the primary contact for each state but asked these individuals to consult with others in their office to determine the most accurate answer for each survey question.", "We implemented our survey as a web-based questionnaire. We notified the state water quality permit directors in February 2012 of our intent to conduct the survey and requested their participation. We instructed the states on how to access the web-based survey on March 2, 2012. We sent three e-mail reminders and telephoned states that had not responded before we closed the survey in April. We received responses from 31 of the 46 states, for an overall response rate of 67 percent of states. The survey data are based on responses from 42 individuals in these 31 states. Because we surveyed state officials only about the industrial categories that discharge the greatest amount of toxic effluent in their state, and because several states did not respond to our survey, the results of our analysis are not generalizable to all industrial categories in all states.", "To determine the extent to which state officials think that effluent guidelines should be revised, we analyzed the univariate frequencies of responses to our six primary survey questions. We aggregated the survey responses to create industry-by-state cases, such that each case represented the views of a particular state about the guidelines for a particular industrial category in that state. The completed survey questionnaires from 31 states led to 155 possible state-by-industry cases. Because not all states responded to all of the survey questions, however, we had at most 123 valid cases for analysis, depending upon the survey question. A summary of the responses to these questions appears in table 5.\nThese tabulations indicate that a substantial number of cases exist for which states thought that EPA should revise effluent guidelines and also for which they perceived that one or more of EPA’s decision-making factors were present. In 51 percent (63 of 123 cases), state officials said that EPA should revise the effluent guidelines for the corresponding industry. With regard to whether the key decision-making factors were present, state officials reported that effluent posed a significant risk in 57 percent of cases, that technology was available in 31 percent of cases, that the guidelines were difficult to administer in 24 percent of cases, and that revised guidelines could promote innovative approaches in 36 percent of cases. We had far fewer responses to our question about whether industry could adopt technology without experiencing financial difficulty because that question was applicable only if the respondent said such technology was available. Among these cases, state officials reported that the technology would not cause financial hardship to the industry in 82 percent of cases (31 of 38 cases).\nWe repeated this analysis after removing the 29 cases representing the three industrial categories whose effluent guidelines are in revision, leaving at most 96 cases for analysis, depending upon the question. Of the remaining cases, state officials said that EPA should revise the effluent guidelines for a substantial percentage of them; they also said that key decision-making factors were present in a substantial percentage of cases. For example, in 46 percent of these cases, state officials said that EPA should revise the effluent guidelines for the corresponding industry.", "We compared state officials’ views about whether effluent guidelines should be revised with their views of each of the factors that EPA uses when considering guideline revisions. For three of the four factors, our results show that when state officials perceived the factor to be present, they were significantly more likely to think that EPA should revise the effluent guidelines for the corresponding industrial category. (We had too few cases with valid responses to the survey question about cost to determine whether that factor was significantly associated with views about guideline revisions.) The risk posed by effluent and the availability of technology were the strongest predictors of states’ views about the need for guideline revisions. In particular, we found the following:\nWhen state officials perceived effluent from a particular industrial category to pose a significant risk, they were 3.8 times more likely to think that EPA should revise the guidelines for that category than when they did not perceive the effluent to pose a significant risk. Specifically, among the cases in which state officials perceived effluent to pose a significant risk, they thought the effluent guidelines should be revised 75 percent of the time (52 of 69 cases), compared with 20 percent of the time (10 of 51 cases) when they thought the effluent did not pose a significant risk.\nWhen state officials perceived technology to be available to substantially reduce the risk for a particular industrial category, they were 4.3 times more likely to think that EPA should revise the guidelines for that category than when they did not perceive technology to be available. Specifically, among the cases in which these officials perceived technology to be available, they thought EPA should revise the effluent guidelines 84 percent of the time (32 of 38 cases), compared with 20 percent (10 of 51 cases) when they thought that technology was not available.\nWhen state officials thought that other factors were present for a particular industrial category, they were 2.3 times more likely to think that EPA should revise the guidelines than when they did not think these factors were present. “Other factors” refers to either that the current guidelines were difficult to understand, implement, monitor, or enforce or that revised guidelines could promote innovative approaches. Specifically, when state officials thought that such other factors were present, they thought that EPA should revise its effluent guidelines 70 percent of the time (43 of 61 cases), compared with 30 percent of the time (18 of 60 cases) when they thought these factors were not present.\nTable 6 presents the complete results of these bivariate comparisons. We excluded one of the factors from the discussion above—namely, whether the industry could afford to implement the technology, process change, or pollution prevention action—because the responses to this question applied only to the subset of cases for which such a technology, change, or action was available, only 33 of which provided a yes or no response. In 87 percent of those cases in which the technology was perceived to be affordable (27 of 31 cases), state officials said that EPA should revise its guidelines for the corresponding industry. We repeated this analysis after removing the 29 cases representing the two industrial categories whose effluent guidelines EPA is already revising. We found that, even after removing these cases, the same three factors retained a significant relationship with state officials’ views about whether effluent guidelines should be revised. This result indicates that these key decision-making factors appear to influence state officials’ views even for industrial categories whose guidelines EPA is not already revising.\nTo understand how the various decision-making factors interact to influence states’ views about the need for revised effluent guidelines, we used the data from our survey to conduct decision-tree analysis. We developed the decision tree by splitting the data into smaller and smaller subgroups according to whether state officials perceived each of the factors to be present for a particular industrial category. Beginning with the first factor, risk, we divided the cases into subgroups, depending upon whether state officials perceived the effluent from the particular industry to pose a significant risk to human health or the environment. For each of these subgroups, we tabulated the number of cases in which state officials said the effluent guidelines should be revised, compared with the number of cases in which they said the guidelines should not be revised. We then split these subgroups again, according to whether state officials thought that technology was available to substantially reduce the risk. This split resulted in further subgroups. We continued splitting the data into smaller and smaller subgroups by next assessing state official’s views of the cost of technology and finally assessing their views on the presence of other factors. At each step, we stopped splitting the data if (1) the original group had fewer than 10 cases, (2) the resulting subgroups did not differ significantly in terms of the percentages of respondents who said that EPA should revise the guidelines; or (3) the resulting subgroups tended to support the same conclusion as to whether EPA should revise the guidelines. We examined the cases terminating in each of the branches and found that the overall decision tree was based on a broad variety of industries and states. The resulting decision tree, which is shown in figure 5, has four splits and six branches.\nThe decision tree illustrates how the key decision-making factors collectively predict states’ views about whether EPA should revise effluent guidelines, and it corroborates the reliability of our survey data. Overall, when the risk of effluent was perceived to be significant and technology was perceived to be available, state officials overwhelmingly thought the corresponding effluent guidelines should be revised. Even when technology was not perceived to be available, many states still thought the guidelines should be revised if they thought that other factors were present. In particular, in three scenarios, corresponding to three branches of the decision tree, state officials generally said that effluent guidelines should be revised:\nWhen state officials thought that effluent from an industrial category poses a significant risk to human health or the environment and when they thought technology was available to substantially reduce that risk, they generally said that EPA should revise the effluent guidelines. In such instances, they thought that EPA should revise the effluent guidelines 83 percent of the time (in 30 of 36 cases). This scenario is illustrated by the far left branch of the decision tree.\nWhen state officials thought that effluent from an industrial category poses a significant risk, they generally thought that EPA should revise the effluent guidelines even when they perceived that technology was not available—as long as they perceived other factors to be present. In such instances, they thought that EPA should revise its effluent guidelines 83 percent of the time (5 of 6 cases). This scenario is illustrated by the second-to-left branch of the decision tree.\nWhen state officials thought that effluent from an industrial category poses a significant risk, they generally thought that EPA should revise the effluent guidelines even when they did not know if technology was available—as long as they perceived other factors to be present. In such instances, these officials thought EPA should revise its effluent guidelines 100 percent of the time (11 of 11 cases). This scenario is illustrated by the branch of the decision tree in the third column from the right.\nBy contrast, in two scenarios, state officials thought EPA should not revise the guidelines. In the primary scenario, officials did not perceive the effluent to pose a significant risk, although officials also thought that guidelines should not be revised when the risk was significant but neither technology nor other factors were present. In particular, our decision tree identified the following two scenarios:\nWhen state officials did not think the effluent from a particular industrial category posed a significant risk to human health or the environment, they generally thought that EPA should not revise the corresponding effluent guidelines. In these instances, state officials thought that EPA should not revise the guidelines 80 percent of the time (41 of 51 cases). This scenario is illustrated by the branch of the decision tree on the far right.\nWhen state officials thought the effluent from a particular industrial category posed a significant risk but that technology was not available and other factors were not present, they generally said that EPA should not revise the effluent guidelines for that industry. In such instances, state officials thought that EPA should not revise the guidelines 100 percent of the time (5 of 5 cases). This scenario is illustrated by the branch of the decision tree in the third column from the left.", "Corresponding to this decision tree, we further examined the data to identify specific industrial categories that presented the strongest evidence for needing to be revised. Because the significance of risk and the presence of technology are the two primary decision-making factors, we selected the 30 cases for which states said these two factors were present and for which they said effluent guidelines should be revised. These cases fall into the far left branch of the decision tree in figure 5. These 30 cases represent 14 industrial categories: canned and preserved seafood processing; cement manufacturing; coal mining; fertilizer manufacturing; meat and poultry products; metal finishing; metal molding and casting; oil and gas extraction; ore mining and dressing; petroleum refining; pulp, paper, and paperboard; steam electric power generation; sugar processing; and timber products processing. We added industries that state officials cited in the second section of our survey, in which we asked them to identify industries that were not among the top five dischargers in their state. This addition lengthened the list by 22 cases, representing 7 additional industrial categories: centralized waste treatment, dairy products processing, electrical and electronic components, electroplating, grain mills manufacturing, landfills, and pharmaceutical manufacturing. In total, therefore, we identified 52 cases representing 21 industrial categories for which state officials thought effluent guidelines should be revised. Of these 52 cases, 39 represent industrial categories whose guidelines EPA is not already revising.", "EPA has promulgated effluent guidelines for 58 industrial categories beginning in the mid-1970s. EPA has also revised the guidelines for most of those industries, although many have not been revised in recent years. As described elsewhere in this report, EPA uses a screening process to determine which categories may warrant further review and possible revision. According to our analysis, since EPA began using its current screening process in 2003, more than half the industrial categories with effluent guidelines did not advance beyond the screening phase in any year from 2003 to 2010 because, during a given 2-year screening cycle, the relative toxicity of their pollutant discharges did not put them among the top 95 percent of discharge hazard. Table 7 provides further information on the industrial categories, including the year their effluent guidelines were first promulgated, the year the guidelines were most recently revised, and the year(s) in 2004 through 2010 when their hazard ranking scores came within the top 95 percent.", "", "", "", "In addition to the individual named above, Susan Iott (Assistant Director), Elizabeth Beardsley, Mark Braza, Ross Campbell, Ellen W. Chu, Heather Dowey, Catherine M. Hurley, Paul Kazemersky, Kelly Rubin, Carol Hernstadt Shulman, and Kiki Theodoropoulos made significant contributions to this report. Wyatt R. Hundrup, Michael L. Krafve, Armetha Liles, and Jeffrey R. Rueckhaus also made important contributions to this report." ], "depth": [ 1, 2, 1, 2, 2, 1, 2, 2, 1, 1, 1, 1, 1, 1, 2, 2, 2, 2, 2, 2, 1, 1, 1, 2, 2 ], "alignment": [ "h0_title", "h0_full", "h0_full", "h0_full", "h0_full", "h3_title h1_full", "h3_full", "", "h2_full h1_full", "h3_full h2_full h1_full", "", "h2_full h1_full", "", "h0_title h1_full", "", "", "", "", "h0_full", "", "h3_full", "", "", "", "" ] }
{ "question": [ "How does the EPA identify industrial categories in need of new or revised guidelines?", "What is the basis for the EPA's two-step process?", "What happens in the process' first phase?", "How does the first phase transition into the second phase?", "What happens in the process' second phase?", "How has EPA screened categories since 2003?", "How did EPA address these 12 categories selected for further review?", "Why did EPA overlook some categories that warrant further review?", "How has technology impacted EPA's screening phase?", "Why did officials identify certain categories as needing new guidelines?", "Why is consideration of treatment technologies important?", "Why has EPA begun revising its process?", "How did EPA supplement hazard data in 2012?", "Why is EPA developing a new regulation?", "How is EPA addressing the issue of treatment technology?", "Why is it important that EPA develop a more thorough screening approach using this information?", "How has the Clean Water Act affected EPA?", "How does EPA use effluent guidelines?", "How does the Clean Water Act address the revision of these guidelines?", "Why is it sometimes appropriate for EPA to revise guidelines?" ], "summary": [ "The Environmental Protection Agency (EPA) uses a two-phase process to identify industrial categories potentially needing new or revised effluent guidelines to help reduce their pollutant discharges.", "EPA’s 2002 draft Strategy for National Clean Water Industrial Regulations was the foundation for EPA’s process.", "In the first, or “screening,” phase, EPA uses data from two EPA databases to rank industrial categories according to the total toxicity of their wastewater.", "Using this ranking, public comments, and other considerations, EPA has identified relatively few industrial categories posing the highest hazard for the next, or “further review,” phase.", "In this further review phase, EPA evaluates the categories to identify those that are appropriate for new or revised guidelines because treatment technologies are available to reduce pollutant discharges.", "Since 2003, EPA has regularly screened the 58 categories for which it has issued effluent guidelines, as well as some potential new industrial categories, and it has identified 12 categories for its further review phase.", "Of these 12 categories, EPA selected 3 for updated or new effluent guidelines. EPA chose not to set new guidelines for the others.", "Limitations in EPA’s screening phase may have led it to overlook some industrial categories that warrant further review for new or revised effluent guidelines. Specifically, EPA has relied on limited hazard data that may have affected its ranking of industrial categories. Further, during its screening phase, EPA has not considered the availability of advanced treatment technologies for most industrial categories.", "Further, during its screening phase, EPA has not considered the availability of advanced treatment technologies for most industrial categories. Although its 2002 draft strategy recognized the importance of technology data, EPA has stated that such data were too difficult to obtain during the screening phase and, instead, considers them for the few categories that reach further review.", "Officials responsible for state water quality programs and experts on industrial discharges, however, identified categories they believe EPA should examine for new or updated guidelines to reflect changes in their industrial processes and treatment technology capabilities.", "According to some experts, consideration of treatment technologies is especially important for older effluent guidelines because changes are more likely to have occurred in either the industrial categories or the treatment technologies, making it possible that new, more advanced treatment technologies are available.", "Recognizing the limitations of its hazard data and overall screening approach, EPA has begun revising its process but has not assessed other possible sources of information it could use to improve the screening phase.", "In 2012, EPA supplemented the hazard data used in screening with four new data sources.", "EPA is also developing a regulation that, through electronic reporting, will increase the completeness and accuracy of its hazard data.", "In 2011, EPA also began to obtain recent treatment technology literature. According to EPA, the agency will expand on this work in 2013. Nonetheless, EPA has not thoroughly examined other usable sources of information on treatment technology, nor has it reassessed the role such information should take in its screening process.", "Without a more thorough and integrated screening approach that both uses improved hazard data and considers information on treatment technology, EPA cannot be certain that the effluent guidelines program reflects advances in the treatment technologies used to reduce pollutants in wastewater.", "Under the Clean Water Act, EPA has made significant progress in reducing wastewater pollution from industrial facilities.", "EPA currently regulates 58 industrial categories, such as petroleum refining, fertilizer manufacturing, and coal mining, with technology-based regulations called effluent guidelines.", "The Clean Water Act also calls for EPA to revise the guidelines when appropriate.", "EPA has done so, for example, to reflect advances in treatment technology or changes in industries." ], "parent_pair_index": [ -1, 0, 0, 2, 0, -1, 5, -1, 0, -1, 2, -1, 0, 0, 0, 3, -1, 0, 1, 2 ], "summary_paragraph_index": [ 3, 3, 3, 3, 3, 3, 3, 4, 4, 4, 4, 5, 5, 5, 5, 5, 0, 0, 0, 0 ] }
GAO_GAO-19-459
{ "title": [ "Background", "The Consumer Reporting Process", "Laws and Regulations Governing Consumer Reporting", "FCRA Provisions Governing Consumer Report Accuracy", "Laws Governing Security of Consumer Data", "Laws Governing Use and Sharing of Consumer Information", "Oversight of CRAs Is Shared among CFPB and Other Federal and State Agencies", "CFPB Has Supervisory Authority over Certain CRAs and Shares Enforcement Authority with FTC for All CRAs", "State Agencies Have Enforcement Authority over CRAs, and Some State Laws Provide Limited Supervisory Authority", "CFPB, FTC, and Prudential Regulators Share Oversight of Data Furnishers", "CFPB’s Oversight Has Prioritized Supervision of CRAs Based on Perceived Risk, but CFPB Has Not Defined Supervisory Expectations", "CFPB’s Supervision Has Prioritized Certain CRAs and Has Focused on Data Accuracy and Dispute Investigations", "Supervisory Priorities for CRAs and Data Furnishers", "Examination Results for CRAs and Furnishers", "CFPB Has Not Defined Expectations for CRA Accuracy and Dispute Investigation Procedures", "FTC Enforcement Targets Smaller CRAs, and Prudential Regulators Examine Some Furnishers’ FCRA Compliance", "FTC Enforcement Actions Have Focused on Smaller CRAs’ Data Accuracy, Dispute Investigation, and Data Security Practices", "Prudential Regulators Said They Examine Some Furnishers’ FCRA Compliance in Conjunction with Other Laws and Regulations", "Stakeholders Identified Various Causes for Inaccuracies in Consumer Reports, and Several Processes Exist to Help Promote Accuracy", "Stakeholders Primarily Attributed Inaccuracies to CRAs Matching Data to the Wrong Consumer Files and Errors in Source Data", "Matching Furnished Data to the Wrong Consumer Files", "Identity Fraud or Theft", "Consumers Can Dispute Potential Inaccuracies in Their Consumer Reports with CRAs or Furnishers", "Oversight Has Led CRAs to Make Changes to Promote Accuracy, but Challenges to Consumer Report Accuracy Remain", "Conclusions", "Recommendations for Executive Action", "Agency Comments and Our Evaluation", "Appendix I: Objectives, Scope, and Methodology", "Appendix II: Comments from the Bureau of Consumer Financial Protection", "Appendix III: GAO Contact and Staff Acknowledgments", "GAO Contact", "Staff Acknowledgments" ], "paragraphs": [ "", "Information on consumers is exchanged through a consumer reporting process that includes consumers, CRAs, furnishers of consumer information, and users of consumer reports (see fig. 1).\nConsumers are individuals whose information is collected by CRAs and shared by CRAs with users of consumer reports to make decisions about eligibility, such as for credit, insurance, or employment. Information about consumers is generated through their participation in markets for goods and services—such as the use of banking or insurance products.\nCRAs are companies that regularly assemble or evaluate consumer information for the purpose of providing consumer reports to third parties. CRAs obtain data from a wide variety of sources, including data furnishers, such as banks and mortgage lenders, and public records. They can generate revenue by selling consumer reports to third parties. In 2012, CFPB estimated that the consumer reporting market consisted of more than 400 CRAs. CFPB estimated in 2015 that the three nationwide CRAs—which also are the three largest CRAs—held information on about 208 million Americans.\nData furnishers are companies that report consumer information to CRAs. Examples of furnishers include banks, payday lenders, mortgage lenders, collection agencies, automobile-finance lenders, and credit card issuers. The information provided by furnishers may include personally identifiable information such as names, addresses, Social Security numbers, and employment data and account status and credit histories. A furnisher may provide CRAs with consumer information on multiple types of products. For example, a financial institution may provide account information on student loans as well as bank deposits. Furnishing of information to CRAs is generally voluntary; therefore, a furnisher is not required to submit all of the records about a consumer’s activity on an account to CRAs. Some accounts may only be reported when the payment history turns negative, such as when the debt is transferred to debt collection.\nUsers of consumer reports include banks, credit card companies, landlords, employers, and other entities that use consumer reports to determine individual consumers’ eligibility for housing, employment, or products and services such as credit and insurance. Companies use consumer information compiled in consumer reports to screen for consumer risks and behaviors. For example, banks and credit unions may rely on consumer reports to assess the risk of opening new accounts. Some companies may act as both furnishers and consumer report users.\nDuring the consumer reporting process, a consumer does not necessarily interact with the CRA; however, if consumers discover inaccurate or incomplete information on their consumer reports as a result of, for example, being denied credit, they can file a dispute with the CRA, the furnisher, or both. Consumers may also request copies of their consumer reports from CRAs directly, and CRAs may provide consumers with certain disclosures about how their information is being shared.\nDifferent types of CRAs compile different types of reports using the data they obtain. The three nationwide CRAs produce credit reports and credit scores that can be used to qualify consumers for credit. Credit reports generally contain personally identifiable information, employment information, account status and credit histories, and inquiries made about consumers’ credit histories (see fig. 2). Other CRAs, called specialty CRAs, provide a variety of specialized reports used for making decisions on employment, rental housing, or other purposes. For example, reports from a specialty background-screening CRA may include some of the same information as a credit report but may also contain criminal history, education verification, and employment history.", "Several federal laws govern the consumer reporting industry, including the accuracy, security, use, and sharing of consumer report information.\nThe Fair Credit Reporting Act (FCRA) is the primary federal law governing the collection, assembly, and use of consumer reports. FCRA was enacted to improve the accuracy and integrity of consumer reports, and promote the consumer reporting agencies’ adoption of reasonable procedures regarding the confidentiality, accuracy, relevancy, and proper use of consumer information. FCRA has been amended several times since it was enacted in 1970. When FCRA was originally enacted, FCRA imposed certain requirements on CRAs and users of consumer reports. Amendments to FCRA, pursuant to the Consumer Credit Reporting Reform Act of 1996 and the Fair and Accurate Credit Transactions Act of 2003, expanded the duties of CRAs, including requirements for dispute investigations, and imposed duties on data furnishers, such as requirements related to data accuracy and dispute investigations.", "FCRA requires CRAs and furnishers to take steps regarding the accuracy of the information contained in consumer reports. In addition, FCRA’s implementing regulation—Regulation V—as well as FTC’s Furnisher Rule more specifically outline furnishers’ responsibilities regarding accuracy. FCRA requires CRAs to follow reasonable procedures to assure “maximum possible accuracy” of the information concerning the individual to whom the report relates when preparing consumer reports. FCRA prohibits furnishers from reporting information that they know or have reasonable cause to believe is inaccurate, unless the furnisher has clearly and conspicuously specified to consumers an address whereby consumers can notify the furnisher that specific information is inaccurate. Regulation V and FTC’s Furnisher Rule require furnishers to have reasonable written policies and procedures in place regarding the accuracy and integrity of the information they provide to a CRA, where accuracy means that the information is for the right person and reflects the terms of the account and the consumer’s performance on the account. They also require furnishers to consider and incorporate, as appropriate, guidelines such as internal controls for accuracy and integrity of furnished information.\nFCRA requires CRAs and furnishers to address disputes consumers submit to them about the completeness or accuracy of information in their consumer reports. FCRA requires CRAs and Regulation V and FTC’s Furnisher Rule require furnishers to conduct reasonable investigations of a consumer’s dispute to determine the accuracy of the disputed information. As part of the process, CRAs and furnishers are required to consider all relevant information, including information provided by the consumer.", "The Gramm-Leach-Bliley Act (GLBA), provisions in the Federal Trade Commission Act, and provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act), among other laws, govern the security of consumer data.\nCongress enacted GLBA in part to protect the privacy and security of nonpublic personal information that individuals provide to financial institutions. Many financial institutions furnish consumer data to CRAs. In a prior report, FTC staff told us that CRAs themselves might be considered financial institutions under GLBA if they collect, maintain, and report on consumer information. GLBA includes a provision directing FTC and certain federal regulators—including the Federal Reserve, FDIC, and OCC—to establish standards relating to administrative, technical, and physical safety for customer records. Specifically, GLBA directs these federal agencies to establish appropriate standards for financial institutions under their jurisdiction to ensure the security and confidentiality of customer records and information; protect against any anticipated threats or hazards to the security or integrity of such records; and protect against unauthorized access to or use of such records or information that could result in substantial harm or inconvenience to any customer.\nProvisions in the Federal Trade Commission Act prohibiting unfair or deceptive acts or practices and provisions in the Dodd-Frank Act prohibiting unfair, deceptive, or abusive acts or practices also may apply to CRAs’ protection of consumer data. Specifically, section 5 of the Federal Trade Commission Act prohibits “unfair or deceptive acts or practices” in or affecting commerce. In the context of privacy and security, these provisions require companies to represent practices to consumers in a truthful manner. For example, we reported previously that FTC has found companies that alleged they were following certain security protections, but did not in fact have such security features, to have engaged in unfair or deceptive practices. Similarly, the Dodd- Frank Act prohibits providers of consumer financial products or services from engaging in “unfair, deceptive, or abusive acts or practices.” For example, we reported previously that CFPB has alleged that claims to consumers that transactions are safe and secure while simultaneously lacking basic security practices can constitute “unfair, deceptive, or abusive acts or practices.”", "FCRA, GLBA, and the Economic Growth, Regulatory Relief, and Consumer Protection Act govern how consumer information may be used and shared. However, as we have previously reported, consumers have limited legal rights to control what personal information is collected and how it is maintained, used, and shared. For example, consumers generally cannot exercise choice in the consumer reporting market—such as by choosing which CRAs maintain their information—and do not have legal rights to delete their records with CRAs.\nFCRA permits CRAs to provide users of consumer reports the report only if the user has a “permissible purpose,” such as to process a credit application, screen a job applicant, or underwrite an insurance policy, subject to additional limitations where the credit or insurance transaction is not initiated by the consumer. FCRA also prohibits a person from using or obtaining a consumer report for any purpose other than that specified to the CRA when the user obtained the report. Further, FCRA requires that CRAs take steps to validate the legitimacy of users and their requests for consumer report information. FCRA and Regulation V also allow consumers to opt out of allowing CRAs to share their information with third parties for prescreened offers and limits the ability of affiliated companies to market products or services to consumers using shared consumer data.\nGLBA contains provisions regarding the use and sharing of consumer information that apply to CRAs. GLBA restricts the sharing of nonpublic personal information collected by or acquired from financial institutions. In particular, generally a nonaffiliated third party that receives nonpublic personal information from a financial institution faces restrictions on how it may further share or use the information. For example, a third party that receives nonpublic personal information from a financial institution to process consumer account transactions may not use the information for marketing purposes or sell it to another entity for marketing purposes.\nConsumers can prevent certain users from accessing their consumer reports by placing a security freeze on their consumer reports, which generally prevents the opening of new lines of credit in the consumer’s name (provided the creditor checks the consumer’s credit). Consumers may place a credit freeze at the three nationwide CRAs free of charge.", "Federal and state agencies share oversight of CRAs and furnishers. At the federal level, CFPB has supervisory authority over certain CRAs and shares enforcement and rulemaking authority with FTC for certain statutes applicable to all CRAs. At the state level, state Attorney General offices have enforcement authority to oversee CRAs, and some state agencies have limited supervisory authority under state laws. Federal agencies that have oversight authority for data furnishers are CFPB, FTC, and prudential regulators—the Federal Reserve, FDIC, NCUA, and OCC. Their oversight authority depends on the size as well as the type of the furnisher, such as if the furnisher is a nonbank institution, depository institution, or credit union.", "CFPB is the only federal agency with supervisory authority over CRAs, but it generally shares enforcement authority over CRAs with FTC as well as rulemaking authority for certain statutes applicable to all CRAs (see table 1).\nCFPB’s supervisory authority includes the authority to perform examinations to assess compliance with FCRA and other Federal consumer financial laws and to detect and assess risk to consumers and markets. CFPB may issue matters requiring attention (MRA) based on its examinations. MRAs identify corrective actions that result from examination findings that require the attention of the supervised institution’s board of directors or principals, including violations of Federal consumer financial laws. According to CFPB, MRAs are not legally enforceable, but CFPB can use them to determine future supervisory work or the need for potential enforcement actions.\nCFPB’s supervisory authority is generally limited to CRAs that qualify as larger participants in the consumer reporting market. In 2012, CFPB defined larger participants of the consumer reporting market to include CRAs with more than $7 million in annual receipts resulting from consumer reporting activities. CFPB’s authority does not extend to CRAs that do not participate in activities involving the use of consumer information to make decisions regarding financial products or services. For example, a specialty CRA that only provides consumer reports regarding a consumer’s employment history may not be considered a larger participant for the purposes of CFPB supervision, even if the CRA’s annual receipts from this activity are more than $7 million. In the preamble to its 2012 rule defining larger participants, CFPB stated that the threshold of more than $7 million is consistent with the objective of supervising market participants that have a significant impact on consumers and is appropriate in light of the highly concentrated nature of the consumer reporting market. In particular, CFPB estimated that out of about 410 CRAs, 30 CRAs met the threshold. Of those 30 CRAs, CFPB estimated that the six largest CRAs generated approximately 85 percent of industry receipts.\nWhile CFPB generally has supervisory authority over only larger- participant CRAs, CFPB and FTC generally share enforcement authority over CRAs. For example, they both enforce CRA compliance with most provisions of FCRA and provisions in other laws related to unfair or deceptive acts or practices. Both agencies have similar enforcement tools, including investigation, civil penalties, monetary relief for consumers, and requirements for a company to conduct or refrain from conducting certain acts. CFPB and FTC entered into a memorandum of understanding to coordinate their enforcement efforts, and staff from both agencies told us they take additional actions to coordinate their enforcement activities. For example, FTC staff said that CFPB and FTC maintain a log of each agency’s investigations to avoid duplication. Additionally, CFPB and FTC staff said they hold periodic coordination meetings to discuss their enforcement activities. FTC staff told us that because CFPB possesses supervisory authority over the three largest CRAs, FTC has focused its FCRA enforcement efforts on other CRAs. However, FTC staff said that to the extent that the largest CRAs offer nonfinancial products or services, such as employment or tenant background screening, FTC will also investigate these activities.\nCFPB and FTC each have certain rulemaking authority in connection with statutes that may apply to CRA activities, but generally CFPB has broader authority than FTC. Generally, CFPB has broad authority to issue regulations for Federal consumer financial laws, including most provisions of FCRA, which are applied to all CRAs. FTC has specific rulemaking authority that may apply to CRAs under FCRA, the Federal Trade Commission Act, and GLBA. For example, FTC’s rule related to safeguarding the security and confidentiality of customer records under GLBA applies to CRAs.", "State agencies, such as state Attorney General offices, have enforcement authority to oversee CRAs, and some state agencies have limited supervisory authority under state laws. Federal laws establish enforcement authority for state agencies over CRAs. Under FCRA and the Dodd-Frank Act’s provisions prohibiting unfair, deceptive, or abusive acts and practices, state Attorney General offices (or another official or agency designated by the state) have certain enforcement authority over some companies, including certain CRAs. However, states are required to coordinate enforcement actions with CFPB and FTC.\nIn addition to enforcement authority under federal laws, state agencies may have enforcement authority under their state laws that apply to CRAs. Staff from state agencies in four selected states—Ohio, New York, Maine, and Maryland—told us that their states’ Attorney General offices have enforcement authority over CRAs under state laws prohibiting unfair or deceptive acts or practices. In addition, according to the National Consumer Law Center, every state has a consumer protection law that prohibits deceptive acts or practices and many states prohibit unfair acts or practices, and the enforcement of such state laws typically is the responsibility of a state enforcement agency, such as the state Attorney General offices.\nSome state Attorney General offices have used their enforcement authority under FCRA and state laws prohibiting unfair or deceptive acts or practices to investigate and take enforcement actions against CRAs. For example, the three nationwide CRAs entered into two separate settlements with 30 state Attorney General offices in 2015 in which the CRAs agreed to implement a number of specific reforms, including reforms related to consumer report accuracy and dispute processes. Under these settlements, the state Attorney General offices claimed the CRAs violated FCRA and the states’ laws prohibiting unfair or deceptive acts or practices. Additionally, representatives of several states’ Attorney General offices told us in connection with a prior report that they launched a joint investigation into whether a nationwide CRA violated state laws in a 2017 data breach, including state laws prohibiting unfair or deceptive practices.\nIn addition to the enforcement authority state Attorney General offices have under state laws prohibiting unfair or deceptive acts or practices, some state laws provide state agencies, such as financial regulators and consumer protection bureaus, with oversight authority over CRAs. Our interviews with staff from four selected states’ agencies—Ohio, New York, Maine, and Maryland—indicated that CRA oversight authority given to state agencies under state laws varies.\nStaff from Ohio’s Office of the Attorney General told us that Ohio does not have specific laws that provide Ohio state regulators with supervisory, rulemaking, or enforcement authority over CRAs, apart from Ohio laws prohibiting unfair or deceptive acts or practices that provide the Office of the Attorney General with enforcement authority.\nNew York’s financial regulator told us that state laws provide the agency with supervisory, enforcement, and rulemaking authority over institutions that provide financial products and services, including certain CRAs. The agency issued a rule in 2018 requiring CRAs reporting on consumers within the state to register with the agency annually and provide information as required by the agency.\nStaff from Maine’s consumer protection agency told us that under Maine law, the agency has supervisory and enforcement authority over CRAs operating within the state. Agency staff told us that the agency examines certain CRAs every 2 years for compliance with Maine’s consumer reporting laws, such as by reviewing records and documents provided by CRAs.\nMaryland’s financial regulator told us that Maryland’s laws provide the agency with enforcement and rulemaking authority over CRAs but not supervisory authority. The agency can adopt regulations in order to administer provisions of Maryland statutes, such as procedures for ensuring accuracy in consumer reports. Additionally, agency staff said that the agency can investigate CRAs using its enforcement authority but cannot conduct supervisory examinations of CRAs.\nRepresentatives from several CRAs we interviewed told us that their supervision by state regulators has been limited. Representatives from two CRAs told us that a state agency has examined them. Representatives from three other CRAs we interviewed said they had limited encounters with state-level agencies. However, as previously stated, CFPB, FTC, and state agencies generally have enforcement authority over CRAs regarding consumer financial protection.", "CFPB, FTC, and the prudential regulators—the Federal Reserve, FDIC, NCUA, and OCC—share federal oversight of data furnishers for compliance with FCRA, among other Federal consumer financial laws. These furnishers include insured depository institutions and credit unions and nondepository institutions, such as student and mortgage loan servicers. Federal agencies generally split oversight of furnishers based on their charter type and asset size.\nOversight of furnishers that are depository institutions or credit unions. CFPB and the prudential regulators have supervisory and enforcement authority over insured depository institutions and credit unions for compliance with FCRA and other federal consumer financial laws (see table 2). The Dodd-Frank Act generally divided authority between CFPB and the prudential regulators based on an institution’s charter type and the value of an institution’s total assets.\nAssets of more than $10 billion. In general, CFPB has enforcement and supervisory authority for insured depository institutions and credit unions (as well as their affiliates) that have more than $10 billion in total assets for compliance with many Federal consumer financial laws.However, a prudential regulator that is authorized to enforce a Federal consumer financial law may recommend that CFPB initiate an enforcement action, and if CFPB does not, the prudential regulator may initiate an enforcement action.\nAssets of $10 billion or less. In general, the four prudential regulators have enforcement and supervisory authority over insured depository institutions or credit unions with total assets of $10 billion or less. If, however, CFPB believes that an institution in this category has violated a Federal consumer financial law, it must notify the appropriate prudential regulator in writing and recommend action.\nAdditionally, regardless of an institution’s asset size, CFPB generally has rulemaking authority for many Federal consumer financial laws that apply to insured depository institutions and insured credit unions. However, prudential regulators have limited rulemaking authority as related to furnishing activities for certain provisions specifically retained pursuant to the Dodd-Frank Act and FCRA.\nCFPB generally has supervisory and enforcement authority over insured depository institutions and insured credit unions, as well as their affiliates, that have more than $10 billion in total assets, for compliance with Federal consumer financial laws as defined under the Dodd-Frank Wall Street Reform and Consumer Protection Act. CFPB has broad rulemaking authority under many Federal consumer financial laws that apply to depository institutions and credit unions, with limited exceptions. The Board of Governors of the Federal Reserve System, Federal Deposit Insurance Corporation, National Credit Union Administration, and Office of the Comptroller of Currency (collectively called the prudential regulators) generally have supervisory and enforcement authority for Federal consumer financial laws (as defined under the Dodd-Frank Wall Street Reform and Consumer Protection Act) for insured depository institutions and credit unions that have $10 billion or less in total assets. The prudential regulators also have limited rulemaking authority related to furnishing activities under certain Federal consumer financial laws, including parts of FCRA.\nOversight of furnishers that are nondepository institutions. CFPB and FTC share oversight of nondepository institutions. In general, CFPB has supervisory authority over certain types of nondepository financial institutions for compliance with FCRA and other Federal consumer financial laws (see table 3). Such institutions include certain kinds of mortgage market participants, private student lenders, and payday lenders. CFPB also has supervisory authority over institutions in markets for consumer financial products or services that it defines as larger participants. For example, CFPB has issued rules defining larger participants for automobile-financing and consumer debt-collection markets.\nCFPB and FTC share enforcement authority for many different types of nondepository institutions, such as mortgage lenders, payday lenders, debt collectors, and telecommunication companies. FTC additionally has enforcement authority over other nondepository institutions for which CFPB does not have enforcement authority, such as automobile dealers. FTC staff told us that, similar to their coordination efforts for CRAs, FTC and CFPB coordinate their enforcement activities with respect to furnishers.\nCFPB has rulemaking authority for most consumer financial laws, including FCRA, that may apply to furnishers that are nondepository institutions. In comparison to CFPB, FTC has specific rulemaking authority under FCRA, the Federal Trade Commission Act, and GLBA to promulgate rules that may apply to nondepository institution furnishers.\nCFPB has supervisory authority over certain nondepository institutions. It shares enforcement authority with FTC for certain nondepository institutions and has broad rulemaking authority for Federal consumer financial laws which apply to many institutions, including those for which it has supervisory jurisdiction.", "", "According to CFPB, in its oversight of the consumer reporting market, CFPB has prioritized CRAs representing the greatest potential risks to consumers. Additionally, CFPB has generally focused on certain compliance areas, particularly data accuracy and investigations conducted in response to consumer disputes. On an annual basis, CFPB updates its plans for supervision of CRAs and furnishers for the next 1 to 2 years. According to CFPB, it assesses specific risks in the market and determines entities and compliance areas to examine. In making these determinations, CFPB stated that it considers factors such as market presence, consumer complaints, its prior supervisory examinations and findings, and its resources.", "According to CFPB, since the start of its supervisory program for the consumer reporting market in 2012, CFPB has prioritized CRAs that pose the greatest risks to consumers and the marketplace for examinations. Specifically, CFPB staff told us that CFPB has prioritized CRAs that represent a significant share of the market and the largest volume of consumer complaints submitted to CFPB’s complaint database. CFPB has also examined one or more specialty CRAs. CFPB stated that in determining which specialty CRAs to examine, it considered factors such as the CRAs’ market share in the particular consumer reporting products they offer. According to CFPB, in setting supervisory priorities, supervision staff also consulted with stakeholders and considered CFPB’s resources and findings from prior examinations that may have indicated weaknesses.\nCFPB staff said that when CFPB began examining CRAs, its supervisory approach was to examine their compliance management systems first before focusing on other compliance areas. The staff said that the compliance management system reviews helped CFPB to learn about how CRAs operate. Based on the compliance management reviews, CFPB determined that it could review data accuracy, dispute investigations, and other compliance areas by examining the mechanisms CRAs use to comply with FCRA. After examining compliance management systems, CFPB prioritized examining other aspects of compliance related to data accuracy (including processes for monitoring furnishers) and dispute investigations, as well as performing follow-up examinations in those areas. CFPB staff stated that they have chosen to focus on data accuracy and dispute investigations because these were the largest problem areas based on CFPB’s assessment of complaint data. Additionally, CFPB identified compliance with the FCRA obligations regarding data accuracy and effective and efficient dispute resolution as agency priorities for the consumer reporting market.\nCFPB has also examined other CRA compliance areas, including procedures related to suppression and reinsertion of information that CRAs found to be inaccurate, unverifiable, or obsolete; procedures for ensuring a permissible purpose for obtaining consumer reports; and compliance management systems related to data security. According to CFPB, when determining compliance areas for examination, the agency considered factors such as its data on complaints, the extent to which it had previously examined the areas, and concerns identified in prior examinations. In February 2019, we found that CFPB’s examination process did not routinely include an assessment of CRAs’ data security risks, and we recommended that CFPB’s prioritization specifically account for data security risk.\nIn conducting its examinations, CFPB has focused on assessing CRA procedures for complying with FCRA rather than on the extent of inaccuracy in consumer reports. For example, according to a 2017 CFPB report, CFPB directed one or more CRAs to establish quality control programs to regularly assess the accuracy of information included in consumer reports and to develop systems to measure the accuracy of consumer reports and identify patterns and trends in errors. CFPB staff said CFPB has not monitored the extent of inaccuracy in consumer reports produced by the CRAs it examines. They stated that FCRA requires CRAs and furnishers to follow reasonable procedures with regard to accuracy but does not require or identify acceptable thresholds for accuracy. CFPB staff explained that CFPB’s supervisory program has therefore focused on evaluating CRAs’ compliance with FCRA requirements for reasonable procedures with regard to accuracy and identifying weaknesses in such procedures.\nAccording to CFPB, in prioritizing examinations of data furnishers, the agency has primarily considered the furnishers’ market shares, the number of disputes CRAs received about the furnishers, and the number of complaints CFPB received in its complaint database. CFPB has prioritized large furnishers within their respective markets. For example, CFPB identified one or more student loan servicers furnishing data to CRAs that had large shares of the student loan servicing market. CFPB has also prioritized furnishers with high dispute rates relative to other furnishers within their markets. For example, CFPB identified one or more credit card issuers with higher dispute rates compared to their peers, based on CFPB’s review of dispute data provided by CRAs. According to CFPB, it has also considered the results of prior CFPB examinations and input from agency stakeholders. As with CRAs, CFPB’s examinations of furnisher activities have focused on accuracy and dispute investigations. In its Supervisory Highlights from March 2017, CFPB stated that the accuracy of consumer report information is a CFPB priority and that furnishers play an important role in ensuring the accuracy of consumer report information through the dispute process. For example, CFPB stated that furnishers’ timely response to consumer disputes may reduce the effect that inaccurate negative information on a consumer report may have on the consumer.", "From 2013 through 2018, CFPB examined several CRAs. Many of these examinations evaluated CRA compliance with accuracy and dispute investigation obligations under FCRA, such as by assessing data governance systems, quality control programs, and furnisher oversight and data monitoring. Additionally, some examinations evaluated other FCRA compliance areas, including ensuring that users had permissible purposes for requesting consumer reports and preventing reinsertion of previously deleted information.\nCFPB’s examinations related to data accuracy and dispute investigation obligations resulted in supervisory findings that CFPB directed CRAs to take actions to address. CFPB found that one or more CRAs had minimal compliance mechanisms in place to meet requirements for data accuracy and for dispute investigations (see table 4 for examples of CFPB’s supervisory findings and directed actions in these areas). For example, CFPB found that one or more CRAs lacked quality control policies and procedures to test compiled consumer reports for accuracy and had insufficient monitoring and oversight of furnishers that provided information used in the reports. CFPB also found that one or more CRAs did not review evidence that consumers provided to support their disputes and relied entirely on the furnishers to investigate the disputes. CFPB directed specific changes in some CRAs’ policies and procedures for ensuring data accuracy and conducting dispute investigations, including increasing oversight of incoming data from furnishers, developing internal processes to monitor furnisher dispute responses to detect those that may present higher risk of inaccurate data, and enforcing the CRAs’ obligation to investigate consumer disputes, including review of relevant information provided by consumers. In addition, CFPB directed one or more CRAs to establish quality control programs that regularly assess the accuracy and integrity of compiled consumer reports.\nIn follow-up reviews of some of its supervisory findings, CFPB found that one or more CRAs took actions that resulted in improvements in policies and procedures. For example, CFPB has found that one or more CRAs established quality control programs, including developing tests to identify the extent to which consumer reports are produced using information for the wrong consumer. For other findings, CFPB determined that one or more CRAs had not taken actions to address the findings, or CFPB had not yet conducted follow-up examinations to determine if they had been addressed.\nFrom 2013 through 2018, CFPB conducted examinations of several data furnishers. These furnishers were involved in various consumer financial markets, such as automobile loan servicing, debt collection, mortgage servicing, and student loan servicing. CFPB staff told us that until 2017, CFPB generally examined furnishers’ compliance with FCRA as part of its assessment of compliance with other Federal consumer financial laws and regulations. CFPB staff said that in 2017, CFPB began conducting examinations specifically focused on furnishing activities under FCRA and Regulation V. CFPB stated that this change was made because the review of furnishers’ practices under FCRA and Regulation V was resource-intensive and merited dedicated resources.\nIn a 2017 report, CFPB stated that it had found numerous furnisher violations of FCRA and Regulation V related to data accuracy and dispute investigations and that it directed furnishers to take corrective actions (see table 5 for examples of CFPB’s supervisory findings and directed actions). For example, CFPB found that certain furnishers failed to establish, implement, and maintain reasonable written policies and procedures consistent with Regulation V regarding the accuracy and integrity of the information furnished; provided information to CRAs despite having reasonable cause to believe the information was inaccurate; and lacked policies for their employees on how to conduct reasonable investigation of consumer disputes. In some cases, CFPB’s furnisher examinations conducted from 2013 through 2018 resulted in findings related to FCRA and Regulation V that CFPB directed the furnishers to take actions to address. For example, CFPB directed furnishers to develop reasonable written policies and procedures regarding accuracy, to promptly update the information provided to CRAs after determining that the information was not complete or accurate, and to update and implement policies and procedures to ensure disputes are handled in accordance with FCRA requirements.\nCFPB staff told us that the agency decides whether to investigate based on consideration of factors such as consumer complaints, extent of effects on consumers, and severity of misconduct. CFPB staff told us that, in many cases, CFPB has chosen to identify and correct FCRA violations and weaknesses in compliance management systems at CRAs through supervisory activity rather than enforcement investigations. However, CFPB has also investigated and used enforcement remedies, such as civil penalties and injunctive relief, against CRAs and furnishers that violated FCRA or Regulation V. From 2012 through 2018, CFPB settled 26 enforcement actions for violations related to FCRA and Regulation V, including four settlements involving CRAs and 16 settlements involving furnishers. Although CFPB found other FCRA violations in its investigations of these companies, such as those related to permissible purpose for obtaining consumer reports and disclosure issues, most of the violations related to data accuracy and dispute investigations. For example, two of the four FCRA-related settlements with CRAs involved dispute investigations or data accuracy procedures. Of the 16 settlements with furnishers for alleged violations related to FCRA and Regulation V, all contained violations related to the furnishers’ obligations regarding data accuracy or dispute investigations.\nCFPB’s settlements contained findings similar to its supervisory examination findings. For example, CFPB found that a CRA failed to investigate consumer disputes, and another CRA failed to take steps to ensure its consumer reports were accurate. For furnishers, CFPB found violations including furnishers that failed to establish and implement reasonable written policies and procedures regarding the accuracy and integrity of information provided to CRAs, as well as furnishers that provided inaccurate or incomplete information about consumers to CRAs or failed to conduct reasonable investigations of consumer disputes.", "CFPB has not defined its expectations—including views on appropriate practices—for how CRAs can comply with key FCRA requirements. Among other provisions, FCRA requires CRAs to (1) follow reasonable procedures when preparing a consumer report to assure maximum possible accuracy of consumer report information and (2) conduct reasonable investigations of consumer disputes. However, FCRA does not define what would constitute such reasonable policies and procedures or investigations or stipulate the types of procedures or investigations that would meet the requirements for CRAs.\nWhile CFPB has not defined its expectations for these two key FCRA requirements for CRAs, it has adopted Regulation V, which, as required by statute, includes information on CFPB’s requirements and guidelines in these areas for furnishers. Regulation V includes requirements and guidelines for reasonable policies and procedures concerning the accuracy and integrity of furnished consumer information and requirements for reasonable investigations of consumer disputes filed directly with the furnishers. In its supervision of furnishers, CFPB has examined furnishers for compliance with the requirements of Regulation V—for example, it has found in examinations that furnishers violated Regulation V’s requirement to establish written policies and procedures regarding the accuracy of consumer information furnished to a CRA.\nAlthough CFPB has not similarly established guidelines or otherwise provided information on its supervisory expectations for CRAs, CFPB has found specific weaknesses in CRA practices. In particular, CFPB has cited one or more CRAs for specific deficiencies related to determinations of noncompliance with FCRA provisions regarding reasonable procedures for accuracy and dispute investigations. For example, CFPB has directed one or more CRAs to take specific actions to improve their accuracy procedures. In addition, CFPB found one or more CRAs’ data governance programs to be decentralized and informal, and it directed the CRAs to develop and implement written policies and procedures to formalize the programs. However, CFPB has not issued any information on its supervisory expectations indicating that “reasonable procedures” include having formal written policies and procedures. CFPB also has identified FCRA violations related to reasonable dispute investigations. For example, CFPB determined that one or more CRAs failed to review and consider documentation attached by consumers to disputes and relied entirely on furnishers to investigate a dispute—therefore violating FCRA requirements for reasonable investigations and for reviewing and considering all relevant information submitted by the consumer—and directed the CRAs to independently investigate consumer disputes. However, CFPB has not issued any information on its supervisory expectations to help interpret FCRA’s requirement for CRAs to conduct a reasonable investigation of disputes and to review and consider all relevant information, including the expectation that CRAs investigate consumer disputes independently. Based on the FCRA requirements alone, it may be unclear to CRAs and others that these FCRA requirements include performing independent investigations. For example, representatives from one large CRA we interviewed stated that the company is not required to conduct an independent investigation.\nFCRA instructs CFPB to enact regulations that are necessary to carry out the purposes of the act, which could include issuing implementing regulations for CRAs regarding data accuracy and dispute investigations. Additionally, a 2018 policy statement issued by CFPB and the prudential regulators explains that information on supervisory expectations serves to articulate an agency’s general views regarding appropriate practices. The policy statement further states that it is important for such information to provide insight to industry, as well as to supervisory staff, in a transparent way that helps to ensure consistency in the supervisory approach. According to CFPB’s Supervisory Highlights from March 2017, CFPB’s vision for the consumer reporting system is a system in which furnishers provide and CRAs maintain and distribute data that are accurate, supplemented by an effective dispute management and resolution process for consumers. According to the same CFPB publication, this vision is rooted in the obligations and rights set forth in FCRA and Regulation V.\nOne reason why accuracy guidelines exist for furnishers but not CRAs is that the Fair and Accurate Credit Transactions Act of 2003 added a provision to FCRA requiring the prudential regulators and FTC to establish and maintain guidelines for furnishers regarding the accuracy of consumer data furnished to CRAs and to prescribe regulations requiring furnishers to establish reasonable policies and procedures for implementing the guidelines. In 2011, CFPB adopted these regulations as part of Regulation V after assuming rulemaking authority from the other agencies. Neither the Fair and Accurate Credit Transactions Act of 2003 nor any other statutory provision within FCRA includes a similar provision for the agencies to establish and maintain guidelines or provide information concerning supervisory expectations regarding the accuracy of consumer data CRAs maintain, and CFPB has not established guidelines or defined supervisory expectations for CRAs.\nSince 2015, CFPB’s long-term rulemaking agenda has stated that it will evaluate possible policy responses to consumer reporting issues, including potential additional rules or amendments to existing rules governing consumer reporting accuracy and dispute processes. However, as of May 2019, CFPB had not conducted any rulemaking related to these topics. CFPB staff said that a substantial body of case law exists to guide CRAs regarding what practices may be considered compliant with FCRA requirements, including with respect to provisions for reasonable procedures for accuracy and performing reasonable dispute investigations. The staff also said that CFPB staff look to relevant case law when assessing CRA compliance with FCRA during examinations, and that supervisory findings serve to communicate to a supervised CRA how CFPB has applied FCRA during an examination.\nProviding information to CRAs about its supervisory expectations for these two key FCRA requirements—and ways in which CRAs could comply—could help CFPB to facilitate CRA compliance with FCRA and achieve agency objectives for the consumer reporting system. Without information about its expectations, CFPB’s supervision lacks transparency about what practices it considers appropriate or expects CRAs to adopt to comply with key FCRA requirements. Absent such information from CFPB, representatives from four CRAs we interviewed told us that they look to other sources to understand what CFPB will consider to be noncompliant during examinations and to determine if they are meeting FCRA requirements for maintaining reasonable procedures. These sources include publicly available information such as court cases, presentations from industry associations, CFPB publications highlighting supervisory actions, and public enforcement actions. While CFPB can communicate with individual CRAs during examinations and by directing corrective actions, the impact of such interactions is limited to specific CRAs rather than helping to ensure consistency in its supervisory approach by providing transparent insights to the industry.\nWhile relevant case law could provide CRAs with some information regarding practices that have been determined to be compliant with FCRA requirements, there may be a lack of clarity about the extent to which all case law fully reflects CFPB’s expectations. By communicating information about its expectations and ways in which CRAs could comply, CFPB could help ensure that CRAs receive complete and consistent information about how to interpret key FCRA requirements. Further, defining its expectations regarding how CRAs can meet key FCRA requirements could help CFPB promote consistency in its supervisory approach by providing examiners with information on the agency’s interpretation of FCRA provisions.", "", "FTC’s enforcement actions since 2010 have targeted smaller CRAs. FTC staff told us that because CFPB has supervisory authority over the larger CRAs, FTC has focused its FCRA enforcement efforts on other CRAs. Additionally, our review of FTC’s enforcement actions showed that FTC generally took enforcement actions against specialty CRAs that are smaller than the nationwide CRAs, such as CRAs conducting background screening. However, FTC staff also told us that they do not use a specific size threshold to initiate investigations against CRAs or furnishers and that they conduct their enforcement on a case-by-case basis, focusing on violations or potential violations of applicable laws.\nPrior to taking an enforcement action against a company, FTC conducts an investigation to determine if the company has violated a law. Using its investigative authority, FTC can compel companies to produce documents, testimony, and other materials to assist in its investigations. To determine whether to initiate investigations, FTC staff said they consider several sources, including leads from consumer advocacy groups and other FTC investigations, tips from whistleblowers, and monitoring of media reports. FTC staff also said that FTC regularly monitors its consumer complaint database to identify the types of complaints that consumers file and to determine if the activity described in the complaint indicates potential noncompliance with laws and regulations. FTC also can start investigations based on requests, such as by a member of Congress. FTC staff said that the agency targets its investigations based on the extent to which the potential noncompliance may affect a large number of consumers. For example, staff said FTC targets companies for investigation where inaccuracies may be occurring on a large scale. In addition, as we reported in February 2019, FTC staff said that when determining whether to initiate an investigation related to privacy and data security matters, they consider factors such as the companies’ size and the sensitivity of the data in the companies’ networks.\nFTC staff said that the consumer reporting market is a high priority for FTC, and that the accuracy of consumer reports and CRA activities has been a large part of FTC’s enforcement priorities. FTC staff said that they initiated about 160 FCRA investigations from 2008 through 2018. FTC staff stated that of the approximately 160 investigations, about 70 related to CRAs or companies, such as data brokers and companies selling public records, that FTC investigated to determine if they were engaged in conduct that would render them CRAs. Additionally, the staff said that about 20 of the approximately 160 investigations related to furnishers, about 55 related to users of consumer reports, and about 15 related to companies that fall under provisions of FCRA that do not require that the entity be a CRA, furnisher, or user. FTC staff stated that among these investigations, FTC investigated specialty CRAs, such as background- screening and check-authorization companies, and furnishers, such as debt collectors, lenders, and telecommunications companies.\nAfter an investigation, FTC may initiate an enforcement action if it has reason to believe that a law is being or has been violated. From 2010 through 2018, FTC took 30 enforcement actions related to FCRA, including against 14 CRAs, six furnishers, and two companies that acted as both a CRA and furnisher. Of the 30 enforcement actions, 14 contained issues related to data accuracy or disputes and two contained issues related to data security. In total, 20 of the 30 enforcement actions contained issues related to other consumer reporting topics, such as provision of consumer reports without permissible purpose. FTC staff told us that all of the enforcement actions related to FCRA involved injunctive relief. Additionally, some enforcement actions involved civil penalties. For example, in one action, a CRA was ordered to pay civil penalties for failing to use reasonable procedures to ensure the maximum possible accuracy of information it provided to its customers, and for failing to reinvestigate consumer disputes, as required by FCRA. FTC alleged that the CRA failed to take reasonable steps to ensure that the information in the reports was current and reflected updates, such as the expungement of criminal records. FTC staff said that there is no overarching definition regarding the FCRA provision for reasonable procedures for assuring maximum possible accuracy and that FTC determines on a case-by-case basis whether a violation has occurred. FTC staff also said that FTC’s enforcement actions provide industry with information on unacceptable practices and that the enforcement actions are closely monitored by the consumer reporting industry.\nIn addition to enforcement actions related to FCRA, FTC staff told us that FTC took five actions against CRAs for unfair or deceptive acts or practices related to data security in the past 10 years. FTC alleged that all five CRAs failed to employ reasonable and appropriate security measures to protect sensitive consumer information.", "As discussed previously, the prudential regulators have supervisory and enforcement authority for FCRA over depository institutions and credit unions with total assets of $10 billion or less, some of which act as furnishers. The four prudential regulators told us they do not perform standalone examinations of these financial institutions for FCRA compliance. Rather, they examine for FCRA compliance in conjunction with other consumer financial laws and regulations and as part of examining an institution’s compliance with federal consumer protection laws and regulations. For example, OCC staff told us that if an examiner reviews an institution’s general compliance management system and identifies compliance, procedural, or other weaknesses related to FCRA, then the examiner would look at those issues more closely. Staff from the four prudential regulators told us they take a risk-based approach to determine the scope of examinations. They said that the approach includes consideration of factors such as an institution’s asset size, record of FCRA compliance, and trends in consumer complaints.\nAs part of their compliance examinations from 2013 through 2018, staff from FDIC, the Federal Reserve, and NCUA said their agencies identified multiple FCRA- and Regulation V-related findings, including findings not related to financial institutions’ furnishing activities. FDIC staff said that examiners identified more than 1,200 violations related to FCRA and Regulation V at around 800 institutions, but found that the majority of the violations posed a low level of concern to the institution and consumers. Of these violations, FDIC staff stated that 106 related to furnisher obligations under Regulation V regarding the accuracy and integrity of information furnished to CRAs and that those types of violations were among the five most frequently cited violation topics related to FCRA and Regulation V. Federal Reserve staff said that in examinations that reviewed compliance with FCRA and Regulation V, Federal Reserve examiners cited FCRA and Regulation V about 210 times for an aggregate of about 4,200 related violations. Of these, Federal Reserve staff said the agency cited FCRA and Regulation V provisions related to furnisher accuracy about 20 times and cited an aggregate of about 3,600 violations. NCUA staff stated that NCUA identified 160 FCRA violations at around 150 credit unions. NCUA staff explained that 20 of the violations related to furnisher accuracy and that these types of violations were not among the five most frequently cited violation topics related to FCRA. OCC staff told us that OCC identified no findings related to FCRA or Regulation V from 2013 to 2018.\nThree prudential regulators stated that they consider the risk that a FCRA or Regulation V violation poses to the depository institution, including risk to consumers. For example, FDIC staff stated that the violations they cited may have had a small but negative effect on consumers, or may have the potential to have a negative effect in the future if uncorrected. FDIC staff added that such violations may also pose compliance and legal risks to the institution. NCUA staff stated that they require corrective action for any FCRA violation, and that they consider the pervasiveness of violations—particularly a risk of systemic or repeated violations—in determining the appropriate supervisory action.", "", "CFPB, FTC, and industry stakeholders attributed inaccuracies in consumer reports to several causes, including (1) CRAs matching data to the wrong consumer files due to missing, inaccurate, or inconsistent personally identifiable information; (2) errors in furnished data; (3) timing of data updates; and (4) identity fraud or theft. In particular, CFPB, FTC, and industry stakeholders most frequently cited CRAs mismatching data and errors in furnished data as the primary causes of consumer report inaccuracies.", "Several industry stakeholders identified CRAs’ mismatching of furnished data or public records to consumer files as a major source of inaccuracies in consumer reports. Two of the consumer groups we interviewed— Consumers Union and the National Consumer Law Center—also cited mismatching of data to consumer files as a source of inaccuracies in reports they published. In addition, FTC and CFPB reported in separate studies in 2012 that mismatching is a key source of inaccuracies in consumer reports. When CRAs do not correctly match data to the appropriate consumer files, the consumer’s file may contain data pertaining to another consumer. Alternatively, data can be excluded from the “correct” consumer’s file. For example, if one consumer’s report contains information about a different consumer’s debt payment history or collections activity, this information would also be missing from the file of the consumer who generated that activity.\nCFPB reported in its 2012 study that inconsistent, inaccurate, or incomplete personally identifiable information can cause errors in matching furnished data to the correct consumer’s file. CFPB, FTC, and industry stakeholders—three CRAs, a CRA industry group, and a consumer group—identified multiple reasons why personally identifiable information in data furnished to CRAs may be inconsistent, inaccurate, or incomplete, including the following examples:\nConsumers may use variations of their names when establishing an account with financial institutions (such as Kathy and Katherine).\nConsumers may change their names as a result of divorce or marriage, but the name change may not be reflected in furnished data.\nConsumers with suffixes in their names (such as junior or senior) may not consistently use suffixes in their applications.\nFurnishers may omit personally identifiable information.\nFurnishers may input consumers’ information incorrectly during data entry.\nIn addition, CFPB stated in its 2012 report that matching public records to consumers’ files can be particularly challenging for CRAs because public records rarely contain Social Security numbers.\nThe processes CRAs have in place to match data to consumers’ files may also contribute to inaccuracies in consumer reports. Generally, CRAs use various combinations of personally identifiable information to match data to consumers. For example, representatives from one CRA said the CRA uses at least the name and address to conduct matches. These representatives said that where only name and address are used, the address is required to be an exact match while the name can be a logical variation determined by the CRA’s algorithm. Representatives from another CRA said that the CRA matches public record information using at least the full name and date of birth but not the Social Security number because it is difficult to obtain. According to a CFPB report, the three nationwide CRAs—as part of their settlements with multiple state Attorney General offices—now require name, address, and Social Security number or date of birth to be present in public records furnished to them and use that personally identifiable information to conduct matches. Representatives from three consumer groups attributed consumer report inaccuracies to how CRAs make such matches. For example, representatives of two consumer groups said that CRAs could reduce inaccuracies arising from mismatching by using stricter requirements, such as requiring both Social Security number and date of birth, in addition to names and addresses, or only matching data to consumers if all nine digits of the Social Security number are present.\nAltogether, the errors originating from consumers or furnishers, as well as processes that CRAs have in place for matching, affect the accuracy of consumer reports (see fig. 3).\nCFPB and representatives from several industry stakeholders identified errors in furnished data as a primary cause of consumer report inaccuracies. Even when a CRA matches data to the correct consumer file, the consumer report can still contain inaccuracies if the information a furnisher provided to the CRA regarding the consumer contained errors (see fig. 4). CFPB has reported and a few CRAs told us that CRAs conduct quality checks to identify issues including blank fields or logical inconsistencies in furnished data, such as reporting of new account balance for closed consumer accounts. The CRA can reject furnished data or ask furnishers to provide corrected data. However, a CFPB report and a few industry stakeholders we interviewed identified weaknesses in furnisher and CRA processes as contributing to errors in furnished data. Two of the consumer groups we interviewed—Consumers Union and the National Consumer Law Center—also cited weaknesses in furnisher and CRA processes as contributing to errors in furnished data in reports they published.\nProcesses for handling consumer transactions. CFPB reported that problems with processes used by furnishers include failing to update records, failing to post a payment, and misattributing ownership of an account to an individual who is only an authorized user.\nProcesses for handling data accuracy. CFPB also reported and a few stakeholders told us that some furnishers lack processes for ensuring the accuracy of data submitted to CRAs and some CRAs lack processes for ensuring the accuracy of furnished data.\nCFPB reported and representatives from a few industry stakeholders said that timing of data updates in furnished data and court records could be a source of potential inaccuracies. For example, representatives from one CRA said that an address or name change can take up to two billing cycles to be reflected in a consumer report. Additionally, representatives from a CRA industry group told us that online court records, where CRAs may obtain data, often lag behind paper court records. Representatives from one consumer group pointed to the timing of when furnishers report debt as a source of potential inaccuracies.", "CFPB, the National Consumer Law Center, and Consumers Union have reported that identity fraud and theft are causes of inaccuracies in consumer reports. Additionally, representatives from one CRA also told us that identity fraud and theft are primary causes of inaccuracies. For example, identity thieves can create new credit accounts in a consumer’s name and let the debt go unpaid. Such debts then may be reflected in the consumer’s account and be reported to CRAs if not identified by the furnisher as resulting from fraudulent activity.", "Consumers can dispute the accuracy or completeness of their consumer reports with the CRAs that produced the consumer reports, with the data furnishers, or both. As stated previously, FCRA requires CRAs to conduct reasonable investigations of consumer disputes; FCRA, Regulation V, and FTC’s Furnisher Rule, as applicable, generally also require furnishers to conduct reasonable investigations of consumer disputes. If consumers are dissatisfied with the results of the investigations conducted by the CRAs or furnishers, they have a few options, discussed in detail below.\nFCRA requires CRAs and furnishers to take specific steps to respond to consumer disputes. When a consumer files a dispute with the CRA, the CRA must investigate the dispute internally, and once the CRA notifies the furnisher of the dispute, the furnisher must also investigate the disputed information (see fig. 5). If the CRA’s internal investigation or the furnisher’s investigation finds that the disputed item is inaccurate, incomplete, or cannot be verified, the CRA must delete the disputed item from the consumer’s file or modify the information and notify the furnisher of the action taken. The CRA must notify the consumer of the investigation results. Representatives from six of the CRAs we interviewed said that they consider disputes resolved when they or the furnishers complete their investigations and notify consumers of the results, even if the consumer does not agree with the results. If a furnisher does not conduct an investigation and report to the CRA within the time frame required by FCRA, then the CRA must remove the disputed information from the consumer’s file.\nCertain furnisher processes for investigating a dispute received from a CRA and a dispute received directly from the consumer are similar under FCRA. When a furnisher investigates a dispute received from a CRA, the furnisher must report the results of the investigation to the CRA that forwarded the dispute. If the furnisher receives the dispute directly from a consumer, then it must investigate the dispute and report the results of the investigation to the consumer, generally within 30 days (see fig. 6). In both cases, the furnisher must provide corrected information to every CRA to which it provided the information.\nCRAs may have differing dispute investigation processes in place because of regulatory requirements or because of how they obtained their data. Under FCRA, the nationwide CRAs are required to maintain an automated system through which furnishers can report incomplete or inaccurate information in a consumer’s file. The nationwide CRAs share the use of an automated system that sends disputes to furnishers and receives furnishers’ responses to the disputes. Other CRAs are not required by FCRA to use an automated system. Representatives from one CRA told us that the CRA uses email and phone calls to send disputes to and receive responses from furnishers. Representatives from a CRA industry group, as well as representatives from a background- screening CRA, said that compared to CRAs that obtain information from furnishers, background-screening CRAs generally obtain records from courts and therefore conduct their dispute investigations by confirming court records and contacting court officials.\nConsumers have several options to address potential inaccuracies in their consumer reports if they disagree with the results of a CRA or furnisher investigation, but these options have potential limitations, according to the stakeholders we interviewed.\nPlacing a consumer statement on the report. Under FCRA, if the investigation does not resolve the dispute (where the dispute is filed with a CRA), the consumer may place a statement regarding the nature of the dispute on the consumer report, such as why the consumer disagreed with the reported item. According to the three nationwide CRAs, such statements alert creditors to the consumer’s disagreement. However, the statement does not modify or remove the information that the consumer perceived to be inaccurate from the consumer report, and users of the consumer report may or may not consider the consumer’s statement in their decision-making.\nResubmitting disputes to CRAs or furnishers. Consumers who believe their disputes have not been satisfactorily resolved may choose to resubmit disputes regarding the same items that they disputed previously to CRAs or to the furnishers. If a consumer submits a dispute and does not provide sufficient information to investigate the disputed information or resubmits a dispute and does not provide additional or new supporting information, a CRA or furnisher may determine that the dispute is frivolous or irrelevant and does not warrant an investigation. Representatives from one CRA told us that if the CRA receives a dispute from a consumer about an item that was previously disputed, it would review consumer records to see if it has verified the consumer’s information previously. If so, the CRA would ask the consumer to provide additional documentation or to contact the furnisher to obtain support for the dispute. In some cases, consumers may turn to third parties that submit disputes on their behalf. Representatives from one CRA said that the CRA does not investigate disputes that certain third parties submit on behalf of consumers because these third parties dispute the same items repeatedly. Representatives from another CRA said that the CRA reviews third-party dispute requests to determine if the third party has proper authorization from consumers to act on their behalf.\nSubmitting complaints to federal and state agencies. Consumers can submit complaints about inaccuracies in their consumer reports to federal and state agencies, such as CFPB and state Attorney General offices. CFPB has stated that it forwards these complaints to CRAs and works with them to obtain responses within 15 days. Staff from several state agencies we interviewed generally told us that after receiving complaints, they contact CRAs about the complaints to obtain responses but do not compel CRAs to take specific actions. CFPB has reported that CRAs handle complaints similarly to consumer disputes. As a result, although complaints are separate from the dispute process required under FCRA, the effectiveness of this option also depends on the same CRA processes for addressing inaccuracies. However, representatives from two consumer groups said that submitting complaints to CFPB through its consumer complaint database has helped consumers resolve inaccuracies in their reports. Representatives from one consumer group said the publication of complaints in CFPB’s database helps to hold CRAs accountable and incentivizes CRAs to respond.\nTaking private legal action. Under FCRA, consumers have private rights of action—or ability to litigate—against CRAs and furnishers, under certain provisions. Consumers have brought legal claims against CRAs and furnishers for failure to follow reasonable procedures to assure maximum possible accuracy or conduct a reasonable investigation of a dispute. Under FCRA, consumers can sue a furnisher for failure to conduct a proper investigation when notified by a CRA that a consumer has disputed information provided by the furnisher. However, before initiating suit, the consumer must first dispute the information with the CRA. A consumer may initiate a dispute through a CRA even if the consumer has previously initiated a dispute with the furnisher. Representatives from two consumer groups and one state agency told us that in general, consumer barriers to litigation include that it is time-consuming and has potentially high legal costs and that consumers might be unaware of their legal rights.", "As a result of CFPB and FTC oversight and settlements with multiple state Attorneys General, the nationwide CRAs and several other CRAs have made changes in their policies and procedures to improve data accuracy and processes for addressing inaccuracies in consumer reports. However, CFPB and a few industry stakeholders said that challenges to improving accuracy in consumer reports remain.\nAccording to CFPB and nationwide CRAs, examples of the changes that CRAs have made as a result of oversight include the following:\nChanges as a result of CFPB supervision. According to CFPB, as a result of supervisory findings, one or more CRAs have implemented or changed policies and procedures related to ensuring accuracy and dispute investigations. These include (1) establishing a data- governance structure to oversee furnisher monitoring, such as by developing policies and procedures for ongoing and systemic screening of furnishers; (2) implementing systems to forward relevant dispute documents submitted by consumers to furnishers; and (3) implementing policies and procedures to ensure consideration of all supporting material submitted by consumers.\nChanges as a result of CFPB and FTC enforcement. As a result of CFPB’s and FTC’s enforcement, the two agencies directed a few CRAs to revise the procedures they use to match data using personally identifiable information. For example, CFPB directed two background-screening CRAs to revise procedures for assuring accuracy, such as by using algorithms to distinguish records by middle name and to match common names and nicknames. In another example, FTC directed a background-screening CRA that required an exact match of a consumer’s last name and a nonexact match of first name, middle name, and date of birth to put in place reasonable procedures to ensure maximum possible accuracy.\nChanges as a result of state oversight. According to the three nationwide CRAs, they have implemented measures as a result of their 2015 settlements with multiple state Attorneys General. For example, they stated they monitor data furnishers’ dispute responses and take corrective actions against data furnishers for noncompliance with their dispute investigation responsibilities. Additionally, they established special handling procedures for disputes involving mixed files, fraud, and identity theft and provided CRA employees with discretion to resolve such disputes, rather than relying on furnishers’ responses.\nIn addition to the changes described above, representatives at various CRAs said they had quality assurance processes in place to help ensure that furnished data are accurate and that furnishers are responsive to disputes.\nMonitoring of furnished data. Representatives from four CRAs said that they use various mechanisms to monitor furnished data to detect potential inaccuracies and take corrective actions against furnishers that do not comply with data furnishing standards. For example, representatives from three CRAs told us they compare data submissions against industry patterns and historical trends—such as data submission history over the past 6 months—to identify anomalies that would suggest erroneous data and take actions such as rejecting incoming data and returning data for correction. Representatives from one of these CRAs said that they analyze why a furnisher deviates from industry trends and help the furnisher identify and implement changes. Representatives from four CRAs told us that they provide regular reports, such as monthly reports, on data quality to furnishers. We reported previously that such steps may improve the quality of the information received from furnishers but cannot ensure the accuracy of such data.\nMonitoring of dispute investigations. Representatives from four CRAs said they have processes in place to help ensure that furnishers are responsive to disputes. For example, representatives from one CRA said that the automated system they use to correspond with furnishers about disputes automatically identifies illogical furnisher responses; the CRA contacts the furnisher to confirm the accuracy of those responses. Representatives from four CRAs told us that they monitor furnisher responses to disputes, such as dispute trends by furnisher type and the rate at which furnishers do not respond to disputes.\nAlthough CRAs have made changes to improve processes for ensuring accuracy and addressing inaccuracies, CFPB and industry stakeholders said that challenges remain in these areas. First, CFPB staff told us that the consumer reporting market has historically had comparatively less regulatory intervention than other regulated markets. As a result, the staff said that it has been challenging to change CRAs’ approach to a proactive one, whereby the CRAs proactively address compliance and change practices, as opposed to a defensive, reactive approach in response to consumer disputes and lawsuits. CFPB staff explained that this has been a focus of CFPB’s supervision and said that its examination findings have demonstrated that CRAs can take actions to improve accuracy. Further, representatives from three consumer groups said that consumer report inaccuracy remains a challenge because CRAs lack incentives to be responsive to consumers, in part because the CRAs’ customers are the users of consumer reports, such as banks and employers, rather than the consumers themselves. Additionally, two industry stakeholders identified gaps in furnisher responsibilities for ensuring accuracy as a challenge. Representatives from one of these stakeholders, a state agency, said that furnishers often do not know their responsibilities for ensuring the accuracy of their data. Representatives from the other stakeholder, a CRA, said that while the CRA has implemented policies and procedures to ensure accuracy in response to CFPB’s supervision, furnishers might not have implemented similar policies and procedures to ensure the accuracy of the data provided.", "Consumer reports affect the lives of millions of Americans because of the role they play in many important decisions, such as whether a lender decides to extend credit and at what terms or whether an employer offers a candidate a job. Therefore, it is important for CRAs to produce reports that are accurate and for consumers to have appropriate procedures available to correct any inaccuracies in their consumer reports, including disputing inaccuracies. We found that opportunities exist for CFPB to improve its oversight of CRAs.\nAs part of its supervision, CFPB has directed CRAs it has examined to make specific changes based on examination findings related to FCRA requirements for (1) reasonable procedures for assuring accuracy and (2) reasonable investigation of consumer disputes. However, CFPB has not defined its expectations for how CRAs can comply with these requirements. Providing additional information to CRAs about its expectations for key FCRA requirements could help CFPB achieve its vision of promoting a consumer reporting system where CRAs maintain and distribute accurate data, supplemented by effective dispute resolution processes. Additionally, such information could help to promote consistency and transparency in CFPB’s supervisory approach.", "We are making two recommendations to CFPB: The Director of CFPB should communicate to CRAs its expectations regarding reasonable procedures for assuring maximum possible accuracy of consumer report information. (Recommendation 1)\nThe Director of CFPB should communicate to CRAs its expectations regarding reasonable investigations of consumer disputes. (Recommendation 2)", "We provided a draft of this report to CFPB, the Federal Reserve, FDIC, FTC, NCUA, and OCC for review and comment. We received written comments from CFPB, which are summarized below and reprinted in appendix II. CFPB, the Federal Reserve, FDIC, and FTC provided technical comments, which we incorporated as appropriate. In email responses, officials indicated that NCUA and OCC did not have any comments on the draft of this report.\nIn its written comments, CFPB neither agreed nor disagreed with the recommendations. CFPB stated that it has made oversight of the consumer reporting market a top priority and that its supervisory reviews of CRAs have focused on evaluating their systems for assuring the accuracy of data used to prepare consumer reports. CFPB noted that CRAs have made significant advances to, among other things, promote greater accuracy.\nWith respect to the first recommendation—that CFPB should communicate to CRAs its expectations regarding reasonable procedures for assuring maximum possible accuracy—CFPB noted that case law includes interpretations of the reasonableness standard and provides guidance to CRAs about how the standard applies to various factual scenarios. CFPB also noted that it and FTC have settled enforcement actions regarding the reasonableness standard in which each agency provided examples of how it applied the standard and the relevant case law to the facts of each matter and described a consent order with two background-screening companies that made clear that a lack of certain written procedures was not reasonable. Additionally, CFPB noted that its examination procedures discuss factors that would be considered in evaluating compliance with the reasonable procedures standard and that it publishes “Supervisory Highlights” that document key examination findings.\nWhile we agree that case law may provide information to CRAs regarding how courts have interpreted the reasonableness standard in specific circumstances, as we note in the report, there may be a lack of clarity about the extent to which all case law fully reflects CFPB’s expectations. Absent additional information from CFPB, the current case law and case- by-case enforcement actions may not best serve to enable CRAs to proactively address compliance practices. More direct communication of CFPB’s expectations can provide CRAs with clearer information on what they should be doing and what actions might constitute a FCRA violation. Similarly, while FTC and CFPB have settled actions with certain CRAs regarding reasonable procedures, such settlements may be applicable only to the specific facts and circumstances and the parties involved in those cases. CFPB’s examination procedures provide information on factors that would be considered in evaluating compliance and areas that may be reviewed in examinations, but they do not provide information on CFPB’s oversight expectations regarding how CRAs may comply with the FCRA requirement for reasonable procedures. Likewise, while CFPB’s Supervisory Highlights provide information on key examination findings, the Supervisory Highlights do not represent CFPB’s expectations for how CRAs may or should comply with the reasonableness standard. For example, the Supervisory Highlights state that the legal violations described are based on particular facts and circumstances and may not lead to such findings under different facts and circumstances.\nWith respect to the second recommendation—that CFPB should communicate to CRAs its expectations regarding reasonable investigations of consumer disputes—CFPB stated that what qualifies as a “reasonable investigation” has been articulated in court cases and noted that an FTC report summarizes how the reasonable investigations standard has been interpreted by courts and FTC. While we acknowledge that FTC may have interpreted and the courts may have ruled on this issue, CFPB has not communicated to CRAs specific information on what may and may not qualify as a “reasonable investigation.” CFPB also stated that it issued a bulletin in September 2013 that is relevant to this recommendation. However, in that bulletin, CFPB restated FCRA requirements and emphasized their importance, but it did not provide further information on what practices may represent a “reasonable investigation” or what it expects of CRAs.\nCFPB noted that it has and will continue to communicate its expectations to CRAs. As stated in our report, communicating information about CFPB’s compliance expectations and ways in which CRAs could comply could help to ensure that CRAs receive complete and clear information about how to comply with key FCRA requirements. CFPB could provide such information in several ways; for example, CFPB has put consumer reporting issues on its rulemaking agenda since 2015. We maintain that providing additional information to CRAs about its expectations for key FCRA requirements could help CFPB to promote consistency and transparency in its supervisory approach and that the recommendations should be addressed.\nWe are sending copies of this report to the appropriate congressional committees and financial regulators, and other interested parties. This report will also be available at no charge on our website at http://www.gao.gov.\nIf you or your staff have any questions about this report, please contact me at (202) 512-8678 or [email protected]. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. Key contributors to this report are listed in appendix III.", "Our objectives for this review were to (1) describe the current oversight framework for consumer reporting agencies (CRA), (2) examine how the Consumer Financial Protection Bureau (CFPB) has overseen CRAs and entities that furnish consumer data, (3) examine how other federal agencies, including the Federal Trade Commission (FTC) and the prudential regulators, have overseen CRAs and entities that furnish consumer data, and (4) identify what is known about the causes of inaccuracies in consumer reports and the processes that are in place to help ensure accuracy.\nSome information has not been included in this public report because CFPB determined it was information prohibited by law from public disclosure. This report omits such information, but we will be issuing a nonpublic version of this report that includes all the information. Although the information provided in this report is more limited, it addresses the same objectives as the sensitive nonpublic report and uses the same methodology.\nTo describe the oversight framework for CRAs, we identified and reviewed relevant federal laws and their application for CRAs and institutions that furnish data to CRAs (called furnishers). We identified and reviewed laws focused on the accuracy of consumer reports, the security of consumer information, and the use and sharing of consumer reports. These laws include the Fair Credit Reporting Act (FCRA) and its implementing regulation, Regulation V, the Gramm-Leach-Bliley Act, the Dodd–Frank Wall Street Reform and Consumer Protection Act, the Federal Trade Commission Act, and the Economic Growth, Regulatory Relief, and Consumer Protection Act. We interviewed staff from CFPB, FTC, and the prudential regulators—the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, the National Credit Union Administration, and the Office of the Comptroller of the Currency—about applicable laws and regulations for CRAs and furnishers and their oversight authority over CRAs and furnishers.\nAdditionally, we interviewed five categories of stakeholders to learn about federal and state oversight over CRAs: state agencies such as Attorney General offices and regulators, CRAs, groups representing state agencies, industry groups representing CRAs, and consumer groups. We selected four states—Maine, Maryland, New York, and Ohio—for a more in-depth review. We chose these states because they had laws and regulations related to consumer reporting or had oversight activities involving CRAs, such as prior enforcement actions. We interviewed staff from state regulatory agencies in Maine, Maryland, and New York, as well as staff from the New York Office of the Attorney General. In addition, we received written responses to our questions from the Ohio Office of the Attorney General. In each case, we asked questions about state oversight of CRAs, including the relevant state laws and state enforcement, rulemaking, and supervisory authorities. We interviewed three nationwide CRAs and four smaller or specialty CRAs that produce or compile consumer reports covering the credit and background-screening markets about federal and state oversight, including applicable laws. We selected these CRAs because of potential differences in oversight based on their size and market. In our selection, we considered the size of the CRA and the number of consumer complaints in CFPB’s database. We also interviewed two industry groups representing CRAs (the Consumer Data Industry Association and the National Association of Professional Background Screeners); two groups representing states (the Conference of State Bank Supervisors and the National Conference of State Legislatures); and four consumer groups (Consumers Union, the National Association of Consumer Advocates, the National Consumer Law Center, and U.S. Public Interest Research Group). We asked these groups about federal and state authorities for overseeing CRAs. We selected these groups because, based on our analysis of publicly available information and interviews with federal agencies, they are the primary organizations representing stakeholders in our review, such as CRAs, or have existing work, such as reports or testimonies, related to CRAs. The groups we included and the views they represent reflect a range of stakeholders but do not necessarily reflect the full scope of the industry.\nTo examine how CFPB has overseen CRAs and furnishers, we interviewed CFPB staff about CFPB’s supervision and enforcement strategies and activities, and we reviewed relevant documents, including supervisory and examination documents. To examine CFPB’s supervisory strategies and activities, we reviewed CFPB’s supervisory plans that document how CFPB determined which CRAs and furnishers to examine and which compliance areas to examine. We also reviewed CFPB’s public reports, such as Supervisory Highlights, and nonpublic examination documents to evaluate CFPB’s supervisory activities for both CRAs and furnishers. To learn about CFPB’s enforcement strategies and enforcement activities in the consumer reporting market, we reviewed the types of enforcement actions available to CFPB for violations of relevant laws, and we identified specific enforcement actions CFPB brought against CRAs and furnishers for violations related to FCRA and Regulation V from 2012 through 2018. We identified these enforcement actions by reviewing CFPB’s publicly available enforcement activities on its website, and we corroborated our results with CFPB. We also interviewed stakeholders, including CRAs, consumer groups, state agencies, and state groups, to obtain their views on CFPB’s oversight.\nTo examine how FTC and the prudential regulators have overseen CRAs and furnishers, we interviewed staff from FTC and the prudential regulators to discuss the agencies’ oversight and enforcement activities. To learn about FTC’s enforcement strategies and activities in the consumer reporting market, we reviewed the types of enforcement actions available to FTC for violations of relevant laws, interviewed FTC staff regarding the process for initiating investigations and the investigations FTC conducted, and identified specific enforcement actions brought against CRAs and furnishers for violations related to FCRA, Regulation V, and FTC’s Furnisher Rule from 2010 through 2018. We identified these enforcement actions by reviewing FTC’s publicly available enforcement activities on its website, and we corroborated our results with FTC. To learn about prudential regulators’ activities, we reviewed the prudential regulators’ policies and procedures for examining furnishers and interviewed regulators’ staff. We also collected information from the regulators about their FCRA-related findings for furnishers from 2013 through 2018.\nTo identify what is known about the causes of inaccuracies in consumer reports and the processes that are currently in place to help ensure accuracy, we conducted interviews with stakeholders. In particular, we interviewed staff from CFPB, FTC, the prudential regulators, and the state agencies to learn about what they believe are the causes of inaccuracies in consumer reports and the options available to consumers to address inaccuracies. Similarly, we interviewed staff at three nationwide CRAs and four smaller or specialty CRAs about the causes of inaccuracies and the processes they have in place for ensuring accuracy and addressing inaccuracies, including the processes in place to meet FCRA requirements for addressing consumer disputes about consumer report information. Additionally, we spoke with staff from four consumer and two industry groups (described above) to gain their perspectives on the causes of inaccuracies and processes in place to address them.\nWe also conducted a literature search on the causes of inaccuracies in consumer reports and processes in place to help ensure accuracy. The search covered academic literature and court cases from 2008 through 2018 and used subject and keyword searches of various databases, such as ProQuest, Westlaw, and CQ. The literature search resulted in limited relevant information. However, we identified reports from CFPB and FTC that included information on the causes of inaccuracies in consumer reports, as well as information CFPB has published, such as Supervisory Highlights, on the processes CRAs have in place to help ensure accuracy. Additionally, through our interviews, we identified information that stakeholders, such as the National Consumer Law Center, have published on these issues.\nWe conducted this performance audit from July 2018 to July 2019 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 that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives.", "", "", "", "In addition to the contact named above, Kevin Averyt (Assistant Director), Weifei Zheng (Analyst in Charge), Yue Pui Chin, Sergio Enriquez, Marc Molino, Stephen Ruszczyk, Kelsey Sagawa, Jessica Sandler, Jennifer Schwartz, and Farrah Stone made key contributions to this report." ], "depth": [ 1, 2, 2, 3, 3, 3, 1, 2, 2, 2, 1, 2, 3, 3, 2, 1, 2, 2, 1, 2, 3, 3, 2, 2, 1, 1, 1, 1, 1, 1, 2, 2 ], "alignment": [ "h0_title", "h0_full", "", "", "", "", "h1_title", "h1_full", "", "", "h2_title h1_title", "h1_title", "h1_full", "h1_full", "h2_full", "", "", "", "h0_title", "h0_full", "h0_full", "", "", "", "h2_full h1_full", "", "", "h3_full", "", "", "", "" ] }
{ "question": [ "What do businesses use consumer reports for?", "How do inaccuracies in consumer reports affect such decisions?", "What did CFPB identify?", "What is the relationship between CFPB and CRAs?", "What CRAs has CFPB prioritized?", "On what does CFPB's oversight focus?", "To what extent has CFPB defined its expectations for CRAs?", "How do CRA staff cope with this lack of information?", "How would providing better information to CRAs benefit CFPB?", "What does FCRA require of CRAs?", "What did CFPB's 2018 policy statement highlight?", "What was GAO's methodology?", "What interviews did GAO conduct?" ], "summary": [ "Businesses and other entities use consumer reports to make decisions about consumers, such as whether they are eligible for credit, employment, or insurance.", "Consumer report inaccuracies can negatively affect such decisions.", "The Consumer Financial Protection Bureau (CFPB) and other stakeholders identified various causes of consumer report inaccuracies, such as errors in the data collected by consumer reporting agencies (CRA) and CRAs not matching data to the correct consumer.", "In 2010, CFPB was granted supervisory and enforcement authority over CRAs.", "In using its oversight authorities, CFPB has prioritized CRAs that pose the greatest potential risks to consumers—such as those with significant market shares and large volumes of consumer complaints—for examination.", "CFPB's oversight has generally focused on assessing compliance with Fair Credit Reporting Act (FCRA) requirements regarding accuracy and the investigations CRAs conduct in response to consumer disputes.", "CFPB has not defined its expectations for how CRAs can comply with key statutory requirements. CFPB has identified deficiencies related to these requirements in its CRA examinations, but it has not defined its expectations—such as by communicating information on appropriate practices—for how CRAs can comply with these requirements.", "Absent such information, staff from four CRAs GAO interviewed said that they look to other sources, such as court cases or industry presentations, to understand what CFPB will consider to be noncompliant during examinations.", "By providing information to CRAs about its expectations for complying with key FCRA requirements, CFPB could help achieve its goal of accurate consumer reporting and effective dispute resolution processes. Such information also could help to promote consistency and transparency in CFPB's supervisory approach.", "FCRA requires CRAs (1) to follow reasonable procedures for ensuring maximum possible accuracy and (2) to conduct reasonable investigations of consumer disputes.", "A 2018 policy statement issued by CFPB and other regulators highlighted the important role of supervisory expectations in helping to ensure consistency in supervision by providing transparent insight to industry and to supervisory staff.", "To answer these questions, GAO reviewed relevant laws, regulations, and agency documents related to CRA oversight.", "GAO interviewed representatives of federal agencies and stakeholders, including a nongeneralizable selection of state agencies from four states that had laws or oversight activities involving CRAs and seven CRAs selected based on size and the type of consumer reports produced. GAO also interviewed groups representing state agencies, consumers, and CRAs selected to reflect a range of stakeholders or based on their work related to CRAs." ], "parent_pair_index": [ -1, 0, -1, -1, 0, 0, -1, 0, 0, -1, -1, -1, 0 ], "summary_paragraph_index": [ 3, 3, 3, 4, 4, 4, 5, 5, 5, 5, 5, 2, 2 ] }
CRS_R44813
{ "title": [ "", "Introduction", "Overview of Cost-Benefit Analysis", "Current Cost-Benefit Analysis Requirements", "Requirements for Nonfinancial Regulators: Executive Order 12866 and OMB Circular A-4", "Exception for Independent Regulatory Agencies from Executive Order 12866", "CBA Requirements on Financial Regulators", "Cross-Cutting Analytical Requirements", "Regulatory Flexibility Act", "Paperwork Reduction Act", "Analytical Requirements Applicable Solely to Banking Regulators", "Agency-Specific Requirements for CBA", "Cost-Benefit Analysis in Practice", "Challenges and Variants of Cost-Benefit Analysis", "Challenges of CBA", "Variants of CBA", "Cost-Effectiveness Analysis", "Breakeven Analysis", "Qualitative Analysis with Expert Judgement", "Retrospective Analysis", "Financial Regulator Requirements Debate", "Arguments That Financial Regulator Discretion is Appropriate", "Arguments That Stricter Requirements on Financial Regulators Are Needed", "Selected CBA Legislation", "115th Congress", "114th Congress", "Conclusion" ], "paragraphs": [ "", "Congress has granted many federal agencies the authority to issue regulations that carry the force of law. This grant of authority raises the issue of how those agencies should be held accountable for the regulations they implement. One method of maintaining accountability is requiring agencies to analyze the potential effects of new regulations—sometimes called regulatory analysis or regulatory impact analysis —before implementing them and making the analyses public during the rulemaking process. An important and commonly performed type of regulatory analysis is a cost-benefit analysis (CBA)—a systematic examination, estimation, and comparison of the economic costs and benefits resulting from the implementation of a new rule. By performing and making public such analyses, an agency demonstrates that it has given reasoned consideration to the necessity and efficacy of a rule and the effects it will have on society.\nMost agencies regulating the financial industry are not subject to certain statutes or other requirements that apply to most executive branch agencies, allowing them to operate with a relatively high degree of independence from the President and Congress. These financial regulators—along with other agencies that have similar independence—are often referred to as independent regulatory agencies . Agencies are given this independence in part so that experts writing technical rules have some degree of insulation from political considerations. One aspect of these regulatory agencies' independence is that they are not subject to certain requirements that direct other agencies to perform CBAs with certain parameters and executive review. Some observers argue that this independence is appropriate and that subjecting financial regulators to increased requirements would inhibit implementing necessary, beneficial regulation. However, others argue that financial regulators should be subject to greater requirements to increase accountability. The debate has drawn increased attention in recent years as regulators promulgate and continue to promulgate rules mandated and authorized by the Dodd-Frank Wall Street Reform and Consumer Protection Act ( P.L. 111-203 ). In response, a number of bills in recent Congresses have proposed increased requirements.\nThis report examines issues related to financial regulators and CBAs, including potential difficulties facing such regulators and methods available to them when preforming a CBA; the analytical requirements the agencies currently face; and the arguments for and against increasing requirements on financial regulators. This report also briefly describes several examples of proposed legislation that would change the requirements facing financial regulators.", "CBA can help ensure that regulators demonstrate that their decisions are based on an informed estimation of likely consequences during the development, issuance, and implementation of rules. In the analysis, economists and other experts use theory, modeling, statistical analysis, and other tools to estimate the likely outcomes if a particular regulation were to be implemented. These outcomes are compared with the likely outcomes if no regulation or a different regulation were implemented. Then the good outcomes (benefits) can be weighed against bad outcomes (costs) of a regulatory action to determine whether and to what degree a regulation is on net beneficial to society.\nBenefits may include such outcomes as deaths and injuries avoided, acres of rare habitat saved, or a decreased probability of financial crisis. Costs may include outcomes such as increased production costs for companies, regulation compliance cost to companies, and increased prices for consumers. Externalities —the effects experienced by parties that are not directly involved in the market transactions covered by the regulation—also should be included in the analysis to the extent possible. If it were the case that regulators were expected to make decisions with complete information, all societal costs and benefits would need to be accurately and precisely estimated. These outcomes would be quantified (assigned accurate numerical values) and monetized (assigned an accurate dollar value). Proposed rules would be finalized and implemented only if benefits were expected to exceed costs, and in a form that maximized net benefits.\nHowever, societal costs and benefits may be difficult to accurately estimate, quantify, and monetize. Therefore, performing most CBAs involves some degree of subjective human judgement and uncertainty, and predicted results are often expressed as a range of values. As discussed in more detail in the \" Financial Regulator Requirements Debate \" section, some argue that performing CBAs for financial regulation is particularly challenging, due largely to the high degree of uncertainty over precise regulatory costs and outcomes.\nThis raises questions about the appropriate scope, level of detail, and degree of quantification that should be required of analysis performed in the rulemaking process. On one hand, overly lenient requirements could allow agencies to implement overly burdensome regulation with limited benefit without due consideration of consequences. In addition, a CBA can be an informational tool that estimates the potential effects of a rule and informs the agency and the public as various groups advocate for certain policies—and potentially exaggerate or minimize risks, costs, or likely outcomes of a certain regulation.\nIn contrast, overly onerous analytic requirements could risk impeding the implementation of necessary, beneficial regulation because performing the analysis would be too time consuming, too costly, or simply not possible. Another concern is that if agencies face highly burdensome requirements, they may have an incentive to achieve policy goals through other methods—such as issuing policy statements, guidance documents, and technical manuals—that create less accountability than the rulemaking process. In addition, a CBA itself can be costly and is performed by departments and agencies funded by general taxes and fees on industry. Finally, requiring uncertain and contestable CBAs may allow self-interested parties to impede socially beneficial regulation by challenging agency analysis in court and offering their own subjective analysis. For these reasons, stringent CBA requirements may themselves generate more costs than benefits.", "As mentioned above, CBA can be a useful tool for ensuring good regulations are implemented and that regulatory agencies are accountable. However, requirements to perform such analyses may restrict agencies from effectively regulating. This section examines current CBA requirements, including those that apply to nonfinancial regulators and those that direct financial regulators more specifically. It also reviews certain government reports examining the methods and results of recent regulatory CBAs performed by financial regulators under the existing requirements.", "The primary requirement for most agencies to calculate estimates of costs and benefits when issuing rules is under Executive Order (E.O.) 12866, which was issued in 1993 by President William Clinton. E.O. 12866 requires covered agencies—that is, agencies other than independent regulatory agencies, which includes most of the financial regulators—to submit \"significant\" rules to the Office of Management and Budget's Office of Information and Regulatory Affairs (OIRA) for review, along with an initial cost and benefit assessment. For rules that are determined to be significant because their annual economic effect is likely to exceed a $100 million threshold, covered agencies are required to conduct a more in-depth CBA. Specifically, the order requires agencies to provide to OIRA an assessment of anticipated costs and benefits of the rule, and an assessment of the costs and benefits of \"reasonably feasible alternatives\" to the rule. Other E.O. 12866 provisions encourage agencies to consider costs and benefits during the rulemaking process for all rules, although those other provisions do not require a complete, detailed cost-benefit analysis for non-economically significant rules.\nE.O. 12866 has remained in effect since 1993, and it was reaffirmed in 2011 in E.O. 13563 by President Barack Obama. E.O. 13563 states that covered agencies should (1) propose or adopt a regulation only upon a reasoned determination that its benefits justify its costs, (2) tailor regulations to impose the least burden on society, and (3) select regulatory approaches that maximize net benefits. It also directs agencies to \"use the best available techniques to quantify anticipated present and future benefits and costs as accurately as possible.\"\nIn September 2003, OMB finalized Circular A-4 on regulatory analysis, which refined and replaced an earlier OMB guidance document, providing good-guidance practices to agencies for conducting their CBAs. The circular states that it was \"designed to assist analysts in the regulatory agencies by defining good regulatory analysis ... and standardizing the way benefits and costs of Federal regulatory actions are measured and reported.\" The document provides some specific information that agencies should generally include in their analyses, such as the statutory or judicial directives that authorize the action; the underlying problem or market failure prompting the regulation; consideration of a \"reasonable number\" of regulatory alternatives; and both a cost-benefit analysis and a cost-effectiveness analysis. Circular A-4 remains the current OMB guidance for agencies preparing CBAs under E.O. 12866 requirements.", "The exception for independent regulatory agencies in Executive Order 12866 is similar to the exception found in Executive Order 12291, in which President Ronald Reagan first established centralized regulatory review in OIRA and required cost-benefit analysis of certain regulations in 1981. This decision is widely understood to have been based on political considerations regarding the statutorily designed independence of these agencies. In short, President Reagan—and subsequent Presidents—viewed these agencies as having been designed by Congress to be independent of the President, and as such chose not to subject them to presidential (OIRA) review. The statutory categorization of those agencies had been codified in the Paperwork Reduction Act of 1980, which designated a special set of procedures for those agencies' information collection approvals from OMB. E.O. 12291, and later E.O. 12866, referenced the PRA's list of agencies to identify the excepted agencies. Currently, the list of independent regulatory agencies includes the following financial regulators:\nBoard of Governors of the Federal Reserve System, Commodity Futures Trading Commission, Federal Deposit Insurance Corporation, Federal Housing Finance Agency, Securities and Exchange Commission, Bureau of Consumer Financial Protection, Office of Financial Research, Office of the Comptroller of the Currency, and National Credit Union Administration.\nWhen President Clinton issued Executive Order 12866 in 1993, he, like President Reagan, chose to exempt the independent regulatory agencies from the order's CBA requirements. Similarly, President Obama continued to exempt independent regulatory agencies from CBA requirements with E.O. 13563, although his OIRA Administrator encouraged those agencies to \"give consideration to all [E.O. 13563's] provisions\" in a memorandum issued soon after the executive order. In July 2011, President Obama issued E.O. 13579, \"Regulation and Independent Regulatory Agencies.\" The executive order encouraged independent regulatory agencies to comply with some of the principles in E.O. 13563 that were directed to Cabinet departments and independent agencies (e.g., public participation, integration and innovation, flexible approaches, and science). In a separate memorandum issued the same day as the executive order, the President said he was taking these actions with \"full respect for the independence of your agencies.\" E.O. 13579 did not, however, directly apply the cost-benefit principles in E.O. 12866 and 13563 to independent regulatory agencies, nor did it require these regulators to conduct CBA before issuing their rules.", "As previously discussed, the financial regulators are exempt from many of the analytical requirements and guidance documents that are applicable to executive agencies, including E.O. 12866 and OMB Circular A-4. However, financial regulators may be required to conduct CBA or other regulatory analyses under cross-cutting statutes or pursuant to the underlying statutes that provide them with rulemaking authority.\nRequirements facing financial regulators arguably require a relatively narrow analysis or allow for more agency discretion compared to the requirements discussed above under E.O. 12866. For example, agencies may be required to \"consider\" or \"estimate\" costs, benefits, or other economic effects, but the degree to which those considerations must be quantified and monetized estimates is not specified. However, the requirements facing financial regulators are not trivial, and financial regulations have been vacated following judicial review when the court found the CBA performed during rulemaking to be deficient.", "The following statutes contain analytical requirements that apply to all federal regulatory agencies, including the financial regulators.", "The Regulatory Flexibility Act (RFA) of 1980 ( P.L. 96-354 ) requires federal agencies to assess the impact of their forthcoming regulations on \"small entities,\" which the act defines as including small businesses, small governmental jurisdictions, and certain small not-for-profit organizations. Under the RFA, all regulatory agencies, including the financial regulators, must prepare a \"regulatory flexibility analysis\" at the time proposed and certain final rules are issued. The RFA requires the analysis to describe, among other things, (1) the reasons why the regulatory action is being considered; (2) the small entities to which the proposed rule will apply and, where feasible, an estimate of their number; (3) the projected reporting, recordkeeping, and other compliance requirements of the proposed rule; and (4) any significant alternatives to the rule that would accomplish the statutory objectives while minimizing the impact on small entities. However, these analytical requirements are not triggered if the head of the issuing agency certifies that the proposed rule would not have a \"significant economic impact on a substantial number of small entities.\"", "The Paperwork Reduction Act (PRA) of 1980 ( P.L. 96-511 ) pertains to certain aspects of the rulemaking process, albeit not the rules themselves. The PRA's primary purpose is to minimize the paperwork burden for individuals, small businesses, and others resulting from the collection of information by or for the federal government, which often stems from regulatory requirements: many information collections, recordkeeping requirements, and third-party disclosures are contained in or are authorized by regulations as monitoring or enforcement tools. In fact, these paperwork requirements are sometimes a primary component of requirements stemming from financial regulation.\nThe PRA requires agencies to justify any collection of information from the public by establishing the need and intended use of the information, estimating the burden that the collection will impose on respondents, and showing that the collection is the least burdensome way to gather the information. Paperwork burden is most commonly measured in terms of \"burden hours.\" The burden-hour estimate for an information collection is a function of the frequency of the information collection, the estimated number of respondents, and the amount of time that the agency estimates it takes each respondent to complete the collection. Agencies must receive OIRA approval (signified by an OMB control number displayed on the information collection) for each collection request before it is implemented, and those approvals must be renewed at least every three years. OIRA can disapprove any collection of information if it believes the collection is inconsistent with PRA requirements. However, multiheaded independent regulatory agencies can, by majority vote of the leadership, void any OIRA disapproval of a proposed information collection.", "The Riegle Community Development and Regulatory Improvement Act (Riegle Act) imposes analytical requirements on rulemaking for the federal banking regulators—the Federal Reserve, the Office of the Comptroller of the Currency (OCC), and the Federal Deposit Insurance Corporation (FDIC). One of the Riegle Act's primary purposes is to reduce administrative requirements for insured depository institutions, and the scope of the analysis required reflects that specific aim. When determining the effective date and compliance requirements of new rules that impose additional reporting, disclosure, or other requirements on depository institutions, the federal banking regulators must take into consideration: \"(1) Any administrative burden that such regulations would place on depository institutions, including small depository institutions and customers of depository institutions; and (2) the benefits of such regulations.\"", "Certain individual agencies—the Securities and Exchange Commission (SEC), the Consumer Financial Protection Bureau (CFPB), and the Commodity Futures Trading Commission (CFTC)—are statutorily required to perform certain analysis in rulemaking specific to the agency. As mentioned previously, the parameters of analysis when \"considering\" cost and benefits are to a degree left to agency discretion, although analysis could be subject to judicial review if a party were to challenge the regulation in court.\nThe SEC is subject to requirements to analyze the effect of its rules, with an emphasis on market efficiency and competition. The National Securities Market Improvement Act ( P.L. 104-290 ) requires the SEC to \"consider or determine whether an action is necessary or appropriate in the public interest ... [and] whether the action will promote efficiency, competition, and capital formation.\" The Securities Exchange Act (P.L. 73-291) requires the SEC to perform economic analysis on \"the impact any such rule or regulation will have on competition.\"\nThe CFPB must specifically consider the costs and benefits to consumers and the companies to which the new rules apply. The Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) ( P.L. 111-203 ) requires the CFPB to \" consider (1) the potential benefits and costs to consumers and covered persons, including the potential reduction of access by consumers to consumer financial products or services resulting from such rule; and (2) the impact of proposed rules on covered persons ... and the impact on consumers in rural areas.\"\nThe CFTC must evaluate costs and benefits of new rules and the analysis must include several specified considerations. The Commodity Exchange Act (P.L. 74-675) requires the CFTC to \"consider the costs and benefits of the action\" before promulgating a rule, and \"the costs and benefits of the proposed Commission action shall be evaluated in light of: (A) considerations of protection of market participants and the public; (B) considerations of the efficiency, competitiveness, and financial integrity of futures markets; (C) considerations of price discovery; (D) considerations of sound risk management practices; and (E) other public interest considerations.\"", "Reports on the characteristics of the agency-performed CBAs—including independent regulatory agencies—can illustrate what analyses are done in practice as part of rulemaking.\nSection 624 of the Treasury and General Government Appropriations Act of 2001 (31 U.S.C. §1105 note)—sometimes known as the \"Regulatory Right-to-Know Act\"—requires OMB to issue an annual report to Congress on regulatory costs and benefits. The report generally includes an assessment of the CBAs for major rules done by agencies as a part of rulemaking. The 2016 report indicated that independent financial regulatory agencies issued 8 major final rules during FY2015, and that although benefits and costs were considered during the rulemaking process for all these rules, they were not always monetized. Six of these rules provided monetized costs, but none provided monetized benefits. In comparison, executive departments and agencies subject to E.O. 12866 implemented 30 major rules: 21 analyses monetized both benefits and costs; 6 monetized costs but not benefits; 2 monetized benefits but not costs; and 1 did not monetize costs or benefits.\nThe Government Accountability Office (GAO) releases an annual report on Dodd-Frank regulations that examines analyses done by financial regulators. These reports typically make an assessment of the degree to which the analyses—for rulemaking related to Dodd-Frank provisions—were consistent with the directives of OMB Circular A-4, even though the regulators are not required to follow the directives. In general, GAO has found that financial regulator analysis is consistent with that guidance. For example, in the 2016 report, GAO notes,\nIndependent federal financial regulators are not required to follow OMB's Circular A-4 when developing regulations, but they told us that they try to follow this guidance in principle or spirit. Regulators generally included the key elements of OMB' s guidance in their regulatory analyses for these major rules. To assess the extent to which the regulators follow Circular A-4, we examined 5 major rules ... Specifically, we examined whether the regulators (1) identified the problem to be addressed by the regulation; (2) established the baseline for analysis; (3) considered alternatives reflecting the range of statutory discretion; and (4) assessed the costs and benefits of the regulation. We found that all five rules we reviewed were consistent with OMB Circular A-4.", "CBA of any type of regulation faces challenges in making an accurate assessment of the regulation's effects. Over recent decades, academics and agency experts have developed sophisticated and useful techniques to do these types of analyses, but they generally contain a degree of uncertainty. Some challenges include\nbehavioral changes of people as they adapt to a new regulation, which are difficult to predict; quantification that must overcome uncertainty over the causal relationship between the regulation and outcomes; and monetization, which is difficult for outcomes that do not have easily discernable monetary values.\nVariations of CBAs address some of these difficulties, including\ncost-effectiveness analysis, which compares costs of alternative regulation when benefits cannot be accurately quantified or monetized; breakeven analysis, which can establish the likelihood or under what conditions a regulation would be beneficial; qualitative analysis with expert judgement, in which experienced professionals describe and explain likely effects that cannot be quantified and make a judgement as to how costs compare with benefits; and retrospective analysis, which estimates the realized costs and benefits following some period of time—often years— after implementation of rules.\nThis section examines these challenges and variants as they relate to CBA generally. There is debate over whether the challenges are particularly daunting for financial regulation CBA and to what degree different types of analysis can solve these problems. An examination of the arguments related to financial regulator CBA requirements can be found in the following section, entitled \" Financial Regulator Requirements Debate .\"", "One difficulty in performing cost-benefit analysis is trying to accurately determine the human behavioral response to the implementation of a regulation. For example, consider a hypothetical and very simplified CBA that analyzes a new requirement that financial institutions make additional disclosures to customers about a certain type of loan. To estimate the benefit to consumers who avoided entering into a bad financial arrangement, the analysis would have to estimate, among other things, how many potential customers would read the disclosure and would elect not to use the product on the basis of that information. Of these, how many would then seek out a substitute credit source? Predicting human choices such as these involves modeling consumer behavior in this market, statistical interpretations of available data, and some degree of uncertainty.\nQuantification of outcomes also poses challenges in determining causation and measuring magnitudes of effects. Returning to the hypothetical regulation outlined above, suppose lenders also would be required to report additional performance data, such as default rates, about the loans. The additional cost of reporting could decrease loan profitability. In such a case, lenders will likely reduce the availability of these loans. An important cost of this regulation might be reduced economic growth by the contraction of credit. Making an estimation of this cost would involve macroeconomic modeling, statistical interpretation, and uncertainty.\nAfter an estimate has been made of the quantity and magnitude of outcomes, those effects must be monetized because measuring the varied effects of a regulation requires a common unit of measurement. This becomes problematic when attempting to assign a dollar value to outcomes that do not have market prices. For example, imagine a proposed regulation aimed at reducing the number of home foreclosures. An important benefit might be the avoidance of the emotional distress families may experience as a result of being forced to move from their homes and finding alternative housings. Assigning a dollar value to this outcome would require sophisticated techniques and would likewise involve uncertainty.\nFinally, regulatory benefits may often be more difficult to monetize than major costs. Costs are often economic costs, which may be more easily monetized, such as an industry's reduction in economic activity or the added expense of complying with regulation. Benefits may be harder to quantify because of the difficulty in determining causation and because the outcomes are harder to price. Financial regulation benefits that may be difficult to monetize include the emotional distress of foreclosure cited in the previous example, consumer and investor confidence in knowing they are protected from fraud, and decreased probability of a financial crisis.", "Quantified and monetized estimates generally provide the clearest measurement and comparison of the costs and benefits of proposed regulation. However, variants of CBA can be performed when full quantification and monetization is not entirely possible due to the challenges described above. Some of these variants include cost-effectiveness analysis , breakeven analysis , and qualitative analysis with expert judgement . Also, agencies sometimes do retrospective analysis . Although not a part of rulemaking and so beyond the scope of this report, it deserves mention because this type of analysis is the subject of proposals to assess the regulatory system and identify regulations that should be amended or repealed.", "Cost-effectiveness analysis may be useful if benefits of a regulation are hard to monetize. In these analyses, an outcome is identified as necessary or sufficiently important to the advancement of social welfare, such as preventing cancer cases, preserving wetlands, or reducing the likelihood of financial crises. A set of alternative regulations—ranging from stringent to lenient—is then analyzed to determine how well each alternative achieves the objective outcome and at what cost. This comparison is useful for identifying the most effective form of regulation.", "Breakeven analysis may be useful when estimates of either benefits or costs or both face a relatively large degree of uncertainty, and the estimates fall within a wide range. In these analyses, the magnitudes of the quantified costs and benefits are compared to determine what values of the unquantified variables would have to be for the regulation to break even or impose no net cost on society. The analysis—in the face of a relatively high level of uncertainty—can reveal under what circumstances a regulation would benefit society or at least identify which regulations are most or least likely to do so. For example, consider another highly stylized analysis of a hypothetical regulation aimed at reducing cases of a certain disease. The cost of the regulation is estimated to be $50 million; how many cases would be avoided can only be estimated in the range of 10,000-50,000; and monetizing the benefit of avoiding a case is problematic. Given these hypothetical values, the breakeven value of avoiding one case of the disease is between $1,000 and $5,000. To use extreme examples for the purpose of illustration: if this disease is the common cold, it could be argued that the regulation is overly burdensome; but if the disease is fatal, it could be argued that the regulation should be implemented.", "Wherever benefits and costs cannot be quantified to a reasonably informative degree of certainty and precision, they could be analyzed qualitatively. This analysis type describes the factors considered, the rationale used in making a policy choice, and the regulators' professional judgement in assessing the regulation's welfare effects.", "Retrospective analysis estimates the realized costs and benefits following some period of time—often years— after implementation of rules. This analysis eliminates some uncertainties about what outcomes will be observed under the regulation. However, the results of the analysis still involve assumptions and uncertainty in assessing the degree to which the regulation caused the observed outcomes or estimating what outcomes would have been realized if the regulation had never been implemented. Retrospective analysis is different from most of the analysis covered in this report, in that it is an ex post analysis performed after implementation and so cannot be part of the rulemaking process.", "Most observers agree that performing CBA is often a useful tool for the regulatory rule-writing process. However, whether financial regulators should be required to perform CBAs with specified parameters that would be subject to review is a matter of long-standing debate, probably at least in part due to their exemption from E.O. 12866. In addition, the issue may have attracted increased attention in recent years as many financial regulations have been implemented in response to the financial crisis, particularly after the enactment of the Dodd-Frank Wall Street Reform and Consumer Protection Act.\nSome observers argue that financial regulators should maintain a relatively high degree of discretion over the role and form of CBAs in the rule-writing process. They assert\ncertain characteristics of the finance industry—discussed in detail below—necessitate CBAs with more easily contestable assumptions and uncertain results than in other industries; and performing highly contestable and uncertain CBAs does not discipline agencies, but instead may provide an opportunity for interested parties to impede socially beneficial regulation.\nOthers argue that financial regulators should be subject to more stringent requirements than is currently the case. They assert\nperforming CBAs for regulation of the finance industry does not pose greater difficulties than for regulation of other industries, and imposing requirements on financial regulators would spur them to overcome methodological and other challenges; and financial CBAs—despite contestable and uncertain results—would be the best tool for ensuring that regulation is implemented responsibly with due consideration of consequences.\nThis section presents the two sides of this debate.", "Some observers assert that performing CBAs for financial regulation is different from other types of regulation. They claim financial regulation CBAs are more uncertain and contestable, and this limits the effectiveness of CBA requirements. Therefore, the argument goes, the CBA requirements facing most regulators would not be appropriate for financial regulators. Others advocate more generally for a relatively high degree of agency discretion to use expert judgement.\nOne potential reason for greater uncertainty in financial CBA is that the outcomes are almost wholly dependent on human behavioral responses. Unlike regulation of other sectors, the objects of regulation are not chemicals or pieces of machinery, but the activities of individuals and financial firms and their interactions in interrelated markets for intangible financial goods. The behaviors of a pollutant in an ecosystem, a drug in the human body, or material in a car during a crash are governed by biological, chemical, and physical laws. The implementation of a regulation does not change these reactions. However, the behavior and reactions in the financial system are governed by human behavior within a system of laws and regulations. A new regulation changes the system itself and its effects result entirely from human behavioral changes. This may make the effects—especially the first-order, direct effects—harder to accurately predict than in other industries.\nFor example, if certain factories were required to install a piece of equipment that prevented the release of a pollutant, the cost of the equipment is identifiable and the direct effect of how much of the pollutant would be captured can likely be measured. In contrast, if a requirement is implemented on banks to hold more liquid assets, the cost to banks is uncertain because it depends on what types of assets banks choose to shed from their balance sheets, what they add, and what effect those actions have on the market prices of those assets. It is also unclear how to quantifiably measure the liquidity of the financial system or its resultant benefits.\nAnother reason cited as a potential cause for uncertain estimates is the central role the financial system plays in the entire economy. For most industries, changes in factors such as production cost, price, and quantity demanded and supplied resulting from regulations can be calculated using relatively well-vetted economic models. However, the causal channels through which financial changes affect overall economic activity are complex with no consensus macroeconomic model that can be used to make precise estimates.\nIn addition, innovation in finance—unlike innovation in industries using physical equipment and chemical processes—faces few physical constraints, possibly allowing the financial system to change more quickly than other industries. Therefore, estimating how a regulation implemented today will affect markets years in the future is challenging. For example, in the years leading up to the financial crisis, private label sub-prime mortgage securitizations and collateralized debt obligations grew very rapidly and to a level of importance in the financial system that would have been difficult to have foreseen when many regulations were being developed.\nAnother confounding factor in financial CBA is that for many financial regulation objectives there is not always consensus about whether outcomes are benefits or costs. For example, most agree improved health outcomes are beneficial and increased consumer prices and industry cost should be counted as costs. However, the cost-benefit tally for financial regulation is sometimes not as clear cut. If a consumer protection provision is expected to reduce a certain kind of high-interest-rate lending, experts might reasonably argue over to what degree this is a benefit versus a cost; it is a benefit to the extent it reduces an abusive practice, but a cost to the extent it reduces the availability of a needed credit source. Often such a lack of clarity arises because the effects of financial regulation often consist largely of wealth transfers between various groups—such as transfers between lenders and borrowers or between businesses seeking to raise capital and investors. CBA is a tool most often used to measure the net economic effects, and economic transfers between groups are typically a secondary concern.\nProponents of greater agency discretion argue that placing more stringent requirements on financial regulators for conducting CBAs could potentially make issuing regulations more costly and time consuming. Those proponents argue that increasing CBA requirements could lead agencies to block or delay the issuance of individual regulations, and that over time, this could ultimately result in less stringent regulation.\nProponents of agency discretion further assert that CBAs involving such a high degree of uncertainty and contestable assumptions would not discipline agencies. Instead of increasing accountability and regulatory efficiency, they argue CBAs could disguise agency judgement as objective, scientific measurement. Instead of providing an authoritative rationale for a regulation, they argue requirements would provide an opportunity for parties aiming to protect their own interests—not social welfare—to challenge certain beneficial regulations by offering competing but similarly subjective CBAs.", "In contrast, some observers believe that regulatory analysis requirements for financial regulators are not stringent enough. Proponents of increased CBA argue that the challenges facing financial regulators are not substantively more difficult than those facing other regulators when performing CBA. They note that all regulation elicits uncertain human behavioral responses. For example, the direct effects of antitrust regulation—where CBA plays an important role—similarly are almost entirely based on the reaction of firms, consumers, and markets. They also challenge the claim that financial innovation is especially rapid compared with other industries, citing the rapid advances in agriculture and pharmaceuticals. In addition, the largest financial regulation effects may actually be easier to monetize because they largely involve changes in monetary transactions rather than health or environmental outcomes that involve assigning a dollar value to nonmarket outcomes.\nProponents of stricter requirements also take issue with the argument that the centrality of finance to the economy represents a reason for exemption from CBA requirements. First, they again disagree that estimating financial effects is uniquely and prohibitively complex, noting the sophistication of CBA performed by other regulators. Next, they argue that the potential to cause very large effects across the entire economy increases the importance of CBA in financial regulation, because implementing harmful financial regulation is more consequential than if the industry were more peripheral to the economy and had small economic effects.\nProponents further assert that financial regulation CBA seems to face such difficult challenges because it has been exempt from certain requirements and oversight. Other regulators—once faced with similar problems—have overcome challenges because requirements spurred them to develop agency expertise and methods for performing CBA. They argue that if faced with similar requirements financial regulators, experts, and consultants would similarly devise solutions. Some academics have already started to propose methods to address questions specific to the financial industry.\nFurthermore, CBA's proponents argue uncertainty and imprecision are not valid reasons for foregoing financial CBA. They note that most CBAs involve some degree of uncertainty and assumptions. Nevertheless, by requiring agencies to perform the analysis, the assumptions used in evaluating the regulation are articulated and transparent, and their merits can be evaluated. Even if estimated outcomes fall over a wide range of values, an analysis can still make an assessment of the likelihood a regulation will be beneficial and how its costs can be minimized. In these ways, they argue uncertain CBAs can play an important role in showing when a proposed regulation is hard to justify or easy to defend. Proponents argue CBAs—despite possible limitations—are the best alternative for identifying good and bad regulations and have rightly become an important and often required part of rulemaking. For these reasons, they assert financial regulators should face requirements similar to those facing regulators of other industries.", "A number of bills have been introduced and seen action in recent Congresses that would impose additional regulatory impact analysis requirements on financial regulators, including bills that would impose more stringent CBA requirements. Examples include bills that would impose certain requirements on all agencies, including the financial regulators; bills that address independent or financial regulators specifically; and bills affecting only one financial regulator.", "The Financial CHOICE Act ( H.R. 10 ) was introduced in the House on April 26, 2017. Section 312 of the bill would require financial regulators to perform certain analyses as part of the rulemaking process, including a quantitative and qualitative assessment of all anticipated direct and indirect costs and benefits of the regulation. Proposed rules found to have quantified costs greater than quantified benefits would require a congressional waiver before being implemented. The Regulatory Accountability Act ( H.R. 5 ) passed the House on January 11, 2017, and introduced in the Senate ( S. 951 ) on April 26, 2017. The bill would make several changes to the rulemaking process of all agencies by amending the Administrative Procedure Act. Among the changes, agencies would have to consider alternatives to the new regulation and the potential costs and benefits of the alternatives. The bill would extend requirements for CBA to all agencies, including independent regulatory agencies. The OIRA Insight, Reform, and Accountability Act ( H.R. 1009 ) passed the House on March 1, 2017. The bill, among other measures, would codify into law OIRA authority of reviewing agency CBA in rulemaking. This authority would also be extended to independent regulatory agencies. The SEC Regulatory Accountability Act ( H.R. 78 ) passed the House on January 12, 2017. The bill would impose additional cost-benefit requirements for the SEC, would specify parameters and considerations that must be part of the analysis, and would require the SEC to retrospectively assess the impact of adopted regulation. The CFTC Commodity End-User Relief Act ( H.R. 238 ) passed the House on January 12, 2017. The bill would expand the number of considerations that CFTC is statutorily required to include in its CBAs from 5 to 12. The additional considerations include the cost of compliance with the regulation and alternatives to direct regulation.", "The Independent Agency Regulatory Analysis Act of 2015 ( S. 1607 ) would have authorized the President to subject independent regulatory agencies to CBA requirements that exist in executive order—such as EO 12866. Notably, this would include the E.O. 12866 requirement that major rules be submitted for OIRA review with an initial cost and benefit assessment. Bills that would have imposed new analysis requirements on individual financial regulators include the Federal Reserve Accountability and Transparency Act of 2015 ( H.R. 113 ), the Fed Oversight Reform and Modernization Act ( H.R. 3189 ), and the CFPB Dual Mandate and Economic Analysis Act ( H.R. 5211 ).", "Congress likely will continue to face questions over what appropriate CBA requirements for financial regulators should be. A reasoned and systematic examination of likely consequences of a regulation is a useful practice to ensure good and avoid bad regulation. However, calibrating requirements to reach this outcome is difficult. Excessively lenient requirements could allow bad regulation to be implemented, because regulators could promulgate regulations without due consideration of their likely effects. In contrast, excessively stringent requirements could block good regulation from being implemented, because the time and resources required to perform the analysis could make the cost to regulators prohibitively high. The calibration is complicated by the difficulties and uncertainties involved in performing CBA. Additional lack of clarity is involved in financial regulation, because experts disagree over whether CBA is especially difficult and uncertain in that field. These factors suggest that the question of what CBA requirements financial regulators should face may not be easily settled." ], "depth": [ 0, 1, 1, 1, 2, 2, 2, 3, 4, 4, 3, 3, 2, 1, 2, 2, 3, 3, 3, 3, 1, 2, 2, 1, 2, 2, 1 ], "alignment": [ "h0_title h2_title h1_title h3_title", "h0_full h1_full", "h1_full", "h2_title", "", "", "h2_full", "", "", "", "", "", "", "", "", "", "", "", "", "", "h3_full h2_full h1_title", "h3_full h2_full", "h3_full h1_full", "", "", "", "" ] }
{ "question": [ "What is CBA?", "Who is CBA implemented by?", "What are the effects of the CBA system?", "How can Congress improve accountability?", "How does this improve accountability?", "What is CBA?", "What are the challenges of performing CBA?", "Why might it be advantageous to allow financial regulators greater discretion?", "What characterizes CBAs in the financial industry?", "What are the benefits of discretion regarding CBAs?", "What do other observers assert?", "How do they support these claims?" ], "summary": [ "Cost-benefit analysis (CBA) in the federal rulemaking process is the systematic examination, estimation, and comparison of the potential economic costs and benefits resulting from the promulgation of a new rule.", "Agencies with rulemaking authority implement regulations that carry the force of law.", "While this system allows technical rules to be designed by experts that are to some degree insulated from political considerations, it also results in rules being implemented by executive branch staff that arguably are not directly accountable to the electorate.", "One method for Congress to increase accountability is to require the regulators to conduct analyses of likely effects of proposed regulations.", "In this way, an agency demonstrates that it gave reasoned consideration to the effects of the proposed rules.", "CBA is an important type of such analysis, as comparing costs and benefits can be useful in determining whether or not a regulation is beneficial.", "However, performing CBA can be a difficult and time-consuming process, and it produces uncertain results because it involves making assumptions about future outcomes. Some observers argue that financial regulation CBA is particularly challenging. This raises questions about what parameters and level of detail agencies should be required to include in their CBA.", "Whether the requirements facing financial regulators should allow for this discretion is a contentious issue. Some observers assert that financial regulators should maintain a relatively high degree of discretion over when and how to conduct CBA.", "They argue that characteristics of the financial industry and regulation make CBAs in this area especially uncertain and contestable, and assert that financial regulation effects depend entirely on human and market reactions; finance plays a central role in a huge, complex economic system; and financial regulations' effects are more likely (relative to other types of regulation) to include transfers between groups not well accounted for in net measurements.", "They further argue that requisite CBAs that are uncertain and contestable are more likely to disguise agency discretion as objective fact and provide the opportunity for interested parties to challenge socially beneficial regulation with their own subjective, self-interested analyses.", "Other observers assert that financial regulators should face more stringent requirements than they currently do.", "They refute claims that financial CBAs are necessarily more uncertain or contestable than in other areas. Also, they argue that tools and techniques would be developed to overcome challenges if CBAs were required. They further argue that even uncertain and contestable CBAs are effective in disciplining agencies because they create transparency of the agency's evaluations of proposed regulations and allow for outside assessment of that evaluation." ], "parent_pair_index": [ -1, 0, 0, -1, 0, -1, 2, -1, 0, 0, -1, 0 ], "summary_paragraph_index": [ 0, 0, 0, 1, 1, 1, 1, 3, 3, 3, 4, 4 ] }
GAO_GAO-17-176
{ "title": [ "Background", "Treasury Is Authorized to Use Financial Agents", "Four Units within Treasury Currently Use Financial Agents", "Fiscal Service Uses Financial Agents in Four Program Areas", "Congress Has Used Reporting Requirements and Other Mechanisms to Oversee Treasury’s Use of Financial Agents", "Treasury’s Use of Financial Agents Has Evolved in Response to Changes in Technology and New Laws, but Treasury Does Not Disclose in a Central Location How It Uses or How Much It Pays Each Agent", "Treasury’s Traditional Use of Financial Agents Has Evolved to Promote Electronic Collections and Payments", "Treasury Has Undertaken Efforts to Simplify and Modernize Programs That Use Financial Agents", "Increased Transactions and Services Provided Have Partly Driven Growth in Financial Agent Compensation since Fiscal Year 2004", "Treasury Does Not Fully Disclose in a Central Location Information on Fiscal Service’s Financial Agents", "Fiscal Service Has a Process for Selecting and Designating Financial Agents and Recently Revised Its Guidance to Improve Documentation Fiscal Service Has Established a Process and Related Internal Controls for Selecting and Designating Financial Agents", "Disclosure and Other Requirements Help Address Conflicts of Interest", "Administrative Records for Financial Agents Designated between 2010 and 2015 Were Not Complete, but Recently Adopted Internal Controls Are Designed to Address the Deficiency", "Conclusions", "Recommendation for Executive Action", "Agency Comments", "Appendix I: Objectives, Scope, and Methodology", "Appendix II: Programs Established in Response to the Financial Crisis That Are Administered by the Department of the Treasury and Use Financial Agents", "Appendix III: The Department of the Treasury’s Bureau of the Fiscal Service Programs Using Financial Agents", "Appendix IV: Department of the Treasury’s Use of a Financial Agent for the myRA Program", "Treasury Used Its Existing Authority to Designate a Financial Agent for the myRA Program", "Treasury Has Controls in Place to Address Potential Conflicts of Interest under the myRA Program", "Appendix V: Comments from the Department of the Treasury’s Bureau of the Fiscal Service", "Appendix VI: GAO Contact and Staff Acknowledgments", "GAO Contact", "Staff Acknowledgments" ], "paragraphs": [ "", "Treasury is authorized to use financial agents under several statutes, including the National Bank Acts of 1863 and 1864. Treasury is authorized to employ financial institutions as financial agents of the government to perform all reasonable duties as may be required of them. Treasury may designate various types of financial institutions as financial agents. Treasury also has issued regulations governing its designation of financial agents. Treasury designates financial institutions as financial agents through financial agency agreements. Financial agency agreements entered into by Treasury do not constitute procurement contracts under the purview of Federal Acquisition Regulations. According to Treasury officials, the department uses financial agents to provide only financial services, and it uses a separate procurement process to acquire commercially available goods and equipment. In 2004, Congress provided Treasury with a permanent, indefinite appropriation to reimburse financial agents, and Treasury uses that appropriation to pay financial agents supporting Fiscal Service’s revenue collections, payments, and other programs.\nTreasury received additional authority to use financial agents under the Emergency Economic Stabilization Act of 2008 and the Small Business Jobs Act of 2010, which were passed in response to the financial crisis. The Emergency Economic Stabilization Act established the Office of Financial Stability within Treasury and provided Treasury with the authority to purchase and guarantee certain types of troubled assets under the Troubled Asset Relief Program to stabilize the economy and financial system. The Small Business Jobs Act established the Small Business Lending Fund and State Small Business Credit Initiative programs within Treasury to stimulate job growth, among other things. Both acts provide Treasury with the authority to designate financial institutions as financial agents to perform all such reasonable duties related to the acts. These acts also provide Treasury with the authority to designate more types of institutions as financial agents than other general statutes, including, for example, security brokers or dealers. The financial agents designated to support these programs are paid from appropriations provided pursuant to those acts.", "As shown in figure 1, four units within Treasury’s Office of Domestic Finance use financial agents.\nFiscal Service, among other things, provides central payment services to federal program agencies; operates the federal government’s collections and deposit systems; issues, services, and accounts for all Treasury securities; and manages the collection of delinquent debt. According to agency officials, Fiscal Service uses financial agents more extensively than the other Treasury units and has designated a number of banks as financial agents to provide a variety of specialized financial services for its revenue collections, payments, and other programs.\nThe Office of Fiscal Assistant Secretary, according to Treasury officials, manages the programs created under the Housing and Economic Recovery Act of 2008, such as the Agency Mortgage Backed Securities Purchase Program. Treasury has designated financial institutions to provide custodial and asset management services.\nThe Office of Financial Stability manages the Troubled Asset Relief Program created under the Emergency Economic Stabilization Act of 2008. Treasury has designated banks, security brokers or dealers, and other entities as financial agents to support the act’s implementation.\nThe Office of Small Business, Community Development, and Affordable Housing Policy coordinates policy on, among other issues, small business finance and development, housing policy, and community and economic development. The office also oversees the Small Business Lending Fund, created by the Small Business Jobs Act of 2010, for which Treasury has used financial agents for custodial and asset management services.", "Within Treasury, Fiscal Service (and its predecessors) is responsible for conducting Treasury’s basic functions of collecting and holding federal taxes and other revenue and making federal payments. As shown in table 1, Fiscal Service currently manages 20 programs that use financial agents under 26 financial agency agreements to provide services in four areas: (1) revenue collections, (2) payments, (3) debt collection, and (4) Treasury securities. Its financial agents include some of the largest financial institutions in the country, and some of them serve as financial agents for multiple collections and payments programs.\nOf the four types of Fiscal Service program areas that use financial agents, revenue collections programs use the largest number of agents. Revenue collections programs use financial agents to collect federal revenue from individuals and businesses, including for taxes, student loan repayments, and customs duties. Payments programs use financial agents to help Fiscal Service disburse payments to individuals and businesses on behalf of federal agencies, such as benefit payments made by the Social Security Administration and the Department of Veterans Affairs and payments to businesses for goods and services provided to the federal government. The debt collection program uses a financial agent to operate a centralized service to assist federal agencies with the management of their accounts receivable. Fiscal Service’s Treasury securities program area manages the issuance and sales of Treasury’s marketable and nonmarketable securities. One Fiscal Service securities program uses a financial agent to provide custodial and related services for the myRA program, which offers retirement savings accounts for individuals without access to an employer-provided retirement savings program and which invests in a U.S. retirement savings security.", "Congress has used reporting requirements and other mechanisms to oversee Treasury’s use of financial agents. Although the National Bank Act and other statutes authorize Treasury to use financial agents, they do not require Treasury to report to Congress on its use of such agents. However, the Check Clearing for the 21st Century Act of 2003 required Treasury to submit (1) a report annually to Congress on its use of compensating balances and appropriations and (2) a final report following the transition from the use of compensating balances to the use of appropriations to pay financial institutions for their services as depositaries and financial agents. For the final report, Treasury was directed to analyze the transition cost, direct costs of the services being paid from the authorized appropriations, and the benefits realized from the use of direct payment for such services rather than the use of compensating balances. Treasury sent the final report to Congress in 2004 and thereafter has reported annually the amount of permanent, indefinite appropriations used to pay financial agents each fiscal year in its President’s budget submission.\nUnlike Treasury’s other authorities, under the Emergency Economic Stabilization Act and Small Business Jobs Act, Congress imposed reporting requirements on Treasury for, among other things, compensation paid for its use of financial agents in the programs created under those acts, and it imposed audit or related mandates on GAO and others.\nUnder the Emergency Economic Stabilization Act, Treasury is required to report to Congress every 30 days on, among other things, a detailed financial statement on the exercise of its authority under the act, including all agreements made or renewed and its operating expenses, including compensation paid to financial agents. The act also includes a provision for GAO to conduct oversight and report on its oversight of the Troubled Asset Relief Program’s activities and performance, including agents and representatives, every 60 days. On one of the reports in response to that mandate, we assessed Treasury’s approaches to acquiring financial agent and other services in support of the program. In addition, the act established the Congressional Oversight Panel to review the state of the financial markets and regulatory system and submit various reports to Congress. The Congressional Oversight Panel investigated and reported on Treasury’s use of contractors and financial agents in the Troubled Asset Relief Program.\nUnder the Small Business Jobs Act, Treasury is required to report to Congress semiannually on, among other things, all operating expenses, including compensation for financial agents, and all transactions made by the Small Business Lending Fund. That act also included a provision for GAO and the Treasury Inspector General to audit the Small Business Lending Fund program at least annually and semiannually, respectively.", "Since the 1980s and continuing today, Treasury has been using financial agents to modernize its systems and keep pace with technological changes in providing financial services to the public. For example, Treasury has used financial agents to reduce the number of paper-based collection and payment transactions by moving them to electronic systems. Since 2008, Treasury also has undertaken several modernization efforts that have affected its use of financial agents. The total amount (outlays) that Treasury has paid Fiscal Service’s financial agents has increased from $378 million in 2005 to $636 million in 2015, partly in response to increased transactions and services. Although Treasury discloses in its annual budget the total amount paid to financial agents, it has not publicly disclosed in a central location information about Fiscal Service’s individual financial agents, including their compensation and services provided.", "While Treasury historically has used financial agents to physically hold and disburse public money, its use of financial agents began to evolve in the mid-1980s as it sought to reduce the number of paper-based collection and payment transactions by moving them to electronic systems in response to technological advancements, new laws, and other factors. Subsequently, Treasury, through Fiscal Service, has continued to promote electronic transactions for its revenue collections and payments programs, including information systems for tracking those transactions, through various efforts to increase efficiency, reduce fraud, and promote transparency.\nIn 1984, Congress directed Treasury to provide more electronic services for collecting payments. As more states took advantage of technological advances to implement electronic tax collection systems, Treasury began piloting programs modeled on individual states’ programs that used financial agents to collect tax receipts electronically. For example, TAX- LINK was an early pilot program that used three financial agents to explore different concepts for implementing a nationwide electronic tax payment system. TAX-LINK evolved into the Electronic Federal Tax Payment System, which is Treasury’s current program for collecting tax payments from the public electronically. Treasury, through Fiscal Service, uses a financial agent to operate the Electronic Federal Tax Payment System and to provide customer support for taxpayers using the system. As shown in figure 2, the Electronic Federal Tax Payment System expedites the collection process by collecting tax payments electronically rather than by paper check.\nThe Check Clearing for the 21st Century Act of 2003 also allowed the conversion of paper checks into electronic images, called substitute checks, which are the legal equivalent of a paper check. As a result, Treasury developed the Electronic Check Processing program, which uses a financial agent to operate a web-based platform to convert paper check payments into electronic transactions, thereby reducing the amount of time and costs associated with processing paper-based collections. According to Treasury’s Fiscal Year 2015 Agency Financial Report, Fiscal Service collected 98 percent of the total dollar amount of U.S. government receipts electronically in fiscal year 2015.\nThe Debt Collection Improvement Act of 1996 required that all federal payments made after January 1, 1999, be made electronically, subject to exceptions. In response, Treasury developed programs that use financial agents to help disburse payments electronically, particularly for programs related to benefits payments. For example, Treasury developed Electronic Transfer Accounts, which use financial agents to establish low- cost electronic accounts for recipients of federal benefits payments. In an effort to increase electronic payments in areas where Electronic Transfer Accounts were not available, in 2008, Fiscal Service developed the Direct Express program, which uses a financial agent to provide pre-paid debit card access to electronic benefits payments. In 2010, Treasury launched an “all-electronic” initiative, in part to further move federal benefit payments away from paper checks to electronic options. Under the initiative, Treasury required individuals receiving certain federal benefits to receive payments electronically, such as through Direct Express cards. According to Treasury officials, more than 98 percent of federal benefits payments are currently made electronically as a result of Treasury’s expansion of its electronic payments programs, thus improving efficiency and reducing costs and fraud.\nFiscal Service is exploring new ways to use modern payment technologies to further reduce the amount of paper-based payments made by the federal government. For example, Fiscal Service is piloting a program that uses a financial agent to provide the settlement mechanism for payment services using mobile banking technologies, such as web- based payment systems. According to Treasury’s Fiscal Year 2015 Agency Financial Report, nearly 95 percent of all Treasury payments were made electronically in fiscal year 2015.\nInformation Systems for Tracking Electronic Transactions As a result of increased electronic transactions, Fiscal Service has developed programs that use financial agents primarily to collect and report information and data about electronic collections and payments transactions. For example, it implemented the Over the Counter Channel Application and the Collections Information Repository, which use financial agents to gather and store information about revenue collection transactions. The Over the Counter Channel Application and the Collections Information Repository do not hold or disburse public money; rather, they use financial agents to process and account for information on the collection of public money. For example, the Over the Counter Channel Application primarily collects data from the electronic processing of checks and provides a web-based application for federal agencies to access information on these transactions. The Collections Information Repository provides a web-based means of tracking, reconciling, and storing revenue collections transactions. In response to a Presidential memorandum in 2009 on data transparency, Fiscal Service made data about revenue collections more accessible to federal agencies through the Collections Information Repository.", "Treasury has undertaken various efforts to modernize or streamline its collections, payments, and other programs to help increase efficiency and transparency and reduce costs. Although Treasury’s modernization efforts primarily focused on how it delivered services through its programs and not necessarily on its use of financial agents, two of the modernization efforts involved revenue and debt collection programs that used financial agents.\nIn 2008, Treasury initiated its Collections and Cash Management Modernization effort that was aimed at simplifying and modernizing its collections and cash management programs and reducing redundancy. Within Treasury, Fiscal Service used 8 financial agents to help support its collection programs in 2010 and reduced the number to 7 financial agents by year-end 2015. According to Treasury, the effort was designed to reduce the duplication of data, applications, and interfaces, promoting a more efficient use of resources.\nIn 2012, Treasury developed the Centralized Receivables Service to centralize and improve the efficiency of federal agencies’ collections of account receivables. To develop the service, Fiscal Service worked jointly with the Office of Financial Innovation and Transformation, which was created in 2010 to identify and implement innovative solutions to help government agencies become more efficient and transparent in federal financial management. Before the development of the service, many agencies operated their own account receivables programs, which Treasury noted were fragmented and inefficient. The Centralized Receivables Service uses a financial agent to centralize receivables collections services across agencies. According to Treasury, the service has increased the collection of receivables and reduced agency costs.", "Since Treasury received the permanent, indefinite appropriation to reimburse financial agents, the total amount (outlays) that Treasury has paid Fiscal Service’s financial agents has increased steadily from approximately $378 million in fiscal year 2005 to approximately $636 million in fiscal year 2015 (see fig. 3). As discussed previously, Treasury paid its financial agents through compensating balances—non-interest- bearing cash balances—before it received a permanent, indefinite appropriation. Prior to receiving the appropriation, Treasury did not report the amount of such compensation in its annual budget submissions. Treasury officials told us that they did not have data on the compensation paid to financial agents before April 2004 and could not determine the amount that the financial agents were paid through those compensating balances. Treasury did not create any new programs in fiscal year 2004 that used financial agents, and according to Treasury officials, the compensation to financial agents would have been similar for fiscal years 2003 and 2004.\nThe increase in the amount of total compensation to financial agents between fiscal years 2004 and 2015 was driven partly by increases in transaction volumes and an expansion in the scope of certain financial agent services. For example, the Card Acquiring Service, the largest revenue collections program in terms of cost, uses a financial agent to process debit and credit card payment transactions at federal agencies. The financial agent’s compensation is based largely on the number of transactions it processes, and the increase in card transactions by the public has led to an increase in its compensation. According to Fiscal Service officials, the financial agent processed over 65 million transactions in fiscal year 2007 and over 133 million transactions in fiscal year 2015. Treasury compensated the financial agent $101 million in fiscal year 2007 and $172 million in fiscal year 2015.\nAs another example, a financial agent operates a specialty lockbox program to process passport applications and fees. According to Treasury, the costs for the passport lockbox program increased steadily after the passage of the Intelligence Reform and Terrorism Prevention Act of 2004, which required passports or other accepted documents for travel into and out of the United States from Canada, Mexico, and the Caribbean. Treasury reported that its financial agent has hired hundreds of new employees and invested in infrastructure to handle the increased application volume, which grew from 10.8 million applications in fiscal year 2006 to 12.4 million applications in fiscal year 2015. In fiscal year 2015, the compensation to the financial agent for the passport lockbox program was $62 million, 10 percent of all compensation paid to financial agents.\nAs shown in figure 4, revenue collections programs, which include the Electronic Federal Tax Payment System, the Card Acquiring Service, and various lockbox programs, among others, accounted for $583 million (92 percent) of all financial agent compensation in fiscal year 2015. Compensation for payments programs, $37 million, accounted for 6 percent of total financial agent compensation in fiscal year 2015.", "Although Treasury publicly discloses the total amount of compensation paid to Fiscal Service’s financial agents in its annual budget submissions, it does not provide more detailed information about these financial agents in a central location, such as on its website. For example, Treasury does not fully disclose in a central location the number of Fiscal Service’s active financial agency agreements, the types of services provided to Fiscal Service under the agreements, and the amount of compensation paid to each financial agent for its services. Treasury officials told us that it is not required to and has not determined the need to publicly disclose Fiscal Service’s financial agency agreements on its website. In contrast, Treasury’s Office of Financial Stability has provided on its public website copies of the 27 financial agency agreements that it entered into to manage the Troubled Asset Relief Program and the amount obligated to compensate each agent. According to Treasury officials, the Office of Financial Stability made its financial agency agreements available to the public based on a policy decision to promote the Troubled Asset Relief Program’s transparency.\nAccording to the Office of Management and Budget’s directive on open government, transparency promotes accountability by providing the public with information about government activities. Because Treasury does not fully disclose in a central location information about Fiscal Service’s use of financial agents, including the types of services provided and compensation paid under each agreement, the public and Congress may not know how much Treasury is spending to obtain services from financial agents or what those services are and, thus, may be less able to hold Treasury accountable for such spending. In addition, by improving how it publicly discloses information about its use of financial agents, Treasury would allow the public and Congress to better understand, assess, and appreciate the scope and value of federal investments.", "Fiscal Service has established a process, which includes internal controls, for selecting and designating its financial agents. While Fiscal Service did not fully document compliance with its process, including controls, for financial agents designated between 2010 and 2015, it adopted new procedures in November 2015 to provide greater assurance that its documentation will be complete.\nAccording to Fiscal Service officials, the decision of whether to perform a program in-house or through financial agents does not often arise because Fiscal Service does not frequently create new programs that use financial agents. Many factors influence the agency’s decision on whether to use a financial agent, including statutory authority, costs, the availability and expertise of Treasury staff versus other providers, and the nature and complexity of the services. The decision to use a financial agent for a new program or to renew or amend an existing financial agency agreement is made formally by the assistant commissioner responsible for the particular program, with approval by the Fiscal Service commissioner. Moreover, Fiscal Service’s Office of Chief Counsel typically is involved in all phases of the process, including in advising on whether a financial agent may be used for a particular project.\nFiscal Service has developed a financial agent selection process (FASP) that it uses internally to guide its selection and designation of financial agents. It has documented the process in its FASP guidance, a 2010 version of which was updated in November 2015 but, according to Fiscal Service officials, has existed in written form since 2005. The guidance divides the process into four phases: (1) initiation of the FASP, (2) publication of a financial agent solicitation, (3) selection of the best proposal submitted by a financial institution, and (4) designation of the financial institution as a financial agent. In addition to documenting the steps in the process, the 2015 FASP guidance incorporates internal controls that generally are applicable to Fiscal Service’s program offices or selection teams in selecting and designating financial agents. The FASP process and related controls help provide reasonable assurance that the selection and designation process is effective and efficient, documents important information, and complies with applicable laws and regulations.\nThe initiation phase includes all of the steps that Fiscal Service’s program offices must complete before drafting and publicizing a financial agent solicitation. The first steps include obtaining approvals to use a financial agent. Such steps and related internal controls include Fiscal Service’s program offices taking the following actions: consulting with the Office of Chief Counsel as to whether designating an agent is acceptable for the particular project, obtaining approval from the appropriate assistant commissioner to designate a financial institution to provide the services, and creating appropriate governance documentation, including a business case or alternatives analysis, to justify the need for a particular service, which is reviewed by the Investment Review Board for a new program, or the assistant commissioner for an existing program selecting a new financial agent.\nIn addition, the FASP guidance highlights the need for program offices to consider as early as possible the portability of the financial agent services—that is, the ability to transfer services from one agent to another with minimum difficulty. According to the guidance, portability helps to ensure that a program can continue without interruption if services need to be transferred to another agent and promotes competitive pricing and high-quality service.\nThe next steps and related controls focus on planning and include Fiscal Service’s program offices taking the following actions: developing and documenting a FASP high-level strategy that outlines the services needed and process for obtaining them, such as a solicitation open to all or a limited number of financial institutions; forming a selection team that consists of representatives, as needed, from various areas; working with the Office of Chief Counsel to draft a financial agency agreement using the model agreement as a starting point; drafting and updating, as needed, a FASP project plan, which is a schedule of activities, action items, and expected time frames for completion; and specifying the criteria that will be used to evaluate and select financial agents.\nThe FASP guidance also discusses two other internal controls in this phase. First, employees involved in selecting or designating the financial agent should complete ethics training before their involvement in the FASP. Second, program offices are to prepare, assemble, and maintain throughout the process an administrative record comprised of documents that describe and support the decisions made in each phase.\nThe solicitation phase generally involves the selection team, in collaboration with the Office of Chief Counsel, writing the financial agent solicitation; publishing the solicitation to notify eligible financial institutions about the FASP; and holding information sessions with eligible financial institutions, if needed. Internal controls discussed in the guidance include that (1) the selection team should have the solicitation’s content approved by an assistant commissioner before it is distributed and (2) the solicitation should, among other things, state that interested financial institutions must submit a proposal to be considered and, by submitting a proposal, are agreeing to the FASP approach under which the selection will be conducted.\nThe FASP guidance notes that a financial institution should describe in its proposal its ability to perform the work, which may include its experience in providing the same or similar services, ability to meet security requirements, personnel and infrastructure capabilities, and private sector and government references.\nThe selection phase spans the receipt of proposals from financial institutions to the selection (but not designation) of the financial institution as a financial agent. According to the 2015 FASP guidance, employees involved in selecting or designating the financial agent should sign a conflict-of-interest statement before evaluating proposals. Other key steps and related controls during this phase include the selection team taking the following actions: having its members independently rate proposals of financial holding individual information sessions with financial institutions determined to be the best able to meet the needs identified in the solicitation and requiring them to sign an acknowledgment form indicating that they, if selected, will accept the terms of the financial agency agreement, subject to negotiation of services and other terms; using the selection criteria and scoring methodology previously created to determine which financial institutions are least qualified to perform the required services; notifying financial institutions that were least qualified to perform the required services that they were not selected; asking the remaining financial institutions to produce a “best and final” offer and evaluating them against the selection criteria; and negotiating with the financial institution that submitted the best overall offer to obtain the best possible level of service, price, or quality that is required.\nFollowing its selection of the financial institution, the selection team must prepare a recommendation memorandum explaining the reasons for recommending the financial agent and a selection decision memorandum, which the assistant commissioner signs to indicate his or her approval of the final selection. According to the 2015 FASP guidance, except in an exigency, no designation of a financial agent should be made without being preceded or accompanied by a recommendation memorandum and selection decision memorandum. Fiscal Service officials said that before approving the selection, the assistant commissioner should obtain the approval of the deputy commissioner, and the approval of the commissioner on a case-by-case basis.\nThe designation phase involves designating the selected financial institution as a financial agent and closing out the process. The financial agency agreement is used to designate a financial institution as a financial agent, and the agreement is signed by authorized representatives of the financial institution and Fiscal Service.\nThe 2015 FASP guidance directs the program office responsible for designating the financial agent to provide Fiscal Service’s Bank Policy and Oversight (BPO) Division with an electronic copy of its administrative record. In turn, the guidance directs BPO to use a checklist to provide assurance that the necessary documents for the administrative record have been created and delivered.\nUnlike the 2010 FASP guidance, the 2015 FASP guidance includes a two-part addendum that provides guidance on financial agent compensation. Part one seeks to establish consistent compensation policies across Fiscal Service’s financial-agent-related business lines. It discusses different pricing methodologies that can be used to compensate financial agents and instructs that the selected methodology should be based on (1) the financial agent’s ability to minimize the government’s costs under normal and changing conditions but provide the highest possible quality of service and (2) the degree to which the prices of the financial agent services can be compared to the prices of similar or identical financial industry services as a way of gauging cost containment. Part two seeks to reduce the need for specialized compensation policy negotiations by delineating Fiscal Service’s compensation policies. In brief, it generally specifies the conditions under which Fiscal Service will compensate a financial agent for severance pay, retention pay, overhead, leased real property, owned real property, and equipment.", "All Treasury employees, including Fiscal Service employees, are subject to the same conflict-of-interest requirements that apply to all executive branch employees. For example, employees meeting certain criteria must file financial disclosures, which are reviewed internally by attorneys, and take annual ethics training. In addition, Fiscal Service has an employee conduct policy, which addresses outside activities, gifts, and other topics relevant to conflicts of interest. As discussed previously, the 2015 FASP guidance requires employees involved in selecting or designating a financial agent to complete ethics training before their involvement in a FASP and sign a conflict-of-interest statement before evaluating financial agent proposals.\nAccording to Fiscal Service officials, Fiscal Service has no specific conflict-of-interest rules that apply to financial agents that provide services for Fiscal Service programs. However, financial agency agreements generally state that financial agents owe a fiduciary duty of loyalty and fair dealing to the United States, and require them to certify annually that they are not delinquent on any federal tax obligation or other debt owed to the United States. Fiscal Service officials also told us Fiscal Service takes steps to identify and mitigate potential conflicts of interest in drafting the financial agency agreement. For example, Fiscal Service did not want the myRA program’s financial agent using myRA data to sell or cross-market its own financial products to myRA account holders. To that end, the agreement specifies that the agent may use any confidential information received in connection with the agreement for the purposes of fulfilling its duties under the agreement and not for its own commercial purposes or those of a third party.\nIn contrast, as required by the Emergency Economic Stabilization Act of 2008, Treasury issued regulations to address and manage actual and potential conflicts of interest that could arise under the act, including from financial agency agreements. The regulations require, among other things, prospective financial agents to provide Treasury with sufficient information to evaluate any organizational conflicts of interest and plans to mitigate them. For example, an existing or potential financial agent under the Troubled Asset Relief Program that provides advice or asset management services to clients that own certain assets under the program would be required to disclose that fact. Fiscal Service generally does not face such conflicts of interest because it uses agents primarily to provide payment and collection services rather than services related to the acquisition, valuation, disposition, or management of assets.\nFinancial agency agreements generally state that the agent, once designated as a financial agent, owes Treasury a fiduciary duty of loyalty and fair dealing when acting as a financial agent of the United States and agrees to act at all times in the best interests of the United States when carrying out its responsibilities under the agreement. Fiscal Service officials said that if a financial agent faced a conflict of interest under its agreement, the agent would have a duty to disclose and address that conflict. Based on a recommendation recently made by the Treasury Inspector General, Fiscal Service amended its model financial agency agreement to include a provision requiring the financial agent to notify the Inspector General if it becomes aware of any possible violation of federal criminal law regarding fraud, conflict of interest, bribery, or illegal gratuities affecting services performed under the financial agency agreement.", "Between 2010 and 2015, Fiscal Service created three new programs (Centralized Receivables Service, myRA, and the Non-Traditional Alternative Payments Service) and selected a financial agent for each, according to Treasury officials. For the Centralized Receivables Service, a pilot program that federal agencies use to manage accounts receivable, officials told us that they evaluated providing the service in-house but instead used a financial agent to take advantage of the expertise of commercial banks in receivables processing and collection and to start the program as quickly as possible. Similarly, Treasury officials said they decided to use a financial agent for myRA, a retirement savings program, because Fiscal Service (1) had not been qualified to act as a Roth IRA custodian under IRS rules, (2) had not yet established the necessary infrastructure to operate a Roth IRA program, and (3) could implement the program more quickly by using a financial agent. For the Non- Traditional Alternative Payment Services, which offers recipients alternative ways to receive federal payments, Fiscal Service officials said that they needed a financial agent to maintain a settlement account and process payments.\nFiscal Service also selected financial agents to provide traditional banking services for several existing programs, including the Stored Value Card Funds Pool and the Navy Cash Open-Loop Program. For the Stored Value Card Funds Pool and the Navy Cash Open-Loop Program, which provide electronic payment alternatives to cash, Fiscal Service officials said that they needed financial agents to maintain settlement accounts and, in the case of Navy Cash, issue prepaid cards and process transactions for existing transactions.\nAs previously discussed, the FASP guidance requires, as an internal control, Fiscal Service’s program offices to prepare and maintain an administrative record—a compilation of documents generated during a FASP that describes and supports the decision making. According to Fiscal Service officials, the administrative record’s purpose is to provide Treasury with a basis of defense in the event of litigation, to memorialize the decisions made during the FASP, and to document Fiscal Service’s compliance with the FASP guidance, including key controls.\nWe requested copies of the administrative records for the five financial agents selected between 2010 and 2015, and Fiscal Service provided us with copies of four of the records. Fiscal Service officials said that an administrative record may have existed for the agent designated in 2010 for the Stored Valued Card Funds Pool, but they could not locate it. For the four records we received, we reviewed each administrative record to assess the extent to which it (1) contained the documents listed in the 2010 FASP guidance and, in turn, (2) documented compliance with Fiscal Service’s internal controls set forth in the 2010 FASP guidance. We used the 2010 FASP guidance as our criteria because that was the guidance in effect at the time. The most recent FASP guidance was not issued until November 2015 and, thus, was not in effect at that time. The 2010 FASP guidance lists 11 types of documents normally included in every administrative record.\nBased on our review of the four administrative records and in light of the missing administrative record, we found that the completeness of the records varied. None contained all of the documents listed in the 2010 FASP guidance, but three contained the majority. For example, the record for myRA, a new retirement savings program using a financial agent to provide custodial services, contained 6 of 11 key documents—missing, for example, certain planning and approval documents. As a result, the documents comprising the administrative records varied in the extent to which they complied with Fiscal Service’s internal controls set forth in the 2010 FASP guidance. More specifically, we found the following in our review of the administrative records (excluding the missing administrative record).\nInitiation Phase. Two of the four administrative records included a FASP plan that outlined the services needed and process for obtaining those services, but the other two did not. One of the four administrative records included documentation of the assistant commissioner’s approval to designate a financial institution as a financial agent, but the other three did not.\nSolicitation Phase: Three of the four administrative records included the solicitation announcing the FASP, but one did not. However, the one missing the solicitation covered a financial institution that was directly designated as a financial agent. According to the FASP guidance, a solicitation is not required under a direct designation. The three administrative records with solicitations also included documentation of the proposals submitted by the financial institutions and other correspondence between Fiscal Service and the financial institutions. Finally, the three records included the criteria that Fiscal Service planned to use to evaluate and select the financial institutions as financial agents.\nSelection Phase: None of the four administrative records included acknowledgment forms signed by the financial institutions indicating that they would, if selected, accept the terms of the financial agency agreement. Three of the four records contained (1) Fiscal Service’s analyses of the financial institutions’ proposals based on the selection criteria and (2) the selection decision memorandums that were signed by an assistant commissioner. The other record did not contain such documentation. Finally, two of the four records included documentation of meetings between Fiscal Service and the financial institutions, but the other two did not.\nDesignation Phase: All four of the administrative records included the financial agency agreements signed by Fiscal Service and the financial institutions. However, one included an amended agreement and not the original agreement.\nThe missing administrative record and incompleteness of the other records highlight the lack of compliance with internal controls, which provide reasonable assurance that the agency achieves its objectives, and could undermine Treasury’s ability to defend itself against litigation.\nAccording to Fiscal Service officials, any legal protest likely would arise soon after a financial agent decision was made, so they could collect any needed documents from the program office. Importantly, no assurances exist that program offices will be able to produce any missing documents. For example, consistent with our findings, a report issued by the Treasury Inspector General in 2015 disclosed instances where Fiscal Service was unable to produce requested documents concerning its use of financial agents. In response to the finding, the Inspector General recommended that Fiscal Service ensure that the selection process for financial agents is documented and that the documentation is maintained through the life of the financial agency agreement. Fiscal Service agreed with the recommendation and noted that it was revising its FASP guidance and expected to complete the revisions by year-end 2015. As discussed earlier, Fiscal Service issued its revised FASP guidance in November 2015.\nAlthough none of the administrative records that we reviewed were complete and one was missing, Fiscal Service’s revised 2015 FASP guidance includes new procedures designed to address the deficiency. Unlike the 2010 guidance, the 2015 guidance instructs not only Fiscal Service’s program offices to provide BPO with an electronic copy of their administrative records at the end of a FASP, but it also instructs BPO to use a checklist to ensure that the necessary documents have been created and electronically delivered to BPO. BPO developed a checklist of 18 of the 19 types of documents listed in the 2015 FASP guidance as examples of documents to be maintained in the administrative record and incorporated fields to check to verify whether each document was provided. In addition, the checklist includes fields to document the reviewer’s name, date of the administrative record’s review, and comments on the administrative record. According to Fiscal Service officials, BPO trained Fiscal Service’s program offices on the revised 2015 FASP guidance. Moreover, BPO’s training slide presentation included a copy of the checklist and examples of the documents to be maintained in the administrative record. As noted, the 2015 FASP guidance was not in effect for the administrative records that we reviewed. However, by conducting its checklist review in future FASPs, BPO should be able to better ensure that the administrative records are complete. Such actions should provide reasonable assurance that Fiscal Service is complying with its FASP guidance, including key controls to provide reasonable assurance that it achieves its objectives.", "Treasury has expanded its use of financial agents through its Bureau of the Fiscal Service to modernize its systems and keep pace with technological changes in providing financial services to the public. However, Treasury has not publicly disclosed in a central location information about Fiscal Service’s individual financial agency agreements, such as a description of services provided under each agreement and the amount paid to each agent for its services. Without such information, the public and Congress are less able to hold Treasury accountable for such spending. In addition, by publicly disclosing more information about its use of financial agents, Treasury would allow the public and Congress to better understand, assess, and appreciate the scope and value of federal investments.", "To promote transparency and accountability of federal spending, the Commissioner of the Fiscal Service should make basic information about Fiscal Service’s use of financial agents publicly available in a central location, including compensation paid to each financial agent under its financial agency agreement and a description of the services provided.", "We provided a draft of this report to Treasury for review and comment. In its written comments (reproduced in app. V), Treasury concurred with our findings and recommendation regarding transparency and accountability. It said that Fiscal Service will make basic information about its financial agents publicly available, including information about compensation and services rendered. In addition, Treasury provided technical comments on the draft report, which we incorporated as appropriate.\nAs agreed with your offices, unless you publicly announce the contents of this report earlier, we plan no further distribution until 30 days from the report date. At that time, we will send copies to the Secretary of the Treasury and appropriate congressional committees. In addition, the report will be available at no charge on the GAO website at http://www.gao.gov.\nIf you or your staff have any questions about this report, please contact me at (202) 512-8678 or [email protected]. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made major contributions to this report are listed in appendix VI.", "Our objectives were to examine (1) how the Department of the Treasury’s (Treasury) use and compensation of financial agents has changed as it has modernized its payment and collection systems and (2) the Bureau of the Fiscal Service’s (Fiscal Service) process and related internal controls for selecting and designating financial institutions as financial agents.\nTo examine how Treasury’s use and compensation of financial agents has changed as it has modernized its payment and collection systems, we reviewed federal statutes, regulations, and directives that have guided Treasury’s use of financial agents; Treasury’s annual budget documents; documentation on current and former Treasury programs using financial agents, including compensation data and descriptions of services provided by financial agents; financial agency agreements and amendments to those agreements; audit or similar reports issued by GAO, Treasury’s Office of the Inspector General, or others; and congressional testimony from a Treasury official. We used Treasury’s budget data for fiscal years 2004 through 2015, the most recent data available at the time of our review, to analyze the total amount paid to financial agents since enactment of the permanent, indefinite appropriation. We also obtained compensation data from Fiscal Service on the amount it compensated each of its financial agents in fiscal years 2014 and 2015 to conduct a more in-depth analysis of the total amount of compensation for collection, payment, and related services. We assessed the reliability of the data by interviewing knowledgeable officials, conducting manual testing on relevant data fields for obvious errors, and reviewing a recent audit. Based on these steps, we found the data to be sufficiently reliable for the purposes of our analyses. Finally, we interviewed officials in various units within Treasury involved in the selection and designation of financial agents, including Fiscal Service and the Office of Financial Stability.\nTo examine Fiscal Service’s process and related internal controls for selecting and designating financial institutions as financial agents, we reviewed federal statutes and regulations authorizing or governing Treasury’s use of financial agents; Fiscal Service’s policies and procedures and related documentation for selecting and designating financial agents, including financial agency agreements, financial agent solicitations, and selection decision memoranda; and audit or similar reports issued by GAO, Treasury’s Office of the Inspector General, or others. We assessed Fiscal Service’s 2010 and 2015 financial agent selection process (FASP) guidance, which documents its process and related internal controls for selecting and designating financial agents against the standards for internal control in the federal government. In addition, we reviewed internal records that Fiscal Service officials generated to document key decisions made in their selection and designation of five financial agents between January 2010 and December 2015 to assess compliance with Fiscal Service’s policies and procedures. We compared those records to the types of documentation listed in Fiscal Service’s 2010 FASP guidance, which was in effect for the five FASPs we reviewed, to assess Fiscal Service’s compliance with its FASP guidance, including key controls. We interviewed officials in various units within Treasury involved in the selection and designation of financial agents, including Fiscal Service and the Office of the Fiscal Assistant Secretary.\nWe conducted this performance audit from January 2016 to January 2017 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 that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives.", "Between 2008 and 2010, Congress passed several laws that established or led to the establishment of a number of programs designed to promote U.S. financial stability and address other effects of the financial crisis. The Department of the Treasury (Treasury) has designated financial institutions as financial agents to provide services under the programs.\nThe Housing and Economic Recovery Act of 2008 (HERA) provided Treasury with authority to purchase obligations and securities issued by Fannie Mae and Freddie Mac, the housing government-sponsored enterprises (GSE). Under its authority, Treasury created the GSE Mortgage-Backed Securities Purchase Program to help support the availability of mortgage credit by temporarily providing additional capital to the mortgage market. By purchasing those securities, Treasury sought to broaden access to mortgage funding for current and prospective homeowners and to promote market stability. Treasury used its existing authorities to designate three financial institutions as financial agents to provide asset management, custodian, and other services for the program, and Treasury has one active financial agency agreement as of October 2016.\nThe Emergency Economic Stabilization Act of 2008 (EESA) established the Office of Financial Stability within Treasury and authorized the Troubled Asset Relief Program, in part to restore liquidity and stability to the U.S. financial system. Among other things, EESA authorized Treasury to buy up to $700 billion (later reduced to $475 billion) in “troubled assets” as defined under the act and to designate financial institutions as financial agents to perform all such reasonable duties related to the act. Treasury entered into 27 financial agency agreements with 23 financial institutions, including banks, security brokers or dealers, and insurance companies, as financial agents to support the act’s implementation, and Treasury has four active financial agency agreements as of October 2016. The Troubled Asset Relief Program, in conjunction with other federal actions, was designed to help restore stability to the financial system, including by providing capital to financial institutions and helping homeowners prevent avoidable foreclosures.\nThe Small Business Jobs Act of 2010 (SBJA), among other things, established the Small Business Lending Fund to provide capital to eligible institutions in order to increase the availability of credit for small businesses. The Small Business Lending Fund’s purpose is to address the ongoing effects of the financial crisis on small businesses by providing temporary authority to Treasury to make capital investments in eligible institutions in order to increase the availability of credit for small businesses. As authorized by SBJA, as of October 2016 Treasury has active financial agency agreements with two financial institutions that it designated as financial agents to provide asset management and custodian services.\nFrom fiscal year 2009 through fiscal year 2015, Treasury paid financial agents for their services under the HERA, EESA, and SBJA programs a total of $1.3 billion. As shown in figure 5, financial agents under the EESA programs account for the large majority of the total compensation paid to these financial agents. Financial agents under the HERA programs are paid with Treasury’s permanent, indefinite appropriation, but financial agents under the EESA and SBJA programs are paid from appropriations provided pursuant to those acts.", "The Department of the Treasury’s Bureau of the Fiscal Service has four program offices that use financial agents: (1) Revenue Collections Management, (2) Payment Management, (3) Debt Management Services, and (4) Treasury Securities Services. Tables 2 through 5 below show the active programs managed by these program offices that use financial agents, a description of the program, the financial agent, and the effective date of the current financial agency agreement.", "myRA® (my retirement account) is a Roth Individual Retirement Account (IRA) that invests in a new U.S. Treasury retirement savings bond. It is designed to facilitate retirement savings for individuals without access to an employer-provided retirement savings program. In January 2014, the President issued a memorandum directing the Secretary of the Department of the Treasury (Treasury) to develop a new retirement savings security focused on reaching new and small-dollar savers. In response, Treasury developed myRA and launched the program nationally in November 2015.", "Treasury’s Bureau of the Fiscal Service (Fiscal Service) developed the myRA program and used its authority to designate a financial agent to administer customer investments in and serve as the custodian for myRAs. Treasury officials said that they decided to use a financial agent for myRA because Fiscal Service (1) had not been qualified to act as a Roth IRA custodian under IRS rules, (2) had not yet established the necessary infrastructure to operate a Roth IRA program, and (3) could implement the program more quickly by using a financial agent. Although Fiscal Service uses Federal Reserve banks as fiscal agents to serve as custodians for its other savings bond programs, Treasury officials said that such banks cannot serve as custodians for Roth IRAs.\nAccording to Treasury officials, Fiscal Service attorneys analyzed the statutory authority for issuing savings bonds under the myRA program and historical precedent for using a financial agent to help carry out the myRA program. Treasury officials stated that Fiscal Service found examples of programs similar to myRA in Treasury’s annual reports. Treasury officials told us this is not the first time that Treasury has used a fiscal or financial agent to hold securities or maintain accounts for others. For example, Fiscal Service uses banks as financial agents in payment programs to allow individuals to receive payments electronically in the form of prepaid debit cards. It also uses Federal Reserve banks, as fiscal agents, to maintain book entry accounts for savings bonds and marketable securities and hold collateral pledged in lieu of surety bonds.\nThe financial agent for myRA holds a Treasury retirement savings bond on behalf of each individual accountholder.\nFiscal Service Generally Followed Its Financial Agent Selection Process for the myRA Financial Agent but Did Not Fully Document Its Process Fiscal Service generally followed its 2010 financial agent selection process (FASP) guidance in selecting and designating Comerica Bank as financial agent for the myRA program. The guidance documents the FASP steps, including related internal controls, in initiating the process, soliciting proposals and evaluating submissions, and selecting and designating a financial agent. The following is a summary of Fiscal Service’s selection and designation process for the myRA program based on the administrative record provided by Treasury.\nFiscal Service formed a selection team to review the applications and recommend which applicant to designate as the financial agent. The team consisted of six employees chosen to bring a breadth of expertise to the selection process.\nFiscal Service developed a cost estimate for the services to be provided by a financial agent under the myRA program.\nIn February 2014, Fiscal Service notified approximately 10,000 financial institutions about its financial agent solicitation through announcements distributed through the Federal Reserve’s bank communication system and American Banker, a news periodical on banking and finance.\nBy the close of the initial application period in March 2014, Fiscal Service had received two applications, both from entities that were not eligible to serve as a financial agent because they were not financial institutions as defined by the laws governing Treasury’s use of financial agents. It extended the application period and received an application from Comerica Bank and a resubmitted application from an entity previously determined not to be eligible.\nFiscal Service initially reviewed Comerica’s application against the criteria provided in the solicitation and held a conference call with Comerica in May 2014 to further discuss Comerica’s application. Fiscal Service held a follow-up meeting with Comerica, which subsequently provided Fiscal Service with proposed pricing information.\nEach member of the selection team individually rated Comerica’s application using the program requirements set forth in the solicitation. Fiscal Service requested and reviewed references for a firm that was partnering with Comerica.\nFiscal Service compared its cost estimate to Comerica’s cost estimate and found the two to be comparable.\nThe selection team prepared a recommendation memorandum, which a Fiscal Service assistant commissioner signed in June 2014.\nFiscal Service and Comerica executed the financial agency agreement in July 2014.\nAs discussed in the report, we reviewed Fiscal Service’s administrative records for four FASPs conducted between 2010 and 2015, including the FASP for the myRA program. Under the 2010 FASP guidance, Fiscal Service’s program offices were required to maintain an administrative record comprised of documents generated during a FASP that describes and supports the decision-making process. We found that the myRA administrative record contained 6 of the 11 types of documents listed in the guidance, such as the solicitation, memorandums of meeting with the financial institutions, the selection decision memorandum, and the financial agency agreement. While some documents were missing from the administrative record, changes to the 2015 FASP guidance should help Fiscal Service provide assurance that documentation is complete, as previously discussed.", "All Treasury employees, including Fiscal Service employees, are subject to the same conflict of interest requirements that apply to all executive branch employees, as discussed previously in this report. For example, employees meeting certain criteria must file financial disclosures, which are reviewed internally by attorneys, and take annual ethics training. In addition, Fiscal Service has an employee conduct policy, which addresses outside activities, gifts, and other topics relevant to conflicts of interest. The 2015 FASP guidance states that employees involved in selecting or designating a financial agent should complete ethics training before their involvement in a FASP and sign a conflict-of-interest statement before evaluating financial agent proposals.\nUnder the terms of its financial agency agreement, the financial agent for myRA owes a fiduciary duty of loyalty and fair dealing to the United States when acting as a financial agent of the United States and agrees to act at all times in the best interests of the United States when carrying out its responsibilities under the agreement. Treasury officials said that if a financial agent faced a conflict of interest under its agreement, the agent would have a duty to disclose and address that conflict. Based on a recommendation recently made by the Treasury Inspector General, Fiscal Service amended its model financial agency agreement to include a provision requiring the financial agent to notify the Inspector General if it becomes aware of any possible violation of federal criminal law regarding fraud, conflict of interest, bribery, or illegal gratuities affecting services performed under the financial agency agreement. The financial agency agreement for myRA includes this provision.\nOnce myRA accountholders reach a limit of $15,000 in their account or the account reaches a maturity of 30 years, they are required to roll over their account into another retirement savings account. Fiscal Service officials told us that to address concerns that the financial agent would try to promote its own products to myRA accountholders, the financial agency agreement includes additional controls that place limits on the financial agent’s ability to cross-market its own products to accountholders so that, for instance, the financial agent would not be able to steer accountholders to its own products when they are required to roll over their account.", "", "", "", "In addition to the contact named above, Richard Tsuhara (Assistant Director), Heather Chartier (Analyst-in-Charge), William R. Chatlos, Jeffrey Harner, Colleen Moffatt Kimer, Marc Molino, Patricia Moye, and Jennifer Schwartz made key contributions to this report." ], "depth": [ 1, 2, 2, 2, 2, 1, 2, 2, 2, 2, 1, 2, 2, 1, 1, 1, 1, 1, 1, 1, 2, 2, 1, 1, 2, 2 ], "alignment": [ "h2_title", "h2_full", "", "", "", "h0_full", "h0_full", "", "h0_full", "h0_full", "h1_full", "", "h1_full", "", "", "", "", "", "", "", "", "", "", "", "", "" ] }
{ "question": [ "Why has Treasury's use of financial agents changed?", "How has Treasury's use of financial agents changed over time?", "In what way has compensation for financial agents grown?", "To what extent does Treasury publically disclose compensation to financial agents?", "How does transparency promote accountability?", "How could greater accountability enhance Treasury's activities??", "Why did Fiscal Service develop a FASP guidance?", "What guidance does this process provide?", "What did GAO find in reviewing financial agents?", "What was the result of this variation?", "How has Fiscal Service revised its guidance?", "How will this revision encourage compliance?", "What is Treasury authorized to do?", "How does Treasury designate financial agents?", "How has Congress altered this process?" ], "summary": [ "The Department of the Treasury's (Treasury) use of financial agents has evolved as it has moved from paper to electronic transactions in response to changes in technology and new laws.", "Treasury has a long history of using financial agents to support its core functions of disbursing payments and collecting revenue. Since the 1980s, Treasury has used agents to move from paper to electronic transactions as it has modernized its systems. For example, Treasury began using financial agents to collect tax revenue electronically in response to a 1984 law and to make payments electronically in response to a 1996 law. Such changes have continued since Congress enacted a permanent, indefinite appropriation in 2004 for Treasury to reimburse financial agents, after which Treasury began including in its annual budget the total amount paid to financial agents.", "Compensation to financial agents has grown from $378 million in fiscal year 2005 to $636 million in fiscal year 2015, partly due to increases in the number of debit and credit card payments made to federal agencies that are processed by financial agents.", "While Treasury discloses in its annual budget the total amount paid to financial agents, it has not fully disclosed in a central location information about individual agents, including their compensation and services provided. Treasury officials said they are not required and have not determined a need to publicly disclose compensation under each financial agency agreement.", "According to an Office of Management and Budget directive on open government, transparency promotes accountability by providing the public with information about government activities.", "Greater disclosure and transparency could enhance the accountability of Treasury's use of financial agents by informing the public and Congress about how much and for what purposes it is spending federal funds to obtain services from financial agents.", "The Bureau of the Fiscal Service (Fiscal Service)—the largest user of financial agents within Treasury—developed its financial agent selection process (FASP) guidance to document the steps and internal controls that its program offices generally are expected to follow in selecting and designating financial agents.", "The guidance provides assurances that a FASP is effective and efficient, documents key information, and complies with applicable laws and regulations. The guidance directs program offices to maintain an administrative record of key documents generated during a FASP.", "GAO selected five financial agents designated between 2010 and 2015 to review their administrative records but could review only four because the record for one was not created. None contained all the documents listed in the guidance, but three contained the majority. For example, the record for my RA®, a new retirement savings program using a financial agent to provide custodial services, contained 6 of 11 key documents—missing, for example, certain planning and approval documents.", "As a result, the records varied in the extent to which they complied with Fiscal Service's guidance, including controls.", "In November 2015, Fiscal Service revised its guidance to require not only program offices to deliver an electronic copy of their administrative records to the Bank Policy and Oversight (BPO) Division but also BPO to use a checklist to ensure that the records are complete.", "The 2015 guidance was not in effect for the records GAO reviewed. However, BPO's implementation of the new procedure should provide assurances that future designations are in compliance with the FASP guidance, including controls.", "Under the National Bank Act and other statutes, Treasury is authorized to designate certain financial institutions as depositaries of public money and financial agents of the federal government.", "Treasury uses financial agency agreements to designate financial agents.", "In 2004, Congress provided Treasury with a permanent, indefinite appropriation to reimburse financial agents for their services, which replaced its use of non-appropriated funds." ], "parent_pair_index": [ -1, 0, -1, -1, -1, 4, -1, 0, -1, 2, -1, 4, -1, 0, 1 ], "summary_paragraph_index": [ 2, 2, 2, 2, 2, 2, 3, 3, 3, 3, 3, 3, 0, 0, 0 ] }
CRS_RL31149
{ "title": [ "", "Snowmobile Use in National Parks", "Park Service Policy on Snowmobile Access", "Denali National Park", "Yellowstone/Grand Teton", "November 2007 Winter Use Plan", "Clean Air Act and Noise Control Act Regulation", "Snowmobile Emissions", "EPA's 2002 Regulations", "Reaction to the EPA Standards", "Legislative Issues", "Conclusions" ], "paragraphs": [ "During the final year of the Clinton Administration, proposals by the National Park Service to enforce long-standing policies that regulated the use of snowmobiles in national parks raised a number of questions regarding the potential regulation of such vehicles. These questions continue to be debated, as the National Park Service (NPS) explores optional winter use plans for Yellowstone and other units of the national park system, and as various parties challenge the actions of the NPS in court.\nNational Park System units account for only about 3% of the land mass of the United States and possess few trails and roads suitable for snowmobiles, compared to areas available on other federal lands; but—for both proponents and opponents—the question of snowmobile access to the parks has taken on a far greater importance. To the snowmobile industry and to many in communities neighboring national parks, \"Snowmobiling is an important part of the economic engine that supports northern communities, winter tourism.\" To environmental groups, snowmobiling \"is one of the most environmentally devastating recreational activities permitted by the Park Service .... resulting in adverse impacts to Park wildlife, air and water quality, vegetation, Park ecology, and Park users.\" Underlying the debate are broader questions concerning regulation of emissions and noise from the vehicles and the degree to which restrictions may serve as a precedent or stigma affecting snowmobile and motorized recreation use more generally.", "In the 1990s, snowmobiles were allowed access to 43 units of the National Park System, including such major parks as Yellowstone, Grand Teton, Rocky Mountain, Acadia, Zion, Mount Rainier, and Sequoia. While numerous park units allowed such access, recreational use of snowmobiles has not been widespread in the park system as a whole. The National Park Service administers 391 units (parks, seashores, monuments, etc.). Of these, 348 (89%) have not been open to snowmobiles. Many units are located in climates unsuitable for them or are too small to be used for such recreation. Others (e.g., Glacier National Park and Yosemite) have banned snowmobiles since the 1970s. According to the National Parks Conservation Association, use of snowmobiles outside of Alaska has mostly been concentrated in five units of the park system: Yellowstone National Park, Voyageurs National Park, Rocky Mountain National Park, Pictured Rocks National Lakeshore, and the John D. Rockefeller Memorial Parkway. Yellowstone accounted for about 40% of the snowmobile visitors at these five parks, with a total of 76,571 in the 1999-2000 winter season.\nComparative data for all five of these units are not available for years after 1999-2000. One of the five, Rocky Mountain National Park, has closed all but one snowmobile route since 2004—the one route remaining being a 2-mile trail that provides access to National Forest land heavily used by snowmobiles. Snowmobile visits to Yellowstone increased during the 2000-2001 and 2001-2002 winter seasons, peaking at 87,206 in the latter winter. In subsequent years, snowmobile visitors to Yellowstone plummeted, to a low of 24,049 in 2004-2005. Changes in access policy (described later in this report) as well as drought and low snow pack in recent years contributed to the decline. Two other Yellowstone area park units, Grand Teton National Park and the Rockefeller Memorial Parkway, experienced an even more steep decline, from a combined 35,000 snowmobile visits in 2000-2001 to about 7,500 in 2004-2005. Snowmobile visits have rebounded somewhat since 2004-2005, but in 2007-2008 they remained at only about 35% of visits in the peak years.", "Although recreational access by snowmobiles has been permitted in units of the national park system, the Park Service, in the late 1990s, concluded that such use has generally been in violation of Executive Orders 11644 and 11989, issued by Presidents Nixon and Carter respectively. The Nixon Order directed that use of off-road vehicles on public lands \"be controlled and directed so as to protect the resources of those lands, to promote the safety of all users of those lands, and to minimize conflicts among the various uses of those lands.\" It specified that off-road vehicle \"areas and trails shall be located in areas of the National Park system ... only if the respective agency head determines that off-road vehicle use in such locations will not adversely affect their natural, aesthetic, or scenic values,\" and it directed the Park Service to \"monitor the effects of the use of off-road vehicles\" and to rescind or limit this use \"as necessary to further the policy of this order.\"\nIn January 1999, the Park Service received a rulemaking petition from the Bluewater Network and 60 other environmental organizations seeking a ban on snowmobiles from all units of the National Park Service. In response, the Service surveyed units of the System to assess the extent to which they were complying with the Executive Orders. According to Interior Department testimony: \"The results graphically demonstrated that the National Park Service was not complying with its statutory and regulatory mandates.... Consequently, maintaining the status quo with regard to snowmobiling was simply not an option.\" On April 27, 2000, the Department of the Interior and the National Park Service announced that \"snowmobiling for general recreational purposes will be prohibited throughout the Park System, with a limited number of narrow exceptions.\" By July 2000, the Department had backed away from its strict enforcement stance with a clarification: there would be no snowmobile ban in park units pending a formal rulemaking and public comment period, and snowmobile practices prior to the April 2000 announcement (i.e., access to more than 40 parks) would continue through the 2000-2001 winter season. NPS has taken no further action to enunciate a general policy.\nSince the summer of 2000, the focus has been on Denali National Park in Alaska and the Yellowstone/Grand Teton area. Both of these areas had been considered exceptions subject to special consideration even under the April 2000 policy announced by the Park Service. Whether snowmobile access to these parks will be allowed to continue has generated substantial public interest.", "In Alaska, vast distances, lack of roads, abundant snow cover, and small dispersed populations make snow machine use ubiquitous. In general, national parks in Alaska allow snowmobile access under the provisions of the Alaska National Interest Lands Conservation Act (ANILCA, P.L. 96-487 ). However, access to the 2 million acres formerly known as Mt. McKinley National Park (now the core of Denali National Park) has been an issue. Prior to passage of ANILCA (1980), snowmobiles had been banned from this park. In 1999, the Park Service reinstated this policy, banning snowmobiles first on a temporary and later on a permanent basis. Litigation regarding access to Denali was initiated by snowmobile user groups, but was withdrawn in June 2001, on the assumption that legislation would be introduced to address the issue. Legislation ( H.R. 4677 / S. 2589 , 107 th Congress) was introduced in the spring of 2002 that would have allowed access to some portions of the old Park, while continuing the ban elsewhere. No action was taken on these bills, however, and similar legislation has not been introduced in subsequent years.\nIn January 2006, the National Park Service published a Final Backcountry Management Plan for Denali National Park and Preserve. The plan notes that as a result of technology improvements that have extended the range of snowmobiles, the use of such machines is now widespread in the southern park additions and \"growing rapidly.\" \"... [C]onflicts with other users, especially non-motorized winter recreationists and subsistence users, are increasing, and concerns have been raised about the effects of snowmachine use on wildlife, vegetation, water quality, air quality, natural soundscapes, and other park resources.\" Despite raising these issues, the plan concludes, \"There are currently few guidelines for managing use.\"", "The other exception to the National Park Service's general policy was the Yellowstone/Grand Teton National Park area. The NPS had been sued in May 1997 by groups who alleged that the Service was violating the National Environmental Policy Act, the Endangered Species Act, the National Park Service Organic Act, and the Yellowstone Act in allowing use of snowmobiles in the two parks and on the Rockefeller Memorial Parkway (which links them). The lawsuit was settled within months when the NPS agreed to conduct an Environmental Impact Study (EIS) of winter use of the parks. Upon completion of the study, the Clinton Administration promulgated a final rule in January 2001, banning snowmobiles from Yellowstone, Grand Teton, and the Rockefeller Parkway beginning in the winter of 2003-2004, but allowing continued visitor access through the use of \"snowcoaches\"—guided tour-vans that run on rubber treads.\nSnowmobile manufacturers, represented by the International Snowmobile Manufacturers Association (ISMA), have suggested that \"cleaner, quieter\" snowmobiles—a phrase not initially defined—be allowed continued access to the parks. Their suggestion found a receptive audience in the Bush Administration. On June 29, 2001, the Administration responded to a suit filed by ISMA and the State of Wyoming by agreeing to reopen the decision to ban the vehicles from the three Yellowstone area units. The Park Service agreed to prepare a Supplemental EIS and reach a new Record of Decision by November 15, 2002 (a deadline subsequently extended to March 15, 2003).\nThe Record of Decision was signed March 25, 2003, and a final rule implementing it was promulgated December 11, 2003. Despite receiving 104,802 comments on the final proposal, 91% of which \"believed the proposed regulation does not adequately protect park resources due to the presence of snowmobiles,\" the Park Service reversed the ban in favor of daily limits on entrants, emission standards for the snowmobiles, other access requirements, and an \"adaptive management strategy,\" allowing park managers to take remedial action if monitoring indicates unacceptable impacts from implementation. In explaining its position, the NPS stated: \"We are trying to provide a range of appropriate activities in the parks, while protecting park resources and values.\"\nThe 2003 rule would have set a daily limit of 950 snowmobile entrance passes for Yellowstone Park, 115 in Grand Teton National Park, and 400 on Rockefeller Memorial Parkway. On most days, this limit would result in no reduction of snowmobile users; but on weekends and holidays, when as many as 1,700 snowmobiles have entered the three park units, it could limit the number of entrants. Snowmobile users would generally have been required to be accompanied by trained guides (although the regulations would have allowed group members to be as much as 1/3 of a mile from the guide, and the rule preamble conceded, given the noise of a snowmobile, that communication is difficult if not impossible even between passengers on the same machine). To discourage irresponsible behavior, alcohol use by snowmobile users would have been strictly limited.\nThe machines themselves would have been required to achieve a 90% reduction in hydrocarbon emissions and a 70% reduction in carbon monoxide under the 2003 rules. Noise emissions would have been limited to 73 dB(A), which the NPS estimates is about a 50% reduction compared to conventional snowmobiles. To implement these provisions, the Yellowstone Park Superintendent released a list of 10 snowmobile models approved for use during the 2003-2004 winter season, on September 16, 2003. This list has been updated annually. The most recent version, released in February 2008, contains 26 models.\nA hearing on the 2003 rules was held in the U.S. District Court for the District of Columbia on December 15, 2003. The rules were vacated and remanded to the National Park Service by Judge Emmett Sullivan on December 16. The judge held that there was no evidence in the record to support the Bush Administration reversal of the previous agency position and that the decision, therefore, was \"arbitrary and capricious.\" The court also held that the Supplemental EIS accompanying the changes was \"flatly inadequate\" under NEPA and that the snowmobile decision was \"completely politically driven and result oriented.\" The judge also ordered NPS to respond to Bluewater Network's 1999 rulemaking petition (seeking a ban on snowmobiles in all National Park System units) by February 17, 2004. Judge Sullivan's decision reinstated the Clinton Administration rule and cut the number of snowmobiles entering the three Yellowstone area park units in half for the 2003-2004 winter season in preparation for a complete ban in 2004-5.\nBoth ISMA and the State of Wyoming appealed the court's ruling. Their request for a stay of the Clinton-era rules pending resolution of their appeal was denied by Judge Sullivan in late December 2003 and by a three-judge panel of the Court of Appeals January 13, 2004. Meanwhile, however, the same groups petitioned the Federal District Court for Wyoming to overturn the Clinton-era rules. That court responded February 10, 2004, when Judge Clarence Brimmer issued a temporary restraining order against the Clinton rules and ordered the National Park Service to develop temporary rules for the remainder of the 2004 winter season. The next day, the Park Service issued such rules, allowing 780 snowmobiles to enter Yellowstone Park each day, an increase of 287 machines. Grand Teton Park and the Rockefeller Parkway were allowed 140 snowmobiles, an increase of 90. An appeal of Judge Brimmer's order was denied by the 10 th Circuit Court in Denver on March 10. (The Wyoming court vacated and remanded the Clinton rules on October 14, 2004.)\nAs a result of the court decisions, snowmobile use in the three parks was substantially reduced during the 2003-2004 winter season. According to NPS, an average of 258 snowmobiles entered Yellowstone in January and February 2004, a reduction of two-thirds from the historic average. In Grand Teton and the Rockefeller Parkway, the reduction was almost total: through February 10, only about 5 snowmobiles a day entered the two parks. After the February 10 court decision, this number increased to about 20.\nThe NPS subsequently issued Temporary Winter Use Plans for the 2004-2005, 2005-2006, 2006-2007, and 2007-2008 winter seasons. The temporary plans, which were intended to guide access policy while additional studies were performed leading to a more permanent solution, allow 720 snowmobiles per day in Yellowstone, all commercially guided, and 140 snowmobiles in Grand Teton National Park and the John D. Rockefeller, Jr., Memorial Parkway. With minor exceptions, all of the snowmobiles are required to meet NPS best available technology (BAT) requirements shown below in Table 2 . Snowcoaches are also allowed. NPS concluded that the combination of snowmobiles and snowcoaches \"should provide a viable program for winter access to the parks, and ... the opportunity for achieving historic visitor use levels.\" The plans also include the prohibition on alcohol use by snowmobilers that the Park Service had promulgated in its remanded 2003 rule.\nDespite the temporary plans' allowable limits, snowmobile visits continued at levels far lower than in the previous decade in the 2004-2008 winter seasons ( Table 1 ). At 31,420, the number of snowmobiles entering Yellowstone in 2007-2008 was 64% below the peak in 2001-2002, and was less than half of the permitted number. The other two area units (Grand Teton National Park and the Rockefeller Memorial Parkway) have seen even steeper declines. Grand Teton fell to 149 snowmobile visitors in the entire winter of 2004-2005, rising only to 799 in 2007-2008, compared to its peak of 4,800 in 1999-2000. The Continental Divide Snowmobile Trail hosted only 11 snowmobiles last winter, compared to a peak of 2,006 in 2001-2002. The Rockefeller Parkway saw more activity than Grand Teton, but still a marked decrease compared to earlier years: 7,351 snowmobile visitors in 2004-2005, rising to 11,695 in 2007-2008, compared to a peak of 31,011 in 2000-2001.\nOne result of the declining snowmobile use was a marked increase in visitors using other modes of travel. Snowcoach visitors to Yellowstone increased to 22,344 in 2007-2008, up 89% compared to the peak snowmobile year. In Grand Teton, the number of cross country skiers more than doubled (to 13,003) compared to the number in the peak snowmobile year.", "The Park Service also began additional studies to develop a final winter use plan in 2004, and on November 20, 2007, it finalized the fruits of its effort by issuing a Record of Decision. Termed a \"Winter Use Plans/Final Environmental Impact Statement,\" this latest plan evaluated seven alternatives. It presented additional data on the effects of snowmobiles and snowcoaches on air quality, noise, and wildlife, and evaluated the economic impacts on surrounding communities of restricting snowmobile access to the three Yellowstone area NPS units.\nThe new plan set final rules and access limits somewhat more stringent than those that have been in place during the past four winter seasons, but significantly higher than actual use during that period. It would allow 540 snowmobiles per day access to Yellowstone, and a combined 65 in Grand Teton National Park and the Rockefeller Memorial Parkway. The snowmobiles would be required to meet best available technology requirements for emissions and noise, and it would require that snowmobilers be accompanied by commercial guides. It would also authorize entry to 83 snowcoaches per day.\nOn September 15, 2008, Judge Emmett Sullivan of the U.S. District Court for the District of Columbia vacated the plan, finding it \"arbitrary and capricious, unsupported by the record, and contrary to law.\" The judge found:\nAccording to NPS's own data, the WUP [Winter Use Plan] will increase air pollution, exceed the use levels recommended by NPS biologists to protect wildlife, and cause major adverse impacts to the natural soundscape in Yellowstone. Despite this NPS found that the plan's impacts are wholly \"acceptable,\" and utterly fails to explain this incongruous conclusion.\nWith the rule vacated, it is unclear what limits will apply in the coming winter season. On October 1, 2008, NPS announced that it would propose a new temporary Winter Use Plan that would be ready for public comment in early November and would be in place before the December 15 scheduled opening of the winter season.", "In reversing the Clinton Administration rules on Yellowstone access, the National Park Service set limits on emissions and noise from the snowmobiles that would be allowed in the three Yellowstone area park units. Simultaneously, the Environmental Protection Agency developed emission limits applicable to new snowmobiles offered for sale anywhere in the United States beginning in 2006 and 2007. The following sections of this report describe the EPA regulations and look at the broader issue of snowmobile emissions.\nThe Clean Air Act gives EPA authority to regulate emissions from mobile sources of pollution, including off-road sources such as snowmobiles; but until 2006, snowmobiles (with the exception of those entering the Yellowstone area national parks) were not subject to any federal or state emission regulations. Nor, with the exception of those allowed in Yellowstone since 2004, have they ever been subject to noise regulations. EPA has authority under Section 6 of the Noise Control Act of 1972 to regulate noise from \"transportation equipment (including recreational vehicles and related equipment).\" But the Agency's Office of Noise Abatement and Control was disbanded in 1982, and EPA has not issued any regulations under the statute in the 26 years since then.", "Snowmobiles generally run on two-stroke engines—the type of engine that traditionally has powered outboard motors and lawnmowers. In a two-stroke engine, fuel enters the combustion chamber at the same time that exhaust gases are expelled from it. As a result, as much as one-third of the fuel passes through the engine without being combusted. This causes poor fuel economy and high levels of emissions, particularly hydrocarbons and carbon monoxide.\nIn one hour, a typical snowmobile emits as much hydrocarbon as a 2008 model automobile emits in 54,000 miles of driving. In a day of use, a snowmobile may emit as much hydrocarbon as an automobile emits over its entire lifetime. The hydrocarbons (gasoline) emitted by snowmobiles (or other mobile sources, for that matter) are of concern because they contain benzene, formaldehyde, and at least three other substances that are known or suspected human carcinogens.\nSnowmobiles meeting EPA regulations also emit as much carbon monoxide (CO) in an hour as a 2008 model auto does in 1,050 miles of driving. Carbon monoxide is a poisonous gas that, at low levels, can affect those who suffer from cardiovascular disease, such as angina. The impact of CO emissions on ambient air quality is of at least equal concern as that of hydrocarbons because of the tendency for atmospheric accumulation of CO in winter.\nIn preparing the 2000 Environmental Impact Statement for the decision on snowmobile access to Yellowstone, the National Park Service measured emissions from snowmobiles and compared them to other emission sources in the park. The Service also estimated the concentrations (ambient levels) of carbon monoxide (CO) and particulate matter (PM) present in the air and compared these concentrations to air quality standards. The EIS concluded that the 8-hour maximum concentration of carbon monoxide at the West Yellowstone entrance to the park exceeded the National Ambient Air Quality Standard for CO by nearly 70% (a concentration of 15.15 parts per million vs. the standard of 9). The analysis also concluded that snowmobiles accounted for 97.9% of the CO at West Yellowstone during winter months.\nNoise has also been an issue. Opponents of allowing snowmobiles in Yellowstone and other units of the national park system argue that the parks are special places whose remoteness, beauty, and quiet inspire reflection and awe. The noise of engines is incompatible with this atmosphere, they argue. As the National Park Service itself states in its Record of Decision, \"Snowmobile use, in historical numbers, is inconsistent with winter park landscapes that uniquely embody solitude, quiet, undisturbed wildlife, ... and the enjoyment of these resources by those engaged in non-motorized activities.\"\nSnowmobile enthusiasts counter that the parks cover vast areas and that snowmobiles are restricted to a few roads—the same roads traversed by cars, recreational vehicles, and buses in summer. They also assert that snowmobile use is compatible with the NPS responsibility to promote visitor use and enjoyment of park resources. Park Service studies indicate that the sound of snowmobiles can be heard for significantly greater distances than that of automobiles, however, and in the late 1990s was essentially continuous during the winter at key locations in Yellowstone: snowmobile noise could be heard 95% of the time by visitors at Old Faithful and 87% of the time at the Grand Canyon of the Yellowstone, according to NPS's December 2000 Federal Register notice.", "Regulations for snowmobile and other non-road engine emissions were signed by the EPA Administrator September 13, 2002 and appeared in the Federal Register November 8, 2002. As shown in Table 2 , the regulations require reduction of both carbon monoxide and hydrocarbon emissions from new snowmobiles by a little more than 30% starting in 2006 and by an average of 50% by 2012, with an intermediate step in 2010. (The regulations did not require any controls on snowmobiles sold before 2006.) For comparison, Table 2 also shows the Yellowstone-specific standards that have been imposed by the National Park Service.\nAccording to EPA, the 2006/2007 reductions can be achieved without major changes in technology, in part because they apply to the average of a manufacturer's fleet emissions, rather than to individual machines. This allows manufacturers to provide a range of models, some with advanced emission controls and others without: \"While some advanced technologies such as two-stroke direct injection and four-stroke engines, would be found in some models, many models would still be equipped with two-stroke engines with relatively minor engine modifications resulting in minimum emission reductions, while some models may not even have any emission controls.\" EPA estimates the cost of these Phase 1 controls at $73 per snowmobile. Vehicles meeting the standards will be more fuel-efficient, resulting in an average reduction in operating cost of $57, thus offsetting most of the initial cost increase.\nThe 2010 and 2012 standards, which also are fleet averages, can also be met without eliminating two-stroke engines, according to the Agency. Because two-stroke engines produce more power than similar size four-strokes and are easy to start in cold weather, the Agency expects the industry to continue to manufacture mostly two-stroke engines even in 2012, although many would be modified with direct injection technology to reduce emissions. According to the Agency, \"A potential scenario for meeting these standards could be a mixture of 50 percent direct injection, 20 percent four-stroke engines, and 30 percent with engine modifications.\" The cost of these changes would average an additional $131 per snowmobile in 2010, according to EPA, but the costs would be offset by $286 in fuel savings and improved performance, so that lifetime costs would actually be $155 lower. The same is true of the 2012 standards: the added cost of $89 per snowmobile is offset by $191 in fuel savings and improved performance, according to EPA, for a net savings of $102 per vehicle.\nThe costs of each of the three phases are incremental. Thus, when fully implemented, the standards would cost an additional $293 per snowmobile, according to the Agency; lifetime operating costs, however, would decline by $534. Combining these two factors, the standards would decrease total costs by $241 per snowmobile when fully implemented.\nThe standards do not include noise limits. While acknowledging that the Agency has the authority to set noise standards, the proposal stated that \"at this time we do not have funding to pursue noise standards for nonroad equipment that does not have an existing noise requirement.\" An Agency source confirmed that the proposed standards would have essentially no impact on noise. Despite receiving comments from a number of organizations that the standards should address noise, the Agency restated in its response to public comments that it would not address the issue, adding that Congress would need to provide appropriations for the Agency to begin any noise control initiative.\nAs noted, the National Park Service promulgated noise standards applicable to snowmobiles entering its three Yellowstone area park units beginning December 17, 2003, under the winter use rule that was vacated; it restated these standards in its Temporary Winter Use Plan that took effect in 2004. According to Park Service estimates, these standards would require a reduction of about 50% in noise emitted by the affected snowmobiles, compared to conventional uncontrolled snowmobiles.", "Both the snowmobile industry and environmentalists challenged EPA's standards in court. On June 1, 2004, the U.S. Court of Appeals for the D.C. Circuit vacated the standard for nitrogen oxides and remanded the 2012 standards for hydrocarbons and carbon monoxide. The court directed EPA \"to clarify (1) the statutory and evidentiary basis of the Agency's assumption that the standards must be sufficiently lenient to permit the continued production of all existing snowmobile models, and (2) the analysis and evidence underlying the Agency's conclusion that advanced technologies can be applied to no more than 70% of new snowmobiles by 2012.\" EPA has not yet responded to the remand, and does not expect to do so until 2010 at the earliest.\nThe International Snowmobile Manufacturers Association (ISMA) has argued that EPA grossly underestimated the costs of compliance, and that the standards will lead to the elimination of entry-level snowmobiles from the market. Cleaner, quieter machines can be made, according to ISMA, but they cost more, are heavier, and can only be ridden on groomed roads. ISMA has estimated that the cleanest four-stroke engines cost an additional $1,700 (about 30% more than average prices). Even modest improvements to two-stroke engines will cost $350-$400 per machine, according to the Association.\nBluewater Network, on the other hand—the environmental group most identified with snowmobile issues—feels the rules should be much stronger. In comments submitted to EPA, Bluewater encouraged the Agency to set standards \"that can only be met using the best available technology, which we believe to be four-stroke engines with particle traps and three-way catalysts.\" They also want mandatory emission labels for the machines, and are disappointed that the Agency chose not to set noise standards.\nBluewater has pointed to the Clean Snowmobile Challenge, an annual design contest open to college engineering students and sponsored by the Society of Automotive Engineers, as demonstrating that machines far cleaner than EPA's standards are feasible. The winning entry in the 2001 Challenge reduced CO 78.8% and unburned hydrocarbons 97.6% and significantly reduced noise, at a cost of $600. In the 2006 contest, the winning entry reduced CO emissions 83% and unburned hydrocarbons more than 99% at a cost of $314. \"If college students are able to build cleaner and quieter machines, surely the billion-dollar snowmobile industry can do as well,\" said Bluewater Public Land Director Sean Smith.\nBoth Bluewater and the snowmobile manufacturers argue that EPA has misinterpreted the legal authority on which the new standards rely. Bluewater (as well as other environmental groups and the National Association of Clean Air Agencies (formerly STAPPA), the association representing state air pollution program administrators, argue that EPA has promulgated standards that are less stringent than the law requires. Section 213(a)(3) of the Clean Air Act requires the Agency to promulgate standards that \"achieve the greatest degree of emission reduction achievable ... giving appropriate consideration to the cost ... and to noise, energy, and safety factors....\" Four-stroke engine technology, achieving greater emission reductions than the Agency promulgated, is already available, they note—machines using this technology are on the market. Cost, noise, and energy factors cannot be used as arguments against adoption of this technology: the lifetime cost of such engines would be lower than that of current engines, according to the Agency's own analysis; the technology uses far less energy, and could be substantially quieter than current engines. Thus, according to these groups, the Agency's standards do not meet the requirements of the act.\nSnowmobile and other nonroad-vehicle manufacturers, on the other hand, focus on Section 213(a)(2) of the act, which ties the Agency's authority to regulate nonroad engines to a finding by the Administrator that emissions from such engines or vehicles \"are significant contributors to ozone or carbon monoxide concentrations in more than 1 area which has failed to attain the national ambient air quality standards for ozone or carbon monoxide.\" EPA addressed this issue before beginning the process of developing regulations: on June 17, 1994, the Agency made an affirmative determination that emissions from nonroad engines and vehicles are significant contributors to ozone, CO, and particulate matter in more than one nonattainment area. On December 7, 2000, the Agency issued a finding that recreational vehicles (including snowmobiles) are among the specific categories of nonroad vehicles that contribute to such pollution. In its October 5, 2001 Federal Register notice, which proposed the snowmobile standards, the Agency identified 7 areas in Alaska, Washington, Colorado, Oregon, and Montana that have significant populations of snowmobiles and have failed to attain the air quality standard for CO.\nManufacturers of snowmobiles and other nonroad vehicles note, however, that carbon monoxide concentrations have declined [chiefly as a result of auto emission standards] and that none of the 7 areas identified by the Agency has exceeded the CO standard in recent years, even if they were still formally classified as nonattainment at the time of the proposal. CO nonattainment today is essentially a problem in urban \"hot spots,\" according to manufacturers, and snowmobiles make no contribution to that problem.", "Members of Congress, both from western and other states, have expressed an interest in whether there will be continued snowmobile access to national parks. At least five hearings have been held on these issues since the 106 th Congress, and Congress has on three occasions approved language in appropriations bills to require that NPS Temporary Winter Use Rules permitting snowmobiles in Yellowstone and Grand Teton National Parks and on the Rockefeller Memorial Parkway remain in effect for the year covered by the appropriations bill. The FY2008 Interior appropriations bill ( S. 1696 , §116), as reported by the Senate Appropriations Committee ( S.Rept. 110-91 ), would have continued this temporary solution, stipulating that Yellowstone's interim winter management rule remain in effect during the 2007-2008 winter season, but the final Consolidated Appropriations Act ( P.L. 110-161 ) did not include such language. Lawsuits challenging the NPS Final Winter Use Plan did not request preliminary injunctions, however, allowing local operations to continue under the same temporary rules that had been in effect for the previous three years.\nIn the 108 th Congress, Representative Holt twice attempted to amend Interior Department Appropriation bills to prohibit spending to manage recreational snowmobile use in the three Yellowstone area park units except in accordance with the Clinton Administration rule phasing out snowmobiles. The first such amendment ( H.Amdt. 266 to H.R. 2691 ) was defeated on a tie vote, 210-210, July 17, 2003. The second attempt ( H.Amdt. 563 to H.R. 4568 ) was defeated on June 17, 2004, by a vote of 224-198. Other legislation to prohibit snowmobile access to national parks and to grant continued access was introduced, but not acted on, in the 107 th and 108 th Congresses.", "Snowmobile issues remain far from resolved, despite actions by Congress, EPA, the National Park Service, and the courts. Congress and the NPS have provided a temporary resolution of the Yellowstone access issue since 2004, but the issue is now returning to the limelight, as a federal district court has vacated final regulations for Yellowstone access for a third time. The development of these rules showed that public interest in snowmobile issues remains significant, and that the National Park Service's preferred alternatives for snowmobile access to Yellowstone remain overwhelmingly unpopular. The draft Yellowstone area Winter Use Plan that was open for comment from March through June 2007 generated 122,190 public comments, of which only 193 (0.1%) supported the NPS preference. Among those opposed, environmental groups and individuals that want snowmobiles banned from the park form a solid majority. They are joined by 7 of the 8 living former directors of the National Park Service itself. The Environmental Protection Agency was also critical of the spring 2007 preferred alternative, noting that it would result in five times more carbon monoxide emissions and 17 times more hydrocarbon emissions than the exclusive use of multi-passenger snowcoaches. EPA concluded that \"either the preferred alternative should be modified or a different alternative should be selected that meets the resource protections identified by the National Park Service.\"\nThis level of opposition would seem to guarantee that Members of Congress will retain an interest in the resolution of these issues. Continued action is also likely in the courts, as the National Park Service responds to the latest court decision." ], "depth": [ 0, 1, 1, 2, 2, 2, 1, 2, 2, 2, 1, 1 ], "alignment": [ "h0_title h2_title h1_title", "h2_full", "h0_title h2_full", "", "h0_full h2_full", "h0_full", "h0_title h1_full", "h0_full h1_full", "h0_full", "", "", "h0_full" ] }
{ "question": [ "Why has the use of snowmobiles in national parks been controversial?", "How has the National Park Service tried to address this issue?", "What challenges have these plans faced?", "How did stakeholders respond to the plan?", "What is the implication of these plans for the upcoming winter season?", "In what way are snowmobiles a significant cause of pollution?", "How has the EPA regulated snowmobile pollution?", "How has the issue of noise pollution from snowmobiles been addressed?", "What has characterized snowmobile use in national parks in recent years?", "How did the Clinton Administration respond to snowmobiling in the parks?", "How did the Bush administration modify these rules?", "How have courts decided on these rules?", "What plan has Yellowstone been operating under in recent years?" ], "summary": [ "For at least a decade, the use of snowmobiles in Yellowstone and other national parks has been controversial because of the potential impacts on wildlife and, until recently, the absence of standards for snowmobile emissions and noise.", "The National Park Service has attempted to address the issue by developing Winter Use Plans that establish regulations and limits at individual park units.", "These plans have been the subject of numerous legal challenges. On September 15, 2008, the U.S. District Court for the District of Columbia vacated the National Park Service's most recent Winter Use Plan for Yellowstone National Park. The plan would have allowed up to 540 snowmobiles per day into the park beginning in the 2008-2009 winter season, provided that they met noise and emission standards and that the riders were accompanied by commercial guides.", "The NPS plan was opposed by environmental groups and the vast majority of public commenters.", "With the rule vacated, it is unclear what limits will apply in the coming winter season.", "Current model snowmobiles emit significant quantities of pollution. In one hour, a new model snowmobile emits as much hydrocarbon as a 2008 model auto emits in about four years (54,000 miles) of driving.", "The Environmental Protection Agency (EPA) promulgated regulations limiting air emissions from snowmobiles in 2002, but the regulations have the effect of allowing the machines to emit as much hydrocarbon pollution in a day as a new auto emits in its lifetime.", "Snowmobiles also emit significant amounts of noise. EPA has no snowmobile noise standards.", "The National Park Service has allowed snowmobile use in 43 units of the national park system, in many cases in apparent violation of Executive Orders from the Nixon and Carter years.", "Under the Clinton Administration, the Park Service decided that the emissions and noise from snowmobiling were incompatible with protecting the park, and promulgated rules that would have phased out snowmobiles from Yellowstone by the winter of 2003-2004.", "The Bush Administration revisited these rules and announced modifications in March 2003 that would have allowed continued use of snowmobiles.", "The 2003 rules and the Clinton Administration action have been the subject of conflicting court rulings: a federal court in Wyoming has vacated and remanded the Clinton Administration's phaseout, while a D.C. federal court has vacated and remanded the Bush Administration rules.", "Outside of Alaska (where snowmobiles are permitted in most national parks by law), the most popular national park for snowmobiling has been Yellowstone, which saw more than 87,000 snowmobile visits in the 2001-2002 winter season. For the last four winters, Yellowstone and two neighboring park units have operated under a temporary plan that permits 720 snowmobiles per day in Yellowstone, but sets standards for their emissions and requires snowmobilers to be accompanied by commercial guides. Under these rules, snowmobile visits have declined by two-thirds." ], "parent_pair_index": [ -1, 0, 1, 2, 2, -1, 0, -1, -1, -1, 1, 1, -1 ], "summary_paragraph_index": [ 0, 0, 0, 0, 0, 1, 1, 1, 2, 2, 2, 2, 2 ] }
CRS_R45206
{ "title": [ "", "Introduction", "The United States and the United Nations", "Congress and U.N. Funding", "How the U.N. System Is Funded", "Assessed Contributions", "U.N. Regular Budget", "U.N. Specialized Agencies", "U.N. Peacekeeping Operations", "Voluntary Contributions", "Congressional Authorization and Appropriations", "Major U.N. Funding Categories and Accounts", "Timing of U.S. Contributions", "Determining Total U.S. Appropriations to the United Nations", "Selected U.S. Contributions: FY2015 to FY2019", "Trump Administration FY2019 Budget Request", "U.S. Contributions to the Regular Budget and Specialized Agencies", "U.S. Contributions to U.N. Peacekeeping Operations", "U.S. Contributions to U.N. Funds and Programs", "U.S. Contributions to U.N. Humanitarian-Related Entities", "Selected Policy Issues", "U.S. Assessment Levels", "Congressional Withholdings", "U.S. Arrears to the United Nations", "Congressional Reporting Requirements", "U.S. Funding and U.N. Reform", "U.N. Voting Records and U.S. Foreign Assistance", "Looking Ahead: U.N. Funding and Evolving U.S. Foreign Policy" ], "paragraphs": [ "", "The United States is the largest single financial contributor to the United Nations (U.N.) system. Congress plays a key role in shaping U.S. policy at the United Nations through funding and oversight. Each fiscal year (FY), Congress authorizes and appropriates U.S. contributions to a range of U.N. entities. In FY2017, the United States provided more than $8.5 billion to the U.N. regular budget, specialized agencies, peacekeeping operations, and funds and programs.\nOver the decades, congressional debates on U.N. funding have generally focused on three key issues: the appropriate level of U.S. contributions to the U.N. system; whether U.S. funds are being used effectively; and how changes in U.S. funding might further U.S. policy priorities in the U.N. system. Congress is currently considering President Trump's FY2019 budget request which, if enacted, would significantly reduce U.S. funding to U.N. bodies.\nThis report provides an overview of the processes and mechanisms for U.N. funding. It discusses how the United States funds the United Nations and outlines selected U.S. contributions to U.N. bodies. The final section presents selected policy issues for Congress, including debates over U.S. assessment levels, the possible impacts of U.S. withholdings, U.S. arrears to the United Nations, and the relationship between U.S. funding and U.N. reform.", "The United States is one of the founding members of the United Nations and continues to play a lead role in the organization today. U.S. participation in and funding of the United Nations is authorized through the U.N. Participation Act of 1945, as amended (22 U.S.C. 287 et seq.). Both Congress and the executive branch shape U.S. policy toward the organization. Congress authorizes, appropriates, and oversees U.S. funding to the United Nations, while the executive branch represents the United States in U.N. bodies through the State Department and the U.S. Mission to the United Nations (USUN). The President nominates Ambassadors for U.N. posts, and the Senate provides advice and consent for executive branch nominees. USUN is led by Ambassador Nikki Haley, the current U.S. Permanent Representative to the United Nations.\nThe United States is a member of several key U.N. bodies. It serves as one of five permanent members of the Security Council (with veto power over Council resolutions), along with China, France, Russia, and the United Kingdom. It is also a member of the General Assembly and 12 specialized agencies. The United States is often elected to leadership positions on U.N. boards, councils, and other entities.", "Members of Congress hold varied perspectives on the appropriate level and extent of U.S. funding to the United Nations. Generally, Congress supports the United Nations and its overall mission; it provides funding to U.N. bodies each year, and often uses U.N. mechanisms to further U.S. foreign policy objectives. In FY2017, the last year in which comprehensive information is available, U.S. funding included\n$1 billion in assessed contributions to the U.N. regular budget and specialized agencies; $1.9 billion in assessed contributions to U.N. peacekeeping operations; $295 million in voluntary contributions to U.N. funds and programs; and $5.6 billion in voluntary contributions to U.N. humanitarian-related entities ( Figure 1 ).\nAt the same time, some policymakers have been critical of the United Nations, especially when they believe U.N. actions may not align with U.S. policy priorities. Many Members have also expressed frustration with U.N. bodies or activities that, in their view, are not operating efficiently or lack effective accountability mechanisms.\nOver the years, Congress has sought to address the aforementioned concerns by raising or lowering U.N. funding levels and placing financial conditions or limits on U.S. contributions to U.N. entities. Some Members have also proposed eliminating all U.S. funding to the organization or providing only voluntary, and not assessed, contributions. In addition, Congress conducts oversight of U.N. funding by holding committee hearings, enacting reporting requirements, or consulting with executive branch agencies. It also queries executive branch nominees for U.N.-related posts, and can investigate U.N. entities or activities funded by the United States.", "The U.N. system is made up of interconnected components that include specialized agencies, voluntary funds and programs, peacekeeping operations, and the U.N. organization itself. Article 17 of the U.N. Charter requires each U.N. member to contribute to the expenses of the organization. U.N. entities are financed largely by contributions from members, which are made through two main channels: assessed and voluntary contributions.", "Members of U.N. entities are assessed a percentage of the organization's total budget. These assessments, which are determined by the members of each organization, provide U.N. entities with a regular source of income to staff and implement authorized programs. Payment of such contributions is a treaty obligation accepted by a country when it becomes a member. The U.N. regular budget, U.N. peacekeeping operations, and U.N. specialized agencies are funded mainly by assessed contributions, although some of these entities also receive voluntary funding.", "U.N. members pay assessed contributions to the U.N. regular budget, which funds the core administrative costs of the organization. The regular budget is negotiated and adopted by the General Assembly for a two-year period, or biennium, and is usually revised mid-budget period to reflect new programs or other changes. As outlined in the U.N. Charter, budget decisions are made by a two-thirds majority of members present and voting in the Assembly, with each country having one vote. Since the late 1980s, however, decisions related to the budget have, with few exceptions, been adopted by consensus. The approved U.N. regular budget for the 2018-2019 biennium is $5.39 billion (about $2.7 billion per year).\nThe U.N. General Assembly negotiates a scale of assessments for the regular budget every three years based on a country's \"capacity to pay.\" The Assembly's Committee on Contributions recommends assessment levels based on gross national income and other economic data, with a minimum assessment of 0.001% and a maximum assessment of 22%. The United States is currently assessed at 22% of the regular budget, the highest of any U.N. member state. Other top contributors include Japan, China, Germany, and France; the largest 12 contributors account for nearly 75% of the total regular budget ( Figure 2 ). The Assembly is expected to adopt new assessment rates for 2019 through 2021 in December 2018.", "There are currently 15 specialized agencies in the U.N. system, including the International Atomic Energy Agency (IAEA) and the World Bank Group ( Figure 3 ). Each of these entities is a legally independent intergovernmental organization with its own constitution, rules, membership, organs, and financial resources, including scale of assessments. Some agencies follow the assessment levels for the U.N. regular budget, while others use their own formulas. The United States is a member of all specialized agencies except for the U.N. Industrial Development Organization (UNIDO) and U.N. World Tourism Organization (WTO); it is currently in the process of withdrawing from the U.N. Educational, Scientific, and Cultural Organization (UNESCO).", "U.N. members provide assessed contributions to U.N. peacekeeping operations. These operations undertake activities related to cessation of armed conflict and postconflict assistance. As of early 2018, there are 14 U.N. peacekeeping missions worldwide with more than 100,000 military, police, and civilian personnel from over 120 countries. The United States, as a permanent member of the Security Council, plays a key role in establishing, renewing, and authorizing funding for such operations. U.N. Security Council resolutions establishing peacekeeping operations specify how each operation will be funded. In most instances, the Security Council authorizes the General Assembly to create a separate special assessed account for each operation that is funded by contributions from U.N. members. The total approved budget for U.N. peacekeeping operations for the current year (July 1, 2017, to June 30, 2018) is $6.8 billion.\nThe General Assembly adopts the peacekeeping scale of assessments every three years. The scale is based on a modification of the U.N. regular budget scale, with the five permanent U.N. Security Council members assessed at a higher level than they are for the U.N. regular budget ( Figure 4 ). The U.S. peacekeeping assessment of 28.43% is the highest of any U.N. member. (Since the mid-1990s, Congress has capped the U.S. assessment at 25%.) Other key contributors to U.N. peacekeeping include Japan, the United Kingdom, and Germany; the top 10 contributors account for about 80% of total peacekeeping assessments.", "Voluntary contributions finance special funds, programs, offices, and other entities of the U.N. system ( Figure 5 ). No member is required to provide such funding; governments may decide what, if any, contributions will be made during each budget cycle. Many U.N. entities such as the U.N. Development Program (UNDP), U.N. Children's Fund (UNICEF), and U.N. Environment Program (UNEP) depend on voluntary funding; consequently, their budgets may fluctuate from year to year. Depending on donor preferences, contributions might be used to fund the core budgets of these bodies or may be earmarked for specific activities.", "Congress has generally authorized the majority of assessed and voluntary contributions to the U.N. system as part of Foreign Relations Authorization Acts, with appropriations provided to the Department of State and U.S. Agency for International Development (USAID) to meet obligations. When authorization bills are not enacted, Congress has waived the authorization requirements and appropriated funds through U.N. and U.N.-related accounts in annual Department of State, Foreign Operations, and Related Programs (SFOPS) appropriations acts. In some cases, U.S. contributions to U.N. bodies might be funded through other appropriations acts.\nA number of congressional committees are responsible for overseeing different aspects of U.N. funding. Authorizing committees include the Senate Committee on Foreign Relations and House Committee on Foreign Affairs. Most U.N.-related appropriations fall under the jurisdiction of the State-Foreign Operations Subcommittees of the House and Senate Committees on Appropriations. Some U.N. activities—particularly those related to global health, labor, defense, or the environment—might fall under the jurisdiction of other authorizing and appropriations committees such as Labor-Health and Human Services, Interior and the Environment, or Defense.", "Most U.S. funding to the United Nations is authorized and appropriated to the State Department or USAID through annual SFOPS appropriations acts. Some U.N. entities are funded through more than one account, and organizations with assessed budgets might also receive U.S. voluntary contributions. SFOPS funding can generally be divided into four categories.\nA ssessed contributions to the U.N. regular budget and specialized agencies are funded primarily through the State Department's Contributions to International Organizations (CIO) account. Congress generally appropriates a lump sum to CIO based on estimates of U.S. assessments. A ssessed contributions to U.N. peacekeeping are funded mainly through the State Department's Contributions for International Peacekeeping Activities (CIPA) account. Congress usually appropriates a lump sum to CIPA based on projected peacekeeping operations budgets and U.S. assessments. V oluntary contributions to U.N. funds and program s are funded through the International Organizations and Programs (IO&P) account. Congress usually specifies funding levels for each U.N. organization in enacted SFOPS bills or in accompanying reports or explanatory statements. V oluntary contributions to U.N. humanitarian-related entities are funded through the global humanitarian accounts, including the State Department's Migration and Refugee Assistance (MRA) and Emergency Refugee and Migration Assistance (ERMA) accounts, and USAID's International D isaster Assistance (IDA), and Food for Peace ( P.L. 480, Title II ) accounts. Congress generally appropriates overall funding for each of these accounts, while the executive branch determines how funds are allocated based on humanitarian needs and U.S. policy priorities.", "The process for authorizing and appropriating funding to the United Nations is sometimes complicated by several factors. Perhaps the most significant of these is the difference between the U.S. and U.N. fiscal years. The U.S. fiscal year (October 1 to September 30) does not align with the U.N. regular budget fiscal year (January 1 to December 31) or the U.N. peacekeeping fiscal year (July 1 to June 30). As a result, U.S. payments are often behind, and funding levels reported by the United States and U.N. system may not match. Other factors include modifications to U.N. budgets due to the practice of \"recosting,\" periodic changes to U.S. assessment levels, unforeseen circumstances (such as the establishment of a new peacekeeping mission), and U.S. withholdings—each of which can cause funding shortfalls or overruns in U.N. or U.N.-related accounts. Additionally, since the 1980s the State Department has paid nearly all of its assessments on a deferred basis, causing some U.S. payments to be delayed by a year. For example, calendar year 2018 U.S. assessments will likely be paid with funds from U.S. FY2019.\nOver the years, Congress and the executive branch have sought to address these issues through a range of methods. To increase budget flexibility, policymakers have requested and allowed for multiyear funding for certain U.N.-related accounts. In some instances, they have also permitted the application of U.N. credits to outstanding balances, transferred funding to or from other accounts, or, when available, applied carryover funding from previous fiscal years. In other cases, Congress or the executive branch has declined to cover funding shortfalls, causing the United States to fall behind in payments and, in some cases, accumulate arrears to U.N. entities.", "An ongoing challenge facing U.S. policymakers is tracking and determining the full scope of U.S. funding to the U.N. system across all U.S. government agencies and accounts. There is no \"one number\" that represents total U.S. funding to the U.N. system at any given point in time. This is due to the complicated nature of U.S. and U.N. budget processes, the decentralized structure of the United Nations, and the range of U.S. government agencies, departments, and offices that, either directly or indirectly, fund various U.N. entities and activities. Over the decades, Congress has enacted several U.N. funding-related reporting requirements to help address this issue. While some have provided useful snapshots of U.S. funding during particular time periods or to select U.N. bodies, for a variety of reasons few have consistently or comprehensively captured the full scope of U.S. contributions to the entire U.N. system. Consequently, the U.S. funding described in this report represents the majority, but not all, of U.S. contributions to the U.N. system.", "This section outlines selected U.S. contributions to the U.N. system through annual State, Foreign Operation, and Related Programs (SFOPS) appropriations acts since FY2015, including the President's FY2019 budget request. In some cases, FY2017 funding levels are used as the main point of comparison because U.N.-specific FY2018 appropriations have not been finalized. In general, Congress appropriates lump sums to the U.N.-related accounts and does not direct U.S. contributions to specific U.N. entities, although it could opt to do so through line item appropriations or other enacted legislation.", "The Trump Administration has expressed general support for the overall mission of the United Nations. At the same time, President Trump has criticized the organization for its lack of effectiveness and argued that the United States contributes a disproportionate amount of funding to U.N. bodies. The Administration's FY2019 budget request appears to reflect these concerns. Specifically, it proposes\na 25% reduction from enacted FY2018 funding for assessed contributions to the entire CIO account based on the expectation that U.N. organizations will \"rein in costs, enhance their accountability and transparency, improve efficiency and effectiveness, and that the funding burden be shared more equitably\"; a 13% reduction from enacted FY2018 funding for U.N. peacekeeping operations, based on the Administration's commitment to seeking reduced costs by \"reevaluating the mandates, design, and implementation\" of missions, and sharing the financial burden \"more fairly\" with other U.N. members; zeroing out voluntary contributions to U.N. funds and programs typically funded through the IO&P account, such as UNICEF and UNDP; and a 32% decrease in humanitarian assistance from FY2018 funding levels and the elimination of the Food for Peace (P.L. 480, Title II) and ERMA accounts, which could impact humanitarian-related funding to some U.N. entities.\nIf enacted, the proposed funding levels for U.S. contributions to assessed U.N. budgets would fall short of actual U.S. assessments, causing the United States to fall behind in its payments and possibly accumulate arrears to U.N. bodies.", "The State Department's Contributions to International Organizations (CIO) account funds assessed contributions to 45 international and regional organizations, including the U.N. regular budget and U.N. specialized agencies. The United States is assessed 22% of the U.N. regular budget, while U.S. assessments to the U.N. specialized agencies vary by organization.\nFor FY2019, the President requested $1.095 billion for the entire CIO account, a $372 million (25%) decrease from the enacted FY2018 funding of $1.467 billion. Of the FY2019 CIO request, $863.39 million is designated for U.N. entities. This represents a $193 million (or 18%) decrease from actual FY2017 U.N. CIO funding of $1.056 billion ( Table 1 ). If the President's FY2019 CIO request were to be enacted, the United States would likely pay less than what it owes to many U.N. entities, creating a funding shortfall in the CIO account and possibly leading to the accumulation of U.S. arrears in some U.N. bodies. For a breakdown of CIO account funding by U.N. entity, including U.S. assessment levels, see Appendix B .", "U.S. assessed contributions to U.N. peacekeeping operations are funded primarily through the State Department's Contributions for International Peacekeeping (CIPA) account, which includes most U.N. peacekeeping operations, the U.N. international criminal tribunals, and mission monitoring and effectiveness support funds. One peacekeeping mission, the U.N. Support Office in Somalia (UNSOS), is funded through the Peacekeeping Operations (PKO) account, which funds most non-U.N. multilateral peacekeeping and regional stability operations. Two others, UNTSO (Middle East) and UNMOGIP (India and Pakistan), are funded through the U.N. regular budget in the CIO account.\nFor FY2019, the Trump Administration has proposed $1.19 billion for the CIPA account, a $186 million (13%) decrease from FY2018 enacted funding of $1.382 billion, and a $711 million (37%) decrease from the actual FY2017 contributions of $1.9 billion. In FY2017, CIPA funding declined by $553 million (22%) from FY2016 levels ( Table 2 ). According to the Administration, the FY2019 request is based on the expectation that the unfunded portion of U.S. assessed expenses \"will be met through a combination of a reduction in the U.S. assessed rate of contributions, and significant reductions in the number of U.N. peacekeeping missions.\"\nSeveral policy changes account for recent declines in U.S. contributions to U.N. peacekeeping operations. The U.S. assessment for U.N. peacekeeping operations is 28.43%; however, since the mid-1990s Congress has capped the U.S. assessment at 25%—at times leading to funding shortfalls. Over the years, the State Department and Congress covered these shortfalls by raising the cap for limited periods and allowing for the application of U.N. peacekeeping credits (excess U.N. funds from previous peacekeeping missions) to be applied to U.S. outstanding balances. For several years, these actions resulted in full U.S. payments to U.N. peacekeeping; however, in FY2017 and FY2018 Congress declined to raise the cap, and since mid-2017 the Trump Administration has allowed for the application of peacekeeping credits up to, and not beyond, the 25% cap. The State Department estimates that the United States will accumulate arrears ($274.6 million in FY2017 and $251.6 million in FY2018) mainly because of these changes. For a breakdown of CIPA funding by U.N. peacekeeping operation, see Appendix C .", "Some U.S. voluntary contributions to U.N. entities and other international organizations are funded through the International Organizations and Programs (IO&P) account; examples include UNDP and UNICEF among others.\nSimilar to its FY2018 budget proposal, the Trump Administration's FY2019 request eliminates the IO&P account and suggests that some unspecified activities currently funded through the account could receive contributions through a proposed Economic Support and Development Fund ( Table 3 ). For FY2018, Congress provided $339 million for the entire IO&P account, of which $296.2 million was for U.N. entities. Organizations that received the most funding include UNICEF ($137.5 million), UNDP ($80 million), and the U.N. Population Fund (UNFPA), if eligible ($32.5 million). Appendix D provides a breakdown of IO&P funding by U.N. entity.", "The majority of U.S. humanitarian assistance is provided to U.N. entities through the global humanitarian accounts, which fund voluntary contributions to U.N. entities. These contributions, which represent the bulk of U.S. funding to the United Nations, are sometimes viewed through a different lens because they do not fall under the umbrella of U.N. assessed contributions. Yet total U.S. funding to U.N. humanitarian-related activities is often equal to or greater than U.S. contributions to peacekeeping, the regular budget, and specialized agencies combined. Because the contributions are voluntary, funding to these organizations tends to fluctuate from year to year depending on U.S. priorities and global humanitarian needs ( Table 4 ).\nIn FY2017, the last year for which comprehensive information is available, contributions to U.N. entities through these accounts totaled nearly $5.6 billion, compared to about $4.16 billion in FY2016 and $3.39 billion in FY2015. (FY2018 funding for U.N. entities has not yet been finalized.) Similar to previous Administrations, the FY2019 budget proposal does not outline how humanitarian funding might be distributed among U.N. entities or if it intends to reduce or expand U.S. contributions to such organizations. A detailed breakdown of global humanitarian-related funding by U.N. entity is provided in Appendix F .", "Members of Congress have debated the level and extent of U.S. funding to the United Nations since the United States first joined the organization in 1945. Over the decades, a number of recurring policy tools and issues have emerged, many of which may continue to be discussed in the 115 th Congress.", "For several decades, many U.S. policymakers, including some Members of Congress, have maintained that the U.S. assessments for the U.N. regular budget and U.N. peacekeeping operations are too high. In particular, some contend that current assessment levels for the regular budget result in a limited number of countries, particularly the United States, providing the bulk of funding while having what they view as minimal influence in the U.N. budget process. Some policymakers have expressed similar concerns about the U.S. peacekeeping assessment, which Congress has capped at 25%. They maintain that a cap on U.S. assessments plays an important role in keeping the current U.S. assessments from rising. On the other hand, some argue that the current assessment levels allow the United States to share peacekeeping, development, and humanitarian funding with other governments (often referred to as burden sharing) at a lower cost than if it were to act unilaterally. More broadly, they contend that current assessment levels reflect the U.S. commitment to the United Nations and allow the United States to pursue its policy priorities and maintain its influence in U.N. bodies. Some suggest that if the United States were to decrease its contributions to the United Nations, other countries with priorities at odds with the United States could step in and undermine U.S. interests.\nWith these issues in mind, some Members of Congress may wish to monitor ongoing U.N. member states negotiations regarding the scale of assessments for the years 2019 through 2021. It is expected that the Assembly will adopt new regular budget and peacekeeping assessments in December 2018. The Trump Administration has stated that it will seek to reduce the U.S. peacekeeping assessment to the statutory cap of 25%. The last time there were significant changes to the U.N. scales of assessments was in 2000, when the U.S. regular budget assessment decreased from 25% to 22%, and the peacekeeping assessment decreased from over 30% to about 26% (it has since risen to 28.43%).", "Withholding funding from U.N. entities is one of the most common mechanisms by which Congress asserts or seeks to influence U.S. policy at the United Nations. In general, congressional withholdings fall into three categories:\nC aps on payment of U.S. assessments . Congress has at times limited U.S. payments to assessed budgets due to concerns that U.S. assessments were too high. In 1990s, for example, Congress capped the U.S. contribution to the U.N. regular budget at 22% and the U.N. peacekeeping assessment at 25%. F ull or partial withholdings from specific U.N. entities or activities . Over the years, and for a range of reasons, Congress has withheld or placed conditions on funding to selected U.N. entities or activities—some of which have required executive branch waivers or certifications to release funds ( Table 5 ). Co ngressional holds . Members of Congress have sometimes placed holds on U.N. funding through foreign affairs appropriations for policy reasons. Holds are generally requested by members of appropriations committees and, in many cases, little information is publicly available on the details of the hold.\nAn additional category of withholding involves the executive branch. If Congress does not enact legislation that authorizes or appropriates funding to a specific U.N. entity, the Administration can unilaterally decide to withhold partial or full funding to such organizations, in some instances without being required to notify or consult with Congress.\nCongressional views on the role and effectiveness of U.S. withholdings vary. Some maintain that placing limitations or conditions on U.S. funding may weaken U.S. influence and standing within the organization, thereby undercutting the United States' ability to conduct diplomacy and make foreign policy decisions both in and out of the U.N. system. Some also argue that withholding U.S. assessed payments to the United Nations infringes on U.S. treaty obligations. On the other hand, some suggest that the United States should use its position as the largest U.N. financial contributor to push for the implementation of policies that are in the best interests of the United States. They contend that despite continued U.S. diplomatic and political pressures, U.S. foreign policy priorities are not adequately reflected in many U.N. bodies.\nThe overall impact of U.S. withholdings on U.N. budget and operations depends on the origin of the program or entity's funding. For example, if an activity is funded by the U.N. regular budget and the United States withholds a proportionate share of its normal contributions, the cost of the program will most likely be covered, at least temporarily, by surplus regular budget funds. In such cases, a U.S. withholding would be largely symbolic and have little or no immediate impact on the program's operation or funding levels. On the other hand, if the United States withholds all or part of its assessed funding—or its voluntary contributions—from an entity funded primarily by member contributions, the impact of the U.S. withholding on the operations and budgets of such organizations could be significant—particularly for U.N. bodies for which the United States accounts for almost one-quarter of total funding.", "Some Members of Congress have demonstrated an ongoing interest in the accumulation of U.S. arrears to U.N. entities. Each U.N. body has its own payment timeline and system for defining and tracking arrears, which are generally outlined in the organization's constitution, statutes, or financial regulations. For instance, assessed contributions to the U.N. regular budget and U.N. peacekeeping operations are due and payable within 30 days of the receipt of notice from the U.N. Secretary-General. As of January 1 of the following calendar year, unpaid balances of such contributions are considered to be arrears.\nA consequence of accumulating arrears to the United Nations is the loss of voting rights in the General Assembly. Under Article 19 of the U.N. Charter, members who are in arrears \"shall have no vote in the General Assembly if the amount of its arrears equals or exceeds the amount of the contributions due from it for the preceding two full years.\" In practice, the \"amount of the contributions\" refers to both assessed contributions to the U.N. regular budget and to U.N peacekeeping operations. Each U.N. specialized agency has its own rules and guidelines for nonpayment of arrears and the possible effects on membership.\nThe causes of U.S. arrears often vary by U.N. entity, with total amounts fluctuating depending on the time of year. Congressional actions such as caps on assessments and withholdings from specific U.N. entities can play key roles in accumulating arrears. The aforementioned practice of deferred payments, which began under the Reagan Administration, also contributes. In the 1990s, the United States came close to losing its vote in the General Assembly under Article 19 due to substantial outstanding balances for the U.N. regular budget and U.N. peacekeeping. To prevent the loss of a vote, Congress and the Clinton Administration negotiated the \"Helms-Biden Agreement\" in 1999 that established conditions under which some U.S. arrears were paid.\nAs of September 2017, the State Department reports that total estimated U.S. arrears to the U.N. regular budget are $347 million, while estimated arrears to U.N. peacekeeping budgets are $536 million. These arrears are the result of a combination of U.S. withholdings, deferred payments, and the U.N. peacekeeping cap. In some cases, the State Department plans to pay these arrears, but in other cases it does not. Congressional views on the payment of U.S. arrears are mixed. Some Members argue that they should be fully paid, while others do not recognize U.S. outstanding balances as arrears and claim the United States is under no obligation to pay them.", "Recognizing the complexity of tracking U.N. funding, over the years Congress has enacted several executive branch reporting requirements to help determine the full level and extent of U.S. contributions. The first of these reports, United States Contributions to International Organizations, has been published annually since 1952; in FY2016 Congress expanded its requirements to include information on the source of funds—including federal agency and account—and a description of the purpose of such funds disbursed in the previous year to international organizations in which the United States is a participant.\nDuring the past decade, Congress has periodically enacted additional reporting requirements. From FY2007 to FY2010, defense authorization legislation required that the Office of Management and Budget (OMB) submit an annual report to Congress listing all assessed and voluntary contributions to the United Nations and its related bodies. More recently, the Department of State Authorities Act, FY2017 ( P.L. 114-323 ) directed that OMB annually submit to Congress a report on all U.S. assessed and voluntary contributions to the United Nations with a value greater than $100,000, including in-kind services, during the previous fiscal year. Some of these more recent reporting requirements are similar to, and overlap with, previously enacted requirements. In certain cases, the executive branch has combined multiple requirements into one report.\nA key challenge to compiling U.N. funding-related data is one of self-reporting. According to the State Department, each participating agency is responsible for the completeness and accuracy of the information provided in the reports, and not all executive branch agencies provide the requested data. The agencies charged with compiling the reports, such as the State Department or OMB, often lack the authority to require other agencies to respond accurately or within a given timeframe, if at all. Consequently, some reporting requirements are incomplete and may not illustrate the full scope of U.S contributions.", "Since its establishment, the United Nations has evolved as various international stakeholders seek ways to improve the efficiency and effectiveness of the U.N. system through reform. Some Members of Congress have demonstrated a continued interest in U.N. reform and over the years have sought to link U.S. funding to specific reform benchmarks. In the 1980s and 1990s, for example, Congress enacted legislation tying U.S. funding to U.N. reform and U.N. regular budget policies that favored the United States, including caps on the U.S. assessments rates, changes to U.N. budget processes, and strengthening U.N. internal oversight.\nMore recently, Congress has enacted legislation conditioning U.S. funding on the implementation of management reforms that aim to improve transparency and accountability (see text box ) and withholding funding to specific U.N. entities, such as the Human Rights Council. Congress has also demonstrated an increased interest in U.N. reforms related to sexual exploitation and abuse (SEA) by U.N. peacekeepers; legislation in the 115 th Congress requires that the United States withhold assistance from \"any unit of the security forces of a foreign country\" if the Secretary of State determines such unit has engaged in SEA while serving in a U.N. peacekeeping operation. More broadly, some Members have introduced legislation requiring a government-wide review of U.S. multilateral aid. The explanatory statement to the Consolidated Appropriations Act, 2018, requires the Secretary of State to provide Congress with a report that includes a description of current tools, methods, and resources to assess the value of, and prioritize contributions to, international organizations and other multilateral entities, as well as to provide related recommendations.\nSupporters of linking U.S. funding to U.N. reform contend that the United States should use its position as the largest U.N. financial contributor to push for the implementation of policies that lead to comprehensive reform. They note that despite diplomatic and political pressures from many countries, the United Nations has been slow to implement substantive reform. They believe that tying U.S. funding to reform may motivate countries to find common ground on otherwise divisive issues. On the other hand, opponents argue that linking U.S. funding to U.N. reform might not be effective and could ultimately weaken U.S. influence at the United Nations. In particular, some maintain that U.N. reform legislation proposals may be unrealistic because the scope and depth of reforms required by the legislation cannot be adequately achieved in the proposed timeframes. Some also contend that the United States can obtain its U.N. reform objectives through other means, including collaborating with like-minded members and working with the U.N. Secretary-General on common reform priorities.", "Policymakers have observed that countries that receive U.S. foreign aid sometimes vote against U.S. foreign policy or national security interests in U.N. bodies such as the Security Council and General Assembly. On occasion, the United States has periodically debated linking U.S. foreign assistance to the U.N. voting records of potential aid recipients. Supporters maintain that doing so could increase member support for U.S. policy priorities in U.N. bodies. The Reagan Administration strongly supported such a policy; then-U.N. Ambassador Jeanne Kirkpatrick stated in a 1983 congressional hearing that the United States must \"communicate to nations that their votes, their attitudes and their actions inside the U.N. system inevitably must have consequences for their relations with the United States outside the U.N. system.\" Recognizing these concerns, in 1984 Congress required the State Department to submit an annual report to Congress, Voting Practices in the United Nations, which tracks member voting records on U.N. resolutions important to the United States. Over the years, some Members of Congress have also periodically introduced, but not enacted, legislation requiring reductions in foreign aid to countries that do not consistently vote with the United States.\nOpponents of these efforts contend that reducing funding to countries based on U.N. voting records could undermine the overall effectiveness of U.S. foreign assistance and, depending on the issue being considered in U.N. bodies, ultimately have little impact on how countries vote. Some have also questioned the criteria the State Department would use to eliminate or decrease aid, noting that many U.S. foreign aid priorities are based on a combination of need and political considerations that may not always align with how countries vote in the United Nations. They further contend that withholding aid in this manner might punish the citizens of countries who often have the greatest need and no control over the foreign policy decisions of their leaders.\nIn the past year, President Trump and Ambassador Haley have expressed support for linking U.S. foreign aid to U.N. votes; prospects for implementation, however, are unclear. Congress is ultimately responsible for appropriating foreign assistance to specific countries, and the Trump Administration's FY2019 budget did not propose foreign aid reductions based on U.N. votes.", "Many congressional debates regarding U.N. funding occur against the backdrop of competing foreign and domestic funding priorities and broad questions about the role of the United Nations in U.S. national security and foreign policy. The emergence of President Trump's \"America First\" position raises questions about the future of U.S. participation in and funding of the United Nations. In the near term, Members of the 115 th Congress might consider the following issues:\nHow, if at all, the President's FY2019 budget proposal aligns with congressional perspectives on U.N. funding. What role and actions, if any, Congress might take in the absence of Administration support for some U.N. activities. The possible impacts of current and potential U.S. financial withholding on (1) U.S. influence in U.N. bodies, and (2) the operations and effectiveness of U.N. activities—particularly in light of continued accumulation of U.S. peacekeeping arrears and the Administration's proposed funding reductions for certain U.N. bodies.\nIn the longer term, some Members might consider the following U.N. funding issues in the context of the changing multilateral and global landscape.\nThe benefits and drawbacks of U.S. funding of the United Nations—including areas where the United States can (1) reduce funding while increasing efficiency and accountability or (2) achieve the most \"bang for its buck.\" Steps Congress can take to ensure that U.S. contributions to the U.N. system are used as effectively as possible. The domestic and foreign policy implications, if any, of reduced U.S. participation in and funding of the United Nations, including the possible impact of other countries stepping into the funding and leadership role traditionally held by the United States. How the United States can further its U.N. reform agenda, and to what extent, if any, such efforts could be linked to U.S. funding. The advantages and disadvantages of multilateral and bilateral U.S. assistance, including the comparative advantage, if any, the United Nations might have over other multilateral organizations, and how the United States might maximize this advantage.\nAppendix A. Organizational Chart of the U.N. System\nAppendix B. Contributions to International Organizations (CIO) Account by U.N. Entity\nThe following table lists CIO account funding by U.N. and U.N.-affiliated entities since FY2015, including amounts appropriated by Congress and U.S. assessment levels. FY2018 funding levels for individual U.N. bodies are not yet available.\nAppendix C. Contributions for International Peacekeeping Activities (CIPA) Account by U.N. Peacekeeping Operation\nThe following table lists CIPA account funding by peacekeeping operation since FY2015, including amounts appropriated by Congress. FY2018 funding levels for individual peacekeeping missions have not yet been finalized.\nAppendix D. International Organizations and Programs (IO&P) Account by U.N. Entity\nThe following table lists U.S. contributions to U.N. entities through the IO&P account since FY2015.\nAppendix E. Timeline of U.S. Peacekeeping Assessment Cap\nThe following table outlines changes to the U.S. peacekeeping assessment and enacted U.S. peacekeeping cap since FY1994, including related legislation.\nAppendix F. Global Humanitarian Accounts by U.N. Entity\nTable F-1 provides an overview of top U.S. voluntary contributions to U.N. humanitarian-related activities through the global humanitarian accounts since FY2015. Contributions for each account are appropriated by Congress, with the executive branch allocating funding to specific U.N. entities and activities based on humanitarian needs and U.S. foreign policy priorities. Some U.N. entities are funded through both State and USAID accounts, while others are only funded through specific agencies or agency accounts. Funding for U.N. entities in FY2018 has not been finalized.\nAppendix G. Selected Legislation: U.S. Funding and U.N. Reform\nThe following sections highlight selected reform legislation from 1986 to the present that ties U.S. funding to U.N. reform and notes any subsequent changes to internal U.N. policy.\nKassebaum-Solomon Amendment (1986-1987)\nIn the mid-1980s, some Members of Congress expressed concern that U.S. influence over the U.N. budget was not proportionate to its rate of assessment. In 1986 Congress passed legislation, popularly known as the \"Kassebaum-Solomon amendment,\" which required that the U.S. assessed contribution to the U.N. regular budget be reduced to 20% unless the United Nations gave major U.N. financial contributors a greater say in the budget process. Subsequently, in 1986 the General Assembly adopted a new budget and planning process that incorporated consensus-based budgeting as a decisionmaking mechanism, thus giving U.N. members with higher assessment levels a potentially greater voice in the budget process.\nU.N. Office of Internal Oversight Services (1993)\nIn the early 1990s, some Members of Congress and the Administration were concerned with the apparent lack of oversight and accountability within the U.N. system. In 1993, as part of the FY1994 State Department Appropriations Act, Congress directed that 10% of U.S. assessed contributions to the U.N. regular budget be withheld until the Secretary of State certified to Congress that \"the United Nations has established an independent office with responsibilities and powers substantially similar to offices of Inspectors General Act of 1978. On July 29, 1994, the U.N. General Assembly established the Office of Internal Oversight Services (OIOS) which reports directly to the Secretary-General and provides \"internal auditing, investigation, inspection, programme monitoring, evaluation and consulting services to all U.N. activities under the Secretary-General's authority.\"\nHelms-Biden Agreement (1999)\nIn the late 1990s, Congress and the Administration negotiated and agreed to legislation that would further U.S. reform policy at the United Nations. The Helms-Biden bill authorized payment of some U.S. arrears if specific reform benchmarks were met and certified to Congress by the Secretary of State. Under the terms of Helms-Biden, the United States agreed to (1) pay $819 million in arrearages over fiscal years 1998, 1999, and 2000; and (2) forgive $107 million owed to the United States by the United Nations in peacekeeping costs if the United Nations applied the $107 million to U.S. peacekeeping arrears. For arrearage payments to occur Congress required that the U.S. assessment for contributions to the U.N. regular budget be reduced from 25% to 22% and that the peacekeeping contribution be reduced from 30% to 25%. In December 2000, the U.N. General Assembly reduced the regular budget assessment level from 25% to 22%, and the peacekeeping share from approximately 30.4% to 28%. In subsequent years, the U.S. peacekeeping assessment continued to fluctuate and is currently 28.43%." ], "depth": [ 0, 1, 1, 1, 1, 2, 3, 3, 3, 2, 1, 2, 2, 2, 1, 2, 2, 2, 2, 2, 1, 2, 2, 2, 2, 2, 2, 2 ], "alignment": [ "h0_title h1_title", "h1_full", "", "", "h0_full", "h0_full", "", "", "", "h0_full", "h0_full h1_title", "", "h1_full", "h1_full", "", "", "", "", "", "", "h0_title h1_title", "h1_full", "h1_full", "h1_full", "h0_full h1_full", "h1_full", "", "h1_full" ] }
{ "question": [ "What makes up the U.N. system?", "How are U.N. bodies funded?", "What are assessed contributions?", "What activities are funded by assessed contributions?", "What do voluntary contributions fund?", "Why are policymakers concerned about the U.S.'s role in the U.N.?", "To what extent does Congress withhold funding from the U.N.?", "What is the current status of U.S. arrears?", "What characterizes the debate regarding funding benchmarks?", "How effectively does the U.S. track its funding provided to the U.N.?" ], "summary": [ "The U.N. system is made up of interconnected entities including specialized agencies, funds and programs, peacekeeping operations, and the U.N. organization itself.", "The U.N. Charter requires each U.N. member to contribute to the expenses of the organization. U.N. bodies are funded by a combination of assessed and voluntary contributions.", "Assessed contributions are required dues shared among U.N. member states to pay for the expenses of the organization.", "The U.N. regular budget, peacekeeping operations, and specialized agencies are funded mainly by assessed contributions.", "Voluntary contributions fund U.N. funds, programs, and offices. The budgets for many of these bodies may fluctuate annually depending on contribution levels. Organizations such as the U.N. Children's Fund (UNICEF) and U.N. Development Program (UNDP) are financed mainly by voluntary contributions.", "Some policymakers are concerned that current assessment levels result in the United States providing the bulk of funding to U.N. entities, particularly the U.N. regular budget, while having minimal influence on the organization's budget processes. Some are concerned that the U.S. peacekeeping assessment of 28.43%, which Congress capped at 25%, is too high. Others argue that the U.S. assessment reflects its commitment to the United Nations, affirms U.S. global leadership, and encourages other countries to fund the organization.", "Over the years, Congress has withheld full or partial funding from selected U.N. bodies and activities. Some Members of Congress have debated the effectiveness of such withholdings in furthering U.S. interests in U.N. bodies, as well as the potential impact on U.N. operations.", "For the past several decades, the United States has accumulated arrears for some U.N. entities and activities, including U.N. peacekeeping. Some Members continue to discuss the impact of these arrears and whether they should be paid.", "Congress has enacted legislation linking U.S. funding to specific U.N. reform benchmarks. Some policymakers oppose such actions due to concerns that they may interfere with U.S. influence and ability to conduct diplomacy in U.N. bodies. Others suggest that the United States should use its position as the largest financial contributor to push for certain U.N. reforms.", "The manner in which the United States provides funding to the U.N. system is complex and often difficult to track in a timely and accurate manner. Congress has enacted several U.N. funding reporting requirements over the years. While some of these efforts have provided useful snapshots of U.S. funding during particular time periods or to select U.N. bodies, for a number of reasons few have comprehensively captured the full scope of U.S. funding to the U.N. system." ], "parent_pair_index": [ -1, -1, 1, 2, 1, -1, -1, -1, -1, -1 ], "summary_paragraph_index": [ 3, 3, 3, 3, 3, 8, 8, 8, 8, 8 ] }
GAO_GAO-19-382
{ "title": [ "Background", "Sources of Retirement Income", "Social Security", "Employer-Sponsored or Other Retirement Savings Plans", "Individual Savings and Assets", "Selected Federal and State Efforts to Support Caregivers", "About One in 10 Americans Provided Parental or Spousal Care, with Women and Minority Caregivers Providing More Frequent Care", "Most Eldercare Providers Cared for a Parent or Spouse", "Parental and Spousal Caregivers Had Similar Demographic Characteristics but Different Economic Circumstances", "Gender", "Marital Status", "Education", "Women Caregivers Were More Likely to Work Part- time and Have Lower Earnings than Men Caregivers", "Women, Minorities, and Those with Lower Education and Earnings Levels Provided More Frequent Care", "Some Caregivers Experienced Adverse Effects on Their Jobs and on Their Retirement Assets and Income", "Parental and Spousal Caregivers Said Caregiving Affected Their Work", "Spousal Caregivers Nearing Retirement Had Less in Retirement Assets and Income While Parental Caregivers Did Not", "Retirement Assets and Income of Spousal Caregivers", "Retirement Assets and Income of Parental Caregivers", "Challenges in Comparing Caregivers to Non-caregivers", "Experts Said a Comprehensive Framework That Incorporates Actions across Policy Categories Could Improve Caregivers’ Retirement Security", "Caregivers Face Several Retirement Security Challenges", "Four Policy Categories Encompass Actions That Could Improve Caregivers’ Retirement Security", "Experts Said Some Policy Categories Could Better Help Women and Low- Income Caregivers and All Have Costs", "Experts Said Implementing Actions across Policy Categories and Enhancing Public Awareness Would Help Address Caregivers’ Needs", "Agency Comments", "Appendix I: Objectives, Scope, and Methodology", "Section I: Information Sources", "American Time Use Survey", "Caregiving in the U.S.", "Health and Retirement Study", "Data Reliability", "Literature Review and Interviews", "Section II: Methods for Analyzing Parental and Spousal Caregivers’ Characteristics and the Effect of Caregiving on Retirement Security", "Characteristics of Parental and Spousal Caregivers", "Effect of Parental and Spousal Caregiving on Retirement Security", "Spousal Care", "Appendix II: Characteristics of Different Types of Caregivers", "Appendix III: Multivariate Analysis of the Probability of Providing Care", "Appendix IV: GAO Contact and Staff Acknowledgments", "GAO Contact", "Staff Acknowledgments" ], "paragraphs": [ "", "There are three main pillars of retirement income in the United States: Social Security benefits, employer-sponsored or other retirement savings plans, and individual savings and assets.", "Social Security is a cash benefit that partially replaces earnings when an individual retires or becomes disabled. The monthly benefit amount depends on a worker’s earnings history and the age at which he or she chooses to begin receiving benefits, as well as other factors. Social Security benefits are paid to workers who meet requirements for the time they have worked in covered employment, that is, jobs through which they have paid Social Security taxes. To qualify for retirement benefits, workers must typically have earned a minimum of 40 quarters of coverage (also referred to as credits) over their lifetime. Social Security benefits are calculated based on the highest 35 years of earnings on which workers paid Social Security taxes. Those who wait until the full retirement age, which has gradually increased from 65 to 67, to claim Social Security receive unreduced benefits. Social Security provides larger benefits, as a percentage of earnings, to lower earners than to higher earners.\nSocial Security makes up a large portion of income for many older Americans, and older Americans face greater risk of poverty without Social Security benefits. We previously reported that data from the Federal Reserve Board’s most recent Survey of Consumer Finances showed that in 2016, among households age 65 and over, the bottom 20 percent, ranked by income, relied on Social Security retirement benefits for 81 percent of their income, on average. According to a 2014 Census report, about 43 percent of people age 65 or older would have incomes below the poverty line if they did not receive Social Security.", "The most common type of employer-sponsored retirement plan is a defined contribution plan, such as a 401(k) plan. Defined contribution plans generally allow individuals to accumulate tax-advantaged retirement savings in an individual account based on employee and employer contributions, and the investment returns (gains and losses) earned on the account. Individuals or employers may make contributions up to statutory limits. Individuals typically pay fees for account maintenance, such as investment management or record keeping fees. An employee may take funds out of the account prior to age 59 ½, but will owe taxes, possibly including an additional tax, for early withdrawal.\nWorkers can also save for retirement through an individual retirement account (IRA). IRAs allow workers to receive favorable tax treatment for making contributions to an account up to certain statutory limits. Most IRAs are funded by assets rolled over from defined benefit and defined contribution plans when individuals change jobs or retire. Individuals must have taxable earnings to contribute to an IRA, and the amount of their contribution cannot exceed their earned income. IRAs also have account maintenance fees, which are generally higher than those charged to participants in employer-sponsored plans. IRAs are a major source of retirement assets. As we reported in 2017, IRAs held about $7.3 trillion in assets compared to $5.3 trillion held in defined contribution plans.", "Individuals may augment their retirement income from Social Security and employer-sponsored plans with their own savings, which includes any home equity and other non-retirement savings and investments. Non- retirement savings and investments might include income from interest, dividends, estates or trusts, or royalties.", "Through our review of literature and interviews with experts, we identified several federal and state efforts that may provide support to caregivers:\nMedicaid. This federal-state health financing program for low-income and medically needy individuals is the nation’s primary payer of long- term services and supports for disabled and aged individuals. Within broad federal requirements, states have significant flexibility to design and implement their programs based on their unique needs, resulting in 56 distinct state Medicaid programs. Under Medicaid requirements governing the provision of services, states generally must provide institutional care to Medicaid beneficiaries, while home and community based long-term services and supports is generally an optional service. All 50 states and the District of Columbia provide long-term care services to some Medicaid beneficiaries in home and community settings under a variety of programs authorized by statute. Some of these programs include self-directed services under which participants, or their representatives if applicable, have decision- making authority over certain services and take direct responsibility for managing their services with the assistance of a system of available supports. Under one such program, participants can hire certain relatives to provide personal care services.\nTax-related provisions. Caregivers may be able to use dependent care accounts, tax credits, or tax deductions for financial assistance with caregiving costs. Dependent care accounts are set up through an employer and allow individuals to set aside pre-tax funds to care for a qualifying individual, such as a spouse who is unable to care for himself or herself. As an example of a tax credit, beginning in 2018, caregivers may be eligible to obtain a $500 non-refundable credit for qualifying dependents other than children, such as a parent or a spouse. As an example of a deduction, taxpayers may deduct the cost of qualifying medical expenses.\nThe Family and Medical Leave Act of 1993 (FMLA). This act generally provides up to 12 weeks of unpaid leave per year for eligible employees to help care for a spouse, child, or parent with a serious health condition or for their own serious health condition, among other things. Employees are generally eligible for FMLA leave if they have worked for their employer at least 12 months, at least 1,250 hours over the past 12 months, and work at a worksite where the employer employs 50 or more employees or if the employer employs 50 or more employees within 75 miles of the worksite.\nThe Older Americans Act of 1965. This act was passed to help older individuals remain in their homes and includes grant funding for services for older individuals. Since its reauthorization in 2000, the Older Americans Act of 1965 has provided supports for caregivers through programs such as the National Family Caregiver Support Program. This program provides grants to states to fund a range of supports to help caregivers. For example, the program provides access to respite care. According to the National Institute on Aging, respite care provides in-home or facility-based care by a trained care provider to give the primary caregiver short-term relief from caregiving.\nPaid sick leave. This form of leave provides pay protection to workers for short-term health needs, and paid family leave is used by employees for longer-term caregiving. No federal sick or paid family leave policy exists. However, as of March 2019, 10 states (AZ, CA, CT, MA, MD, NJ, OR, RI, VT, WA) and the District of Columbia (DC) have guaranteed paid sick days for specific workers, according to the National Partnership for Women and Families, with eligibility varying by state. As of February 2019, six states (CA, NJ, NY, RI, MA, and WA) and DC have paid family leave laws in effect or soon will be implementing them, according to the National Partnership for Women and Families. The covered family relationships, wage replacement rate, and funding mechanism of these programs vary by state.", "", "An estimated 45 million people per year provided unpaid eldercare from 2011 through 2017, according to American Time Use Survey (ATUS) data. About 26 million people—roughly one in 10 adults in the U.S. population—cared for their parent or spouse, and about 22 million people cared for other relatives, such as grandparents, aunts and uncles, or non- related adults (see fig. 1). Among parental and spousal caregivers, 88 percent (about 23.4 million people) provided care to a parent, and 12 percent (3.2 million people) provided care to a spouse. About 7.4 million parental or spousal caregivers (close to 30 percent) provided care for more than one person.", "We examined several demographic and economic characteristics of parental and spousal caregivers compared to the general population.", "Women and men were almost evenly divided in the general population, but women were more likely than men to be parental or spousal caregivers, according to ATUS data from 2011 through 2017. Women made up 52 percent of the general population, but represented 56 percent of parental caregivers and 63 percent of spousal caregivers (see fig. 2).\nParental caregivers were younger than spousal caregivers, but both groups were older, on average, than the general population. The average age of parental caregivers was 50, and the average age of spousal caregivers was 70, according to ATUS data. While about half of the general population was under 45, most parental caregivers were over 50, and most spousal caregivers were over 65 (see fig. 3). While far fewer in number, spousal caregivers were considerably older than parental caregivers. Almost three-quarters of spousal caregivers were over Social Security claiming age for full retirement benefits compared to less than 10 percent of parental caregivers.\nThe racial/ethnic distribution of parental and spousal caregivers was consistent with the general population in that a significant majority of caregivers were white. When compared to the general population, caregivers were more likely to be white and less likely to be minorities.", "The distribution in the marital status of parental caregivers was similar to the general population in that most people in the general population were married, followed by single, divorced, widowed, and separated. About two-thirds of parental caregivers were married, and not surprisingly, almost all spousal caregivers were married.", "Parental caregivers were more educated than spousal caregivers and the general population, according to ATUS data. For example, 38 percent of parental caregivers had completed college compared to 26 percent of spousal caregivers (see fig. 4). These differences may reflect that spousal caregivers are generally older and may come from a generation in which women were less likely to attend college.\nParental caregivers were more likely to be employed and to have higher earnings than spousal caregivers and those in the general population. Over 70 percent of parental caregivers worked either full-time or part-time compared to 26 percent of spousal caregivers and 62 percent of the general population (see fig. 5). This may be related to the older age of many spousal caregivers, as the percentage of spousal caregivers out of the labor force was about equal to the percentage over age 65. Further, parental caregivers tended to earn higher wages than spousal caregivers. Among wage and salary workers with a single job, parental caregivers earned $931 per week while spousal caregivers earned $513 per week, and the general population earned $743 per week, according to ATUS data.", "We found that women who provided parental or spousal care were more likely to be employed part-time and to have lower earnings than men who were parental or spousal caregivers (see fig. 6). Women caregivers were less likely to work than men caregivers, but among those who worked, women caregivers were more likely to work part-time, according to ATUS data. For example, among parental caregivers, 66 percent of women were employed either full-time or part-time compared to 77 percent of men, but 17 percent of women worked part-time compared to 10 percent of men. Similarly, among spousal caregivers, women were less likely to be employed than men. In addition, differences in the employment status of women and men caregivers are similar to differences between women and men in the general population. When we examined the distribution of men and women caregivers in earnings quartiles, we found that men caregivers were more likely to be among the highest earners. For parental caregivers, 43 percent of men compared to 25 percent of women were among the highest earners. For spousal caregivers, 22 percent of men compared to 14 percent of women were among the highest earners. Regression results show that these differences between men and women caregivers were significant for parental and spousal caregivers, and remained significant after controlling for caregiver age and years of education.\nIn terms of education, women parental caregivers were more likely to have completed some college or more (69 percent) while women spousal caregivers were less likely to have done so (50 percent) compared to men parental and spousal caregivers (63 and 56 percent, respectively). Similar to the education levels of the parental and spousal caregiving populations generally, these results may reflect generational differences.", "Spousal caregivers were more likely to provide care daily compared to parental caregivers, and parental caregivers who lived in the same house as their parents were unsurprisingly more likely to provide care daily than those who did not, according to ATUS data. The vast majority of spousal caregivers (81 percent) provided care on a daily basis compared to 21 percent of parental caregivers. When we examined the frequency of caregiving among those who lived in the same house as their parents, we found that about 63 percent of these parental caregivers provided care daily, suggesting there is a positive relationship between frequency of care and cohabitation (see fig. 7). Experts we spoke with said the frequency of care may depend on whether the care recipient has a disability and the type of disability. For example, someone with a severe disability may be more likely to require care daily compared to someone with a less severe disability.\nWomen and minorities tended to provide care more frequently. Among parental and spousal caregivers, 30 percent of women provided care daily compared to 25 percent of men. While the majority of caregivers were white, as discussed above, black and Hispanic caregivers were more likely to provide daily care than white caregivers—35 percent of black caregivers and 39 percent of Hispanic caregivers provided care daily compared to 26 percent of white caregivers (see fig. 8). While most parental caregivers were married, parental caregivers who were never married were more likely to provide daily care than divorced, widowed, separated, and married caregivers.\nDaily caregiving may be concentrated among those with the fewest financial resources. Parental or spousal caregivers with lower levels of education and earnings were more likely to provide care daily (see fig. 9). For example, 48 percent of caregivers without a high school degree provided care daily compared to 21 percent who had completed college. Those who worked part-time were also more likely to provide care daily compared to those who worked full-time (27 percent versus 18 percent, respectively). Those who provided care daily were also more likely to be among the lowest earners.\nIn addition to examining frequency of care, we also found that most parental or spousal caregivers provided care that lasted several years. The majority of parental or spousal caregivers (54 percent) provided care for at least 3 years, and 16 percent provided care for 10 years or more. On average, parental or spousal caregivers provided care for about 5 years, regardless of gender. The number of years of care provided increased with the age of the parental or spousal caregivers (see fig. 10).\nWomen caregivers, spousal caregivers, and Hispanic caregivers were more likely to provide long-term daily care. Among parental or spousal caregivers who said they provided care daily and provided care for at least 5 years, 61 percent were women. In comparison, among all parental and spousal caregivers, 56 percent were women. Twenty-nine percent of spousal caregivers provided long-term daily care compared to 8 percent of parental caregivers. In addition, 16 percent of Hispanic caregivers provided long-term daily care compared to 10 percent of whites and 12 percent of blacks.", "", "An estimated 68 percent of working parental and spousal caregivers said they experienced at least one of eight job impacts about which they were asked, according to our analysis of data used in the 2015 National Alliance for Caregiving and AARP sponsored study, Caregiving in the U.S. The highest percentage of parental and spousal caregivers—more than half—reported that they went in late, left early, or took time off during the day to provide care (see fig. 11).\nSpousal caregivers were more likely to experience adverse job impacts than parental caregivers. About 81 percent of spousal caregivers said they experienced at least one of the eight job impacts they were asked about compared to 65 percent of parental caregivers. Spousal caregivers were more likely to reduce their work hours, give up work entirely, or retire early, compared to working parental caregivers. For example, 29 percent of spousal caregivers said they went from working full-time to part-time or cut back their hours due to caregiving, compared to 15 percent of parental caregivers. Our prior work has reported that some older workers felt forced to retire for professional or personal reasons and that individuals approaching retirement often have to retire for reasons they did not anticipate, including caregiving responsibilities. In addition, our prior work has reported that job loss for older workers, in general, can lead to lower retirement income, claiming Social Security early, and exhaustion of retirement savings. We also found that older workers face many challenges in regaining employment.\nConsistent with these results, we also found that spousal caregiving was negatively associated with the number of hours caregivers worked. Specifically, spousal caregivers who were ages 59 to 66 worked approximately 20 percent fewer annual hours than married individuals of the same age who did not provide spousal care, according to HRS data from 2002 to 2014.", "We found that spousal caregivers who were at or near the age of full retirement eligibility had lower levels of IRA assets, non-IRA assets, and Social Security income compared to those who did not provide care. We did not detect the same relationship between parental caregiving and retirement income, which may be due, in part, to the older age of the caregivers we examined.", "Spousal caregivers at or near retirement age had lower levels of retirement assets and income compared to married individuals who did not provide spousal care. Spousal caregivers tended to have lower levels of IRA assets, non-IRA assets—such as real estate or stocks—and Social Security income than non-caregivers (see table 1). After controlling for certain characteristics of caregivers, we found that spousal caregivers still had less retirement assets and income than non- caregivers. For example, spousal caregivers had an estimated 39 percent less in non-IRA assets than non-caregivers, after controlling for characteristics such as level of education and race/ethnicity.\nWhen we compared women and men spousal caregivers, we found both had less in IRA and non-IRA assets than non-caregivers, but only women had less in Social Security income. Specifically, we found that women and men caregivers had 37 to 54 percent less in IRA and non-IRA assets than non-caregivers, after controlling for demographic and other characteristics. However, the effect of spousal caregiving on Social Security income was only significant among women. Women caregivers had 15 percent less in Social Security income than married women who did not provide care. Many older Americans rely on Social Security for a significant portion of their retirement income. Therefore, a lower Social Security benefit could have serious consequences for these individuals’ retirement security.\nOne possible explanation experts offered for why spousal caregivers may have less in retirement income and assets than non-caregivers is that the care recipient may be in poor health, resulting in reduced workforce participation of both members of the household, which could then have a large negative impact on household wealth. This scenario could leave spousal caregivers in a precarious financial situation heading into retirement.", "We did not find that parental caregivers at or near retirement age had lower levels of retirement assets or income than non-caregivers. We compared the retirement assets and income of parental caregivers to the retirement assets and income of individuals who did not provide parental care and did not find a statistically significant effect of parental caregiving on IRA assets, non-IRA assets, defined contribution balances, or Social Security income. See appendix I for more information on this analysis.\nWe may not have seen a significant effect of parental caregiving for a few reasons. First, because of the scope of the HRS data we used, we limited the analysis to individuals who provided care in the 6 years leading up to ages 65 or 66. Therefore, this analysis does not capture the possible effects of parental caregiving prior to age 59, which may be during the middle of a person’s career or during their peak earning years. Second, similar to spousal caregivers, experts said a caregiver may reduce their workforce participation to care for a parent; however, parental caregiving may not affect household income because married caregivers’ spouses may be able to continue working and offset any lost earnings. In addition, unlike spousal care, parental care may be provided by multiple individuals, so the effect on retirement security may be distributed across siblings.", "Our analysis could not definitively identify the causal effect or lack of effect of caregiving on retirement income due to three main limitations. First, because caregiving is not random but is a function of an individual’s circumstances, it is difficult to isolate its effect. For example, individuals who provide care may do so because they have jobs that are more flexible, or because they have better family support. Second, there may be other ways of providing care beyond an individual giving their time that were not captured in the HRS data and therefore could not be included in our analysis. For example, a child may provide financial assistance to a parent rather than providing time. However, the HRS does not capture whether financial help to parents was specifically used for caregiving expenses. Third, common to analyses of this type, alternate measures of certain variables may produce different estimates. For example, we controlled for a caregiver’s level of education based on data included in the HRS; however, a measure of education that included the type of education, such as whether the person was a trained caregiver, might have changed our estimates. As a result of these limitations, our estimates may not capture the effect of caregiving on retirement income for the broader population.", "", "Our analysis of literature and expert interviews found that parental or spousal caregivers could face several retirement security challenges:\nCaregivers may have high out–of-pocket expenses. Caregivers may face immediate out-of-pocket expenses that could make it difficult to set aside money for retirement or that could require them to prematurely withdraw funds from existing retirement accounts. These financial burdens can include, for example, travel and medical expenses for a care recipient. AARP’s study, Family Caregiving and Out-of-Pocket Costs, estimated that family caregivers spent an average of nearly $7,000 on caregiving costs in 2016. Caregiving costs amounted to about 14 percent of income for white family caregivers and 44 percent and 34 percent for Hispanic and black caregivers, respectively.\nCaregivers may reduce their workforce participation. In addition to foregone earnings, caregivers who reduce their workforce participation may also lose access to employer-provided retirement benefits, such as participating in an employer-sponsored 401(k) plan or receiving an employer’s matching contributions. About 68 percent of working parental and spousal caregivers reported job impacts due to caregiving responsibilities, which included reducing their workforce participation. For those who leave the workforce, re-entry can be challenging, and wages and retirement savings can be negatively affected long-term.\nCaregivers may not contribute to retirement accounts. Caregivers may face challenges contributing to retirement accounts due to caregiving, and some working caregivers may not be eligible for employer-sponsored retirement benefits. For example, some part-time employees may not be eligible to participate in employer-sponsored retirement plans, or some employees may lose access if they reduce their workforce participation. Individual and employer-sponsored retirement accounts serve as important supplements to Social Security as income replacements in retirement.\nCaregivers may have lower Social Security benefits. Caregivers may have less in Social Security benefits if they reduce their workforce participation. Social Security benefits are calculated using the highest 35 years of earnings. If a caregiver retires after working for 33 years, he or she would have 2 years of zero income in their benefit calculation, which would result in lower benefits throughout retirement compared to what their benefit would have been if they had a full 35- year earnings history. Social Security makes up a large portion of retirement income from many older Americans, so a lower Social Security benefit could have significant consequences for financial security.", "We identified four policy categories that could potentially address retirement security challenges faced by caregivers. To do so, we identified specific actions that could improve caregivers’ retirement security based on a review of literature and interviews with experts. We then grouped these actions into four categories: 1) decrease caregivers’ out–of-pocket expenses, 2) increase caregivers’ workforce attachment and wage preservation, 3) increase caregivers’ access or contributions to retirement accounts, and 4) increase caregivers’ Social Security benefits. See figure 12 for example actions in each category.", "Experts we interviewed identified potential benefits of each of the four policy categories. They also identified specific groups of parental or spousal caregivers who could benefit, including women, lower-income caregivers, and working caregivers (see table 2). As discussed previously, women were more likely to provide parental and spousal care, to work part-time, and to have lower earnings than men caregivers. In addition, over one-third of parental caregivers and almost two-thirds of spousal caregivers were in the bottom two income quartiles, and caregivers in the bottom earnings quartile were more likely to provide care daily.\nExperts also said all four categories have potential costs and challenges (see table 3).\nExperts identified three implementation issues that would need to be addressed regardless of the policy category.\nDetermining responsibility for implementation. It is unclear who would be responsible for implementing and funding certain actions under each approach, according to experts. Some may require legislative changes, steps by employers, or public-private partnerships that integrate both sectors. The RAISE Family Caregivers Act enacted in January 2018 requires the Department of Health and Human Services (HHS) to develop a strategy, including recommendations related to financial security and workforce issues, to support family caregivers and to convene an advisory council to help develop the strategy. The advisory council will include representatives from federal agencies, employers, state and local officials, and other groups. Between October 12, 2018 and December 3, 2018, HHS sought nominations for individuals to serve on the advisory council.\nDefining caregiving for benefit eligibility. Experts said some actions may require a definition of caregiving to use in determining eligibility for benefits. Current definitions related to federal caregiving policy vary. For example, FMLA defines a caregiver by specific familial relationships. In contrast, the RAISE Family Caregivers Act defines a family caregiver more broadly as an “adult family member or other individual who has a significant relationship with, and who provides a broad range of assistance to, an individual with a chronic or other health condition, disability, or functional limitation.”\nIdentifying and verifying caregivers. Experts said some actions may require a mechanism for identifying and verifying a caregiver’s status. Experts noted that many caregivers do not identify themselves as such, particularly those caring for a spouse, and therefore do not claim existing benefits. In addition, certain actions may require a decision about whether benefits extend to the primary caregiver or to all caregivers, for example, siblings who may jointly provide care to a parent.", "Several experts we interviewed said caregivers could benefit more from a retirement system that incorporates actions across the policy categories so that actions can work in tandem to address caregivers’ needs. For example, if caregivers have lower out-of-pocket caregiving costs, they might be able to contribute more to their retirement savings. If caregivers can contribute more to their retirement savings because they have better access to accounts, they might have to rely less on Social Security in retirement. Some experts pointed to Hawaii’s Kupuna Caregivers Program as an example of a program with complementary goals—to alleviate out-of-pocket expenses and reduce barriers to staying fully employed while providing care for a family member. Specifically, according to experts, the program provides a financial benefit of $70 per day for up to 365 days to caregivers who work at least 30 hours a week to spend on respite care, home health care workers, meal preparation, and transportation costs for a care recipient age 60 or older. Although the program is in the early stages of implementation, experts said several states already see it as a model for meeting these two goals.\nExperts also said it would be helpful to implement actions that address the needs of caregivers in the long- and short-term and across their lifespans. In general, experts said each of the policy categories could help longer-term caregivers more than short-term caregivers. However, they said certain actions to decrease caregivers’ out-of-pocket expenses or to increase workforce attachment could also help in addressing immediate needs. For example, experts said actions such as paid time off and flexible work schedules could help those caring for individuals with acute conditions to attend doctor’s appointments. Experts also said policies should address the needs of caregivers with different levels of workforce attachment. For example, one expert said there are disparate policy impacts to consider depending on whether someone is a salaried worker, an hourly worker, or a caregiver who does not work. Similarly, someone who depends on other types of government assistance, such as Social Security Disability Insurance, may also have different needs. Another expert said the age at which caregiving takes place may impact retirement security; people may be caring for older parents or a spouse at a point in their careers when they are supposed to be catching up on retirement contributions or have peak earnings, so they may not be able to make up for lost time in terms of retirement savings.\nFinally, several experts mentioned public awareness as critical to helping people understand the implications of caregiving on retirement security. They stressed the importance of financial literacy and making caregivers aware of existing and new benefits. Experts said people are not well informed about their Social Security benefits or their options for private retirement savings. In addition, it can be difficult to understand the long- term impacts of becoming a caregiver, and experts pointed to the need for education about how the decision, along with those to leave the workforce or reduce workforce participation, could affect caregivers’ long- term financial security. One expert noted that education and services that help families proactively think about their financial security and plan for caregiving needs could be useful. Educating the public about what supports exist, new supports as they become available, and eligibility and enrollment procedures, is critical to ensuring caregivers take advantage of available supports.", "We provided a draft of this report to the Department of Labor, the Department of Health and Human Services, the Department of the Treasury, and the Social Security Administration for review and comment. The Departments of Labor, Health and Human Services, and the Treasury provided technical comments, which we incorporated as appropriate. The Social Security Administration told us they had no comments on the draft report.\nAs agreed with your offices, unless you publicly announce the contents of this report earlier, we plan no further distribution until 30 days from the report date. At that time, we will send copies to the appropriate congressional committees, the Secretaries of Labor, Health and Human Services, and Treasury, the Acting Commissioner of Social Security, and other interested parties. In addition, the report will be available at no charge on the GAO website at http://www.gao.gov.\nIf you or your staff have any questions about this report, please contact me at (202) 512-7215 or [email protected]. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made contributions to this report are listed in appendix IV.", "The objectives of this review were to (1) examine what is known about the size and characteristics of the parental and spousal caregiving population, including differences among women and men; (2) examine the extent to which parental or spousal caregiving affects retirement security; and (3) identify and discuss policy options and initiatives that could improve caregivers’ retirement security. This appendix provides information about the methods we used to answer these questions. Section I describes key information sources we used, and section II describes the empirical methods we used to answer the first and second research questions and the results of supplementary analyses.", "To answer our research questions, we analyzed data from three nationally representative surveys—the American Time Use Survey (ATUS), the Health and Retirement Study (HRS), and Caregiving in the U.S.—conducted an extensive literature search, and interviewed relevant experts or stakeholders. This section provides a description of our data sources and the steps we took to ensure their reliability for the purposes of our review.", "To answer the first objective, we analyzed data collected through ATUS’ eldercare module from 2011 through 2017, the most recent year of data available. The ATUS—which is sponsored by the Bureau of Labor Statistics and conducted by the U.S. Census Bureau—provides nationally representative estimates of how, where, and with whom Americans spend their time. Individuals interviewed for the ATUS are randomly selected from a subset of households that have completed their eighth and final month of interviews for the Current Population Survey (CPS). Starting in 2011, the ATUS began asking questions about eldercare. We weighted the data and calculated relative standard errors to reflect CPS guidance on the sample design. A relative standard error is equal to the standard error of a survey estimate divided by the survey estimate.", "We analyzed data used in the 2015 Caregiving in the U.S. study sponsored by the National Alliance for Caregiving and the AARP Public Policy Institute to estimate job impacts of parental and spousal caregiving for working caregivers. The survey was conducted through online interviews. To identify caregivers, respondents were asked whether they provided unpaid care to a relative or friend 18 years or older to help them take care of themselves. Respondents were also asked to whom they provided care, which allowed us to identify parental and spousal caregivers. We considered someone to be a parental caregiver if they provided care to a parent or a parent-in-law. We considered someone to be a spousal caregiver if they provided care to a spouse or partner. To determine the job impacts of caregiving, respondents were asked whether they were currently employed while providing care or whether they were employed in the last year while providing care and whether they experienced any of the following job impacts as a result of caregiving:\nWent in late, left early, or took time off during the day to provide care\nWent from working full-time to part-time, or cut back hours\nTook a leave of absence\nReceived a warning about performance or attendance at work\nGave up working entirely\nTurned down a promotion\nLost any job benefits All estimates derived from random samples are subject to sampling error. All percentage estimates from this survey have margins of error at the 95 percent confidence level of plus or minus 5 percentage points or less, unless otherwise noted.", "To analyze the effects of caregiving on retirement security, we analyzed data collected through the HRS, a nationally representative survey sponsored by the National Institute on Aging and the Social Security Administration and conducted by the Survey Research Center at the University of Michigan’s Institute for Social Research. This biennial longitudinal survey collects data on individuals over age 50 and contains information on unpaid parental and spousal caregivers. Each biennial period is referred to as a “wave.” The HRS includes both members of a couple as respondents. There are currently 12 waves of core data available from 1992 to 2014 with about 18,000 to 23,000 participants in any given wave. The initial 1992 cohort consisted of respondents who were then ages 51 to 61, and these respondents have been interviewed every 2 years since 1992. New cohorts have been added over time to maintain the representation of the older population from pre-retirement through retirement and beyond. We used data from 2002 to 2014 for our analyses; we did not use data prior to 2002 because data on spousal caregivers were formatted differently. We adjusted asset and income values for inflation. We weighted the data and calculated standard errors to reflect HRS guidance on the sample design.", "For each of the datasets described above, we conducted a data reliability assessment of variables included in our analyses. We reviewed technical documentation, conducted electronic data tests for completeness and accuracy, and contacted knowledgeable officials with specific questions about the data. We determined that the variables we used from the data we reviewed were sufficiently reliable for the purposes of describing and comparing the caregiving populations to each other or to non-caregivers. We also cited studies conducted by other researchers to supplement our findings; each of these studies was reviewed by two social scientists with expertise in research methodology and was found to be sufficiently methodologically sound for the purposes of supplementing our descriptions or comparisons.", "To gain an understanding of policy options that could improve caregivers’ retirement security, we reviewed prior GAO work, conducted an extensive literature review of journal articles, working papers, and think-tank studies on caregiving and topics related to retirement security, and conducted preliminary interviews with experts in caregiving or retirement security. Based on this information, we identified specific actions that could affect caregivers’ retirement security, which we categorized into four different categories based on common themes. We then conducted semi- structured interviews with or received written responses from a range of experts and stakeholders—including some of the experts we met with to identify specific policy actions—to obtain their views on the benefits and costs of the specific policy options and approaches we identified, and we also asked them to identify any additional actions. We selected experts and stakeholders who are engaged in research or advocacy around caregiving or retirement issues, or those who might be affected by the actions identified. We also aimed to interview experts or stakeholders who might have different viewpoints regarding the identified actions. See table 4 for a list of the experts or stakeholders we interviewed or received written comments from over the course of our work.", "This section discusses the quantitative analysis methods we used to describe the characteristics of parental and spousal caregivers and the regression analyses we conducted to estimate the impact of caregiving on retirement security. We used ATUS and HRS data for these analyses.", "To describe the characteristics of parental and spousal caregivers, we conducted descriptive analyses to examine differences between parental and spousal caregivers and the general population. For all univariate and multivariate statistics calculated using the ATUS data, we constructed variance estimates using replicate weights.\nThe ATUS eldercare module defines caregiving as “assisting or caring for an adult who needed help because of a condition related to aging.” The eldercare module contains one observation per eldercare recipient, and for each recipient, includes information about the duration of care provided to the recipient, the age of the recipient, the relationship of the recipient to the care provider, and whether the care recipient and the care provider share a household. To analyze data on eldercare providers rather than recipients, we restructured the data into a single observation per care provider. While any given care provider could provide care to multiple recipients, we defined care provider types as follows:\nSpousal caregivers were those who provided care to a spouse or cohabiting domestic partner, regardless of whether they also provided care to another person.\nParental caregivers were those who provided care to a parent or parent-in-law, regardless of whether they also provided care to another person.\nCaregivers of another relative were those who provided care to someone related to them (such as a grandparent or aunt or uncle), regardless of whether they also provided care to another person.\nCaregivers of a non-relative were those who provided care to an unrelated person, such as a friend or neighbor, regardless of whether they also provided care to another person.\nData on frequency of care—how often a respondent provided eldercare— is collected once for each care provider, rather than for each recipient, and therefore did not require restructuring. However, as noted above, data on the duration of care—how long a respondent provided care—is collected for each care recipient. Therefore, we analyzed the duration of care for the relevant care recipient (parent or spouse) using the same caregiver types as described above. For example, if someone provided both parental and spousal care, the duration of care for the relevant recipient would be used.\nWe conducted descriptive analyses to examine parental and spousal caregivers’ characteristics including gender, age, race and ethnicity, marital status, level of education, employment status, and earnings. The following are important considerations of these analyses:\nAge. We examined caregivers who provided care to an adult recipient of any age, and, except where indicated in the text, we compared the characteristics of adult caregivers to the general adult population of all ages. We used four age categories (15 to 44, 45 to 50, 51 to 64, and 65 and older). We chose these age groups so that we could examine the characteristics of care providers with a similar age profile to those we examine in our analysis of household income and assets.\nPresence of a living parent. We did not have information in the ATUS to determine whether those who provided parental care had living parents; therefore, our analyses included all parental caregivers who said they provided care to a parent or parent-in-law within the past three to four months, even if the parent was deceased by the time of their interview. Certain analyses, where indicated in the text, control for the presence of a parent in the respondent’s household.\nEarnings. ATUS provides current information on respondent’s usual weekly earnings at their main job. Because we did not have current information on earnings from all jobs, for this analysis only, we restricted the sample to those respondents who have a single job. Because we did not have current information on self-employment income, we restricted our analysis of earnings to those respondents who are wage and salary workers.\nIn our report, we present data on the unadjusted demographic and economic characteristics of caregivers and the general population. We present the unadjusted characteristics so that readers can view the actual demographic profile of caregivers. However, we also conducted logistic regression analyses that predict the likelihood of caregiving as a function of various demographic and economic characteristics and found that most characteristics are qualitatively similar in the multivariate and univariate context. Our independent variables for this multivariate analysis were age, education, gender, marital status, race, ethnicity, and labor force status—employed, unemployed, or not in the labor force. Where indicated, as mentioned above, we included a categorical variable for whether the respondent’s parent lives in the respondent’s household. Where indicated, we included quartiles of usual weekly earnings; in logistic regressions that included weekly earnings as an independent variable, the analyses were restricted to wage and salary workers with a single job. See appendix III for more detail about these logistic regression analyses.", "To analyze the impact of caregiving on retirement assets and income, we compared the assets and retirement income of caregivers and non- caregivers. We conducted separate analyses for each type of care, as described below.", "To determine the effect of spousal caregiving on retirement security, we took two approaches: 1. We conducted descriptive analyses to examine differences between spousal caregivers and non-caregivers in terms of assets at or near retirement and Social Security income during retirement. We also examined differences between spousal caregivers and non-caregivers in terms of work, education, and health status of both the person providing and the person receiving care. 2. We conducted regression analyses to examine whether observed differences in assets and Social Security income were still statistically significant when we controlled for these differences in the spousal caregiving and non-caregiving populations.\nIn order to construct our analysis sample of spousal caregivers, we took the following steps. First, we identified married individuals at ages 65 or 66. We chose these ages because they are at or near the full retirement age at which individuals can receive unreduced Social Security benefits. We then identified the respondents that provided spousal care in the current wave or in the prior two waves of data, a 6-year period of time. To determine whether someone provided spousal care, the HRS asks the respondent whether they received help with activities of daily living (ADLs) or with instrumental activities of daily living (IADLs) and who helped with these activities. If the respondent indicated that their spouse or partner provided help, we then identified that person as a spousal caregiver. This resulted in a sample of about 5,000 observations. We found that about 10 percent of the sample provided spousal care in the 6 years we examined.\nWe also obtained information on the asset levels, hours worked, and other descriptive attributes at ages 65 or 66. To determine the level of Social Security retirement income, we looked ahead to the household’s Social Security income at age 71 using data from future waves of the HRS because some individuals may receive benefits at a later age.\nWe found differences between spousal caregivers and non-spousal caregivers, and differences were often statistically significant (see table 5). As the table shows, spousal caregivers tended to have lower asset levels—IRA assets, non-IRA assets, or defined contribution account balances—as well as lower levels of Social Security income. Although the asset levels of spousal caregivers did not increase as much as for non-caregivers, the differences were not statistically significant. Spousal caregivers also tended to work fewer hours, were less likely to have a college degree, and were more likely to be in self-reported poor or fair health.\nSpouses receiving care also had different characteristics than spouses not receiving care, indicating that the care recipient also could affect household assets. Spouses receiving care tended to work less and to be in poorer self-reported health. Spouses receiving care also worked fewer hours—1,100 compared to 2,700 for spouses who did not receive care (see table 5). About 66 percent of spouses that received care were in self-reported fair or poor health, as opposed to 15 percent of those who did not receive care.\nWe also compared differences between spousal caregivers and non- caregivers by gender (see table 6). We found some of the same differences between men and women spousal caregivers and non- caregivers as we did among spousal caregivers and non-caregivers more generally. However, there were also additional differences. For example, among women, growth in assets was larger among caregivers, and was statistically significant. However, differences in the cumulative hours worked was not statistically significant.\nIn order to investigate whether observed differences in retirement assets or income might be due to factors other than caregiving, we controlled for additional variables using a multiple regression. Specifically, we generated a binary variable which took the value of one if the respondent had provided spousal care and took the value of zero if not and examined the estimated coefficient on this variable. We ran six different regression models for each of the assets, with six different sets of controls, in addition to the spousal caregiving variable. The different models are as follows, with each building on the model prior. Unless otherwise noted, the findings presented in the report are from model 5.\nModel 1 estimated the differences, with only controls for the year of the wave. This helps control for the effects that would be experienced by all retirees in that year, like an economic recession.\nModel 2 included the controls from model 1 and also whether the person has a college degree. This helps control for the effects of education on assets and income.\nModel 3 included the controls from models 1 and 2 as well as earnings for the respondent in the period before we observed them caregiving. This helps control for caregivers having lower earnings before caregiving, which could affect assets and income.\nModel 4 included the controls from models 1, 2, and 3 and also demographic characteristics, such as race and ethnicity, which can be associated with assets or income.\nModel 5 included the controls from models 1, 2, 3, and 4 and also controlled for the self-reported health of the potential caregiver.\nModel 6 included the controls from models 1, 2, 3, 4, and 5 and also controlled for the self-reported health of the potential care recipient. Having a spouse in poor health might affect assets or income, even if no caregiving was provided.\nWe estimated effects on four different types of assets and income at ages 65 and 66: IRA assets, non-IRA assets, defined contribution balances, and Social Security income (see table 7). We took the logarithm of the value before running the regression to normalize the distribution. We also considered the possibility that caregiving might not only affect the level of assets, but might affect the accumulation or growth of assets. We did that by including models that estimated the effect on the growth of IRA and non-IRA assets.\nThe table below shows the parameter estimates of the effect of spousal caregiving with different levels of controls or dependent variables. In the table, the columns represent the different models (1 through 6). The rows represent different dependent variables—different types of assets or Social Security income for which we estimated the effect of spousal caregiving. In the table, the upper panel shows the effects on women’s assets and income based on caregiving. The middle panel shows the effects on men’s assets and income based on caregiving, and the final panel shows the effect when the men’s and women’s samples were pooled. As the table shows:\nFor women, men, and when the sample was pooled, we found significant negative effects of spousal caregiving on both IRA and non-IRA assets. However, the coefficient decreased in magnitude when we added additional controls. For example, when we controlled for the health of the person receiving the help, the coefficient almost fell by half, from about .5 to about .25 in the case of non-IRA assets. This indicates that it is difficult to differentiate the effect of spousal caregiving from the effect of having a spouse in poor self-reported health.\nFor women, men, and when the sample was pooled, we found significant negative effects of spousal caregiving on Social Security income. But for men, the effect was only significant at the 10 percent level for models with fewer controls. In addition, when we added controls for demographics and health, the effect for men no longer was significant.\nFor the growth of assets, we found negative effects for non-IRA assets for women, but not for men and not for the pooled sample. However, the effects were only significant at the 10 percent level and not significant when we controlled for the health of the care recipient.\nIn addition to the regression coefficients, we also calculated the differences in percent terms, which may be easier to interpret (see table 8). We found results that were strongest when comparing women spousal caregivers to women who did not provide spousal care. The effect for women was resilient to the inclusion of controls. In the model that included the health of the recipient (model 6), the effect ranged from a 40 percent reduction in IRA assets, to an 8 percent reduction in household Social Security income. For men, we found effects for IRA assets, but the effects for Social Security income were not resilient to the inclusion of controls besides the education of the recipient.\nTo determine the effect of parental caregiving on retirement security, we conducted descriptive analyses to examine differences between parental caregivers and non-caregivers in terms of assets at or near retirement age and Social Security income during retirement.\nIn order to construct our analysis sample of parental caregivers, we took the following steps. First, we identified individuals at age 65 or 66 who had living parents or parents-in law. We made this restriction because having living parents at ages 60 to 66 (and the opportunity to provide care) might be associated with higher socio-economic strata. Therefore, we did not want to compare caregivers to those who did not provide care because their parents were deceased. We then identified the respondents that provided parental care in the current wave or in the prior two waves of data. To determine who is a parental caregiver, the HRS asks respondents two separate questions. The first asks whether a respondent spent a total of 100 hours or more since their last interview or in the last 2 years helping a parent or parent-in-law with basic personal activities like dressing, eating, or bathing. The second question asks whether a respondent spent a total of 100 hours or more since their last interview or in the last 2 years helping a parent or parent-in-law with other things, such as household chores, errands, or transportation. We limited the analysis to those with living parents or in-laws. This resulted in a sample of about 2,499 observations. We found that about 57 percent of the sample provided parental care in the 6 years we examined.\nUnlike our analysis of spousal caregivers, we found that parental caregivers had higher levels of assets at or near retirement than non- caregivers, but differences between parental caregivers and non- caregivers were not statistically significant (see table 9).", "The following tables provide information about the characteristics of various types of eldercare providers.", "Table 13 shows the adjusted odds of providing care for people with different economic and demographic characteristics, from multivariate analyses. Models 1, 2, 3 and 4 show the adjusted odds of providing parental care, and models 5 and 6 show the adjusted odds of providing spousal care.\nModel 1 estimates the probability of providing parental care as a function of gender, age, marital status, race, education, and labor force status.\nModel 2 estimates the probability of providing parental care as a function of gender, age, marital status, race, education, and income quartiles. This model is restricted to employed workers, and therefore does not include labor force status as a regressor.\nModel 3 is identical to model 1, except that model 3 includes an indicator for whether the parental caregiver and the parental care recipient live in the same household.\nModel 4 is identical to model 2, except that model 4 includes an indicator for whether the parental caregiver and the parental care recipient live in the same household.\nModel 5 estimates the probability of providing spousal care as a function of gender, age, marital status, race, education, and labor force status.\nModel 6 estimates the probability of providing spousal care as a function of gender, age, marital status, race, education, and income quartiles. Like model 2, this model is restricted to employed workers, and therefore does not include labor force status as a regressor.", "", "", "In addition to the contact named above, Erin M. Godtland (Assistant Director), Nisha R. Hazra (Analyst-in-charge), Benjamin Bolitzer, Jessica Mausner, and Rhiannon C. Patterson made key contributions to this report. Also contributing to this report were Susan Aschoff, Deborah Bland, Justin Fisher, Avani Locke, Michael Naretta, Mimi Nguyen, Rachel Stoiko, Shana Wallace, and Adam Wendel." ], "depth": [ 1, 2, 3, 3, 3, 2, 1, 2, 2, 3, 3, 3, 2, 2, 1, 2, 2, 3, 3, 3, 1, 2, 2, 2, 2, 1, 1, 2, 3, 3, 3, 3, 3, 2, 3, 3, 4, 1, 1, 1, 2, 2 ], "alignment": [ "h3_title", "h3_title", "h3_full", "", "", "h3_full", "h0_title", "h0_full", "h0_title", "h0_full", "", "h0_full", "", "h0_full", "h1_title", "h1_full", "h1_title", "h1_full", "", "h1_full", "h2_title h3_title", "h3_full", "", "", "h2_full", "", "h2_title h3_title", "h2_title h3_title", "", "", "", "", "h3_full h2_full", "", "", "", "", "", "", "", "", "" ] }
{ "question": [ "How many Americans provide caretaking duties?", "How does the age of caregivers compare to the general population?", "What is the class status of spousal caregivers?", "What groups were most likely to provide ongoing care?", "How do spousal caregivers ages 59-66 differ from non-caregivers of the same age?", "What was the scale of this difference?", "To what extent is caregiving the cause of this gap?", "What did GAO do with the information gathered to improve caregivers' retirement security?", "What do the experts believe will help caregivers?", "What public awareness campaigns did the experts identify?", "What is the population projection for seniors in the United States?", "Why are family caregivers important?", "What issues may family caregivers face?", "What was GAO asked to do?" ], "summary": [ "An estimated one in 10 Americans per year cared for a parent or spouse for some period of time from 2011 through 2017, and women were more likely than men to provide care, according to Bureau of Labor Statistics survey data.", "Both parental and spousal caregivers were older than the general population, with spousal caregivers generally being the oldest.", "In addition, spousal caregivers were less likely to have completed college or to be employed, and they had lower earnings than parental caregivers and the general population.", "Most parental and spousal caregivers provided care for several years, and certain groups were more likely to provide daily care, including women and minorities.", "According to 2002 to 2014 data from the Health and Retirement Study, spousal caregivers ages 59 to 66 had lower levels of retirement assets and less income than married non-caregivers of the same ages.", "Specifically, spousal caregivers had an estimated 50 percent less in individual retirement account (IRA) assets, 39 percent less in non-IRA assets, and 11 percent less in Social Security income.", "However, caregiving may not be the cause of these results as there are challenges to isolating the effect of caregiving from other factors that could affect retirement assets and income.", "Expert interviews and a review of relevant literature identified a number of actions that could improve caregivers' retirement security, which GAO grouped into four policy categories.", "Experts identified various benefits to caregivers and others from the policy categories—as well as pointing out possible significant costs, such as fiscal concerns and employer challenges—and in general said that taking actions across categories would help address caregivers' needs over both the short-term and long-term (see figure).", "Several experts also said public awareness initiatives are critical to helping people understand the implications of caregiving on their retirement security. For example, they pointed to the need for education about how decisions to provide care, leave the workforce, or reduce hours could affect long-term financial security.", "According to the U.S. Census Bureau, the number of people in the United States over age 65 is expected to almost double by 2050.", "As Americans age, family caregivers, such as adult children and spouses, play a critical role in supporting the needs of this population.", "However, those who provide eldercare may risk their own long-term financial security if they reduce their workforce participation or pay for caregiving expenses.", "GAO was asked to provide information about parental and spousal caregivers and how caregiving might affect their retirement security." ], "parent_pair_index": [ -1, 0, 0, 0, -1, 0, 0, -1, 0, 0, -1, -1, 1, -1 ], "summary_paragraph_index": [ 3, 3, 3, 3, 6, 6, 6, 7, 7, 7, 0, 0, 0, 0 ] }
GAO_GAO-12-735
{ "title": [ "Background", "Bankruptcy Proceedings", "Orderly Liquidation Authority under the Dodd- Frank Act", "Resolution Plans and Other Financial Stability Provisions under the Dodd-Frank Act", "Additional Rulemaking Authorities under the Dodd-Frank Act", "D.C. District Court Revised Its Rule for Judicial Review under OLA", "Although Regulators Have Issued Rules Related to OLA, Some Clarifications Remain Outstanding", "Federal Regulators Have Issued Final Rules for OLA and Resolution Plans", "Concerns Have Been Raised about FDIC’s Limited Experience with Resolving Large, Complex Institutions", "International Coordination Remains a Key Challenge, Although Regulators Have Made Progress on a Universal Identifier", "International Coordination Efforts", "Financial Company Bankruptcies Remain Difficult to Track and Several Major Cases Move Forward", "Data on Financial Company Bankruptcies Are Limited", "Agency Comments and Our Evaluation", "Appendix I: Objectives, Scope, and Methodology", "Appendix II: Status of Selected Rules Related to the Orderly Liquidation Authority and Resolution Planning under the Dodd-Frank Act", "Appendix III: GAO Contact and Staff Acknowledgments", "GAO Contact", "Staff Acknowledgments" ], "paragraphs": [ "Bankruptcy is a federal court procedure conducted under the Code. The goal of bankruptcy is to give individuals and businesses a “fresh start” by eliminating or restructuring debts they cannot repay and help creditors receive some payment in an equitable manner. The filing of a bankruptcy petition operates as an “automatic stay” that stops most lawsuits, foreclosures, and most other collection activities against the debtor. Under the Code, secured creditors—those with liens or other secured claims against the debtor’s property—are more likely to get some debt repaid than unsecured creditors. Creditors typically receive payment of their debts before shareholders receive any return of their equity in the failed company.", "Business debtors that are eligible for protection under the Code may qualify for liquidation, governed primarily by Chapter 7 of the Code, or reorganization, governed by Chapter 11. Proceedings under both Chapters 7 and 11 can be voluntary (initiated by the debtor) or involuntary (generally initiated by at least three creditors).\nA liquidation proceeding—under Chapter 7—is a court-supervised procedure by which a trustee takes over the assets of the debtor’s estate, reduces them to cash, and makes distributions to creditors in accordance with the Code’s priority scheme.\nA reorganization proceeding—under Chapter 11—allows debtors that are commercial enterprises to continue to operate some or all of the debtor’s operations as a way to satisfy creditor claims. The debtor typically remains in control of its assets under a Chapter 11 proceeding, and is called a debtor-in-possession (DIP). However, if the court determines that there is cause or it is in the best interest of creditors, the court can direct the U.S. Trustee to appoint a Chapter 11 trustee to take over the affairs of the debtor. A debtor (or other interested party) may file a reorganization plan, which ultimately may be confirmed by the court. The plan includes details on the operations of the reorganization, including disposition or retention of property, mergers, and issuance of securities. The plan also divides creditors into classes and directs how the creditor classes will be paid. The debtor can terminate burdensome contracts and leases, recover assets, and rescale its operations to return to profitability. To continue operations, a debtor may obtain additional financing, which could be paid before other debts.under Chapter 11 or transfer to a Chapter 7 liquidation, which may provide a greater return to creditors.\nA debtor also may file a plan of liquidation The U.S. bankruptcy system involves multiple federal entities. While bankruptcy courts are located in 90 federal judicial districts, the Southern District of New York (which includes Manhattan) and the District of Delaware adjudicate a majority of larger corporate or business bankruptcy cases, many of which constitute “megacases.” The Judicial Conference of the United States recommends national policies and legislation for all aspects of federal judicial administration. AOUSC serves as the central administrative support entity for the Judicial Conference and the federal courts, including bankruptcy courts. For example, AOUSC provides administrative, legal, financial, management, and information technology support functions for the federal courts. The Federal Judicial Center, an education and research agency for the federal courts, assists bankruptcy courts with education relating to case administration and management, while the majority of Federal Judicial Center research helps inform policy decisions of the Judicial Conference of the United States. In addition, the Trustee Program at Justice and the Bankruptcy Administrator Program oversee bankruptcy trustees and the administration of bankruptcy estates, respectively.\nIt is important to note that certain financial institutions may not file as debtors under the Code and other entities face special restrictions in using the Code: Insured depository institutions: Under the Federal Deposit Insurance Act, FDIC serves as the conservator or receiver for the insured depository institutions placed into conservatorship or receivership under applicable law.\nInsurance companies: Insurers generally are subject to oversight by state insurance commissioners, who have the authority to place them into conservatorship, rehabilitation, or receivership.\nBroker-dealers: Broker-dealers can be liquidated under the Securities Investor Protection Act (SIPA) or under a special provision of Chapter 7 of the Code. However, broker-dealers may not file for reorganization under Chapter 11.\nCommodity brokers: Commodity brokers, also known as futures commission merchants, are restricted to using only a special provision of Chapter 7 for bankruptcy relief.", "Bank Holding Company Act of 1956, 12 U.S.C. § 1841 et seq. nonbank financial companies supervised by the Federal Reserve; any company that is predominantly engaged in activities that the Federal Reserve has determined to be financial in nature or incidental thereto for purposes of section 4(k) of the Bank Holding Company Act (including broker-dealers that are registered with SEC and are members of SIPC); or any subsidiary of a company described in the bullets above that is predominantly engaged in activities that the Federal Reserve has determined to be financial in nature or incidental thereto for purposes of section 4(k) of the Bank Holding Company Act (except for insured depository institutions and insurance companies).\nIn addition to the evaluation of whether the financial company fits within one of the categories described above, federal regulators recommending whether the Secretary of the Treasury should appoint FDIC as receiver must include: an evaluation of whether the financial company is in default or in danger of default; a description of the effect that the default of the financial company would have on the financial stability in the United States; a description of the effect that the default of the financial company would have on economic conditions or financial stability for low- income, minority, or underserved communities; a recommendation on the nature and extent of actions to be taken under Title II of the Dodd-Frank Act regarding the financial company; an evaluation of the likelihood of a private-sector alternative to prevent the default of the financial company; an evaluation of why a case under the Code is not appropriate for the an evaluation of the effects on creditors, counterparties, and shareholders of the financial company and other market participants.\nUpon recommendation, the Secretary of the Treasury, must invoke OLA if the Secretary, in consultation with the President, determines that: the financial company is in default or in danger of default; the failure of the financial company and its resolution under otherwise applicable federal or state law would have serious adverse effects on the financial stability of the United States; no viable private-sector alternative is available to prevent the default; the effect on the claims or interests of creditors, counterparties, and shareholders of the financial company and other market participants of proceedings under Title II of the Dodd-Frank Act is appropriate, given the impact that any action under Title II would have on the financial stability of the United States; an orderly liquidation would avoid or mitigate such adverse effects; and the company meets the definition of financial company as described above.\nBy a two-thirds vote, the Federal Reserve and FDIC (or relevant regulator) must agree to make the recommendation to the Secretary of the Treasury to place the financial company into receivership. The Secretary consults with the President and then makes a determination to place the company in receivership, and notifies the company’s board of directors (or equivalent). If the company consents or acquiesces to the recommendation, FDIC becomes receiver. If the company does not consent, the Secretary through Justice must petition the D.C. District Court for an order authorizing the appointment of FDIC as receiver. The D.C. District Court has 24 hours to determine whether the Secretary’s determination was arbitrary and capricious, in which case FDIC would not become receiver. If the D.C. District Court failed to act within 24 hours, then FDIC would become receiver. The financial company can appeal the D.C. District Court’s determination, but the receivership would not be stayed (or postponed) if it did so. If the D.C. District Court did not uphold the Secretary’s determination, the Secretary could amend and refile or appeal within 30 days. Upon appointment as receiver, FDIC becomes successor to and legal custodian of the financial company, including assets and operations.\nUnder authority provided by Title II of the Dodd-Frank Act, when FDIC is appointed receiver of the financial company it may take over and manage the assets of the company. FDIC must liquidate and wind up the affairs of the financial company, and may sell or transfer the assets to a bridge financial company, which is a temporary company used to maintain the failed company’s operations. A bridge financial company may purchase assets, assume liabilities, and undertake other functions of the financial company. FDIC also has authority to determine the validity of creditor claims against the company and pay creditor claims. The Dodd-Frank Act generally requires that all creditors of a financial company with similar priority be treated similarly; however, in certain circumstances FDIC may treat similarly situated creditors differently. In some cases, FDIC may repudiate contracts to which a financial company is a party or may enforce certain contracts that otherwise could have been terminated because of the financial company’s insolvency.", "Among its provisions, Title I of the Dodd-Frank Act requires certain financial companies to provide regulators with periodic reports on their plans for rapid and orderly resolution in the event of “material financial distress or failure” under the Code. The resolution plan must include the following: information on the manner and extent to which any insured depository institution affiliated with the company is adequately protected from risks arising from the activities of any nonbank subsidiaries of the company; full descriptions of the ownership structure, assets, liabilities, and contractual obligations of the company; identification of the cross-guarantees tied to different securities, identification of major counterparties, and a process for determining to whom the collateral of the company is pledged; and any other information that the Federal Reserve and FDIC jointly require by rule or order.\nThe Federal Reserve and FDIC must review the information in these resolution plans. If they jointly determine and notify a company that its plan is not credible or would not facilitate an orderly resolution under the Code, the financial company would have to submit a revised plan. A revised plan must discuss in detail revisions that address the deficiencies jointly identified by the Federal Reserve and FDIC. The revised plan must also address changes, if any, in its business operations or corporate structure that the company proposes to make to facilitate implementation of the plan. If the company fails to submit a satisfactory revised plan, the Federal Reserve and FDIC could impose stricter requirements such as If the company higher capital or liquidity requirements on the company. fails to submit a satisfactory revised plan within 2 years of the imposition of stricter requirements, the Federal Reserve and FDIC, in consultation with the Financial Stability Oversight Council (FSOC), may jointly direct a company to divest certain assets or operations jointly identified by the Federal Reserve and FDIC as necessary to facilitate an orderly resolution under the Code in the event of failure of the company.", "The Dodd-Frank Act requires certain regulators to develop and issue rules to implement OLA and resolution plan requirements. For some rules, the regulators must consult with FSOC, a new entity established by the Dodd-Frank Act. FDIC—in consultation with FSOC—has primary responsibility for developing and issuing rules and regulations related to its authority as receiver of a failed financial company. Other sections of Title II of the Dodd-Frank Act also contain specific requirements for FDIC to coordinate with the Federal Reserve, SEC, and other banking regulators on key aspects of OLA. Under Title I, the Federal Reserve and FDIC must issue joint rules on resolution plans. FSOC has the authority to designate nonbank financial companies (including foreign nonbank financial companies) for Federal Reserve supervision if FSOC determines that such companies could pose a threat to the financial stability of the United States. These nonbank financial companies would have to file resolution plans. Appendix II lists the primary rules related to OLA and resolution plans and their status as of May 15, 2012.", "As we previously reported, the D.C. District Court issued Local Civil Rule 85 on January 19, 2011, to implement its judicial review requirements under OLA. Generally, the rule reiterated the procedural requirements in the Dodd-Frank Act. It provided for a 24-hour review, and the financial company has the right to oppose the Secretary’s petition to invoke an FDIC receivership under OLA. If the court did not rule on the petition within 24 hours, or ruled in favor of the Secretary, the receivership would proceed immediately. As the rule was originally written, the Secretary of the Treasury would have had to notify the D.C. District Court under seal at least 48 hours before the filing of a petition, which would give the court time to prepare for the review. In addition, the original rule did not specifically address Rule 6 of the Federal Rules of Civil Procedure regarding the 24-hour period. Rule 6 states that if a time period ends on a weekend or holiday, the period would be extended to the next business day. Court officials told us that they included the original 48-hour notice because they were concerned about receiving advance notice before an OLA filing. Court officials also told us that the D.C. District Court was a smaller court that did not hear many business cases and few large bankruptcies and therefore they needed the advance notice.\nIn letters dated March 2011, FDIC and Treasury objected to notification requirements in the rule that required Treasury to provide an additional 48-hour notification to the court before filing a petition to invoke OLA. In addition, they were concerned about the possible use of Rule 6 of the Federal Rules of Civil Procedure to extend the 24-hour period for the court to rule and the 48-hour notification period. The agencies said that Treasury may not always be able to provide the 48-hour notice because of the speed with which a financial company could become insolvent. FDIC and Treasury were concerned that the use of Rule 6 to calculate the timing of filings and decisions effectively would expand the court’s 24- hour time frame to rule on the petition and the 48-hour notice period. For example, if the Secretary’s 48-hour notice period or the court’s 24-hour review period ended on a weekend or holiday, Rule 6 calculations would move the ends of those periods to the next business day. According to agency officials, this delay could have serious adverse effects on U.S financial stability. As a result, the agencies thought the court should be prepared to make rulings over the weekend.\nOn July 6, 2011, the court issued a revised final rule, which added “to the extent feasible” to the requirement that the Secretary of the Treasury notify the court 48 hours before filing a petition. In addition the revised rule added a section stating that the 48-hour notice period and the 24- hour decision period were not subject to Rule 6, meaning that the time limit would apply without regard to whether the time periods ended on a weekend or holiday. FDIC and Treasury officials told us that the revisions to the court’s rule addressed their concerns. The court has not yet tested the effectiveness of the rule because, as of May 1, 2012, the Secretary had not sought the appointment of FDIC as receiver in an OLA proceeding.", "Federal regulators have issued separate final rules for OLA and resolution plans, as required by the Dodd-Frank Act. FDIC plans to issue additional rules to clarify its use of OLA, such as a joint rule with SEC for the resolution of broker-dealers. Because the first financial companies will not begin filing resolution plans until July 2012, it is too soon to determine the effectiveness of the plans. Despite the issuance of rules, academics and other experts have questioned FDIC’s ability to resolve large, systemically important financial institutions under OLA because of the complexity of the firms involved and challenges relating to international coordination. Regulators have reported progress on developing a universal identifier for financial companies that would help them identify and manage companies’ counterparty exposures.", "Final Rules for OLA. On July 15, 2011, FDIC published a final rule (referred to as the Orderly Liquidation Authority Final Rule) under rulemaking authority provided by Section 209 of the Dodd-Frank Act. In its discussion of the final rule, FDIC noted that the rule represented the results of its initial phase of rulemaking for its OLA authority. FDIC staff also told us that this final rule included topics addressed in an earlier interim final rule and two notices of proposed rulemakings.\nMore specifically, the final rule covers topics under three broad categories: (1) the definition of terms in a receivership under OLA and other general provisions of an FDIC receivership; (2) the priority of payments, including those for administrative expenses and to unsecured creditors; and (3) the process for administering claims against the failed financial company. The rule also covers other aspects of the receivership. For example, the final rule addresses FDIC’s ability to recover compensation from a current or former senior executive who is found substantially responsible for the failure of the financial company. In addition, the rule addresses the payment for services performed under personal service agreements after FDIC is appointed receiver or for the acceptance of services by a bridge financial company. FDIC’s final rule also discusses the distribution of assets in the liquidation of a noninsurance company subsidiary of an insurance company. FDIC has indicated that it believes it now has in place the regulations necessary to accomplish a resolution under OLA, even though it intends to adopt several additional regulations over the next year.\nIn addition, FDIC published a final rule (the Mutual Insurance Holding Company Treated as Insurance Company Rule) concerning the treatment of mutual insurance holding companies on April 30, 2012. Mutual insurance holding companies are owned by policyholders, not stockholders, and generally have been subject to state insurance insolvency regimes. In its final rule, FDIC sought to make the resolution of mutual insurance companies conform to state insurance statutes for the resolution of such companies.\nProposed Rules Related to OLA. FDIC, in consultation with FSOC, also has issued two proposed rules related to OLA to clarify certain technical issues. First, FDIC and Treasury jointly issued a notice of proposed rulemaking on November 25, 2011, governing the calculation of the maximum obligation FDIC could incur as receiver under OLA, as required by the Dodd-Frank Act. The proposed rule (the Maximum Obligation Limitation Rule) outlines a calculation that limits the total outstanding obligations that FDIC can incur in connection with the liquidation of a financial company under OLA and defines terms such as “obligations.” FDIC issued a second proposed rule on March 20, 2012, which relates to its enforcement of subsidiary and affiliate contracts as the receiver of a covered financial company. The proposed rule (Enforcement of Subsidiary and Affiliate Contracts by the FDIC as Receiver of a Covered Financial Company Proposed Rule) clarifies FDIC’s authority to preserve the value of a failed financial company’s assets and business lines by enforcing certain contracts of subsidiaries and affiliates of the financial company. FDIC as receiver has authority to enforce contracts guaranteed by the financial company even though the counterparty has the contractual right to terminate or accelerate the contract based on the insolvency of the financial company. FDIC must transfer the guarantee and all related assets to a bridge financial company or third party or provide adequate protection for the obligations. According to FDIC, this authority will help enable it to place a financial company at the holding company level into receivership without placing solvent subsidiaries into receivership, while also helping to mitigate systemic risk and maintain financial stability.\nFinal Rule on Resolution Plans. On November 1, 2011, FDIC and the Federal Reserve published a final rule (the Resolution Plans Final Rule) implementing the Dodd-Frank Act requirement under section 165(d). Under this requirement, bank holding companies with at least $50 billion in total consolidated assets (including foreign banking organizations that are treated as bank holding companies) and nonbank financial companies supervised by the Federal Reserve must periodically submit resolution plans. Although this rule requires these types of financial institutions to submit plans describing how they would be resolved through the bankruptcy process, regulators reported that having companies file resolution plans would help FDIC in planning for the exercise of the possible use of its resolution authorities, including OLA. Regulators anticipate the plans also would provide additional insights on these companies’ structure and complexity, including funding sources and counterparties. In addition, the Federal Reserve noted that the plans will assist in its supervisory efforts to ensure that companies operate in a manner that is both safe and sound and do not pose risks to financial stability generally. The final rule addresses information required in the plans, steps for submitting the plans, requirements for updating plans, and steps regulators may take for addressing inadequate plans. Under the rule, a company’s resolution plan must take into account different economic scenarios provided to the company by the Federal Reserve; the scenarios will be developed in the Federal Reserve’s rules on stress testing. As shown in table 1, the deadlines for resolution plans are staggered by company size. Plans for the largest bank holding companies are due in July 2012.\nFDIC and other regulators noted in our discussions that although they completed a final rule for OLA and drafted several other rules, regulators are working on, but have not yet issued, certain mandated rules. In addition, the final rule does not address a number of important issues. Most of the outstanding rules related to OLA are required under the Dodd-Frank Act. Three of these are rules FDIC must issue jointly with other regulators:\nOrderly liquidation of broker-dealers (no statutory deadline);\nRecordkeeping for qualified financial contracts (due July 21, 2012);\nSource of strength (due July 21, 2012).\nFDIC officials reported that each of these three rules was in a different stage of development, with the recordkeeping rule for qualified financial contracts closest to being issued, potentially as an interim rule before the statutory deadline in July.\nBesides addressing the complexity of OLA, regulators told us that coordination and reaching consensus with different regulators represented a challenge in drafting and issuing OLA-related rules, particularly given the number of rulemakings required of some regulators and resource constraints. As part of the OLA rule development process, FDIC must consult with different members of FSOC and in some cases is statutorily mandated to work with specific regulators or agencies. Regulators also have had to address how certain rules would avoid conflicts with other rules and help ensure consistency with other requirements mandated under the Dodd-Frank Act.\nDodd-Frank Act § 616(d); 12 U.S.C. § 1831o-1. dealers that are subject to OLA. Under OLA, FDIC, as receiver of a failed broker-dealer, or in a case in which the largest U.S. subsidiary of a financial company is a broker-dealer, would appoint SIPC as trustee for the liquidation. However, in our earlier discussions with FDIC, SEC, and SIPC officials, they noted that the Dodd-Frank Act did not clearly delineate SIPC’s role in a broker-dealer resolution under OLA, which may pose challenges in such a case. For instance, if FDIC as the receiver of a broker-dealer put the broker-dealer into a bridge institution, the agencies would need to determine what SIPC’s role would be and how creditor and customer claims would be handled.would govern the relationship between FDIC and SIPC. Although there is no statutory deadline for this rule, SIPC officials emphasized the importance of the rule to clarify SIPC’s participation so as to avoid confusion in any future resolution under OLA. FDIC and SIPC officials told us that they met together with SEC for the first time on May 3, 2012, to discuss developing this rule. FDIC officials reported that they anticipate issuing a final rule by the end of 2012.\nFDIC officials told us that this rule SEC officials told us that other Dodd-Frank requirements were a complicating factor in the development of the required rule on recordkeeping for qualified financial contracts. Under FDIC’s proposal, financial companies would have to provide FDIC with information on swaps and other contracts similar to the information that they would provide regulators under other Dodd-Frank requirements. FDIC officials told us that they are actively working with other regulators on the rule, which is due in July 2012. In another example, Federal Reserve staff told us that rulemaking related to the source of strength rule involved significant policy decisions, including to which bank holding companies the rule would apply, and how this requirement relates to other requirements for bank holding companies.they have reached out to the Federal Reserve and Office of the Comptroller of the Currency to start developing this rule (also due in July 2012) but do not have an estimated issuance date.\nFDIC officials told us that other OLA-related rules—either mandated by the Dodd-Frank Act or recommended by others—detailing key aspects of FDIC’s authority as receiver, as well as the treatment of creditors, were still in the design phase or had not been drafted. First, the final rule on FDIC’s general authority under OLA does not fully define the universe of financial companies for which FDIC could be receiver. proposed rule, FDIC included a definition of financial companies (under its authority under Title II of the Dodd-Frank Act) but in the final rule, the agency deferred finalizing this definition until the Federal Reserve issued its final rule on the definition of nonbank financial companies (under its authority for enhanced supervision under Title I of the Dodd-Frank Act). The Federal Reserve has issued two proposed rules on the definition of financial companies and officials from FDIC and the Federal Reserve told us that they have been coordinating to make their definitions consistent.FDIC officials told us that they anticipated issuing a final rule defining financial companies by the end of 2012.\nAs discussed earlier, FDIC’s authority under OLA would extend to those companies “predominantly engaged in activities that the Federal Reserve has determined are financial in nature or incidental thereto for purposes of section 4(k) of the Bank Holding Company Act.” The final OLA rule did not define how FDIC would make this determination. the proposed rule, industry groups and a federal regulator called for greater clarification about how FDIC would do its assessment. FDIC officials told us that they have started to develop a “minimum recovery” rule to respond to these concerns and clarify how creditors would receive no less than they would under a Chapter 7 bankruptcy proceeding.\nMartin J Gruenberg. “Remarks to the Federal Reserve Bank of Chicago Bank Structure Conference” (Chicago, Ill.: May 10, 2012).\nDodd-Frank Act allows for a bridge financial company to be established for 2 years, with the ability to extend it for 1 year (up to three times).\nThe Dodd-Frank Act specifically states OLA is not a bailout to individual firms. Section 214 provides that all financial companies put into OLA must be liquidated and all funds expended in the liquidation shall be recovered through disposition of assets or assessments on the financial sector. 12 U.S.C. § 5394, Section 1101 amended the section 13(3) of the Federal Reserve Act to prohibit the Federal Reserve Board from authorizing direct loans for the purpose of assisting a single and specific company to avoid bankruptcy, as it did in the 2008 financial crisis. 12 U.S.C. § 343. under OLA. FDIC faces no statutory deadline for completing these rules, and FDIC officials told us that they considered them to be of lower priority. Lastly, FDIC may issue additional rulemakings through its general authority under Title II of the Dodd-Frank Act, in consultation with FSOC. FDIC plans to issue a rule about the orderly liquidation of a commodity broker, but officials told us that they would coordinate any rulemaking with changes CFTC might make to its rule related to commodity broker bankruptcies.", "Although FDIC and other regulatory officials noted that resolution plans could help prepare for the possible failure of a large financial company, not enough time has passed to determine the effectiveness of the living will requirement in assisting financial companies to prepare for bankruptcy (as discussed earlier) as well as aiding FDIC in the use of its Title II authority. As mentioned previously, the largest bank holding companies are required to submit resolution plans by July 1, 2012. As of May 2012, FSOC had not yet designated the systemically important nonbank financial companies, and the resolution plan final rule states that these companies do not have to file earlier than 270 days from their date of designation. Federal Reserve and FDIC staff told us that they anticipated that 9 or 10 bank holding companies would file in the first wave of submissions. Federal Reserve officials told us that they have been in discussions with the largest bank holding companies since the Although entities commenting on the draft rule for rule was finalized.resolution plan requirements brought up concerns about the definition of government support to financial companies and the confidentiality of proprietary data, regulatory officials believe that they have largely addressed these issues in the final rule. As of May 2012, details on the credit exposure reporting requirements had not been specified. Federal Reserve officials told us that the requirement for credit exposure reports will be included in a separate rulemaking related to single-party credit exposure limitation.\nIn the bankruptcy process, the resolution or liquidation of large, complex, internationally active financial firms involves multiple challenges. As we discussed in our 2011 report, these challenges include identifying funding sources and counterparties and dealing with complex corporate Financial and legal experts structures across international jurisdictions. have noted that resolution plans might not be as helpful as hoped during times of financial distress because of the need for current information— much of a company’s contracts, assets, and liabilities could change dramatically from day to day. The final rule for resolution plans under Title I requires financial companies to stress test their portfolios under multiple scenarios to identify the financial firm’s risks. However, the scenarios may not anticipate the type of financial crisis that could eventually lead to a firm’s insolvency. Because of these challenges and the reported burden associated with developing the plans, some industry and academic experts have questioned the merits of the plans. FDIC noted their expectation that the plans, when complete, would provide important information for its advance planning to facilitate any necessary liquidation of a firm, irrespective of the cause of the firm’s failure.\nFurthermore, although FDIC has been working to further clarify its authority under OLA, several academic and other experts have raised concerns about FDIC’s overall ability to effectively initiate the resolution of large and complex firms without causing broader market disruption. As we discussed in our 2011 report, FDIC has issued an analysis of how it would have handled the failure of Lehman under OLA; some criticized the analysis for its assumptions about Barclays Capital Inc.(Barclays)’s ability to obtain regulatory approval to purchase Lehman’s distressed assets at a time of widespread weakness in the financial markets. According to Lehman’s bankruptcy examiner, Barclays was interested in acquiring Lehman prior to Lehman’s bankruptcy and did purchase certain assets of Lehman’s following bankruptcy. According to FDIC, its willingness to absorb the first $40 billion in Lehman’s losses would have addressed concerns of Barclays’ U.K. regulators. FDIC officials told us that they have been given sufficient powers to resolve such firms in order to limit further market disruption. FDIC officials reported that having access to funding would allow the receiver to make payments to creditors shortly after the time of failure and would help to maintain financial stability. In addition, they noted that the receiver would be able to establish a bridge financial company, as discussed earlier, to maintain the operations of the company without engaging in a bailout of stockholders of the failed firm. FDIC reported it received strong support for its proposals under OLA during a public forum with academic experts in January 2012.\nOthers have noted FDIC’s lack of experience in resolving financial companies as complex as Lehman with multiple international subsidiaries. As one SIPC official told us, Lehman collapsed within 24 hours—a much shorter planning period than that to which FDIC is accustomed when resolving failed banks. In response, FDIC officials noted that they likely would have reviewed a firm’s resolution plan and been kept abreast of actions taken by the firm’s supervisor. As FDIC notes in its paper on the hypothetical liquidation of Lehman under OLA, FDIC would have been engaged for months prior to the failure of the firm. In addition, we noted in our 2011 report, there have been few large scale bankruptcies of complex, internationally active financial firms.\nHowever, others have noted that today’s largest financial companies have structures and asset sizes that dwarf those of Lehman, which remains the largest Chapter 11 debtor in U.S. history. FDIC also could be limited in its ability to manage the failure of an internationally active financial institution because it would be responsible for resolving the domestic subsidiaries of a failed company. Certain subsidiaries, assets, and creditors would be subject to separate insolvency regimes in various countries.", "", "As discussed in our 2011 report, cross-border resolutions of internationally active financial institutions such as Lehman Brothers remain a challenge, due to the manner in which different countries’ insolvency proceedings interact. In comments on the proposed resolution plan rules, several entities called for international coordination on the submission and approval of resolution plan requirements, as many internationally active financial institutions will be subject to resolution regimes in multiple countries. U.S. and international regulators have recognized this challenge and in July 2011 the Financial Stability Board issued a consultative document that proposed a requirement to mandate that all designated global systemically important financial institutions (SIFI) have recovery and resolution plans.called for cross-border cooperation agreements to enable countries’ resolution authorities to act collectively to resolve internationally active financial institutions in an orderly and less-costly way.\nIn addition, the document After receiving comments on its proposal, the Financial Stability Board released an updated list of key attributes of effective regimes for resolving failed SIFIs in October 2011. These attributes addressed issues such as the scope and independence of the country’s resolution authority, the essential powers and authorities of the resolution authority, and how jurisdictions can facilitate cross-border cooperation in resolutions of SIFIs. Members of the G20 endorsed the attributes in November 2011. FDIC and Federal Reserve officials report that the Dodd-Frank Act’s Title II authority for FDIC to resolve systemically important financial institutions and its Title I requirement for these institutions to file periodic resolution plans follow the key attributes designated by the Financial Stability Board. Federal Reserve staff told us that the United States was ahead of some jurisdictions in adopting these provisions. In a November 2011 update (the latest available), the Financial Stability Board wrote that many jurisdictions had not implemented adequate legal frameworks for resolving global SIFIs and substantial further work on recovery and resolution plans as well as cross-border cooperation was needed.\nFDIC, the Federal Reserve, and other international regulators that are members of the Financial Stability Board have formed “crisis management groups” to review the recovery and resolution plans for global SIFIs. Officials from both U.S. agencies told us that the crisis- management groups for five of the U.S. global SIFIs have met with their international regulatory counterparts during the past year. In particular, they discussed progress for the planning efforts of these institutions. FDIC also has reported starting bilateral discussions with the foreign regulators of U.S.-based global SIFIs to identify any impediments to orderly resolution and implement any changes to address those challenges. FDIC noted that these discussions have led to the drafting of several memorandums of understanding with international regulators. FDIC further reported in January 2012 that their analysis has shown that in a crisis the U.S.-based global SIFIs would have a limited number of international regulators with which to work. For these financial institutions, more than 90 percent of the “total reported foreign activity” was located in from one to three foreign jurisdictions and more than 80 percent of this activity came from legal entities in the United Kingdom.\nHowever, Federal Reserve staff told us developing plans for cross-border resolution under the Bankruptcy Code remains a challenge. While the United States is requiring companies to file resolution plans that must detail how companies would resolve themselves under the Code, in some countries, regulators complete a resolution plan that discusses resolving the company without further market disruptions. In contrast, financial companies in those countries only have to complete a recovery plan that discusses ways to restore strength to a company under financial stress. Therefore, foreign banking organizations, which must file resolution plans in the United States, could face a different set of requirements in their home countries.\nU.S. and international regulators have cited the development of the Legal Entity Identifier (LEI) as a code for financial institutions and regulators to better identify and manage institutions’ relationships with other institutions—allowing them to more effectively measure and monitor systemic risk. In addition, FDIC officials told us that the use of an LEI should help regulators in resolving a financial company during the OLA process because its adoption would allow large, systemically important financial companies to identify their many component entities, which generally are organized along business rather than legal lines. As we discussed in our 2011 report, the resolution of these companies involves unwinding the complex interrelationships among the entities in order to address creditor claims.\nCurrently, a single financial institution may be identified or coded in different ways by a firm doing business with that institution. For example, JP Morgan Chase, Inc. may be referred to as JPMC, Chase, and JPMorgan. Regulators have cited a universal identifier for financial institutions as particularly helpful in the identification of parties in transactions involving over-the-counter derivatives. collapsed in 2008, other financial institutions struggled to determine their counterparty exposure to the firm, causing further market disruptions.\nOver-the-counter derivatives refer to derivatives not traded on a formal exchange.\nThe financial industry has been exploring a universal identifier for decades, but recently regulators have pushed for a global mandate. The Dodd-Frank-created Office of Financial Research issued a policy statement in 2010 seeking comment on the development of an LEI. Since then, the Office of Financial Research and the Financial Stability Board have held roundtables and the financial industry has convened panels on the development of an LEI. In January 2012, the Financial Stability Board convened an expert group of regulators (supported by an industry advisory panel of experts) to provide recommendations on the governance framework for the LEI with a goal of endorsement by the G20 summit in June 2012. On May 30, the Financial Stability Board endorsed the expert group’s recommendations for a governance and operational framework for an LEI. In addition, the Financial Stability Board’s specification for an LEI standard is derived from the technical standard for a 20-digit alphanumeric code published in May 2012 by the International Organization for Standardization.\nGlobal acceptance of an LEI requires determining its governance and regulatory oversight. An Office of Financial Research official told us that the Financial Stability Board’s LEI Expert Group has broken into committees to discuss issues including governance, operating model, reference data and confidentiality, funding, and implementation. The official said that the governance committee also has been considering a model in which a nonprofit entity would administer the process. According to Treasury, the Financial Stability Board published a report in mid-June 2012 including recommendations for the appropriate governance framework for a global LEI. U.S. regulators reported that the first iteration of LEI structure will be limited to the code itself and a minimal set of reference data, not information about ownership hierarchies, because of confidentiality concerns. In its commodity swap reporting rule (which goes into effect July 16, 2012), CFTC became the first U.S. regulator to require financial companies to use LEIs.securities swap reporting rule that requires the use of an LEI provided by SEC also has published a proposed an international organization when available.Board has recommended a target for global implementation of the LEI standard by March 2013.", "In the 2011 report, we found that comprehensive data on the number of financial companies in bankruptcy are not readily available. Bankruptcy data are collected for provisions relevant to the Code and for management of cases. While federal agencies currently do not collect information to identify certain bankrupt entities, the Federal Judicial Center is starting to assemble a specialized database of financial company bankruptcies from the past 10 years. Two large cases we began tracking in our 2011 report, Lehman Brothers and Washington Mutual, are moving forward, but these cases along with the more recent bankruptcy of MF Global illustrate the challenges in resolving large, complex financial institutions.", "As we reported last year, tracking financial company bankruptcies is difficult because data are limited. Specifically, data on the number of financial company bankruptcies and their outcomes have been difficult to obtain. Neither AOUSC, the Trustees’ Office in Justice, nor FDIC collect information on the number of financial companies in bankruptcy. We previously reported that AOUSC collects some data on bankruptcy outcomes, such as the closing date for large cases. However, AOUSC does not specifically include information on bankruptcy cases involving financial institutions, or track outcomes such as the value of creditor returns or the value of firms emerging from bankruptcy. The bankruptcy courts only collect data on the type of business in which an institution is engaged if the data are pertinent to provisions of the Code (for example if the business was a broker-dealer subject to a SIPA proceeding) and these data are used for case processing rather than overall study. AOUSC officials told us they have been considering having the bankruptcy courts include the North American Industry Classification System code when a company files for bankruptcy. However, AOUSC and Federal Judicial Center officials told us that this new requirement would require a modification to the Official Bankruptcy Forms. These officials told us that this process generally takes 2 years and follows the process for amending the Federal Rules of Bankruptcy Procedure, except the process does not require approval by the Supreme Court or an opportunity for review by Congress.\nAOUSC provides the Trustee Program’s bankruptcy filing data. Officials told us these data include whether the debtor is a person or a corporation, whether it is a small business, the case number, the name and address of the debtor, and the status of the case (that is, whether a plan has been filed or if the case has been dismissed), and other types of information. However, officials told us they do not flag financial companies and cannot track them separately. FDIC officials told us that although they track individual cases of bank holding companies in bankruptcy, such as Washington Mutual, Inc. and Colonial Bank, they do not have a database that aggregates these case records.\nAlthough AOUSC officials told us that they currently were not routinely collecting any data that would allow the identification and tracking of financial company bankruptcies, AOUSC and the Federal Judicial Center have undertaken a collaborative effort to create a specialized database of financial companies that have filed for bankruptcy protection from 2000 to 2010, but they have concerns about the reliability of these data as they are untested for this purpose. According to a Federal Judicial Center official, the purpose of the database is to compile information useful in understanding the effectiveness of Chapter 7 and Chapter 11 of the Code in facilitating the orderly liquidation or reorganization of financial companies. Officials told us developing such a database has been A challenging, due to the resources needed and coding concerns.Federal Judicial Center official told us they had developed an online coding form to document more information about each case and held a training session for the student coders. One of the items researchers must code is the type of financial company, which is not information the courts currently collect. Some outcomes included in the database, such as details about the sale of all assets, are more difficult to find in court dockets. In addition, the official told us determining the level of detail on each case to include in the database has been a challenge. For example, the official told us they attempted to limit the complexity of information for staff to code, while still documenting the necessary data for further study. To address this issue, the official told us that the Federal Judicial Center is undertaking various data verification processes, including a process by which two independent coders will code the same information and a third, more experienced researcher will reconcile any differences between them. Despite these efforts, AOUSC officials told us that they currently are not able to determine how effective this database will be in allowing them to track large financial company bankruptcies, partly because of concerns over using data reported by the companies filing for bankruptcy.\nAs in our 2011 report, to examine the number of large financial companies filing for bankruptcy protection, we matched AOUSC data on Chapter 11 megacases with data from a private firm on financial company bankruptcies to determine the number of financial companies in bankruptcy during the past decade. Table 2 describes both the total megacase filings and those megacases that are financial companies.\nWe continued to monitor two financial megacases, Washington Mutual, Inc. (Washington Mutual) and Lehman Brothers Holdings, Inc. (Lehman) and began monitoring a third, MF Global Holdings Ltd. (MF Global). Washington Mutual and Lehman are making progress in their bankruptcy proceedings, with several issues outstanding. Both financial institutions filed for Chapter 11 protection in September 2008. A new case involves MF Global, a holding company with a broker-dealer and commodity broker, which filed for Chapter 11 protection in October 2011. Each case illustrates the complexities of liquidating large financial institutions.\nWashington Mutual. As we discussed in our 2011 report, the parties to the bankruptcy had agreed to a revised settlement report in late 2010, but confirmation of that plan was delayed due to various claims by shareholders and some creditors. These delays continued throughout 2011 because of additional hearings to discuss allegations of insider trading by hedge funds. Shareholders alleged that several hedge funds had access to discussions about the settlement plan through their attorneys and later bid on creditor claims. The parties entered mediation in October 2011 and reached a settlement and submitted a plan on December 12, 2011. A Delaware bankruptcy court judge confirmed the plan on February 17, 2012. As discussed in the 2011 report, the plan set forth the allocation of the tax refund among all of the parties: up to $2.2 billion to Washington Mutual’s holding company; up to $2.2 billion to J.P. Morgan Chase, Inc. (the new owner of the depository bank); up to $850 million to FDIC; and $335 million to the bank’s bondholders. As of May 2012, the judge told us that she had been advised that the majority of the claims had been resolved. Further payouts will be distributed through a liquidating trust. Washington Mutual, Inc. is being reorganized as a reinsurance company that will be funded by capital contributions from new bondholders, not by the creditors from the original debtor.\nLehman Brothers. On June 29, 2011, Lehman filed a disclosure statement that set out the plan for distribution of assets to the creditors of 23 Lehman debtor entities. This plan was made after extensive negotiations with representatives of major creditor groups, including those that supported substantive consolidation and those that did not. This plan represents a compromise between the parties by providing for adjustments in payments to creditors. In November 2011, creditors approved Lehman’s reorganization plan. The bankruptcy court confirmed the plan in December 2011. The plan included numerous settlements between the holding company and other counterparties, including a series of bilateral settlements with foreign affiliates and creditors. As a result, creditors reduced the amount of claims asserted against Lehman by more than $295 billion. According to Lehman, distributions to creditors totaling $22.5 billion began on April 17, 2012. A second distribution is planned for September 2012.\nThe resolution of Lehman’s broker-dealer, Lehman Brothers Inc., continues through the SIPC process. According to SIPC officials, almost all of the 100,000 claims had been satisfied as of May 2012. However, some of the remaining claims are among the largest and involve complex litigation over who meets the definition of “customer” under SIPA. According to the SIPA Trustee, there are over 2,100 claims with a total value of nearly $42 billion that are still unresolved. One of the largest of these claims involves Lehman’s overseas affiliate—Lehman Brothers International, Europe (LBIE)—which is pursuing two types of claims against Lehman Brothers Inc. The first is an “omnibus customer claim” on behalf of approximately 1,100 LBIE clients against Lehman Brothers Inc., of which $6 billion in claims for securities and $2 billion in claims for cash have been allowed by the SIPA Trustee. A remaining $6.7 billion remains under dispute. The second is a “house claim” on its own behalf against Lehman Brothers Inc., of which $8.9 billion remains under dispute. The trustee said he does not recognize LBIE as a “customer” of Lehman Brothers Inc. because it does not meet the definition of “customer” under SIPA. According to SIPC officials, Lehman Brothers Inc. never held reserves on behalf of LBIE. These issues remain in litigation and may go to trial in 2013.\nThe SIPA Trustee for Lehman Brothers Inc. has initiated litigation against other counterparties over payment distribution, which also remains ongoing. In the first case, the SIPA Trustee is in litigation with Barclays involving issues surrounding its purchase of assets of Lehman Brothers Inc., immediately after Lehman filed for bankruptcy. According to the SIPA Trustee’s report, the dispute centers on competing interpretations of the Asset Purchase Agreement (defining the terms of the sale of certain Lehman Brothers Inc. assets to Barclays) between Lehman, Barclays, and Lehman Brothers, Inc. and involves contested claims to approximately $7 billion of “disputed assets.” This case is currently on appeal.\nIn a second case, SIPC officials told us the SIPA Trustee has filed an adversary proceeding against Citibank seeking the return of a $1 billion deposit Lehman Brothers Inc. made with Citibank during Lehman Brothers Inc.’s last week in operation. The case involves Citibank’s setoff of Lehman Brothers Inc.’s obligations against Lehman Brothers Inc.’s deposits at Citibank and affiliated entities. Citibank claims it set off the deposit shortly before Lehman Brothers Inc.’s SIPA liquidation process began in September 2008. The SIPA Trustee also has been seeking the turnover of approximately $300 million deposited in Lehman Brothers Inc. accounts at various Citibank locations around the world. According to the SIPA Trustee, Citibank has been attempting to set off these deposits against a component of the Lehman Brothers Inc. obligations (approximately $1.26 billion) that are related to a settlement service provided by Citibank.\nIn addition, the SIPA Trustee has been pursuing claims against LBIE on behalf of the broker-dealer’s customers. The SIPA Trustee alleges that LBIE has assets that belong to Lehman Brothers Inc. customers. According to the SIPA Trustee, due to the hundreds of thousands of transactions between Lehman Brothers Inc. and LBIE, the final outcome and amounts available for SIPC’s customer distribution are heavily dependent on LBIE’s own resolution in the United Kingdom. The SIPA Trustee has filed claims against LBIE totaling almost $16 billion. According to the SIPA Trustee, he and his advisers have been engaged in discussions with LBIE about the extent to which LBIE will allow the SIPA Trustee’s claim. The SIPA Trustee said the result of this process will have a major impact on the resolution of the U.S.-based Lehman Brothers Inc. estate and the SIPA Trustee’s ability to satisfy claims of customers and other creditors of the broker-dealer.\nMF Global. MF Global has been in the bankruptcy process since October 31, 2011, and has faced challenges due to missing customer funds and property. MF Global was a large, globally active company with a commodity and securities broker-dealer. The firm was based in the United States, with operations in multiple countries, including Australia, Canada, Hong Kong, India, Japan, Singapore, and the United Kingdom. As of mid- 2011, the holding company had total assets of almost $46 billion. MF Global’s stock price declined during 2011, falling from about $8 a share at the start of the year to below $4 in early October and below $2 by late October. According to the SIPA Trustee, MF Global’s exposure to European debt and poor earnings reports led to credit downgrades and increased demands for collateral from MF Global’s counterparties. This in turn led to an increased loss of confidence in MF Global as customers began to close their accounts and withdraw funds.\nAccording to CFTC, the failure of the MF Global commodity broker (MF Global Inc.) is unprecedented in the size and scope of missing customer funds. Ordinarily, the designated self-regulatory organization, in coordination with CFTC, would have arranged for the sale of a failed commodity broker to another commodity broker, but in the case of MF Global Inc., the missing customer funds and possible fraud prevented this from occurring, according to CFTC officials. These officials said they increased their involvement in the MF Global case after the company was downgraded by credit rating agencies on October 27, 2011. Despite repeated inquiries, MF Global Inc. was not able to provide supporting records for its calculations of segregated customer accounts. Because CFTC lacks authority to put the commodity broker into bankruptcy, when customer money was found missing, SEC and CFTC determined that a SIPC-led bankruptcy was the appropriate course of action to protect customer accounts and assets.\nThe MF Global bankruptcy has highlighted issues related to resolving an international broker-dealer and commodity broker and the effect on customer payments. According to SIPC officials, for the securities estate, the SIPA Trustee is using SIPA, and for the commodities estate, the Trustee is applying subchapter IV of Chapter 7 of the Code to the extent consistent with SIPA, as well as applicable commodities law. While a SIPA proceeding and the bankruptcy process for a commodity broker are similar, there are important differences. Under the bankruptcy process for a commodity broker, to the extent that the debtor’s general estate is insufficient to pay for the estate’s administrative expenses, these expenses are paid from customer property ahead of the claims of customers. However, under the SIPA process, customer property is used to pay customers, and is available to pay estate expenses only if all customers have been satisfied in full. These differences could have a distinct effect on the funds available to customers, depending on the amount of the administrative expenses being paid compared to the amount of the general estate and the amount of the customer claims. In addition, SIPC may advance up to $500,000 for each customer holding securities (and a maximum of $250,000 for customers holding cash) while the liquidation is ongoing, which enables the trustee to provide some relief to securities customers relatively quickly. SIPC has no authority to make advances to satisfy commodities claims and the liquidation process for a commodity broker has no such provision. In MF Global, more than 30,000 commodity customer claims were filed compared with approximately 300 securities customer claims.\nBecause different customer estates are available to securities and commodity customers, each type of customer is receiving a different recovery percentage. CFTC officials told us they have been working to identify customer property for these estates, and SIPC officials told us the CFTC has closely cooperated with the SIPA Trustee. However, SIPC officials said the CFTC’s regulations that implement bankruptcies for commodity brokers have been cumbersome to follow. In addition, according to SIPC officials, the SIPA Trustee’s authority to conduct bulk transfers from the insolvent commodity broker-dealer to other broker- dealers is vague.\nAccording to the SIPA Trustee, a large volume of transactions occurred in the final week of MF Global’s operations. The SIPA Trustee’s report stated that the company’s information technology system could not handle this increased volume, leading to transactions that were not recorded or recorded incorrectly. The report estimated that “fail transactions” (in which a counterparty fails to deliver cash or securities) were five times the normal volume in the final week. Following the bankruptcy filing, the SIPA Trustee conducted an investigation examining 840 cash transactions in excess of $10 million that totaled $327 billion and 20,000 cash transfers below $10 million that totaled $9 billion. In addition the SIPA Trustee has been examining securities transactions valued at more than $100 billion. The SIPA Trustee has sought to connect cash transfers from counterparties to the transfers of securities from MF Global to locate more customer funds.\nThe resolution of MF Global Inc. also has been hampered by differences in laws of various jurisdictions and the location of foreign assets. According to the SIPA Trustee, differences in insolvency laws and a lack of legal precedent have contributed to significant gaps in commodity customer protection between the United States and foreign jurisdictions. SIPC officials and the SIPA Trustee said customers who had accounts for trading on domestic exchanges and customers who had accounts to take physical delivery of commodities received an 80 percent return on their account from the first interim distribution; however, the customers with accounts for trading on foreign exchanges will receive only a 10 percent return from this distribution. The officials explained that most of the property for customers on foreign exchanges is in the United Kingdom and according to the SIPA Trustee, these assets are now under the control of foreign bankruptcy trustees, similar to other international bankruptcies. The SIPA Trustee said that recovery of foreign assets was uncertain and would take time, adding that these issues were usually the last to be resolved and only after litigation. At a June 1, 2012, hearing, a target date of April 9, 2013, was set by the U.K. court.\nThe recent bankruptcy cases involving large complex financial institutions illustrate the potential challenges FDIC will have in an OLA proceeding, including resolving a securities and commodity broker, a company with significant international presence, and cases involving complex litigation. As described previously, MF Global customer property may be located in other countries, complicating the trustee’s efforts to obtain it. The trustee for Lehman’s broker-dealer has been involved in litigation with one of Lehman’s foreign affiliates for several years. Because OLA will only apply to domestic entities, international coordination and voluntary cooperation with foreign regulators will be essential for the resolution of a global company. As discussed earlier, FDIC and other regulators have been taking steps to improve international coordination of the resolution of large, systemically important financial institutions but challenges remain. Regulators have yet to clarify the roles and responsibilities of FDIC and SIPC during the liquidation of a broker-dealer under OLA, including the treatment of securities customers, commodity customers, and general creditors. On May 3, 2012, FDIC conducted an exercise with SEC and CFTC simulating a hypothetical failure of a systemically important financial institution with both a securities broker and commodity broker to better understand gaps in the OLA process and assist in their rulemaking process.", "We provided a draft of this report to AOUSC, CFTC, Departments of Justice and the Treasury, FDIC, Federal Judicial Center, Federal Reserve, National Association of Insurance Commissioners, SEC, and SIPC for review and comment. The National Association of Insurance Commissioners did not provide comments. We received technical comments from the remaining agencies, which we incorporated as appropriate.\nWe are sending copies of this report to the appropriate congressional committees, the Director of the Administrative Office of the U.S. Courts, the Chairman of the Commodity Futures Trading Commission, the Assistant Attorney General for Administration at the Department of Justice, the Secretary of the Treasury, the Chairman of the Federal Deposit Insurance Corporation, the Director of the Federal Judicial Center, the Chairman of the Board of Governors of the Federal Reserve System, the Chief Executive Officer of the National Association of Insurance Commissioners, the Chairman of the Securities and Exchange Commission, and the Chairman of the Securities Investor Protection Corporation, and other interested parties. The report also is available at no charge on the GAO website at http://www.gao.gov.\nIf you or your staff members have any questions about this report, please contact Alicia Puente Cackley at (202) 512-8678 or [email protected]. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. Major contributors to this report are listed in appendix III.", "As required under section 202 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act), this report examines: (1) actions the U.S. District Court for the District of Columbia (D.C. District Court) has taken in response to the judicial review provision of Orderly Liquidation Authority (OLA), including any revisions to Local Civil Rule 85; (2) federal rules or regulations relating to OLA and efforts to improve international coordination, including living wills, in resolving financial companies; and (3) data collection efforts and the outcomes of financial institutions that were in the bankruptcy process.\nGenerally to address our objectives, we reviewed the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) of 2010 and its rulemaking requirements. We also conducted interviews with officials at the Administrative Office of the U.S. Courts (AOUSC); Commodity Futures Trading Commission; Federal Deposit Insurance Corporation (FDIC); Board of Governors of the Federal Reserve System (Federal Reserve); Federal Judicial Center; Securities and Exchange Commission; Securities Investor Protection Corporation; Department of the Treasury (Treasury); and the U.S. District Court for the District of Columbia (D.C. District Court). We reviewed relevant literature and reports issued since our last report, including those written by AOUSC and the Federal Reserve in response to mandates in the Dodd-Frank Act.\nSpecifically to address the first objective on actions the D.C. District Court took in response to the judicial review provision of the OLA, we monitored the website for the D.C. District Court for changes in Local Civil Rule 85. We interviewed the Chief Judge and other officials from the court to discuss how the rule would be implemented in case of a petition under OLA and the changes made to the rule in response to comments from FDIC and Treasury. We also discussed these changes with officials from FDIC and Treasury to obtain their views on the amended rule and how they expected the rule to be implemented.\nTo address the second objective on federal regulations relating to OLA and the resolution of financial institutions, we searched the Federal Register and monitored the websites of FDIC and the Federal Reserve to determine if relevant rules related to FDIC’s authority under Title II and resolution planning had been issued. We also monitored the development of other related rules, including the Federal Reserve’s rule related to the definition of nonbank financial companies and the Financial Stability Oversight Council’s designation of systemically important financial institutions. We reviewed proposed, interim final, and final rules under these authorities; they are presented in appendix II. We reviewed comment letters on the rules, testimonies by regulatory officials, roundtable discussions held by FDIC, legal opinions and law firm client updates, and seminars conducted by law firms on FDIC’s new authority under Title II. We reviewed updates from the Financial Stability Board on international coordination of related resolution and recovery planning and monitored the websites of the Financial Stability Board and Treasury’s Office of Financial Research for developments on the Legal Entity Identifier. We also participated in financial industry presentations on the development and challenges of adoption of the Legal Entity Identifier.\nTo address the third objective on data collection and the status of financial institutions in the bankruptcy process, we spoke to officials from AOUSC, the Federal Judicial Center, and the Trustee Program at the Department of Justice to learn more about potential sources of financial company bankruptcy data. However, as discussed in our report, we found that no single source for financial company bankruptcy data is available. To provide some background information on the number of bankruptcies of large financial institutions from January 1, 2010, through December 31, 2011, we used data (as we did for last year’s report) on Chapter 11 megacases collected by AOUSC and compared these cases with bankruptcy data from New Generations Research, Inc. New Generations, Inc., is a private company that takes data from U.S. bankruptcy filings and augments it with industry-specific data, including the type of industry of the debtor. We spoke with federal officials familiar with New Generations, Inc., and they consider it to be reliable for tracking bankruptcy cases. We also spoke to representatives from New Generations, Inc. regarding their data collection and reliability methods. We concluded that the data were reliable for tracking bankruptcy cases. AOUSC provided lead case data on megacases (involving assets of more than $100 million and more than 1,000 creditors) that included date and location of filing and some information on how closed cases were concluded (such as by sale, liquidation, or reorganization). By matching data on bankruptcies of financial institutions from New Generations with the AOUSC-provided megacase data, we were able to provide some context on the number of Chapter 11 megacases that represented financial institutions. We decided the data were sufficiently reliable for that purpose because there was a reasonable match between cases in the two data sets. As with our previous report, AOUSC provided only data on Chapter 11 cases and not Chapter 7. According to AOUSC officials, virtually all megacases were originally filed as Chapter 11 cases.\nIn addition to our general tracking of financial institution bankruptcies, we continued to monitor two major financial company bankruptcies—Lehman Brothers Holdings, Inc. and Washington Mutual, Inc.—on which we reported as case studies in 2011. We also began monitoring a new major financial company bankruptcy, MF Global Holdings, Inc., that filed for Chapter 11 protection in October 2011. For each of these cases, we reviewed court documents such as court orders, trustee reports, and reorganization plans. We also interviewed federal officials on their involvement in these cases. We reviewed these data to provide illustrative examples of some of the challenges and complexities of financial company megacases; for example, challenges in resolving an internationally active company or cases involving complex legal issues. We verified information about these cases with federal officials. We concluded that the information in these sources was sufficiently reliable for our purposes.\nWe conducted this performance audit from August 2011 to July 2012, 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 that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives.", "The following are rules either mandated by the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) or initiated by the Federal Deposit Insurance Corporation (FDIC) or other agencies. As discussed in the report, FDIC has been considering additional rules under its Title II authority. Table 3 includes a list of rules and actions that have been completed by the regulators and the courts related to the orderly liquidation authority (OLA), resolution planning, or bankruptcy.\nSee table 4 for the status of various rules that have yet to be finalized.\nFinally, table 5 provides the status of selected required rules that have yet to be proposed or had any action taken.", "", "", "In addition to the individual named above, Debra Johnson, Assistant Director; Nancy Barry; Rachel DeMarcus; Katherine Bittinger Eikel; William R. Chatlos; Dean P. Gudicello; Jonathan M. Kucskar; Marc W. Molino; Barbara M. Roesmann; and Jessica Sandler made major contributions to this report. Technical assistance was provided by JoAnna Berry and David Martin." ], "depth": [ 1, 2, 2, 2, 2, 1, 1, 2, 2, 2, 3, 1, 2, 1, 1, 1, 1, 2, 2 ], "alignment": [ "h0_title", "", "h0_full", "", "", "", "h0_full h2_title h1_title", "h0_full h2_full", "h0_full h1_full", "h1_title", "h1_full", "h2_full h1_full", "h1_full", "", "h2_full h1_full", "h0_full h1_full", "", "", "" ] }
{ "question": [ "What is the purpose of OLA?", "What issues need to be resolved with regards to FDIC?", "What actions have stakeholders taken already?", "What did regulators tell GAO about their plans?", "What are regulators trying to address with their new data collection efforts?", "What efforts are being made?", "Why is this information important?", "What is the current status of ongoing bankruptcies?", "What issues have these bankruptcies revealed?", "Why was OLA created?", "What actions have been taken since the Dodd-Frank Act with OLA was passed?", "What was GAO's role in this process?", "What did GAO review?" ], "summary": [ "The federal financial regulators have issued certain final rules for resolving large, complex financial companies under the Dodd-Frank Wall Street Reform and Consumer Protection Act’s (Dodd-Frank Act) established Orderly Liquidation Authority (OLA). Under OLA, the Federal Deposit Insurance Corporation (FDIC) could serve as receiver of a failing financial company instead of the company entering the bankruptcy process.", "Regulators continue to address a number of issues related to FDIC’s new authority, including how creditors will ensure that they receive no less than they would under a Chapter 7 bankruptcy liquidation; how certain assets and liabilities would be treated in a new company created by FDIC under OLA; and what role the Securities Investor Protection Corporation would play in the resolution of a broker-dealer under OLA.", "Regulatory officials reported that they were continuing to draft rules to clarify how OLA would be used. FDIC and the Board of Governors of the Federal Reserve (Federal Reserve) also have issued final rules requiring certain financial companies to file resolution plans or “living wills” that must detail how companies would resolve their operations through an orderly bankruptcy.", "Regulators told GAO that the plans also would help FDIC plan for the exercise of its resolution authority, including OLA. The filing dates for these plans are phased in over the next year and a half, with the first group of financial companies filing their first plans on July 1, 2012. However, “nonbank financial companies” that also will need to provide plans have yet to be designated.", "International coordination remains a critical component in resolving the failure of a large, complex financial company and regulators have been taking steps to address this and are testing new data collection efforts.", "Specifically, efforts are under way to develop a universal legal entity identifier that allows companies to identify and manage risks from companies with which they are engaged in financial transactions.", "This additional information could help regulators in resolving internationally active financial companies. Data to identify financial institutions filing for bankruptcy protection as well as their outcomes are limited. Since neither FDIC nor federal judicial agencies have a database that tracks financial companies in bankruptcy, the Administrative Office of the U.S. Courts (AOUSC) and the Federal Judicial Center have begun a new effort to track financial company bankruptcies, but reported court data are untested for this purpose.", "Several large financial institution bankruptcies are still in progress. Two of the largest financial company bankruptcies, Lehman Brothers Holdings Inc. (Lehman Brothers) and Washington Mutual, Inc.—both of which filed in September 2008—recently had their reorganization plans confirmed by creditors and approved by the courts. However, these cases are not yet fully resolved. In the Lehman Brothers case, international litigation could take several years to resolve.", "The October 2011 bankruptcy of MF Global Holdings Ltd., a holding company with a securities and commodities broker, has raised concerns about how commodity customers are treated under a liquidation regime and also involves international litigation over customer property. These financial company bankruptcies highlight the challenges FDIC and other regulators would face in resolving large, complex financial companies under the OLA process.", "The Dodd-Frank Act created OLA for resolving failed, systemically important financial companies.", "Since the act was passed in 2010, regulators have been developing regulations to implement this authority and avoid disorderly resolutions that create substantial losses for the financial system.", "In July 2011, GAO issued the first of its statutorily mandated reports on the effectiveness of the Bankruptcy Code for resolving or liquidating complex, internationally active financial companies.", "Among the topics examined in this second report, GAO reviewed: (1) federal rules or regulations relating to OLA and the resolution of financial institutions, including living wills; and (2) status of efforts to improve coordination on international resolutions, data collection efforts, and the outcomes of financial institutions that were in the bankruptcy process." ], "parent_pair_index": [ -1, 0, 1, 1, -1, 0, 1, -1, 3, -1, 0, 0, 2 ], "summary_paragraph_index": [ 3, 3, 3, 3, 4, 4, 4, 4, 4, 0, 0, 0, 0 ] }
CRS_R44839
{ "title": [ "", "Introduction", "Regulatory Relief", "Leverage Ratio as an Alternative to Current Bank Regulation6", "Background", "Policy Issues", "Provision in the FCA", "Volcker Rule21", "Background", "Policy Issues", "Provision in the FCA", "Relief for Small Capital Issuers", "Background", "Policy Issues", "Provisions in the FCA", "Fiduciary Rule36", "Background", "Policy Issues", "Provisions in the FCA", "Risk Retention", "Background", "Policy Issues", "Provisions in the FCA", "Executive Compensation47", "Background", "Policy Issues", "Provisions in the FCA", "Systemically Important (\"Too Big To Fail\") Financial Institutions", "Regulating Systemically Important Financial Institutions and Limiting Their Size55", "Background", "Policy Issues", "Provisions in the FCA", "Resolving a Failing TBTF Firm and Preventing \"Bailouts\"59", "Background", "Policy Issues", "Provisions in FCA", "Changes to Regulatory Authority", "Appropriations77", "Background", "Policy Issues", "Provisions in the FCA", "Consumer Financial Protection Bureau", "Background81", "Policy Issues130", "Provisions in the FCA131", "Federal Reserve142", "Background", "Policy Issues", "Provisions in the FCA", "Rulemaking", "Cost-Benefit Analysis148", "Background", "Policy Issues", "Provisions in the FCA", "Congressional Review of Federal Financial Agency Rulemaking157", "Background", "Policy Issues", "Provisions in the FCA", "Judicial Review of Administrative Rulemakings166", "Background", "Policy Issues", "Provisions in the FCA", "Enforcement Powers", "Background189", "Policy Issues190", "Provisions in the FCA192" ], "paragraphs": [ "", "In the 114 th Congress, the Financial CHOICE Act of 2016 ( H.R. 5983 ) was sponsored by Representative Jeb Hensarling, chairman of the House Committee on Financial Services. The bill was reported by the House Committee on Financial Services on December 20, 2016. In the 115 th Congress, a modified version of the CHOICE Act was introduced as the Financial CHOICE Act of 2017 ( H.R. 10 , FCA) on April 26, 2017. It passed the House on June 8, 2017. This report describes the FCA as passed in the 115 th Congress. The Congressional Budget Office estimated that a similar version of the bill would reduce budget deficits by $33.6 billion over the next 10 years.\nThe FCA is a wide-ranging proposal with 12 titles that would alter many parts of the financial regulatory system. Many of the provisions can be categorized as providing regulatory relief to financial firms, investors, or borrowers. Other provisions alter the financial regulatory architecture or change the relationship between financial regulators and Congress or the judiciary. For background and reference, Table 1 lists the federal financial regulators and their general responsibilities.\nMany parts of the FCA would repeal or amend provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act), a broad package of regulatory reform legislation passed following the 2007-2009 financial crisis that initiated the largest change to the financial regulatory system since at least 1999 (see Appendix A ). President Trump has called for the Dodd-Frank Act to be \"dismantled,\" and Chairman Hensarling has characterized the FCA as \"work(ing) with the president to end and replace the Dodd-Frank mistake.\" The minority on the House Financial Services Committee stated that the FCA \"dismantles critical safeguards included in the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank), the law that was put in place to protect the American economy from another financial crisis. Dodd-Frank improves accountability in the financial system and protects consumers, investors, and the economy from abusive Wall Street practices.\" Although many of the provisions of the bill focus on parts of the Dodd-Frank Act, others would address long-standing or more recent issues.\nThis report highlights major policy proposals in the version of the bill as passed in the 115 th Congress, but it is not a comprehensive summary of the bill. It provides context for these proposals in the form of background and policy debate. This report also includes an experts' contact list for FCA topics in Appendix C .", "As financial regulators have implemented the Dodd-Frank Act and other reforms, some Members of Congress argue that the pendulum has swung too far toward excessive regulation. As a result, they argue that additional regulatory burden—the cost associated with government regulation and its implementation—has stymied economic growth and restricted consumer and business access to credit. Other Members, however, contend the current regulatory structure has appropriately strengthened financial stability and increased protections for consumers and investors. They are concerned that regulatory relief for financial institutions could negatively affect consumers and market stability.\nIn determining whether to provide regulatory relief, a central question is whether an appropriate trade-off has been struck between the benefits and costs of regulation. In other words, can relief be provided while maintaining the stability of the financial system and ensuring taxpayers, consumers, and investors are protected, or would relief undermine those goals? Regulatory relief is generally focused on the financial services providers—such as banks, broker-dealers, and other institutions—but what effect would relief have on consumers, investors, particular markets, and market stability more broadly? The answers to these and other policy questions will vary based on the particulars of the relief being proposed.\nThe FCA would provide regulatory relief to two broad categories—banks and securities markets' participants.\nThe FCA would provide regulatory relief to banks through more than two dozen provisions. Some of the proposals are aimed at assisting community banks, whereas others would apply to all banks, regardless of size. Some provisions provide relief from regulations, whereas others target supervisory practices. Many would modify or repeal rules stemming from the Dodd-Frank Act, whereas others target long-standing regulatory practices. This report highlights two provisions providing relief to banks—the Volcker Rule and the leverage ratio.\nMany of the securities-related provisions in the FCA provide regulatory relief with the aim of facilitating capital formation. Among the over three dozen securities-related provisions in the FCA are provisions that relax restrictions on who is eligible to invest in certain types of securities, including venture capital investors; provisions that relax regulatory requirements on licensed professionals in the securities industry, including private equity advisers, private funds, municipal advisors, investment fund researchers, and credit rating agencies; and provisions that relax regulatory requirements for firms that issue capital or securities, including emerging growth companies, risk retention requirements for nonmortgage securitizers, firms subject to disclosures on conflict minerals, and companies raising funds via crowdfunding or from angel investors. Many of these issues are discussed in further detail below.", "", "With more than 500 banks failing between 2007 and 2014, strengthening prudential regulation has been a major goal of postcrisis financial reforms. Prudential regulation covers a broad set of a bank's activities, including assessing whether a bank will be able to meet its obligations during a market downturn, evaluating the quality of its assets and management team, and other factors. One of the main areas of focus is bank capital adequacy.\nCapital is the difference between the value of a bank's assets and its liabilities and is an indicator of a bank's ability to absorb losses. For example, if a bank has $100 worth of assets and $90 of liabilities, then the bank has capital of $10. If the value of the assets decreases by $5 to $95 and the bank still has $90 in liabilities, then the $5 decline in asset value would be absorbed by the capital, which would decrease from $10 to $5.\nCapital requirements are stated as the ratio of capital to the bank's assets. Banks are required to satisfy several different capital ratios, but the ratios fall into two main categories: (1) a leverage ratio and (2) a risk-weighted asset ratio. Failure to satisfy the required ratios could lead to regulators taking corrective action against a bank, including ultimately shutting the bank down.\nUnder a leverage ratio, all assets regardless of riskiness are treated the same and the ratio is calculated by dividing capital by assets. A 10% leverage ratio, for example, would imply $10 of capital for every $100 of assets. Under a risk-weighted asset ratio, each asset is assigned a risk weight to account for the fact that some assets are more likely to lose value than others. Riskier assets receive a higher risk weight, which requires banks to hold more capital—and so be better able to absorb losses—to meet the ratio requirement.\nThe specifics of the capital ratios—what the minimum levels are, what qualifies as capital, what the asset risk weights are, what is included in total assets—were proposed by the Basel Committee on Bank Supervision and then implemented by the U.S. financial regulators. The Basel Committee \"is the primary global standard-setter for the prudential regulation of banks and provides a forum for cooperation on banking supervisory matters.\" The most recent comprehensive reform proposal is referred to as Basel III.\nThe capital ratios that a bank must satisfy and how those levels are computed varies based on a bank's size and complexity. The largest banks are required to hold more capital than smaller, less complex banks. In regard to the simple leverage ratio, most banks are required to meet a 4% leverage ratio. Large banks must also comply with a supplementary leverage ratio ranging from 3% to 6% depending on their size and the organizational unit within the bank. The supplementary leverage ratio is more expansive than the leverage ratio because it takes into account certain off-balance-sheet assets and exposures.", "Some economists argue that it is important to have both a risk-weighted ratio and a leverage ratio because the two complement each other. A basic tenet of finance is that riskier assets have a higher expected rate of return to compensate the investor for bearing more risk. Without risk weighting, banks would have an incentive to hold riskier assets because capital is costly and the same amount of capital must be held against riskier and safer assets. For example, banks might decide to shift out of certain lines of business that involve holding large amounts of safe assets, such as cash, if risk-weighted ratios were replaced by a higher leverage ratio. But relying solely on risk-weighted ratios could be problematic, because the weight assigned to an asset may in fact be an inaccurate measure of its riskiness and therefore distort bank behavior. For example, banks held highly rated mortgage-backed securities (MBSs) before the crisis, in part because those assets had a higher expected rate of return than other assets with the same risk weight. The crisis revealed that MBSs were more risky than their risk weights indicated, and banks holding them suffered unexpectedly large losses. Thus, the leverage ratio can be thought of as a backstop to ensure that incentives posed by risk-weighted capital ratios do not result in a bank holding insufficient capital.\nOthers argue that the risk-weighted system provides \"needless complexity\" and is an example of \"central planning.\" The complexity generally benefits those largest banks that have the resources to absorb the added regulatory cost. They contend that the risk weights in place prior to the financial crisis were poorly calibrated and \"encouraged financial firms to crowd into these\" unexpectedly risky assets, exacerbating the downturn. Risk weighting may encourage regulators to set the weights so as \"to provide a cheaper source of funding for governments and projects favored by politicians,\" which can lead to a distortion in credit allocation. Better, they argue, to eliminate the risk-weighted system for those banks that agree to hold more capital and satisfy a higher, simpler leverage ratio.\nIn addition to the issue of whether it is better to have both a risk-weighted ratio and a leverage ratio or only a leverage ratio is the broader issue of the role of capital in bank regulation. Those who argue in favor of having only a higher leverage ratio also generally support eliminating some other forms of prudential regulation, such as liquidity requirements, asset concentration guidelines, and counterparty limits. They argue that, so long as sufficient capital is in place in case of losses, banks should not be subject to excessive regulatory micromanagement. Others, however, contend that the different components of prudential regulation each play an important role in ensuring the safety and soundness of financial institutions and are essential complements to bank capital. In other words, capital can absorb losses, but unlike other forms of prudential regulation, it cannot make losses less likely.", "Under the FCA, a banking organization could choose to be subject to a higher, 10% leverage ratio, and in exchange would be exempt from risk-weighted capital ratios; liquidity requirements; stress-test requirements; certain merger, acquisition, and consolidation restrictions; limitations on dividends; and other regulations. A bank would have the option to follow current regulatory requirements or this new regulatory approach.\nSome of the regulations from which a bank could receive relief are regulations that apply to all banks, such as the risk-weighted capital ratios set by Basel III. Other regulations from which a bank could receive relief under the FCA would only apply to larger banks (with an asset threshold of $50 billion to $700 billion, depending on the provision). For example, banks opting in to the new leverage ratio approach would be exempt from the Dodd-Frank Act's enhanced prudential regulations for banks with $50 billion or more in assets and other regulations based on financial stability considerations (discussed in \" Regulating Systemically Important Financial Institutions and Limiting Their Size \").\nAlthough a 10% leverage ratio is significantly more capital than what banks are currently required to hold, it is not necessarily more capital than they are currently holding. For example, under the current definition of the leverage ratio, banks except those with more than $250 billion in assets had an average leverage ratio above 10% at the end of 2016. For traditional banks, as defined in the FCA, the bill uses a slightly different definition of leverage ratio than found in regulatory filings, however, making a direct comparison to the bill's requirement difficult. For traditional banks that are already above a 10% ratio, the FCA would provide them with regulatory relief without requiring them to hold more capital.\nPredicting which banks would elect to hold the 10% leverage ratio involves a degree of uncertainty, but CBO did make such an estimate when scoring the bill. In general, the CBO estimates that larger banks would be less likely to elect to be subject to the 10% leverage ratio than smaller banks and expects none of the eight U.S. globally systemically important banks would make the election. One source of uncertainty the CBO had to address is that some banks that hold enough capital to meet the requirement would not necessarily make the election. CBO estimated that half the banks whose leverage ratio (as defined by the bill) currently exceeds 10%—most of which are banks with less than $50 billion in assets—would make the election. As a result, the CBO estimated that the banks that would make the election would account for roughly 9% of total bank industry assets.", "", "Section 619 of the Dodd-Frank Act, also known as the Volcker Rule, has two main parts—it prohibits banks from proprietary trading of \"risky\" assets and from \"certain relationships\" with risky investment funds, including acquiring or retaining \"any equity, partnership, or other ownership interest in or sponsor[ing] a hedge fund or a private equity fund.\" The statute carves out exemptions from the rule for trading activities that Congress viewed as legitimate for banks to participate in, such as risk-mitigating hedging and market making related to broker-dealer activities. It also exempts certain securities, including those issued by the federal government, government agencies, states, and municipalities, from the ban on proprietary trading.", "The Volcker Rule is named after Paul Volcker, former chair of the Federal Reserve (Fed) and former chair of President Obama's Economic Recovery Advisory Board. Volcker proposed this rule on the grounds that\nadding further layers of risk to the inherent risks of essential commercial bank functions doesn't make sense, not when those risks arise from more speculative activities far better suited for other areas of the financial markets…. Apart from the risks inherent in these activities, they also present virtually insolvable conflicts of interest with customer relationships, conflicts that simply cannot be escaped by an elaboration of so-called Chinese walls between different divisions of an institution. The further point is that the three activities at issue—which in themselves are legitimate and useful parts of our capital markets—are in no way dependent on commercial banks' ownership.\nVolcker also pointed out that in the presence of deposit insurance, banks are implicitly backed by taxpayers, which presents moral hazard problems. Thus, support for the Volcker Rule has often been posed as preventing banks from \"gambling\" in securities markets with taxpayer-backed deposits. In Volcker's view, moving these activities out of the banking system reduces moral hazard and systemic risk concerns.\nAlthough proprietary trading and hedge fund sponsorship pose risks, it is not clear whether they pose greater risks to bank solvency and financial stability than traditional banking activities, such as mortgage lending. They could be viewed as posing additional risks that might make banks more likely to fail, but alternatively those risks might better diversify a bank's risks, making it less likely to fail. Further, the Volcker Rule bans these activities from any subsidiary within a bank holding company, including nonbank subsidiaries. Proprietary trading in nonbank subsidiaries would be less likely to pose concerns about moral hazard and taxpayer risk unless the firm poses too big to fail problems.\nA House Financial Services Committee majority report argues that the Volcker Rule is \"a solution in search of a problem—it seeks to address activities that had nothing to do with the financial crisis, and its practical effect has been to undermine financial stability rather than preserve it.\"\nThe Volcker Rule poses a practical challenge in differentiating between proprietary trading and permissible activities, such as hedging and market making. For example, how can regulators determine whether a broker-dealer is holding a security as inventory for market making, as a hedge against another risk, or as a speculative investment? Differentiating between these motives creates regulatory complexity, and if the benefits are not sufficient, the Volcker Rule might be unduly burdensome. The House Financial Services Committee report argues that banks will alter their behavior to avoid this regulatory burden, and this will reduce financial market efficiency:\nThe Volcker Rule will increase borrowing costs for businesses, lower investment returns for households, and reduce economic activity overall because it constrains market-making activity that has already reduced liquidity in key fixed-income markets, including the corporate bond market.", "The FCA would repeal the Volcker Rule in its entirety.", "", "Some small and emerging companies may be interested in accessing funds for investment through issuing (or expanding their issuance of) securities that represent ownership in the firms. Such companies, however, may be disproportionally burdened by the costs of complying with the Securities and Exchange Commission's (SEC's) regime of securities registration and periodic disclosure aimed at protecting investors through the provision of material information.\nMany existing securities requirements already have exemptions and tailoring for small capital issuers. For example, the Jumpstart Our Businesses Startup Act of 2012 (JOBS Act; P.L. 112-106 ) expanded on the regulatory relief that had historically been given to companies who issue unregistered securities called private placements when certain conditions (such as limitations on the issuance size or the types of eligible investors) are met.", "In a securities context, granting regulatory relief to boost capital formation may diminish the content and the efficacy of investor-based SEC disclosures, a potential trade-off between two of the SEC's statutory goals—investor protection and capital formation. This trade-off might also be informed by the fact that small and emerging firms are often described as risky investments.\nConversely, some observers note that expanding the range of securities an investor can purchase will potentially allow them to increase risk diversification. Another potentially complicating dimension to the dynamic is the notion that some mandatory SEC corporate disclosures may not necessarily facilitate informed investing because they may be superfluous or may contribute to investor information overload. For example, in a 2013 speech, then-SEC Chair Mary Jo White observed that the agency would be examining whether investors' needs are served by the \"detailed and lengthy disclosures about all of the topics that companies currently provide in the reports they are required to prepare and file with us … [and] whether information overload is occurring.\" In contrast, there is some evidence that giving small issuers exemptions from certain disclosure requirements reduces the price that investors are willing to pay when a firm issues equity—an example of how the goals of investor protection and capital formation sometimes reinforce each other.", "The FCA contains numerous provisions that would provide regulatory relief related to capital issuance by small firms, whether through public secondary markets or private placements (privately issued corporate securities). Examples of these provisions include the following:\nAuditor Attestation. Internal controls are the policies and procedures that a company employs to maintain the accuracy of its financial reporting. Section 404(b) of the Sarbanes-Oxley Act of 2002 (SOX; P.L. 107-204 ) requires that a public company's outside auditor attest to its senior managers' assertions about the company's internal controls for its financial reporting (ICFR). In response to concerns over the burdens for small firms of complying with the auditor attestation provision, the Dodd-Frank Act included an exemption from Section 404(b) for public companies with a public float of less than $75 million. In 2011, the SEC reported that such companies represented about 60% of all public companies. The FCA would increase the exemption from Section 404(b) to nondepository corporate issuers with a public float from $75 million to $500 million.\nEquity Crowdfunding. Traditionally, crowdfunding constituted the online donation of small amounts of capital from a large number of individuals to help finance a startup firm. It was initially illegal for donors to obtain an ownership stake through a debt or equity interest in the firms, however. The JOBS Act enabled firms to offer and sell securities conferring ownership through crowdfunding, known as equity crowdfunding, without SEC registration. To take advantage of the crowdfunding exemption, a crowdfunding issuer must conduct its offering solely through an online platform operated by an intermediary that is a SEC-registered broker-dealer or that is operated as a funding portal, subject to various requirements. Companies face limits on how much they can raise and investors face limits on how much they can invest.\nThe FCA would significantly loosen the regulation of the current equity crowdfunding regime. Among other things, it would subject crowdfunding issuers and investors to no limits in terms of the amount of securities that they could issue and invest in. Issuers would be allowed to offer securities directly to investors, provided that they complied with certain requirements. Equity crowdfunding firms would also be able to bypass broker-dealer or funding portal intermediaries and issue securities directly to the public.\nGeneral Solicitation and Demo Days. SEC Regulation D (Reg D) exempts certain securities offerings from SEC registration requirements, while also prohibiting issuers of Reg D securities from publicly marketing them via general solicitation. However, various members of the business community have criticized what they describe as the SEC policy's lack of clarity on whether general solicitation is permissible during promotional events, commonly known as \"demo days.\" The FCA attempts to address such concerns by directing the SEC to revise Reg D to lift the prohibition on the use of general solicitation by issuers offering securities under Reg D in the context of a demo day as long as the demo day promotions do not specifically reference a given securities offering.\nXBRL Exemptions for Emerging Growth Companies and Smaller Companies. Extensible Business Reporting Language (XBRL) is a freely available global standard developed to improve the way financial data are disseminated, compiled, and shared electronically. Historically, publicly traded companies were required to submit paper-based filings of mandatory financial statement disclosures to the SEC. Beginning in 2011, all publicly traded firms were required to submit disclosures to the agency in XBRL. A provision in the FCA would exempt emerging growth companies (EGCs) and other small public companies with annual revenues of less than $250 million from the requirement to use XBRL for SEC disclosures.\nRaising Venture Capital Funds' Investment Company Act Registration Threshold. One exception from SEC registration requirements is for a pooled investment entity whose outstanding stock is owned by 100 beneficial owners or fewer and is neither currently making nor intends to make a public securities offering.\nOrganized and run by their general partners, venture capital funds are investment pools that manage the funds of their wealthy investors interested in acquiring private equity stakes in emerging small- and medium-sized firms and startup firms with perceived growth potential. Currently, within the business community, there are some concerns over the perceived behavioral impact of the 100-owner limit. Some say that to avoid registration and its potentially significant compliance costs, some venture capital funds are reluctant to add additional investors—potentially foregoing the opportunity to expand the capital to invest in various businesses.\nA provision in the FCA attempts to address such concerns by creating a new subset of venture capital fund called a qualifying venture capital fund (QVCF). QVCFs are defined as venture capital funds with no more than $50 million in invested capital. They could be owned by up to 500 beneficial owners before triggering registration requirements.", "", "Under federal securities laws, SEC-registered investment advisers are fiduciaries , a designation that carries a legal obligation to act in a client's best interest. By contrast, brokers and dealers who receive commissions are generally not subject to the fiduciary standard, and are instead required to make investment recommendations that are suitable for the customer—a comparatively less demanding standard of client duty. The Dodd-Frank Act authorized, but did not require, the SEC to promulgate rules to establish a uniform standard of client responsibility for broker-dealers and investment advisers, which it has not done to date. In 2016, the Department of Labor (DOL) finalized rules to amend the definition of investment advice to broaden the class of financial professionals (including broker-dealers and insurance agents) subject to the fiduciary obligation under the Employee Retirement Income Security Act of 1974, which governs investment advisers for private-sector retirement accounts.\nOn February 23, 2017, President Donald Trump issued an executive memorandum directing the DOL to analyze the fiduciary rule's impact. If the study found that the rule would negatively affect investors in specified ways, the agency was then authorized to either rescind or revise the rule. Subsequent to the presidential memorandum, the DOL delayed the effective date of the fiduciary rule to June 9, 2017.", "In announcing the fiduciary rule, DOL observed that investment advisers and consultants have increasingly assumed greater roles in managing retirement accounts. The services provided by broker-dealers and investment advisers often overlap—both can provide investment advice—and there are some concerns that customers may falsely assume that the person advising them is required to be acting in their best interests.\nAmong other things, DOL said that the rule would help address instances in which plan advisers (1) steer Individual Retirement Account (IRA) owners into investments based on their—not the investors'—own financial interests; (2) have conflicts of interests with respect to the investment advice that they give; and (3) give imprudent investment advice. Critics of the rule, including some Members of Congress, have argued that it would have a negative impact on retirees and would result in higher costs for people who seek financial advice.", "The FCA would repeal the DOL's fiduciary rule. Additionally, before it promulgated any fiduciary standard rule, the SEC would have to report to Congress on whether\n1. retail customers are being harmed because there is not a uniform standard; 2. alternative reforms would alleviate retail investor harm and confusion; 3. adoption of a uniform fiduciary standard would adversely impact the broker-dealers; and 4. the adoption of a uniform fiduciary standard would adversely affect retail investor access to personalized and cost-effective investment advice.\nIn addition, the DOL could not reissue a fiduciary rule until after the SEC publishes one.", "", "Securitization is the process of turning mortgages, credit card loans, and other debt into securities that can be purchased by investors. Securitizers make or acquire a pool of many loans, then issue securities—called asset-backed securities (ABS)—which entitle the holder of the security to receive payments based on the flow of payments being made on the underlying loans. Banks can reduce their exposed risk on their retained portfolios by securitizing the loans they hold, spreading risks to other types of investors more willing to bear them. If risks are adequately managed and understood, this can enhance financial stability. In addition, securitization allows nonbank lenders with limited sources of long-term funding to make loans, and thus can increase the total amount of credit available to businesses and consumers.\nIn the years leading up to the financial crisis, securitization grew rapidly, driving loan origination and becoming an increasingly important source of funding for lenders. During the crisis, the value of ABS that were backed by residential mortgages—called residential mortgage backed securities (RMBS)—decreased significantly, precipitating systemic distress. The decline, and the general contraction in credit following the crisis, resulted in a sharp decline in new ABS issuance. Although ABS issuance has grown in the years since the crisis, it remains below precrisis levels.\nThe Dodd-Frank Act generally required securitizers to retain some of the risk if they issue ABS. The amount of risk required to be retained depends in part on the quality and type of the underlying assets. The act instructed regulators to require not less than 5% retention of risk unless the securitized assets meet underwriting standards prescribed by the regulators. Securitizers were prohibited from hedging the retained credit risk.\nThe act required securitizers to perform due diligence on the underlying assets of the securitization and to disclose the nature of the due diligence. In addition, ABS investors are to receive more information about the underlying assets.", "Securitization can create an incentive to originate loans without appropriate underwriting because lenders collect origination fees but are not exposed to losses from borrower defaults. These incentives likely contributed to deteriorating underwriting standards prior to the crisis, the housing bubble, and the turmoil experienced during the financial crisis. Private-label securitization was prevalent in the subprime mortgage market, the nonconforming mortgage market, and in regions where loan defaults were particularly severe. Losses and illiquidity in the RMBS market led to wider problems in the crisis, including a lack of confidence in financial firms because of uncertainty about their exposure to potential RMBS losses, through their holdings of RMBS or off-balance-sheet support to securitizers.\nOne approach to address incentive problems in securitization is to require loan securitizers to retain a portion of the long-term default risk. An advantage of this \"skin in the game\" requirement is that it may help preserve underwriting standards among lenders funded by securitization, because securitizers would share in their investors' securities risks.\nOne possible cost of risk retention is that it may make less credit available in markets in which loans are securitized. If securitizers must hold onto, rather than sell, a portion of their securities or underlying assets, a portion of their funding remains tied up in those assets, making less funding available for new loans. Reducing the availability of credit could also increase the cost to borrowers. Another possible disadvantage is that less risk may be shifted away from lenders and other securitizers and out to a broader sector of investors willing and able to bear it. Concentrating risk in certain financial sectors could increase financial instability. Finally, opponents of risk retention assert that certain loan types—including commercial real estate loans and certain corporate loans—feature characteristics and securitization practices that differ from residential mortgages and RMBS in ways that reduce the incentive problem. They note that nonresidential mortgage ABS performed relatively well during the crisis and were not a source of systemic risk, making the risk retention rule inappropriate for these markets.", "The FCA would amend the provision of Dodd-Frank Act mandating risk retention rules by applying those requirements only to securities that are wholly composed of residential mortgages. Under this definition, securities backed by assets that are not residential mortgages—such as commercial real estate mortgages, commercial loans, auto loans, or other types of debt—would not be subject to the risk retention rule.", "", "In general, federal policy does not limit or regulate executive compensation levels. Instead, publicly listed companies are required to disclose certain information about their executive compensation levels and practices.\nTwo examples of the general approach to current disclosure requirements come from the Dodd-Frank Act. The \"say-on-pay\" provision requires public companies to conduct a nonbinding shareholder vote on executive compensation at least every three years. The \"pay ratio\" provision requires publicly traded companies to calculate and disclose the median annual total compensation of all employees excluding the chief executive officer (CEO), the annual total compensation of the CEO, and the ratio between the two.\nOne exception to this general approach on executive compensation is a Dodd-Frank Act requirement that federal financial regulators promulgate rules aimed at prohibiting incentive-based compensation (performance-based variable employee pay) that encourages \"inappropriate risks\" at financial institutions with greater than $1 billion in assets. In 2016, the regulators jointly released proposed rules to implement the requirement.", "Proponents of greater disclosure believe that requiring transparency about executive compensation will help prevent outsized pay arrangements that are not in the interest of investors or in line with social values. Critics argue current disclosure requirements impose unnecessary costs that do not impart useful information that helps maximize shareholder return. For example, critics of the pay ratio have cited the compliance challenges and costs of building systems capable of generating the worker pay data needed to arrive at worker median pay data, particularly for large multinational or multisegmented firms with decentralized payroll systems.\nA key question in this debate is whether high executive compensation levels reflect executives' productivity or result from corporate governance shortcomings. Those who contend it is due to corporate governance shortcomings can point to research that found that executive pay has become decoupled from corporate financial performance. Critics of this view counter that, overall, the body of research on the issue has failed to convincingly make the case for such a decoupling.\nOn the proposed rule prohibiting incentive-based compensation at financial firms, proponents have described the proposals as critically important to mitigating systemic risk. Critics, however, dispute that it would mitigate systemic risk, and argue it would result in an exodus of talent from various financial institutions.", "The FCA would amend the Dodd-Frank Act's say-on-pay provision by eliminating mandatory periodic shareholder votes on executive pay and limiting such votes to when a company has made a material change to the previous year's executive compensation. The FCA would repeal the Dodd-Frank Act requirement that companies calculate and disclose the CEO-worker pay ratio. The FCA would also repeal the Dodd-Frank Act's incentive compensation mandate.", "Although \"too big to fail\" (TBTF) has been a long-standing policy issue, it was highlighted by the near-collapse of several large financial firms in 2008, including Bear Stearns, Fannie Mae, Freddie Mac, Lehman Brothers, and AIG, which led to a worsening of the financial crisis. With the exception of Lehman Brothers (which filed for bankruptcy), all of these firms received government assistance under emergency authority to avoid insolvency. Financial firms are said to be TBTF when policymakers judge that the firms' failure would cause unacceptable disruptions to financial stability. Financial firms can be perceived as TBTF because of their size or interconnectedness. In addition to fairness issues, economic theory suggests that market expectations that the government will not allow a firm to fail create moral hazard—if the creditors and counterparties of a TBTF firm believe that the government will protect them from losses, they have less incentive to monitor the firm's riskiness (referred to as market discipline ). If this is the case, a firm that is perceived to be TBTF could have a funding advantage, which some call an implicit subsidy, compared with other firms.", "", "The Dodd-Frank Act included a number of provisions to address TBTF, using several different policy approaches. The act's main approach was to create an enhanced regulatory regime mostly administered by the Federal Reserve to hold systemically important firms to stricter prudential standards than other financial firms. Prudential regulation is a concept from banking regulation that refers to monitoring an institution's financial safety and soundness; the concept was generally not applied federally to nonbank financial firms before the crisis, with limited exceptions. The enhanced regulatory regime can include capital standards, liquidity standards, counterparty limits, stress tests, risk-management standards, \"living will\" requirements, and early remediation requirements.\nThe Dodd-Frank Act applied enhanced prudential regulation to three sets of financial entities—banks; nonbank financial firms; and payment, clearing, and settlement systems (called financial market utilities , or FMUs). Bank holding companies (BHCs) are automatically subject to enhanced regulation if they have $50 billion or more in assets. More than 30 BHCs—which include most of the largest U.S. financial firms—meet this criterion. A BHC cannot \"debank\" to avoid enhanced regulation if it received funds under the Troubled Asset Relief Program (referred to as the \"Hotel California\" provision). A smaller subset of the largest U.S. BHCs also faces additional capital, leverage, and liquidity requirements through U.S. regulations implementing Basel III, an international accord. Nonbank financial firms and FMUs are subject to enhanced regulation only if they are designated as systemically important financial institutions (SIFIs) by the Financial Stability Oversight Council (FSOC). To date, eight FMUs and four nonbank financial firms, three of which are insurance companies, have been designated. Subsequently, one firm (GE Capital) has had its designation removed by FSOC and one designation (MetLife) has been overturned in court, subject to pending appeals.\nThe Dodd-Frank Act included other approaches to coping with the TBTF problem, including provisions to limit the size of financial firms and narrow the scope of emergency authority to limit future bailouts. It gave the Federal Reserve the authority to restrict the size and activities of a financial firm that posed a grave threat to financial stability and prevented a nonbank financial firm from most mergers and acquisitions that would cause its liabilities to exceed 10% of total financial-sector liabilities. These powers could be used only in limited circumstances, however, and have not been exercised to date.", "The fact that many large firms have grown in dollar terms since the enactment of the Dodd-Frank Act has led some critics to question whether the TBTF problem has been solved. Debate continues about whether the best policy approach to address excessive risk-taking from moral hazard is through enhanced prudential regulation or market discipline—the fear of losses curbing excessive risk-taking. Although these two approaches need not be at odds with one another in theory—and policymakers have tried to pursue both simultaneously—in practice they may be. Critics of enhanced prudential regulation fear that if the government explicitly designates specific firms as systemically important, investors will assume that the firms will not be allowed to fail, which will undermine market discipline. If enhanced regulation is not tough enough—critics point to regulatory failures during the crisis as evidence that it may not be—and market discipline is undermined, designated firms might take greater risks and the financial system could be less stable.\nProponents of enhanced regulation question how credible a pledge to let firms fail can be. They point to the excessive risk-taking leading up to 2008—when the government did not have a policy of aiding failing firms—and the subsequent decision to assist large firms to avoid a further deterioration in financial conditions as an example of the failure of market discipline. In addition, the fact that many large failing firms did receive government assistance in 2008 may have already undermined the viability of the market discipline approach going forward, by undermining the credibility of any subsequent pledge to allow firms to fail (regardless of current statutory limitations). Furthermore, systemic risk is a risk to the rest of society that investors do not internalize. From a policymaker's perspective, systemic risk may still be too high in the presence of perfect market discipline, because a TBTF firm's creditors have less to lose from its failure than the financial system as a whole. Another limit to market discipline is that creditors do not have access to the same confidential information as regulators.\nExtending prudential regulation to nonbank SIFIs raises additional policy questions:\nEnhanced regulation. Can the Federal Reserve effectively adapt banking prudential regulation and supervision to nonbanks, tailoring regulation to match their business models and the risks that they pose? Designation process. Given the lack of consensus on how to measure systemic importance, is FSOC's discretion appropriate or is the existing designation process too opaque and arbitrary? Insurance and systemic risk. Given that all currently designated SIFIs are insurers, are large insurance firms a source of systemic risk and, if so, is it already adequately addressed by prudential regulation at the state level? Size vs. activities. Is the source of systemic risk for nonbanks caused mainly by firm size or by specific market practices by firms of all size? If the latter, then SIFI regulation is unlikely to contain systemic risk.", "The FCA would repeal several provisions of the Dodd-Frank Act related to TBTF. Notably, it would repeal FSOC's ability to designate nonbank financial firms or FMUs as SIFIs and subject them to enhanced regulation, as detailed above. Firms and FMUs currently designated as SIFIs (see Table 2 ) would no longer be subject to enhanced regulation. The FCA also would repeal early remediation requirements for SIFIs and bank holding companies with more than $50 billion in assets. It would also reduce the frequency of and modify the frameworks for stress testing and living wills for large banks.\nThe FCA would leave in place enhanced regulation from the Dodd-Frank Act and Basel III for large BHCs. However, banks that qualify for regulatory exemptions under the 10% leverage ratio would no longer be subject to these enhanced regulations. The FCA would also repeal the Hotel California provision prohibiting a BHC from debanking to avoid enhanced regulation.\nIn addition, the FCA would repeal Dodd-Frank Act provisions that gave the Federal Reserve the ability to restrict the size and activities of a financial firm that posed \"a grave threat to financial stability\" and the limit on a nonbank financial firm exceeding 10% of total financial sector liabilities (the provision would still apply to banks).\nWhether these changes would increase or decrease the riskiness of large financial firms and the financial system as a whole depends on whether the effect of potentially greater market discipline or reduced prudential regulation dominates. The effect on market discipline, in turn, will depend in part on what market participants believe will happen in the event of a failure, which is addressed in the next section.", "", "The financial crisis raised issues about how to allow large financial firms to fail without triggering financial instability. In an attempt to quell the crisis, the Fed (under Section 13(3) of the Federal Reserve Act), FDIC, and Treasury (using the Exchange Stabilization Fund) used emergency authority to offer loans and guarantees to financial firms and markets. Broadly speaking, the Dodd-Frank Act (for the Fed and FDIC) and the Emergency Economic Stabilization Act ( P.L. 110-343 ) (for Treasury) narrowed the scope of these authorities in an attempt to rule out \"bailouts\" to insolvent, failing firms, while preserving their authority to provide emergency liquidity to healthy but illiquid firms. The Dodd-Frank Act also extended access to the Fed's discount window to FMUs.\nPolicymakers at the time of the crisis argued that government intervention was unavoidable in the absence of a means to wind down systemically important firms without triggering financial instability. Some argued that these concerns were confirmed by the financial instability associated with the government's decision to allow the broker-dealer Lehman Brothers to enter the bankruptcy process rather than extending it assistance to remain solvent and. Critics, by contrast, argue that repeated ad hoc interventions by policymakers created uncertainty that contributed to financial instability.\nIn response to these concerns, Title II of the Dodd-Frank Act created a special resolution regime (called Orderly Liquidation Authority or OLA) for liquidating failing financial firms only if federal policymakers determine that a firm's imminent failure poses a threat to financial stability. OLA is an administrative, rather than judicial, resolution forum modeled on how the FDIC resolves insured depository institutions. Should the failing firm's estate lack sufficient liquid assets to prevent creditor reactions from contributing to financial instability, the FDIC is empowered to contribute resources to the failing firm's estate. Any such payments would be recouped through the liquidation of the failed firm's assets or after-the-fact assessments on surviving firms in the financial industry. (Note that access to OLA is not limited to designated SIFIs and has not been used to date.)\nOLA is statutorily structured as a fallback alternative to the normally applicable insolvency regimes; the failure of most nonbank financial institutions generally is dealt with under the Bankruptcy Code. The Bankruptcy Code consists of separate chapters designed to resolve a variety of failing entities through judicial processes. However, certain entities are not statutorily permitted to be resolved through the Bankruptcy Code. For example, FDIC insured depositories are not permitted to be debtors under the Bankrutpcy Code. Instead, the FDIC is statutorily authorized to resolve failing insured depositories through a largely nonjudicial, FDIC-administered conservatorship or receivership. Part of the policy justification for resolving insured depositories through this administrative regime, rather than the normally applicable Bankruptcy Code, is that the FDIC, as deposit insurer, guarantees payment to depositors even if such obligations exceed the resources of the failing firm's estate, but also due to the threat of financial instability accompanied by widespread failures of depositories.", "Advocates of OLA highlight several specific characteristics of financial markets and the Bankruptcy Code at the time that may have magnified financial instability. First, some argue that the Lehman Brothers bankruptcy announcement was a negative shock to confidence because investors had assumed that Lehman was \"too big to fail.\" By contrast, OLA has a statutory focus on maintaining financial stability, of which there is no statutory equivalent under the existing Bankruptcy Code. Second, some argue that the length of a typical judicial bankruptcy proceeding compared to an administrative agency resolution process would contribute to financial uncertainty. Proponents argue that OLA's administrative forum would allow the FDIC to move more quickly than generally is possible through a judicial bankruptcy proceeding, thus decreasing market uncertainty. Third, some argue that the treatment of some financial contracts, such as acceleration and netting of qualifying financial contracts (QFCs), under the Bankruptcy Code is done selectively by counterparties to the detriment of the bankruptcy estate.\nCritics say these three advantages of OLA could be replicated in a judicial forum by establishing a new chapter of the Bankruptcy Code designed specifically to address the unique characteristics of large financial institutions.\nFourth, supporters of OLA argue that the nature of financial intermediaries' continuous need to access credit (liquidity) makes a bankruptcy process impractical for large financial institutions. They view it as unlikely that markets will be able to provide sufficient private financing during the bankruptcy of a failing firm and, therefore, \"it is not credible to suggest that a financial institution bankruptcy can work without standby government financing,\" like that which is provided by Title II.\nThe FDIC's option to temporarily use government funds to meet creditor claims under OLA leads critics to argue that it \"institutionalized bailouts\" and that the FDIC's plan for implementing OLA has promoted \"expectations that the government will come to the rescue of large financial institutions and insulate their creditors and counterparties from losses.\" OLA cannot be used to bail out failing firms in the sense that it can only be used to wind a firm down, but it could potentially be used to bail out a firm's creditors by making them whole or at least compensating them more than would be available through a bankruptcy proceeding. Although Title II instructs the FDIC to generally treat similarly situated creditors similarly, critics worry that the fact that, if necessary for financial stability, the FDIC has \"authority to treat similarly situated creditors differently places far too much discretion in the hands of the government to pick winners and losers\" during a resolution. The FDIC, in addressing these concerns, has noted that it \"expects that disparate treatment of creditors would occur only in very limited circumstances and has, by regulation, expressly limited its discretion to treat similarly situated creditors differently.\"", "The FCA would repeal Title II of the Dodd-Frank Act and would add a new subchapter to the Bankruptcy Code designed specifically to handle the arguably unique characteristics associated with the failure of certain financial firms. As such, the resolution process would be handled through the courts rather than through largely nonjudicial proceedings administered by the financial regulators. However, the relevant financial regulators would, under certain circumstances, have the right to \"appear and be heard\" in certain bankruptcy proceedings of covered financial institutions.\nSimilar to the current Bankruptcy Code, under the FCA there would be several resolution options available to covered financial institutions. The firm could be liquidated (Chapter 7) or reorganized (Chapter 11). However, the plan must meet a number of conditions, including that it is in the best interests of the creditors and must not pose a likely threat to the financial stability of the United States.\nThe FCA would add additional limits to the Fed's emergency lending authority and would eliminate FMU access to the discount window, the FDIC's emergency authority to guarantee bank debt and systemic risk exception to least cost resolution, and the use of the Exchange Stabilization Fund for government guarantees.\nCBO projects that the elimination of the Orderly Liquidation Authority would reduce the budget deficit by $14.5 billion over 10 years based on the probability of a firm being resolved through OLA over the next 10 years multiplied by the net cost to the government of doing so. Eliminating OLA reduces the deficit mainly because of scoring conventions. Although the FDIC is required to assess fees on large financial firms after the fact sufficient to completely offset the costs of an OLA resolution, CBO assumes that some of these fees (and asset sales from the resolution) would be collected outside of the 10-year scoring window.", "Conventional wisdom regarding regulators is that the structure and design of the organization matters for policy outcomes. These agencies have been given certain characteristics that enhance their day-to-day independence from the President or Congress, which may make policymaking more technical and less political or partisan, for better or worse. Independence also may make regulators less accountable to elected officials and can reduce congressional influence. From a practical perspective, independence and accountability take various forms and each regulator has a unique group of characteristics that, along with tradition, determine its relative independence and accountability. Two of the most independent regulators, the Fed and the CFPB, would see their independence reduced and congressional oversight increased by the FCA. The rest of this section discusses issues raised by the FCA related to independence and accountability, with added focus on the CFPB and the Fed.", "", "The annual appropriations processes and periodic reauthorization legislation provide Congress with opportunities to influence the size, scope, priorities, and activities of an agency. Most financial regulators determine their own budgets and assess fees to cover expenditures, as shown in Table 3 , typically subject to some general language regarding proportionality of budget and mission. Currently, the two financial regulators whose funding is primarily determined through the appropriations process and who are subject to periodic reauthorizations are the CFTC and the SEC. Most financial regulators generate income from various sources, particularly fees or assessments on entities that they oversee. The two financial regulators that do not largely raise their own revenues are the CFTC and the CFPB. The CFTC's funding comes from general revenues and CFPB funding is transferred from the Federal Reserve's revenues.", "The appropriations and authorization processes provide Congress regular opportunities to evaluate an agency's performance. During these processes, Congress might also influence the activities of these agencies by legislating provisions that reallocate resources or place limitations on the use of appropriated funds to better reflect congressional priorities. Through line-item funding, bill text, or accompanying committee report text, Congress can encourage, discourage, require, or forbid specific activities at the agency, including rulemaking. Alternatively, Congress can adjust an agency's overall funding level if Congress is supportive or unsupportive of the agency's mission or conduct. Thus, congressional control over an agency's funding reduces its independence from (and increases its accountability to) Congress. To the extent that agency budget requests exceed appropriations in practice, bringing agencies into the appropriations process could result in lower agency funding levels, for better or worse.", "The FCA would bring the rest of the financial regulators—the FDIC, FHFA, NCUA, OCC, Fed, and CLEA—as well as FSOC into the appropriations process. For the Fed, spending related to monetary policy would remain outside of the appropriation process. For the FDIC, the Deposit Insurance Fund would remain outside of the appropriations process. The CLEA, replacing the CFPB, would not receive transfers from the Federal Reserve and thus would not have a dedicated source of revenues. Fees and assessments that agencies currently collect to fund themselves would appear as offsetting collections in the federal budget with certain exceptions. Agencies that are currently permanently authorized would remain so. The FCA would also reauthorize the SEC through 2022 and the CLEA through 2018.\nCBO estimates that moving these agencies to appropriations would reduce direct spending (and therefore decrease the deficit) by $18.4 billion over 10 years. To the extent that these agencies were funded through future appropriations acts, discretionary spending would rise and offset that reduction in the deficit.", "", "Before Title X of the Dodd-Frank Act (entitled the Consumer Financial Protection Act) went into effect, federal consumer financial protection regulatory authority was split between five banking agencies—the OCC, Fed, FDIC, NCUA, and Office of Thrift Supervision (OTS) —as well as the Federal Trade Commission (FTC) and the Department of Housing and Urban Development (HUD). These seven agencies shared (1) the authority to write rules to implement most federal consumer financial protection laws; (2) the power to enforce those laws; and (3) supervisory authority over the individuals and companies offering and selling consumer financial products and services. The jurisdictions of these agencies varied based on the type of institution involved and, in some cases, based on the type of financial activities in which institutions engaged.\nThe regulatory authority of the banking agencies varied by depository charter. The OCC regulated depository institutions with a national bank charter. The Fed regulated the domestic operations of foreign banks and state-chartered banks that were members of the Federal Reserve System (FRS). The FDIC regulated state-chartered banks and other state-chartered depository institutions that were not members of the FRS. The NCUA regulated federally insured credit unions, and the OTS regulated institutions with a federal thrift charter.\nThe banking agencies were charged with a two-pronged mandate to regulate depository institutions within their jurisdiction for safety and soundness, as well as consumer compliance. The focus of safety and soundness regulation is ensuring that institutions are managed in a safe and sound manner so as to maintain profitability and avoid failure. The focus of consumer compliance regulation is ensuring that institutions abide by applicable consumer protection and fair lending laws. To reach these ends, the banking agencies held broad authority to subject depository institutions to up-front supervisory standards, including the authority to conduct regular, if not continuous, on-site examinations of depository institutions. They also had flexible enforcement powers to redress consumer harm, as well as to rectify proactively compliance issues found in the course of examinations and the exercise of their other supervisory powers, potentially before consumers suffered harm.\nThe FTC was the primary federal regulator for nondepository financial companies, such as payday lenders and mortgage brokers. Unlike the federal banking agencies, the FTC had little up-front supervisory or enforcement authority. For instance, the FTC did not have the statutory authority to examine nondepository financial companies regularly or impose reporting requirements on them as a way proactively to ensure they were complying with consumer protection laws. Instead, the FTC's powers generally were limited to enforcing federal consumer laws. However, because the FTC lacked supervisory powers, it generally initiated enforcement actions in response to consumer complaints, private litigation, or similar \"triggering events [that] postdate injury to the consumer.\"\nAdditionally, both depository institutions and nondepository financial companies were subject to the federal consumer financial protection laws. Together, these federal laws establish consumer protections for a broad and diverse set of activities and services, including consumer credit transactions, third-party debt collection, and credit reporting. Before the Dodd-Frank Act went into effect, the rulemaking authority to implement federal consumer financial protection laws was largely held by the Fed. However, the authority to enforce the federal consumer financial protection laws and regulations was spread among all of the banking agencies, the FTC, and HUD.\nSome scholars and consumer advocates contended that this arguably complex, fragmented federal consumer financial protection regulatory regime failed to protect consumers adequately and created market inefficiencies to the detriment of both financial companies and consumers. Some argued that these problems could be corrected if federal consumer financial regulatory powers were strengthened and consolidated in a single regulator with a consumer-centric mission and supervisory, rulemaking, and enforcement powers akin to those held by the banking agencies.\nThe Dodd-Frank Act established the Consumer Financial Protection Bureau (CFPB, or Bureau), in part to address these concerns. The CFPB is established as an independent agency within the Federal Reserve System. The Bureau is headed by a single director who is appointed by the President of the United States, subject to the advice and consent of the Senate, and may only be removed from office \"for inefficiency, neglect of duty, or malfeasance in office.\" The Bureau is funded primarily through transfers of nonappropriated funds from the Federal Reserve System's combined earnings in an amount \"determined by the Director to be reasonably necessary to carry out the authorities of the Bureau,\" subject to specified caps.\nThe CFPB has regulatory jurisdiction over a broad array of consumer financial products and services, as well as the entities that sell them. The Dodd-Frank Act significantly enhances federal consumer protection regulatory authority over nondepository financial companies, for instance, by providing the CFPB with supervisory and examination authority over such companies akin to those powers long held by the banking agencies over depository institutions. Although the Dodd-Frank Act consolidates in the CFPB much of the federal consumer financial protection authority, at least six other agencies—the OCC, Fed, FDIC, NCUA, HUD, and FTC—retain some powers in this field. The Dodd-Frank Act also explicitly exempts certain industries from CFPB regulation.\nThe Dodd-Frank Act transferred from the banking agencies to the Bureau primary consumer compliance authority over banks, thrifts, and credit unions with more than $10 billion in assets. However, the banking agencies continue to hold safety and soundness authority over these \"larger depositories,\" as well as both consumer compliance and safety and soundness authority over \"smaller depositories\" (i.e., bank, thrifts, and credit unions with $10 billion or less in assets).\nThe CFPB has significant rulemaking authority. The Dodd-Frank Act transferred to the Bureau the primary rulemaking authority over 19 \"enumerated consumer laws,\" which, with one exception, were enacted prior to the Dodd-Frank Act. These laws, which include the Truth in Lending Act (TILA) and the Real Estate Settlement Procedures Act of 1974 (RESPA), govern a broad and diverse set of consumer activities and services. Additionally, the CFPB is authorized to prohibit unfair, deceptive, and abusive acts or practices associated with consumer financial products and services that fall under the Bureau's general regulatory jurisdiction.\nThe Bureau also is authorized to enforce consumer financial protection laws either through the courts or administrative adjudications. The CFPB is authorized by statute to redress violations of consumer financial protection laws through the assessment of civil monetary penalties, restitution orders, and various other forms of legal and equitable relief.", "Since the CFPB was established, some have argued that the agency has overly broad powers, too much independence, and not enough accountability. Much of the policy discussion around it has focused on two main questions. First, is the CFPB as an institution structured appropriately to achieve the correct balance between independence on the one hand and transparency and accountability on the other? Those who criticize the CFPB's policy choices often attribute some of the perceived shortcomings to what they see as the CFPB's excessive independence, insularity, and lack of sufficient accountability. The presence of a director rather than a board, some argue, leads to a lack of diverse viewpoints at the CFPB. Some also cite funding that is outside the traditional appropriations process as a contributing factor to the CFPB's independence. Supporters of the CFPB highlight other aspects of its structure that they argue provide sufficient transparency and accountability, including the director's biannual testimony before Congress and the cap on CFPB funding. Other structural characteristics, they argue, are important for ensuring that the CFPB is somewhat insulated from political pressures and can focus on the technical aspect of policymaking.\nThe second major policy question is whether the substance of the CFPB's rulemakings has struck an appropriate balance between protecting consumers and ensuring that consumers have access to financial products while also safeguarding lenders from unduly burdensome regulations. One of the long-standing issues in the regulation of consumer financial services is the perceived trade-off between protecting consumers and ensuring the providers of financial services are not unduly burdened. If regulation intended to protect consumers increases the cost of providing a financial product, a company may reduce how much of that product it is willing to provide and to whom it is willing to provide it. Those who still receive the product may benefit from the enhanced disclosure or added legal protections of the regulation but at the cost of a potentially higher price.\nSome Members of Congress believe the CFPB has struck an appropriate balance in its rulemaking between protecting consumers and ensuring that credit availability is not restricted due to overly burdensome regulations on financial institutions. Others counter that some of the CFPB's rules have imposed compliance costs on lenders of all sizes that will result in less credit available to consumers and restrict the types of products available. An analysis of whether recent rulemakings have restricted the availability of credit is complicated by the effects of the financial crisis on the supply of and demand for credit, as well as by the fact that many of the more significant CFPB rulemakings only took effect in early 2014.", "The FCA would replace the CFPB with a \"Consumer Law Enforcement Agency\" (CLEA) and would make numerous other significant alterations to the federal consumer financial regulatory system put in place by the Dodd-Frank Act. Although the CLEA would take over some of the Bureau's regulatory functions, the CLEA would not acquire all of the powers currently held by the CFPB, and the CLEA would have a substantively distinct administrative structure.\nSimilar to the CFPB, the CLEA would be headed by a single director, but unlike the CFPB director, who can only be removed by the President for cause, the CLEA director would be removable at-will by the President. The CLEA would be funded through appropriations, rather than through a transfer of nonappropriated funds from the Federal Reserve System, as is the case for the CFPB.\nThe CLEA, in contrast to the CFPB, would not be authorized to conduct examinations of or engage in other supervisory activities involving covered financial institutions. However, the CLEA would have at its disposal many of the same enforcement powers that currently are held by the CFPB. The CLEA also would acquire the CFPB's rulemaking authority over the 19 \"enumerated consumer laws.\" However, prior to initiating an enforcement action, entering a consent order, or issuing a regulation, the FCA would require the CLEA to analyze the costs and benefits of such an action and evaluate how such an action would affect \"consumer choice, price, and access to credit products.\"\nUnlike the CFPB, the CLEA would not serve as the primary consumer compliance regulator for larger depositories. Instead, the FCA would transfer those powers to the relevant banking agencies. The CLEA also would not have the CFPB's authority to prohibit unfair, deceptive, and abusive acts or practices in consumer financial markets.", "", "The Federal Reserve is unique among financial regulators in that, in addition to its regulatory role, it is responsible for conducting monetary policy and operating parts of the payment system. The Federal Reserve System is comprised of a Board of Governors and 12 regional Federal Reserve Banks. Monetary policy is set by the Federal Open Market Committee (FOMC), comprised of all seven governors, the president of the New York Fed, and four of the regional bank presidents (selected on a rotating basis among the other 11 banks).\nThe Fed's financial statements are annually audited by a private sector auditor, and its policies are regularly evaluated by GAO, subject to statutory restrictions. The Dodd-Frank Act allowed the Fed's monetary policy and lending activities to be audited by GAO for the first time, but limited the scope of those audits to waste, fraud, and abuse.\nIn normal conditions, the Fed lends minimally to banks through its discount window and does not provide any credit to nonbank financial firms. During the 2007 to 2009 financial crisis, it provided extensive credit to banks and nonbanks, the latter through its emergency powers found in Section 13(3) of the Federal Reserve Act. Some criticized the Fed's use of Section 13(3) in the bailouts of Bear Stearns and AIG, although the funds were repaid in full with interest. The Dodd-Frank Act restricted Section 13(3) to prohibit assistance to failing firms, while still allowing the Fed to provide liquidity to healthy firms through broadly based facilities.", "To shield monetary policy from undue political influence, Congress made the Federal Reserve more independent from Congress and the Administration than other financial regulators. It currently has broad discretion to set monetary policy as it sees fit to achieve its dual statutory mandate of maximum employment and stable prices. Nevertheless, it is still subject to congressional oversight. Recent Congresses have debated whether the balance should be tilted toward greater congressional oversight and less independence, notably by expanding the scope of GAO audits of the Fed and reducing the Fed's discretion over monetary policy.", "The FCA contains 11 Fed-related sections, including provisions that would\nremove statutory restrictions on Government Accountability Office (GAO) audits of monetary policy and require an annual audit that is not subject to current statutory provisions, such as confidentiality requirements. Effectively, this provision would expand GAO's powers to allow it to evaluate the economic merits of Fed policy decisions. require the Fed to formulate a mathematical rule (called the \"Directive Policy Rule\") that would instruct it how to set monetary policy so as to achieve its mandate of stable prices and maximum employment based on macroeconomic variables. The provision would also require the Fed to calculate a traditional Taylor Rule (called the \"Reference Policy Rule\" in the bill) and compare it to the Directive Policy rule. If the Fed did not comply, it would trigger a GAO audit and testimony by the Fed chair before the committees of jurisdiction. change the voting membership of the FOMC. The provision would dilute the voting power of the Fed governors and the New York Fed president by expanding the votes of the other regional bank presidents. further restrict the Fed's emergency lending powers. It would limit eligible collateral and eligible firms, establish a minimum \"penalty\" interest rate, and require approval by at least nine Fed bank presidents. create a commission whose voting members are composed of eight Members of Congress from the majority party and four Members from the minority party, split evenly between the House and Senate. The commission would examine and make recommendations on monetary policy, the dual mandate, macroprudential regulation, and lender of last resort functions.\nThe FCA would also enhance oversight at the expense of Fed independence by moving the Fed's nonmonetary policy activities to appropriations (see the section entitled \" Appropriations \") and subjecting Fed rulemaking to cost-benefit analysis requirements (see the section entitled \" Cost-Benefit Analysis \").", "Rulemaking is one of the basic tools that federal agencies use to implement public policy. In enacting legislation, Congress often grants agencies rulemaking authority, under which they are required or permitted to set standards and prescribe the details of certain federal policies and programs. Some rules an agency issues are promulgated under the agency's inherent authority, while others are in response to the specific requirements of legislation. When they issue those regulations, agencies are generally required to follow a certain set of procedures established by Congress. The most long-standing and broadly applicable federal rulemaking requirements are in the Administrative Procedure Act (APA) of 1946, which applies to all executive agencies, including independent regulatory agencies. The APA contains rulemaking requirements and procedures for agency adjudications, and it provides for judicial review of rulemaking and agency actions.\nThree proposals in the FCA—requiring cost-benefit analysis (CBA), modifying the Congressional Review Act (CRA), and overturning the judicial Chevron Doctrine—would affect regulator discretion and accountability in the rulemaking process.", "", "In the rulemaking process, cost-benefit analysis is the systematic examination of estimated total costs incurred and benefits accrued if a proposed rule were to be implemented. Many regulatory agencies are required to perform some analysis of the potential effects of the rule prior to finalizing it, but not necessarily a quantified CBA. The scope of consideration and the level of detail required of the analysis can vary between different departments and agencies, and financial regulators generally are not required to quantify and evaluate total economic costs and benefits.\nFinancial regulators generally face requirements that involve a relatively narrow analysis of a specific effect of a regulation—such as the effect on small businesses or the burden of recordkeeping and reporting necessary to comply with a new regulation—or that leave the parameters of a CBA to the discretion of the issuing agency. Also, because financial regulators are generally classified as independent regulatory agencies , they are exempted from Executive Order (EO) 12866. EO 12866 establishes analytical principles for federal CBA and a review process—performed by the Office of Information and Regulatory Affairs within the Office of Management and Budget—to ensure rulemaking adheres to those principles.", "CBA requirements help to ensure that regulators are held accountable during the development, issuance, and implementation of rules, by requiring regulators to demonstrate that their decisions are based on an informed estimation of likely consequences. However, a statutory requirement for financial regulators to perform certain types of CBAs that are subject to judicial, presidential, or congressional review would change the balance between their independence and accountability.\nOne side of the debate asserts that financial regulators should not be subject to rigid legal structure when performing CBA—especially in regard to quantification of costs and benefits. One argument for this position is that attempts to quantify the effects of financial regulation are imprecise and unreliable, because they entail making causal assumptions that are contestable and uncertain and often face issues concerning data availability and accuracy. The reason for this imprecise analysis is that financial regulation aims to induce behavioral, microeconomic, and macroeconomic responses, and its effects can be harder to quantify than other types of regulation, which generally require firms to take actions with more measurable effects. Some warn that increasing rulemaking requirements could lead to \"ossification\" of the rulemaking process, meaning agencies find it difficult to regulate because the rulemaking process becomes difficult, costly, and time consuming.\nOthers assert that financial regulators should be subject to stricter CBA requirements than is currently the case. They argue that the CBA—even in the case of financial regulation, when it might yield a wide range of estimates of costs and benefits or when technical experts might disagree over the accuracy—is necessary because it disciplines agencies in regard to what rules they implement and allows for an assessment of whether a regulation is desirable. Some also argue that the challenges of performing CBA for financial regulations are not greater than for other industries, arguing that the necessary data are available and estimations of benefits and costs—while challenging—are possible.", "The FCA would require the financial regulators listed in Table 1 to perform CBA as part of the rulemaking process and lists 12 specified areas of analysis. The 12 areas relate to verifying the necessity, efficacy, benefits, and costs of the rule, and include a quantitative and qualitative assessment of all anticipated direct and indirect costs and benefits of the regulation. Other provisions would restrict the implementation of rules depending on the findings of the CBA and the agencies' adherence to the requirements of the bill. For example, agencies would be prohibited from issuing a final rule if the expected quantified costs were greater than expected quantified benefits, unless Congress granted a waiver by joint resolution. Also, the bill would entitle parties adversely affected by regulation to bring action to the U.S. Court of Appeals for the District of Columbia Circuit for judicial review. The court may vacate a rule if it finds the agency did not comply with certain requirements. Finally, the bill would require each financial regulator to conduct certain additional CBA after the rule is issued and implemented, a type of analysis often referred to as retrospective analysis.", "", "The Congressional Review Act is an oversight tool that Congress can use to invalidate a final rule issued by a federal agency. The CRA provides Congress with a special set of expedited parliamentary procedures, which Congress can use to consider legislation striking down agency rules it opposes. These \"fast track\" parliamentary procedures, which are available primarily in the Senate, limit debate and amendment on a joint resolution disapproving a rule and ensure that a simple majority can reach a final up-or-down vote on the measure.\nMembers of Congress have specified time periods in which to submit and act on a joint resolution of disapproval invalidating the rule. If both houses agree to such a joint resolution, it is sent to the President for his signature or veto. If a CRA joint resolution of disapproval is enacted, either by being signed by the President or by being enacted over his veto, the agency final rule in question \"shall not take effect (or continue).\" The act also provides that if a joint resolution of disapproval is enacted, a new rule may not be issued in \"substantially the same form\" as the disapproved rule unless the rule is specifically authorized by a subsequent law. The CRA prohibits judicial review of any \"determination, finding, action, or omission under\" the act.\nPrior to 2017, the CRA mechanism had successfully overturned one agency final rule: a 2000 Occupational Safety and Health Administration (OSHA) rule related to workplace ergonomics standards. Thus far in the 115 th Congress (2017-2018), Congress has passed, and President Trump has signed into law, 13 CRA disapproval resolutions aimed at rules issued by the Obama Administration.", "The CRA was enacted in 1996 in response to concerns expressed by Members of both parties about Congress's ability to control what many viewed as a rapidly growing body of administrative rules. Simply put, many Members felt that as Congress delegated more power to agencies to implement law, the traditional oversight tools Congress possessed were not adequate. Congressional concern about administrative rules is arguably as high as ever, but in recent years, there has been a growing bipartisan consensus that the CRA has not been particularly effective as an oversight tool. As one House 2015 committee report noted of the expedited disapproval mechanism, \"Despite its conceptual promise, the CRA has produced few results.\" It is too early to tell if the increased successful use of the CRA in the 115 th Congress has influenced or will influence this viewpoint or perhaps give rise to new opinions of the act.\nPrior to 2017, perhaps the most widely cited reason why the CRA had overturned only one agency rule in 20 years is the de facto two-thirds supermajority of both houses of Congress required to enact a CRA resolution of disapproval. This is because a President is likely to veto a joint resolution that attempts to strike down a final rule proposed by his or her own Administration or by a like-minded independent agency. As a result, observers have argued that the structure of the CRA disapproval process tilts the playing field away from Congress and toward the President in a way that renders the CRA largely unworkable as an oversight mechanism. Such observers argue that the CRA can only be generally effective during periods when there is a change in party control of the White House to match that of the party controlling Congress. These are the exact circumstances in force at the beginning of the 115 th Congress.\nSuch concerns have led in recent Congresses to the introduction of several proposals that would restructure the CRA disapproval mechanism from a resolution of disapproval to a resolution of approval . Under proposals of this type, instead of rules automatically going into force unless Congress could enact a measure stopping them, some or all rules would become effective only upon the enactment of a law approving them.\nChief among proposals of this type is the Regulations from the Executive in Need of Scrutiny Act (REINS Act; H.R. 26 ). The REINS Act would keep the CRA process the same for nonmajor agency rules but would require Congress to vote to approve all so-called \"major\" rules before they could become effective. H.R. 26 passed the House on January 5, 2017.\nSupporters of these proposals argue that amending the CRA mechanism in this way would properly \"flip\" the balance of power in agency rulemaking to favor Congress—the lawmaking branch—by requiring affirmative congressional action for significant rules to become effective. Opponents of such an approach have expressed concern that it could make it difficult or impossible for agencies to issue needed rules and might significantly increase congressional workload. In the case of financial regulators, the approach would reduce their independence from—and increase their accountability to—Congress.", "The FCA would amend the CRA in a manner virtually identical to that proposed in H.R. 26 , described above. Unlike H.R. 26 , however, the FCA would apply this revised CRA approval mechanism only to rules promulgated by a \"federal financial agency,\" a term it defines as the financial regulators listed in Table 1 .\nThe FCA would require the agency to meet a number of reporting requirements to Congress when issuing a rule. The FCA would require a joint resolution of approval for major financial agency rules to be enacted under \"fast track\" consideration before such rules could take effect. (As noted above, currently, major rules automatically take effect unless a joint resolution disapproving them is enacted. The bill defines \"major rule\" using the same definition as is currently contained in the CRA.) The FCA would provide that if a joint resolution of approval is not enacted by the end of 70 session days or legislative days (as applicable) after the financial agency proposing the rule submits its report on the rule to Congress, the major rule is not approved and will not take effect.\nThe FCA would, however, permit a major financial rule to take effect for one 90-calendar-day period without congressional approval if the President determined that the rule was necessary because of an imminent threat to health or safety or other emergency, for the enforcement of criminal laws, for national security, or to implement an international trade agreement. Unlike the current CRA, the FCA would allow a court to review whether a financial agency has completed the necessary requirements for a final rule to take effect.", "", "The FCA contains a provision that would change how agency interpretations of the law would be reviewed. Before discussing the benefits or drawbacks of such an approach, it is important to discuss the current legal framework in which courts generally review agency interpretations of the law. An administrative agency may generally only exercise that authority that is provided to it by Congress. Often, however, congressional delegations of authority may be imprecise and, as a result, agencies often must construe ambiguous terms and make interpretive decisions to implement Congress's delegation. The Supreme Court, in Chevron U.S.A., Inc. v. Natural Resources Defense Council , Inc. , envisioned a limited role for courts in reviewing agency interpretations of law. Chevron has been a cornerstone of administrative law since being handed down more than three decades ago, having been cited and followed thousands of times by federal courts. The Chevron test requires courts to enforce the clearly expressed intent of Congress. In the absence of such clarity, generally Chevron instructs reviewing courts to defer to an agency's construction of an ambiguous statute if the agency's interpretation is reasonable. When assessing the reasonableness of an agency's interpretation, reviewing courts generally \"will consider whether the agency's position comports with the overall purpose and goal of the statute in question.\" Thus, under Chevron , it is generally left to federal agencies, and not the courts, to resolve ambiguities necessary to interpret and implement authority provided to the agency by Congress.\nAlthough Chevron did not directly involve a federal financial regulator, courts have applied Chevron's principles to statutory interpretations of the federal financial agencies.", "The Chevron Court explained that when Congress has delegated the authority to interpret the statute to the administrative agency, a judge must not substitute his or her own interpretation of the statute in question when the agency has provided a permissible construction of the statute. In reaching its decision, the Supreme Court established a two-part test, commonly referred to as the \" Chevron two-step,\" to be applied when a court is reviewing an agency's statutory interpretation. The Court announced\nWhen a court reviews an agency's construction of the statute which it administers, it is confronted with two questions. First, always, is the question whether Congress has directly spoken to the precise question at issue. If the intent of Congress is clear, that is the end of the matter; for the court, as well as the agency, must give effect to the unambiguously expressed intent of Congress. If, however, the court determines Congress has not directly addressed the precise question at issue, the court does not simply impose its own construction on the statute, as would be necessary in the absence of an administrative interpretation. Rather, if the statute is silent or ambiguous with respect to the specific issue, the question for the court is whether the agency's answer is based on a permissible construction of the statute.\nIn Chevron , the Supreme Court elucidated several reasons for favoring a restrained judicial role when reviewing an agency interpretation of an ambiguous statute. First, the Court noted that when Congress enacts an ambiguous statute, it has, in effect, delegated to the agency the authority to clarify the ambiguity. In other words, Congress made a conscious choice in selecting a specific agency to implement the statutory delegation, and the courts, the Supreme Court reasoned, should respect Congress's decision by granting the agency leeway in interpreting the statute. Moreover, the Court noted that interpreting a statutory ambiguity is akin to making a policy decision on how to implement a statutory program. In the Court's view, agencies and legislators are best suited to balance applicable considerations and to resolve debates regarding competing, acceptable interpretations of an ambiguous delegation.\nSecond, according to the Court, agencies have technical expertise in the field in which they are acting and are, therefore, in a better position to make appropriate policy decisions as part of a large and complex regulatory scheme. Courts, on the other hand, generally lack such expertise. In Chevron , the Court specifically acknowledged that \"judges are not experts in the field\" and thus \"may not substitute [their] own construction of a statutory provision for a reasonable interpretation made by the administrator of an agency.\"\nFinally, the Chevron Court noted that administrative agencies are politically accountable—though not directly—through the democratic process. Although courts are called to reconcile political preferences in certain circumstances, they should not do so when the power to implement the statute has been delegated to an administrative agency. In the Court's view, an Administration has the authority to implement its policy judgments through the permissible interpretation of a statute. If the agency's, and by extension the Administration's, permissible construction of a statute is undesirable, the electorate may have its voice heard through the democratic process. On the other hand, when a federal court interprets a statute, the electorate cannot voice similar concerns to the unelected court. These general justifications for Chevron deference are arguably applicable with regard to agency enforcement of federal financial laws, which typically are broadly worded, and allow expert agencies to craft more specific rules in a highly technical environment.\nSome have argued, however, that judicial deference under Chevron has allowed administrative agencies to exercise too much \"power to expand the scope of their own authority ... to decide what and who they can regulate, and how to regulate,\" risking abrupt deviations from long-standing statutory interpretations. Thus, the argument has been made that a recalibration of judicial review of administrative interpretations of law is necessary to ensure that federal statutes are interpreted as intended by Congress and to effectively hold the federal financial agencies accountable in how they implement federal law. By contrast, such a recalibration of the judicial review over agency interpretations of statutes arguably could result in courts more closely scrutinizing agency decisions. A departure from Chevron also might increase the number of legal challenges to agency rulemakings, which could delay the time it takes for new regulations to take legal effect, as well as increase the costs of promulgating regulations.", "The FCA would upend Chevron's policy of judicial deference to interpretations of the law that are issued by the CLEA, Fed, CFTC, FDIC, FHFA, OCC, NCUA, and SEC. In lieu of deferring to the covered agencies' reasonable interpretations of silent or ambiguous statutes in accordance with Chevron , the FCA would require courts to apply a de novo review of administrative actions—that is, review wherein a court reviews an administrative agency's interpretation of a law without any deference. De novo review would require courts to independently interpret a covered agency's statutory authority, rather than deferring to that agency's reasonable interpretation of the law. (It should be noted that, while the focus of this section is on regulations, the FCA would require de novo review on not just administrative rulemakings but also the broader set of \"final agency actions,\" which are subject to varying degrees of judicial deference.) The FCA would bar reviewing courts from \"rely[ing] on [a] gap or ambiguity [in the law] as a justification either for interpreting agency authority expansively or for deferring to the agency's interpretation on the question of law.\" Although the bill would not explicitly prohibit courts from taking into account the relevant agency's reasoning and technical expertise of the subject matter, courts would appear to have much greater latitude to set aside, overrule, and modify agency interpretations if the FCA were enacted into law. This provision would go into effect two years after the FCA is enacted.", "", "Another major administrative tool held by the federal financial agencies is their power to enforce laws within their jurisdictions. The strength and effectiveness of an administrative agency's enforcement power can be affected by, among other things\nthe scope of the agency's statutory authority (e.g., the types of entities that fall within its enforcement jurisdiction); the type of enforcement powers (e.g., civil penalties, criminal penalties, restitution, and disgorgement, in the agency's arsenal; maximum and minimum penalties available for certain violations); and the enforcement-related resources (e.g., financial, personnel) at its disposal.", "The way in which federal financial regulators exercise their enforcement powers requires a balance between protecting consumers and investors from unlawful conduct, on the one hand, and ensuring that law-abiding financial institutions are not pushed out of certain markets and the costs of their products and services for consumers and investors are not unduly increased, on the other.", "The FCA would make a number of changes that would directly or indirectly affect the enforcement authorities of the federal financial regulators. For example, the FCA would increase the maximum civil penalties that could be assessed for violations of various laws, including Section 8A of the Securities Act of 1933 and Section 951(b) of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989.\nThe bill also would constrain the enforcement powers of certain federal financial regulators. For example, the bill would repeal the SEC's current statutory authority to, under certain circumstances, permanently or temporarily prohibit individuals from serving as an officer or director of a securities issuer. The FCA would also restrict the ability of the federal financial regulators, as well as the Department of Justice, Department of Housing and Urban Development, and Rural Housing Service of the Department of Agriculture, from entering into legal settlements that allow or require a party to \"direct or provide for a payment to any person who is not a victim of the alleged wrongdoing.\" Additionally, the FCA's proposals to modify the way in which various federal financial regulators are funded (see the \" Appropriations \" section, above) could indirectly impact the enforcement resources at the disposal of those regulators.\nAppendix A. The Financial CHOICE Act and the Dodd-Frank Act\nThis table provides a brief overview of selected changes that the Financial CHOICE Act makes to the Dodd-Frank Act on a title-by-title basis for the 16 titles in the Dodd-Frank Act.\nAppendix B. Provisions of the Financial CHOICE Act Included in FY2018 Appropriations Bills\nSelected provisions of the Financial CHOICE Act were included in the FY2018 Financial Services and General Government Appropriations Act (H.R. 3280). On September 5, 2017, the House Rules Committee combined H.R. 3280 with selected other appropriation bills in H.R. 3354 . The Financial CHOICE Act provisions are found in Division D of H.R. 3354 as passed by the House on September 14, 2017. Table B-1 provides an overview of the provisions of the Financial CHOICE Act that were included in H.R. 3354 .\nTwo notable policy changes were included in both bills in different versions. First, H.R. 10 repealed the Conflict Minerals provision (Section 1502) of the Dodd-Frank Act, whereas H.R. 3354 prohibited the use of appropriated funds toward enforcing the rule implementing it. Second, H.R. 3354 contains Section 841(a) of H.R. 10 , repealing the Department of Labor's 2016 Fiduciary Rule, but does not contain the rest of Section 841.\nAppendix C. Authors of this Report and Areas of Research" ], "depth": [ 0, 1, 1, 2, 3, 3, 3, 2, 3, 3, 3, 2, 3, 3, 3, 2, 3, 3, 3, 2, 3, 3, 3, 2, 3, 3, 3, 1, 2, 3, 3, 3, 2, 3, 3, 3, 1, 2, 3, 3, 3, 2, 3, 3, 3, 2, 3, 3, 3, 2, 3, 4, 4, 4, 3, 4, 4, 4, 3, 4, 4, 4, 2, 3, 3, 3 ], "alignment": [ "h0_title h2_title h1_title", "h0_full", "h1_full", "h1_title", "", "", "h1_full", "", "", "", "", "h1_title", "", "", "h1_full", "", "", "", "", "", "", "", "", "", "", "", "", "h1_title", "", "", "", "", "h1_title", "", "", "h1_full", "h2_title", "h2_title", "h2_full", "", "", "h2_title", "", "", "h2_full", "h2_title", "", "", "h2_full", "h2_full", "", "", "", "", "", "", "", "", "h2_title", "", "h2_full", "", "h2_title", "", "", "h2_full" ] }
{ "question": [ "What is the purpose of H.R. 10?", "To what did the FCA respond?", "What would provisions of FCA do?", "In what ways can a leverage ratio be changed?", "What actions could be taken with regards to regulatory relief?", "What do these provisions target?", "What actions can be taken with regards to institions assumed to be \"too big to fail\"?", "What actions could be taken to change rulemaking processes?", "How could judicial review processes be changed?", "What changes may be brought to enfocement?", "What actions could be taken to change CFPB?", "How would CFPB and the new agency differ?", "What steps could be taken to change funding processes?", "How could the Federal Reserve be changed?" ], "summary": [ "H.R. 10, as passed, is a wide-ranging proposal with 12 titles that would alter many parts of the financial regulatory system.", "Much of the FCA is in response to the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act; P.L. 111-203), a broad package of regulatory reform following the financial crisis that initiated the largest change to the financial regulatory system since at least 1999.", "Many of the provisions of the FCA would modify or repeal provisions from the Dodd-Frank Act, although others would address long-standing or more recent issues.", "Leverage Ratio—allowing a banking organization to choose to be subject to a higher, 10% leverage ratio in exchange for being exempt from risk-weighted capital ratios, liquidity requirements, enhanced prudential regulation (if the bank has more than $50 billion in assets), and other regulations.", "Regulatory Relief—providing regulatory relief throughout the financial system to banks, consumers, and capital market participants, including by repealing the Volcker Rule, fiduciary rule, and risk retention requirements for nonmortgage asset-backed securities.", "Some provisions are targeted at small financial institutions or issuers, whereas others provisions are applied across the board.", "Too Big To Fail—repealing the designation of systemically important nonbank financial institutions, repealing or restricting authority to provide emergency assistance to financial markets, and replacing an option for winding down systemic institutions with a new chapter in the Bankruptcy Code that is tailored to financial firms.", "Rulemaking—requiring regulators to perform more detailed cost-benefit analysis when issuing new rules and to use cost-benefit analysis to review existing rules, as well as requiring congressional approval for a major rule to come into effect.", "Judicial Review—requiring courts to apply a heightened judicial review standard for agency actions taken by financial regulators rather than applying varying levels of deference to the agencies' interpretations of the law.", "Enforcement—increasing the maximum civil penalties that could be assessed for violations of certain banking and securities laws and restraining certain agency enforcement powers.", "CFPB—replacing the Consumer Financial Protection Bureau with the Consumer Law Enforcement Agency and modifying its powers, leadership, mandate, and funding.", "The new agency would not have the CFPB's examination or supervisory powers, but would have similar enforcement powers. Its director would be removable at-will by the President.", "Funding—subjecting regulators that currently set their own budgets to the traditional congressional appropriations process.", "Federal Reserve—requiring a GAO audit of the Fed, restricting emergency lending, and requiring the Fed to compare its monetary policy decisions to a mathematical rule." ], "parent_pair_index": [ -1, -1, 1, -1, -1, 1, -1, -1, -1, -1, -1, 3, -1, -1 ], "summary_paragraph_index": [ 1, 1, 1, 4, 4, 4, 4, 6, 6, 6, 6, 6, 6, 6 ] }
CRS_RL32205
{ "title": [ "", "Introduction", "Issues Facing Congress", "Scope and Limitations", "Background", "What Is LNG and Where Does It Come From?", "Expectations for U.S. LNG Import Growth", "Proposed LNG Import Terminals in the United States", "Potential Safety Hazards from LNG Terminals", "Physical Hazards of LNG", "Pool Fires", "Flammable Vapor Clouds", "Other Safety Hazards", "Terrorism Hazards", "Safety Record of LNG", "LNG Hazard Models", "Hazards vs. Risks", "LNG Terminal Safety in Perspective", "Other Hazardous Materials", "Civil and Criminal Liability", "Regulation of Onshore LNG Siting", "Department of Transportation", "Federal Energy Regulatory Commission (FERC)", "FERC-DOT Jurisdictional Issues", "U.S. Coast Guard", "National Fire Protection Association (NFPA)", "State Regulatory Roles", "Federal-State Jurisdictional Conflicts", "Key Policy Issues", "\"Exclusive\" Federal Siting Authority", "Regional Siting Approach", "\"Remote\" Siting of LNG Terminals", "Other Statutes that May Influence LNG Terminal Siting", "Terror Attractiveness", "Public Costs of LNG Marine Security", "Other Issues", "Conducting More Safety Research", "Developer Employee Disclosure", "Reducing LNG Demand", "Conclusion", "Appendix. Offshore LNG Terminal Regulation" ], "paragraphs": [ "", "Liquefied natural gas (LNG) historically has played a minor role in U.S. energy markets, but in reaction to rising natural gas prices, price volatility, and the possibility of domestic shortages, demand for LNG imports has increased significantly in recent years. To meet anticipated growth in LNG demand, new onshore and offshore LNG import terminals have been constructed or approved in United States coastal regions. More have been proposed. Because LNG (like other fossil fuels) is a hazardous liquid transported and stored in enormous quantities—often near populated areas—concerns exist about the federal government's role in addressing LNG safety in the terminal siting process. In addition, various energy policy proposals could impact the need for new LNG terminals by encouraging the development of alternative U.S. energy supplies and promoting conservation and efficiency.\nThis report provides an overview of recent industry development of new LNG import terminals. The report summarizes LNG hazards and the industry's safety record. It discusses federal laws and regulations related to LNG terminal siting with a focus on the authorities of key federal agencies and safety provisions in the permitting of onshore facilities. The report reviews controversial safety issues in recent LNG siting proceedings, such as safety zones, marine hazards, hazard modeling, and remote siting. The report outlines policy issues related to LNG terminal safety, including the Federal Energy Regulatory Commission's (FERC's) LNG siting authority, regional LNG siting, \"remote\" siting requirements in federal regulations, state permitting requirements, terrorism, and other issues.", "LNG terminals directly affect the safety of communities in the states and congressional districts where they are sited, and may influence energy costs nationwide. Faced with an uncertain national need for greater LNG imports and persistent public concerns about LNG hazards, some in Congress have proposed changes to safety provisions in federal LNG siting regulation. Legislation proposed in the 110 th Congress addressed Coast Guard LNG resources, FERC's exclusive siting authority, state concurrence of federal LNG siting decisions, and agency coordination under the Coastal Zone Management Act, among other proposals. If Congress concludes that new LNG terminals as currently regulated will pose an unacceptable risk to public safety, Congress may consider additional LNG safety-related legislation, or may exercise its oversight authority in other ways to influence LNG terminal siting approval. Alternatively, Congress may consider other changes in U.S. energy policy legislation to reduce the nation's demand for natural gas or increase supplies of North American natural gas and, thus, the need for new LNG infrastructure.", "This report focuses broadly on industry and federal activities related to safety in LNG import terminal siting. For a more specific discussion of LNG security, see CRS Report RL32073, Liquefied Natural Gas (LNG) Infrastructure Security: Issues for Congress , by [author name scrubbed]. This report also deals primarily with those parts of LNG terminals which transfer, store, and process LNG prior to injection to natural gas pipelines for transmission off site. For more discussion of general natural gas or pipeline hazards, see CRS Report RL33347, Pipeline Safety and Security: Federal Programs , by [author name scrubbed]. Also, this report discusses mostly onshore facilities and near-shore shipping, since they pose the greatest public hazards. Offshore LNG terminal siting regulations are summarized in the Appendix .", "", "When natural gas is cooled to temperatures below minus 260° F it condenses into liquefied natural gas, or LNG. As a liquid, natural gas occupies only 1/600 th the volume of its gaseous state, so it is stored more effectively in a limited space and is more readily transported. A single tanker ship, for example, can carry huge quantities of LNG—enough to supply a single day's energy needs of over 10 million homes. When LNG is warmed it \"regasifies\" and can be used for the same purposes as conventional natural gas such as heating, cooking, and power generation.\nIn 2009, LNG imports to the United States originated in Trinidad (54%), Egypt (34%), Norway (8%), and Nigeria (4%). In recent years, some LNG shipments have also come from Algeria, Qatar, Equatorial Guinea, Malaysia, Oman, Australia, and other countries. Brunei, Indonesia, Libya, and the United Arab Emirates also export LNG, and may be U.S. suppliers in the future. In addition to importing LNG to the lower 48 states, the United States exports Alaskan LNG to Japan.", "The United States has used LNG commercially since the 1940s. Initially, LNG facilities stored domestically produced natural gas to supplement pipeline supplies during times of high gas demand. In the 1970s, LNG imports began to supplement domestic production. Primarily because of low domestic gas prices, LNG imports stayed relatively small—accounting for only 1% of total U.S. gas consumption as late as 2002. In countries with limited domestic gas supplies, however, LNG imports grew dramatically over the same period. Japan, for example, imported 97% of its natural gas supply as LNG in 2002, more than 11 times as much LNG as the United States. South Korea, France, Spain, and Taiwan also became heavy LNG importers.\nNatural gas demand growth accelerated in the United States from the mid-1980s through 2000 due to environmental concerns about other energy sources, widespread building of natural gas-fired electricity generation, and low natural gas prices. Domestic gas supplies have not always kept up with growth in demand, however, so prices have become volatile. At the same time, international LNG costs have fallen since the 1970s because of increased supplies and more efficient production and transportation, making LNG more competitive with domestic natural gas.\nIn 2003 testimony before Congress, the Federal Reserve Chairman called for a sharp increase in LNG imports to help avert a potential barrier to U.S. economic growth. According to the Chairman's testimony: \"... high gas prices projected in the American distant futures market have made us a potential very large importer.... Access to world natural gas supplies will require a major expansion of LNG terminal import capacity.\" Likewise, FERC Commissioner Suedeen Kelly told industry representatives in 2006 that,\"while LNG has made a marginal contribution to gas supply over the last 30 years, it is poised to make a major contribution in the future.\" Because burning natural gas produces only half as much carbon dioxide as burning coal, and also less carbon dioxide than vehicular fuels like gasoline, some also anticipate natural gas demand to grow as the preferred fuel in the near-term for power plants and motor vehicles under a national policy of carbon control. Recent increases in U.S. natural gas production from domestic shale deposits have complicated projections about LNG markets. Nonetheless, many analysts expect continued growth in the U.S. LNG imports over the long term.", "LNG tankers unload their cargo at dedicated marine terminals which store and regasify the LNG for distribution to domestic markets. Onshore terminals consist of docks, LNG handling equipment, storage tanks, and interconnections to regional gas transmission pipelines and electric power plants. Offshore terminals regasify and pump the LNG directly into offshore natural gas pipelines or may store LNG for later injection into offshore pipelines.\nThere are seven active onshore LNG import terminals in the United States: Everett, Massachusetts; Lake Charles, Louisiana; Cove Point, Maryland; Elba Island, Georgia; Peñuelas, Puerto Rico; Freeport, Texas; and Sabine Pass, Louisiana. There are two active offshore import terminals, one located in the Gulf of Mexico and a second near Boston, Massachusetts. (There is also one export terminal in Kenai, Alaska.) In addition to these active terminals, some 25 LNG terminal proposals have been approved by regulators across North America to serve the U.S. market Figure 1 . A number of these proposals have been withdrawn, however, due to siting problems, financing problems, or other reasons. Developers have proposed another 8 U.S. terminals prior to filing formal siting applications.", "The safety hazards associated with LNG terminals have been debated for decades. A 1944 accident at one of the nation's first LNG facilities killed 128 people and initiated public fears about LNG hazards which persist today. Technology improvements and standards since the 1940s have made LNG facilities much safer, but serious hazards remain since LNG is inherently volatile and is usually shipped and stored in large quantities. A 2004 accident at Algeria's Skikda LNG terminal, which killed or injured over 100 workers, added to the ongoing controversy over LNG facility safety.", "Natural gas is combustible, so an uncontrolled release of LNG poses a hazard of fire or, in confined spaces, explosion. LNG also poses hazards because it is so cold. The likelihood and severity of catastrophic LNG events have been the subject of controversy. While questions remain about the credible impacts of specific LNG hazards, there appears to be consensus as to what the most serious hazards are.", "If LNG spills near an ignition source, evaporating gas will burn above the LNG pool. The resulting \"pool fire\" would spread as the LNG pool expanded away from its source and continued evaporating. A pool fire is intense, burning far more hotly and rapidly than oil or gasoline fires. It cannot be extinguished—all the LNG must be consumed before it goes out. Because an LNG pool fire is so hot, its thermal radiation may injure people and damage property a considerable distance from the fire itself. Many experts agree that a large pool fire, especially on water, is the most serious LNG hazard.", "If LNG spills but does not immediately ignite, the evaporating natural gas will form a vapor cloud that may drift some distance from the spill site. If the cloud subsequently encounters an ignition source, those portions of the cloud with a combustible gas-air concentration will burn. Because only a fraction of such a cloud would have a combustible gas-air concentration, the cloud would not likely ignite all at once, but the fire could still cause considerable damage. An LNG vapor cloud fire would gradually burn its way back to the LNG spill where the vapors originated and would continue to burn as a pool fire.", "LNG spilled on water could (theoretically) regasify almost instantly in a \"flameless explosion,\" although an Idaho National Engineering Laboratory report concluded that \"transitions caused by mixing of LNG and water are not violent.\" LNG vapor clouds are not toxic, but they could cause asphyxiation by displacing breathable air. Such clouds may begin near the ground (or water) when they are still very cold, but rise in air as they warm, diminishing the threat to people. Due to its extremely low temperature, LNG could injure people or damage equipment through direct contact. Such contact would likely be limited, however, as a major spill would likely result in a more serious fire. The environmental damage associated with an LNG spill would be confined to fire and freezing impacts near the spill since LNG dissipates completely and leaves no residue.", "LNG tankers and land-based facilities could be vulnerable to terrorism. Tankers might be physically attacked in a variety of ways to release their cargo—or commandeered for use as weapons against coastal targets. LNG terminal facilities might also be physically attacked with explosives or through other means. Some LNG facilities may also be indirectly disrupted by \"cyber-attacks\" or attacks on regional electricity grids and communications networks which could in turn affect dependent LNG control and safety systems. The potential attractiveness of LNG infrastructure to terrorists as a target is discussed later in this report.", "The LNG tanker industry claims a record of relative safety over the last 50 years; since international LNG shipping began in 1959, tankers have carried over 45,000 LNG cargoes and traveled over 128 million miles without a serious accident at sea or in port. LNG tankers have experienced groundings and collisions during this period, but none has resulted in a major spill. The LNG marine safety record is partly due to the double-hulled design of LNG tankers. This design makes them more robust and less prone to accidental spills than old single-hulled oil and fuel tankers like the Exxon Valdez , which caused a major Alaskan oil spill after grounding in 1989. LNG tankers also carry radar, global positioning systems, automatic distress systems and beacons to signal if they are in trouble. Cargo safety systems include instruments that can shut operations if they deviate from normal as well as gas and fire detection systems.\nThe safety record of onshore LNG terminals is more mixed. There are more than 40 LNG terminals (and more than 150 other LNG storage facilities) worldwide. Since 1944, there have been approximately 13 serious accidents at these facilities directly related to LNG. Two of these accidents caused single fatalities of facility workers—one in Algeria in 1977, and another at Cove Point, Maryland, in 1979. On January 19, 2004, a fire at the LNG processing facility in Skikda, Algeria killed an estimated 27 workers, injured 74 others, destroyed a processing plant, and damaged a marine berth. (It did not, however, damage a second processing plant or three large LNG storage tanks also located at the terminal, nor did the accident injure the rest of the 12,000 workers at the complex.) It was considered the worst petrochemical plant fire in Algeria in over 40 years. According to press reports, the accident resulted from poor maintenance rather than a facility design flaw. Another three accidents at worldwide LNG plants since 1944 have also caused fatalities, but these were construction or maintenance accidents in which LNG was not present.", "Since the terror attacks of September 11, 2001, a number of technical studies have been commissioned to reevaluate the safety hazards of LNG terminals and associated shipping. The most widely cited of these studies are listed in Table 1 . These studies have caused controversy because some reach differing conclusions about the potential public hazard of LNG terminal accidents or terror attacks. Consequently, some fear that LNG hazards may be misrepresented by government agencies, or that certain LNG hazards may simply not be understood well enough to support a terminal siting approval.\nHazard analyses for LNG terminals and shipping depend heavily upon computer models to approximate the effects of hypothetical accidents. Federal siting standards specifically require computer modeling of thermal radiation and flammable vapor cloud exclusion zones (49 C.F.R. §§ 193.2057, 2059). Such models are necessary because there have been no major LNG incidents of the type envisioned in LNG safety research and because historical LNG experiments have been limited in scale and scope. But LNG hazards models simulate complex physical phenomena and are inherently uncertain, relying on calculations and input assumptions about which fair-minded analysts may legitimately disagree. Even small differences in an LNG hazard model have led to significantly different conclusions. Referring to previous LNG safety zone studies, for example, FERC noted in 2003 that \"distances have been estimated to range from 1,400 feet to more than 4,000 feet for [hazardous] thermal radiation.\"\nThe LNG hazard studies in Table 1 have been sponsored by a range of stakeholders and have been performed by individuals with various kinds of expertise. It is beyond the scope of this report to make detailed comparisons of the methodologies and findings of these studies and FERC analysis. Furthermore, each of the available studies (or its application) appears to have significant limitations, or has been questioned by critics. For example, the ABSG Consulting study released by FERC in May 2004, which reviewed existing LNG hazard models, concluded that\nNo release models are available that take into account the true structure of an LNG carrier; No pool spread models are available that account for wave action or currents; and Relatively few experimental data are available for validation of models involving LNG spills on water, and there are no data available for spills as large as the spills considered in this study.\nThe 2004 Sandia National Laboratories study similarly reported that \"there are limitations in existing data and current modeling capabilities for analyzing LNG spills over water.\" Nonetheless, the Sandia report concluded that \"existing [analytic] tools ... can be used to identify and mitigate hazards to protect both public safety and property.\"\nUncertainty related to LNG hazard modeling continues. A December 2006 study using yet another LNG computer model of a large LNG fire states that \"current generation models that are being used to calculate the radiant heat ... from the fire are found to be overly conservative.\" In February 2007, the Government Accountability Office (GAO) issued a report comparing six recent unclassified studies (including studies in Table 1 ) of the consequences of LNG spills. The GAO report concluded that\nBecause there have been no large-scale LNG spills or spill experiments, past studies have developed modeling assumptions based on small-scale spill data. While there is general agreement on the types of effects from an LNG spill, the results of these models have created what appears to be conflicting assessments of the specific consequences of an LNG spill, creating uncertainty for regulators and the public.\nFollowing the GAO report, Members of Congress expressed renewed concern about the uncertainty associated with LNG hazard analysis.", "In reviewing the various LNG hazard studies, it is important to be clear about the distinction between hazards and risks . Although theoretical models may try to quantify the effects of \"worst-case\" hazards, evaluating the risks associated with those hazards requires an estimate of the probability that they will occur. Some argue that a significant hazard that is nonetheless highly unlikely does not represent an unacceptable risk to the public. In this view, worst-case hazard studies alone do not provide a sufficient basis for evaluating public safety. Unfortunately, few LNG safety studies comprehensively and convincingly address the probability of catastrophic accidents or attacks actually occurring. In part, this shortcoming arises from a lack of historical LNG incidents and detailed terrorist threat information on which to base such probabilities. Faced with this analytic uncertainty, decision makers are forced to draw the best information they can get and rely upon their own best judgment to reach conclusions about LNG safety.", "", "LNG terminals and tankers have a high profile because of extensive media coverage, although there are few of them relative to all the hazardous chemical plants and ships currently operating near U.S. cities. According to the U.S. Environmental Protection Agency (EPA), for example, more than 500 toxic chemical facilities operate in \"urban\" areas at which worst-case accidents could affect 100,000 or more people. These include chlorine plants in city water systems and ammonia tanks in agricultural fertilizer production. There are also oil refineries and liquefied petroleum gas (e.g., propane, butane) terminals operating in U.S. ports that pose safety hazards similar to those of LNG. Based on the most recent data available from the U.S. Office of Hazardous Materials Safety, there are over 100,000 annual U.S. shipments of hazardous marine cargo such as ammonia, crude oil, liquefied petroleum gases, and other volatile chemicals. Many of these cargoes pose a hazard similar to LNG and pass through the same harbors serving existing or proposed LNG terminals.", "One reason LNG tanker and terminal operators seek to ensure public safety is to avoid civil and criminal liability from an LNG accident; there are no special provisions in U.S. law protecting the fossil fuel industry from such liability. As a result of the 1989 Exxon Valdez oil spill, for example, Exxon has been required to pay over $500 million in criminal and civil settlements. In January 2003, the Justice Department announced over $100 million in civil and criminal penalties against Olympic Pipeline and Shell Pipeline resolving claims from a fatal pipeline fire in Bellingham, Washington in 1999. In March 2003, emphasizing the environmental aspects of homeland security, the U.S. Attorney General reportedly announced a crackdown on companies failing to protect against possible terrorist attacks on storage tanks, transportation networks, industrial plants, and pipelines. In 2002, federal safety regulators proposed a $220,000 fine against the Distrigas LNG terminal in Everett, Massachusetts, reportedly for security training violations. Notwithstanding these actions, some observers are skeptical that government scrutiny will ensure LNG infrastructure safety.\nEven if no federal or state regulations are violated, LNG companies could still face civil liability for personal injury or wrongful death in the event of an accident. In the Bellingham case, the pipeline owner and associated defendants reportedly agreed to pay a $75 million settlement to the families of two children killed in the accident. In 2002, El Paso Corporation settled wrongful death and personal injury lawsuits stemming from a natural gas pipeline explosion near Carlsbad, New Mexico, which killed 12 campers. Although the terms of those settlements were not disclosed, two additional lawsuits sought a total of $171 million in damages. The impact of these lawsuits on the company's business is unclear, however; El Paso's June 2003 quarterly financial report stated that \"our costs and legal exposure ... will be fully covered by insurance.\"", "The Department of Transportation (DOT) and FERC are the federal agencies primarily responsible for the regulation of onshore LNG facilities. Although federal statutes do not explicitly designate the relative jurisdiction of DOT and FERC, the agencies have clarified their roles through interagency agreement. These roles and their relation to other authorities are summarized below.", "The DOT sets safety standards for onshore LNG facilities. The DOT's authority originally stemmed from the Natural Gas Pipeline Safety Act of 1968 (P.L. 90-481) and the Hazardous Liquids Pipeline Safety Act of 1979 ( P.L. 96-129 ). These acts were subsequently combined and recodified as the Pipeline Safety Act of 1994 ( P.L. 102-508 ). The acts were further amended by the Pipeline Safety Improvement Act of 2002 ( P.L. 107-355 ) and the Pipeline Safety Improvement Act of 2006 ( P.L. 109-468 ). Under the resulting statutory scheme, DOT is charged with issuing minimum safety standards for the siting, design, construction, and operation of LNG facilities. It does not approve or deny specific siting proposals, because that authority is vested with FERC, as discussed below.\nThe Pipeline Safety Act, as amended, includes the following provisions concerning LNG facility siting (49 U.S.C. § 60103):\nThe Secretary of Transportation shall prescribe minimum safety standards for deciding on the location of a new liquefied natural gas pipeline facility. In prescribing a standard, the Secretary shall consider the—\n(1) kind and use of the facility;\n(2) existing and projected population and demographic characteristics of the location;\n(3) existing and proposed land use near the location;\n(4) natural physical aspects of the location;\n(5) medical, law enforcement, and fire prevention capabilities near the location that can cope with a risk caused by the facility; and\n(6) need to encourage remote siting.\nGeneral safety-related regulations may also impact siting decisions and affect the operation of existing facilities. The Secretary is authorized to order corrective action if operating an LNG facility could be hazardous to life, property, or the environment (49 U.S.C. §§ 60112, 60117). DOT's implementing regulations for the Pipeline Safety Act, as amended, are in 49 C.F.R.§§ 190-199. Safety standards, including those on siting, for LNG facilities are in 49 C.F.R. § 193 and are overseen by the Department's Office of Pipeline Safety (OPS) within the Pipeline and Hazardous Materials Safety Administration (PHMSA).\nThe siting provisions in 49 C.F.R. § 193 incorporate by reference standard 59A from the National Fire Protection Association (NFPA). NFPA 59A requires thermal exclusion zones and flammable vapor-gas dispersion zones around LNG terminals (§§ 193.2057, 193.2059). The DOT regulations also adopt many of NFPA's design and construction guidelines including requirements for LNG facilities to withstand fire, wind, hydraulic forces, and erosion from LNG spills (§§ 193.2067, 193.2155, 193.2301). Other provisions address operations (§§ 193.2501-2521), maintenance (§§ 193.2601-2639), employee qualification (§§ 193.2701-2719), and security (§§ 193.2901-2917).", "Under the Natural Gas Act of 1938 (NGA), FERC grants federal approval for the siting of new onshore LNG facilities. Section 7 of the NGA authorizes FERC to issue certificates of \"public convenience and necessity\" for \"the construction or extension of any facilities ... for the transportation in interstate commerce of natural gas\" (15 U.S.C. § 717f). Section 7 does not expressly mention LNG facilities, however, so recent agency policy has FERC exercising LNG siting regulation under its Section 3 authority, which authorizes FERC to approve the import and export of natural gas (15 U.S.C. § 717b). Specifically, FERC asserts approval authority over the place of entry and exit, siting, construction, and operation of new LNG terminals as well as modifications or extensions of existing LNG terminals.\nThe Energy Policy Act of 2005 ( P.L. 109-58 ) amends Section 3 of the NGA to give FERC explicit and \"exclusive\" authority to approve onshore LNG terminal siting applications (§ 311c). The 2005 act requires FERC to promulgate regulations for pre-filing of LNG import terminal siting applications and directs FERC to consult with designated state agencies regarding safety in considering such applications. It permits states to conduct safety inspections of LNG terminals in conformance with federal regulations, although it retains enforcement authority at the federal level. The 2005 act also requires LNG terminal operators to develop emergency response plans, including cost-sharing plans to reimburse state and local governments for safety and security expenditures (§ 311(d)). The 2005 act designates FERC as the \"lead agency for the purposes of coordinating all applicable Federal authorizations\" and for complying with federal environmental requirements, discussed below (§ 313a). It also establishes FERC's authority to set schedules for federal authorizations and establishes provisions for judicial review of FERC's siting decisions in the U.S. Court of Appeals, among other administrative provisions (§ 313(b)).\nFERC implements its authority over onshore LNG terminals through the agency's regulations at 18 C.F.R. § 153. These regulations detail the application process and requirements under Section 3 of the NGA. The process begins with a pre-filing, which must be submitted to FERC at least six months prior to the filing of a formal application. The pre-filing procedures and review processes are set forth at 18 C.F.R. § 157.21. Once the pre-filing stage is completed, a formal application may be filed. FERC's formal application requirements include detailed site engineering and design information, evidence that a facility will safely receive or deliver LNG, and delineation of a facility's proposed location (18 C.F.R. § 153.8). Additional data are required if an LNG facility will be in an area with geological risk (18 C.F.R. § 153.8). The regulations also require LNG facility builders to notify landowners who would be affected by the proposed facility (18 C.F.R. § 157.6d). Facilities to be constructed at the Canadian or Mexican borders for import or export of natural gas also require a Presidential Permit. According to FERC officials, applications under their Section 3-based regulations are also sufficient for Presidential Permit purposes (18 C.F.R. §§ 153.15-153.17).\nUnder the National Environmental Policy Act of 1969 (P.L. 91-190), FERC must prepare an environmental impact statement during its review of an LNG terminal siting application (18 C.F.R. § 380.6). Applicants must prepare certain environmental reports to aid FERC in its preparation of the environmental impact statement (18 C.F.R. § 380.3(c)(2)(i)). These reports require analysis of, among other things, the socioeconomic impact of the LNG facility, geophysical characteristics of the site, safeguards against seismic risk, facility effects on air and noise quality, public safety issues in the event of accidents or malfunctions, and facility compliance with reliability standards and relevant safety standards (18 C.F.R. § 380.12). Once these environmental reports are received, the EPA may become involved in the approval process. The EPA often assists in the review of the environmental reports and the issuance of the environmental impact statements.\nIn an effort to speed the review process for natural gas infrastructure projects (including LNG projects), FERC has approved rules to expand eligibility for \"blanket certificates.\" Blanket certificates are granted by FERC to companies that have previously been granted certificates for construction for public convenience and necessity under Section 7 of the NGA. A company that possesses a blanket certificate may improve or upgrade existing facilities or construct certain new facilities without further case-by-case authorization from FERC. Regulations governing acceptable actions under blanket certificate authority can be found at 18 C.F.R. §§ 157.201-157.218.\nFERC also has created a Liquefied Natural Gas Compliance Branch to monitor the safety of operational LNG facilities on an ongoing basis. This branch is responsible for the continued safety inspections and oversight of operating LNG facilities, and it reviews final facility design and engineering compliance with FERC orders. The staff comprises LNG engineers, civil and mechanical engineers, and other experts. The branch coordinates FERC's LNG Engineering Branch, the U.S. Coast Guard (USCG), and DOT to address safety and security at LNG facilities.", "Jurisdiction between the two federal agencies with LNG oversight responsibilities historically has been a point of contention. In practice, FERC requires compliance with DOT's siting and safety regulations as a starting point, but can regulate more strictly if it chooses. This working arrangement is not explicitly established under the relevant federal law. Neither do the statutes and regulations clearly define the roles of the agencies vis-a-vis one another. The Pipeline Safety Act, for example, states:\nIn a proceeding under section 3 or 7 of the Natural Gas Act (15 U.S.C. § 717b or 717f), each applicant ... shall certify that it will design, install, inspect, test, construct, operate, replace, and maintain a gas pipeline facility under ... section 60108 of this title. The certification is binding on the Secretary of Energy and the Commission... (49 U.S.C. § 60104(d)(2)).\nDespite this provision, which might appear to give DOT full control of gas safety regulation (including LNG siting authority), the authors of the House committee report for the revised Pipeline Safety Act indicated their intention to preserve FERC jurisdiction over LNG. Accordingly, FERC has held that the Pipeline Safety Act does not remove its jurisdiction under the NGA to regulate LNG safety. In 1985, FERC and DOT executed a Memorandum of Understanding expressly acknowledging \"DOT's exclusive authority to promulgate Federal safety standards for LNG facilities\" but recognizing FERC's ability to issue more stringent safety requirements for LNG facilities when warranted. This agreement appears to have resolved any jurisdictional conflict between the agencies at that time. In February 2004, FERC streamlined the LNG siting approval process through an agreement with the USCG and DOT to coordinate review of LNG terminal safety and security. The agreement \"stipulates that the agencies identify issues early and quickly resolve them.\"", "The USCG has authority to review, approve, and verify plans for marine traffic around proposed onshore LNG marine terminals as part of the overall siting approval process led by FERC. The USCG is responsible for issuing a Letter of Recommendation regarding the suitability of waterways for LNG vessels serving proposed terminals. The agency is also responsible for ensuring that full consideration is given in siting application reviews to the safety and security of the port, the LNG terminal, and the vessels transporting LNG. The USCG acts as a cooperating agency in the evaluation of LNG terminal siting applications. The Coast Guard provides guidance to applicants seeking permits for onshore LNG terminals in \"Guidance on Assessing the Suitability of a Waterway for Liquefied Natural Gas Marine Traffic\" (NVIC 05-05) issued on June 14, 2005. Provisions in the Coast Guard Authorization Act of 2010 ( H.R. 3619 ) would require additional waterway suitability notification requirements in LNG siting reviews by FERC (Sec. 1117).", "As noted above, LNG terminal safety regulations incorporate standards set by the NFPA. The NFPA is an international nonprofit organization which advocates fire prevention and serves as an authority on public safety practices. According to NFPA, its 300 safety codes and standards \"influence every building, process, service, design, and installation in the United States.\" The NFPA LNG Standards Committee includes volunteer experts with diverse representation from industry and government, including FERC, DOT, USCG, and state agencies. The NFPA standards for LNG safety were initially adopted in 1967, with 10 subsequent revisions, most recently in 2009. According to the Society of International Gas Tanker and Terminal Operators (SIGTTO), although the NFPA standards originated in the United States, they were the first internationally recognized LNG standards and are widely used throughout the world today.", "While the federal government is primarily responsible for LNG terminal safety and siting regulation, state and local laws, such as environmental, health and safety codes, can affect LNG facilities as well. Under the Pipeline Safety Act, a state also may regulate intra state pipeline facilities if the state submits a certification under section 60105(a) or makes an agreement with the DOT under section 60106. Under these provisions, a state \"may adopt additional or more stringent safety standards\" for LNG facilities so long as they are compatible with DOT regulations (49 U.S.C. 60104(c)). Of course, if a particular LNG facility would otherwise not fall under FERC and DOT jurisdiction, states may regulate without going through the certification or agreement process. Regulation of inter state facilities remains the primary responsibility of federal agencies. The Office of Pipeline Safety may, however, delegate authority to intra state pipeline safety offices, allowing state offices to act as \"agents\" administering inter state pipeline safety programs (excluding enforcement) for those sections of inter state facilities within their boundaries. All 50 states, the District of Columbia, and Puerto Rico are participants in the natural gas pipeline safety program.\nState regulation of LNG facility safety and siting runs the gamut from piecemeal to comprehensive. For example, Arizona sets out specific requirements for LNG storage facilities, including \"peak shaving\" plants used by regional gas utilities, consistent with DOT regulations for construction maintenance and safety standards (Ariz. Admin. Code R14-5-202, R14-5-203, 126-01-001). Colorado and Georgia have comprehensive administrative systems for enforcing the federal standards (see 4 Co. Admin. Code 723-11; Ga. Admin. Code 515-9-3-03).\nApart from state regulation aimed specifically at LNG facilities, generally applicable state and local laws, such as zoning laws and permit requirements for water, electricity, construction, and waste disposal, also may impact the planning and development of LNG facilities. This is discussed in more detail later in this report.", "Federal and state government agencies have had jurisdictional disagreements specifically related to the siting of new LNG terminals. In February 2004, for example, the California Public Utilities Commission (CPUC) disputed FERC's jurisdiction over the siting of a proposed LNG terminal at Long Beach because, in the CPUC's opinion, the terminal would not be involved in interstate sales or transportation and therefore would not come under the Natural Gas Act. In March 2004, FERC rejected the CPUC's arguments and asserted exclusive regulatory authority for all LNG import terminal siting and construction. In April 2004, the CPUC voted to assert jurisdiction over the Long Beach terminal and filed a request for FERC to reconsider its March ruling. In June 2004, FERC reasserted its March ruling, prompting a federal court appeal by California regulators. The Energy Policy Act of 2005 effectively codified FERC's jurisdictional rulings, however, leading the CPUC to drop its lawsuit challenging FERC's LNG siting authority in September 2005. Notwithstanding the CPUC case, other state challenges to FERC jurisdiction remain a possibility.", "Proposals for new LNG terminal facilities have generated considerable public concern in many communities. Some community groups and government officials fear that LNG terminals may expose nearby residents to unacceptable hazards, and that these hazards may not be appropriately considered in the federal siting approval process. Ongoing public concern about LNG terminal safety has focused congressional attention on the exclusivity of FERC's LNG siting authority, proposals for a regional LNG siting process, the lack of \"remote\" siting requirements in FERC regulations, state permitting requirements under the Clean Water Act (CWA) and the Coastal Zone Management Act (CZMA), terrorism attractiveness of LNG, the adequacy of Coast Guard security resources, and other issues.", "As stated earlier in this report, the Energy Policy Act of 2005 ( P.L. 109-58 ) gives FERC the \"exclusive\" authority to approve onshore LNG terminal siting applications (§ 311(c)). Supporters of this provision argue that it is necessary to prevent federal-state jurisdictional disputes over LNG siting authority, and that it reduces the possibility that state agencies might prevent or unduly delay the development of LNG infrastructure considered essential to the nation's energy supply. They further argue that states retain considerable influence over LNG siting approval through their federally delegated permitting authorities under the Coastal Zone Management Act of 1972 (16 U.S.C. 1451 et seq.), the Clean Air Act (42 U.S.C. 7401 et seq.), and the Federal Water Pollution Control Act (33 U.S.C. 251 et seq.). They maintain that states have a role in siting reviews under provisions in P.L. 109-58 requiring FERC to consult with governor-designated state agencies regarding state and local safety considerations prior to issuing LNG terminal permits (§ 311(d)).\nA number of lawmakers at the federal and state levels have suggested that Congress should consider amending or repealing FERC's exclusive authority under P.L. 109-58 . Critics of this authority argue that it vests too much power in the federal government at the expense of state agencies, which may have a better understanding of local siting issues and may bear most of the risks or burdens associated with a new LNG facility. They do not believe that FERC adequately seeks state input in its LNG siting reviews, nor adequately addresses state concerns in its siting decisions. Critics question why governors lack the authority to veto onshore LNG terminal proposals as they can offshore terminal proposals under the Deepwater Port Act (33 U.S.C. § 1503(c)(8)). Some in Congress have proposed granting governors similar veto authority over onshore LNG terminal proposals, or other legislation to increase state authority in terminal siting reviews. Several legislative proposals in the 110 th Congress would have required state concurrence of federal siting approval decisions for onshore LNG terminals or would have repealed provisions in the Energy Policy Act of 2005 granting FERC exclusive authority to approve LNG terminal siting applications.", "In areas such as the Northeast, where a number of onshore LNG terminal proposals have been particularly controversial, some policy makers have sought to establish a regional approach for identifying suitable sites for such terminals. They argue that FERC's consideration of LNG terminals on a proposal-by-proposal basis does not adequately take into account the regional needs for LNG, public safety concerns, and environmental impacts. They also argue that the proposal-by-proposal approach does not adequately account for the relative merits of multiple LNG and natural gas pipeline facilities proposed in the same region. They assert a regional LNG siting process would be more efficient than FERC's current process because it would focus attention on sites and projects with the highest chances of success rather than having numerous communities and state and local agencies react to individual plans, many of which are unlikely to be approved. One legislative proposal in the 110 th Congress would have established a national commission for the placement of natural gas infrastructure, such as LNG terminals, taking regional energy and environmental considerations into account.\nFERC officials reportedly have stated in the past that while they are not opposed to regional siting in principle, the commission cannot adopt such a regional approach because it has no land-use authority or responsibility and must let the energy market determine which terminals ultimately are constructed. FERC officials also have reportedly expressed skepticism about the effectiveness of regional siting processes, for example, in finding storage locations for low-level radioactive waste. More recently, however, the acting chairman of FERC reportedly called for more assessment of alternatives to LNG terminals in LNG siting decisions \"including full examination of regional gas infrastructure.\" Whether this statement indicates a future shift in FERC's approach towards LNG siting reviews remains to be determined. As oversight of federal LNG siting activities continues in the 111 th Congress, legislators may be asked to consider whether incorporating regional approaches in the LNG siting process could alleviate state concerns about FERC's current process while supporting the nation's needs for new LNG infrastructure.", "The LNG safety provisions in the federal pipeline safety law require the Secretary of Transportation to \"consider the ... need to encourage remote siting\" of new LNG facilities (49 U.S.C. § 60103). Federal regulations contain no clear definition of what constitutes \"remote\" siting, relying instead on safety exclusion zones to satisfy the remoteness requirements under the Pipeline Safety Act. This regulatory alternative was criticized by the General Accounting Office (GAO) in 1979 testimony to Congress supporting remote siting in the Pipeline Safety Act:\nWe believe remote siting is the primary factor in safety. Because of the inevitable uncertainties inherent in large-scale use of new technologies and the vulnerability of the facilities to natural phenomena and sabotage, the public can be best protected by placing these facilities away from densely populated areas.\nIn 2003, Representative Edward Markey, an original sponsor of the Pipeline Safety Act, reportedly expressed concern that DOT regulations did not go far enough in complying with the congressional intent of the remote siting provisions.\nIndustry and government officials maintain that exclusion zones do provide adequate public safety based on the current state of knowledge about LNG. They argue that LNG terminals are no longer a new technology and face far fewer operational uncertainties than in 1979. In particular, some experts believe that hazard models in the 1970s were too conservative. They believe that more recent models have led to a better understanding of the physical properties of LNG and, consequently, a better basis for design decisions affecting public safety. They point out that LNG terminals like those in Everett, Massachusetts (1971); Barcelona, Spain (1969); Fezzano, Italy (1969); and Pyongtaek, Korea (1986) have been operating for decades near populated areas without a serious accident affecting the public. Of the 28 existing LNG terminals in Japan, a seismically active country, most are near major cities such as Tokyo and Osaka. While the Algerian terminal accident was serious, experts point out that it did not lead to the catastrophic failure of the main LNG storage tanks and did not cause injuries to the general public. Nonetheless, some policy makers reportedly have called for amendments to federal energy law prohibiting new LNG terminals in urban and densely populated areas.", "The Energy Policy Act of 2005 (§ 311(c)) explicitly preserves states' authorities in LNG siting decisions under the Federal Water Pollution Control Act, the Coastal Zone Management Act of 1972, and other federal laws. Under the Federal Water Pollution Control Act, often referred to as the Clean Water Act (CWA), states have the authority to develop and enforce their own water quality standards. Any federal permit applicant for a project that may discharge pollutants into navigable waters must provide the permitting agency with a certification from the state in which the discharge originates or will originate that the discharge is in compliance with the applicable provisions of the CWA, including the state's water quality standards. States potentially could use their certification authority under the Clean Water Act to influence the siting of an LNG project by attaching conditions to the required water quality certificate or by denying certification. This certification authority has become an important tool used by states to protect the integrity of their waters. It is worth noting that the Energy Policy Act of 2005 created one potential avenue of relief for potential developers by providing for expedited review in a federal court of any order or action, or alleged inaction, by a federal or state agency acting under the authority of federal law. Previously, parties seeking to challenge a state's decision regarding a water quality certificate had to do so in state court.\nStates have been delegated authority under the Coastal Zone Management Act (CZMA, 16 U.S.C. § 1451 et seq.) which also could influence permitting of LNG terminals. Under the CZMA, applicants for federal permits to conduct activity affecting the coastal zone of a state must be certified by that state that the proposed activity is consistent with the state's federally approved coastal program. A state wishing to forestall the licensing of an LNG terminal in its coastal waters could deny the certification required by the CZMA. However, unlike the state-issued water quality certificates required for federal permitting by the Clean Water Act, the CZMA provides an alternative to applicants who are unable to obtain state certification. Under the CZMA, applicants may appeal the state's decision to the Department of Commerce, which may find that the activity is consistent with the objectives of the CZMA, or is otherwise necessary in the interest of national security, and thus override the state's denial of certification. One analyst has suggested that there is a specific set of circumstances in which a state could create a regulatory stalemate pursuant to its CZMA authority by rejecting an application as incomplete (rather than rejecting it as improper or by failing to act). Under these circumstances the statute does not grant the Secretary of Commerce authority to review the decision. Battles between state regulatory agencies and applicants for LNG terminals have played out in this manner on at least two occasions.\nThe discussion above suggests that authorities under the CWA and CZMA, at a minimum, give states the opportunity to have their concerns addressed when applicants seek federal approval for new LNG terminals. One legal commentator has stated that\nultimately, while the EPAct of 2005 might have streamlined the federal [LNG siting] review process in some respects and changed the rules under which the review takes place, it has not dramatically changed the balance of power between the federal government and states.\nThe courts addressed the potential tension between the CZMA and exclusive federal authority over LNG terminal siting in a dispute over a proposed LNG terminal in the Baltimore, MD, area. In AES Sparrows Point LNG, LLC v. Smith, the U.S. District Court for the District of Maryland held that a recent amendment to the Baltimore County Zoning Regulations prohibiting the siting of an LNG facility in a particular \"critical area\" of the Chesapeake Bay was a part of the state's Coastal Zone Management Plan and thus not preempted by the Natural Gas Act as amended by the Energy Policy Act of 2005. The plaintiffs had claimed that the statutes explicitly gave LNG siting authority to the federal government, and thus the states could not interfere with FERC authority to rule on the plaintiff's LNG facility permit application. However, on appeal the U.S. Court of Appeals for the 4 th Circuit reversed the lower court's decision. The appellate court ruled that the Baltimore County zoning regulation in question was not part of the state's Coastal Zone Management Plan because the regulation was never submitted to NOAA for approval. The Supreme Court declined to review this decision in October of 2008.\nAnother statute that may have an emerging role in the LNG siting process is the Wild and Scenic Rivers Act of 1968 (WSRA). The WSRA was enacted with the intention of preserving certain sections of rivers in the United States \"in their free-flowing condition to protect the water quality of such rivers and to fulfill other vital national conservation purposes.\" Under the WSRA, rivers may be designated as additions to the National Wild and Scenic Rivers system, or as potential additions to the system. Designation of rivers prevents certain future development, including, potentially, projects licensed by FERC.\nThe WSRA explicitly prohibits FERC from licensing the construction of projects under the Federal Power Act \"on or directly affecting any river which is designated ... as a component of the national wild and scenic rivers system.\" However, projects and developments would be permitted above or below the section of the river designated under WSRA, if that development would not diminish the values present at the time of designation. With regard to rivers that are designated as potential additions to the system, FERC similarly is prohibited from construction of projects along that river and other agencies are prohibited from assisting in such projects for certain periods of time after the designation to allow for the study and consideration of the river's inclusion in the system.\nLNG industry representatives have opined that the WSRA may be used to block LNG facility siting. These representatives cited a legislative proposal in the 110 th Congress to designate segments of the Taunton River in Massachusetts as \"scenic and recreational\" under the WSRA. The industry representatives argue that this provision, if enacted, would be an obstacle towards the construction of the proposed Weaver's Cove LNG Terminal in Massachusetts. The Center for Liquefied Natural Gas described this provision as a \"congressional hurdle\" and said that it provided a case study of \"the gauntlet of things that can be used to oppose a project.\" As oversight of the federal LNG siting process continues, Congress may consider how federal authorities under the Energy Policy Act of 2005, the CWA, the CZMA, the WSRA, and other federal statutes fit together to achieve their various objectives.", "Potential terrorist attacks on LNG terminals or tankers in the United States have been a key concern of policy makers because such attacks could cause catastrophic fires in ports and nearby populated areas. A 2007 report by the Government Accountability Office states that, \"the ship-based supply chain for energy commodities,\" specifically including LNG, \"remains threatened and vulnerable, and appropriate security throughout the chain is essential to ensure safe and efficient delivery.\" Accordingly, the Coast Guard's FY2006 budget requested funding for \"additional boat crews and screening personnel at key LNG hubs.\" To date, no LNG tanker or land-based LNG facility in the world has been attacked by terrorists. However, similar natural gas and oil assets have been terror targets internationally. The Department of Homeland Security (DHS) included LNG tankers among a list of potential terrorist targets in a security alert late in 2003. The DHS also reported that \"in early 2001 there was some suspicion of possible associations between stowaways on Algerian flagged LNG tankers arriving in Boston and persons connected with the so-called 'Millennium Plot'\" to bomb targets in the United States. Although these suspicions could not be proved, DHS stated that \"the risks associated with LNG shipments are real, and they can never be entirely eliminated.\" The 2004 report by Sandia National Laboratories concluded that potential terrorist attacks on LNG tankers could be considered \"credible and possible.\" Former Bush Administration counterterrorism advisor Richard Clarke has asserted that terrorists have both the desire and capability to attack LNG shipping with the intention of harming the general population.\nAlthough they acknowledge the security information put forth by federal agencies, some experts believe that concern about threats to LNG infrastructure is overstated. In 2003, the head of one university research consortium reportedly remarked, \"from all the information we have ... we don't see LNG as likely or credible terrorist targets.\" Industry representatives argue that deliberately causing an LNG catastrophe to injure people might be possible in theory, but would be extremely difficult to accomplish. Likewise, FERC and other experts believe that LNG facilities are relatively secure compared with other hazardous chemical infrastructures that receive less public attention. In a December 2004 report, FERC stated that\nfor a new LNG terminal proposal ... the perceived threat of a terrorist attack may be considered as highly probable to the local population. However, at the national level, potential terrorist targets are plentiful.... Many of these pose a similar or greater hazard to that of LNG.\nFERC also remarked, however, that \"unlike accidental causes, historical experience provides little guidance in estimating the probability of a terrorist attack on an LNG vessel or onshore storage facility.\" Former Director of Central Intelligence James Woolsey has stated his belief that a terrorist attack on an LNG tanker in U.S. waters would be unlikely because its potential impacts would not be great enough compared with other potential targets. LNG terminal operators that have conducted proprietary assessments of potential terrorist attacks against LNG tankers have expressed similar views. In its September 2006 evaluation of a proposed LNG terminal in Long Island Sound, the USCG stated that \"there are currently no specific, credible threats against\" the proposed LNG facility or tankers serving the facility. The evaluation also noted, however, that the threat environment is dynamic and that some threats may be unknown. Echoing this perspective, a 2008 report by the Institute for the Analysis of Global Security states\nProponents are correct in that both safety and security measures currently in place make LNG terminals and ships extremely hard targets for terrorists. However, it would be imprudent to believe that terrorists are either incapable or unwilling to attack such targets. It would be equally imprudent to assume that these targets are impenetrable. If anything, in today's environment, insiders will always remain a potential threat.\nBecause the probability of a terrorist attack on LNG infrastructure cannot be known, policy makers and community leaders must, to some extent, rely on their own judgment to decide whether LNG security is adequately addressed in FERC siting application reviews. As oversight of the federal role in LNG terminal siting continues, Congress may explore policies to reduce this uncertainty by improving the gathering and sharing of terrorism intelligence related to LNG.", "The potential increase in security costs from growing U.S. LNG imports, and the potential diversion of Coast Guard and safety agency resources from other activities have been a persistent concern to policy makers. According to Coast Guard officials, the service's LNG security expenditures are not all incremental, since they are part of the Coast Guard's general mission to protect the nation's waters and coasts. Nonetheless, Coast Guard staff have acknowledged that resources dedicated to securing maritime LNG might be otherwise deployed for boating safety, search and rescue, drug interdiction, or other security missions.\nIn a December 2007 report, the GAO recommended that the Coast Guard develop a national resource allocation plan to address growing LNG security requirements. In subsequent testimony before Congress, Coast Guard Commandant Admiral Thad Allen expressed concern about the costs to the Coast Guard of securing dangerous cargoes such as LNG and called for a \"national dialogue\" on the issue. During questioning, Admiral Allen acknowledged that the Coast Guard did not currently possess sufficient resources to secure future LNG deliveries to a proposed LNG terminal in Long Island Sound which has subsequently been authorized by FERC.\nState and local agencies also seek more funding to offset the costs of LNG security. Addressing these concerns, the Energy Policy Act of 2005 requires private and public sector cost-sharing for LNG tanker security (§ 311d). In compliance with the act and prior FERC policy, FERC officials require new LNG terminal operators to pay the costs of any additional security or safety needed for their facilities. FERC has also recommended that LNG terminal operators provide private security staff to supplement Coast Guard and local government security forces. A legislative proposal in the 110 th Congress would have prohibited LNG facility security plans based upon the provision of security by a state or local government lacking an LNG security arrangement with the facility operator, and would have required the Coast Guard to certify that it has adequate security resources in the sector where a terminal would be located before facility security plans for a new LNG terminal could be approved. In the 111 th Congress, the public provision of LNG security continues to be an issue. The Maritime Hazardous Cargo Security Act ( S. 1385 ), introduced by Senator Lautenberg and three co-sponsors on June 25, 2009, would require a national study to identify measures to improve the security of maritime transportation of liquefied natural gas, among other provisions (Sec. 6).", "", "Analysts have suggested for several years that Congress could call for additional LNG safety research to help reduce uncertainties about specific LNG terminal or shipping hazards. Among the LNG terminal hazard reports issued by federal agencies, LNG developers, and community groups, there appears to be widespread agreement that additional \"objective\" LNG safety research would be beneficial. The ABSG report states, for example, that \"additional research will need to be performed to develop more refined models, and additional large-scale spill tests would be useful for providing better data for validation of models.\" The 2004 Sandia study similarly concluded that \"obtaining experimental data for large LNG spills over water would provide needed validation and help reduce modeling uncertainty.\" Physical testing (as opposed to computer simulations) of impacts, explosions, and thermal stresses on LNG tanker hulls could also fill important gaps in engineering knowledge about the potential effects of terrorist attacks.\nIn 2008, Congress appropriated $8 million to fund large-scale LNG fire experiments by the Department of Energy addressing some of the hazard modeling uncertainties identified in the 2007 GAO report. In that report, the GAO stated that DOE's proposed research plan at that time would \"address only 3 of the top 10 issues—and not the second-highest ranked issue—that our panel of experts identified as potentially affecting public safety.\" In response to the GAO's concerns and those of congressional staff, the DOE and Sandia modified their test program to better align with the priorities put forward by the GAO. The DOE's study could, nonetheless, still be subject to the same types of technical limitations and criticisms facing existing analysis, so while it may reduce key uncertainties, it may not eliminate them altogether. As of December 2009, Sandia had completed two large LNG pool fire experiments, although the test results are not yet available.", "Some policy makers have been concerned that LNG terminal developers may engage in non-public community lobbying or other similar activities promoting individual LNG terminals. Concern arises that these activities may limit public information and awareness about proposed terminals and, therefore, may impede the federal LNG siting review process. Accordingly, legislation proposed in the 110 th Congress would have required an applicant for siting approval for an LNG terminal to identify each of its employees and agents engaged in activities to persuade communities of the benefits of the terminal. Supporters of such a policy view it as a means of ensuring public transparency in LNG terminal siting. Disclosure requirements of this type might trigger some First Amendment concerns, however. The Supreme Court has recognized that such government disclosure requirements may have a deterrent effect on the exercise of First Amendment rights. In balancing First Amendment interests, for example, against the government's interest preserving the integrity of the legislative process, the Court has generally upheld the constitutionality of disclosure requirements related to \"direct\" lobbying of members of Congress. It is unclear how the Court would rule on a disclosure law such as S. 323 related to \"indirect\" lobbying efforts targeting constituents or otherwise taking place at the local level.", "Some policy makers argue that Congress should try to reduce the need for new LNG terminals by acting to curb growth in domestic LNG demand, or growth in natural gas demand overall. For example, Congress could change public and industrial incentives for conservation and efficiency, switching to other fuels, or developing renewable energy supplies. Conservation and renewable energy provisions in the American Recovery and Reinvestment Act of 2009 ( P.L. 111-5 ), which was signed by President Obama on February 17, 2009, exemplify such policies. Switching to nuclear power or biomass, however, poses its own hazards to communities and the environment, and so may not be preferable to additional LNG infrastructure. Conservation and renewable energy sources are less hazardous, although they face significant technological and cost barriers to public adoption on the scale that would be required.\nAnother potential way to curb U.S. LNG demand is to encourage greater North American production of natural gas. Provisions in the Energy Policy Act of 2005 promote this objective, as do proposals to encourage construction of an Alaska gas pipeline and to expand natural gas production on the outer continental shelf. An Alaska gas pipeline would take years to build, however, and might not on its own be able to meet anticipated long-term growth in U.S. gas demand. Increased production from natural gas wells in the lower 48 states since 2005, as well as the recent U.S. economic recession, have reduced possible near-term pressure on natural gas supplies. It is unclear, however, if new domestic gas supplies may offer a sufficient long-term natural gas supply to meet rising gas demand in the future.", "Proposals for new U.S. LNG import terminals pose safety challenges. LNG is inherently hazardous and its infrastructure is potentially attractive to terrorists. The 2004 LNG terminal fire in Algeria demonstrates that, despite technological improvements since the 1940s, LNG facilities can still experience serious accidents. Many lawmakers and the general public are concerned about these hazards.\nThe U.S. LNG industry is subject to more extensive siting and safety regulation than many other similarly hazardous facilities. Federal, state, and local governments have also put in place security measures intended to safeguard LNG against newly perceived terrorist threats. Some community groups and other stakeholders fear that federal siting requirements for LNG facilities are still not stringent enough, but the responsible federal agencies disagree.\nThe safety issues associated with LNG terminal siting are both important and familiar. Every major energy source poses some hazard to public safety. Similar public concerns have been raised around siting of other types of energy facilities such as nuclear power plants, oil import terminals, pipelines, and electric transmission lines. In evaluating new LNG terminal proposals, therefore, policy makers face a full range of facilities and safety hazards associated with U.S. energy supplies, not only LNG needs and hazards on their own.\nAlthough LNG terminal regulations are extensive, and the global industry has decades of experience operating LNG facilities, many stakeholders question LNG terminal safety. Some of these questions might be resolved through additional research on key LNG topics. LNG siting decisions are already underway, however, so any additional research efforts intended to affect the siting process would probably have to be completed quickly. Revising LNG safety requirements after completion of a facility could be disruptive of energy supplies. Some cite the Shoreham nuclear power plant in the 1980s, which was closed after construction due to new public safety requirements, as an example of the need to resolve safety concerns before capital is invested.\nBoth industry and government analysts project continued growth in the demand for natural gas. Greater LNG imports represent one way to address this growth in demand, along with increased North American gas production, conservation, fuel-switching, and the development of renewable energy sources. One way or another the fundamental gas supply and demand balance must be maintained. If policy makers encourage LNG imports, then the need to foster the other energy options may be diminished—and vice versa. Thus decisions about LNG infrastructure could have consequences for a broader array of natural gas supply policies.", "Under the Deepwater Port Act of 1974 ( P.L. 93-627 ) the Secretary of Transportation is directed to \"authorize and regulate the location, ownership, construction, and operation of deepwater ports\" (33 U.S.C. §§ 1501(a), 1503). The Secretary has delegated this authority to the Maritime Administration (MARAD) within the Department of Transportation, and to the Coast Guard (USCG), within the Department of Homeland Security. Originally, P.L. 93-627 applied only to offshore oil ports and terminals and not LNG facilities. However, the Maritime Transportation Security Act of 2002 ( P.L. 107-295 ) amended P.L. 93-627 to include natural gas facilities, including LNG terminals, developed offshore. As amended, \"deepwater ports\" are:\nany fixed or floating manmade structure other than a vessel ... located beyond State seaward boundaries ... intended for use as a port or terminal for the transportation, storage, or further handling of oil or natural gas for transportation to any State... (33 U.S.C. § 1502(9a))\nThe Deepwater Port Act sets out a detailed process for offshore facility siting applications. The act also authorizes regulations addressing potential threats to the environment or human welfare posed by development of offshore LNG facilities (33 U.S.C. §§ 1504, 1508; 33 C.F.R. § 148). The act also requires regulations for the designation of safety zones around deepwater ports (33 U.S.C. § 1509(d)). Among the amendments to the act is a provision exempting LNG terminals from the limitation on the number of \"deepwater ports\" that can be located in a designated \"application area,\" a provision applicable to oil terminals (33 U.S.C. §§ 1504(d)(4), (i)(4)). Additionally, a preexisting provision of the act allows the governor of a state adjacent to a proposed offshore LNG facility to have that facility license conform to state environmental protection, land and water use, or coastal zone management programs (33 U.S.C. § 1508(b)).\nThe USCG's regulations regarding LNG facilities are codified throughout 33 C.F.R., with major provisions in part 127. These regulations detail the requirements for siting applications, which include information about the proposed location, design, construction, and operation (33 C.F.R. § 148.109). NEPA analysis is often instrumental in siting and safety-related decisions at specific proposed facilities and is facilitated by the Minerals Management Service, the agency responsible for offshore minerals extraction and the Outer Continental Shelf leasing program. Unlike requirements for onshore facilities, the Coast Guard does not appear to require generally applicable exclusion zones for offshore facilities, but relies instead on case-by-case designation of safety zones. Additional USCG regulations include agency oversight of emergency procedures, security, fire protection, and design and construction standards (33 C.F.R. §§ 127.109, 127.701-127.711, 127.601-127.617, 127.1101-127.1113, 149.205)." ], "depth": [ 0, 1, 2, 2, 1, 2, 2, 2, 1, 2, 3, 3, 3, 3, 2, 2, 3, 2, 3, 3, 1, 2, 2, 3, 2, 2, 2, 3, 1, 2, 2, 2, 2, 2, 2, 2, 3, 3, 3, 1, 2 ], "alignment": [ "h0_title h1_title", "h0_full", "", "", "h0_title", "", "", "h0_full", "", "", "", "", "", "", "", "", "", "", "", "", "h1_title", "h1_full", "h1_full", "", "", "", "", "", "h1_full", "", "", "", "", "h1_full", "", "", "", "", "", "", "" ] }
{ "question": [ "What is LNG?", "Why has LNG demand increased?", "How will this demand be met?", "Where would these terminals be built?", "What is the role of the FERC in the new LNG facilities?", "What does the approval process include?", "How has the public reacted to these new terminals?", "Why have LNG terminal facilities generated public concern?", "On what issues has this concern focused?" ], "summary": [ "Liquefied natural gas (LNG) is a hazardous fuel shipped in large tankers to U.S. ports from overseas.", "While LNG has historically made up a small part of U.S. natural gas supplies, rising price volatility, and the possibility of domestic shortages have significantly increased LNG demand.", "To meet this demand, energy companies have proposed new LNG import terminals throughout the coastal United States.", "Many of these terminals would be built onshore near populated areas.", "The Federal Energy Regulatory Commission (FERC) grants federal approval for the siting of new onshore LNG facilities under the Natural Gas Act of 1938 and the Energy Policy Act of 2005 (P.L. 109-58).", "This approval process incorporates minimum safety standards for LNG established by the Department of Transportation.", "Although LNG has had a record of relative safety for the last 45 years, and no LNG tanker or land-based facility has been attacked by terrorists, proposals for new LNG terminal facilities have generated considerable public concern.", "Some community groups and governments officials fear that LNG terminals may expose nearby residents to unacceptable hazards.", "Ongoing public concern about LNG safety has focused congressional attention on the exclusivity of FERC's LNG siting authority, proposals for a regional LNG siting process, the lack of \"remote\" siting requirements in FERC regulations, state permitting requirements under the Clean Water Act and the Coastal Zone Management Act, terrorism attractiveness of LNG, the adequacy of Coast Guard security resources, and other issues." ], "parent_pair_index": [ -1, 0, 1, 2, -1, 0, -1, 2, 2 ], "summary_paragraph_index": [ 0, 0, 0, 0, 1, 1, 1, 1, 1 ] }
CRS_R44403
{ "title": [ "", "Background", "Export Restrictions Repeal", "Savings Clause", "Exceptions", "Potential Crude Oil Export Volumes", "National Defense Sealift Enhancement", "Enhanced Section 199 Tax Deduction for Independent Refiners", "Motivation for Tax Relief for Independent Refiners", "Modification to Section 199 for Independent Refiners" ], "paragraphs": [ "", "In the wake of the 1973 Organization of Arab Petroleum Exporting Countries (OAPEC) embargo of oil shipments to the United States, and during an era of U.S. oil price controls, Congress passed the Energy Policy and Conservation Act of 1975 (EPCA; P.L. 94-163 ), which included a provision directing the President to promulgate a rule prohibiting the export of crude oil and natural gas. For nearly four decades, total repeal of the crude oil export prohibition was not a major policy issue since U.S. oil production was declining and import volumes were increasing. However, circumstances changed around 2010/2011 with the successful application of horizontal drilling and hydraulic fracturing technologies to economically extract oil from tight/shale formations that were previously known but considered to be too difficult and expensive to produce.\nFrom January 2010 to April 2015 U.S. crude oil production increased by approximately 4.3 million barrels per day, a nearly 80% increase. Crude oil production in April 2015 was 9.7 million barrels per day. While this production level did not exceed domestic crude oil consumption, infrastructure bottlenecks and limitations resulted in domestic oil prices that were discounted relative to international crude oil prices. During certain periods, these discounts were as large as $30 per barrel (see Figure 1 ). This price differential was primarily the result of changing oil production patterns and infrastructure constraints on the delivery of oil from new and growing production areas to U.S. refining locations. Nevertheless, this price differential was a principal factor that motivated the interest in marketing, selling, and exporting U.S. crude oil globally.\nAlthough Congress had debated aspects of the crude oil export restrictions in the past, recent congressional debate about U.S. crude oil export policy started in earnest in January 2014 with calls from Members of Congress to remove the export prohibition as well as one of the first hearings on the topic. Numerous analytical studies from government, industry, and non-profit organizations about the potential effects associated with removing crude oil export restrictions were published during 2014 and 2015. Additionally, hearings within various congressional committees were held during this time to debate the many and varied aspects of this complex and multi-dimensional policy issue. Topics covered in studies and hearings included price effects, impacts on the domestic refining industry, geopolitical considerations, economic impact, government revenues, and environmental concerns.\nOn December 18, 2015, Congress passed the Consolidated Appropriations Act, 2016 ( H.R. 2029 ), which was signed by the President and became P.L. 114-113 . The law includes a provision that repeals the EPCA crude oil export prohibition. U.S. producers and traders can now sell and export crude oil to international customers. In addition to repealing crude oil export restrictions, P.L. 114-113 also included provisions that addressed two topics that were part of the export restriction debate: (1) maritime transportation of crude oil from the United States to foreign destinations, and (2) the effects of policy changes on independent oil refiners.", "Division O, Title I, Section 101 of P.L. 114-113 repeals Section 103 of the Energy Policy and Conservation Act (EPCA; P.L. 94-163 ), which provided the President authority to restrict the export of various hydrocarbon materials and directed the President to \"promulgate a rule prohibiting the export of crude oil and natural gas produced in the United States.\" Additionally, P.L. 114-113 includes a National Policy on Oil Export Restrictions stating that \"no official of the Federal Government shall impose or enforce any restriction on the export of crude oil.\" P.L. 114-113 essentially removes all existing crude oil export restrictions. However, the law does include a \"Savings Clause\" and exceptions that either maintain or provide the President with authority to restrict crude oil exports under certain circumstances such as national emergencies or demonstrable effects to prices and supply that might result from allowing crude oil exports.", "During the crude oil export debate, some Members of Congress expressed concern that the National Policy on Oil Export Restrictions language included in the bill might limit presidential authority to restrict crude oil exports during emergency or other circumstances. To address these concerns, a \"Savings Clause\" was included in the bill language affirming presidential authority to prohibit exports under the Constitution, the International Emergency Economic Powers Act or regulations issued under that act, the National Emergencies Act, part B of title II of EPCA, the Trading with the Enemy Act, or other laws that impose sanctions on a foreign person or foreign government.", "P.L. 114-113 also provides the President with authority to impose crude oil export licensing requirements or other restrictions should conditions for a set of exceptions be met. Such licensing requirements and restrictions on the export of U.S. crude oil would be limited in duration to not more than one year, although they could be renewed for additional time periods up to one year each. Three exceptions under which the President can impose crude oil export restrictions are:\n1. The President declares a national emergency and provides notice in the Federal Register ; 2. In the event that sanctions or trade restrictions are imposed by the President or by Congress; or 3. The Secretary of Commerce determines and reports to the President that (i) U.S. crude oil exports have resulted in oil supply shortages or oil prices significantly higher than global prices, and (ii) supply shortages and price increases have or will result in adverse employment effects in the United States.\nExceptions one and two are, to some degree, similar to the presidential authority that is expressly maintained by the Savings Clause. However, the third exception provides a two-part test that could result in the President restricting exports should data and analysis determine a direct relationship between crude oil exports, supply shortages, and prices above global levels as well as sustained adverse effects on U.S. employment. While this provision provides for a possible means of restricting crude oil exports in the future, determining a direct relationship that correlates the effects of U.S. crude oil exports on supply shortages, price increases, and U.S. employment may be difficult due to the numerous, and interrelated, factors that influence crude oil supplies and prices.", "During the crude oil export debate, and since enactment of P.L. 114-113 , understanding the potential volumes and oil market impacts that might result from removing export restrictions are areas that have received congressional interest. Areas of interest related to export volumes include potential economic impacts and environmental concerns, among others. Analytical studies published during the debate about the effects of removing crude oil export restrictions estimated that exports may range from 0 to approximately 2 million barrels per day. This relatively large disparity is a result of the varied assumptions used to calculate the estimates. However, the motivation for companies to export crude oil is generally contingent on the existence of financial and market conditions that economically justify selling crude oil to international customers. One market condition monitored by crude oil producers and traders to determine if exports are economically justified is the price differential between domestic and international crude oil benchmark prices. Two price benchmarks that are closely monitored are West Texas Intermediate (WTI) and Brent (a combination of North Sea crudes priced in Europe), although Dubai is another important price benchmark for Asian markets. Domestic prices are typically represented by WTI and international prices are generally represented by Brent, two crude oils with similar quality characteristics. The WTI/Brent price differential has fluctuated over time and experienced a period of volatility, most recently during the years 2010 to 2015. See Figure 1 .\nAs indicated in Figure 1 , WTI spot prices were as much as $30 per barrel below Brent spot prices in 2011 and were consistently more than $10 below Brent during most of 2011 and 2012. When the WTI/Brent price differential is large enough to compensate for the costs associated with exporting crude oil (e.g., pipeline transportation from the WTI price point in Cushing, OK, to a port facility, storage fees, loading fees, shipping fees, offloading fees, insurance fees) then the economic incentive exists to market, sell, and deliver crude oil to international markets. Total costs associated with exporting crude oil vary by destination, although as a general rule the closer the destination the lower the transportation cost. Taking into account this consideration, Atlantic basin countries in Europe and the Americas are likely to be the preferred destinations for U.S. oil exports.\nAnalysis by the Energy Information Administration suggests that total export costs can range from $6 to $8 per barrel. Based on this cost range, the economic incentive to export crude oil existed at some point during each of the years 2011 to 2015. However, price differentials have since narrowed and have been in the $1 or less per barrel range since the start of 2016. WTI sold at a premium to Brent on certain days in January 2016. While the WTI/Brent price relationship provides some indication of the economic attractiveness of exporting crude oil, there are other price and non-price considerations that may motivate crude oil exports. Logistics, storage, and localized price relationships could potentially influence export decisions even when the WTI/Brent differential may not economically justify exports. For example, oil producers in the Eagle Ford and Permian Basin areas in Texas have direct pipeline routes to the Gulf Coast and may be subject to pricing dynamics that are not reflected in the WTI/Brent price differential. When considering pipeline capacity constraints to Cushing, OK, along with local storage limits, there could be instances when an oil producer in Texas might choose to pursue exports to global markets regardless of the WTI/Brent differential.\nAccording to an industry database of crude oil cargoes, during the period from December 19, 2015, to February 19, 2016, three crude oil shipments totaling approximately 1.7 million barrels—roughly 27,000 barrels per day—of crude oil have been exported to destinations that were prohibited prior to enactment of P.L. 114-113 . Two of the shipments were delivered to France and the Netherland Antilles. One shipment is projected to be delivered in the Mediterranean region. This level of exports is somewhat small, compared to total U.S. crude oil production of approximately 9.3 million barrels per day, and reflects the narrow WTI/Brent price differential that has existed since crude oil export restrictions were removed. Additionally, preliminary EIA information indicates that total crude oil exports—including those to Canada—declined by approximately 100,000 barrels per day in mid-January 2016 compared to December 2015.\nWhile current market conditions may not economically support large volumes of U.S. crude oil exports, market conditions tend to change over time. Should U.S. oil production increase, it is possible that the price differential could widen in the future to reflect an oversupply of light/sweet crude oil in the Gulf Coast where many refineries are currently configured to process heavier crude oil types. A widening price differential could result in an increase in export volumes. Nevertheless, the elimination of crude oil export restrictions provides two relevant benefits to U.S. oil producers. First, should domestic/international crude price differentials return to levels observed in 2011, some producers and traders can now sell crude oil to international buyers for potentially higher prices. Second, and perhaps more important for all U.S. oil producers, domestic/international price differentials will likely be moderated by the ability to export crude oil on an unrestricted basis. Should price differentials in the future be large enough to motivate international sales, the resulting exports will likely limit the differential value to the total costs—$6 to $8 per barrel based on EIA analysis referenced above—associated with exporting crude oil to non-U.S. destinations. Allowing exports reduces the likelihood that domestic prices will be severely discounted in the future, which benefits all U.S. producers, even those that do not export crude oil. However, U.S. refiners may not be able to financially benefit from large price differentials in the future should crude oil exports have the anticipated effect of eliminating or limiting the domestic/international price differential.", "The debate over allowing crude oil exports proceeded in tandem with a debate over providing cargoes for the U.S.-flag merchant fleet. U.S.-flag international vessels, which must have U.S. ownership and be crewed by U.S. citizens, are guaranteed a large share of government-impelled cargoes, such as military shipments and food aid. However, U.S.-flag international vessels carry almost no commercial cargo, because their daily operating costs are estimated to be nearly three times those of similar foreign-flag ships. In a 2015 hearing, Paul Jaenichen, head of the U.S. Maritime Administration (MARAD), said that the lack of cargo has contributed to a decline in the number of ships participating in the Maritime Security Program (MSP), under which vessels receive operating subsidies in return for being made available to the Department of Defense in time of war or national emergency. A requirement that some portion of crude oil exports be carried by U.S. flag ships was advanced as a means of ensuring additional cargoes for U.S.-flag tankers, but encountered opposition due to concerns that the cost of U.S.-flag shipping could make U.S. oil uncompetitive in foreign markets.\nP.L. 114-113 does not require U.S. crude oil be exported on U.S.-flag vessels, but it does increase the annual operating subsidies for MSP vessels for FY2017 through FY2021. The increase is intended to encourage ship operators to keep their vessels in the MSP fleet. The annual subsidy increases from $3.1 million per ship to around $5 million per ship through FY2020 and then $5.2 million per ship in 2021. In 2022, the annual subsidy is to revert back to $3.1 million per ship.\nThis subsidy increase further offsets the cost of employing U.S. merchant mariners aboard ship and complying with other requirements to operate under the U.S. flag. Higher subsidies potentially could assist these ships in competing with foreign-flag ships to carry private-sector imports and exports. However, the increased subsidy could also encourage U.S. seafarers and ship supply vendors to negotiate higher compensation for services provided to U.S.-flag operators. It was out of concern for rising U.S. crew costs that Congress changed the operating subsidy program from a fluctuating amount based on the cost differential between U.S.- and foreign-flag ships, to a fixed amount in 1996, the intent being that a fixed payment would create better incentives for U.S. flag operators to constrain costs.\nAt the end of 2015, 57 ships were enrolled in MSP; 60 ships are authorized. The MSP fleet includes 33 container ships, 16 roll-on/roll-off ships (ships with ramps for transporting vehicles), and two tankers. These ships employ about 2,500 U.S. mariners. About 75% of the fleet is owned by U.S. entities affiliated with a foreign shipping line.", "Division P, Section 305 of P.L. 114-113 enhanced the Section 199 domestic production activities deduction for refiners that are not a major integrated oil company.", "The provision was designed to address concerns that some U.S. refiners would be disadvantaged should there be a change in crude export policy. Domestic and international price differentials that motivated oil producers to advocate for allowing exports (see Figure 1 ) were a benefit to U.S. refiners and contributed to an increase in refinery profit margins. Allowing crude oil exports will likely cap price differentials in the future, thus potentially reducing opportunities for refineries to realize these margins.\nRefinery advocates presented two oil transportation-related concerns that would result in a competitive disadvantage should crude oil export restrictions be removed. First, the Jones Act cost premium associated with moving crude oil from the Gulf Coast to the Northeast would result in East Coast refineries being at a competitive disadvantage vis-a-vis European refineries. It was suggested by the American Fuels and Petrochemicals Manufacturers (AFPM) that the Jones Act might need to be modified in conjunction with any change to crude export policy. Second, some refineries invested in rail transportation, one of the most expensive crude oil transportation modes. These infrastructure investments were motivated by the large price differentials observed periodically since 2010. To the extent that a change in crude oil export policy either eliminates or limits future price differentials, this effect could potentially adversely affect the value of these rail transportation investments.", "Broadly, the Section 199 deduction serves to reduce effective tax rates on domestic manufacturing activities. Section 305 of Division P of P.L. 114-113 changed how independent refiners account for transportation costs when calculating the deduction, potentially allowing higher oil transportation costs to be associated with greater tax relief.\nThe Section 199 production activities deduction allows taxpayers to deduct a fixed percentage of either income derived from qualified production activities (qualified production activity income; QPAI) or taxable income, the lesser of the two. A taxpayer's QPAI is equal to the taxpayer's domestic production gross receipts (DPGR), reduced by (1) the cost of goods sold that is allocable to those receipts; and (2) other deductions, expenses, and losses that are properly allocable to those receipts. The Section 199 deduction is 6% for oil-related activities, and 9% for other domestic production activities.\nThe change to Section 199 in P.L. 114-113 for independent refiners allows qualifying entities to reduce oil transportation costs accounted for when calculating QPAI. Specifically, the provision states that \"costs related to the transportation of oil shall be 25 percent of the amount properly allocable.\" Thus, independent refiners are allowed to exclude 75% of oil transportation costs when calculating income for the purposes of determining their Section 199 deduction. Assuming that refiners incur oil-related transportation costs, the effect of this change is an increase in QPAI and thus an increase of the deduction amount. The modified treatment for transportation costs became available starting in 2016, and is scheduled to expire at the end of 2021. The Joint Committee on Taxation estimates that the provision will reduce federal revenues by $1.9 billion between 2016 and 2025.\nA simplified and stylized hypothetical example of how this deduction is calculated appears in Table 1 . Receipts, expenses, and subsequent calculations are illustrative only and actual receipts and expenses for a specific refiner will likely be different. In this example, an independent refiner is assumed to have $80 million in oil-related receipts, $40 million in oil-related expenses, and an additional $10 million in oil transportation expenses. Without the Section 199 deduction, at a 35% tax rate, the tax on this income would be $10.5 million in this example. If the taxpayer were allowed to claim the Section 199 deduction, the deduction would be $1.8 million, or 6% of QPAI. The deduction reduces taxable income by $1.8 million. Thus, assuming a 35% tax rate, tax liability would be reduced by $630,000 (tax liability is reduced from $10.5 million to $9.87 million).\nWith the enhanced deduction, for the purposes of calculating the Section 199 deduction, only 25% of oil transportation expenses are included when calculating QPAI. Thus, QPAI is $37.5 million, and the Section 199 deduction is $2.25 million. At a tax rate of 35%, the additional deduction results in a further reduction in tax liability of $157,500 (tax liability is reduced from $9.87 million to $9.71 million).\nOverall, the enhanced deduction for independent refiners has the potential to reduce tax liability by up to 1.575% of oil transportation costs. Thus, in the above example, if oil transportation expenses were $5 million, instead of $10 million, the enhanced tax benefit would result in a tax liability reduction of $78,750, instead of $157,500.\nIt is possible that certain independent refineries will not receive any reduction in tax liability from this provision, even if they have substantial oil transportation costs. For taxpayers where taxable income is less than QPAI, the modification of how oil transportation costs are accounted for does not change tax liability since the Section 199 deduction is calculated from taxable income, not QPAI.\nIf the purpose of the provision was to provide relief for independent refineries, particularly those with high transportation costs, the modifications to Section 199 in P.L. 114-113 have several notable limitations. Independent refiners with zero taxable income, or with taxable income that is less than QPAI, will not receive additional tax relief from the modifications of Section 199's treatment of transportation expenses in P.L. 114-113 . Additionally, for independent refiners that are able to claim the enhanced deduction, the reduction in tax liability will generally be worth, at most, 1.575% of oil transportation costs. Finally, as a temporary provision, it may provide some relief during a period of transition, but could also contribute to uncertainty as the modified treatment of transportation expenses is scheduled to expire at the end of 2021. Tax provisions enacted with an expiration date are often extended. Since temporary tax provisions may or may not be extended, expiration dates on tax provisions may be associated with uncertainty." ], "depth": [ 0, 1, 1, 2, 2, 2, 1, 1, 2, 2 ], "alignment": [ "h0_title h2_title h1_title h3_title", "h0_full h1_full", "h0_full h2_full h1_title h3_title", "", "", "h3_full h1_full", "h2_full", "h3_title", "h3_full", "h3_full" ] }
{ "question": [ "What did Congress pass on December 18, 2015?", "What is included in the act?", "How did past policy debates treat the possible repeal of EPCA?", "Why has the repeal of EPCA become a policy issue?", "What the are results of enacting P.L. 114-113?", "How can oil producers benefit from the enactment?", "What characterizes predictions about crude oil exports?", "What else does P.L. 114-113 include?", "What is the first consideration included?", "What does the law include regarding this first consideration?", "How did the operating subsidy change?", "What is the second consideration included in P.L. 114-113?", "What concerns did refiners express?", "How did P.L. 114-113 address this concern?", "What is the predicted effect of this change?" ], "summary": [ "On December 18, 2015, Congress passed the Consolidated Appropriations Act, 2016 (H.R. 2029), which was signed by the President and became P.L. 114-113.", "Included in P.L. 114-113 is a provision that repeals Section 103 of the Energy Policy and Conservation Act of 1975 (EPCA; P.L. 94-163), which directs the President to promulgate a rule prohibiting crude oil exports. P.L. 114-113 also includes a \"savings clause\" and a list of exceptions that maintain and provide the President with authority to restrict exports under certain circumstances.", "For nearly four decades, repeal of EPCA was generally not a policy issue since oil production was declining and imports were rising.", "However, increasing U.S. light oil production starting in the 2010/2011 timeframe, projected production increases, and domestic-to-international oil price differentials that were as large as $30 per barrel, motivated many companies and trade organizations to advocate removing the EPCA crude oil export prohibition.", "Enactment of P.L. 114-113 allows U.S. crude oil to be marketed and sold to international buyers and concludes a nearly two-year debate about the varied and multi-dimensional considerations associated with allowing the export of crude oil produced in the United States.", "Some oil producers may benefit from this policy change, when market conditions warrant, by potentially selling crude oil for a higher price to global buyers. Perhaps more important for all U.S. oil producers is that allowing crude oil exports may limit the domestic/international price differential in the future.", "Studies published during the debate estimated that crude oil exports might range between 0 and 2 million barrels per day, reflecting the uncertainty of future market conditions that might motivate exports. Exactly how much crude oil will be exported will depend on oil price differentials, which had narrowed to less than $1 per barrel in January 2016.", "In addition to repealing EPCA Section 103, P.L. 114-113 also includes provisions that address two considerations discussed during the crude oil export debate.", "First, owners of U.S. flag ships advocated that crude oil exporters be required to use such ships for overseas transport.", "While this requirement was not included in P.L. 114-113, the law does include a provision that authorizes increasing the annual subsidy paid to U.S. flag cargo ships participating in the Maritime Security Program (MSP), which provides an operating subsidy in exchange for participating ships being subject to Department of Defense acquisition during times of war.", "The operating subsidy for each participating ship was increased from $3.1 million to around $5 million per year thru 2021.", "Second, independent U.S. refiners were generally opposed to allowing unrestricted crude oil exports as many of them were benefiting from price discounts that might either be eliminated or limited as a result of removing export restrictions.", "Some refiners expressed concern that the cost of waterborne crude shipments from the Gulf coast may result in a competitive disadvantage and that the value of investments made in crude-by-rail infrastructure may be adversely affected should crude oil export restrictions be removed.", "114-113 modified the Section 199 tax deduction for independent refiners by changing how independent refiners account for transportation costs when calculating the deduction, potentially allowing higher oil transportation costs to be associated with greater tax relief.", "Overall, the enhanced deduction for independent refiners may have fairly modest effects. For most independent refiners that are able to claim the enhanced deduction, the change has the potential to reduce tax liability by up to 1.575% of oil-related transportation costs." ], "parent_pair_index": [ -1, 0, 1, 2, -1, 0, -1, -1, 0, 1, 2, -1, 0, 0, 2 ], "summary_paragraph_index": [ 0, 0, 0, 0, 1, 1, 1, 2, 2, 2, 2, 3, 3, 3, 3 ] }
CRS_R40201
{ "title": [ "", "U.S. Flood Challenge: A Federal Primer", "Recent Interest and Developments", "Flood Policy in a Federalist System: Shared Responsibilities", "CRS Flood-Related Reports", "Limits to Levees and Dams", "2008 Midwest Flood: What Happened and How Does It Compare to 1993?", "Intense Precipitation in Tributary Watersheds in June 2008", "Storms in 2008 Were Quick, Which Caused Primarily Tributary Flooding; Extended Storms in 1993 Inundated the Region", "2008 Flood Damages Were Concentrated in Duration and Extent; 1993 Damages Created a Regional Economic Disaster", "Lessons from the 2008 Midwest Flood", "Post-1993 Investments Paid Off, but More Development at Risk", "Better Forecasting Data Needed to Improve Emergency Response", "Gains in Managing Levee Repairs, but Levee Deficiencies and Improvements Remain Challenges", "No Comprehensive Midwest Flood Management Strategy in Place", "Upper Mississippi Flood Management", "Post-1993 Flood Proposals and Recommendations", "Upper Mississippi River Comprehensive Plan", "Federal Flood Policy Since 1993: Tough Challenges Remain", "Unfinished Business on Many Post-1993 Recommendations", "Flood and Floodplain Management Policy", "Federal Flood Insurance and Mapping", "Flood Map Accuracy", "Trends Affecting Flood Risk", "Climate, Demographic, and Development Trends", "Coastal Vulnerability", "Recent Congressional Steps to Address the Flood Challenge", "Steps Toward a Flood Policy Reorientation", "Levee Reliability", "Reducing Flood Risk", "Resilient Recovery", "Concluding Remarks" ], "paragraphs": [ "", "In late May and early June 2008, several midwestern states were hit with a series of storms that produced flooding along many Mississippi River tributaries and nearby segments of the Mississippi River. This flooding raised concerns about both the risk of another disaster like the devastating 1993 Midwest flood and the state of the nation's flood policies, programs, and infrastructure. Although emergency response has improved since 1993 and hazard mitigation programs have reduced some risks, the region's flood risk continues to increase as more investments and people are concentrated in flood-prone areas affected by extreme precipitation.\nRiverine and coastal flooding remain serious risks to the nation's population and economy. The principal causes of floods in eastern states and the Gulf Coast are hurricanes and storms. Coastal counties are 17% of the land area, and home to roughly 50% of the country's population and jobs. Flooding in the Midwest and western states is primarily from snowmelt and rainstorms. At least 9 million homes and $390 billion in property are at risk from a flood with a 1% annual probability of occurring.\nIncreasing flood hazards are putting existing developments at risk. New development is occurring in flood-prone areas, often behind aging levees constructed to reduce agricultural damages rather than protect urban populations. National flood damages, which averaged $3.9 billion annually in the 1980s, nearly doubled in the decade 1995 through 2004. Total disaster assistance for emergency flood response operations, and subsequent long-term recovery efforts, increased from an average of $444 million during the 1980s to $3.75 billion from 1995 to 2004.\nCongress and federal agencies have taken steps to address selected flood challenges; at the same time, climate, population, and investment trends have increased the threat, vulnerability, and consequences of flooding. In response to the 1993 flood, Congress shifted federal programs to increase support for a wider range of activities that reduce damage and prevent loss of life, such as moving flood-prone structures and developing evacuation plans; this broader set of activities is known as hazard mitigation. This shift has prompted wider use of nonstructural mitigation, particularly for new development and repairing damaged property. Traditional structural approaches, such as levees, floodwalls, and dams, continue to dominate much of the national investment in flood damage reduction. Often structural measures are the most readily available and locally acceptable tools to reduce flood risk for existing population, economic, and infrastructure hubs.\nSince 2005, Congress has considered legislation and enacted other measures to address some flood issues; broader efforts to adopt a comprehensive flood policy and management strategy, however, have not been pursued. Hurricane Katrina's devastation in 2005 and the 2008 Midwest flood have again prompted attention to the suite of tools available to create a more flood-resilient nation. Many of these tools would require action by local governments, regulation of floodplain use, significant changes to federal programs, and substantially increased investment in flood damage reduction. Achieving these actions and implementing improved floodplain management is likely to confront opposition from those benefitting from the status quo and those opposed to land use regulation. And it likely would require broader congressional action than the incremental policy alterations that have been typical following recent floods.\nThis report first provides a primer on recent developments, the federal role in flood policy, and the limitations of levees and dams. The report then discusses lessons from the 2008 Midwest flood and contrasts the 2008 flood with the 1993 flood. It then discusses the evolution of U.S. flood policy, with particular attention to the role of Congress and federal agencies and programs, and the available tools for addressing the nation's flood challenge.", "The 2008 Midwest flood and the extensive damage and loss of life caused by Hurricane Katrina have raised awareness of flood risk, and levee construction and maintenance in particular. These disasters raised many flood policy questions, including whether to change the division of the roles and responsibilities between the federal, state, and local government; whether to have more federal leadership on floodplain management; and whether to increase coordination of federal flood-related actions.\nSince Hurricane Katrina, Congress has conducted hearings and considered legislation on numerous aspects of federal flood programs and policies (see Appendix A for a list of flood-focused hearings since 1993). In the Water Resources Development Act (WRDA) of 2007 ( P.L. 110-114 ), Congress enacted flood policy provisions aimed largely at improving the planning and safety of levees. Few other changes have been enacted, and the legislation considered has largely addressed individual programs or agencies, rather than attempting a comprehensive realignment of federal flood actions.\nTwo recent developments may garner congressional attention. In January 2009, the National Committee on Levee Safety (created by WRDA 2007) released its draft recommendations for a national levee safety program. On January 15, 2009, Congress received a report on the Upper Mississippi River Comprehensive Plan (UMRCP) study; the report identifies the costs and benefits of significantly increasing the level of flood damage reduction along the mainstems of the Mississippi and Illinois Rivers. Both developments are discussed later in this CRS report.", "In the United States, flood-related roles and responsibilities are shared; local governments are responsible for land use and zoning decisions that shape floodplain and coastal development, but state and federal governments also influence community and individual decisions on managing flood risk. State and local governments largely are responsible for making decisions (e.g., zoning decisions) that allow or prohibit development in flood prone areas. Local and some state entities construct, operate, and maintain most levees and have initial flood-fighting responsibilities. Levees are embankments built alongside a river to prevent high water from flooding bordering land. The federal government constructs some of the nation's levees and dams in partnership with local project sponsors, but turns over operation and maintenance responsibility for most of these levees to local entities. The federal government also supports hazard mitigation, offers flood insurance, and provides emergency response and disaster aid for significant floods.\nFederal flood programs and investments consist primarily of:\nConstruction investments in select dams, levees, seawalls, and beach improvements; Nonstructural hazard mitigation assistance; Flood and crop insurance; and Disaster preparedness, response, and recovery assistance.\nThe principal federal agency involved in levee construction and repair is the U.S. Army Corps of Engineers (Corps). (See Appendix A for a table of selected congressional direction to guide the Corps' efforts in flood damage reduction.) Other federal agencies also are involved with flood-related activities, such as the U.S. Department of Agriculture's Natural Resources Conservation Service, the Department of the Interior's Bureau of Reclamation, and the Tennessee Valley Authority. The Federal Emergency Management Agency (FEMA) has primary responsibilities for federal hazard mitigation, flood insurance, and disaster assistance. FEMA and the Corps require levee inspection and certification for participation in the Corps' Rehabilitation and Inspection Program (RIP, also known as the P.L. 84-99 program, which is discussed on page 11 ) and FEMA's National Flood Insurance Program (NFIP). Crop insurance is administered by the U.S. Department of Agriculture.", "This report largely leaves the discussion of insurance and disaster assistance to other CRS reports, including:\nCRS Report RL33053, Federal Stafford Act Disaster Assistance: Presidential Declarations, Eligible Activities, and Funding , by [author name scrubbed]; CRS Report RS22945, Flood Insurance Requirements for Stafford Act Assistance , by [author name scrubbed]; CRS Report R40073, FEMA Funding for Flood Map Modernization , by [author name scrubbed]. CRS Report RL32825, Hurricanes and Disaster Risk Financing Through Insurance: Challenges and Policy Options , by [author name scrubbed]; CRS Report RL34207, Crop Insurance and Disaster Assistance in the 2008 Farm Bill , by [author name scrubbed] and [author name scrubbed]; and CRS Report RS21212, Agricultural Disaster Assistance , by [author name scrubbed] and [author name scrubbed].\nAlthough hazard mitigation is mentioned in this report, discussions of flood risk through hazard management are one focus of the following reports :\nCRS Report RL33129, Flood Risk Management and Levees: A Federal Primer , by [author name scrubbed] and [author name scrubbed]; and CRS Report RL34537, FEMA's Pre-Disaster Mitigation Program: Overview and Issues , by [author name scrubbed] and [author name scrubbed].\nTwo other CRS reports discuss additional aspects of issues raised by the 2008 Midwest flood. According to CRS Report RL34610, Midwest Flooding Disaster: Rethinking Federal Flood Insurance? , by [author name scrubbed], a key lesson learned from the 2008 Midwest flood is that many people believe that the government will provide them with economic assistance despite their lack of insurance. CRS Report RL34583, Midwest Floods of 2008: Potential Impact on Agriculture , by [author name scrubbed], addressed the concerns about disruption in agricultural markets.", "Hurricanes, other severe weather systems, and rapid snowmelt can cause flooding. Floods are a vital element of variability in the hydraulic regime of healthy riverine, estuarine, and coastal ecosystems; however, they can result in immediate human suffering and economic loss. Failure of levees and dams and inadequate urban drainage also may result in flooding.\nHurricane Katrina focused attention on the performance of levees and floodwalls and the risk remaining behind these structures. There are over 100,000 miles of levees in the nation, only 14,000 miles of these receive regular inspections by the Corps. These levees do not work in isolation from the rest of the watershed. Levees restrict the size of the floodplain which constricts floodwaters to a smaller area, thus raising river crests and often increasing the river's velocity. How land is used can have a dramatic impact on the response of streams to flooding (e.g., tile drains in agricultural areas, impervious areas in urban developments can increase runoff and flood crests). Land use choices can cause 500-year flood levels to be produced by events of lesser magnitude. Some land uses can, therefore, result in levees having to hold back higher flows more frequently.\nGenerally the Corps no longer refers to levees and dams as \"flood control\" measures, rather it calls levee projects \"flood damage reduction\" measures and discusses them in the context of a suite of \"flood risk management\" actions. This language shift reflects an appreciation of the limitations of these structures. Levees, if constructed properly, should perform up to their design level of protection (i.e., 100-year level of protection is the design to reduce damages from a flood with a 1% probability of occurring in a given year); however, when a flood is greater than that design, the levees are overtopped. Sufficient overtopping often results in levee failure, known as breaching. Similarly, dam are designed to spill floodwaters when their capacity is exceeded.\nAlthough floodwaters overtopped and breached many Midwest levees and a few dams in 1993 and 2008 causing significant economic damage, the dams and levees worked largely as designed. The dams reduced the river crests, and many levees held, thereby preventing floodwaters from damaging many population centers and agricultural and industrial investments. Nonetheless, the potential role of the basin's levees in increasing damages because of their encouragement of risky development and reduction natural flood storage remains debated and part of the active discussion about the future of the basin's floodplains.\nThe performance of the Midwest levees contrasts to the performance of floodwalls in New Orleans during Hurricane Katrina. Some of the floodwalls protecting urban New Orleans failed before their design level was reached, and the damage was catastrophic. These floodwalls lost their integrity, allowing the water level in the city to rise to the level of surrounding water bodies.\nResidual risk is the portion of risk that remains after flood damage reduction structures have been built and other damage-reducing measures have been taken. Risk remains because of the likelihood that levees and dams will be overwhelmed by severe floods and the risk of structural failure. The damaging consequences of floods increase as development occurs behind levees and below dams; ironically, this development may occur because of the flood protection provided. The nation's risk in terms of lives lost, economic disruption, and property damage is increased by overconfidence in the level and reliability of structural flood protection.\nThe inability of infrastructure to protect against all flooding is fundamental to understanding why some flood risk always remains and to making decisions of how to prioritize flood risk reduction investments. Decision-makers are faced with choosing the level of protection to provide for urban areas, critical infrastructure, rural areas, etc., and making tradeoffs when distributing limited funds across different projects throughout the nation and across the range of flood damage reduction measures (e.g., levees, buyouts, insurance).", "", "Intense precipitation in May and early June 2008 led to numerous record and near-record river crests in the Midwest, particularly on Mississippi River tributaries in eastern Iowa and southern Wisconsin. The resultant flooding was localized, but extremely severe. A few streams, particularly in eastern Iowa, had discharges that exceeded record levels for ten or more consecutive days. The 100-year and 500-year flood levels were exceeded in much of eastern Iowa. These exceptional flood levels overtopped levees and flooded areas that many people assumed to be safe.\nThe most affected tributaries were the Cedar, Des Moines, and Iowa Rivers. Record river stages were set at 47 river gage stations on more than 12 tributary rivers and creeks. In some locations, the new record crests were considerably higher than the previous record crests, including 1993 records. Levees in Des Moines and Cedar Rapids were breached. Two significant examples were the Cedar River at Cedar Rapids (see Box 1 ) and the Iowa River at Columbus Junction and Iowa City. As the floodwaters from these tributaries entered the mainstem of the Mississippi River, they set records at Keithsburg and Gladstone, Illinois and Burlington, Iowa, and approached record stages at other locations.", "The 1993 flood is sometimes described as a \"leisurely\" disaster because it resulted not from a single storm but from a weather pattern that remained stationary for months. From May through September of 1993, record or major flooding occurred across North Dakota, South Dakota, Nebraska, Kansas, Minnesota, Iowa, Missouri, Wisconsin, and Illinois. The geographic scale of the flood was vast, much larger than the 2008 flood. The four-month duration of the 1993 flooding significantly increased the scale of its consequences.\nIn 1993, extensive reaches of the mainstems of the Missouri and Mississippi Rivers experienced flooding of extended duration (see Figure 1 ). Lower reaches of the Illinois River and extended reaches of the Kansas, Des Moines, and Iowa Rivers also recorded record flood crests. Approximately 600 river forecast points in the Midwest were above flood stage at the same time. In contrast, the 2008 flooding was shorter and concentrated along select Mississippi River tributaries and nearby segments of the Mississippi River.\nThe 1993 differs from the 2008 flood in its areal extent, magnitude, duration, volume of floodwater, extent of damage, and time of the year. The rainfall causing the 1993 flood was uncommonly persistent and covered a huge drainage area encompassing most of nine states. This scenario caused many tributaries to crest at about the same time and to synchronize with crests on the mainstem of the Mississippi and Missouri Rivers.", "Forty-eight deaths and economic damages of $30.2 billion were attributed to the 1993 flood; more than 70,000 homes were damaged. Roughly150 major rivers and tributaries had flooded, at least 15 million acres of farmland had been inundated. More than half of the economic losses were agricultural. It is important to note that most agricultural damage resulted from wet fields in upland areas and a short growing season, rather than inundation by floodwaters.\nAccording to a 1995 analysis of Corps records by the then-General Accounting Office (renamed the Government Accountability Office, GAO), many mainstem levees withstood the 1993 floodwaters, preventing both flooding of an additional 1 million acres and an additional $19 billion in damages. Other levees in the basin were overtopped when floodwaters exceeded their design. Four levees that were regularly inspected by the Corps were breached or otherwise allowed water into protected areas before their design capacity was exceeded.\nIn 1993, transportation impacts were severe and lengthy. Barge traffic on the Missouri and Mississippi Rivers was stopped for nearly 2 months. Bridges were out or not accessible on the Mississippi River from Davenport, Iowa, downstream to St. Louis, Missouri. On the Missouri River, bridges were out from Kansas City, Missouri, downstream to St. Charles, Missouri. Major east-west rail and road transportation routers were severed, causing significant delays and rerouting. Numerous interstate highways and other roads were closed. Ten commercial airports flooded. Much of the railroad traffic in the Midwest was halted. Other public infrastructure, such as sewage treatment and water treatment plants, was damaged or destroyed.\nThe 2008 floodwaters caused local disaster conditions and significant damages. Property, agricultural, and other damages are estimated at $15.0 billion, and the weather was attributed to 24 deaths. Unlike in 1993, damage in 2008 was from inundation by floodwaters along the rivers, not in saturated upland areas.\nThe magnitude and severity of the 1993 flood event was overwhelming. Hundreds of levees were breached along the Mississippi and Missouri Rivers; in contrast, dozens of levees were breached in 2008. The levees breached on the Mississippi mainstem in 2008 were primarily lower agricultural levees. In 2008, although some levees overtopped, they worked largely as intended; that is, they held back floodwaters until the floodwaters exceeded the level of protection the levees were expected to provide. Many of these overtopped levees were protecting primarily agricultural areas and provided the anticipated 5- to 25-year protection. Floodwaters overtopping levees protecting larger communities, like Cedar Rapids, resulted in considerable and concentrated damage; these damages contributed to the 2008 damage estimates being half of the 1993 flood damages even though the duration and extent of flooding was less than in 1993.\nThe lower regional damage estimates in 2008 ($15 billion compared to $30 billion in 1993) fail to capture the challenge of recovery in severely affected communities. The social and economic consequences for families and communities can be extreme, and recovery in severely damaged communities often takes years.\nSome roads in eastern Iowa and northwest Illinois sustained severe flood damage in 2008, resulting in closings, delays, and lengthy detours. Major rail lines in Iowa, Wisconsin, Minnesota, Missouri and Illinois were washed out. Navigation locks 13-25 on the Mississippi River closed, leaving 281 miles of the river closed to barge traffic. In June, the flooding was predicted to have major impacts on agriculture. CRS Report RL34583, Midwest Floods of 2008: Potential Impact on Agriculture , found that anticipated crop losses contributed to agricultural prices for corn and soybeans hitting record highs in late June and early July. After that, however, most of the \"Corn Belt\" experienced nearly ideal growing conditions resulting in substantial crop recovery and lower market prices. Therefore, although the floodwaters caused transportation and agricultural disruptions, they largely were resolved and repairs were underway once the localized flooding diminished.", "", "Is the Midwest more or less at risk of floods now than in 1993? Some communities in the Midwest are less at risk than in 1993 due to buyouts, relocation, and floodproofing (i.e., adjustments to structures that reduce or eliminate flood damage) of vulnerable properties. Relocation of key public infrastructure such as drinking water facilities reduced the consequences of flooding. The general sense is that flood risk reduction in the Mississippi River basin since 1993 paid off in 2008. However, the basin's aggregate flood risk appears to be increasing.\nAfter the 1993 flood, the GAO found that not only had man-made changes within the basin over many decades raised the levels of floodwaters in the basin's rivers, but also the precipitation trend in the basin appeared to be increasing over the long term. Congress reacted to the 1993 flood by enacting a number of policy and program changes. It authorized using a portion of federal disaster assistance to cover 75% of the cost to acquire, relocate or elevate flood-prone homes and businesses; prior to the change, the federal cost share had been 50%. Buyouts of at-risk properties using FEMA disaster mitigation funds were more extensive for the 1993 flood than for previous disasters. In the nine states that flooded, FEMA ultimately moved more than 300 homes, and bought and demolished nearly 12,000 at a cost of over $150 million. The lands were turned to flood-friendlier uses such as parks and wildlife habitat. State and federal agencies have also acquired interest in over 250,000 acres of flood-prone land, principally frequently flooded farmland. Another 9,140 properties in 140 communities were elevated, acquired or relocated under hazard mitigation grants. Taken together, these actions signaled a dramatic departure from historic flood policies, which relied primarily on levees and dams.\nSignificant redevelopment and new development has occurred in Midwest floodplains since 1993, including areas flooded in 1993. The population in the 500-year floodplain has increased by 17%; the population in the area flooded in 1993 has increased by 18%. There also has been significant new commercial and industrial development and highway and interchange development within the 500-year floodplain. New development in the 100-year floodplain would be required to meet floodplain development regulations if the community participates in the NFIP. Therefore, this development ought to be more flood resilient than before. Development or redevelopment, however, may not be more flood resilient if built behind levees that are certified to provide 100-year protection or if the community does not participate in the NFIP. Therefore, risk from the 100-year flood in the NFIP-participating communities in the Midwest may have decreased since 1993, but the risk in these communities to more intense floods may have increased. Moreover, risk in the 500-year floodplain has increased substantially due to development.", "Rainfall and streamflow data are fundamental to coordinating and managing emergency flood response activities. In 2008, several Mississippi River tributaries rose quickly. At the most severely affected locations, rivers rose at a rate of one foot per hour. River crests on some tributaries eventually exceeded their river gauges ability to record. Limited river gauging information constrained the National Weather Service and others in developing timely and accurate river stage forecasts.\nIn October 2008, the Corps convened a Rainfall-River Forecast Summit of representatives of the Corps, the National Weather Service, and the USGS; the summit also included a public meeting. Federal summit participants concluded that significantly more rainfall fell than was predicted resulting in record river flood stages that were not forecast with sufficient lead time for appropriate emergency response preparations. Although the coordination and data exchange generally went well, according to summit participants, discrepancies of reported data created forecasting challenges and raised doubts of forecast reliability. River gauges swept away by the floodwaters resulted in data gaps during critical periods. As a result, some river forecasts were inaccurate. Better coordination, communication, and collaboration, as well as more and better data measurements, were recommended by the summit participants.", "During the 2008 flood, a total of 41 levees overtopped. Of these, only six were constructed by the Corps; these had been turned over to a local entity for maintenance. Another 19 of the 41 were constructed by local entities but met participation requirements for the Corps' Rehabilitation and Inspection Program, which assists with repairs. The other 16 overtopped levees were built and operated by local entities and had not met RIP participation requirements. Their repair is not eligible for federal assistance through RIP, but may be eligible for some other federal assistance through the Natural Resources Conservation Service for levees in small watersheds or FEMA, particularly if there is an immediate threat to life and property.\nRepairing levees following the 2008 floods has illustrated some improvements since 1993, as well as continuing issues with repair and maintenance. Reducing flood risk to conditions prior to the damaging event can be complicated by choices about whether and how to repair damaged levees and the availability of assistance from various federal agencies. At the same time these choices represent opportunities to consider alternative methods of managing flood risk.\nIn 2008 coordination of near-term alternatives for levee repair showed improvement over 1993. The Corps is leading a regional Interagency Levee Task Force for the 2008 Midwest flood. This type of task force has not been used extensively before. The basis for its use is a February 1997 guidance memo issued by the Office of Management and Budget and the Council on Environmental Quality. The memo was published as part of the Clinton Administration's efforts to improve flood and floodplain management policy after the 1993 floods. The memo instructed federal agencies to \"fully consider relevant options, including non-structural alternatives, during evaluation and review of levee repair and reconstruction projects…\".\nThe 2008 Midwest Interagency Levee Task Force was established to assist in the rapid and effective recovery of floodplain management systems in the affected communities and areas before the next flood season. The task force is charged with implementing a collaborative and integrated regional approach by the federal agencies to the long-term restoration of damaged floodplain management systems. Its use is viewed by floodplain management advocates as promising because it is not only looking at rebuilding levees but also considering long-term mitigation and recovery.\nA common issue that arises following a flood is local interest in not only repairing levees but improving the level of protection provided. Rehabilitation and Inspection Program funds are expressly restricted to repairing and cannot be used to increase protection. The RIP program is not designed to evaluate the federal interest in investments to further reduce the local flood risk. If federal participation is sought in increasing protection, the traditional process is to initiate a Corps flood damage reduction study. This is separate from repair work.\nInterest in increasing the resiliency of levees and their level of protection has become more salient since the 2005 hurricane season. Since 2005, the levee inspection and certification programs used by the Corps for the Rehabilitation and Inspection Program and FEMA for the NFIP have been strengthened to address weaknesses identified in the programs. Consequently, significant numbers of levees have been identified as deficient since 2005. If the deficiencies are not addressed, the levee may not be eligible for federal repair assistance if damaged by a flood, and NFIP floodplain requirements may go into effect (e.g., areas behind the levee may be required to purchase flood insurance). The local entities that own and maintain the levees are responsible for making the improvements necessary to pass inspection and obtain certification. Generally federal funds are not available for these rehabilitations which are considered part of the local responsibility for levee upkeep. Additionally NFIP hazard map modernization and policy changes have improved the understanding of current risks, resulting in some areas receiving higher risk designations and having stricter NFIP requirements apply.", "The dams and levees of the Upper Mississippi River System were largely constructed as separate projects, not in accordance with a basin flood damage reduction plan. The existing facilities have varying structural integrity, and provide varying levels of flood risk reduction for similar land uses. The levels of protection range from less than 5 years up to 500 years, with three-quarters of the urban systems designed to manage a 500-year flood. Land use and flood management changes (e.g., levee building that constricts the flow of floodwaters to within the levee banks, or channel straightening that increases the velocity of floodwaters) in upstream areas can alter flood risk in downstream areas. Whether and how to integrate Midwest flood management and related infrastructure was an issue after the 1993 flood. Nonetheless, responsibilities for flood programs in the basin remains largely unchanged (i.e., distributed among local, state, and federal entities).\nLike many other basins, no broad planning authority has guided the Upper Mississippi basin's water resource management since the termination of the Upper Mississippi River Basin Commission (UMRBC) at the end of 1981, which had been established in 1972. The UMRBC was a regional entity for comprehensive planning that integrated federal-state-local planning with public input. The UMRBC prepared a comprehensive master plan for management of the upper Mississippi River system's water and related-land resources. The Commission's termination complicated implementation of the master plan. The interstate Upper Mississippi River Basin Association (UMRBA), which was founded in 1981 remains in operation; its role largely has been limited to a policy research and coordination forum for the basin states. Because the UMRBA is a state initiative, unlike the UMRBC, the federal government has no voice.\nThe long-standing Mississippi River Commission has authority for river improvements from the Mississippi River's delta to the headwaters. The Commission provides water resources engineering direction and policy advice to the Administration, Congress, and the Army by overseeing the planning and reporting on river improvements. Unlike in the lower basin, the Commission currently does not have the funded authority to implement improvement plans in the upper Mississippi River. In 1997, the Commission initiated a process of listening, inspecting, and partnering in the upper basin, but has not pursued significant steps to increase its upper basin role.", "", "The 1993 flooding engendered some congressional interest in a systemic approach to flood damage reduction on the upper basin. Following the 1993 flood, numerous reports were produced recommending changes to various aspects of how floods are managed in the United States and the Midwest in particular. The most prominent of these reports was the July 1994, Sharing the Challenge: Floodplain Management into the 21 st Century , by the Interagency Floodplain Management Review Committee, often called the Galloway report after the Committee's chairman, Brigadier General Gerald Galloway. Box 2 briefly describes the report's recommendations for the Upper Mississippi River and a general floodplain management strategy.\nIn August 1994, S. 2418 (103 rd Congress) was introduced. It would have acted on many of the report's recommendations. If enacted, it would have represented a significant shift in flood and floodplain management for the Midwest. The legislation would have required development of comprehensive river basin management plans for the long-term ecological, economic, and flood management needs of the Upper Mississippi and the Missouri Rivers and established federal-state coordinating committees to review and recommend the basin plans. The bill also included numerous other broad water resources policy provisions that would have emphasized nonstructural measures for risk reduction. This legislation was not enacted.", "It was not until the Water Resources Development Act of 1999 ( P.L. 106-53 ) that a new flood management study for the upper Mississippi River basin was authorized. In Sec. 459 of WRDA 1999, Congress authorized the Upper Mississippi River Comprehensive Plan (UMRCP). It directed the Secretary of the Army to \"develop a plan to address water resource and related land resource problems and opportunities in the upper Mississippi and Illinois River basins, from Cairo, Illinois, to the headwaters of the Mississippi River, in the interest of systemic flood damage reduction….\". The Corps chose not to perform a comprehensive watershed analysis encompassing the entire upper Mississippi River basin and its tributaries, citing fiscal and time constraints. Instead, it limited the study to the mainstem Mississippi River and Illinois River floodplain. The Missouri River and smaller tributaries, such as the Cedar River and Iowa River, were excluded. This scope left out the majority of the areas most severely affected in 2008.\nThe UMRCP final report, dated June 2008, was transmitted to Congress on January 15, 2009. Congress must decide how to proceed given the analysis presented in the report. The UMRCP was conducted as a preliminary study, similar to the level of detail in a Corps reconnaissance study. The UMRCP final report and supporting documents are not at the level of detail of a feasibility study, which typically informs decision-making on construction authorization.\nThe report states \"additional authority to implement the Comprehensive Plan is not being recommended nor requested at this time based upon the [national economic development] evaluation of alternative plans.\" Although the report does not recommend proceeding with additional authority to implement the comprehensive plan, the report identified the Corps' preferred alternative; it would provide 500-year protection at a total cost $4.42 billion.\nThe Assistant Secretary of the Army (Civil Works) in his January 2009 transmittal letter to Congress also did not recommend proceeding with implementation; the letter stated that \"recommendations for implementation of a specific plan based on a reconnaissance level of detail is premature.\" Instead the Assistant Secretary recommended some intermediate steps ─ expanding the UMRCP to include Mississippi River tributaries, conducting cost-shared studies of the reconstruction needs for the basin's existing flood damage infrastructure (where a federal interest is identified), and conducting a study of flood protection for critical transportation infrastructure such as bridge approaches and railroads.\nEarlier in August 2008, the Mississippi River Commission in its planning oversight and policy advice role voted to support implementing the preferred alternative. The Commission believed that the full benefits of implementing the preferred alternative were not adequately measured with the current Corps project planning guidelines. Also in 2008, the then-Governor of Illinois and the then-Governor of Missouri wrote letters of support for a comprehensive plan; these letters, however, supported an alternative that was studied but not the preferred alternative.\nCongress is faced with deciding how to proceed given the differing recommendations of the Corps report and the Assistant Secretary of the Army, Mississippi River Commission, two state governors, and the many stakeholder viewpoints in the basin. For example, some stakeholders prefer emphasizing nonstructural measures to manage flood hazards, and others are concerned about tributary flood risk. Appendix B provides an analysis of the UMRCP final report and its limitation, the preferred alternative identified in the report, various stakeholders recommendations on how to proceed, the debate over the future of the Midwest flood and floodplain management, and the potential state and federal roles.", "", "Although Congress did take numerous actions after the 1993 flood to improve flood policy and programs, numerous recommendations in the Galloway report have not been implemented, including:\nEnact a national Floodplain Management Act to define government responsibilities, strengthen federal-state coordination and improve accountability. It should establish a national model for floodplain management that recognizes the states as the principal floodplain managers. Reactivate the Water Resources Council to coordinate federal-state-tribal water resources activities. Reestablish a river basin commission, as needed, as forum for coordination of regional issues. Issue a new Executive Order to reaffirm the federal government's commitment to floodplain management with a broader scope and more defined federal agency responsibilities than in the existing floodplain E.O. 11988. Limit public grant assistance available to communities not participating in the NFIP. Provide loans for the upgrade of infrastructure and public facilities. Reduce the vulnerability of population centers to damages from roughly the standard project flood (which is roughly the 500-year flood).\nMany of the actions that were taken were among the narrower recommendations of the Galloway report, such as increasing the waiting period for flood insurance policies to become active.", "Over the years, many commissions and reports, like the Galloway report, have called for a fundamental reorientation in national flood policy that addresses not only the economic but also the social and environmental welfare tradeoffs of floodplain development. These commissions and reports have urged Congress, relevant agencies, and the public to commit to the broad goal of reducing the dangers and damages via flood and floodplain management, rather than allowing development that could be located elsewhere to occur in flood-prone areas. Despite these recommendations, a fundamental reorientation for floodplain management has not occurred.\nAlthough federal efforts have not been guided by a clearly defined flood policy or floodplain vision, many incremental changes to improve flood programs and projects have been enacted or adopted at all levels of government. These actions include supporting nonstructural flood damage reduction, retiring flood-prone farmland, purchasing repetitive flood loss properties, augmenting hazard mitigation activities, fostering floodplain regulation, and guiding federal actions in floodplains.\nNotwithstanding these changes, the nation's flood risk is increasing. Many of these changes have seen only marginal implementation, enforcement, and funding. The incremental improvements largely have been overwhelmed by incentives to develop floodplains and coastal areas and by a growing population, or have never fully implemented or enforced. Other federal actions produce some indirect flood risk reduction benefits; for example, Congress has supported conservation efforts on agricultural lands and wetlands protection that may reduce flood damages by slowing down or temporarily storing flood waters. Whether these benefits are overwhelmed by changes in flood-prone land use (e.g., conversion of agricultural land behind levees to residential development) remains largely unknown because regional-scale and multi-agency plans and evaluations have been rare.\nGenerally, congressional oversight, administrative implementation, and federal appropriations have reflected a reactive and fragmented approach to flooding. Earlier institutional arrangements that provided avenues for more coordinated federal flood efforts have diminished. For example, the national-level Water Resources Council which was established by the Water Resources Planning Act (P.L. 89-80), disbanded in 1983; the Federal Interagency Task Force on Floodplain Management, which had continued some of the Water Resources Council flood-related functions after 1983, stopped convening in the late 1990s. Federal support and opportunities for local capacity building decreased with the loss of these institutions.\nFlood policy continues to be dominated by separate treatment of structural flood damage reduction investments (e.g., levee building), the NFIP, and federal disaster aid, rather than a comprehensive flood risk and floodplain management approach. Current arrangements of aid, insurance, and water resources projects at times unintentionally provide disincentives to reduce exposure to flood risks. This is in contrast to recommendations promoting a focused and coordinated effort to reduce the cost of flooding on the economy, improve public safety, and promote state and local capacity and responsibility for flood management.", "In 1968, Congress created the National Flood Insurance Program as an alternative to disaster assistance and to manage the escalating cost of repairing flood damage to buildings and their contents. Under the NFIP, the federal government identifies and maps areas subject to flooding, provides insurance to property owners in flood-prone areas, and offers incentives for communities to reduce future flood-related losses through floodplain management measures. Since 1973, homeowners in 100-year flood-prone areas are required to buy flood insurance if using a federally backed mortgage. Today, the NFIP provides flood insurance to more than 5 million homeowners, renters, and business owners in over 20,000 participating communities.\nA significant policy reaction to the 1993 flood was passage of the National Flood Insurance Reform Act of 1994. The flooding revealed that most flooded homeowners did not have flood insurance. And mortgage lenders had been lax in checking if federally backed mortgages were being granted in flood-prone areas, as required by NFIP. The 1994 legislation aimed to improve compliance with NFIP's mandatory flood insurance requirement, and to pressure lenders to ensure that at-risk owners in a flood zone purchase insurance. The legislation also:\nCreated the Increased Cost of Compliance program within the NFIP. This program gives money to insured owners of substantially damaged properties to meet the more expensive costs of rebuilding according to a local floodplain management ordinance. Created the Flood Mitigation Assistance program. This program funding is derived from a surcharge added to all flood insurance policies nationwide. The funds are distributed as grants to states for flood mitigation. Increased emphasis on floodplain mapping. Codified the Community Rating System (CRS) into the NFIP. The CRS is an incentive program to reduce communities' flood insurance premiums by exceeding the minimum flood risk reduction requirements of the NFIP.\nAfter the 1993 floods, Congress authorized FEMA to use a portion of federal disaster assistance to cover 75% of the cost to acquire, relocate or elevate homes and businesses; set aside flood insurance premiums to relocate flood-prone buildings; and tighten flood insurance purchase requirements. These actions signaled a shift toward hazard reduction away from reliance on levees and dams. Nonetheless, the potential consequences of floods are increasing as more people and investments are located in flood-prone areas.\nSome of the more significant changes in flood-related policy have consisted of efforts to improve the NFIP (e.g., improvements to increase participation in the program and better manage repetitive loss properties) and reorganization of federal emergency response and recovery following the 9/11 attacks and Hurricane Katrina's impact on New Orleans. Considerable concerns continue to be raised about the degree of subsidization under the NFIP and the financial foundation of the program. Numerous GAO studies have reviewed various aspects of the NFIP; some recommendations have been implemented. In 2006, an independent review working group released its evaluation of the NFIP; the recommendations are among other changes that have been considered, but not enacted. Reorganization of emergency response, in particular the placement of FEMA within the Department of Homeland Security, remains a topic of much debate.", "As part of the NFIP, FEMA has implemented a standardized flood mapping program covering a large fraction of the population at risk. Government agencies use these maps to establish zoning and building standards and to support transportation, infrastructure, and emergency planning. Insurance companies, lenders, realtors, and property owners use maps to determine flood insurance needs and to assess their flood risk.\nIn January 2009, the National Research Council released Mapping the Zone: Improving Flood Map Accuracy . The report calls for investments in improving the accuracy of NFIP maps. It cites maps as central to anticipating, preparing for, and insuring against flooding. It found that current maps have significant uncertainties and do not necessarily represent current floodplain conditions. The Council concluded that these investments are needed and economically justified despite recent investments. From 2003 to 2008 at a cost of more than $1 billion, FEMA and local and state partners collected new flood data in unmapped areas, updated existing data, and digitized flood maps that were previously on paper. The Council found that although 92% of the continental U.S. population now has digital flood maps, only 21% has maps fully satisfying FEMA's data quality standards.\nTo remain accurate, flood maps must require updating to reflect changes in the flood threat (e.g., changes in sea level or precipitation patterns) and land use changes that affect flood risk. Future conditions (e.g., anticipated sea level rise, changes in hydrology due to land use changes) currently are not considered in developing NFIP maps.", "", "Growth in total damage from floods in the United States since the early 1930s can be attributed to both climate factors and societal factors: that is, increased damage associated with increased precipitation and with growth in population and wealth. Much of the flood-related damage in recent decades is the result of numerous human choices, meaning that society has considerable potential to reduce flood risk. Without major changes in societal responses to weather and climate extremes, it is reasonable to predict ever-increasing losses even without any detrimental climate changes. As the former General Counsel of FEMA put it:\nThe challenge is that more and more development is taking place in flood prone and hurricane prone areas. People like to live near the seashore. But unless the actual cost of living by the water is reflected in the cost of ownership ─ including the cost of building property to resist wind damage, elevating out of floodplains, and insuring at actuarial rates for the cost of rebuilding after inevitable floods and hurricanes ─ the result will only be more development in more risk prone areas …\nClimate and population trends are combining in coastal areas so that flood risks of coastal storms exceed river flooding risks. The top eleven amounts paid for NFIP claims were for coastal storms (including Hurricane Ike). The 1993 Midwest flood ranks twelfth, and the 2008 Midwest flood is not in the top 20 NFIP events.", "Damage caused by Hurricane Katrina and other coastal storms illustrates the vulnerability of the nation's coastal developments to storm surge, flooding, erosion, and other hazards. Hurricane-prone states have increasingly dominated NFIP outlays and disaster losses. The risk facing the nation's coastal development, particularly barrier islands and other particularly vulnerable locations, is great regardless of whether climate change may alter the intensity and frequency of hurricanes. Severe storms and their surges have plagued coastal communities for centuries, costing thousands of lives, and damaging communities, businesses, and infrastructure.\nSince the mid-1960s, the federal role in coastal hurricane storm protection has become more prominent; the Corps, with nonfederal sponsors, builds structures and places sand periodically for beach renourishment to reduce flooding. Congress also has enacted laws aimed at protecting coastal resources that have some flood risk reduction benefits. Through reauthorizations and amendments to the Coastal Zone Management Act of 1972 (P.L. 92-532) and the Coastal Barrier Resources Act of 1982 ( P.L. 97-348 ), Congress has tried to improve federal actions that support coastal resource protection. With the passage of the Coastal Zone Management Act in 1972, Congress was responding primarily to widespread public concern about estuarine and oceanfront degradation; the act provides for federal assistance to state and local coastal zone. The Coastal Barrier Resources Act prohibits federal spending that would support additional development in designated relatively-undeveloped coastal barriers and adjacent areas. Notwithstanding these efforts, both increasing coastal populations and the dominance of NFIP claims and federal disaster aid to coastal states indicate that significant coastal flood risk remains.", "The 2008 Midwest flood, Hurricane Katrina, and other levee breaches have increased the congressional debate about how to manage flood and infrastructure risks, what is an acceptable level of risk—especially for low-probability, high-consequence events—and who should bear the costs to reduce flood risk (particularly in the case of levee construction and rehabilitation). Issues to be addressed include protecting concentrated urban populations, reducing risk to the nation's public and private economic infrastructure, reducing vulnerability by investing in natural buffers, and equity in protection for low-income and minority populations. A challenge for Congress is structuring federal actions and programs so they provide incentives to reduce flood risk without unduly infringing on private property rights or usurping local decision making. Tackling this challenge would require significant adjustments in the flood insurance program, disaster aid policies and practices, and programs for structural and nonstructural measures and actions.", "Since Hurricane Katrina, Congress has conducted hearings (see Appendix A )and considered legislation on numerous aspects of federal flood programs and policies. Actions by many federal agencies shape the nation's flood risk management. Legislative efforts since 2005 have largely proceeded by addressing individual programs or agencies, rather than through a comprehensive attempt to reorient flood policy. For example, in the 110 th Congress, both the House and Senate passed a Flood Insurance Reform and Modernization Act ( H.R. 3121 and S. 2284 ) aimed at changing the NFIP and FEMA's programs; this legislation was not enacted. The Water Resources Development Act of 2007 enacted numerous provisions related to Corps flood projects and programs. While implementation of WRDA 2007 provisions may shift the Corps' flood-related actions, few other changes to federal programs have been enacted.\nIn WRDA 2007, Section 2032 calls for the Administration to prepare a report by the end of 2009 describing flood risk and comparing regional risks. The report also is to assess the effectiveness of flood efforts and programs, analyze whether programs encourage development in flood-prone areas, and provide recommendations. The report's preparation, however, is delayed; the Corps has not received appropriations to prepare it.\nAnother provision in §2031 requires Corps feasibility studies to calculate a proposed flood damage reduction project's residual risk of flooding, loss of human life, and human safety. The benefit-cost calculations of the study also must include upstream and downstream impacts and give equitable consideration to structural and nonstructural alternatives.\nSection 2031 of WRDA 2007 also called for the Secretary of the Army to update water resources planning guidance; the update would affect how Corps flood damage reduction projects are planned, evaluated, and selected. Sec. 2031 also stated:\nNATIONAL WATER RESOURCES PLANNING POLICY.—It is the policy of the United States that all water resources projects should reflect national priorities, encourage economic development, and protect the environment by— (1) seeking to maximize sustainable economic development; (2) seeking to avoid the unwise use of floodplains and flood-prone areas and minimizing adverse impacts and vulnerabilities in any case in which a floodplain or flood-prone area must be used; and (3) protecting and restoring the functions of natural systems and mitigating any unavoidable damage to natural systems.\nHow this planning update and implementation of this policy statement may alter flood damage reduction and other water resources planning by federal agencies remains unknown.", "Hurricane Katrina also brought national attention to the issue of levee and floodwall reliability and different levels of protection provided by flood damage reduction structures. Floodwall failures contributed to roughly half of the flood damages in New Orleans. A large percentage of locally built levees are poorly designed and maintained.\nSection 9004 of WRDA 2007 required the Corps by 2009 to establish and maintain a national levee database. The database structure was completed; the process of populating the database with information on levees is ongoing. Section 9004 also requires the Corps to establish an inventory and inspect all federally owned and federally constructed levees. The provision also requires the Corps to establish an inventory of levees participating in the Corps' Repair and Inspection Program; the Corps may inspect these levees if requested by the owner. The Corps has completed an initial survey identifying 14,000 miles of Corps-owned, Corps-constructed, and RIP participating levees.\nNo federal program specifically regulates the design, placement, construction, or maintenance of nonfederal levees built by private individuals or by public entities such as levee districts. Section 9003 of WRDA 2007 created a National Committee on Levee Safety to make recommendations to Congress for a national levee safety program. WRDA 2007 also requires Corps planning to consider the risk that remains behind levees and floodwalls, evaluate upstream and downstream impacts, and equitably analyze structural and nonstructural alternatives. This provision put in statute requirements similar to direction in agency planning guidance.\nHow WRDA 2007 provisions and previous congressional direction (see Appendix A ) are implemented and enforced, and whether the recommendations by the National Committee on Levee Safety (see Box 3 ) are pursued, may influence the nature of federal and local levee investments. However, levees represent only a portion of the nation's efforts at flood risk management.", "Recommendations for how to improve flood policy abound. Figure 2 illustrates how different tools can combine to lower risk, but that some risk will always remain. Often following a significant flood or hurricane, changes are made to implement some tools and improve existing programs, but other tools and changes are not pursued. A comprehensive strategy to realign floodplain management would confront many challenges and require dramatic changes in how local, state, and federal government agencies and programs operate. One proposal for a national strategy was the 1986 Unified National Program for Floodplain Management by the Interagency Task Force on Floodplain Management. It laid out a four-part strategy for a balanced approach to floodplain management (see Box 4 ). Implementing the risk reduction tools in this strategy would realign government programs to reward behaviors that decrease flood risk. Use of these tools also would represent a policy choice to shift more of the long-term costs of staying or locating in flood-prone areas from the federal government to local communities and individuals.", "The 2008 Midwest flood and Hurricane Ike will not be the last riverine flood or coastal storm to affect these areas and devastate communities. See Box 5 for a discussion of Hurricane Ike's impact on coastal communities and the challenge of recovery. To assist communities to rebuild in a more resilient manner, the Disaster Mitigation Act of 2000 ( P.L. 106-390 ) requires that each state and community must have a mitigation plan to be eligible for certain disaster assistance. This planning requirement represents an initial step in improving the identification of risks; however, these plans have not translated into mitigation actions and assessment being incorporated into community comprehensive plans. There is no requirement for catastrophic recovery planning in communities that face significant risk, such as Galveston. Such planning could assist recovery by vetting, prior to the disaster, preliminary needs, priorities, and plans for rebuilding. New Orleans after 2005 and the Texas coast, Cedar Rapids, and other severely affected Midwest communities after 2008 illustrate the challenge of undertaking an extensive recovery effort. It can be difficult to balance minimizing the disaster's disruption to the community and its economy and reestablishing a more resilient community.", "The 2008 Midwest flood, Hurricane Ike, and Hurricane Katrina have been recent reminders of the nation's flood risk. These events have raised both concerns about the state of the nation's flood policies, programs, and infrastructure, and awareness of the tradeoff between the benefits and risks of developing flood-prone areas.\nAfter the 1993 Midwest flood, Congress took several actions that departed from historic flood policies which relied heavily on structural solutions by providing more incentives and assistance for hazard mitigation. Nonetheless, many fundamental issues identified in reports following the 1993 flood remain today. Many federal, state, and local policies and programs continue to encourage floodplain development and use. Local-state-federal tensions over proper and respective roles and responsibilities continue to cloud resolution of difficult water resource issues and can slow recovery in disaster-affected communities. Flood damage reduction and mitigation projects are still largely authorized and implemented in piecemeal fashion, and water and related land use decisions and programs are rarely coordinated. Federal legislation enacted since 1993 generally has addressed individual programs or agencies, rather comprehensively dealing with the disparate federal policies, programs, and agencies influencing the nation's flood risk. In summary, although federal programs have improved through congressional and agency action since 1993, the fundamental direction and approach of national flood policies and programs remain largely unchanged.\nAppendix A. Congressional Flood Direction and Oversight\nCongress shapes how federal agencies implement their missions through authorization, appropriations, and oversight. To illustrate how Congress shapes federal agencies flood-related actions through legislative direction, Table A -1 provides a list of the direction that Congress has given to the Corps on how the agency should implement its flood damage reduction mission and conduct its flood studies and projects. How to use this direction in guiding implementation can be challenging when one provision of law may conflict with another. Table A -2 is a listing of flood-focused congressional hearings between the 1993 Midwest flood and 2008; the table illustrates the role and focus of congressional oversight. Table A -3 is a list of flood-focused reports by the GAO from 1993 through 2008; GAO reports investigate how the federal government spends taxpayer dollars in order to assist Congress in meeting its constitutional responsibilities and to help improve the performance and ensure the accountability of the federal government.\nAppendix B. Analysis of the Upper Mississippi River Comprehensive Plan\nWRDA 1999 authorized the Upper Mississippi River Comprehensive Plan (UMRCP). The UMRCP final report, which is dated June 2008, was transmitted to Congress on January 15, 2009. The UMRCP was conducted as a preliminary study, similar to the level of detail in a Corps reconnaissance study. The UMRCP final report and supporting documents are not at the level of detail of a feasibility study, which typically informs decision-making on construction authorization.\nThe UMRCP Preferred (But Not Recommended) Plan\nThe UMRCP final report states \"additional authority to implement the Comprehensive Plan is not being recommended nor requested at this time based upon the [national economic development] evaluation of alternative plans.\" Nonetheless, the UMRCP final report did identify a preferred alternative from among the fourteen analyzed; the alternatives were evaluated on multiple criteria, including environmental, social, and regional benefits. The report presented one \"no action\" alternative and thirteen other alternatives that would provide 500-year urban protection. These thirteen varied primarily on the level of protection and type of flood damage reduction actions taken in agricultural areas; the alternatives ranged from increase in existing protection to 500-year protection for agricultural areas.\nThe preferred alternative, known as Plan H, would provide a 500-year level of flood protection along the length of the mainstem of the Mississippi and Illinois Rivers (but not other tributaries) and ecosystem restoration benefits. The preferred plan would protect urban areas and towns with 500-year levees; for agricultural areas it would provide 500-year levees except where buyouts would be more cost effective. The UMRCP final report indicates that up to 39 levee districts would be bought out while 144 would have levees raised to 500-year protection. If buyouts of districts are implemented, there would be opportunities to pursue ecosystem restoration actions. The total initial cost for Plan H would be $4.42 billion ─ $3.97 billion for flood damage reduction construction, and $460 million for ecosystem restoration; these costs do not include operation, maintenance, and rehabilitation.\nMixed Recommendations on How to Proceed\nThe UMRCP final report indicates that none of the alternatives studied would meet the current economic test for federal participation of the plan's national benefits exceeding costs. Current guidelines exclude regional benefits from these calculations because regional benefits are viewed as transfers from one region to another, and do not produce national gains.\nThe thirteen UMRCP alternatives analyzed (excluding the no action alternative) had costs from $3 billion to $9 billion and benefit-cost ratios ranging from 0.03 to 0.07 for the national economic development benefits. For Corps projects, other than ecosystem restoration projects, a national benefit-cost ratio greater than 1.0 generally is used in gauging the economic attractiveness of the federal investment, consistent with the direction in the Flood Control Act of 1936.\nCongress is faced with deciding how to proceed given differing recommendations. Consistent with the UMRBC final report, the Assistant Secretary of the Army (Civil Works) in his January 2009 transmittal letter to Congress stated that \"recommendations for implementation of a specific plan based on a reconnaissance level of detail is premature.\" The Assistant Secretary instead recommended intermediate steps ─ expanding the UMRCP to include Mississippi River tributaries, conducting cost-shared studies of the reconstruction needs for the basin's existing flood damage infrastructure (where a federal interest is identified), and conducting a study of flood protection for critical transportation infrastructure such as bridge approaches and railroads.\nEarlier in August 2008, the Mississippi River Commission voted to support implementing the preferred alternative. The Commission believed that the full benefits of implementing the preferred alternative were not adequately measured with the current Corps project planning guidelines.\nIn 2008, the then-Governor of Illinois and the then-Governor of Missouri wrote letters of support for Plan M. Plan M at a total cost of $6.88 billion would provide 500-year protection without the option for agricultural district buyouts and without trying to minimize the impacts in the lower basin (i.e., Plan M would increase the height of floodwaters below St. Louis). Plan M would provide less ecosystem restoration opportunities than Plan H.\nA Plan with Limited Scope and Detail\nAlthough the study authorization was labeled as comprehensive and inclusive of some navigation maintenance and habitat management considerations, the authorized flood study did not fully integrate navigation, flood, and ecosystem management as recommended in the 1994 Galloway report. Instead, the Corps studied and obtained construction authorization for navigation and ecosystem restoration actions (in Title VIII of WRDA 2007, P.L. 110-114 ) separately from the flood plan.\nDue to the large study area for the flood plan, the Corps chose not to perform a comprehensive watershed analysis encompassing the entire 185,000 square miles, instead it limited the study to the Mississippi and Illinois River floodplain encompassing 4,000 square miles, and the only tributary that was included was the Illinois River. The Missouri River and smaller tributaries were excluded.\nFor the comprehensive flood plan, the Corps identified preliminary alternatives and scoped out the federal interest in the effort; the level of detail of the plan is compared to a Corps reconnaissance study. Therefore, the UMRCP final report and supporting documentation are not at the level of detail typically used to inform congressional decision-making regarding construction authorization.\nThe analyses used to support the UMRCP (e.g., counting as benefits the increased development opportunities behind levees ), the scoping of the study and the selection of alternatives studied, and whether nonstructural alternatives and enhanced floodplains were given equal consideration are some of the items that may be scrutinized as the final report is discussed. For example, the hydrology and hydraulics analysis supporting the UMRCP final report did not account for the effects on precipitation, runoff, and river crests from future changes in land use, population, and climate. Moreover, the scope of the UMRCP final report leaves out much of the areas most severely affected in 2008.\nVisions of the Future Floodplain\nWhether Plan H, particularly the raising of most agricultural levees to a significantly higher level of protection than currently available, contrasts with the vision of the future floodplain described in the Galloway report likely will be debated. The Galloway report stated:\nUrban centers whose existence depends on a river for commerce or whose locational advantage is tied historically to a floodplain would be protected from the ravages of devastating floods by means of levees, floodwalls, upstream reservoirs, or floodwater storage in managed upland and floodplain natural areas. Sections of communities with frequently flooded businesses or homes would become river-focused parks and recreation areas as former occupants relocated to safer areas on higher ground. In areas outside of these highly protected communities, where land elevation provided natural protection from floods, state and local officials would control new construction by requiring it to be at elevation well out of harm's way. Those who were at risk in low-lying areas would be relocated, over time, to other areas. … Outside of the urban areas, industry would protect its own facilities against major floods. Critical infrastructure, such as water and wastewater treatment plants, power plants, and major highways and bridges would be either, elevated out of the flood's reach or protected against its ravages. Much of the infrastructure, as well as the homes, businesses, and agricultural activities located behind lower levees, would be insured against flooding through participation in commercial or federally supported insurance programs.\nThe potential role of higher mainstem levees in increasing risk because of their encouragement of floodplain development and reduction in flood storage is an active part of the debate over the future of the basin's floodplains. The experience of extreme floodwaters along Mississippi River tributaries in the 2008 flood and differing visions for the future of the upper Mississippi River basin floodplains may be central to the debate about how to proceed with reducing flood risk in the Midwest and the UMRCP.\nRegional Development and the Federal Role\nAccording to the economic analysis used for the development of the UMRCP final report, the regional economic benefit of an alternative similar to Plan H would be $27.1 billion. The majority of regional benefits (79%) cluster in Illinois, with Iowa and Missouri receiving most of the remaining benefits. Therefore, regional stakeholders, particularly in Illinois, Iowa, and Missouri, may view plans, like Plan H and Plan M, as attractive investments. The majority of those regional economic benefits ($20.5 billion) are due to the increase in economic development behind the higher levees. Plan H potentially would open to development up to 215,775 acres. This potential for expanded economic development behind levees raises concerns regarding the residual risk behind levees and the evaluation of that risk in selecting Plan H as the preferred alternative. That is, it remains unclear the extent to which the flood risk reduction benefits of Plan H may be offset by the residual risk of more development behind levees. The methodology used in developing the study appears to be more similar to the traditional Corps flood damage reduction study, than a flood risk reduction study.\nAs well as noting that Plan H has not been thoroughly vetted with the public and stakeholders, the UMRCP final report stated:\nThere is likely to be limited Federal interest, based upon current guidance, in plan implementation by Federal agencies.… Regional or national oversight (e.g., the Mississippi River Commission) would be required to ensure the plan functions as a system over the implementation and operation phases of the project and project priorities are established to reflect the changing systemic needs.… The States of Illinois, Iowa, and Missouri need to agree on the plan and plan implementation to insure the plan is acceptable. The Corps could provide facilitation and technical support to this effort.\nIn effect, the UMRBC final report is identifying that the states could choose to further develop then implement one of the alternatives studied without significant federal leadership or funding." ], "depth": [ 0, 1, 2, 2, 3, 2, 1, 2, 2, 2, 1, 2, 2, 2, 2, 1, 2, 2, 1, 2, 2, 2, 3, 2, 3, 3, 1, 2, 2, 1, 2, 1 ], "alignment": [ "h0_title h2_title h1_title h3_title", "h0_full h3_full h2_full h1_full", "", "h0_full", "", "h1_full", "", "", "", "", "", "", "", "", "", "", "", "", "h0_title h2_title", "", "h2_full", "h2_full", "", "h0_title", "h0_full", "", "h3_full", "", "", "", "", "h3_full h2_full" ] }
{ "question": [ "To what extent are floods a risk in the U.S.?", "What conflicts exist in mitigation efforts?", "How is flood responsibility allocated?", "For what are local governments responsible?", "What is the role of state and federal units?", "What does the federal government do with regards to floods?", "What issues did the 2008 floods bring up?", "What differences exist between the 1993 and 2008 Midwest floods?", "How are the two floods similar?", "How has the Midwest flood risk changed?", "How has the flood risk changed since 1993?", "What actions has Congress taken?", "What is lacking in these efforts?", "What would a comprehensive strategy involve?", "What events renewed interest in improving flood resiliency?", "What issue does Congress face therein?", "What factors does it have to balance?", "What changes would Congress have to implement?" ], "summary": [ "Floods remain a significant hazard in the United States.", "Developing and investing in flood-prone areas represents a tradeoff between the location's economic and other benefits and the exposure to a flood hazard.", "In the United States, flood mitigation, protection, emergency response, and recovery roles and responsibilities are shared.", "Local governments are responsible for land use and zoning decisions that shape floodplain and coastal development.", "State and federal programs, policies, and investments influence community and individual decisions on managing flood risk.", "The federal government constructs some of the nation's dams and levees, offers flood insurance, supports nonstructural risk reduction actions (known as hazard mitigation), and provides emergency response and disaster aid.", "In June 2008, a series of storms in several midwestern states caused $15 billion in damages. The 2008 flooding drew comparisons to the devastating 1993 Midwest flood and raised questions about whether the lessons from the 1993 flood were heeded.", "In 1993, hundreds of levees throughout much of the basin were breached in the Midwest causing $30 billion in damages; much of the damage was agricultural and occurred in soaked upland areas. In contrast, the majority of the 2008 damages were concentrated along a few Mississippi River tributaries and in population centers with breached levees.", "The magnitude of the two floods simply overwhelmed the region's levees and dams, illustrating that some residual risk remains to people and investment behind these protective structures.", "Since 1993, emergency response and hazard mitigation programs have reduced risks in some Midwest communities; however, the region's flood risk continues to increase as more investments and people are located in flood-prone areas.", "Since 1993, Congress, federal agencies, state, and local governments have taken steps aimed at reducing the nation's flood risk; at the same time, climate, population, and investment trends have increased the threat, vulnerability, and consequences of flooding.", "For example, Congress authorized using federal disaster assistance to cover more of the costs to acquire, relocate or elevate flood-prone homes and businesses.", "However, broader efforts to adopt a comprehensive flood policy and management strategy have not been pursued. The fundamental direction and approach of the national policies and programs remain largely unchanged since 1993.", "A comprehensive strategy would require regulation of floodplain use, significant changes to federal programs, and increased investment in flood risk reduction by all levels of government. Although they would reduce flood risk, these changes face significant opposition.", "The 2008 Midwest flooding, Hurricane Ike in 2008, and Hurricane Katrina in 2005 have renewed interest in the suite of tools available to improve flood resiliency.", "The issue for Congress is deciding on whether and how to enact and implement feasible and affordable flood policies and programs to reduce flood risk.", "The challenge is how to structure federal actions and programs so they provide incentives to reduce flood risk without unduly infringing on private property rights or usurping local decision making.", "Tackling this challenge would require adjustments in the flood insurance program, disaster aid policies and practices, and programs for structural and nonstructural flood risk reduction measures and actions." ], "parent_pair_index": [ -1, 0, 0, 2, 2, 2, -1, 0, 0, 0, -1, 0, 1, 2, -1, 0, 1, 1 ], "summary_paragraph_index": [ 0, 0, 0, 0, 0, 0, 1, 1, 1, 1, 2, 2, 2, 2, 3, 3, 3, 3 ] }
CRS_R44614
{ "title": [ "", "Introduction", "Overview of Marketplace Lending", "Business Models", "Size and Growth", "Participants", "Marketplace-Lending Companies", "Funding Providers", "Banks", "Potential Opportunities", "Potential Industry Advantages", "Potential Beneficial Outcomes", "Potential Risks", "Potential Sources of Risk", "Potential Adverse Outcomes", "Regulation", "Existing Regulatory Framework", "Federal Securities Regulation", "Federal Consumer Protection Regulation", "State Laws", "Regulatory Issues", "Federal and State Regulation: Debate and Uncertainty", "\"True Lender\" and \"Valid When Made\"76", "Special Purpose National Bank Charter89", "Federal Supervisory Authority", "\"Originate-to-Sell\" and the Risk-Retention Rule", "Potential Future Developments", "Traditional Lender Response", "Performance in Recession", "Regulatory Developments", "Conclusion", "Appendix. Examples of Laws and Regulations" ], "paragraphs": [ "", "This report examines marketplace lending, a type of nonbank lending done by online companies that make loans to consumers and small businesses using innovative technology. The marketplace-lending industry has experienced rapid growth and, with that growth, an increase in scrutiny by regulators, the media, and the public. Marketplace lending could create both benefits and risks, and it raises several policy questions.\nThis report begins by providing an overview of the marketplace-lending industry. The report then analyzes the potential benefits and risks the industry creates. Next, it describes existing regulation relevant to marketplace lending before examining some regulatory issues surrounding the industry. The report concludes with an examination of possible future developments.", "Marketplace lending refers to certain online lending that relies on innovative financial technology, or f intech . The industry is rapidly growing and evolving, and companies are continually developing new variants of existing business models. In addition, incumbent lenders—including banks and nonbanks—are using and increasingly adopting some of the technologies and practices of marketplace lending to varying degrees. For these reasons, it is difficult to construct a concise definition that neatly divides all lending into either marketplace or not marketplace . Instead, this report will examine certain characteristics central to the business model of marketplace lenders, compare and contrast the characteristics with those of more traditional lenders, and examine issues regarding future performance and regulation of the marketplace-lending industry.\nMarketplace lending combines all of the following characteristics:\nLoans are made to individuals and small businesses. Marketplace lenders operate almost entirely online, with no physical retail space. Underwriting is almost entirely automated and algorithmic. Marketplace lenders are funded by issuing equity or selling loans to investors.\nThis report will treat marketplace lending as lending in which all of these characteristics are the basis for the lender's business model. Additionally, the following characteristics are common and important to an examination of the current state of the industry, although they are not universal across all marketplace lending:\nLoans are unsecured, small, and short term. Loans are sold whole or in pieces as a security or \"note\" backed by a single loan, as opposed to the more traditional practice of pooling many loans together into a security backed by payments made across that portfolio of loans.\nThese characteristics can be found across all types of lenders. For example, many banks and nonbank lenders may offer online and automated application processes. However, lending done by a bank will not be considered marketplace lending, because bank business models also involve physical retail locations, loan officers to underwrite loans, deposit-taking as a funding source, and a diverse menu of available financial services. Other forms of nonbank lending deviate from marketplace lending models in ways that include pooling many loans together into a single security.\nThe distinction between marketplace lending and traditional forms of lending is becoming increasingly blurred as marketplace lenders expand their activities and traditional lenders adopt the practices of marketplace lenders. Nevertheless, the characteristics listed above are pertinent to discussion of benefits, risks, regulatory issues, and possible future developments in consumer and small-business lending related to innovative financial technology and so will be the focus of this report.", "Marketplace lenders typically make relatively small and short-term loans that are unsecured by collateral. Most companies focus on a certain type of loan, such as personal, small business, or student loans, and the borrowers are usually individuals or small businesses. Interest rates on loans made through marketplace lending vary depending on the assessed creditworthiness of the borrower, but unsecured loans generally have relatively high interest rates regardless of the type of lender.\nMarketplace lenders rely solely on automated, online processes. A typical application process would require prospective borrowers to fill out online forms that provide information about themselves (such as employment status and income) and the size, term, and purpose of the loan they are seeking. Applicants also may be required to give permission to the lender to access other information, such as credit scores. An algorithm uses this information and perhaps other publicly available information to assess the creditworthiness of the potential borrowers. Borrowers are then quoted a rate, and, if borrowers accept, they can have the money within a few days. Many observers assert that the process is shorter and more convenient than traditional loan applications.\nMarketplace lenders may hold loans once they have been originated or sell the loans to investors. Direct lenders , or balance - sheet lenders , hold most or all of the loans on their own balance sheets, earn the interest on the loans, and face the credit risk if a borrower does not repay, as shown in the top panel of Figure 1 . These lenders typically raise funds to make loans by issuing equity to large investors, such as hedge funds and venture capitalists. Direct lenders are increasingly using new methods to raise funds, which make these lenders increasingly resemble more established nonbank lenders. In cases where an online lender securitized many loans that the lender originated, the lender would not be engaged in marketplace lending as described in this report.\nIndirect lenders , or platform lenders , rarely hold loans themselves. Instead, they match individual loans to investors that want to purchase the loans, as shown in the bottom two panels of Figure 1 . Prospective loan investors—individuals, financial institutions, or investment funds—select loans with interest rates and risk profiles that they want to own to earn interest. When investors have committed to fund a loan, marketplace lenders use a partner bank to originate the loan. The marketplace lender buys the loan from the bank and then sells the loan to the investors, often using an instrument called a payment dependent note , which directs payments to the investor based on the performance of the loan. Generally, these marketplace lenders earn origination and servicing fees on the loan and do not face losses in the event of a default.", "Marketplace lending is small relative to total personal and small-business credit outstanding in the United States. According to one industry data provider, marketplace lenders originated almost $26 billion of loans in 2017, an increase of 34% from the $19 billion originated in 2016. However, this figure accounted for less than 1% of the total consumer and small-business loan market, as total consumer credit outstanding was more than $3.8 trillion and nonfinancial, noncorporate business loans outstanding—a category that includes many small-business loans—totaled about $1.5 trillion at the end of 2017.\nHowever, growth in recent years has been rapid. Marketplace origination experienced an annual compounding growth rate of 163% between 2011—when originations were $473 million—and 2015. One market analysis predicts originations could grow to $90 billion by 2020. Another analysis identified $386 billion in personal and small-business lending that potentially could migrate from banks to marketplace lenders by sometime between 2020 and 2025.", "The borrowers in the marketplace lending industry are individuals and small businesses. Making the loan involves the marketplace lender, funding providers, and sometimes banks.", "One online compendium lists 111 marketplace lenders operating in the United States but does not claim to be exhaustive. Many of these marketplace lenders are still small, but a few prominent companies are originating billions of dollars of loans. For example, Lending Club focuses on personal loans and originated $9.0 billion of loans in 2017, and OnDeck is a small-business lender that originated $2.1 billion in loans in 2017.", "Funding for the loans comes from both individuals and large institutional investors. Initially, the industry mostly relied on peer-to-peer lending , in which individuals invested small amounts to purchase a piece of a loan. However, large institutional investors—such as hedge funds and private investment firms—have become an increasingly important source of funding in recent years through whole loan purchases and equity investments. Matching specific loans to individual investors was initially a very distinctive characteristic of marketplace lending, and the migration toward institutional funding makes the industry increasingly similar to incumbent nonbank lenders.\nThis transformation likely has several causes. Marketplace lenders had to establish a track record of low delinquency and charge-off rates before institutional investors would purchase loans. Also, large investors are searching for assets with relatively high yields in a low-interest-rate environment. Finally, some institutional loan owners have had success securitizing marketplace loans.", "Some banks are collaborating with the new marketplace lenders in a variety of ways. As mentioned earlier, indirect lenders use an issuing bank to originate loans for a fee, which the indirect lender buys within a few days. Although this business model is widely used and involved in issuing billions of dollars of loans, only a few specialized banks currently participate.\nSmall and large banks are involved in marketplace lending as purchasers of loans. According to reports, one marketplace lender finances almost 10% of its loans with small banks, and another reportedly has an agreement with a single bank that allows the bank to purchase up to 25% of the lender's loans. Typically, banks apply their own automated filters on loan characteristics to determine which loans they want to purchase. This arrangement allows banks to use the low-cost underwriting of marketplace lenders without having to create their own online platforms. Banks are able to acquire loans that they otherwise may not originate themselves because of high underwriting and servicing costs relative to the income generated by small loans. However, the borrowers in such arrangements often are not aware of a bank's involvement. Thus, a bank may not able to build customer relationships or offer additional products, as it would if it made the loan itself.\nBanks also enter into arrangements with marketplace lenders in ways that allow the banks to maintain closer relationships with the borrowers. In referral partnerships, a bank will refer customers—usually those who do not meet underwriting standards or are looking for a product the bank does not offer—to a marketplace lender. Often the bank collects a fee from the lender, but the interaction with the borrower may allow the bank to establish or maintain a business relationship.\nWhite label or co-branded partnerships allow banks to be more closely associated with the provision of credit to a customer, while still taking advantage of the cost advantages of a marketplace lender. These partnerships are also an example of how marketplace-lending activities are increasingly being adopted by traditional lenders. In these partnerships, a bank sets underwriting standards, originates the loans, and holds the loan once issued. The marketplace lender sets up the online application platform and automation of the underwriting. In this case, the lending ceases to be marketplace lending in the sense that this report uses the term, as the marketplace lending company acts as a third-party vendor for a bank.", "Some industry observers assert that marketplace lending has inherent advantages over traditional lending, including the following:\nCost structures may be lower. Underwriting may be more accurate. The application and underwriting processes may be faster, more convenient, and more aligned with certain customer preferences for financial-service delivery.\nProponents argue that these advantages will allow marketplace lending to continue to grow and transform the way individuals and small businesses acquire credit. Furthermore, proponents assert that the changes will provide an opportunity for improvements in financial and societal outcomes:\nCredit could become less expensive for individuals and small businesses. Credit could become more available, especially for traditionally underserved or unserved market segments, such as small businesses and people with thin credit histories. Returns for credit investors could be higher.\nThis section analyses those arguments.", "Marketplace lenders likely hold operating - cost advantages over banks, because online-only application processes, automated underwriting, and a lack of branch infrastructure keep labor and overhead costs low. One analysis estimates that loan processing and servicing costs as a percentage of loan amounts were 61% lower for marketplace lenders than traditional banks. Whether marketplace lenders could hold operating-cost advantages over other nonbank lenders is not clear, but it is possible if older nonbank lenders have more costly legacy systems.\nSome analysts question whether marketplace lenders have a total cost advantage over banks, because banks have lower funding and marketing costs. Early analyses find that marketplace lenders' total costs as a portion of loan amount are similar to the largest banks. However, it may be too early to make these comparisons. Marketplace lenders have only recently begun to build their business, whereas the largest banks have achieved economies of scale that reduce average costs. Marketplace lenders' costs per loan may decrease as these lenders become bigger and refine their business models and practices. For example, the technology-driven innovations used to process and service loans are likely scalable, meaning costs will not increase substantially as lending volumes do. Therefore, operating-cost advantages could grow as the industry does.\nSome marketplace lending proponents argue that the automated underwriting used by marketplace lenders may be more accurate than traditional underwriting processes. Traditional lenders use income, debt, and credit score information—such as FICO scores, a measure of past debt-repayment performance—to assess the likelihood that a borrower will repay the loan. Whereas traditional credit scores are largely based on a customer's repayment performance on past debt, marketplace lenders may analyze more factors. Each company uses different variables in its proprietary algorithm, but data used in some algorithms may include information such as utility bill payment history, monthly cash flow and expenses, government records, internet presence, and social-network activity. Whatever advantage marketplace lenders may have in this area is precarious, because established lenders can adopt similar technologies and practices.\nAnother potential advantage that the marketplace-lending industry holds over incumbent bank and nonbank lenders is its ability to better satisfy the preferences of and reduce time costs for potential borrowers. Consumers are increasingly comfortable using the internet and mobile devices for the delivery of financial services, and many may value the speed and convenience offered by marketplace lenders. Whereas traditional lenders have to adjust legacy systems and existing infrastructure to use these technologies, marketplace lenders may be able to design their processes to fit current customer needs. However, certain traditional lenders possibly could update their large existing infrastructures to meet their customers' preferences at less cost than start-up companies could build a new infrastructure and customer base.", "Although there are no official data to accurately measure the effects of marketplace lending on financial markets and the economy, it is possible that the advantages described above could result in desirable outcomes, such as lower rates for borrowers, better returns for investors, and increased credit availability for some borrowers without access to bank credit.\nIf the costs of originating and servicing loans and the costs of losses from nonperforming loans (due to more accurate underwriting) are lower, then these savings could be passed on to consumers in the form of lower interest rates and lower loan fees. In addition, lowering the cost of making loans and reducing losses on the loans improves the efficiency of financial intermediation—the matching of a borrower's need for funds to a saver's or an investor's available funds. If marketplace lenders as intermediators are able to charge less to cover their costs, that could result in higher returns for the investor as well as lower costs for the borrower.\nAccurate underwriting using a greater number of factors could also result in the extension of credit to creditworthy borrowers that otherwise would not have been approved. Small businesses and people with a lack of credit history—many of whom are low-income earners, minorities, or immigrants—are often cited as being at particular risk of being denied credit, even if they may be creditworthy. Marketplace lenders could overcome two potential causes for this lack of available credit. One potential challenge facing traditional lenders is that small loans generate little revenue relative to large ones, but underwriting and processing a small loan carries similar costs to underwriting and processing a large one. Thus, traditional lenders may find it difficult to make small lending profitable, whereas a marketplace lender with lower underwriting and processing costs could profitably make those loans.\nAnother challenge to traditional lenders is that assessing borrowers with a lack of credit history—which is vital to traditional credit assessments through credit scores—may involve too much uncertainty about the likelihood of repayment. For marketplace lenders, innovative use of a wider array of data could reduce the uncertainty of credit assessments compared with traditional underwriting.\nThese improved outcomes need not necessarily come from marketplace lenders alone. Better credit availability also could be realized if traditional banks and nonbank lenders adopted similar methods to reduce costs and expand data usage in underwriting.", "Some observers are concerned that a great deal of uncertainty surrounds the marketplace lending industry. Skeptics argue that the industry is creating risks for borrowers, investors, and the financial system. The sources of potential risk include the following:\nUnderwriting accuracy and loan performance has not been tested by economic recession. Some marketplace lenders—including a number of the largest—generate revenue from origination fees but do not hold the resultant loans and are not subject to risk-retention rules, possibly creating an incentive to make excessively risky loans. Funding availability and demand for loans has been high during a period of economic expansion with low interest rates, but the ability to raise funds and attract borrowers in other economic conditions is unproven. Servicing of loans in the event of a failure of a marketplace lender could be disrupted.\nThese risks potentially threaten the borrowers of and investors in marketplace loans, marketplace lending companies themselves, and—if marketplace lending grows sufficiently in coming years—the financial system. The adverse outcomes could include the following:\nLoan delinquency and default rates could grow to an unexpectedly high rate, harming borrowers' future credit availability and inflicting large, unanticipated losses on investors. Credit determinations by marketplace lenders could disparately impact minorities and other protected groups. Loan demand or funding for marketplace loans could contract to the point that marketplace lenders fail, potentially stopping the flow of payments to loan investors. If the industry grows sufficiently large in the future, bad underwriting, large losses on marketplace loans, or marketplace lender failures could create systemic stress.\nThis section analyses those arguments.", "The accuracy of the data-driven algorithms used by marketplace lenders is hard to determine without a long history of data for these types of loans to compare their performance with that of traditionally originated loans. Importantly, marketplace lending has only grown into a substantial financial activity during the current expansion, when loans of almost all types are expected to perform well. All new lending companies and underwriting methods remain untested for a period, but the rapid growth of marketplace lending has occurred during relatively favorable economic conditions, which could create a concentration of underwriting risk. A more revealing test will come during the next economic downturn, when delinquency and default rates across assets can be expected to rise.\nSome observers are concerned that certain marketplace-lending companies could be threatened by changing economic conditions. Marketplace lenders need to continually attract both borrowers demanding loans and investors willing to fund loans. Lenders have been able to do this successfully in recent years, but exclusively in a time of economic expansion and low interest rates. During expansion, credit demand is relatively high, which results in more loans to originate. Investors have been willing to fund relatively high-interest-rate loans, potentially because investors are seeking out higher rates of return in a low-rate environment. When these conditions change, marketplace lending may not remain viable.\nBanks and some nonbank lenders, by contrast, may be better able to withstand a change in these conditions. Unlike many indirect marketplace lenders, banks and nonbank companies that hold assets on their balance sheets will earn interest on those assets and their portfolios of loans, and other assets may be more diversified than those of direct marketplace lenders. Additionally, deposits give banks a source of stable funding.\nSome finance companies—nonbank lenders that hold consumer and business loans and leases on their balance sheets—share important characteristics with marketplace lenders; they make loans and rely on market funding rather than deposits. The experience of finance companies during the financial crisis illustrates the potential risk marketplace lenders face. When market funding contracted, many finance companies failed or were bought by banks.\nCertain aspects of some marketplace-lender business models could create incentives to weaken underwriting and originate bad loans. Many marketplace lenders originate a loan for a fee but do not hold the loan on their balance sheets. If the borrower defaults, the loan investor bears the loss. Thus, a marketplace lender could make bad loans and collect fees but not suffer the ensuing losses, potentially creating the incentive to make bad loans. This activity is also common among traditional bank and nonbank lenders, but these lenders are subject to risk-retention rules—which will be discussed in more detail in the \" Regulatory Issues \" section—designed to mitigate this risk. However, marketplace lenders are generally not subject to these rules, provided they do not pool numerous loans together into a single security. Such originate-to-sell models concern some observers.\nThe potential for marketplace-lender failure creates uncertainty surrounding loan servicing—a process that includes taking payments from borrowers and delivering these payments to the investors. After marketplace lenders sell loans, they often still perform loan servicing for a fee. Typically, when a mortgage servicer fails the servicing rights are quickly reassigned. Whether a marketplace-lending company would be able to continue to process these payments or transfer the mortgage servicing to another company in the event of a failure is unclear. This risk exists for any mortgage servicer, but the risk of disruption may be greater at marketplace lenders that are relatively inexperienced.", "Borrowers could potentially be harmed in several ways as a result of these risks. Faulty underwriting could result in borrowers being rated as being a higher credit risk than they actually are and having to pay unnecessarily high interest rates. Alternatively, if the underwriting is too lenient, loans could be made to borrowers that lack the ability to repay the loans. Defaulting would then restrict these borrowers' future access to and prices paid for credit.\nAnother possibility is that the algorithms and data used in automated underwriting could make credit assessments that are correlated to borrower characteristics protected by fair-lending laws, such as race or gender. Whether this correlation were intentional or unintentional, it could result in borrowers from a protected group being disproportionately denied credit or charged higher interest rates compared with other groups.\nInvestors in marketplace loans also face risks related to the accuracy of credit assessment. Proprietary underwriting systems' lack of a track record through all types of economic and credit conditions introduces uncertainty regarding the future performance of marketplace loans. If the underwriting proves to be inaccurate, investors could be buying inappropriately high-risk loans and eventually could suffer unexpected losses.\nThe failure of marketplace lending firms is not problematic per se. Uncompetitive or unsustainable business models failing and equity holders suffering losses after taking informed risks is a central dynamic to a market economy. However, widespread failure of marketplace lenders—especially if these lenders grow to the point that they provide a substantial amount of credit to consumers and small businesses—could lead to a sharp contraction in the availability of credit to the economy. Also, because marketplace lenders often service loans they make, marketplace lenders' failure could disrupt payment to investors from performing loans.\nAnother potential future issue is systemic risk from marketplace lenders. Currently, marketplace lending is likely too small relative to total credit outstanding to cause stress across the financial system if loan defaults were to rise or marketplace lenders were to fail. However, the industry is growing rapidly, and its investors include individual savers and large institutional investors. Banks buy marketplace loans and enter into a variety of agreements and arrangements with marketplace lenders. If the size and interconnectedness of marketplace lending continues to grow, the industry risks could threaten systemic stability in coming years.", "Marketplace lending is subject to federal and state regulations and requirements. The rules are numerous but will be generally described here in three groups:\nSecurities registration and disclosure. Consumer protection and fair-lending compliance. State-level regulatory requirements.\nAlthough marketplace lending is subject to these rules and regulations, the existing regulatory system was designed prior to the advent of online marketplace lending. As a result, there is some uncertainty related to how regulation should be applied and how effective it can be. Some issues include the following:\nPotentially uncertain, inconsistent, or unnecessarily burdensome application of state regulation. Potential lack of supervisory oversight. Lack of risk-retention requirements.", "Making loans and selling whole loans, loan notes, or equity to investors are well-established financial activities, and participating firms are subject to many existing regulations and requirements involving both federal and state regulatory agencies. Examples of federal regulations are listed in the Appendix . This section focuses on certain issues concerning securities issuance, consumer protection and fair lending, and regulations at the state level.", "The objective of securities law is to ensure that investors have enough information to make informed judgments and to prevent investors from being defrauded. The Securities Act of 1933 (P.L. 73-22) generally requires issuers that make a public offering of securities —which would include marketplace lenders raising funding by selling loan notes or issuing equity to the general public —to register securities with the Securities and Exchange Commission (SEC). The act also requires that issuers of securities provide investors with a public disclosure containing detailed information about the issuer and the relevant securities, including descriptions of the issuing company and securities, financial statements, and a discussion of risk factors. Companies issuing registered securities also must fulfill ongoing reporting requirements related to their financial condition under the Securities Exchange Act of 1934 (P.L. 73-291).\nCertain marketplace lenders may be able to forego registration of their securities with the SEC if they meet criteria that qualify them for an exemption from registration. Some of these exemptions restrict funding sources and marketplace lender size. For example, a marketplace lender that offered securities online could be exempt from SEC registration under Regulation A or Regulation D.\nCompanies can also qualify for reduced reporting requirements as an \"emerging growth company\" if they meet certain criteria, including annual revenues of less than $1.07 billion.\nRegardless of whether the securities are registered or unregistered, marketplace lenders would be liable for investor losses if the offering materials they provided contained materially false information or omitted important information. Borrower-provided information could potentially create such a liability. Marketplace lenders verify much, but not all, of the information borrowers include in applications, some of which could be incorrect. Marketplace lenders have addressed the problem by stating in their offering materials what borrower information is unverified and specifying that investors assume the risk that this information is unverified.\nSecurities issued by marketplace lenders backed by a single loan generally have not been treated as asset-backed securities (ABS) subject to the risk-retention rule by regulators. The purpose of this regulation is to incentivize prudent lending. ABS are defined as securities backed by a pool of assets. Most marketplace lenders issue notes backed by a single asset, an individual loan. This distinction allows marketplace lenders to avoid certain reporting requirements and risk-retention rules—prescribed by The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 ( P.L. 111-203 )—that require ABS issuers to retain a stake in the assets underlying an issuance.", "When marketplace lenders make loans to consumers, the lenders are subject to consumer-protection laws. The Truth in Lending Act (P.L. 90-321) requires that lenders provide consumers with standardized, easy-to-understand information about the terms of the loan. The Equal Credit Opportunity Act ( P.L. 94-239 ) prohibits lenders in a credit transaction from considering a borrower's race, color, sex, age, religion, national origin, marital status, or whether the borrower receives income from public assistance. Also, the method used to determine creditworthiness generally must not have a disparate impact on those groups based on any of these characteristics. The Dodd-Frank Act prohibits unfair, deceptive, and abusive acts and practices in consumer lending, and the Federal Trade Commission Act (P.L. 75-447) prohibits unfair or deceptive acts and practices in or affecting commerce, including lending. Consumers are also protected by laws related to debt collection, privacy, and credit-reporting practices, all of which may apply to marketplace lenders when their activities fall within the scope of these laws. Additional federal laws and regulations apply, but an exhaustive examination is beyond the scope of this report.\nThe Consumer Financial Protection Bureau (CFPB) and the Federal Trade Commission (FTC) are two important agencies involved in regulating marketplace lending. The CFPB has the authority to enforce federal consumer-protection laws, and nonbank lenders—including marketplace lenders—are generally subject to this enforcement authority. The CFPB also has rulemaking authority over consumer lending, including for rulemaking that prohibits unfair, deceptive, or abusive acts and practices. The FTC has enforcement authority of certain consumer-protection statutes. The FTC also has regulations in place prohibiting certain abusive terms in credit contracts.\nIn addition, under certain circumstances, marketplace lenders may be subject to consumer compliance requirements and supervision by federal bank regulators—the Federal Reserve, the Office of the Comptroller of the Currency, and the Federal Deposit Insurance Corporation—an issue that will be covered in more detail in the \" Federal Supervisory Authority \" section.", "In addition to federal securities and lending laws, many marketplace lenders are subject to related state-level laws in states in which they operate. The issuer of securities sometimes has to register the securities with a state securities commission and may have to renew that registration periodically. The state commission may have the authority to deny registration of any security it judges to be unsuitable for sale. Individual states also have laws prohibiting unfair or deceptive trade practices. Each state may require a marketplace lender to get one or more licenses to operate as a lender, broker, or debt-collection agency, depending on the state's requirements. Finally, certain states have laws that limit the amount of interest and fees a lender can charge for certain loans.\nState laws and regulations—and the related obligations and costs they impose on certain marketplace lenders—raise interrelated policy questions related to what degree marketplace lenders should be subject to federal- or state-level laws and regulations. These questions are covered in more detail in the \" Federal and State Regulation: Debate and Uncertainty \" subsection in this report.", "Policymakers developed much of the existing regulatory framework before marketplace lending emerged, and observers have raised questions about the effectiveness and efficiency of current regulation as it relates to this industry. Proponents of marketplace lending highlight certain issues that they argue are unnecessarily hindering the growth of a beneficial source of credit. They assert that certain court decisions have created uncertainty regarding how existing laws and regulations will be applied to marketplace lenders and the loans they make. In addition, they argue that complying with 50 different sets of state laws and regulations is unnecessarily burdensome.\nBy contrast, some observers have expressed concern over whether current regulations appropriately address the risks posed by marketplace lending. They question whether regulators have the necessary authorities—such as supervisory authority—to adequately monitor the industry and whether existing regulation appropriately mitigates risks associated with the \"originate-to-sell\" business model used by many marketplace lenders. A related concern is that certain marketplace lenders may be practicing regulatory arbitrage—meaning they are designing their business models and activities specifically to circumvent certain regulations. If this were the case, it would mean that although the risks presented by marketplace lenders are not fundamentally different from those presented by other, more established lenders, they nevertheless are subject to regulation that is more lenient.\nThis section will cover issues related to the following:\nUncertainties over the degree to which federal or state laws and regulations apply to particular marketplace lenders and certain proposed solutions to create clarity; Supervisory authorities in regard to marketplace lenders; and Originate-to-sell models used by many marketplace lenders.", "In many cases, marketplace lenders are required to obtain applicable state licenses and are subject to state regulatory regimes regarding lending and securitization in each state in which they operate. Certain proponents of the industry have argued that in certain cases, state-by-state regulation is unnecessarily onerous, is inefficient, and hinders the growth of a potentially beneficial industry. They contend that federal bank regulations should apply to certain marketplace lending and preempt state law. Other observers, including customer advocacy groups and state regulators, have argued that state-level regulations provide important oversight and consumer protections that marketplace lenders should not be allowed to circumvent.\nIn addition to debates over whether federal or state rules should apply, recent court rulings have created uncertainty regarding the circumstances in which federal or state law will apply. Policymakers have made certain proposals intended to provide clarity on these issues. For example, bills that would provide clarity on the legal issues in question have been introduced in the 115 th Congress, and the Office of the Comptroller of the Currency (OCC) has announced that it will accept applications for national bank charters from certain fintech companies, such as marketplace lenders. These proposals generally seek to ensure that federal law will preempt certain state regulations of marketplace lenders. As a result, observers that view state regulations as unduly burdensome typically support these proposals, and those that view state regulations as necessary and appropriate oppose them.", "State usury laws and other state-level requirements are likely a factor in why some marketplace lenders use an indirect lending business model. Recall that in this model, a Federal Deposit Insurance Corporation (FDIC)-insured bank originates the loans and the marketplace lender sells a note backed by the loan to investors. The indirect lending arrangement may allow indirect marketplace lenders to avoid being subject to individual state laws. Generally, federal law provides that FDIC-insured banks are subject to the usury laws of only the state in which they are incorporated, even when lending to borrowers in other states with stricter usury laws. Federal law accordingly preempts the application of state usury laws to FDIC-insured banks by allowing FDIC-insured banks to \"export\" the maximum interest rates of their \"home\" states when lending to borrowers in other states.\nRecently, certain judicial decisions have created uncertainty over whether states may enforce their usury laws against nonbanks that purchase loans from FDIC-insured banks. Specifically, these decisions have generated uncertainty regarding the circumstances in which nonbanks, which do not have the right to \"export\" the maximum interest rates of their \"home\" states when they originate loans to borrowers in other states, acquire that right with respect to loans they purchase from FDIC-insured banks. A detailed legal analysis of such cases is beyond the scope of this report. What bears mentioning here is that until recently, nonbanks that purchased loans from FDIC-insured banks generally have assumed that they are entitled to federal preemption of state usury laws with respect to those loans under the \"valid when made\" principle. According to the \"valid when made\" principle, which has been endorsed by some courts in certain contexts, a loan that is nonusurious (and thus valid) when originated remains nonusurious irrespective of the identity of its subsequent purchasers. However, several recent judicial decisions have cast doubt on whether the \"valid when made\" principle allows nonbanks to benefit from federal preemption.\nA number of courts have held that arrangements pursuant to which nonbanks engage in significant \"lender-like\" activities in connection with loans, such as soliciting borrowers and making credit decisions, and direct partner banks to originate the loans (so-called \"rent-a-charter\" schemes), do not benefit from federal preemption of state usury laws. These courts have concluded that based upon the economic realities of the relevant transactions, the nonbanks are the \"true lenders\" and are not entitled to federal preemption.\nMoreover, in 2015, the U.S. Court of Appeals for the Second Circuit held that federal law did not preempt state-law usury claims brought against a nonbank debt collector that had purchased debt from a national bank even in the absence of such a \"true lender\" claim. The court arrived at this conclusion despite the fact that the plaintiff had not alleged that the debt collector was the \"true lender\" because the court reasoned that the application of state usury law to the debt collector would not significantly interfere with the national bank's ability to exercise its federally conferred right to \"export\" the maximum interest rate of its \"home\" state.\nThese decisions present some marketplace lenders with legal uncertainty. Currently, indirect marketplace lenders generally rely on an understanding that the banks they partner with are the \"true lenders,\" and that they benefit from federal preemption with respect to the loans they purchase from these banks. If this is not actually the case, marketplace lenders may have to adjust their business models to ensure that they comply with the usury laws of all of the states in which they operate.\nA number of bills in the 115 th Congress are intended to address these uncertainties and clarify issues related to third-party loan arrangements. H.R. 4439 , which was referred to the House Committee on Financial Services in November 2017, would establish guidelines for when a bank is a \"true lender.\" Section 581 of H.R. 10 and H.R. 3299 (which passed the House in June 2017 and February 2018, respectively), and S. 1642 (which was referred to the Senate Banking Committee in July 2017) would codify the \"valid when made\" principle. Proponents argue that these bills would resolve the uncertainty involving \"true lender\" questions and the \"valid when made\" doctrine, and thus allow increased credit availability through third-party relationships. Opponents argue such bills would inappropriately undermine important state-level consumer protections.", "One possible avenue to resolve some uncertainty facing certain marketplace lenders (and other financial technology firms performing bank-like activities) would be to allow them to apply for and, provided they meet all necessary requirements, to grant them national bank charters. In this way, these companies would be explicitly subject to all laws and regulations applicable to national banks, including those that preempt state law. In December 2016, then-Comptroller of the Currency Thomas Curry announced that the OCC would examine whether certain financial technology companies would be eligible to receive a special purpose national bank charter, and the OCC released a whitepaper examining the issue and calling for public comments. On July 31, 2018, the OCC issued a policy statement announcing that it would consider \"applications for special purpose bank charters from financial technology (fintech) companies that are engaged in the business of banking but do not take deposits.\"\nUntil the OCC actually grants such charters and marketplace lenders operate under the national bank regime for some amount of time, determining the benefits and costs of these fintech charters will be speculative to a certain degree. Importantly, marketplace lenders are not required to obtain an OCC charter, but rather they have the option to do so. How many will elect to apply to enter the national bank regime and be approved by the OCC is still an open question.\nIn addition, the OCC stated that fintech firms granted the charter \"will be subject to the same high standards of safety and soundness and fairness that all federally chartered banks must meet,\" and also that the OCC \"may need to account for differences in business models and activities, risks, and the inapplicability of certain laws resulting from the uninsured status of the bank.\" How the specific parameters of the new charters strike that balance in practice may significantly affect what the outcomes of issuing fintech charters will be. If the OCC is too accommodative of marketplace lenders, they could gain the advantages of a national bank charter without being subject to sufficient prudential safeguards and consumer protections. Not only could this generate inappropriately large risks, it could give marketplace lenders an advantage over traditional banks. If the OCC is too stringent, then there may be no incentive for marketplace lenders to apply for a charter, making it an ineffective solution to the challenges the charter is aimed at addressing.\nFinally, the OCC's assertion that it has the authority to grant such charters may be challenged. Shortly after the initial 2016 announcements that the OCC was examining the possibility of granting the charters, the Conference of State Bank Supervisors and the New York State Department of Financial Services sued the OCC to prevent it from issuing the charters on the grounds that it lacked the authority to do so. However, a federal district court dismissed the case after concluding that because the OCC had not yet issued charters to nonbanks, the plaintiffs (1) lacked standing to challenge the OCC's purported decision to move forward with chartering nonbanks, and (2) had alleged claims that were not ripe for adjudication. Since the dismissal, state regulators have expressed their intent to file new legal challenges if the fintech charters are granted. Given the OCC's July 2018 announcement, it appears state regulators may soon have the opportunity to do so.\nNotwithstanding these uncertainties, observers have made assessments on the advisability or inadvisability of making a national bank charter available to marketplace lenders. Proponents of the idea generally view the charter as a mechanism for freeing companies from what they assert is the unnecessarily onerous regulatory burden of being subject to numerous state regulatory regimes. They further argue that this would be achieved without overly relaxing regulations, as the companies would become subject to the OCC's national bank regulatory regime and its rulemaking, supervisory, and enforcement authorities. Opponents generally assert both that the OCC does not have the authority to charter these types of companies, and that doing so would inappropriately allow marketplace lenders to circumvent important state-level consumer protections.", "Marketplace lenders—like many nonbank lenders—are generally not subject to the same federal supervisory oversight as banks. Although many laws and regulations apply to marketplace lenders, federal regulatory oversight and checking for compliance is generally less active ex ante than it is at banks, where examiners periodically check if the institution is complying with regulations.\nHowever, in the event that marketplace lenders apply for and are granted special purpose national bank charters as proposed by the OCC, they would become directly subject to the OCC's supervisory authority. In addition, as third-party vendors, indirect lenders that partner with banks that originate loans are subject to supervision if the bank's regulator chooses to examine them. Even if the regulator chooses not to directly supervise an indirect marketplace lender, its supervisory authorities could indirectly set parameters on marketplace lender behavior. The partner bank is \"ultimately responsible for managing activities conducted through third-party relationships\" in the eyes of the regulator, and so the bank has incentive to monitor and demand certain standards of partners in business relationships.\nSome observers, though, are concerned that as currently constructed, this situation creates opportunities for marketplace lenders to harm borrowers. For example, direct lenders are not subject to federal oversight, because their lending activities do not involve a partner bank. If policymakers determine that greater federal oversight is necessary, one possible avenue would be to subject them to CFPB supervision. The CFPB has certain authorities to supervise nonbanks under certain circumstances. The CFPB may supervise nonbanks that originate, broker, or service mortgage loans; \"larger participants\" (as defined through CFPB rulemaking) in markets for consumer financial products or services; payday lenders; private education lenders; and entities which the CFPB has reasonable cause to determine pose risks to consumers with regard to the offering or provision of consumer financial products or services. Thus, the CFPB may be able to place certain marketplace lenders that are large or have questionable business practices under its supervision, though it has not yet done so. If Congress determined marketplace lenders should have closer federal supervision, it could direct the CFPB or another agency to do so through legislation.", "When marketplace lenders sell a single loan or pieces of a single loan, they generally have not been required to adhere to risk-retention rules, which apply to issuers that pool many loans together into a single security, a common practice at banks and nonbank lenders. Risk-retention rules were adopted after the financial crisis in an effort to prevent imprudent lending by institutions originating loans with the intent to securitize them. The rules generally require an institution that securitizes loans into a pooled security to hold a portion (usually 5%) of the underlying assets on its balance sheet. Potential loss from loans defaulting is an incentive for the originator to maintain careful underwriting practices and not make excessively risky loans. Some observers assert that marketplace lenders face the same incentive to weaken underwriting that issuers of pooled securities do and should be subject to the rule. Others assert that risk retention is unnecessary because, among other reasons, the simplicity of a single loan—unlike a security backed by numerous loans and featuring complex structures regarding returns to investors—makes it easier for an investor to understand the risks she is taking.", "The marketplace-lending industry is young and involves a degree of uncertainty. Several developments could reveal more about the future of the industry, including the following:\nTraditional lender response to new innovations and companies. Marketplace lending performance during and after a recession. Resolution of outstanding regulatory issues.", "Incumbent lenders may respond to the emergence of marketplace lending in several ways, including no longer competing for small, unsecured loans; adopting the technology and practices of marketplace lenders; and entering into cooperative relationships with marketplace lenders. How the market develops and to what extent marketplace lending becomes part of traditional bank and nonbank lending practices may affect how the regulatory system will respond.\nSome banks may choose not to compete directly with marketplace lenders. Small loans have low profit margins compared to large ones. Banks may decide that their business models, which require branch infrastructure and higher regulatory costs, should not include making small, unsecured loans. By not competing in this market, banks would avoid the costs of setting up their own online, automated systems or changing their application and underwriting systems, while losing only unprofitable customers. However, banks would risk later losing market share of more profitable segments if marketplace lending continues to grow and branch out into more profitable market segments.\nAlternatively, banks could choose to compete directly with the emergent companies. One option for banks would be to independently start their own online, automated platforms and use more data in underwriting. All loans or certain loans that align with a bank's own underwriting standards could be held on the balance sheet, and capabilities to match loans with investors could also be developed. By developing their own platforms, banks could bring the efficiencies of marketplace lenders into their own business models. Alternatively, banks could purchase existing online marketplace lenders and make them part of the bank's organization. The risk associated with developing a platform or purchasing an existing one is that it would require a potentially large investment in an area outside bank expertise. Another, more concerning possibility is that in competition for market share, banks may weaken underwriting to generate more originations, potentially leading to loan losses.\nAnother option that banks are commonly pursuing is to enter into a collaborative relationship with marketplace lenders, as discussed in the \" Participants \" section. For most banks, this approach means investing in loans originated by online lenders or contracting with marketplace lenders to create an online, automated platform for the bank. These arrangements could allow banks to share in some of the benefits of marketplace lending and to commit to smaller additional costs.", "Many uncertainties about marketplace lending will likely be clarified after the industry has been active during an entire economic cycle with a recession. Loan demand and funding availability likely will decline during adverse economic conditions, and whether marketplace lenders fail will reveal more about the sustainability of the business models. In addition, potential investors and market analysts will be able to more meaningfully compare delinquency and default rates of marketplace loans relative to other lenders after a complete credit cycle, and the industry's relative performance may affect funding availability either positively or negatively.", "As the marketplace lending industry develops, industry participants and policymakers will likely closely observe how laws and regulations are applied to marketplace lenders and what effect those applications have on the industry's growth and development. Based on those observations, policymakers likely will have to make determinations on where the existing framework appropriately regulates the industry—in such instances no action will necessarily be taken—and where regulation needs to be changed. For example, as marketplace lenders apply for and are granted special purpose charters, it will create clarity about the characteristics and parameters of that regime. Policymakers could determine a federal agency or agencies should take a more active role in the direct oversight of marketplace lenders, which may require a statutory change depending on the current supervisory authority of regulatory agencies. If policymakers determine the originate-to-sell business models used by marketplace lenders present sufficiently similar risks as those used by traditional loan securitizers, risk-retention rules could be applied to the marketplace lenders. Other uncertainties related to \"true lender\" and \"valid when made\" questions may be resolved judicially or through legislation.", "Marketplace lending is a rapidly growing and evolving industry involving new firms and technologies, individual borrowers and savers, institutional investors, and banks. The industry's lack of track record and its interconnectedness result in many areas of uncertainty. Opportunities for benefits exist for borrowers (including underserved borrowers), investors, and the financial system, but these opportunities come with potential risks. The current regulatory system aims to balance benefits and risks, but it was developed before marketplace lending became prevalent. As a result, it is not clear how effectively the existing system will regulate the marketplace-lending industry. As the industry matures and if regulatory issues are resolved, the effects of marketplace lending for the financial system and the economy will become clearer.", "" ], "depth": [ 0, 1, 1, 2, 2, 2, 3, 3, 3, 1, 2, 2, 1, 2, 2, 1, 2, 3, 3, 3, 2, 3, 4, 4, 3, 3, 1, 2, 2, 2, 1, 2 ], "alignment": [ "h0_title h2_title h4_title h3_title h1_title", "h0_full", "h0_full", "h0_full", "", "", "", "", "", "h0_title h1_full", "h1_full", "h0_full h1_full", "h0_title h2_full h1_title h4_title", "h0_full h4_full h2_full h1_full", "h4_full", "h3_full h2_title", "h3_title", "", "", "h3_full", "h3_full h2_full", "h3_title", "h3_full", "", "", "", "h4_title", "h4_full", "", "", "h0_full", "" ] }
{ "question": [ "What is marketplace lending?", "How do marketplace lenders operate?", "How does this make them more flexible than traditional lenders?", "How do traditional lenders sell loans?", "Why is the future of marketplace lending facing uncertainty?", "How could marketplace lending affect the availability of credit?", "How does marketplace lending differ from traditional lending?", "How is data analysis used by marketplace lenders?", "How can data analysis help borrowers with little credit history?", "Why is the future of the marketplace lending industry uncertain?", "Why might there be incentives for weak underwriting standards?", "How does the lack of oversight affect the industry?", "How are marketplace lenders regulated?", "To what extent were these regulations intended for marketplace lenders?", "What are perceived flaws with the current regulation?", "What is Congress' stance regarding markeplace lending?", "To what extent will lending change in coming years?", "How will traditional lenders likely change?", "What factors will likely change market place lending?" ], "summary": [ "Marketplace lending—also called peer-to-peer lending or online platform lending—is a nonbank lending industry that uses innovative financial technology (fintech) to make loans to consumers and small businesses. Although marketplace lending is small compared to traditional lending, it has grown quickly in recent years.", "In general, marketplace lenders accept applications for small, unsecured loans online and determine applicants' creditworthiness using an automated algorithm. Often, the loans are then sold—individually or in pieces—directly to investors (although holding the loans on their own balance sheet is not uncommon).", "More traditional lenders are more apt to use employees to make credit assessments and to have a greater need for office and retail space.", "Traditional lenders also may hold loans themselves, but when they sell loans they are more apt to package many loans together into large securities rather than to sell a single loan or pieces of a single loan, like marketplace lenders.", "Due to these differences and to marketplace lending's lack of industry track record, marketplace lending is facing uncertainty about its advantages, its risks, and how it should be treated by regulators.", "Some observers assert that marketplace lending may pose an opportunity to expand the availability of credit to individuals and small businesses in a fair, safe, and efficient way.", "Marketplace lenders may have lower costs than traditional lenders, potentially allowing them to make more small loans than would be profitable for traditional lenders.", "In addition, some observers believe the accuracy of credit assessments will improve by using more data and advanced statistical modeling, as marketplace lenders do through their automated algorithms, leading to fewer delinquencies and write-offs.", "They argue that using more comprehensive data could also allow marketplace lenders to make credit assessments on potential borrowers with little or no traditional credit history.", "Other observers warn about the uncertainty surrounding the industry and the potential risks marketplace lending poses to borrowers, loan investors, and the financial system. The industry only began to become prevalent during the current economic expansion and low-interest-rate environment, so little is known about how it will perform in other economic conditions.", "Many marketplace lenders do not hold the loans they make themselves and earn much of their revenue through origination and servicing fees, which potentially creates incentives for weak underwriting standards.", "Finally, some observers argue that lack of oversight may allow marketplace lenders to engage in unsafe or unfair lending practices.", "Marketplace lenders are subject to existing federal and state regulations related to lending and security issuance, and some observers assert that the existing system is appropriate for regulating this lending.", "However, existing regulations were developed and implemented largely prior to the emergence of marketplace lending.", "Some observers argue that current regulation is unnecessarily burdensome or inefficient. By contrast, others argue that regulatory gaps and weaknesses exist and regulation should be strengthened.", "Congress may consider policy issues related to these debates and uncertainties.", "The evolution of the regulatory environment facing marketplace lenders is just one development that likely will occur in coming years.", "Traditional lenders that compete with marketplace lenders will adapt to the market entrants and market conditions, perhaps adopting certain marketplace lender technologies and practices.", "In addition, marketplace lending has not been through an entire economic cycle, and rising interest rates or the onset of a recession likely will reveal certain strengths and weaknesses of marketplace lending." ], "parent_pair_index": [ -1, -1, 1, 1, -1, -1, -1, 1, 2, -1, 0, 0, -1, 0, 0, 2, -1, 0, 0 ], "summary_paragraph_index": [ 0, 0, 0, 0, 0, 1, 1, 1, 1, 2, 2, 2, 3, 3, 3, 3, 4, 4, 4 ] }
CRS_RL33465
{ "title": [ "", "Most Recent Developments", "Background and Analysis", "Legislative Activity Since P.L. 100-4", "109th Congress", "Recovery from 2005 Hurricanes", "Wastewater Security", "Legislative Issues in the 109th Congress", "Authorization of Water Infrastructure Funding", "Legislative Responses", "Other Clean Water Act Issues", "Regulatory Protection of Wetlands", "Judicial Proceedings Involving Section 404", "Congressional Actions", "TMDLs and State Water Quality Standards", "\"Good Samaritan\" Legislation", "Other Implementation Issues", "For Additional Reading" ], "paragraphs": [ "", "Before adjourning sine die in December 2006, Congress passed legislation to reauthorize the Clean Water Act's Lake Pontchartrain Basin program ( H.R. 6121 ). President Bush signed this bill into law on December 12 ( P.L. 109-392 ). House and Senate committees reported several other bills near the end of the 109 th Congress, but none of these was enacted. The House Transportation and Infrastructure Committee reported H.R. 4126 , to reauthorize the act's Chesapeake Bay program. Two other bills reported by the Senate Environment and Public Works Committee dealt with security of wastewater treatment facilities ( S. 2781 ), and incentives to promote remediation of inactive and abandoned hardrock mines ( S. 1848 ).", "Although much progress has been made in achieving the ambitious goals that Congress established 30-plus years ago to restore and maintain the chemical, physical, and biological integrity of the nation's waters, problems persist. The types of remaining water quality problems are diverse, ranging from pollution runoff from farms and ranches, city streets, and other diffuse or \"nonpoint\" sources, to metals, as well as organic and inorganic toxic substances discharged from factories and sewage treatment plants.\nThe principal law that deals with polluting activity in the nation's streams, lakes, estuaries, and coastal waters is the Federal Water Pollution Control Act (P.L. 92-500, enacted in 1972), commonly known as the Clean Water Act, or CWA (amended by P.L. 95-217 in 1977, P.L. 97-117 in 1981, and P.L. 100-4 in 1987). It consists of two major parts: regulatory provisions that impose progressively more stringent requirements on industries and cities to abate pollution and meet the statutory goal of zero discharge of pollutants; and provisions that authorize federal financial assistance for municipal wastewater treatment plant construction. Both parts are supported by research activities, plus permit and enforcement provisions. Programs at the federal level are administered by the Environmental Protection Agency (EPA); state and local governments have major responsibilities to implement CWA programs through standard-setting, permitting, and enforcement.\nThe objective declared in the 1972 act of restoring and maintaining the chemical, physical, and biological integrity of the nation's waters was accompanied by statutory goals to eliminate the discharge of pollutants into navigable waters by 1985 and to attain, wherever possible, waters deemed \"fishable and swimmable\" by 1983. While those goals have not been fully achieved, considerable progress has been made, especially in controlling conventional pollutants (suspended solids, bacteria, and oxygen-consuming materials) discharged by industries and municipal sewage treatment plants.\nProgress has been mixed in controlling discharges of toxic pollutants (heavy metals, inorganic and organic chemicals), which are more numerous and can harm human health and the environment even when present in minute amounts—at the parts-per-billion level. Moreover, efforts to control pollution from diffuse sources, termed nonpoint source pollution (rainfall runoff from urban, suburban, and agricultural areas, for example), are more recent, given the earlier emphasis on \"point source\" pollution (discharges from industrial and municipal wastewater treatment plants). Overall, data reported by EPA and states indicate that 39% of river and stream miles assessed by states and 45% of assessed lake acres do not meet applicable water quality standards and are impaired for one or more desired uses. Approximately 95,000 lakes and 544,000 river miles in the United States are under fish-consumption advisories (including 100% of the Great Lakes and their connecting waters), due to chemical contaminants in lakes, rivers, and coastal waters, and one-third of shellfishing beds are closed or restricted, due to toxic pollutant contamination. For mercury—a contaminant of growing concern—as of 2003, 45 states had issued partial or statewide fish or shellfish consumption advisories.\nThe most recent major amendments were enacted in 1987 ( P.L. 100-4 ); this was the first comprehensive revision to the law in a decade. Authorizations for some programs, such as general grant assistance to states, research, and general EPA support authorized in that law, expired in FY1990 and FY1991. Authorizations for wastewater treatment funding expired in FY1994. None of these programs has lapsed, however, as Congress has continued to appropriate funds to implement the act.\nThe Clean Water Act has been viewed as one of the most successful environmental laws in terms of achieving its statutory goals, which have been widely supported by the public, but lately some have questioned whether additional actions to achieve further benefits are worth the costs. Criticism has come from industry, which has been the long-standing focus of the act's regulatory programs and often opposes imposition of new stringent and costly requirements. Criticism also has come from developers and property rights groups who contend that federal regulations (particularly the act's wetlands permit program) are a costly intrusion on private land-use decisions. States and cities have traditionally supported water quality programs and federal funding to assist them in carrying out the law, but recently many have opposed CWA measures that they fear might impose new unfunded mandates. Many environmental groups believe that further fine-tuning to strengthen the act is needed to maintain progress achieved to date and to address remaining water quality problems.", "Following enactment of amendments in 1987, no major CWA legislative activity occurred until the 104 th Congress (1995). The House approved a comprehensive reauthorization bill, H.R. 961 , that was opposed by environmentalists and the Clinton Administration. Critics said that the bill would undermine the existing framework for protecting U.S. waters. The Senate did not take up H.R. 961 or other CWA legislation.\nIn the 105 th and 106 th Congresses, no comprehensive reauthorization legislation was introduced, but action occurred in the 106 th Congress on bills dealing with specific water quality issues. Congress passed a bill to strengthen protection of coastal recreation waters through upgraded water quality standards and coastal waters monitoring programs ( P.L. 106-284 ). Congress also passed a bill ( P.L. 106-457 ) that reauthorized several existing CWA programs (i.e., Chesapeake Bay cleanup, clean lakes, and the National Estuary Program), and a bill to authorize CWA grant funding for wet weather sewerage projects (included as a provision of the FY2001 Consolidated Appropriations bill, P.L. 106-554 ).\nDuring its tenure, the Clinton Administration did not offer legislation to reauthorize the CWA, but rather initiated a number of agency-wide and program-specific reforms focusing on flexibility and what were termed \"common sense\" approaches to regulation.\nThe 107 th Congress focused legislative attention on one of the key programs of the act, provisions concerning financial assistance for municipal wastewater treatment projects. A House subcommittee and a Senate committee approved bills to extend the act's State Revolving Fund (SRF) program through FY2007 ( H.R. 3930 , S. 1961 ). Neither bill received further action, in large part due to controversies over application of the Davis-Bacon Act, which requires that contractors, engaging in certain federal contract construction, pay workers on such projects not less than the locally prevailing wage for comparable work, and over the formula for allocating SRF grants among the states.\nThe single water quality measure enacted by the 107 th Congress was the Great Lakes Legacy Act ( P.L. 107-303 ). It amended existing Great Lakes provisions of the CWA (Section 118) to authorize $50 million annually for FY2004-FY2008 for EPA to carry out projects to remediate sediment contamination in the Great Lakes. The bill also reauthorized CWA provisions concerning the Lake Champlain Basin program (Section 120). Miscellaneous provisions revived a number of CWA reports to Congress that had been discontinued under a previously passed \"sunset\" law ( P.L. 104-66 ) and allowed states to use CWA Section 319 grant funds for stormwater management projects in FY2003.\nIn the 108 th Congress, attention again focused on water infrastructure financing issues, although no bill was enacted (see \" Authorization of Water Infrastructure Funding ,\" below). However, there was some action on bills to reauthorize existing, mostly geographic-specific programs in the Clean Water Act. Before recessing for the 2004 election, the House and Senate passed H.R. 4731 , to reauthorize the National Estuary Program through FY2010. The President signed this bill on October 30, 2004 ( P.L. 108-399 ). The National Estuary Program, authorized by the 1987 CWA amendments, is directed at improving the quality of estuaries of national importance. Also in September 2004, the House Transportation and Infrastructure Committee reported three other bills. They were (1) H.R. 784 , to reauthorize section 221 of the act and provide $1.5 billion over six years for sewer overflow projects ( H.Rept. 108-675 ); (2) H.R. 4470 , to extend the Lake Pontchartrain Basin Restoration Program in Section 121 through FY2010 ( H.Rept. 108-676 ); and (3) H.R. 4688 , to reauthorize the Chesapeake Bay Program through FY2010 ( H.Rept. 108-677 ). The House passed H.R. 4470 on October 7, 2004, but no further action occurred. Also on October 7, the House passed H.R. 4794 , to amend and reauthorize the Tijuana River Valley Estuary and Beach Sewage Cleanup Act ( P.L. 106-457 ) in order to address treatment of sewage from Tijuana, Mexico, that impacts the San Diego border region. The Senate passed this bill on November 16, 2004, and the President signed it on November 30 ( P.L. 108-425 ; this law did not amend the CWA).", "Wastewater infrastructure legislation again received attention in the 109 th Congress (see further discussion below). In July 2005, the Senate Environment and Public Works Committee approved S. 1400 ( S.Rept. 109-186 ), authorizing federal funds for water quality and drinking water State Revolving Fund programs. In May 2005, the House Transportation and Infrastructure Committee approved bills to reauthorize funding for two other related CWA programs. The bills are (1) H.R. 624 ( H.Rept. 109-166 ), to reauthorize Section 221 of the act and provide $1.5 billion over six years for sewer overflow projects (identical to H.R. 784 from the 108 th Congress) and (2) H.R. 1359 ( H.Rept. 109-167 ), to extend Section 220 of the act, authorizing a pilot program for alternative water source projects. The House did not take up either of these bills.\nOther bills concerned with specific CWA programs received attention; two were enacted. In December 2005, Congress passed H.R. 3963 ( H.Rept. 109-293 ), authorizing $40 million per year to extend the Long Island Sound program in Section 119 of the act for six years (through FY2010). President Bush signed it on December 22 ( P.L. 109-137 ). In November 2006, Congress passed H.R. 6121 , a bill to reauthorize the Lake Pontchartrain Basin program in Section 121 of the act through FY2011. President Bush signed it on December 12 ( P.L. 109-392 ).\nOther bills were considered but not enacted. In December 2005, the House approved H.R. 1721 ( H.Rept. 109-292 ), to extend the coastal water quality program in Section 406 of the act and to authorize $30 million over six years for coastal water quality monitoring. In September 2006, the House Transportation and Infrastructure Committee approved H.R. 4126 , a bill to improve and reauthorize the CWA Chesapeake Bay program in Section 117 of the act (no report on this bill was filed). Also in September, the Senate Environment and Public Works Committee reported S. 1848 ( S.Rept. 109-351 ), a bill intended to promote remediation of inactive and abandoned hardrock mines by modifying requirements of the Clean Water Act and certain other environmental laws as an incentive to persons carrying out such projects (see \" \"Good Samaritan\" Legislation ,\" below).", "Throughout the Gulf Coast region affected by Hurricanes Katrina and Rita in 2005, high winds and water damaged a wide range of public service facilities, including sewage treatment plants, and restoring those facilities is part of the overall cleanup and restoration process. Damages at many facilities included loss of electric power after the storm to pump, process, and treat raw water supply and wastewater. EPA and the U.S. Army Corps of Engineers staff have assisted state and local government personnel to evaluate damages. Efforts continue throughout the region to assess facilities to determine their operating status, including needs to repair or rebuild, but EPA reported that six weeks after Hurricane Katrina, more than 95% of wastewater treatment facilities in the affected region were operational, although many may require major repairs or rebuilding. Even more than a year after the storms, facilities in some cities (serving parts of New Orleans, for example) were not fully operational.\nThe 109 th Congress considered a wide range of legislative proposals to aid generally in response and recovery. In particular, S. 1709 , passed by the Senate on September 27, 2005, would have modified the revolving loan provisions of the Clean Water Act to provide favorable treatment (such as forgiveness of loan principal and extended repayment) for sewage treatment repair or rebuilding projects in Alabama, Mississippi and Louisiana. It also would have permitted those states for two years to provide CWA assistance even for projects not included on a state's Intended Use Plan, since many of the systems affected by Hurricane Katrina are believed to not be included in the plans. The House did not act on this legislation. More generally, some suggested that environmental review and permitting requirements of the Clean Water Act and other federal environmental laws should be modified to enable swift recovery from the storms. Several bills with provisions intended to do so were introduced ( S. 1711 , S. 1765 / S. 1766 ) but received no further congressional consideration.", "Since the September 11, 2001 terrorist attacks in the United States, congressional attention has focused on security, preparedness, and emergency response issues. Among the topics of interest are protection of the nation's water infrastructure facilities (both drinking water and wastewater) from possible physical damage, biological/chemical attacks, and cyber disruption.\nPolicymakers have examined a number of legislative options in this area, including enhanced physical security, communication and coordination, and research. In October 2002, the House passed legislation to authorize $200 million in grants for security activities at wastewater treatment plants ( H.R. 5169 ). It also authorized $15 million in technical assistance for small treatment plant facilities and $5 million to EPA for improved vulnerability assessment tools. Similar legislation was introduced in the Senate ( S. 3037 ), but no further action occurred. Congress did enact legislation authorizing $160 million in grants for drinking water utilities to conduct vulnerability assessments ( P.L. 107-188 ).\nIn the 108 th Congress, the House passed legislation similar to H.R. 5169 . H.R. 866 ( H.Rept. 108-33 ) would have authorized $200 million in grants to wastewater utilities to conduct vulnerability assessments and an additional $20 million for technical assistance and improved assessment tools. The Senate Environment and Public Works Committee approved a similar bill ( S. 1039 , S.Rept. 108-149 ) in May 2003. No further action occurred, due in part to concerns expressed by some that the legislation would not mandate vulnerability assessments and would not require that they be submitted to EPA, as is the case with drinking water assessments required by P.L. 107-188 .\nWastewater security issues again received attention in the 109 th Congress. In May 2006, the Senate Environment and Public Works Committee approved S. 2781 ( S.Rept. 109-345 ). It was similar to S. 1039 in the 108 th Congress in that it would encourage wastewater utilities to conduct vulnerability assessments and would authorize $220 million to assist utilities with assessments and preparation of site security plans. It also included provisions responding to a March 2006 GAO report that found that utilities have made little effort to address vulnerabilities of collection systems, which may be used by terrorists to introduce hazardous substances or as access points for underground travel to a potential target. S. 2781 would have authorized EPA to conduct research on this topic. During committee consideration of the bill, an amendment was rejected that would have required, rather than encouraged, treatment works to conduct vulnerability assessments and also would have required high-risk facilities to switch from using chlorine and similar hazardous substances to other chemicals that are often referred to as \"inherently safer technologies.\" No further action on this bill occurred.", "The year 2002 marked the 30 th anniversary of passage of the Clean Water Act and 15 years since the last major amendments to the law. While, as noted, there has been measurable clean water progress as a result of the act, observers and analysts agree that significant water pollution problems remain. However, there is less agreement about what solutions are needed and whether new legislation is required. Several key water quality issues exist: evaluating actions to implement existing provisions of the law, assessing whether additional steps are necessary to achieve overall goals of the act that have not yet been attained, and defining the appropriate federal role in guiding and paying for clean water infrastructure and other activities. For some time, efforts to comprehensively amend the act have stalled as interests have debated whether and exactly how to change the law. Many issues that might be addressed involve making difficult tradeoffs between impacts on different sectors of the economy, taking action when there is technical or scientific uncertainty, and allocating governmental responsibilities for implementing the law.\nThese factors partly explain why Congress has recently favored focusing legislative attention on narrow bills to extend or modify selected CWA programs, rather than taking up comprehensive proposals. Other factors also are at work. These include a general reluctance by most Members of Congress to address controversial environmental issues in view of the slim majorities held by political parties in the House and the Senate; lack of presidential initiatives on clean water issues (neither the Clinton nor the Bush Administration proposed CWA legislation); and, since the terrorist attacks of September 11, 2001, more prominent congressional focus on security, terrorism, and Iraq war issues than on many other topics, including environmental protection.", "The act's program of financial aid for municipal wastewater treatment plant construction is a central feature of the law. At issue today is how the federal government will assist states and cities, especially in view of the high projected funding needs that exist. It received attention in the 109 th Congress, as it has for several years, although controversies have stymied enactment of new legislation. Since 1972, Congress has provided a total of $76.5 billion to assist cities in constructing projects to achieve the act's requirements for secondary treatment of municipal sewage (equivalent to 85% reduction of wastes), or more stringent treatment where required by local water quality conditions. The CWA does not authorize funds for operation or maintenance of completed projects. State and local governments have spent more than $25 billion of their own funds for construction, as well. In addition to CWA programs, other sources of federal funding are administered by the U.S. Department of Agriculture and the Department of Housing and Urban Development.\nNevertheless, funding needs remain very high: an additional $181 billion nationwide for all types of projects eligible for funding under the act, according to the most recent Needs Survey estimate by EPA and the states, issued in August 2003. In September 2002, EPA released a study, called the Gap Analysis, that assessed the difference between current spending for wastewater infrastructure and total funding needs (both capital and operation and maintenance). In that report, EPA estimated that, over the next two decades, the United States needs to spend nearly $390 billion to replace existing wastewater infrastructure systems and to build new ones (including for some projects not currently eligible for CWA funds, such as system replacement, which are not reflected in the EPA-state Needs Survey). Funding needs for operation and maintenance, which are not currently eligible for federal aid, are an additional $148 billion, the agency estimates. According to the Gap Analysis, if there is no increase in investment, there will be about a $6 billion gap between current annual capital expenditures for wastewater treatment ($13 billion annually) and projected spending needs. The study also estimated that, if wastewater spending increases by 3% annually, the gap would shrink by nearly 90% (to about $1 billion annually). Outside groups, including a coalition called the Water Infrastructure Network, have offered proposals that have attracted some congressional interest for a multibillion dollar investment program in wastewater and drinking water infrastructure.\nThe 1987 amendments initiated a program of grants to capitalize State Water Pollution Control Revolving Funds (SRF), or loan programs. This program in Title VI of the act replaced the previous categorical grants program, under which the federal share was 55% of project costs, and localities were not obligated to repay federal funds that they received. Under the revolving fund concept, monies used for construction will be repaid by borrowing communities to the states, to be recycled for future construction in other communities, thus providing an ongoing source of financing. States must provide a 20% match of the federal amount. The intent of the 1987 amendments was that federal contributions to SRFs would assist in making a transition to full state and local financing by FY1995. The essential tradeoff was that states would have greater flexibility to set priorities and administer funding in exchange for ending federal aid after FY1994.\nAll states have established the mechanisms to administer the new loan programs and have been receiving SRF capitalization funds under Title VI for several years. Many have complained that the SRF program is unduly complicated by federal rules, even though Congress had intended that states were to have greater flexibility. Congressional oversight has examined the progress toward reducing the backlog of wastewater treatment facilities needed to achieve the act's water quality objectives, while newer estimates of future funding needs have drawn increased attention to the role of the SRF program in meeting such needs.\nSmall communities and states with large rural populations have experienced the largest share of problems with the SRF program. Many small towns did not participate in the previous construction grants program and consequently are likely to require major projects to achieve compliance with the law. Yet these communities often lack an industrial tax base and thus face the prospect of very high per capita user fees, if their citizens are required to repay the full capital cost of sewage treatment projects.\nWhile the initial intent was to phase out federal support for this program, Congress has continued to appropriate SRF capitalization grants to the states, providing an average of $1.35 billion annually in recent years. The SRF provisions have been less controversial than others in the act, such as wetlands reform, because of apparent general agreement on the need to provide funding assistance (as reflected in continued appropriations). The CWA's SRF provisions also were a model for similar provisions added to the Safe Drinking Water Act (SDWA) in 1996 ( P.L. 104-182 ).\nHowever, because remaining clean water funding needs are still so large, at issue is whether and how to extend SRF assistance to address those needs, how to allocate SRF funds among the states, and how to prioritize projects and funding. Bush Administration officials have said that infrastructure funding needs go beyond what the federal government can do on its own. Of particular concern is assisting small and economically disadvantaged communities that have had the most difficulty in adjusting from the act's previous categorical grants program to SRF loans.\nAdditionally, there is concern about the adequacy of SRF or other funding specifically for projects dealing with problems of overflows from municipal combined and separate sewers which can release partially treated or untreated wastewaters that harm public health and the environment. EPA estimates that the cost of projects to control sewer overflows, from combined and separate sanitary sewer systems, is nearly $140 billion nationwide. And more recently, wastewater utilities have sought assistance to assess operational vulnerabilities and upgrade physical protection of their facilities against possible terrorist attacks that could threaten water infrastructure systems.", "Congress has actively considered water infrastructure funding issues since the 107 th Congress, when House and Senate committees approved bills to extend the act's SRF program through FY2007 and increase federal assistance ( H.R. 3930 ; S. 1961 , S.Rept. 107-228 ). A report on H.R. 3930 was not filed. Neither bill received further action, in large part due to controversies over application of prevailing wage requirements of the Davis-Bacon Act and over the formula for allocating SRF grants among the states.\nIn the 108 th Congress, four bills to reauthorize the Clean Water Act SRF program were introduced ( S. 170 , S. 2550 , H.R. 20 , H.R. 1560 ). In addition, separate bills to reauthorize funding for sewer overflow grants (CWA Section 221) were introduced ( H.R. 784 , S. 567 ). In October 2004, the Senate Environment and Public Works Committee reported legislation authorizing $41.25 billion over five years for wastewater and drinking water infrastructure programs, including $20 billion for the clean water SRF program ( S. 2550 , S.Rept. 108-386 ). The bill included a new formula for state-by-state allocation of clean water SRF grants, renewal of the Clean Water Act's sewer overflow grant program, and provisions such as extended loan repayments and subsidies for disadvantaged communities.\nPrior to the Senate committee's action, in July 2003, the House Transportation and Infrastructure Subcommittee on Water Resources and Environment approved H.R. 1560 , legislation similar to H.R. 3930 , the bill approved by that committee in the 107 th Congress. H.R. 1560 would have authorized $20 billion for the clean water SRF program for FY2004-FY2008. It included several provisions intended to benefit economically disadvantaged and small communities, such as allowing extended loan repayments (30 years, rather than 20) and additional subsidies (e.g., principal forgiveness and negative interest loans) for communities that meet a state's affordability criteria. It included provisions to require communities to plan for capital replacement needs and to develop and implement an asset management plan for the repair and maintenance of infrastructure that is being financed. No further action occurred.\nThe issue of the applicability of the prevailing local wage requirements of the Davis-Bacon Act to SRF-funded projects has affected consideration of water infrastructure legislation for some time, because that act has both strong supporters and critics in Congress. Critics of Davis-Bacon say that it unnecessarily increases public construction costs and hampers competition, while supporters say that it helps stabilize the local construction industry by preventing competition that would undercut local wages and working conditions. The bill approved by the House subcommittee in July 2003 ( H.R. 1560 ) did not include language specifying that the Davis-Bacon Act shall apply to SRF-funded projects, while S. 2550 did include such a requirement. Other factors that clouded the bills were Administration opposition to authorization levels in both bills and disputes over funding allocation formulas.\nIn the 109 th Congress, the Senate Environment and Public Works Committee approved S. 1400 , the Water Infrastructure Financing Act, in July 2005 ( S.Rept. 109-186 ). The bill was similar to S. 2550 in the 108 th Congress; it would have authorized $20 billion for grants to capitalize the Clean Water Act SRF program and $15 billion for Safe Drinking Water Act SRFs through FY2010. As approved by the committee, S. 1400 would have revised and updated the CWA formula for state-by-state allocation of SRF monies and also specified that the prevailing wage requirements of the Davis-Bacon Act shall apply to all projects financed from an SRF (as similarly provided in the committee's bill in the 108 th Congress). No further action on this bill occurred.\nFor some time, interest has been growing in identifying and developing new mechanisms to help localities pay for water infrastructure projects, beyond federal grants or SRFs, which appear insufficient to fully meet funding needs. In June 2005, the House Transportation and Infrastructure Subcommittee on Water Resources and Environment held hearings on alternative means to fund water infrastructure projects in the future. At the first hearing, witnesses focused on one way to increase funding for water infrastructure that has recently been advocated by some groups, creating a national clean water trust fund that would conceptually be similar to trust funds that exist for highway and aviation projects. Witnesses and subcommittee members discussed difficulties in identifying potential revenue sources that would be deemed fair and equitable. The second hearing addressed other financing options, such as expanded use of tax-exempt private activity bonds, and more efficient management techniques, such as asset management programs and sustainable infrastructure initiatives. In December 2005, legislation was introduced to establish a $7.5 billion federal trust fund for wastewater infrastructure improvements. This bill, H.R. 4560 , proposed to use a concept for funding such projects that has been promoted by wastewater treatment industry officials, other stakeholders, and some environmentalists, who argue it could provide a new source of money for necessary system upgrades amid dwindling federal funds. The bill contemplated a system of user fees to create the fund, but the source of revenue was not specified in the bill. Congress did not act on this legislation.", "Several other CWA issues have drawn some degree of congressional attention.", "How best to protect the nation's remaining wetlands and regulate activities taking place in wetlands has become one of the most contentious environmental policy issues, especially in the context of the CWA, which contains a key wetlands regulatory tool, the permit program in Section 404. It requires landowners or developers to obtain permits for disposal of dredged or fill material that is generated by construction or similar activity into navigable waters of the United States, including wetlands. Section 404 has evolved through judicial interpretation and regulatory change to become one of the principal federal tools used to protect wetlands, although that term appears only once in Section 404 itself and is not defined there. At the same time, its implementation has come to be seen as intrusive and burdensome to those whose activities it regulates. At issue today is how to address criticism of the Section 404 regulatory program while achieving desired goals of wetlands protection.\nUnlike the rest of the act, the permit aspects of Section 404 are administered by the U.S. Army Corps of Engineers, rather than EPA, although the Corps uses EPA environmental guidance. Other federal agencies including the U.S. Fish and Wildlife Service (FWS) and Natural Resource Conservation Service (NRCS) have more limited roles in the Corps' permitting decisions. Tension has existed for many years between the regulation of activities in wetlands under Section 404 and related laws, on the one hand, and the desire of landowners to develop property that may include wetlands, on the other hand. The conflicts over wetlands regulation have for the most part occurred in administrative proceedings, as Congress has not amended Section 404 since 1977, when it provided exemptions for categories of routine activities, such as normal farming and forestry. Controversy has grown over the extent of federal jurisdiction and impacts on private property, burdens and delay of permit procedures, and roles of federal agencies and states in issuing permits.", "One issue involving long-standing controversy and litigation is whether isolated waters are properly within the jurisdiction of Section 404. Isolated waters that are wetlands which are not physically adjacent to navigable surface waters often appear to provide only some of the values for which wetlands are protected, such as flood control or water purification, even if they meet the technical definition of a wetland. On January 9, 2001, the Supreme Court ruled on the question of whether the CWA provides the Corps and EPA with authority over isolated waters. The Court's 5-4 ruling in Solid Waste Agency of Northern Cook County (SWANCC) v. U.S. Army Corps of Engineers (531 U.S. 159 (2001)) held that the Corps' denial of a 404 permit for a disposal site on isolated wetlands solely on the basis that migratory birds use the site exceeds the authority provided in the act.\nThe full extent of impacts on the regulatory program resulting from this decision remains unclear, even five years after the ruling, in part because of different interpretations of SWANCC reflected in subsequent federal court cases. While it continues to be difficult to fully assess how regulatory protection of wetlands will be affected as a result of the SWANCC decision and other possible changes, the remaining responsibility to protect affected wetlands falls on states and localities. Environmentalists believe that the Court misinterpreted congressional intent on the matter, while industry and landowner groups welcomed the ruling. Policy implications of how much the decision restricts federal regulation depend on how broadly or narrowly the opinion is applied. Some federal courts have interpreted SWANCC narrowly, thus limiting its effect on current permit rules, while a few read the decision more broadly.\nThe government's current view on this key question was expressed in EPA-Corps guidance issued in January 2003. It provides a legal interpretation essentially based on a narrow reading of the Court's decision, thus allowing federal regulation of some isolated waters to continue, but it calls for more headquarters review in disputed cases. Administration press releases say that the guidance demonstrates the government's commitment to \"no-net-loss\" wetlands policy. However, it is apparent that the issues remain under discussion, because at the same time, the Administration issued an advance notice of proposed rulemaking (ANPRM) seeking comment on how to define waters that are under jurisdiction of the regulatory program. The ANPRM did not actually propose rule changes, but it indicated possible ways that Clean Water Act rules might be modified to further limit federal jurisdiction, building on SWANCC and some subsequent legal decisions.\nThe government received more than 133,000 comments on the ANPRM, most of them negative, according to EPA and the Corps. Environmentalists and many states opposed changing any rules, saying that the law and previous court rulings call for the broadest possible interpretation of the Clean Water Act (and thus a narrow interpretation of SWANCC ), but developers sought changes to clarify interpretation of the SWANCC ruling. In December 2003, EPA and the Corps announced that the Administration would not pursue development of rule changes concerning federal regulatory jurisdiction over isolated wetlands. The EPA Administrator said that the Administration wanted to avoid a contentious and lengthy rulemaking debate over the issue. Environmentalists and state representatives expressed relief at the announcement. Interest groups on all sides have been critical of confusion in implementing the 2003 guidance, which constitutes the main tool for interpreting the reach of the SWANCC decision. Environmentalists remain concerned about diminished protection resulting from the guidance, while developers said that without new regulations, confusing and contradictory interpretations of wetland rules will continue.\nFederal courts continue to have a key role in interpreting and clarifying the SWANCC decision. On February 21, 2006, the Supreme Court heard arguments in two cases brought by landowners ( Rapanos v. United States ; Carabell v. U.S. Army Corps of Engineers ) seeking to narrow the scope of the CWA permit program as it applies to development of wetlands. The issue in both cases had to do with the reach of the CWA to cover \"waters\" that were not navigable waters, in the traditional sense, but were connected somehow to navigable waters or \"adjacent\" to those waters. (The act requires a federal permit to discharge dredged or fill materials into \"navigable waters.\") Many legal and other observers hoped that the Court's ruling in these cases would bring greater clarity about the scope of federal regulatory jurisdiction.\nThe Court's ruling was issued on June 19 ( Rapanos , v. United States , 126 S.Ct. 2208 (2006)). In a 5-4 decision, a plurality of the Court, led by Justice Scalia, held that the lower court had applied an incorrect standard to determine whether the wetlands at issue are covered by the CWA. Justice Kennedy joined this plurality to vacate the lower court decisions and remand the cases for further consideration, but he took different positions on most of the substantive issues raised by the cases, as did four other dissenting justices. Early judgments by legal observers suggest that the implications of the ruling (both short-term and long-term) are far from clear. Because the several opinions written by the justices did not draw a clear line regarding what wetlands and other waters are subject to federal jurisdiction, one likely result is more case-by-case determinations and continuing litigation. There also could be renewed pressure on the Corps and EPA to clarify the issues through an administrative rulemaking.", "In September 2002, the House Government Reform Subcommittee on Energy Policy, Natural Resources, and Regulatory Affairs held a hearing on the government's response to the SWANCC decision and to press the government to clarify its interpretation of the Court case. Committee Members and public witnesses indicated that a lack of guidance has led to inconsistent regulatory decisions by Corps officials in individual regions of the country, and subsequent judicial decisions by other federal and state court have been mixed. At the hearing, Corps and EPA officials testified on their efforts to develop guidance, which subsequently was released in January 2003. Concern about lingering confusion over the SWANCC decision and its implementation by the Corps was the topic of an oversight hearing by the Senate Environment and Public Works Committee in June 2003. Developers and others in the regulated community criticized the Corps and EPA, saying that the January 2003 guidance document had not clarified the reach of federal jurisdiction. A House Transportation and Infrastructure subcommittee also held a hearing on post- SWANCC issues on March 30, 2004.\nControversies about the SWANCC guidance issued by EPA and the Corps in 2003 persist. In response, on May 18, 2006, the House adopted an amendment to a bill providing FY2007 appropriations for EPA ( H.R. 5386 ). The amendment (passed by a 222-198 vote) would bar EPA from spending funds to implement the 2003 policy guidance. Supporters of the amendment said that the guidance goes beyond what the Supreme Court required in SWANCC, has allowed many streams and wetlands to be unprotected from development, and has been more confusing than helpful. Opponents of the amendment predicted that it would make EPA's and the Corps' regulatory job more difficult than it already is. Congress adjourned sine die in December without taking final action on H.R. 5386 , thus delaying final action until the beginning of the 110 th Congress.\nLegislation to overturn the SWANCC decision by providing a broad definition of \"waters of the United States\" was introduced in the 109 th Congress ( H.R. 1356 / S. 912 , the Clean Water Authority Restoration Act of 2005). Other legislation to narrow the definition of \"waters of the United States\" also was introduced ( H.R. 2658 , the Federal Wetlands Jurisdiction Act of 2005). No further action occurred on either bill. For now, it is unclear whether the more recent decision in the Rapanos and Carabell cases will accelerate congressional interest in these or other proposals to address uncertainties about federal jurisdiction over wetlands and other waters. On August 1, a Senate Environment and Public Works subcommittee held a hearing on the Court's June 19 Rapanos decision. While some witnesses urged Congress to clarify the jurisdictional issues, others urged EPA and the Corps to issue new guidance and/or initiate a rulemaking to change applicable regulations. Administration witnesses said that EPA and the Corps are working on new guidance for their regulatory staffs, but have not yet decided whether a rulemaking is needed.", "The CWA requires states to identify pollution-impaired water segments and develop \"total maximum daily loads\" (TMDL) that set the maximum amount of pollution that a water body can receive without violating water quality standards. A TMDL is essentially a plan to allocate responsibility for implementing pollution control measures within an area or watershed in order to remedy water quality impairments. Until recently, there had been little implementation of the TMDL provision (Section 303(d)), which Congress enacted in 1972. Since the early 1990s, environmental groups have filed lawsuits in 38 states to pressure EPA and states to meet the law's requirements. Of the suits tried or settled to date, more than half have resulted in court orders requiring expeditious development of TMDLs, thus driving the program that had previously received little attention. At issue today are controversies over implementation of the existing TMDL program and regulatory revisions that EPA issued in July 2000; the 2000 revisions were issued partly in response to the lawsuits and were intended to strengthen the program. That rule was highly controversial (and never went into effect) because of issues such as potential burdens on states, industries, cities, and others to implement a revised TMDL program and potential impacts on some agriculture and forestry sources, which are not now directly subject to CWA regulations. Because of those controversies, the Clinton Administration delayed the effective date of the 2000 rule until October 2001.\nIn the FY2001 appropriations act funding EPA, P.L. 106-377 , Congress requested a study by the National Academy of Sciences (NAS) on the scientific basis of the TMDL program. The NAS report was issued in June 2001. It did not specifically analyze the July 2000 revised regulations. The NAS panel concluded that scientific knowledge exists to move forward with the TMDL program and recommended that EPA and states use adaptive implementation for TMDL development. In many cases, the report said, water quality problems and solutions are obvious and should proceed without complex analysis. In other cases, solutions are more complex and require a different level of understanding and something like phased implementation. In addition, the General Accounting Office (now the Government Accountability Office) concluded in a report that inconsistent monitoring, data collection, and listing procedures used by states to identify impaired waters have hindered efforts to develop effective TMDL programs.\nIn October 2001, the Bush Administration announced that it would delay the rule for 18 months (until May 2003) to allow EPA officials time to review the rule and the NAS report. This action came after a federal court approved the Administration's request for a similar suspension of litigation that is challenging the regulation (nearly a dozen interest groups have sued EPA over various parts of the TMDL rule). In the interim and continuing for the present time, existing rules and requirements and court-sanctioned TMDL schedules (affecting approximately 22 states) remain in place.\nOn March 19, 2003, EPA withdrew the July 2000 TMDL rule. EPA officials said that implementation of the existing TMDL program will continue in the meantime, but that additional time is needed to decide whether and how to revise the current program. EPA is considering initiating an entirely new rule or other options, but no further timeframe or proposal has been announced. Recent congressional attention to these issues has been limited to oversight hearings held by the House Transportation and Infrastructure Subcommittee on Water Resources in June and November 2001. Implementation of existing TMDL requirements and possible regulatory changes, if issued, could be of interest to Congress in view of continuing disagreement among states, cities, industry, and environmental advocates about program effectiveness and efficiency.", "In the 109 th Congress, bills were introduced to address the legacy of pollution from inactive and abandoned hardrock mines (IAMs) that degrades the environment throughout the United States, particularly in the West. EPA has estimated that 40% of headwaters in the West have been adversely impacted by acidic and other types of drainage from abandoned sites where gold, silver, copper, lead, and iron ore were mined. The core concept underlying the bills is that, in order to address the problem of pollution from IAM sites, it is appropriate to encourage cleanup by so-called \"Good Samaritan\" entities. To do so, the bills ( H.R. 1266 , S. 1848 , and an Administration proposal, H.R. 5404 and S. 2780 ) proposed to establish a process for issuing permits to Good Samaritans and to provide incentives in the form of reduced liability from environmental laws and less stringent environmental cleanup standards. Proponents, who include mining companies and industry associations, maintain that any degree of cleanup is better than inaction or the status quo, and they argue that, if not addressed in this legislation, the issues of liability exposure under environmental law and strict regulatory standards could stymie voluntary cleanups. Opponents, especially many environmental and conservation advocates, acknowledge that cleanup would benefit the environment, but they expressed concern that exemptions and relief such as these bills proposed might be the first step in dismantling key environmental legislation, because the bills were vague about standards that would apply to a Good Samaritan cleanup.\nIn the 109 th Congress, three House and Senate committees held hearings on issues raised by the Good Samaritan legislation. Testimony was heard from witnesses representing EPA, states, hardrock mining industry companies and associations, and environmental groups. On September 13, 2006, the Senate Environment and Public Works Committee approved S. 1848 ( S.Rept. 109-351 ), a bill that would have allowed Good Samaritans to apply for an EPA permit that relieves the cleanup party of liability and regulatory requirements under several environmental laws, including the Clean Water Act, Superfund, the Toxic Substances Control Act, the Solid Waste Disposal Act, and the National Environmental Policy Act. It was a free-standing bill and would not have amended any of these laws. The legislation would have relieved a potential Good Samaritan of the need to obtain CWA permits and of any requirement that discharges from the cleanup site must attain water quality standards. No further action occurred on the Good Samaritan legislation.", "Also of legislative interest were the impacts of recent court rulings in several cases concerning implementation of existing provisions of the law and involving questions of whether certain activities require a Clean Water Act discharge permit. A fundamental element of the act is the requirement that the \"discharge of a pollutant\" from a point source shall be carried out pursuant to a permit authorized by the National Pollutant Discharge Elimination System (NPDES) program under Section 402 of the law. In 2004, the Supreme Court held that the transfer of polluted water from one waterbody to another requires a permit, notwithstanding that no new pollutant is added in the process of transfer ( South Florida Water Management District v. Miccosukee Tribe of Indians , 124 S. Ct. 1537 (2004)). The decision raised concerns in agricultural areas where such transfers often occur in supplying irrigation water, presently without a permit. Congress did not hold oversight hearings on impacts of the Court's decision, and legislation that might have addressed the ruling was not introduced.\nDecisions of federal courts in two cases have held that aerial application of a pesticide over and into U.S. waters requires a CWA permit, even when the pesticide use meets other requirements of federal law, including the Federal Insecticide, Fungicide, and Rodenticide Act (FIFRA). These and related decisions drew the attention of many pesticide applicators, including public health entities such as mosquito control districts, concerned with how the rulings might affect their need to control pests associated with diseases such as the West Nile virus. In November 2006, EPA finalized a rulemaking seeking to resolve the conflict over the regulatory scope of the CWA and FIFRA related to pesticide use, in light of the recent litigation, by promulgating regulations to clarify circumstances under which a CWA permit is or is not required for activities carried out pursuant to FIFRA. Congress examined these issues in oversight hearings, one by a House Transportation and Infrastructure subcommittee in October 2002 and another by a House Government Reform subcommittee in October 2004. Legislation intended to affirm that a CWA permit is not required for use of FIFRA-approved pesticides was introduced in the 109 th Congress, the Pest Management and Fire Suppression Flexibility Act ( H.R. 1749 , S. 1269 ). A House Transportation and Infrastructure subcommittee held a hearing on H.R. 1749 on September 29, 2005, but no further action occurred.", "National Research Council, National Academy of Sciences. Assessing the TMDL Approach to Water Quality Management . National Academy Press, Washington, DC. June 2001. 82 p.\nU.S. Congressional Budget Office. Future Investment in Drinking Water and Wastewater Infrastructure. Washington, November 2002. 58 p.\nU.S. Environmental Protection Agency. The National Water Quality Inventory: 2000 Report . Washington, September 2002. \"EPA-841-R-2-001.\" 207 p.\n——. The Clean Water and Drinking Water Infrastructure Gap Analysis . Washington, September 2002. \"EPA-816-R-02-020.\" 50 p.\n——. Clean Watersheds Needs Survey 2000, Report to Congress . Washington, August 2003. \"EPA-832-R-03-001.\" 1 vol.\nU.S. Government Accountability Office. Key EPA and State Decisions Limited by Inconsistent and Incomplete Data. (GAO/RCED-00-54) March 2000. 73 p.\n——. Water Infrastructure: Information on Financing, Capital Planning, and Privatization . (GAO-02-764) August 2002. 79 p." ], "depth": [ 0, 1, 1, 2, 3, 3, 3, 1, 2, 3, 2, 3, 4, 4, 3, 3, 3, 1 ], "alignment": [ "h0_title h2_title h1_title", "", "h0_title h2_title h1_title", "h0_full h2_full h1_full", "h0_full h1_full", "", "", "h0_full h2_title h1_title", "h1_full", "h1_full", "h2_title", "h2_full", "h2_full", "h2_full", "", "", "", "" ] }
{ "question": [ "What is the state of the proposed CWA amendments?", "What narrow proposals have passed?", "What proposals have not been passed?", "What has been the most prominent legislative water quality issue?", "What is at issue with municipal wastewater treatment projects?", "What bills were proposed to fund CWA projects?", "What is the status of these bills?", "What CWA issues have not been considered by the 109th Congress?", "Why do environmentalists view these programs as essential?", "What court cases are these groups concerned about?", "How has legislation attempted to narrow the government's regulatory jurisdiction?" ], "summary": [ "Legislative initiatives to comprehensively amend the Clean Water Act (CWA) have stalled for some time as interested parties have debated whether and exactly how to change the law. Congress has instead focused legislative attention on narrow bills to extend or modify selected CWA programs, but not any comprehensive proposals.", "In the 109th Congress, two such bills were enacted: a bill extending authorizations for the Long Island Sound program (H.R. 3963, P.L. 109-137), and another concerning the Lake Pontchartrain Basin (H.R. 6121, P.L. 109-392). The House also passed H.R. 1721, a bill to reauthorize coastal water quality programs, and several other CWA bills were reported by House and Senate committees (including H.R. 4126, concerning the Chesapeake Bay; and S. 2781, concerning wastewater facility security).", "A free-standing bill intended to promote remediation of abandoned hardrock mines (S. 1848), which would have affected CWA requirements for such projects, also was reported but not passed.", "For several years, the most prominent legislative water quality issue has concerned financial assistance for municipal wastewater treatment projects.", "At issue is how the federal government will assist states and cities in meeting needs to rebuild, repair, and upgrade wastewater treatment plants, especially in light of capital costs that are projected to be as much as $390 billion over the next two decades.", "In the 109th Congress, the Senate Environment and Public Works Committee approved S. 1400, a bill authorizing $20 billion in federal grants to capitalize state clean water infrastructure loan programs. A House committee approved bills to reauthorize other Clean Water Act programs: H.R. 624 would have provided $1.5 billion in grants over six years for sewer overflow projects; and H.R. 1359 would have extended a pilot program for alternative water source projects.", "None of these bills was passed.", "Other Clean Water Act issues have received attention from numerous stakeholders, but were not considered by the 109th Congress. In particular, programs that regulate activities in wetlands, especially CWA Section 404, have been criticized by landowners for intruding on private land-use decisions and imposing excessive economic burdens.", "Environmentalists view these programs as essential for maintaining the health of wetland ecosystems.", "These groups are concerned about a 2001 Supreme Court decision, the SWANCC case, that narrowed regulatory protection of wetlands, a 2006 Court ruling that also addressed the regulatory jurisdiction of Section 404, and related administrative actions, including 2003 policy guidance intended to interpret the SWANCC case.", "Legislation to reverse the SWANCC ruling (H.R. 1356/S. 912, the Clean Water Authority Restoration Act), and another bill to narrow the government's regulatory jurisdiction (H.R. 2658, the Federal Wetlands Jurisdiction Act), were introduced but were not enacted." ], "parent_pair_index": [ -1, 0, 0, -1, 0, -1, 2, -1, 0, -1, 2 ], "summary_paragraph_index": [ 0, 0, 0, 2, 2, 2, 2, 3, 3, 3, 3 ] }
GAO_GAO-17-668
{ "title": [ "Background", "Definition of the IoT", "Prior GAO Reports Addressing IoT Security Challenges", "DOD Responsibilities Relating to the IoT", "DOD Has Identified Security Risks with IoT Devices and Begun to Examine Them in Its Assessments, but Operations Security Surveys Are Not Being Conducted", "DOD Has Identified Security Risks with IoT Devices and Developed Notional Threat Scenarios", "Mission Assurance and Intelligence Community Assessments Have Examined Security Risks with IoT Devices, but Operations Security Surveys Are Not Being Conducted", "Mission Assurance Assessments Have Been Conducted", "Intelligence Community Assessments Have Been Conducted", "Operations Security Surveys Have Not Been Conducted", "DOD Has Policies and Guidance for IoT Devices, but Gaps Remain", "DOD Has Policies and Guidance for IoT Devices", "Portable Electronic Devices", "Smartphones", "Infrastructure Devices", "Existing DOD Policies and Guidance Do Not Clearly Address Some IoT Risks", "Policies and Guidance Do Not Address Certain DOD-acquired IoT Devices and Applications", "Core Security Policies Do Not Address IoT Devices", "DOD Has Taken Other Actions to Address Security Risks Related to IoT Devices", "Conclusions", "Recommendations for Executive Action", "Agency Comments and Our Evaluation", "Appendix I: Objectives, Scope, and Methodology", "Appendix II: Comments from the Department of Defense", "Appendix III: GAO Contact and Staff Acknowledgments", "GAO Contact", "Staff Acknowledgments", "Related GAO Products" ], "paragraphs": [ "", "While DOD does not have a standard, department-wide definition of the IoT, the department has identified a number of existing definitions of it. As noted previously, a 2016 Defense Science Board study defined the IoT as the set of Internet Protocol-addressable devices that interact with the physical environment, noting that “IoT devices typically contain elements for sensing, communications, computational processing, and actuation.” The study identified that IoT devices span a range of complexity and size, including thermostats, traffic lights, televisions, mini-drones, and full-size vehicles. A 2016 DOD Chief Information Officer policy paper on the IoT cited a definition from a non-DOD organization. According to this definition, the IoT consists of two foundational things: 1) the Internet itself, and 2) semi-autonomous devices (the “things”) that leverage inexpensive computing, networking, sensing, and actuating capabilities in uniquely identified implementations to sense the physical world and act on it. Such devices have the capability to connect to the Internet, being Internet Protocol-based, but may also be deployed in stand-alone Internet Protocol networks. These DOD IoT definitions describe devices having the characteristics of sensing, communicating (or networking), computing (or processing), and actuating, and all leveraging the Internet Protocol.\nFigure 1 depicts typical data flows from a range of IoT devices— smartphones, smart watches, cars, buildings, and televisions—where data are collected, transmitted, and analyzed before leading to commands back to the devices or inputs to decision makers. Consumers and senior leaders in industry or public-sector organizations, such as DOD, can potentially act on IoT device data.", "In a 2016 report, we provided a primer on the IoT that highlighted key benefits of IoT devices, categories of devices, a future outlook for IoT, and security challenges posed by the devices. We reported that security vulnerabilities in many IoT devices can arise for several reasons, including (1) a lack of security standards addressing unique IoT needs; (2) a lack of better incentives for developing secure devices; and (3) the decreasing size of such devices—which limits the computational power that is currently available to implement security protections. The primer cites reports of wireless medical devices being taken over and controlled; of a widespread wireless standard for IoT devices used in smart energy being compromised; and of gas stations’ tank-monitoring systems having no passwords, thereby potentially exposing the pumps to a risk of being shut down. These security challenges could potentially impact DOD hospitals and facility energy and fuel systems where managers may consider using or deploying IoT devices.\nIn May 2017, we issued a technology assessment on the IoT that defined the concept of the IoT, described its uses, highlighted its benefits, and discussed its potential implications, including security challenges. We reported that adoption of the IoT across the different sectors has amplified the challenge of designing and implementing effective security controls by bringing the potential effects of poor security into homes, factories, and communities. In addition, the technology assessment noted a security risk whereby unauthorized individuals or organizations might gain access to these devices and use them for potentially malicious purposes, including fraud or sabotage. The lack of attention to security in designing IoT devices and the predominant use of cloud computing to provide connectivity with these devices pose unique security challenges. These challenges have direct implications for DOD as the department considers how to develop and deploy these devices. As cyber threats grow increasingly sophisticated, the need to manage and bolster the cybersecurity of IoT products and services is increasingly critical, according to our technology assessment. According to the assessment, while many industry-specific standards and best practices address information security, standards and best practices that are specific to IoT technologies are either still in development or not widely adopted. Any device that is connected to the Internet is at risk of being compromised if it does not have adequate access controls.", "According to DOD officials, no one specific DOD office or entity is responsible for IoT security. Instead, various DOD organizations have roles and responsibilities related to IoT security risks. For example,\nOffice of the DOD Chief Information Officer is charged with developing the department’s cybersecurity policy and guidance, as well as policy regarding the continuous monitoring of DOD information technology. The DOD Chief Information Officer has issued instructions on cybersecurity, a risk management framework for DOD information technology, and the use of Internet-based capabilities to collect, store, and disseminate information.\nWithin the Office of the Under Secretary of Defense for Acquisition, Technology, and Logistics, the Office of the Assistant Secretary of Defense for Energy, Installations, and Environment oversees the cybersecurity of industrial control systems on DOD’s facilities— systems that contain IoT devices—and establishes design criteria for these systems that include cybersecurity requirements.\nOffice of the Under Secretary of Defense for Intelligence establishes and oversees the implementation of policies and procedures for the conduct of DOD operations security, physical security, and information security. The office has established policy calling for all DOD missions, programs, functions, and activities to be protected by an operations security program.\nOffice of the Principal Cyber Advisor to the Secretary of Defense is responsible for overall supervision of cyber activities related to, among other things, defense of DOD networks, including oversight of policy and operational considerations.\nJoint Staff provides guidance on mission assurance assessments— installation-level assessments that integrate information on asset criticality, area-specific hazards and threats, and vulnerabilities to be exploited—and consolidates reporting. The assessments should include benchmarks for the cybersecurity of wireless and portable electronic devices.\nMilitary services and DOD agencies are to conduct assessments and surveys of their operations security. Additionally, military services and DOD agencies are to delegate responsibilities for mission assurance assessments and to ensure that information technology under their authority complies with the department’s risk management framework.\nDefense Information Systems Agency provides security guidance for DOD-owned smartphones and wireless systems. Command Cyber Readiness Inspection teams conduct oversight and assess implementation of this guidance, according to DOD officials.", "", "DOD documents and officials identified numerous security risks with IoT devices—as highlighted in table 1—that can generally be divided into risks with the devices themselves and risks with the devices’ operational implications.\nIoT devices pose numerous risks by how they are designed, manufactured, and configured. According to DOD officials, there is little incentive for manufacturers to design security functions into the software or hardware of their products, resulting in little thought or effort given to security. A DOD Chief Information Officer policy paper also states that IoT devices may be subverted during their manufacture and distribution at various points in the supply chain—thereby rendering the cyber attacker’s job easier. With respect to IoT configuration, a DOD report in 2016 notes that IoT devices are often sold with old and unpatched software that can lead to the device being exploited as soon as it is taken out of the box. Poor password management is another cybersecurity risk. According to the DOD report, a majority of IoT cloud services allow the user to choose weak passwords—such as “1234”—and, in some cases, prevent the user from using strong passwords.\nGiven their functionality and capabilities, IoT devices also pose security risks with their operational implications. DOD officials told us that rogue wireless devices in secure areas could provide a pathway for adversaries to collect classified or sensitive information. For example, a cell phone could be concealed and “pocket dialed” such that ambient conversations are recorded or transmitted. Similar to rogue wireless devices, rogue applications also pose risks. According to a DOD report, in 2016 a smartphone gaming application was released that makes use of the global positioning system and the camera of the device on which it is installed. The report cautions that installing the game may lead to the application gaining full access to a user’s email account. Whether on personal or DOD-issued devices, the potential of such applications to collect location and photographic data on DOD personnel or units and communicate this data to third parties has raised DOD operations security risks. DOD’s 2016 DOD Policy Recommendations for the Internet of Things (IoT) also laid out operations security implications of IoT devices, particularly with the expanded aggregation of information. Specifically, it discussed how information collected through various IoT devices and then aggregated could inform adversaries about DOD capabilities or deployments. For example, an adversary could gather information related to which people were present or which organizations were working overtime.\nThe department has also identified notional threat scenarios that exemplify how these security risks could adversely impact DOD operations, equipment, or personnel. DOD documents and officials from a number of organizations—including the Office of the Secretary of Defense, Joint Force Headquarters-DOD Information Networks, and the Navy—discussed with us a number of notional threat scenarios. Figure 2 highlights a few examples of these scenarios.\nThe first notional IoT scenario, the “sabotage of mission,” illustrates a few security risks that could adversely impact DOD operations. The increase of IoT devices used to monitor and control DOD infrastructure could increase the number of attack points through which a network or system could be attacked. Many of these devices are insecure because of a limited ability to patch and upgrade devices, or due to poor security design. As a result, the successful penetration of a smart electrical meter could lead to cascading effects that negatively impact an industrial control system and degrade an ongoing mission. In the second notional IoT scenario, “sabotage of equipment,” the combination of poor password management and an insider threat could lead to unauthorized access to a utility system, such as a water system in a dry dock. The insider threat could then manipulate the water control system to flood the dry dock and damage the ship, according to Navy officials. The third notional IoT scenario, “operations security and intelligence collection,” illustrates the adverse impacts on operations security that can emerge from smart televisions. The scenario involves a television with limited cybersecurity controls being targeted by commercial providers or adversaries to collect information for malicious purposes. The fourth notional IoT scenario, the “endangerment of leadership,” depicts how an adversary could exploit a car equipped with IoT capabilities. Here, an adversary—for example exploiting poor security in the car’s devices—could hack a senior DOD official’s car to monitor conversations, take control of car functions, or endanger the lives of senior DOD leaders in the car.", "While DOD has conducted some assessments to examine security risks with IoT devices, threat-based comprehensive operations security surveys (hereinafter referred to as “operations security surveys”) that could examine such risks are not being conducted. DOD requires different types of assessments to protect DOD information residing on and outside the department’s networks. Some of these assessments can be used to identify and examine security risks related to IoT devices. Such assessments include mission assurance assessments, specific threat assessments from the intelligence community—such as the Defense Intelligence Agency’s April 2016 Threats via the Internet of Things—and operations security surveys.", "According to DOD Directive 3020.40, Mission Assurance, DOD component heads are responsible for implementing the mission assurance process and developing assessments. Mission assurance assessments are installation-level assessments that integrate information on asset criticality, area-specific threats, and vulnerabilities. According to the concept of operations, the mission assurance assessments should examine, among other things, security risks related to infrastructure devices. The 2015 DOD Mission Assurance Assessment Benchmarks lays out specific cybersecurity operations benchmarks, or best practices, that mission assurance assessment teams can use to examine and address security risks related to IoT devices. Some of these benchmarks include: (1) implementing security policies and configurations to ensure secure wireless access into the networks, and taking measures to prevent unauthorized wireless access; (2) conducting vulnerability scans; (3) determining the extent to which remote access is allowed or necessary; and (4) checking on the current configuration information for all industrial control system components.\nTo date, DOD has conducted a number of mission assurance assessments. Three of the four military services—the Army, Navy, and Marine Corps—conducted these assessments and identified cybersecurity risks related to IoT devices on critical infrastructure. While the Air Force did not conduct any assessments in 2016, the service plans to conduct mission assurance assessments in 2017, according to service officials. These officials noted that their assessments will have a limited focus on devices. A 2015 assessment conducted on an Army facility detected cybersecurity vulnerabilities with its IoT devices. The assessment identified how an adversary could hack into industrial control systems’ wireless devices, leading to cascading effects and mission degradation. Additionally, the cybersecurity vulnerabilities of IoT devices in this mission assurance assessment were linked to the benchmarks. Navy and Marine Corps mission assurance assessments also contained recommendations to address IoT cybersecurity vulnerabilities, such as unauthorized communication of information to third parties, rogue wireless devices, and poor security design in the devices. Regarding the unauthorized communication of information to third parties, Marine Corps officials expressed concern over the potential capture of electronic data from a base and transmission of the data to unknown individuals or entities. Some mission assurance assessments recommended discontinuing remote access to systems where possible, implementing wireless intrusion detection systems to detect unauthorized devices, implementing a configuration management process, and conducting vulnerability scans.", "Assessments from the intelligence community have also identified cybersecurity risks related to IoT devices. For example, officials from the Office of the Director of National Intelligence published an essay on challenges with IoT in which they noted that IoT devices present a rich target for attackers and pose a range of potential risks, including eavesdropping and unauthorized access.", "According to DOD Directive 5205.02E, DOD Operations Security Program, DOD components must conduct operations security surveys, at a minimum, every 3 years. Also, DOD’s Operations Security Program Manual 5205.02-M requires a threat analysis that includes identifying potential adversaries and their associated capabilities to collect, analyze, and exploit critical information as an essential step in the operations security process. This could potentially include information collected by IoT devices. The Under Secretary of Defense for Intelligence is also required to report annually to the Secretary of Defense on the status of the DOD operations security program. According to DOD officials, IoT devices pose significant risks to operations security. Officials cited the geolocation capability of some IoT devices as a particular concern— specifically, how the location of troops or personnel could be revealed. Another concern is the ability to use IoT devices to clandestinely record conversations. Military service and agency officials cited smart televisions as an example of an IoT device that could secretly record conversations of DOD personnel.", "DOD has a number of policies as well as guidance for IoT devices, including wearable devices, portable electronic devices, smartphones, and infrastructure devices. Some gaps remain, however, with respect to how DOD addresses security risks associated with IoT in its policies and guidance.", "DOD has issued a number of policies and guidance for IoT devices, including personal wearable fitness devices, portable electronic devices, smartphones, and infrastructure devices associated with industrial control systems. Generally, these policies and guidance apply across the department’s components. Additionally, many of DOD’s policies and guidance address IoT devices based on areas where classified information is processed, and where it is not. Some military services and agencies have issued additional policy and guidance, such as on personal wearable fitness devices and portable electronic devices.\nFigure 3 highlights examples of existing DOD policies and guidance for different types of IoT devices. The figure also lists the DOD sponsor of the policy or guidance, the owner of the device, and the type of device for which the policy or guidance applies. This list may not include all department-wide or component policies and guidance on IoT devices but is intended to show a range of policies and guidance on IoT devices.\nThe DOD Chief Information Officer issued a DOD-wide policy on personal wearable fitness devices (e.g., step counting, heart rate monitoring). Other DOD components—including at least two military services and the National Security Agency—have issued similar guidance on these personal devices. The DOD Chief Information Officer policy addresses the use of personally owned (or government-furnished) devices that meet certain requirements in areas where classified information is stored, processed, or transmitted—authorizing these devices in DOD facilities up to the “top secret” level. The policy prohibits devices with photographic, video recording, or microphone or audio recording capabilities, and requires that wireless or connectivity capabilities be disabled.", "The DOD Chief Information Officer issued a DOD instruction on portable electronic devices able to connect to DOD unclassified and classified wireless local area networks. This instruction identifies a minimum set of security measures, such as antivirus software, encryption, and personal firewalls that must be present in unclassified wireless local area network- enabled portable electronic devices. Several DOD components— including the Defense Information Systems Agency, the Defense Intelligence Agency, and the Department of the Navy—have also issued policies and guidance on these devices. For example, Defense Intelligence Agency employees and visitors must not use video, wireless, photographic, or other recording capabilities of any personally owned portable electronic devices within any agency spaces unless approved in advance for special events (e.g., promotion ceremonies conducted in common areas). Generally, personally owned portable electronic devices with photographic, video recording, audio recording, or wireless transmission capabilities are prohibited in areas where classified information is processed and in other restricted areas.", "The Defense Information Systems Agency has issued a number of policies as well as guidance that apply to DOD-owned smartphones, including mobile Security Requirements Guides and Security Technical Implementation Guides for specific smartphones (e.g., Apple, Blackberry, and Samsung). For example, the Security Technical Implementation Guides state that department personnel should disable their phones from: 1) data transfers with the Bluetooth capability on DOD’s Blackberry phones; 2) data storage in the iCloud on DOD’s Apple phones; and 3) voice dialing on DOD’s Apple phones.", "DOD has department-wide policy and guidance that addresses infrastructure devices (e.g., smart electric meters) within industrial control systems. The Unified Facilities Criteria: Cybersecurity of Facility-Related Control Systems lays out criteria for the inclusion of cybersecurity in the design of control systems down to the device level. For example, at the IoT device level, some of these cybersecurity controls include (a) the avoidance of wireless communications to the greatest extent possible; (b) the implementation of authentication between devices, if possible; and (c) the avoidance of mobile code—i.e., code that is downloaded and executed without explicit user action. Additionally, the Advanced Cyber Industrial Control System Tactics, Techniques, and Procedures (ACI TTP) for Department of Defense (DOD) Industrial Control Systems (ICS) offers guidance and identifies procedures that include infrastructure devices. This guidance identifies device anomalies that could indicate a cyber incident, specific detection procedures to assess the anomaly, and procedures to recover electronic devices, including removing and replacing the device.", "DOD policies highlight the importance of protecting and securing DOD information from any potential adversaries. DOD Directive 8000.01, Management of the Department of Defense Information Enterprise, states that information is considered a strategic asset to DOD and must be safeguarded, appropriately secured and shared, and made available to authorized personnel to the maximum extent allowed by law, policy, and mission requirements. Similarly, DOD Directive 5205.02E, DOD Operations Security (OPSEC) Program, directs that DOD personnel maintain essential secrecy of information that would be useful to adversaries, and that countermeasures are employed to deny adversaries any potential indicators that reveal critical information about DOD missions. Federal internal control standards also require that management evaluate security threats to information technology, which can come from both internal and external sources, and periodically review policies and procedures for continued relevance and effectiveness in addressing related risks. For example, the federal standards note that external threats are particularly important for entities dependent on telecommunications networks and the Internet, and that continual effort is required to address these risks.", "DOD officials told us that existing DOD policies and guidance do not clearly address security risks relating to smart televisions, and particularly smart televisions in unsecure areas. Officials from military services and other DOD components described smart televisions as a risk to operations security due, in part, to the ability of commercial providers to access the devices remotely—potentially eavesdropping on conversations or sending recordings of these conversations to third parties. Although they acknowledged the need for them, Navy and Marine Corps officials stated that they do not have service-wide policies addressing cybersecurity controls for smart televisions. Officials from Joint Force Headquarters-DOD Information Networks highlighted the potential to “hop” (i.e., gain access) from smart televisions to personal smartphones in close proximity and thereby possibly gain access to non- DOD networks—potentially leading to the collection of data on DOD personnel.\nAdditionally, DOD officials affirmed that existing DOD policies and guidance do not clearly address security risks of applications installed on DOD-issued mobile devices. These risks include rogue applications and the unauthorized communication of data to third parties. For example, these officials highlighted the need for policies that could lead to the automatic removal of unauthorized applications from DOD mobile devices or restrictions on the number of parties to whom data are transmitted from an application. DOD officials confirmed that one gaming application—an example of a rogue application—was downloaded on some unclassified DOD-issued phones. Similarly, a DOD report further identifies the dangers of downloading certain applications and unwittingly granting third parties access to a host of personal information on one’s own phone. According to a Defense Information Systems Agency official, other mobile applications will likely be downloaded with similar security implications unless the policy recommendations noted above are implemented.", "Core DOD security policies and guidance on cybersecurity, operations security, information security, and physical security do not address IoT devices. First, DOD Instruction 8500.01, Cybersecurity, and DOD Instruction 8510.01, Risk Management Framework (RMF) for DOD Information Technology (IT)—core DOD policies on cybersecurity—do not provide policy and guidance for IoT devices. Although these instructions may apply to IoT devices that are part of a larger system, they neither focus on these devices nor clearly address security risks specific to these devices. DOD officials acknowledged that these instructions do not focus on IoT devices. Similarly, DOD Chief Information Officer’s DOD Policy Recommendations for the Internet of Things (IoT) also recommends a number of policy tenets to inform changes to DOD’s cybersecurity policies, including encryption of IoT data, monitoring of IoT networks for anomalous traffic, and active management of supply chains for IoT devices.\nSecond, core DOD policies and guidance on operations security do not address IoT devices. As noted earlier, adverse impacts on operations security is a key security risk that DOD identified with IoT devices. Although these core operations security policy documents refer to Internet-based capabilities and the data collection capabilities of potential adversaries, they do not offer guidance to mitigate the risks to operations security associated with these devices. Additionally, a key DOD official with department-wide oversight over operations security agreed that DOD policy on operations security could be enhanced by providing guidance and focusing on IoT devices, including a taxonomy for such devices.\nThird, core DOD policies and guidance we reviewed on information security relating to unclassified DOD information do not address IoT devices. In a 2017 report, we noted that the rapid adoption of IoT devices, the lack of attention to security in the design phase, and the predominant use of cloud computing to provide connectivity with these devices pose unique information security challenges—challenges that could be mitigated in part with DOD guidance on information security. Lastly, core DOD policies and guidance on physical security do not address IoT devices. For example, in one DOD threat scenario, a malicious actor compromises an Internet-connected car of a DOD senior leader and unlocks the doors to abduct the passengers.\nTable 2 below summarizes core DOD security policies and guidance we reviewed that do not address security risks related to IoT devices.\nDOD has developed guidance and detailed procedures for defending industrial control systems against cyber attacks. As noted previously, DOD’s Advanced Cyber Industrial Control System Tactics, Techniques, and Procedures (ACI TTP) for Department of Defense (DOD) Industrial Control Systems (ICS) offers guidance to DOD components and identifies procedures for infrastructure devices, including procedures to assess device anomalies and to recover devices that may have been targeted in cyber attacks. According to U.S. Cyber Command officials, the procedures were tested and validated over the course of 2 years, and U.S. Cyber Command also trained and tested the procedures with Navy personnel over a 2-week period to assess their effectiveness. Although the procedures were found to be effective, DOD does not have a policy that directs the implementation of these procedures throughout the department, according to DOD officials. For example, a DOD installations official cited the need to modify existing and future contracts with vendors of utility services to ensure that these cybersecurity procedures would be put in place. Further, Navy and Air Force officials stated that their services do not have a defined plan in place to implement the advanced cyber industrial control system tactics, techniques, and procedures. Navy officials expressed their intent to fully adopt these procedures; however, they cited a current lack of resources and the strain on system operators—who are more focused on non-security issues—as reasons for not yet having implemented the procedures.", "In addition to the assessments, policies, and guidance discussed above, DOD has taken other actions to address IoT-related security risks. These ongoing efforts include an inventory of systems that incorporate IoT devices, the establishment of forums to discuss DOD IoT policies, and the research of IoT security issues.\nInventory of industrial control systems effort: In March 2016, the Office of the Assistant Secretary of Defense (Energy, Installations, and Environment) directed the military departments and certain other DOD components to develop plans to implement cyber security controls on their facility industrial control systems, including devices and sensors. All of the military departments drafted and submitted implementation plans or a strategy to the Office of the Assistant Secretary of Defense (Energy, Installations, and Environment) by February 2017. After the initial inventory phase, DOD components are to make their control systems resilient to cyber threats and to implement a continuous monitoring process to respond to emerging threats. The department’s goal is to implement cybersecurity controls on the most critical control systems by the end of fiscal year 2019. These actions would be consistent with the National Defense Authorization Act for Fiscal Year 2017 and our recommendation in a prior report, which also requires DOD to take actions on the cybersecurity of its industrial control systems.\nIoT Forum: According to officials in the Office of the DOD Chief Information Officer, the office has established an informal IoT working group for DOD officials working on IoT issues. The group has attended IoT workshops and developed a paper on the IoT. The group authored and published the policy paper DOD Policy Recommendations for the Internet of Things (IoT) in December 2016 to raise awareness of IoT issues. As noted previously, the report discusses the definition of the IoT, the benefits and cybersecurity risks of IoT devices, potential IoT threat scenarios, and DOD policy tenets for addressing the IoT. According to an official in the Office of the DOD Chief Information Officer, their next steps are to establish an IoT community of interest and to produce another IoT report that focuses on DOD component responsibilities and more detailed policy analysis.\nResearch and testing efforts: The Defense Advanced Research Projects Agency has a few ongoing research programs that relate to IoT security issues. The Leveraging the Analog Domain for Security program seeks to develop new cyber techniques in digital devices by monitoring their analog emissions (e.g., radio waves, sound waves, micro-power changes) and is projected to continue through December 2019. By studying analog signals radiating from IoT devices, they intend to better monitor IoT devices and detect deviations from normal device behavior to provide protection for DOD networks. Additionally, the Vetting Commodity Information Technology Software and Firmware program aims to develop checks for broad classes of malicious features and dangerous flaws in software and firmware. The program includes the IoT and other devices and is projected to continue through September 2017. The program seeks to address the department’s need to ensure that the devices and equipment it procures—much of it produced overseas—do not contain hidden code or malware; this could help address the supply chain risk noted previously.", "The IoT and IoT devices represent the wave of the future for the global economy, from infrastructure to public services to consumer use. DOD will likely be involved in using these devices for the foreseeable future. However, IoT devices pose numerous security challenges that need to be addressed, both in specific instances and as part of a holistic approach to risk management in the information age. DOD has made some progress in addressing the security challenges we identify in this report, including: (1) identifying a number of IoT security risks and notional threat scenarios; (2) examining security risks of IoT devices by conducting assessments on critical infrastructure; (3) developing policies and guidance for IoT devices; and (4) establishing ongoing efforts, such as research programs, to mitigate the security risks with these devices. DOD could capitalize on this progress by further addressing challenges we found in the following areas: the lack of operations security surveys that could identify and mitigate security risks of IoT; insufficient DOD policies and guidance for specific IoT devices and applications of concern (e.g., smart televisions and smartphone applications); and the need for DOD core security policies (e.g., cybersecurity, operations security, physical security, information security) that provide clear guidance on the IoT or IoT devices. By addressing these challenges, DOD could better ensure that it is identifying security issues with IoT devices and more effectively safeguarding and maintaining the security of DOD information.", "The Under Secretary of Defense for Intelligence, in coordination with the DOD Chief Information Officer, the Under Secretaries of Defense for Policy; Acquisition, Technology, and Logistics; and Personnel and Readiness; and with military service and agency stakeholders, should conduct operations security surveys that identify IoT security risks and protect DOD information and operations, in accordance with DOD guidance, or address operations security risks posed by IoT devices through other DOD risk assessments.\nThe Principal Cyber Advisor, in coordination with the DOD Chief Information Officer; the Under Secretaries of Defense for Policy; Intelligence; Acquisition, Technology, and Logistics; and Personnel and Readiness; and with military service and agency stakeholders, should\nReview and assess existing departmental security policies and guidance—on cybersecurity, operations security, physical security, and information security—that may affect IoT devices; and Identify areas where new DOD policies and guidance may be needed—including for specific IoT devices, applications, or procedures—and where existing security policies and guidance can be updated to address IoT security concerns.", "We provided a draft of this report to DOD and the Office of the Director of National Intelligence. DOD provided written comments, in which it concurred with our two recommendations. DOD’s written comments are reprinted in their entirety in appendix II. DOD also provided technical comments, which we incorporated into the report where appropriate. The Office of the Director of National Intelligence did not provide technical comments.\nDOD concurred with our recommendation to conduct operations security surveys that identify IoT security risks and protect DOD information and operations, in accordance with DOD guidance, or address operations security risks posed by IoT devices through other DOD risk assessments. The department stated that it will take action in accordance with its existing policies for operations security.\nDOD concurred with our recommendation to review and assess existing departmental security policies and guidance—on cybersecurity, operations security, physical security, and information security—that may affect IoT devices; and to identify areas where new DOD policies and guidance may be needed—including for specific IoT devices, applications, or procedures—and where existing security policies and guidance can be updated to address IoT security concerns. The department stated that it has already begun work in this area and should complete a review of its policies and guidance affected by loT by the end of the fourth quarter, fiscal year 2017. DOD also stated that updates to address IoT will be done as part of the department’s policy update process.\nWe are sending copies of this report to the appropriate congressional committees, the Secretary of Defense, the Under Secretary of Defense for Intelligence, DOD’s Principal Cyber Advisor, the Under Secretaries of Defense for Policy; Acquisition, Technology, and Logistics; and Personnel and Readiness; DOD’s Chief Information Officer, and the Director of National Intelligence. In addition, the report is available at no charge on the GAO website http://www.gao.gov.\nIf you or your staff has any questions about this report, please contact me at (202) 512-9971 or [email protected]. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix III.", "The objectives of this report were to (1) address the extent to which Department of Defense (DOD) has identified and assessed security risks related to Internet of Things (IoT) devices; (2) assess the extent to which DOD has developed policies and guidance related to IoT devices; and (3) describe other actions DOD has taken to address security risks related to IoT devices.\nThe scope of this review includes a range of IoT devices, to include wearable fitness devices, portable electronic devices, smartphones, and infrastructure devices, but it excludes weapon systems—such as airplanes and tanks—and intelligence, surveillance, and reconnaissance networks, which could be described as an example of the IoT. In addition, we assessed IoT devices and their related security challenges, and we excluded from our review the back-end computing and analytic infrastructure, such as computer servers, that can store and process IoT device data.\nTo address the extent to which DOD has identified and assessed security risks related to IoT devices, we reviewed DOD reports on IoT, including reports from the Defense Science Board, the Office of the DOD Chief Information Officer, the Defense Intelligence Agency, and Joint Staff, that identified broad security risks with IoT devices. We also interviewed officials from a number of organizations—including the Office of the Secretary of Defense, Joint Force Headquarters-DOD Information Networks, the military services, the Defense Information Systems Agency, the National Security Agency, the Defense Intelligence Agency, and the Defense Advanced Research Projects Agency—to identify key security risks associated with IoT devices. After these interviews and reviews, we grouped identified risks into common categories. We examined DOD notional threat scenarios that depict consequences ensuing from compromised IoT devices. Officials in the Office of the Secretary of Defense, the Navy, the Defense Information Systems Agency, and Joint Force Headquarters-DOD Information Networks developed these scenarios. Through our interviews with organization officials, we identified various types of risk assessments that may address security risks related to IoT devices. We reviewed the focus areas of these assessments and identified whether they examined IoT devices. We compared these assessments against DOD criteria. We collected and analyzed a non-generalizable sample of these assessments to review. For the mission assurance assessments, we requested and received a sample of documents from the services to review. From our request, we received and reviewed a total of 11 mission assurance assessments—2 from the Army, 2 from the Navy, and 7 from the Marine Corps. With respect to intelligence assessments, we requested and received 1 assessment from the Defense Intelligence Agency and 1 from the Office of the Director of National Intelligence—documenting the challenges related to the IoT.\nTo assess the extent to which DOD has developed policies and guidance related to IoT devices, we interviewed officials from the Office of the Secretary of Defense, the Joint Staff, the military services, the Defense Information Systems Agency, U.S. Cyber Command, the Defense Intelligence Agency, the National Security Agency, and the Defense Logistics Agency to identify current policies and guidance applying to a range of IoT devices, including wearable fitness devices, portable electronic devices, smartphones, and infrastructure devices. We reviewed these policies and guidance—including the DOD Chief Information Officer’s DOD Policy Recommendations for the Internet of Things (IoT)— and identified their general characteristics, applicability, and focus areas. When we interviewed officials from the organizations noted above, we also asked them whether there are any gaps in policies and guidance for IoT devices, applications, or procedures. We compiled their responses to identify a few commonly cited policy and guidance gaps where security risks may not be addressed. Additionally, we reviewed core DOD security policy documents on cybersecurity, operations security, physical security, and information security (see table 2 in the report) to assess whether these documents addressed IoT devices or security risks associated with IoT devices. We used relevant search terms such as “device,” “capabilities,” and “threat” to make these assessments. Federal internal control standards require that management evaluate security threats to information technology and periodically review policies and procedures for continued effectiveness in addressing related risks, so we asked officials whether the department was addressing risks related to IoT devices.\nTo describe other actions DOD has taken to address security risks related to IoT devices, we interviewed officials from a number of organizations— including the Office of the Under Secretary of Defense for Acquisition, Technology, and Logistics; Office of the DOD Chief Information Officer; the National Security Agency; the Defense Advanced Research Projects Agency; the Defense Intelligence Agency; and the military services—and collected documents to identify and describe ongoing efforts and actions to address and mitigate security risks relating to IoT devices. We grouped ongoing efforts they identified into categories, such as research, inventory tasks, forums, and the development of use cases. Due to the limited number of ongoing efforts directly tied to IoT we could identify, we developed a small number of categories—which captured all of these efforts—by distinguishing among the primary focuses of these efforts. These focuses included long-term knowledge building, information collection on assets, intra-departmental collaboration, and the development of threat scenarios or environments.\nTo address our reporting objectives, we reviewed relevant documents and interviewed knowledgeable officials from the following DOD organizations and offices as identified in table 3.\nWe also interviewed officials from three non-DOD organizations, including the Office of the Director of National Intelligence, the Internet Society, and the National Institute of Standards and Technology. We interviewed the Office of the Director of National Intelligence to gain a non-DOD intelligence community perspective of cyber issues related to IoT devices. We also interviewed the Internet Society to collect insights on IoT issues from a non-governmental organization. Lastly, we interviewed the National Institute of Standards and Technology as they have issued a number of cybersecurity documents, including those that apply to IoT devices.\nWe conducted this performance audit from June 2016 to July 2017 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 that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives.", "", "", "", "In addition to the contact named above, key contributors to this report were Tommy Baril (Assistant Director), Ivelisse Aviles, Tracy Barnes, John Beauchamp, Jennifer Beddor, Robert Breitbeil, Jennifer Cheung, Amie Lesser, and Cheryl Weissman.", "GAO, Technology Assessment: Internet of Things: Status and Implications of an Increasingly Connected World, GAO-17-75 (Washington, D.C.: May 15, 2017).\nGAO, Data and Analytics Innovation: Emerging Opportunities and Challenges, GAO-16-659SP (Washington, D.C.: Sep. 20, 2016).\nGAO, Defense Infrastructure: Improvements in DOD Reporting and Cybersecurity Implementation Needed to Enhance Utility Resilience Planning, GAO-15-749 (Washington, D.C.: July 23, 2015)\nGAO, Vehicle Cybersecurity: DOT and Industry Have Efforts Under Way, but DOT Needs to Define Its Role in Responding to a Real-world Attack, GAO-16-350 (Washington, D.C.: Mar. 24, 2016)." ], "depth": [ 1, 2, 2, 2, 1, 2, 2, 3, 3, 3, 1, 2, 3, 3, 3, 2, 3, 3, 1, 1, 1, 1, 1, 1, 1, 2, 2, 1 ], "alignment": [ "h0_title", "h0_full", "", "", "h0_title", "h0_full", "h0_full", "", "h0_full", "", "h0_title h1_title", "h1_full", "", "", "", "h0_title h1_title", "h0_full", "h1_full", "", "", "h1_full", "", "h0_full h2_full", "", "", "", "", "" ] }
{ "question": [ "What is the IoT?", "What are security risks of IoT devices?", "How can these risks be catagorized?", "How has the DOD planned for IoT security threats?", "To what extent has the DOD adequately assessed the risks of IoT devices?", "How has the DOD regulated its IoT devices?", "To what extent do these policies address security risks?", "To what extent do these policies address all DOD IoT devices?", "To what extent have general security policies been applied to IoT devices?", "How can DOD IoT device security be improved?", "How did GAO source their data for this report?", "How did GAO identify risk assessments that might address IoT devices?", "How did GAO make use of DOD policies and guidance?" ], "summary": [ "The Internet of Things (IoT) is the set of Internet-capable devices, such as wearable fitness devices and smartphones, that interact with the physical environment and typically contain elements for sensing, communicating, processing, and actuating.", "Even as the IoT creates many benefits, it is important to acknowledge its emerging security implications. The Department of Defense (DOD) has identified numerous security risks with IoT devices and conducted some assessments that examined such security risks, such as infrastructure-related and intelligence assessments.", "Risks with IoT devices can generally be divided into risks with the devices themselves and risks with how they are used. For example, risks with the devices include limited encryption and a limited ability to patch or upgrade devices. Risks with how they are used—operational risks—include insider threats and unauthorized communication of information to third parties.", "DOD has developed IoT threat scenarios involving intelligence collection and the endangerment of senior DOD leadership—scenarios that incorporate IoT security risks (see figure).", "Although DOD has begun to examine security risks of IoT devices through its infrastructure-related and intelligence assessments, the department has not conducted required assessments related to the security of its operations.", "DOD has issued policies and guidance for IoT devices, including personal wearable fitness devices, portable electronic devices, smartphones, and infrastructure devices associated with industrial control systems.", "However, GAO found that these policies and guidance do not clearly address some security risks relating to IoT devices.", "First, current DOD policies and guidance are insufficient for certain DOD-acquired IoT devices, such as smart televisions in unsecure areas, and IOT device applications.", "Secondly, DOD policies and guidance on cybersecurity, operations security, information security, and physical security do not address IoT devices. Lastly, DOD does not have a policy directing its components to implement existing security procedures on industrial control systems—including IoT devices.", "Updates to DOD policies and guidance would likely enhance the safeguarding and securing of DOD information from IoT devices.", "GAO reviewed reports and interviewed DOD officials to identify risks and threats of IoT devices faced by DOD.", "GAO also interviewed DOD officials to identify risk assessments that may address IoT devices and examined their focus areas.", "GAO further reviewed current policies and guidance DOD uses for IoT devices and interviewed officials to identify any gaps in policies and guidance where security risks may not be addressed." ], "parent_pair_index": [ -1, -1, 1, -1, 3, -1, 0, 0, -1, 3, -1, 0, 0 ], "summary_paragraph_index": [ 2, 2, 2, 2, 2, 3, 3, 3, 3, 3, 1, 1, 1 ] }
GAO_GAO-19-207
{ "title": [ "Background", "At EM’s 16 Cleanup Sites, Cleanup Is Governed by 72 Agreements, but EM Headquarters and Sites Do Not Consistently Define or Track Milestones", "At EM’s 16 Cleanup Sites, Cleanup Is Governed by 72 Agreements, Most of Which Include Cleanup Milestones", "EM Headquarters and Selected Cleanup Sites Do Not Consistently Define or Track Milestones", "EM Does Not Track Sites’ Renegotiated Milestone Dates and Has Not Consistently Reported Milestone Information to Congress as Required", "Sites Renegotiate Milestone Dates Before They Are Missed, and EM Does Not Track How Often This Occurs", "EM Has Not Consistently Reported Required Information to Congress, and the Information It Has Reported Is Incomplete", "EM Does Not Analyze the Root Causes of Missed or Postponed Milestones and Does Not Have Guidelines for Considering Root Causes When Renegotiating New Milestones", "Conclusions", "Recommendations for Executive Action", "Agency Comments and Our Evaluation", "Appendix I: Department of Energy (DOE) Cleanup Sites", "Brookhaven National Laboratory", "Energy Technology Engineering Center", "Hanford Site", "Idaho National Laboratory", "Lawrence Livermore National Laboratory", "Los Alamos National Laboratory", "Moab Uranium Mill Tailings Project", "Nevada National Security Site", "Oak Ridge Reservation", "Paducah Gaseous Diffusion Plant", "Portsmouth Gaseous Diffusion Plant", "Sandia National Laboratories", "Savannah River Site", "Separations Process Research Unit", "Waste Isolation Pilot Plant", "West Valley Demonstration Project", "Appendix II: Comments from the Department of Energy", "Appendix III: GAO Contact and Staff Acknowledgments", "GAO Contact", "Staff Acknowledgments" ], "paragraphs": [ "EM oversees a nationwide complex of 16 sites. A majority of the sites were created during World War II and the Cold War to research, produce, and test nuclear weapons (see figure 1). Much of the complex is no longer in productive use but still contains vast quantities of radioactive and hazardous materials related to the production of nuclear weapons. In 1989, EM began carrying out activities around the complex to clean up, contain, safely store, and dispose of these materials. Starting at about the same time, DOE documents indicate that EM and state and federal regulators entered into numerous cleanup agreements that defined the scope of cleanup work and established dates for coming into compliance with applicable environmental laws. EM has spent more than $170 billion since it began its cleanup program, but its most challenging and costly cleanup work remains, according to EM documents.\nThe processes that govern the cleanup at EM’s nuclear waste sites are complicated, involving multiple laws, agencies, and administrative steps. EM’s cleanup responsibilities derive from different laws, including CERCLA, RCRA, the Atomic Energy Act, and state hazardous waste laws. Federal facility agreements, compliance orders, and other compliance agreements also govern this cleanup.\nFederal facility agreements are generally enforceable agreements that DOE enters into with EPA and affected states under CERCLA and applicable state laws. For each federal facility listed on the National Priorities List, EPA’s list of seriously contaminated sites, section 120 of CERCLA requires the relevant federal agency to enter into an interagency agreement with EPA for the completion of all necessary cleanup actions at the facility. The interagency agreement must include, among other things, the selection of the cleanup action and schedule for its completion. Interagency agreement provisions can be renegotiated, as necessary, to incorporate new information, adjust schedules, and address changing conditions.\nStates generally issue federal facility compliance orders to DOE under RCRA and the Federal Facilities Compliance Act. RCRA prohibits the treatment, storage or disposal of hazardous waste without a permit from EPA or a state that EPA has authorized to implement and enforce a hazardous waste management program. Under the Federal Facilities Compliance Act, federal agencies are subject to state hazardous waste laws and state enforcement actions, including compliance orders. RCRA regulations establish detailed and often waste-specific requirements for the management and disposal of hazardous wastes, including the hazardous waste component of mixed waste. Tri-party agreements among DOE, EPA, and the relevant state often serve as both a federal facility agreement and a compliance order.\nIn addition to federal facility agreements, other types of agreements governing cleanup at specific sites may also be in place, including administrative compliance orders, court-ordered agreements, and settlement agreements. Administrative compliance orders are orders from state agencies enforcing state hazardous waste management laws. Court-ordered agreements result from lawsuits initiated primarily by states. Settlement agreements are agreements between parties that end a legal dispute.\nThese agreements may include milestones—dates by which DOE commits to plan and carry out its cleanup work at the sites. DOE has identified two different types of milestones: enforceable and planning milestones. Generally, an enforceable milestone has a fixed, mandatory due date, subject to the availability of appropriated funds, whereas a planning milestone is not enforceable and usually represents a placeholder or shorter term of work. In this report, we are examining any enforceable milestone that derives from either federal facility agreements or other compliance agreements.\nEM manages its cleanup program based on internal guidance, on milestone commitments to regulators, and in consultation with a variety of stakeholders. First, according to EM officials, EM manages cleanup activities based on requirements listed in a cleanup policy that it issued in July 2017 along with guidance listed in standard operating policies and procedures associated with this policy. The 2017 cleanup policy states that EM will apply DOE’s project management principles described in Order 413.3B to its operations activities in a tailored way. Second, EM’s budget requests are explicit regarding the role the milestones play in the cleanup effort. For example, in its fiscal year 2019 request to Congress, EM stated that the request addresses cleanup “governed through enforceable regulatory milestones.” Third, in addition to the milestone commitments to EPA and state environmental agencies, other stakeholders involved include county and local governmental agencies, citizen groups, and other organizations. These stakeholders advocate their views through various public involvement processes, including site- specific advisory boards.", "At EM’s 16 cleanup sites, cleanup is governed by 72 agreements and hundreds of cleanup milestones. These agreements include federal facility agreements generally negotiated between DOE, the state, and EPA, and compliance orders from state regulators. These agreements may impose penalties for missing milestones and may amend or modify earlier agreements, including extending or eliminating milestone dates. Within the agreements, hundreds of milestones outline deadlines for specific actions to be taken by EM as it carries out its cleanup work. However, because EM lacks a standard definition of milestones, some sites track milestones differently than EM headquarters, limiting EM’s ability to monitor performance.", "In total, DOE has entered into 72 cleanup agreements at EM’s 16 cleanup sites. The agreements were initially signed between 1985 and 2009 (see table 1). With the exception of the Moab Uranium Mill Tailings Remedial Action Project in Utah and the Waste Isolation Pilot Plant in New Mexico, each site is governed by at least one cleanup agreement. Twelve are governed by multiple agreements (up to as many as 17 at the Savannah River Site, for example).\nTwelve sites are governed by federal facility agreements, generally with the relevant state and EPA. These agreements generally set out a sequence for accomplishing the work, tend to cover a relatively large number of cleanup activities, and include milestones that DOE must meet. All of the 12 sites with federal facility agreements are also governed by additional compliance agreements that have been negotiated at each site subsequent to the initial federal facility agreement or other agreement with the state. These agreements may impose penalties for missing milestones and may amend or modify earlier agreements, including extending or eliminating milestone dates. For example, the Hanford Site is subject to three consent decrees that resulted from litigation in which the state of Washington sued DOE for failing to meet certain cleanup milestones.", "EM headquarters and cleanup site officials provided us with different totals on the number of milestones in place at the four sites we selected for further review. Both federal facility agreements and other compliance agreements contain milestones with which EM must comply and, according to EM officials and our review of the agreements, these agreements collectively contain hundreds of milestones. However, milestone information that EM headquarters and site officials shared with us was not consistent. For example, for milestones due in fiscal years 2018 through 2020, officials at EM headquarters identified 135 enforceable cleanup milestones at the four selected sites, which was less than half of the number of such milestones officials at those sites reported to us (see table 2).\nThese discrepancies result from how headquarters and selected sites define and track milestones.\nMilestone definitions. EM headquarters officials said that they are primarily concerned with milestones related to on-the-ground cleanup; that is, cleanup activities that actually result in waste being removed, treated, or disposed of. EM officials said they consider these to be major milestones. However, not all sites make the same distinction between major and non-major milestones and, as a result, are not consistently reporting the same types of milestones to EM headquarters. For example, officials at the Savannah River Site track milestones in a federal facility agreement that lists 79 milestones due in fiscal years 2018 through 2020. This agreement makes no distinction between major and non-major milestones and includes administrative activities, such as revisions to cleanup reports, in its milestone totals. EM headquarters officials, on the other hand, do not include these activities as major milestones and list only 43 milestones due in the same time frame. Similarly, Hanford officials do not distinguish between major or other milestones in their internal tracking. As a result, Hanford officials are tracking 178 milestones due in fiscal years 2018 through 2020, whereas EM headquarters officials are tracking 57 for the same time frame at Hanford.\nRequirements for updating milestones. Sites do not consistently provide EM headquarters with the most up-to-date information on the status of milestones at each site. This is because EM requirements governing the submission of milestone information do not specify when or how often sites are to update this information, so sites have the discretion to choose when to send updated milestone data to headquarters. As a result, the information on the list of milestones used to track cleanup performance by EM headquarters may differ from the more up-to-date information kept by the sites. For example, officials at each of the four sites we examined stated that they try to send updated information on the status of milestones to headquarters on an annual basis, though they sometimes send it less frequently. Officials at EM headquarters acknowledged that their list of milestones is not always up-to-date because of the lag between when a milestone changes at the site and when sites update that information in the EM headquarters’ database.\nIn addition to inconsistencies in tracking and defining milestones, lists of milestones maintained by EM headquarters and the four selected sites may not include all cleanup milestones governing the cleanup work at the site. We found two cases in which permits at two sites included milestones that neither EM headquarters nor site officials included in their list of sites’ cleanup milestones. For example, milestones related to a major construction project at one of the selected sites we reviewed— Savannah River—are not listed in either EM headquarters’ or the Savannah River Site’s list of enforceable milestones. According to South Carolina state environmental officials, milestones associated with this project are part of a separate permit and dispute resolution agreement not connected to the federal facility agreement or one of the sites’ compliance agreements. Recently, DOE acknowledged in its fiscal year 2019 budget request that this project has faced technical challenges, and officials noted that the previously agreed-upon start date for operating this project would be delayed. However, this milestone and its delay are not included in either EM headquarters’ or Savannah River’s list of milestones. Similarly, officials at the Hanford Site said that some milestones governing Hanford’s cleanup are part of the site wide RCRA permit issued by the state, which is separate from its federal facility agreement, and, as a result, officials do not track this information in the same Hanford milestone tracking system and do not report it to EM headquarters.\nEM does not have a standard definition of milestones for either sites or headquarters to use for reporting and monitoring cleanup milestones or guidance on how often sites should update the status of milestones. EM headquarters officials cited guidance that sites can refer to when entering their milestone data into the headquarters-managed database. This guidance addresses how to submit milestone data but does not include a definition of milestones or specify how often sites should update the information. EM headquarters officials noted that sites have the discretion to input milestones as they choose. EM’s lack of a standard definition of milestones limits management’s ability to use milestones to manage EM’s cleanup mission and monitor its progress. We have previously found that poorly defined, incomplete, or missing requirements make it difficult to hold projects accountable, result in programs or projects that do not meet user needs, and can result in cost and schedule growth. In addition, according to Standards for Internal Control in the Federal Government, information and communication are vital for an entity to achieve its objectives. According to these standards, the first principle of information and communication is that management should define the information requirements at the relevant level and the requisite specificity for appropriate personnel. Without this, EM’s ability to use milestones for managing and measuring the performance of its cleanup program is limited.", "EM relies on cleanup milestones, among other metrics, to measure the overall performance of its operations activities. However, sites regularly renegotiate milestones they are at risk of missing, and EM does not track data on the history of postponed milestones. As a result, EM cannot accurately track the progress of cleanup activities to meet these milestones. Additionally, EM has not consistently reported required information to Congress, and the information it has reported is incomplete. For example, in its report to Congress on the status of the enforceable milestones, EM includes the latest (meaning the most recently renegotiated) milestone dates with no indication of whether or how often those milestones have been missed or postponed.", "Site officials typically renegotiate enforceable milestones they are at risk of missing with their regulators, in accordance with the modification procedures established in federal facility agreements. EM officials said that sites have the ability to renegotiate milestones before they are missed. For example, the Hanford Site Federal Facility Agreement allows DOE to request an extension of any milestone; the request must include, among other things, DOE’s explanation of the good cause for the extension. As long as there is consensus among EM and its regulators, the milestone is changed. Similarly, the Los Alamos Federal Facility Agreement requires site officials to negotiate cleanup milestones each fiscal year. Because renegotiated milestones are not technically missed, EM avoids any fines or penalties associated with missed milestones.\nSite officials we interviewed at the four selected sites stated that it is common for regulators and sites to renegotiate milestones before sites miss them. For example, at the Savannah River Site, both DOE and South Carolina officials said they could not recall any missed milestones among the thousands of milestones completed since the cleanup began. Similarly, Hanford officials told us that since the beginning of the cleanup effort in 1989, more than 1,300 milestones had been completed and only 62 had actually been missed because, in most cases, whenever milestones were at risk of being missed, they were renegotiated. However, officials at these sites could not provide us with the exact number of times milestones had been renegotiated. This is because once milestones are changed, sites are not required to maintain or track the original milestones. As a result, the new milestones become the new agreed-upon time frame, essentially resetting the deadline.\nBecause EM does not track the original baseline schedule for renegotiated milestone dates, milestones do not provide a reliable measure of program performance. According to best practices identified in GAO’s schedule assessment guide, agencies should formally establish a baseline schedule against which performance can be measured. In particular, we have previously found that management does not have the ability to identify and mitigate the effects of unfavorable performance without a formally established baseline schedule against which it can measure performance. We have also found that, without a documented and consistently-applied schedule change control process, program staff may continually revise the schedule to match performance, hindering management’s insight into the true performance of the project. In addition, DOE’s internal project management policies call for steps to maintain a change control process, including setting a baseline schedule for completing certain activities and maintaining a record of any subsequent deviations from that baseline. EM uses milestones as one of its metrics for measuring the performance of its cleanup efforts, since the milestones are effectively schedule targets. However, since neither EM headquarters nor the sites track renegotiated milestones and their baseline dates at the sites, EM cannot accurately use milestones for managing and measuring the performance of its cleanup program.", "EM has not consistently reported required information to Congress on the status of its milestones. The National Defense Authorization Act for Fiscal Year 2011 established a requirement for EM to annually provide Congress with a future-years defense environmental cleanup plan. This plan is to contain, among other things, information on the current dates for enforceable milestones at specified cleanup sites, including whether each milestone will be met and, if not, an explanation as to why and when it will be met. However, since 2011, EM has only provided Congress with the required annual plan in 2 years—2012 and 2017—and EM officials told us in September 2018 that they were unsure when EM would release the next future-years plan. EM officials said that, instead of the annual plan, they have provided oral briefings to Congressional staff during the 4 years when a formal report was not produced.\nIn addition, our analysis of the 2012 and 2017 plans EM submitted to Congress identified three ways in which the plans provide inaccurate or incomplete information on EM’s enforceable milestones.\nNo historical record. First, the plans contain no indication of whether each milestone date reported is the original date for that milestone or whether or how many times the milestones listed have been missed or postponed. Instead, the plans report the latest (and most recently renegotiated) dates for the milestones without listing the original dates or acknowledging that some of the milestones have been delayed, in some cases by several years, beyond their original agreed-upon completion dates. For example, we found that at least 14 milestones from the 2012 plan were repeated in the 2017 plan with new forecasted completion dates, but the 2017 plan gave no indication that these milestones had been postponed (see table 3). The milestones’ due dates had been pushed back by as many as 6 years without any indication in the 2017 report that they were delayed. As noted above, EM headquarters does not track changes to milestones and EM officials at both headquarters and the sites said that they have not historically kept a record of the original baseline dates for renegotiated milestones they change. As a result, EM officials could not readily provide information on whether the other milestones listed in the 2012 report met their listed due date or whether they were postponed. Headquarters officials stated that to gather this information they would need to survey officials at each site.\nInaccurate forecast. Second, the forecast completion dates for milestones listed in the 2012 and 2017 plans may not present an accurate picture of the status of the milestones and EM’s cleanup efforts. For example, in the 2012 plan, DOE reported that four out of 218 milestones were at risk of missing their planned completion date, while the rest were on schedule. As discussed above, we found 14 of the milestones in the 2012 plan had been postponed and listed again in the 2017 plan. Similarly, the 2017 plan listed only one milestone out of 154 as forecasted to miss its due date. However, because EM does not have a historical record of the changes made to the milestones, it is unclear how many of these milestones represented their original due dates.\nIncomplete list. Third, the plans did not include milestones from all of the 10 DOE cleanup sites that EM is required to report on. In 2012, EM did not report milestone information for two of the 10 sites that were required to be included in the plan. In the 2017 plan, information was missing for one of the 10 required sites. EM headquarters officials said that this could be because some sites did not update their milestone information or some sites may still be renegotiating new milestones. However, neither report indicated that data were missing for these sites.\nAs a result of these issues, DOE’s future-years defense environmental cleanup plans provide only a partial picture of the milestones and overall cleanup progress made across the cleanup complex, and actual progress made in cleanup is not transparent to Congress. The absence of reliable and complete information on the progress of EM’s cleanup mission limits EM’s ability to manage its mission and complicates Congress’s ability to oversee the cleanup work.", "Best practices and DOE requirements for project management call for a root cause analysis when problems lead to schedule delays, but EM officials at both headquarters and selected sites have not analyzed reasons why milestones are missed or postponed. According to best practices identified in GAO’s cost estimating guide, agencies should identify root causes of problems that lead to schedule delays and renegotiated milestones. Specifically, when risks materialize (i.e., when milestones are missed or delayed), risk management should provide a structure for identifying and analyzing root causes. The benefits of doing so include developing a better understanding of the factors that caused milestones to be missed and providing agencies with information to more effectively address those factors in the future. In addition, DOE has recently emphasized the importance of doing this kind of analysis. In 2015, DOE issued a directive requiring sites to do a root cause analysis when the project team, program office, or independent oversight offices determine that a project has breached its cost or schedule thresholds. This directive, which applies to all programs and projects within DOE, calls for “an independent and objective root cause analysis to determine the underlying contributing causes of cost overruns, schedule delays, and performance shortcomings,” such as missed or postponed milestones.\nHowever, EM has not done a complex-wide analysis of the reasons for missed or postponed milestones. Similarly, officials we interviewed at the four selected sites said that they were not aware of any site-wide review of why milestones were missed or postponed. According to headquarters officials, this analysis has not been done because EM has determined that DOE requirements governing this type of analysis apply only to contract schedules, not regulatory milestones, and that missed or postponed milestones are not necessarily an indication of cleanup performance shortcomings. However, as previously noted in this report, missing or postponing milestones is a systemic problem across the cleanup complex that makes it difficult for DOE to accurately identify cleanup performance shortcomings. Because EM has not analyzed why it has missed or postponed milestones, EM cannot address these systemic problems and consider those problems when renegotiating milestones with regulators. Without such analysis, EM and its cleanup regulators lack information to set more realistic and achievable milestones and, as a result, future milestones are likely to continue to be pushed back, further delaying the cleanup work. As we have reported previously, these delays lead to increases in the overall cost of the cleanup.", "The federal government faces a large and growing future environmental liability, the vast majority of which is related to the cleanup of radioactive and hazardous waste at DOE’s 16 sites around the country. EM has responsibility for addressing the human health and environmental risks presented by this contamination in the most cost-effective way. However, most of EM’s largest projects are significantly delayed and over budget, and state regulators for nearly all of EM’s cleanup sites have responded by initiating enforcement actions, often leading to additional agreements, including administrative orders and court settlements, in addition to initial federal facility agreements to ensure those risks are addressed.\nEM relies on cleanup milestones, among other metrics, to measure the overall performance of its operations activities, and EM reports that very few of its cleanup milestones over the past 2 decades have been missed. However, EM’s self-reported performance in achieving milestones does not provide an accurate view of actual progress in cleaning up sites. EM has not established clear definitions for tracking and reporting milestones and does not have any requirements governing the way sites are to update milestone information. As a result, EM’s internal tracking of these milestones has inconsistencies. Additionally, since the requirement to annually report on the status of milestones was set in 2011, EM has produced only two reports to Congress, and these were inaccurate and incomplete. Without a clear and consistent approach to collecting and reporting this data, including the history of milestone changes, EM cannot accurately use milestones for managing and measuring the performance of its cleanup program. The absence of reliable and complete information on the progress of EM’s cleanup mission also limits EM’s and Congress’s ability to oversee the cleanup work. In addition, without a root cause analysis of why milestones are missed or postponed, EM and its cleanup regulators lack information to set more realistic and achievable milestones. As a result, future milestones are likely to continue to be pushed back, further delaying the cleanup work, which will likely increase cleanup costs and risks to human health and the environment.", "We are making the following four recommendations to DOE: The Assistant Secretary of DOE’s Office of Environmental Management should update EM’s policies and procedures to establish a standard definition of milestones and specify requirements for both including and updating information on milestones across the complex. (Recommendation 1)\nThe Assistant Secretary of DOE’s Office of Environmental Management should track original milestone dates as well as changes to its cleanup milestones. (Recommendation 2)\nThe Assistant Secretary of DOE’s Office of Environmental Management should comply with the requirements in the National Defense Authorization Act by reporting annually to Congress on the status of its cleanup milestones and including a complete list of cleanup milestones for all sites required by the act. The annual reports should also include, for each milestone, the original date along with the currently negotiated date. (Recommendation 3)\nThe Assistant Secretary of DOE’s Office of Environmental Management should conduct root cause analyses of missed or postponed milestones. (Recommendation 4)", "We provided a draft of this report to DOE for review and comment. DOE provided written comments, which are reproduced in appendix II; the agency also provided technical comments that we incorporated in the report as appropriate. Of the four recommendations in the report, DOE agreed with three, and partially agreed with one.\nRegarding the recommendation that DOE update EM’s policies and procedures to establish a standard definition of milestones and specify requirements for both including and updating information on milestones across the complex, the agency agreed with the recommendation. DOE stated that these policy-driven reforms can improve the efficiency of milestone tracking.\nRegarding the recommendation that DOE track changes to cleanup milestones, the agency agreed with the recommendation. DOE stated that EM currently monitors milestone status, including changes as the need for changes are identified and as part of its ongoing communication with field offices, and therefore DOE considers the recommendation to be closed. However, as we noted in the report, neither EM headquarters nor the sites track the original baseline schedule for renegotiated milestone dates. We adjusted the language of the recommendation to make clear that the EM Assistant Secretary should track original milestone dates as well as changes to cleanup milestones. DOE stated in its written comments that EM does not believe that tracking original and changed milestones will strengthen EM's ability to use milestones to manage and measure the performance of its cleanup program. However, as we noted in this report, according to best practices identified in GAO's schedule assessment guide, agencies should formally establish a baseline schedule against which performance can be measured. We have found that, without a documented and consistently-applied schedule change control process, program staff may continually revise the schedule to match performance, hindering management's insight into the true performance of the project. In addition, DOE's internal project management policies call for steps to maintain a change control process, including setting a baseline schedule for completing certain activities and maintaining a record of any subsequent deviations from that baseline.\nRegarding our recommendation that DOE comply with the requirements in the National Defense Authorization Act by reporting annually to Congress on the status of its cleanup milestones and including a complete list of cleanup milestones for all sites required by the act, the agency partially agreed with the recommendation. DOE stated that additional budget and clarification of purpose and scope would be required to fulfill this recommendation. As we point out in our report, DOE has not fully complied with requirements established by the act, including not submitting all required annual reports and, even when DOE did submit these reports, its reporting omitted information about some sites. DOE stated that EM is reviewing options to address this recommendation.\nRegarding our recommendation that DOE conduct root cause analyses of performance shortcomings that lead to missed or postponed milestones, the agency agreed with the recommendation and stated that EM is evaluating options to implement it. However, DOE stated that there may be multiple reasons why milestones are changed, and not all of the changes are due to DOE performance. To acknowledge the uncertainty in the causes of missed or postponed milestones, we adjusted the language of the recommendation to clarify that the EM Assistant Secretary should conduct root cause analyses of missed or postponed milestones.\nIn addition, in its written comments, DOE disagreed with the draft report's description of the process and authorities related to renegotiating compliance milestones, stating that EM cannot and does not unilaterally delay/postpone milestones and that EPA and state regulator approval of milestone changes is required. We agree, and the report states that it is common for regulators and sites to renegotiate milestones before sites miss them. DOE also disagreed with the draft report’s characterization of the coordination between EM sites and headquarters in tracking milestones. In particular, DOE’s written comments state that site-specific databases include all regulatory compliance milestones drawn from applicable agreements, while the headquarters database tracks major enforceable milestones. However, as our report notes, because not all sites make the same distinction between major and non-major milestones, sites are not consistently reporting the same types of milestones to EM headquarters. In addition, DOE’s written comments state that EM sites and headquarters routinely collaborate and discuss the status of milestones via meetings and EM periodically requests that sites verify the data in the EM headquarters database. Nevertheless, as our report notes, EM requirements governing the submission of milestone information do not specify when or how often sites are to update this information.\nWe are sending copies of this report to the appropriate congressional committees, the Secretary of Energy, and other interested parties. In addition, this report is available at no charge on the GAO website at http://www.gao.gov.\nIf you or your staff have any questions about this report, please contact me at (202) 512-3841 or [email protected]. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made significant contributions to this report are listed in appendix III.", "", "The Brookhaven National Laboratory was established in 1947 by the Atomic Energy Commission. Formerly Camp Upton, a U.S. Army installation site, Brookhaven is located on a 5,263-acre site on Long Island in Upton, NY, approximately 60 miles east of New York City. Historically, Brookhaven was involved in the construction of accelerators and research reactors such as the Cosmotron, the High Flux Beam Reactor, and the Brookhaven Graphite Research Reactor. These accelerators and reactors led the way in high-energy physics experiments and subsequent discoveries but also resulted in radioactive waste. To complete the cleanup mission, DOE is working to build and operate groundwater treatment plants, decontaminate and decommission the High Flux Beam Reactor and the Brookhaven Graphite Research Reactor, and dispose of some wastes off-site.", "The Energy Technology Engineering Center occupies 90 acres within the 290 acre Santa Susana Field Laboratory 30 miles north of Los Angeles, California. The area was primarily used for DOE research and development activities. In the mid-1950s, part of the area was set aside for nuclear reactor development and testing, primarily related to the development of nuclear power plants and space power systems, using sodium and potassium as coolants. In the mid-1960s, the Energy Technology Engineering Center was established as a DOE laboratory for the development of liquid metal heat transfer systems to support the Office of Nuclear Energy Liquid Metal Fast Breeder Reactor program. DOE is now involved in the deactivation, decommissioning, and dismantlement of contaminated facilities on the site.", "DOE is responsible for one of the world’s largest environmental cleanup projects: the treatment and disposal of millions of gallons of radioactive and hazardous waste at its 586 square mile Hanford Site in southeastern Washington State. Hanford facilities produced more than 20 million pieces of uranium metal fuel for nine nuclear reactors along the Columbia River. Five plants in the center of the Hanford Site processed 110,000 tons of fuel from the reactors, discharging an estimated 450 billion gallons of liquids to soil disposal sites and 53 million gallons of radioactive waste to 177 large underground tanks. Plutonium production ended in the late 1980s. Hanford cleanup began in 1989 and now involves (1) groundwater monitoring and treatment, (2) deactivation and decommissioning of contaminated facilities, and (3) the construction of the waste treatment and immobilization plant intended, when complete, to treat the waste in the underground tanks.", "DOE’s Idaho Site is an 890-square-mile federal reserve, situated in the Arco Desert over the Snake River Plain Aquifer in central Idaho. The Idaho Cleanup Project involves the environmental cleanup of the Idaho Site, contaminated with legacy wastes generated from World War II-era conventional weapons testing, government-owned research and defense reactors, spent nuclear fuel reprocessing, laboratory research, and defense missions at other DOE sites.", "The 1-square-mile Lawrence Livermore National Laboratory site is an active, multi-program DOE research laboratory about 45 miles east of San Francisco. A number of research and support operations at Lawrence Livermore handle, generate, or manage hazardous materials that include radioactive wastes. The site first was used as a Naval Air Station in the 1940s. In 1951, it was transferred to the U.S. Atomic Energy Commission and was established as a nuclear weapons and magnetic fusion energy research facility. Over the past several years, Lawrence Livermore constructed several treatment plants for groundwater pumping and treatment and for soil vapor extraction. These systems will continue to operate until cleanup standards are achieved.", "Los Alamos National Laboratory is located in Los Alamos County in north central New Mexico. The laboratory, founded in 1943 during World War II, served as a secret facility for research and development of the first nuclear weapon. The site was chosen because the area provided controlled access, steep canyons for testing high explosives, and existing infrastructure. The Manhattan Project’s research and development efforts that were previously spread throughout the nation became centralized at Los Alamos and left a legacy of contamination. Today, the Los Alamos National Laboratory Cleanup Project is responsible for the treatment, storage, and disposition of a variety of radioactive and hazardous waste streams; removal and disposition of buried waste; protection of the regional aquifer; and removal or deactivation of unneeded facilities.", "The Moab Site is located about 3 miles northwest of the city of Moab in Grand County, Utah. The former mill site encompasses approximately 435 acres, of which about 130 acres is covered by the uranium mill tailings pile. Uranium concentrate (called yellowcake), the milling product, was sold to the U.S. Atomic Energy Commission through December 1970 for use in national defense programs. After 1970, production was primarily for commercial sales to nuclear power plants. During its years of operation, the mill processed an average of about 1,400 tons of ore a day. The milling operations created process-related wastes and tailings, a radioactive sand-like material. The tailings were pumped to an unlined impoundment in the western portion of the Moab Site property that accumulated over time, forming a pile more than 80 feet thick. The tailings, particularly in the center of the pile, have a high water content. Excess water in the pile drains into underlying soils, contaminating the ground water.", "In 1950, President Truman established what is now known as the Nevada National Security Site in Mercury, Nevada, to perform nuclear weapons testing activities. In support of national defense initiatives, a total of 928 atmospheric and underground nuclear weapons tests were conducted at the site between 1951 and 1992, when a moratorium on nuclear testing went into effect. Today, the site is a large, geographically-diverse research, evaluation, and development complex that supports homeland security, national defense, and nuclear nonproliferation. In Nevada, DOE activities focus on groundwater, soil, and on-site facilities; radioactive, hazardous, and sanitary waste management and disposal; and environmental planning.", "DOE’s Oak Ridge Reservation is located on approximately 33,500 acres in eastern Tennessee. The reservation was established in the early 1940s by the Manhattan Engineer District of the U. S. Army Corps of Engineers and played a role in the production of enriched uranium during the Manhattan Project and the Cold War. DOE is now working to address excess and contaminated facilities, remove soil and groundwater contamination, and enable modernization that allows the National Nuclear Security Administration to continue its national security and nuclear nonproliferation responsibilities and the Oak Ridge National Laboratory to continue its mission for advancing technology and science.", "The Paducah Gaseous Diffusion Plant, located within an approximately 650-acre fenced security area in in McCracken County in western Kentucky, opened in 1952 and played a role in the production of enriched uranium during and after the Cold War until ceasing production for commercial reactor fuel purposes in 2013. Decades of uranium enrichment and support activities required the use of a number of typical and special industrial chemicals and materials. Plant operations generated hazardous, radioactive, mixed (both hazardous and radioactive), and nonchemical (sanitary) wastes. Past operations also resulted in soil, groundwater, and surface water contamination at several sites located within plant boundaries.", "The Portsmouth Gaseous Diffusion Plant is located in Pike County, Ohio, in southern central Ohio, approximately 20 miles north of the city of Portsmouth, Ohio. Like the Paducah Plant, this facility was also initially constructed to produce enriched uranium to support the nation’s nuclear weapons program and was later used by commercial nuclear reactors. Cleanup activities here are similar to those at the Paducah Plant.", "The Sandia National Laboratories comprises 2,820 acres within the boundaries of the 118 square miles of Kirtland Air Force Base and is located about 6 miles east of downtown Albuquerque, New Mexico. It is managed by the National Nuclear Security Administration. Sandia National Laboratories was established in 1945 for nuclear weapons development, testing, and assembly for the Manhattan Engineering District. Beginning in 1980, the mission shifted toward research and development for nonnuclear components of nuclear weapons. Subsequently, the mission was expanded to research and development on nuclear safeguards and security and multiple areas in science and technology.", "The Savannah River Site complex covers 198,344 acres, or 310 square miles, encompassing parts of Aiken, Barnwell, and Allendale counties in South Carolina, bordering the Savannah River. The site is a key DOE industrial complex responsible for environmental stewardship, environmental cleanup, waste management, and disposition of nuclear materials. During the early 1950s, the site began to produce materials used in nuclear weapons, primarily tritium and plutonium-239. Five reactors were built to produce nuclear materials and resulted in unusable by-products, such as radioactive waste. About 35 million gallons of radioactive liquid waste are stored in 43 underground tanks. The Defense Waste Processing Facility is processing the high-activity waste, encapsulating radioactive elements in borosilicate glass, a stable storage form. Since the facility began operations in March 1996, it has produced more than 4,000 canisters (more than 16 million pounds) of radioactive glass.", "The Separations Process Research Unit is an inactive facility located at the Knolls Atomic Power Laboratory in Niskayuna, New York, near Schenectady. The Mohawk River forms the northern boundary of this site. Built in the late 1940s, its mission was to research the chemical process to extract plutonium from irradiated materials. Equipment was flushed and drained, and bulk waste was removed following the shutdown of the facilities in 1953. Today, process vessels and piping have been removed from all the research unit’s facilities. In 2010, cleanup of radioactivity and chemical contamination in the Lower Level Railroad Staging Area, Lower Level Parking Lot, and North Field areas was completed.", "The Waste Isolation Pilot Plant is an underground repository located near Carlsbad, New Mexico, that is used for disposing of defense transuranic waste. The plant is managed by DOE’s Office of Environmental Management and is the only deep geological repository for the permanent disposal of defense generated transuranic waste.", "The West Valley Demonstration Project occupies approximately 200 acres within the 3,345 acres of land called the Western New York Nuclear Service Center. The project is located approximately 40 miles south of Buffalo, New York. The West Valley Demonstration Project Act of 1980 established the project. The act directed DOE to solidify and dispose of the high-level waste and decontaminate and decommission the facilities used in the process. The land and facilities are not owned by DOE. Rather, the project premises are the property of the New York State Energy Research and Development Authority. DOE does not have access to the entire 3,345 acres of property.", "", "", "", "In addition to the contact named above, Nico Sloss (Assistant Director), Jeffrey T. Larson (Analyst in Charge), Natalie M. Block, Antoinette C. Capaccio, R. Scott Fletcher, Cindy K. Gilbert, Richard P. Johnson, Jeffrey R. Rueckhaus, Ilga Semeiks, Sheryl E. Stein, and Joshua G. Wiener made key contributions to this report." ], "depth": [ 1, 1, 2, 2, 1, 2, 2, 1, 1, 1, 1, 1, 2, 2, 2, 2, 2, 2, 2, 2, 2, 2, 2, 2, 2, 2, 2, 2, 1, 1, 2, 2 ], "alignment": [ "", "h0_full", "", "h0_full", "h1_full", "h1_full", "h1_full", "h2_full h1_full", "", "", "h2_full", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "" ] }
{ "question": [ "How is the DOE cleanup process governed?", "To what extent is milestone data tracked?", "How consistent is the reported milestone data?", "What causes these discrepancies?", "How do these inconsistencies affect the use of milestones?", "To what extent does EM accurately track milestones?", "To what extent does EM track milestone changes?", "How does the lack of a schedule change process negatively affect overview?", "What characterizes EM's reports to Congress?", "To what extent are milestones a reliable measure of performance?", "How completely have EM officials analyzed the use of milestones?", "How does this conflict with recognized best practices?", "How would analyzing the causes of missed milestones be beneficial to EM?", "How will EM suffer if they do not perform this analysis?" ], "summary": [ "The cleanup process at the 16 sites overseen by the Department of Energy's (DOE) Office of Environmental Management (EM) is governed by 72 agreements and hundreds of milestones specifying actions EM is to take as it carries out its cleanup work.", "However, EM headquarters and site officials do not consistently track data on the milestones.", "EM headquarters and site officials provided GAO with different totals on the number of milestones in place at the four sites GAO selected for review.", "These discrepancies result from how headquarters and selected sites define and track milestones. First, not all sites make the same distinction between major (i.e., related to on-the-ground cleanup) and non-major milestones and, as a result, are not consistently reporting the same milestones to EM headquarters. Second, sites do not consistently provide EM headquarters with the most up-to-date information on the status of milestones at each site.", "These inconsistencies limit EM's ability to use milestones to manage the cleanup mission and monitor its progress.", "EM does not accurately track met, missed, or postponed cleanup-related milestones at the four selected sites, and EM's milestone reporting to Congress is incomplete.", "EM sites renegotiate milestone dates before they are missed, and EM does not track the history of these changes. This is because once milestones change, sites are not required to maintain or track the original milestone dates.", "GAO has previously found that without a documented and consistently-applied schedule change control process, program staff may continually revise the schedule to match performance, hindering management's insight into the true performance of the project.", "Further, since 2011, EM has not consistently reported to Congress on the status of the milestones each year, as required, and the information it has reported is incomplete. EM reports the most recently renegotiated milestone dates with no indication of whether or how often those milestones have been missed or postponed.", "Since neither EM headquarters nor the sites track renegotiated milestones and their baseline dates at the sites, milestones do not provide a reliable measure of program performance.", "EM officials at headquarters and selected sites have not conducted root cause analyses on missed or postponed milestones; thus, such analyses are not part of milestone negotiations. Specifically, EM has not done a complex-wide analysis of the reasons for missed or postponed milestones. Similarly, officials GAO interviewed at the four selected sites said that they were not aware of any site-wide review of why milestones were missed or postponed.", "Best practices for project and program management outlined in GAO's Cost Estimating and Assessment Guide note the importance of identifying root causes of problems that lead to schedule delays. Additionally, in a 2015 directive, DOE emphasized the importance of conducting such analysis.", "Analyzing the root causes of missed or postponed milestones would better position EM to address systemic problems and consider those problems when renegotiating milestones with regulators.", "Without such analysis, EM and its cleanup regulators lack information to set more realistic and achievable milestones and, as a result, future milestones are likely to continue to be pushed back, further delaying the cleanup work. As GAO has reported previously, these delays lead to increases in the overall cost of the cleanup." ], "parent_pair_index": [ -1, 0, 0, 2, 2, -1, 0, 1, -1, -1, -1, 0, 0, 2 ], "summary_paragraph_index": [ 3, 3, 3, 3, 3, 4, 4, 4, 4, 4, 5, 5, 5, 5 ] }
GAO_GAO-14-671T
{ "title": [ "Background", "OMB Has Launched Major Initiatives for Overseeing Investments", "Opportunities Exist to Improve Acquisition and Management of IT Investments", "GAO Contact and Staff Acknowledgments" ], "paragraphs": [ "Information technology should enable government to better serve the American people. However, despite spending hundreds of billions on IT since 2000, the federal government has experienced failed IT projects and has achieved little of the productivity improvements that private industry has realized from IT. Too often, federal IT projects run over budget, behind schedule, or fail to deliver results. In combating this problem, proper oversight is critical.\nBoth OMB and federal agencies have key roles and responsibilities for overseeing IT investment management, and OMB is responsible for working with agencies to ensure investments are appropriately planned and justified. However, as we have described in numerous reports, although a variety of best practices exist to guide their successful acquisition, federal IT projects too frequently incur cost overruns and schedule slippages while contributing little to mission-related outcomes.\nAgencies have reported that poor-performing projects have often used a “big bang” approach—that is, projects that are broadly scoped and aim to deliver capability several years after initiation. For example, in 2009 the Defense Science Board reported that the Department of Defense’s (Defense) acquisition process for IT systems was too long, ineffective, and did not accommodate the rapid evolution of IT. The board reported that the average time to deliver an initial program capability for a major IT system acquisition at Defense was over 7 years.\nEach year, OMB and federal agencies work together to determine how much the government plans to spend on IT projects and how these funds are to be allocated. As reported to OMB, federal agencies plan to spend more than $82 billion on IT investments in fiscal year 2014, which is the amount expended for not only acquiring such investments, but also the funding to operate and maintain them. Of the reported amount, 27 federal agencies plan to spend about $75 billion: $17 billion on development and acquisition and $58 billion on operations and maintenance (O&M). Figure 1 shows the percentages of total planned spending for 2014 for the $75 billion spent on development and O&M.\nHowever, this $75 billion does not reflect the spending of the entire federal government. We have previously reported that OMB’s figure understates the total amount spent in IT investments. Specifically, it does not include IT investments by 58 independent executive branch agencies, including the Central Intelligence Agency or by the legislative or judicial branches. Further, agencies differed on what they considered an IT investment; for example, some have considered research and development systems as IT investments, while others have not. As a result, not all IT investments are included in the federal government’s estimate of annual IT spending. OMB provided guidance to agencies on how to report on their IT investments, but this guidance did not ensure complete reporting or facilitate the identification of duplicative investments. Consequently, we recommended, among other things, that OMB improve its guidance to agencies on identifying and categorizing IT investments.\nIn September 2011, we reported that the results of OMB initiatives to identify potentially duplicative investments were mixed and that several federal agencies did not routinely assess their entire IT portfolios to identify and remove or consolidate duplicative systems. In particular, we said that most of OMB’s recent initiatives had not yet demonstrated results, and several agencies did not routinely assess legacy systems to determine if they were duplicative. As a result, we recommended that OMB require federal agencies to report the steps they take to ensure that their IT investments are not duplicative as part of their annual budget and IT investment submissions. OMB generally agreed with this recommendation and has since taken action to implement it. Specifically, in March 2012, OMB issued a memorandum to federal agencies regarding its PortfolioStat initiative, which is discussed in more detail in the following section.\nFurther, over the past several years, we have reported that overlap and fragmentation among government programs or activities could be harbingers of unnecessary duplication. Thus, the reduction or elimination of duplication, overlap, or fragmentation could potentially save billions of tax dollars annually and help agencies provide more efficient and effective services.", "OMB has implemented a series of initiatives to improve the oversight of underperforming investments, more effectively manage IT, and address duplicative investments. These efforts include the following: IT Dashboard. Given the importance of transparency, oversight, and management of the government’s IT investments, in June 2009, OMB established a public website, referred to as the IT Dashboard, that provides detailed information on 759 major IT investments at 27 federal agencies, including ratings of their performance against cost and schedule targets. The public dissemination of this information is intended to allow OMB; other oversight bodies, including Congress; and the general public to hold agencies accountable for results and performance. Among other things, agencies are to submit Chief Information Officer (CIO) ratings, which, according to OMB’s instructions, should reflect the level of risk facing an investment on a scale from 1 (high risk) to 5 (low risk) relative to that investment’s ability to accomplish its goals. Ultimately, CIO ratings are assigned colors for presentation on the Dashboard, according to the five-point rating scale, as illustrated in table 1.\nAs of June 2014, according to the IT Dashboard, 183 of the federal government’s 759 major IT investments—totaling $10 billion—were in need of management attention (rated “yellow” to indicate the need for attention or “red” to indicate significant concerns). (See fig. 2.)\nTechStat reviews. In January 2010, the Federal CIO began leading TechStat sessions—face-to-face meetings to terminate or turnaround IT investments that are failing or are not producing results. These meetings involve OMB and agency leadership and are intended to increase accountability and transparency and improve performance. Subsequently, OMB empowered agency CIOs to hold their own TechStat sessions within their respective agencies. According to the former Federal CIO, the efforts of OMB and federal agencies to improve management and oversight of IT investments have resulted in almost $4 billion in savings.\nFederal Data Center Consolidation Initiative. Concerned about the growing number of federal data centers, in February 2010 the Federal CIO established the Federal Data Center Consolidation Initiative. This initiative’s four high-level goals are to promote the use of “green IT” by reducing the overall energy and real estate footprint of government data centers; reduce the cost of data center hardware, software, and operations; increase the overall IT security posture of the government; and shift IT investments to more efficient computing platforms and technologies. OMB believes that this initiative has the potential to provide about $3 billion in savings by the end of 2015.\nIT Reform Plan. In December 2010, OMB released its 25 point plan to reform federal IT. This document established an ambitious plan for achieving operational efficiencies and effectively managing large- scale IT programs. In particular, as part of an effort to reduce the risk associated with IT acquisitions, the plan calls for federal IT programs to deploy capabilities or functionality in release cycles no longer than 12 months, and ideally, less than 6 months. The plan also identifies key actions that can help agencies implement this incremental development guidance, such as working with Congress to develop IT budget models that align with incremental development and issuing contracting guidance and templates to support incremental development.\nPortfolioStat. In order to eliminate duplication, move to shared services, and improve portfolio management processes, in March 2012, OMB launched the PortfolioStat initiative. Specifically, PortfolioStat requires agencies to conduct an annual agency-wide IT portfolio review to, among other things, reduce commodity IT spending and demonstrate how their IT investments align with the agency’s mission and business functions. PortfolioStat is designed to assist agencies in assessing the current maturity of their IT investment management process, making decisions on eliminating duplicative investments, and moving to shared solutions in order to maximize the return on IT investments across the portfolio. OMB believes that the PortfolioStat effort has the potential to save the government $2.5 billion over the next 3 years by, for example, consolidating duplicative systems.", "Given the magnitude of the federal government’s annual IT budget, which is expected to be more than $82 billion in fiscal year 2014, it is important that agencies leverage all available opportunities to ensure that their IT investments are acquired in the most effective manner possible. To do so, agencies can rely on IT acquisition best practices, incremental development, and initiatives such as OMB’s IT Dashboard and OMB- mandated TechStat sessions. Additionally, agencies can save billions of dollars by continuing to consolidate federal data centers and by eliminating duplicative investments through OMB’s PortfolioStat initiative.\nBest Practices Are Intended to Help Ensure Successful Major Acquisitions In 2011, we identified seven successful acquisitions and nine common factors critical to their success and noted that (1) the factors support OMB’s objective of improving the management of large-scale IT acquisitions across the federal government and (2) wide dissemination of these factors could complement OMB’s efforts. Specifically, we reported that federal agency officials identified seven successful acquisitions, in that they best achieved their respective cost, schedule, scope, and performance goals. Notably, all of these were smaller increments, phases, or releases of larger projects. The common factors critical to the success of three or more of the seven acquisitions are generally consistent with those developed by private industry and are identified in table 2.\nThese critical factors support OMB’s objective of improving the management of large-scale IT acquisitions across the federal government; wide dissemination of these factors could complement OMB’s efforts.\nIT Dashboard Can Improve the Transparency into and Oversight of Major IT Investments The IT Dashboard serves an important role in allowing OMB and other oversight bodies to hold agencies accountable for results and performance. However, we have issued a series of reports highlighting deficiencies with the accuracy and reliability of the data reported on the Dashboard. For example, we reported in October 2012 that Defense had not rated any of its investments as either high or moderately high risk and that, in selected cases, these ratings did not appropriately reflect significant cost, schedule, and performance issues reported by us and others. We recommended that Defense ensure that its CIO ratings reflect available investment performance assessments and its risk management guidance. Defense concurred and has revised its process to address these concerns.\nFurther, while we reported in 2011 that the accuracy of Dashboard cost and schedule data had improved over time, more recently, in December 2013, we found that agencies had removed investments from the Dashboard by reclassifying their investments—representing a troubling trend toward decreased transparency and accountability. Specifically, the Department of Energy reclassified several of its supercomputer investments from IT to facilities and the Department of Commerce decided to reclassify its satellite ground system investments. Additionally, as of December 2013, the public version of the Dashboard was not updated for 15 of the previous 24 months because OMB does not revise it as the President’s budget request is being prepared.\nWe also found that, while agencies experienced several issues with reporting the risk of their investments, such as technical problems and delayed updates to the Dashboard, the CIO ratings were mostly or completely consistent with investment risk at seven of the eight selected agencies. Additionally, the agencies had already addressed several of the discrepancies that we identified. The final agency, the Department of Veterans Affairs (VA), did not update 7 of its 10 selected investments because it elected to build, rather than buy, the ability to automatically update the Dashboard and has now resumed updating all investments. To their credit, agencies’ continued attention to reporting the risk of their major IT investments supports the Dashboard’s goal of providing transparency and oversight of federal IT investments.\nNevertheless, the rating issues that we identified with performance reporting and annual baselining, some of which are now corrected, serve to highlight the need for agencies’ continued attention to the timeliness and accuracy of submitted information in order to allow the Dashboard to continue to fulfill its stated purpose. We recommended that agencies appropriately categorize IT investments and that OMB make Dashboard information available independent of the budget process. OMB neither agreed nor disagreed with these recommendations. Six agencies generally agreed with the report or had no comments and two others did not agree, believing their categorizations were appropriate. We continue to believe that our recommendations are valid.\nAgencies Need to Establish and Implement Incremental Development Policies to Better Achieve Cost, Schedule, and Performance Goals for IT Investments Incremental development can help agencies to effectively manage IT acquisitions and, as such, OMB has recently placed a renewed emphasis on it. In particular, in 2010 OMB called for IT investments to deliver functionality every 12 months, and since 2012 has required investments to deliver functionality every 6 months.\nHowever, as discussed in our recent report, most selected agencies had not effectively established and implemented incremental development approaches. Specifically, although all five agencies in our review—the Departments of Defense, Health and Human Services (HHS), Homeland Security (DHS), Transportation (Transportation), and VA—had established policies that address incremental development, the policies usually did not fully address three key components we identified for implementing OMB’s guidance. Table 3 provides an assessment of each agency’s policies against the three key components of an incremental development policy.\nAmong other things, agencies cited the following reasons that contributed to these weaknesses: (1) OMB’s guidance was not feasible because not all types of investments should deliver functionality in 6 months and (2) the guidance did not identify what agencies’ policies are to include or time frames for completion. We agreed that these concerns have merit.\nAdditionally, the weaknesses in agency policies enabled inconsistent implementation of incremental development approaches. Specifically, almost three-quarters of the selected investments we reviewed did not plan to deliver functionality every 6 months and less than half planned to deliver functionality in 12-month cycles. Table 4 shows how many of the selected investments at each agency planned on delivering functionality every 6 and 12 months during fiscal years 2013 and 2014.\nConsidering agencies’ concerns about delivering functionality every 6 months and given that so few are planning to deliver functionality in that time frame, our report noted that delivering functionality every 12 months, consistent with OMB’s IT Reform Plan, would be an appropriate starting point and a substantial improvement. Until OMB issues realistic and clear guidance and agencies update their policies to reflect this guidance, agencies may not consistently adopt incremental development approaches, and IT expenditures will continue to produce disappointing results—including sizable cost overruns and schedule slippages and questionable progress in meeting mission goals and outcomes. We recommended that OMB develop and issue realistic and clear guidance on incremental development, and that Defense, HHS, DHS, and Transportation update and implement their incremental development policies, once OMB’s guidance is made available. OMB stated that it agreed with our recommendation to update and issue incremental development guidance, but did not agree that its current guidance is not realistic. However, slightly more than one-fourth of selected investments planned to deliver functionality every 6 months—and less than one-half planned to do so every 12 months. Additionally, there were three types of investments for which it may not always be practical or necessary to expect functionality to be delivered in 6-month cycles. Thus, we continued to believe that delivering functionality every 6 months is not an appropriate requirement for all agencies and that requiring the delivery of functionality every 12 months, consistent with OMB’s IT Reform Plan, is a more appropriate starting point. We therefore maintained that OMB should require projects associated with major IT investments to deliver functionality at least every 12 months.\nFour agencies—Defense, HHS, DHS, and VA—generally agreed with the report or had no comments and one agency—Transportation—did not agree that its recommendation should be dependent on OMB first taking action. Specifically, the department explained that relying on another agency to concur with one of our recommendations before Transportation can take action leaves the department with the potential challenge of a recommendation that cannot be implemented. However, as previously stated, OMB agreed with our recommendation to update and issue incremental guidance, meaning that OMB committed to taking the actions necessary to enable Transportation to begin addressing our recommendation. Accordingly, we continued to believe that our recommendations were warranted and can be implemented.\nTechStat Reviews Can Help Highlight and Evaluate Poorly Performing Investments TechStat reviews were initiated by OMB to enable the federal government to turnaround, halt, or terminate IT projects that are failing or are not producing results. In 2013, we reported that OMB and selected agencies had held multiple TechStats, but that additional OMB oversight was needed to ensure that these meetings were having the appropriate impact on underperforming projects and that resulting cost savings were valid. Specifically, we determined that, as of April 2013, OMB reported conducting 79 TechStats, which focused on 55 investments at 23 federal agencies. Further, four selected agencies—the Departments of Agriculture, Commerce, HHS, and DHS—conducted 37 TechStats covering 28 investments. About 70 percent of the OMB-led and 76 percent of agency-led TechStats on major investments were considered medium to high risk at the time of the TechStat.\nHowever, the number of at-risk TechStats held was relatively small compared to the current number of medium- and high-risk major IT investments. Specifically, the OMB-led TechStats represented roughly 18.5 percent of the investments across the government that had a medium- or high-risk CIO rating. For the four selected agencies, the number of TechStats represented about 33 percent of the investments that have a medium- or high-risk CIO rating. We concluded that, until OMB and agencies develop plans to address these weaknesses, the investments would likely remain at risk.\nIn addition, we reported that OMB and selected agencies had tracked and reported positive results from TechStats, with most resulting in improved governance. Agencies also reported projects with accelerated delivery, reduced scope, or termination. We also found that OMB reported in 2011 that federal agencies achieved almost $4 billion in life-cycle cost savings as a result of TechStat sessions. However, we were unable to validate OMB’s reported results because OMB did not provide artifacts showing that it ensured the results were valid. Among other things, we recommended that OMB require agencies to report on how they validated the outcomes. OMB generally agreed with this recommendation.\nContinued Oversight Needed to Consolidate Federal Data Centers and Achieve Cost Savings In an effort to consolidate the growing number of federal data centers, in 2010, OMB launched a consolidation initiative intended to close 40 percent of government data centers by 2015, and, in doing so, save $3 billion. Since 2011, we have issued a series of reports on the efforts of agencies to consolidate their data centers. For example, in July 2011 and July 2012, we reported that agencies had developed plans to consolidate data centers; however, these plans were incomplete and did not include best practices. In addition, although we reported that agencies had made progress on their data center closures, OMB had not determined initiative-wide cost savings, and oversight of the initiative was not being performed in all key areas. Among other things, we recommended that OMB track and report on key performance measures, such as cost savings to date, and improve the execution of important oversight responsibilities. We also recommended that agencies complete inventories and plans. OMB agreed with these two recommendations, and most agencies agreed with our recommendations to them.\nAdditionally, as part of ongoing follow-up work, we have determined that while agencies had closed data centers, the number of federal data centers was significantly higher than previously estimated by OMB.\nSpecifically, as of May 2013, agencies had reported closing 484 data centers by the end of April 2013 and were planning to close an additional 571 data centers—for a total of 1,055—by September 2014. However, as of July 2013, 22 of the 24 agencies participating in the initiative had collectively reported 6,836 data centers in their inventories— approximately 3,700 data centers more than OMB’s previous estimate from December 2011. This dramatic increase in the count of data centers highlights the need for continued oversight of agencies’ consolidation efforts.\nWe have ongoing work looking at OMB’s data center consolidation initiative, including evaluating the extent to which agencies have achieved planned cost savings through their consolidation efforts, identifying agencies’ notable consolidation successes and challenges in achieving cost savings, and evaluating the extent to which data center optimization metrics have been established.\nAgencies’ PortfolioStat Efforts Have the Potential to Save Billions of Dollars OMB launched the PortfolioStat initiative in March 2012, which required 26 executive agencies to, among other things, reduce commodity IT spending and demonstrate how their IT investments align with the agencies’ mission and business functions. In March 2013, OMB issued a memorandum commencing the second iteration of its PortfolioStat initiative and strengthening IT portfolio management.\nIn November 2013, we reported on agencies’ efforts to complete key required PortfolioStat actions and make portfolio improvements. We noted that all 26 agencies that were required to implement the PortfolioStat initiative took actions to address OMB’s requirements.\nHowever, there were shortcomings in their implementation of selected requirements, such as addressing all required elements of an action plan to consolidate commodity IT and migrating two commodity areas to a shared service by the end of 2012. Further, we found that several agencies had weaknesses in selected areas, such as the CIO’s authority to review and approve the entire portfolio. While OMB had issued guidance and required agencies to report on actions taken to implement CIO authorities, it was not sufficient to address the issue. For example, although HHS reported having a formal memo in place outlining the CIO’s authority and ability to review the entire IT portfolio, it also noted that the CIO had limited influence and ability to recommend changes to it. Similarly, the Office of Personnel Management reported that the CIO advises the Director, who approves the IT portfolio, but this role was not explicitly defined. As a result of OMB’s insufficient guidance, agencies were hindered in addressing certain responsibilities set out in the Clinger- Cohen Act of 1996, which established the position of CIO to advise and assist agency heads in managing IT investments.\nWe also observed that OMB’s estimate of about 100 consolidation opportunities and a potential $2.5 billion in savings from the PortfolioStat initiative was understated because, among other things, it did not include estimates from Defense and the Department of Justice. Our analysis, which included these estimates, showed that collectively the 26 agencies reported about 200 opportunities and at least $5.8 billion in potential savings through fiscal year 2015—at least $3.3 billion more than the number initially reported by OMB.\nWe made more than 50 recommendations to improve agencies’ implementation of PortfolioStat requirements. We also recommended that OMB require agencies to fully disclose limitations with respect to CIO authority. OMB partially agreed with our recommendations, and responses from 20 of the agencies commenting on the report varied.\nLast month, we also reported on OMB’s and agencies’ policies and management of software licenses—one PortfolioStat focus area. We found that OMB’s PortfolioStat policy did not guide agencies in developing comprehensive license management policies, and of the 24 major federal agencies, 2 had comprehensive policies for managing enterprise software license agreements; 18 had them but they were not comprehensive; and 4 had not developed any. The weaknesses in agencies’ policies were due, in part, to the lack of a priority for establishing software license management practices—such as whether agencies’ employed a centralized approach to software license management and established a comprehensive inventory of the software licenses—and a lack of direction from OMB. Table 5 lists the leading practices and the number of agencies that had fully, partially, or not implemented them.\nAdditionally, the inadequate implementation of leading practices in software license management, such as centralized management and a comprehensive inventory, was partially due to weaknesses in agencies’ policies. As a result, we noted that agencies’ oversight of software license spending was limited or lacking, and they may miss out on savings. The potential savings could be significant considering that, in fiscal year 2012, DHS reported saving approximately $181 million by consolidating its enterprise license agreements.\nWe also stated that agencies lacked comprehensive software license inventories that were regularly tracked and maintained. Of the 24 agencies, 2 had a comprehensive inventory of software licenses; 20 had some form of an inventory; and 2 did not have any inventory of their software licenses purchased. We recommended that OMB issue a directive to help guide agencies in managing licenses and made more than 130 recommendations to the 24 agencies to improve their policies and practices for managing licenses. OMB disagreed with the need for a directive. However, until this gap in guidance is addressed, agencies will likely continue to lack the visibility into what needs to be managed, and be unable to take full advantage of OMB’s tools to drive license efficiency and utilization. Most agencies generally agreed with the recommendations or had no comments.\nWe have ongoing work looking at the second iteration of OMB’s PortfolioStat initiative, including identifying action items and associated time frames from joint OMB-agency PortfolioStat meetings, determining agencies’ progress in addressing these action items, and evaluating the extent to which agencies have realized planned savings.\nIn summary, OMB’s and agencies’ recent efforts have resulted in greater transparency and oversight of federal spending, but continued leadership and attention are necessary to build on the progress that has been made. The expanded use of the common factors critical to the successful management of large-scale IT acquisitions should result in more effective delivery of mission-critical systems. Additionally, federal agencies need to continue to improve the accuracy and availability of information on the Dashboard to provide greater transparency and even more attention to the billions of dollars invested in troubled projects. Further, agencies need to implement incremental development approaches in order to increase the likelihood that major IT investments meet their cost, schedule, and performance goals. Additionally, agencies should conduct additional TechStat reviews to focus management attention on troubled projects and establish clear action items to turn the projects around or terminate them.\nThe federal government can also build on the progress of agencies’ data center closures and eliminating duplicative IT investments. With the possibility of over $5.8 billion in savings from the data center consolidation and PortfolioStat initiatives, agencies should continue to identify consolidation opportunities in both data centers and commodity IT. In addition, better support for the estimates of cost savings associated with the opportunities identified would increase the likelihood that these savings will be achieved. Finally, until OMB and the agencies focus on improving policies and processes governing software licenses, they will likely miss opportunities to reduce costs.\nChairman Tester, Ranking Member Portman, and Members of the Subcommittee, this completes my prepared statement. I would be pleased to respond to any questions that you may have at this time.", "If you or your staffs have any questions about this testimony, please contact me at (202) 512-9286 or at [email protected]. Individuals who made key contributions to this testimony are Dave Hinchman (Assistant Director), Rebecca Eyler, and Kevin Walsh.\nThis is a work of the U.S. government and is not subject to copyright protection in the United States. The published product may be reproduced and distributed in its entirety without further permission from GAO. However, because this work may contain copyrighted images or other material, permission from the copyright holder may be necessary if you wish to reproduce this material separately." ], "depth": [ 1, 2, 1, 1 ], "alignment": [ "h1_title", "h1_full", "h0_full h2_full h1_full", "" ] }
{ "question": [ "How can OMB reduce investment risk?", "How did OMB's previous policies regulate functionality reviews?", "To what extent were these policies adhered to?", "What did GAO recommend?", "How did the agencies respond to the recommendations?", "What is the PortfolioStat initiative?", "How well was the initiative implemented?", "What did GAO recommend?", "How did the agencies respond to GAO's recommendations?", "To what extent do federal agencies have thorough license policies?", "What did GAO recommend?", "How did OMB respond to the recommendations?", "How did the agencies respond to the recommendations?" ], "summary": [ "An additional key reform initiated by OMB emphasizes incremental development in order to reduce investment risk.", "In 2010 it called for agency investments to deliver functionality every 12 months and since 2012 has required investments to deliver functionality every 6 months.", "However, GAO recently reported that almost three-quarters of investments reviewed did not plan to deliver capabilities every 6 months and less than half planned to deliver capabilities in 12-month cycles.", "GAO recommended that OMB develop and issue clearer guidance on incremental development and that selected agencies update and implement their associated policies.", "Most agencies agreed with GAO recommendations or had no comment.", "To better manage existing IT systems, OMB launched the PortfolioStat initiative, which, among other things, requires agencies to conduct annual reviews of their IT portfolio and make decisions on eliminating duplication.", "GAO reported that agencies continued to identify duplicative spending as part of PortfolioStat and that this initiative had the potential to save at least $5.8 billion through fiscal year 2015, but that weaknesses existed in agencies' implementation of the initiative, such as limitations in the Chief Information Officer's authority.", "Among other things, GAO made several recommendations to improve agencies' implementation of PortfolioStat requirements.", "OMB partially agreed with GAO's recommendations and responses from 20 of the agencies varied.", "In particular, 22 of the 24 major federal agencies did not have comprehensive license policies.", "GAO recommended that OMB issue needed guidance to agencies and made more than 130 recommendations to the agencies to improve their policies and practices for managing licenses.", "OMB disagreed with the need for guidance.", "Most agencies generally agreed with the recommendations or had no comments." ], "parent_pair_index": [ -1, -1, 1, -1, 3, -1, 0, -1, 2, -1, -1, 1, 1 ], "summary_paragraph_index": [ 4, 4, 4, 4, 4, 5, 5, 5, 5, 6, 6, 6, 6 ] }
GAO_GAO-15-418
{ "title": [ "Background", "Youth Athletic Programs Aimed at Developing High Performance", "Private Athletic Programs", "Youth Sports Camps on College and University Campuses", "Behaviors of Perpetrators of Child Sexual Abuse", "Federal Efforts to Address Child Sexual Abuse in a Broader Context May Apply to Youth Athletes", "Federal Agencies Engage in Some Activities to Prevent and Respond to Child Sexual Abuse that May Apply to Youth Athletes", "HHS and Justice Provide Resources and Justice Conducts Criminal Investigations to Address Child Sexual Abuse in a Variety of Settings, Including Youth Athletics", "Education and Justice Oversee Postsecondary School Compliance with Federal Requirements to Address Sexual Abuse, Which May Include Youth at Sports Camps on Campus", "Federal Oversight and Enforcement Activities", "Education’s Efforts to Assist Schools in Their Obligations to Prevent and Respond to Sexual Abuse", "Selected Athletic Programs Use Screening and Training of Staff, Among Other Actions, to Prevent and Address the Sexual Abuse of Youth Athletes", "All Selected Athletic Programs Reported Using Name-Based Criminal Background Checks to Screen Staff, but Vary in Use of Other Screening Tools", "Criminal Background Checks", "Interviews and Reference Checks", "Selected Athletic Programs Establish Policies Governing Behavioral Standards and Require Staff Training to Prevent and Address the Sexual Abuse of Youth Athletes", "Policies Governing Behavior between Coaches and Athletes", "Training", "Monitoring for Compliance with Policies", "Reporting and Response Policies of Selected Athletic Programs Vary Based on the Type of Incident and Program", "Reporting", "Response", "Agency Comments and Our Evaluation", "Appendix I: Objectives, Scope and Methodology", "Review of Federal Laws, Regulations and Guidance", "Interviews with Federal Officials and Experts", "Site Visits", "Appendix II: GAO Contact and Staff Acknowledgments", "GAO Contact", "Staff Acknowledgments", "Related GAO Products" ], "paragraphs": [ "", "", "Youth aiming to develop advanced skills, compete at a high performance level, and achieve competitive excellence in a sport have a variety of options for honing their skills. Youth can participate through private athletic clubs—local sport-specific organizations that serve athletes who compete, or may be interested in competing, at the highest performance level. Generally, these clubs are part of a larger sport network under the umbrella of the USOC.\nThe Amateur Sports Act of 1978 established the USOC as a federally chartered nonprofit corporation that serves as the centralized body for U.S. Olympic sports. In 1998, the Amateur Sports Act was revised by the Ted Stevens Olympic and Amateur Sports Act. Under the act, the USOC is authorized to recognize NGBs, which govern their respective sports and recommend athletes to the USOC for participation in the Olympic Games. Currently, the USOC recognizes 47 NGBs. The act sets forth a number of purposes for the USOC, including to exercise jurisdiction over U.S. participation in the Olympic Games and the organization of the Olympic Games when held in the United States. Other purposes include to provide swift resolution of conflicts and disputes involving athletes and NGBs; to coordinate and provide information on training, coaching, and performance; and to encourage and support research, development, and dissemination of information in the areas of sports medicine and sports safety. The USOC may provide financial support and other resources to the NGBs, as needed and as the USOC considers appropriate.\nAll members of the USOC are organizations, such as NGBs; the USOC has no individual members. Members of the NGBs may include youth and adult athletes, coaches, and other staff, although some NGBs may only have organizational members. The USOC and NGBs can impose various requirements as a condition of membership, but do not govern employment practices of clubs. Clubs may also be members of regional affiliates or associations of their sport, which generally serve as intermediaries between the NGB and the local clubs, and as the governing body for the local club within their region. (See fig. 1.)\nThe USOC established the SafeSport program, an athlete safety program that addresses misconduct in sports through information, training, and resources. The program was born out of a working group convened by the USOC in 2010 to develop a set of recommendations for promoting safe training environments in sports. To deliver its recommendations, the working group sought input from a range of stakeholders. The subsequent creation of the SafeSport program included one-on-one discussions and a review of relevant research and best practice documents, including a resource document on child sexual abuse prevention from the Centers for Disease Control and Prevention (CDC) within HHS. The USOC’s minimum standards policy for the program required each NGB to adopt an athlete safety program by December 31, 2013, that included the following minimum components: a policy that prohibits and defines six forms of misconduct: bullying, hazing, harassment (including sexual harassment), emotional misconduct, physical misconduct, and sexual misconduct (including child sexual abuse); criminal background checks for individuals who are in a position of authority over or have frequent contact with athletes; an education and training program covering key components of their athlete safety program by January 1, 2014; a procedure for reporting misconduct; and a grievance process to address allegations of misconduct following a report or complaint.", "Youth seeking to compete at a high performance level and achieve competitive excellence in a sport can also participate in sports camps held on college and university campuses. For example, some colleges and universities offer sport-specific skill building through youth sports camps and instructional clinics held on their campuses. While the offerings vary by campus, such camps and clinics are available for a variety of sports, may be offered as day or overnight camps, and may range in duration from a few days to several weeks. In addition, the degree to which colleges and universities operate and oversee the camps can vary. For example, youth sports camps may be operated by the college or university’s athletic department, by a private entity that contracts with the college or university to use its facilities, or by a combination of the two.", "While child sexual abuse—the act of forcing a child to engage in sexual activity with a perpetrator—is criminal in nature, according to research, perpetrators of such abuse typically exhibit other inappropriate, and sometimes noncriminal, behaviors. These behaviors may be displayed on a continuum and may include grooming, sexual misconduct, and child sexual abuse. (See fig. 2.)", "", "Federal agencies engage in various efforts to prevent and respond to the sexual abuse of a broad population of youth, and these efforts may apply to youth athletes, depending on the circumstances. Some of these federal efforts may help prevent or respond to the sexual abuse of youth athletes in both private athletic clubs and university sports camps. For example, HHS and Justice provide resources in the areas of sexual violence prevention, reporting, and response practices, and the Federal Bureau of Investigation (FBI) has a role in investigating incidents of child sexual abuse that may constitute federal crimes. Other federal activities may influence postsecondary schools’ efforts to prevent and respond to the sexual abuse of youth athletes at sports camps held on their campuses. Specifically, Education and Justice oversee school compliance with Title IX, which prohibits sex discrimination, including sexual harassment and abuse, in any education program or activity that receives federal funds. In addition, Education oversees compliance with the Clery Act, which requires schools that participate in federal student aid programs to annually disclose statistics on certain crimes, including sex offenses, that occur on or near their campuses. (See table 1.)", "CDC and the National Center for Missing and Exploited Children (NCMEC), a nonprofit organization that receives Justice funding, each developed suggested practices for preventing and responding to sexual abuse within youth-serving organizations, which may include youth athletes in private athletic clubs and college and university sports camps. Both CDC and NCMEC’s resources emphasize similar categories of suggested practices: conducting an organizational self- assessment; screening staff for risk factors; defining behavioral guidelines and creating safe environments; training staff on sexual abuse and misconduct; monitoring behavior; and developing reporting and response strategies when complaints or allegations are made (see table 2).\nThe NCMEC resource, in particular, includes information on how to address the unique interactions that occur between coaches and youth athletes. For example, NCMEC’s resource provides references to sexual abuse prevention and response programs, online training available through selected athletic organizations, and an article on developing appropriate relationships between coaches and athletes. NCMEC’s resource also offers youth-serving organizations some considerations regarding background checks to screen applicants. NCMEC suggests organizations use name-based and fingerprint-based criminal history checks in addition to other screening tools, such as interviews and reference checks. According to NCMEC, name-based checks typically offer greater accessibility and more timely results. However, based on a federal pilot program through which NCMEC assisted certain youth- serving organizations in conducting nationwide fingerprint-based criminal history checks, NCMEC officials concluded fingerprint-based checks were the most reliable way to identify those with disqualifying criminal histories in other states, under a different name, or under a different date of birth.\nFurther, they concluded that fingerprint checks provide the greatest potential in confirming an individual’s identity.\nHHS and Justice also provide funding for sexual violence awareness and prevention programs. Although these efforts do not focus on athletic programs, funding has been used in some instances to address sexual abuse in athletics. For example, an official from the Pennsylvania Coalition against Rape told us that the organization, in part using funding from the CDC’s Rape Prevention and Education Program, has partnered with Pennsylvania State University (Penn State) to help the university strengthen its sexual abuse prevention and response activities in response to high-profile incidents of sexual abuse involving youth athletes on campus. Justice’s Office on Violence Against Women also provides funding to colleges and universities to help prevent sexual violence through its campus grant program, and officials from this office indicated that some college grantees have included athletic departments in their efforts to increase awareness of sexual violence.\nIn addition to the suggested practices and prevention resources offered by HHS and Justice, the FBI has a role in investigating crimes against children that fall under federal jurisdiction, which may involve youth athletes who participate in private athletic clubs or college and university sports camps. For example, if a youth athlete is transported across state lines and sexually abused by a coach or other athletic personnel, the FBI may investigate the incident for possible violations of federal law. As researchers and experts on athlete abuse have noted, travel can be an area of significant risk for sexual abuse and misconduct, particularly if coaches travel alone with or share hotel rooms with athletes. FBI officials told us they are alerted to these crimes through various means, including direct reports from victims and families, witnesses, state and local law enforcement agencies, university and youth group officials, mandatory reporters, such as medical professionals and legal practitioners, and other federal law enforcement partner agencies. The FBI relies on a network of 71 Child Exploitation Task Forces that partner with 400 state and local law enforcement entities to help bridge federal, state, and local resources to address the challenges of child exploitation investigations, which may include those involving youth athletes. Still, according to the FBI, child sexual abuse offenses, such as those involving youth athletes, are inherently challenging, as children or their parents may be reluctant to report them, especially when their abuser is in a position of trust, as is often the case with sports coaches.", "Education oversees school compliance with Title IX and Clery Act requirements, which may apply to incidents of sexual abuse of youth athletes on college and university campuses. In general, Title IX and Education’s regulations implementing Title IX require schools to take steps to respond to sexual violence, including abuse, while the Clery Act requires schools to annually report statistics on sex offenses that occur on or near their campus to Education and in a security report for students and employees. However, these requirements would generally not apply in cases of sexual abuse of youth participating in sports at private athletic clubs unrelated to a postsecondary school. According to Education officials, determining a school’s obligations under either law would depend on the circumstances of each incident, which may be affected by the structure of sports camp operations, as well as where the abuse is alleged to have occurred.\nTitle IX: Education officials said that Title IX would generally apply to cases of sexual abuse committed by school employees, and a school would be obligated to take steps to prevent and respond to such abuse, if the school knew or reasonably should have known about the abuse. By contrast, if alleged sexual abuse occurs in a program held on campus, but operated by an entity independent of the school, Education first determines whether Title IX applies and, if so, whether the school met its obligations under the law. One factor Education considers when making these determinations is whether the camp receives significant assistance from the school, such as use of a school’s facilities. As with cases of abuse committed by school employees, in cases of abuse committed by third parties, such as coaches at sports camps who are not employed by the university, Education also considers whether the school knew of or should reasonably have known of the alleged abuse to determine whether the school is obligated under Title IX to address the abuse.\nClery Act: With respect to reporting campus crimes under the Clery Act, Education officials stated that a school’s reporting obligations would be triggered if sexual abuse occurs on or near a campus and is reported to a campus official responsible for Clery Act reporting. They explained that this would be true regardless of whether the school is involved with the daily operations of a sports camp.", "Education conducts reviews of and investigations into schools’ compliance with Title IX and Clery Act requirements to ensure schools are meeting their obligations under these laws. Justice may also review and investigate allegations of Title IX violations. Because Title IX protections cover a broad population and Clery Act requirements apply to a range of incidents, Education officials stated that they do not target their activities toward youth athletes specifically. Officials from Education and Justice told us they initiate Title IX investigations, and Education officials told us they initiate Clery Act investigations, both in response to complaints received alleging suspected violations and on their own initiative. Although Education officials told us of investigations into possible Title IX and Clery Act violations at Penn State, as of February 2015, both investigations were ongoing and determinations had not yet been reached, according to officials. Education and Justice officials said they were not aware of any other cases or complaints in recent years specifically alleging sexual abuse of youth athletes participating in sports camps on school campuses. However, given the purposes for which their data collection systems were established, neither Education nor Justice’s systems allow officials to conduct automated searches for cases involving the sexual abuse of youth athletes by coaches or other athletic personnel.\nTitle IX: Education and Justice officials said their complaint intake systems do not track information about the relationship between the victim and the perpetrator or the age of the victim, given the broad focus of their enforcement activities.\nClery Act: Education officials explained that crime statistics required by the Clery Act contain high-level information about incidents, which do not include information about the relationship between victims and perpetrators in sex offense cases.\nFederal agencies may take certain actions if a school is found to be out of compliance with either Title IX or the Clery Act. If Education’s OCR finds that a school has violated Title IX, it first seeks to establish voluntary compliance through a resolution agreement, which describes changes the school agrees to make to ensure its procedures for preventing and responding to sexual abuse comply with Title IX. If Education is unable to achieve voluntary compliance in a Title IX case, it may initiate proceedings to terminate the school’s federal funding, or refer the case to Justice for possible litigation. Additionally, Education’s FSA can impose fines on colleges for Clery Act violations.", "Education has published several guidance documents to assist schools in complying with Title IX and the Clery Act, which include information that may apply to the sexual abuse of youth participating in university sports camps.\nGuidance on Protected Individuals and Covered Settings Title IX: OCR guidance emphasizes that Title IX protects students from sexual harassment and sexual abuse carried out by a school employee. OCR guidance further specifies that any sexual activity between an adult employee and a student below the legal age of consent in his or her state is viewed as unwelcome and nonconsensual, and therefore sexual harassment under Title IX. Although the guidance focuses on school employees and students, according to a senior OCR official, the same principles would apply in cases of sexual activity between adult coaches and youth athletes participating in sports camps held on campus.\nClery Act: OPE guidance specifies that all crimes covered by the Clery Act should be counted in schools’ crime statistics for their annual security reports and reports to Education, even if they involve individuals not associated with the school. According to officials from OPE and FSA, the sexual abuse of youth athletes participating in sports camps held on campus are covered by the Clery Act.\nGuidance on Training and Education Title IX: OCR’s Title IX guidance states that schools should provide training about how to identify and prevent sexual abuse to all employees likely to witness or receive reports of sexual abuse, including athletic coaches. OCR also explained in guidance that schools are responsible for developing policies that prohibit inappropriate conduct by school personnel and procedures for identifying and responding to such conduct. Such policies, OCR guidance states, could include a code of conduct that addresses grooming—behavior intended to establish trust with a minor to facilitate future sexual activity. In our prior work on sexual abuse by K-12 school personnel, experts cited behavioral codes of conduct and awareness and prevention training on sexual abuse as key tools for preventing abuse. Furthermore, experts said identifying and addressing violations of conduct, including those that fall short of abuse, as they occur could help prevent future abuse.\nClery Act: In October 2014, Education issued final regulations implementing recent amendments to the Clery Act which, among other things, define requirements for schools to offer sexual violence prevention and awareness programs to employees, including athletic personnel. OPE and FSA officials stated that they instructed schools to provide training and education on sexual violence, which may include populations involved in youth sports programs on campus. Officials from OPE and FSA also confirmed that schools should offer training to temporary hires for youth sports camps. According to OPE officials, while schools are strongly encouraged to mandate training, such a requirement was not included in the final Clery Act regulations because it was not required by the statute. Officials said that concerns were raised during the negotiated rulemaking process that mandating training would be burdensome for schools with large numbers of students and employees.\nGuidance on Reporting and Response Title IX: In its Title IX guidance, OCR recommends that schools working with minors incorporate relevant state and local mandatory requirements for reporting child abuse and neglect into their policies, as schools may have reporting obligations to local child protective services and law enforcement agencies. OCR guidance also states that individuals designated as responsible employees are obligated to report alleged incidents of sexual abuse to school officials. To assist schools in appropriately responding to reported cases of sexual abuse, which may include youth athletes, OCR guidance states that schools should consider potential conflicts of interest when investigating reports of alleged sexual abuse. OCR officials confirmed that employees from a college’s athletic department should not be responsible for conducting investigations of suspected sexual abuse of youth athletes.\nClery Act: OPE guidance outlines schools’ Clery Act obligations, which include reporting the number of certain crimes, including sex offenses, occurring on or near their campuses in an annual security report, submitting those statistics to Education, and maintaining a daily crime log to record information about all reported campus crimes. FSA officials also reported providing training that instructed schools to inform those employees with significant responsibility for campus activities, such as athletic directors and coaches, of their duty to report any crimes on campus under the Clery Act. FSA officials said they have also responded to inquiries from schools about how to set up procedures to ensure reports are made in light of a recent high profile case at Penn State where questions were raised about reporting suspected sexual abuse of youth athletes. In response to these inquiries, FSA officials told us they explained to colleges that designating a Clery compliance officer—an individual responsible for coordinating a college’s Clery Act activities— can help colleges ensure they have an individual on campus who is aware of and can enforce Clery Act requirements across different campus departments.", "", "", "Each of the 11 athletic programs we visited reported conducting some type of screening to determine if applicants are suitable to work with children. For the eight private athletic clubs we visited, determining minimum standards for who receives background checks and what type of check is used is the responsibility of the NGBs of their sport or their regional affiliates. At sports camps operated by the three universities we visited, the school determines who gets checked and in what ways. Annual or bi-annual screenings of staff were the most frequently used method among the selected athletic programs we visited. The most commonly used screening method of all the athletic programs we visited was the name-based criminal background check, which involves comparing the names, dates of birth, and Social Security numbers of individuals to information collected by private vendors from state and local court and criminal records. These background checks involve scanning national or federal criminal databases and sex offender registries. While relying on name-based checks, sports camps at two universities we visited also used fingerprint checks in certain instances, such as when employees work at camps for multiple years, and for volunteers.\nOfficials acknowledged the benefits and challenges of using name-based and fingerprint-based checks. Although NCMEC officials cited some advantages to using name-based criminal history checks from private screening vendors, such as availability and timeliness, athletic program officials we spoke with raised concerns about the completeness and accuracy of those checks, and some told us of their preference for fingerprint-based checks. For example, NGB officials told us that due to the number of background check vendors in the marketplace and the various databases they use, it can be difficult for consumers to know the quality of the vendors and of the information in their databases. Information compiled by vendors is typically drawn from a variety of state and county law enforcement databases which may not be frequently updated to ensure criminal histories are complete and accurate, according to an official from one child sexual abuse prevention organization. Officials from two of the three NGBs we talked with told us they would prefer to use fingerprint-based background checks, with one citing NCMEC’s conclusions from the pilot program that fingerprint-based checks provide greater accuracy in identifying an individual than name- based checks.\nOfficials at both private athletic clubs and university sports camps told us, however, that the cost of fingerprint-based background checks was a concern. GAO previously conducted work on FBI criminal history checks for non-criminal justice purposes and found that state law enforcement authorities often charge fees for fingerprint-based checks. One official from an organization that uses sports programs to engage at-risk youth explained that these fees can range from $25 to $100 per check and can be cost prohibitive for organizations that rely on large numbers of athletic personnel.", "In addition to background checks, four youth athletic programs whose officials we met with reported having screening policies that called for applicant interviews, and reference checks of applicants were generally not required among the 11 athletic programs, according to program officials. According to officials at both private athletic clubs and university sports camps, because sports communities are often small and well acquainted, applicants are typically referred by coaches and other athletic personnel, and formal screening practices such as targeted interview questions and reference checks are not commonly used. Officials at one of the private athletic clubs that reported conducting applicant interviews told us there is no need for specific interview questions to weed out perpetrators of sexual abuse because they could detect such offenders based on appearance or demeanor. However, as noted by one national child advocacy center, many perpetrators of child sexual abuse are well educated and respected members of the community and look like anyone else. Further, research has pointed out that the belief that offenders fit certain stereotypes can hinder child sexual abuse prevention. One NGB official explained that in local programs, there is a feeling that “everybody knows everybody,” and that it is unnecessary to ask for references. Though the NGB requires private athletic clubs to check references, this official expressed doubt that clubs are following through. The official told us the NGB is developing an enhanced tool for clubs that will offer sample questions for interviews and reference checks to address findings from a study which evaluated their SafeSport program against the CDC resource and identified weaknesses in screening policies, including the lack of personal interviews and reference checks in which youth protection is discussed.", "", "The policies of selected athletic programs whose officials we met with set basic standards of behavior between coaches and youth athletes. Private athletic clubs we visited generally had athlete safety policies that were based on guidance provided by their respective NGBs. Officials from each of the eight private clubs explained that in response to the recent creation of SafeSport policies by the USOC and their NGB, clubs either defer to their NGB’s policies or look to their NGB or regional affiliates for implementation guidance. For example, NGB SafeSport guidelines detail a variety of behavioral boundaries, prohibitions, and expectations for coach-athlete relationships, covering topics such as physical contact and social media use, among others. The SafeSport policies of all three NGBs whose officials we met with also provide guidelines local clubs may want to consider to ensure their SafeSport policies reflect and account for the particular setting of the club and facility. For example:\nOne NGB’s social media guidance prohibits coaches from connecting to any athletes through a personal social media page or application, and suggests that any contact via social media should only take place through an official team page that parents are able to join.\nAn official at one local hockey club we met with told us their policy is to lock all locker room doors when youth players are on the ice. In addition, this official explained that youth and adult hockey players sometimes use the locker rooms simultaneously at the club’s facility, and when this occurs, the club has two individuals serve as monitors in the locker room, one more than their NGB recommends.\nPolicies of the three selected universities that operate sports camps also addressed issues of child protection, with some reflecting changes made to enhance youth safety in light of sexual abuse incidents at Penn State University. They covered practices to prevent sexual misconduct and monitoring and supervision of campers, among other topics. For example:\nOne university swim camp developed a code of conduct for its staff that states any inappropriate interaction or relationship with a camper will result in immediate termination and, depending on the circumstance, notification of law enforcement authorities.\nOfficials at all three universities we visited stressed the importance of preventing one-on-one interactions between staff and campers through a practice known as two-deep leadership, as a way to limit opportunities for misconduct. For example, in one camp’s counselor handbook, private one-on-one interactions were listed as a violation.\nOne university recently changed its policies on access to campus facilities following a report evaluating another university’s response to a high profile case of sexual abuse of youth athletes on its campus. Using the report’s recommendations as a benchmark against its own policies, the university we visited changed access to its facilities so that electronic keycards previously used to enter a building would be deactivated once an individual no longer needed access.\nOver the last 2 years, another university created an office focused on youth on campus. This office developed a central registration system to maintain information about all university camps. In addition, they created a system of spot checks in which staff from this office conduct in-person visits to camps to ensure staff-to-camper ratios are followed and those present at the camp are on the central registration list, among other safety measures.", "All 11 of the youth athletic programs included in our study had policies requiring training of staff on youth athlete safety. The eight private athletic clubs required training of staff and volunteers with regular, routine, or frequent access to youth athletes, while the three universities we visited required all sports camp staff and volunteers to complete training.\nTraining participation in both private clubs and university sports camps was generally monitored using a roster, according to program officials. Child sexual abuse prevention was a topic included in the required training for the selected athletic programs, and training generally covered topics such as how to identify the warning signs of, respond to, and report suspected abuse, including sexual abuse involving an athlete and athletic personnel. (See table 3.) All of the athletic programs we reviewed offered online training, and one program also offered training led by an instructor. Training is generally required at least every other year, and participants must complete one or more quizzes before receiving credit for completing the course.\nSome athletic programs we visited offer child sexual abuse prevention training and education resources to parents and athletes, though none require training of these groups. Further, officials from both types of athletic programs cited some challenges in implementing mandatory parent and athlete training. For example, officials from the eight private athletic clubs said they cannot require parents to take the training unless they are members of the NGB of their sport.\nOne NGB official noted that some Canadian provinces require parents to take child abuse prevention training before their child can participate in athletic programs, but he believed that policy would be unlikely to be accepted in American sports. An official from the organization that spearheaded the effort to require training explained that it took the Canadian sports community years to embrace child sexual abuse prevention training. He told us that while organizations had background checks and other policies in place, education on the need for such policies and a greater understanding of the issue of abuse was also necessary. He explained that, in his view, perpetrators of sexual abuse are able to operate, in part, because of ignorance and indifference in the community. Eventually, through a survey, the organization found that the Canadian sports community supported the training and considered it a good recruitment and retention tool.\nAnother NGB official told us that in its commissioned report to assess its SafeSport program against abuse prevention and response standards, parent training was cited as a weak area that needed improvement. Specifically, the author of the report recommended the NGB require parents to take SafeSport training, noting that few parents discuss sexual abuse prevention with their children and those who do often give inaccurate information. In response, the task force charged with addressing the report’s recommendations suggested the NGB strongly recommend parents take the training and encourage participation through an incentive program that would tie parent training on SafeSport with clubs’ SafeSport recognition status and funding. Regarding athlete training, this NGB’s task force recommended that its SafeSport committee and staff work with the training vendor to develop material appropriate for parents to use to discuss abuse prevention with children under age 12.\nAt one university we visited, officials cited the short duration of camp programs, which generally last between 4 days and 1 week, as a barrier to expanding training to both parents and campers. Officials told us that camps do provide parents with general safety information such as emergency contact numbers and, in the case of one university camp, an overview of hiring practices. However, as one campus official explained, information on the Clery Act, sexual abuse prevention, or requirements to report is not currently provided to camp parents, although the university’s Clery statistics are available online.", "Athletic programs we visited developed some internal practices and policies to monitor compliance with athlete safety policies. Each of the three NGBs whose officials we talked with required the appointment of staff at the regional and, in some cases, local level to monitor SafeSport program implementation and oversee each private athletic club’s efforts to meet SafeSport requirements. In addition, one official explained that the NGB she represents is considering a recommendation made in the report that assessed its SafeSport program to conduct a baseline study to determine the extent of child abuse and the effectiveness of various prevention and response policies.\nUniversity staff responsible for overseeing youth on campus also help monitor camp operations, according to officials from the universities we visited. For example, officials at one university we visited told us they developed a central registration system that tracked all of its camps, and included information on the program name, schedules, and the staff and athletes to assist with monitoring. This tracking system allows campus officials to identify who works with each camper, making it easier to investigate allegations of inappropriate interactions between staff and campers, according to one campus security official at the university. University officials also explained that staff overseeing youth programs on campus will periodically observe athlete interactions with camp staff to ensure that child protection policies, such as never having a camper alone with one adult, are being followed. An official from another university told us that while the coaches are in charge of day-to-day operations of the camps, the administrative oversight duties are primarily handled centrally by the university’s camp coordinator and human resources. For the more heavily enrolled sports, coaches have the support of the university’s director of operations who assists with the administration of the camp.\nAn official from one private athletic club also explained how the wider sports community can help alert them to potential problems with interactions between athletic personnel or other adults and youth athletes. For example, the official told us a parent notified the head coach that a registered sex offender, who had inadvertently been let into the building, was observing youth hockey practice. The club responded by developing a policy of escorting all visitors at the rink.", "", "In cases where the sexual abuse of a youth athlete is observed or suspected, all 11 athletic programs we visited have policies that require contacting the appropriate law enforcement or child protection officials. According to athletic program officials we spoke with, their programs’ policies reflected their state’s requirements for reporting child sexual abuse, including how to report, which child welfare or law enforcement agencies are designated to receive reports, and who is responsible for reporting. In some cases, officials at universities we visited told us they changed policies to reflect recent changes in state law that address child abuse, including sexual abuse. Additionally, athletic programs may choose to designate additional staff as mandatory reporters beyond those persons designated by state child abuse and neglect reporting laws. For example, officials from one university we visited told us the university decided to designate all staff on campus as mandatory reporters of child abuse and neglect after their state identified university administrators as mandatory reporters. University officials explained that while designating all staff as mandatory reporters could lead to over-reporting of the same issues, it would be better than incidents not being reported.\nIn addition to contacting the appropriate law enforcement authorities, the policies for each of the programs we visited included reporting observed or suspected abuse to internal officials. The policies of local private athletic clubs we visited provided options for reporting incidents to the club or regional affiliate’s SafeSport staff or NGB by phone, email, or letter, or anonymously through an online reporting system. At university sports camps, internal reporting structures varied, but could include university police, general counsel, the Clery compliance office, and in some cases, the university’s Title IX coordinator.", "Following reports of suspected sexual abuse to law enforcement, which may lead to criminal investigations, all of the selected athletic programs we met with reported having response policies that generally include separating the alleged perpetrator from athletes, and which may also bring immediate suspension. Policies also include conducting an internal investigation that could result in a range of sanctions, including bans from the athletic program if there are findings of wrongdoing. Under these policies, the accused is provided the right to receive a written notice of the complaint, present information during the investigation, and appeal the final decision. However, these reporting and response policies have not been put into action and tested because officials from each of the 11 athletic programs told us they were not aware of cases of alleged sexual abuse involving athletes and athletic personnel affiliated with their program.\nIn addition to criminal investigations handled by law enforcement, any allegations of sexual abuse or misconduct occurring at the private athletic clubs we visited would generally be handled by their respective NGB, which would also be responsible for determining any violations of policy and resulting sanctions for cases in which violations are found. In some cases, NGB officials lead investigations of abuse complaints at private athletic clubs and, in the case of two NGBs, contract with private investigators to carry out the investigation once the NGBs have completed initial work to ascertain basic information about the complaint and seek cooperation from the alleged victim. At the university sports camps we visited, after making reports to law enforcement, multiple departments and offices, including the Title IX compliance and the Clery Act compliance offices, the university police, the general counsel’s office, and others may be involved in responding to such allegations internally. At one school we visited, an official explained that the Title IX coordinator and the human resources department would work together to either conduct an investigation of any incident involving a youth athlete participating in campus programs, or engage an outside investigator to conduct the investigation.\nAccording to the response policies of athletic programs we visited, athletic personnel found to have committed sexual abuse against a youth athlete can face penalties including bans from the sport or campus.\nOfficials at all three NGBs we spoke with told us they can recommend imposing a lifetime ban from their sport on those found to have sexually abused youth athletes.\nTwo of the three NGBs we reviewed also publish a list of banned coaches and other athletic personnel. However, officials from one NGB told us that they knew of multiple coaches that were banned from their sport only to find them moving on to coach in other sports.\nAt the university sports camps we visited, if there are findings of wrongdoing the universities can terminate the university employee involved. One school told us they would ban perpetrators of sexual violence from campus for three years and if the perpetrator is an employee, the human resources department can impose a variety of sanctions, from mandatory counseling to suspension or termination.\nAs with allegations of sexual abuse, in cases of inappropriate behavior that falls short of abuse, the policies of selected athletic programs we visited included a variety of disciplinary actions. For example, officials from one NGB explained that although sharing a hotel room with an athlete while traveling for competition was formerly a common cost-saving measure, SafeSport policies now strictly forbid it. However, they said some coaches have continued to share rooms, and in response the NGB issued formal warning letters to coaches who violated the policy. In addition, according to this official, more severe measures would be taken in the event of subsequent violations or if the shared room violation is combined with other violations. Officials from university camps told us they also have a variety of disciplinary actions to choose from when staff members are found to have acted inappropriately with campers, such as verbal or written reprimands or requiring staff to take leave.\nAccording to one USOC official, responding to allegations of sexual misconduct requires significant expertise. To address this, the official told us the USOC is working to create a United States Center for SafeSport that will establish an administrative proceeding for handling allegations of sexual misconduct as defined in a standardized safe sport code. This centralized approach to investigating and resolving allegations at the center would aim to deliver expert and consistent results across sports and sports organizations, as well as provide the ability to effectively share information about individuals who have been suspended or banned for policy violations. This official explained that all NGBs have adopted definitions for sexual misconduct established by the SafeSport program. According to this official, plans for the center, once created, include developing a national code to help individuals further distinguish between appropriate and inappropriate behavior, which can enhance people’s ability and willingness to report misconduct, and the ability of the center to ensure fair and equitable responses to incidents. According to this official:\nThere are plans for the center to include a board of directors that would have no material conflicts or relationships with the USOC or any NGB to ensure independent review of all SafeSport cases.\nThe center may compile and maintain a centralized list of those who are banned from USOC and NGB membership.\nThe center is expected to be launched sometime during 2015. As of February 2015, work to secure insurance within budget and sustainable financial support for five years for the center was ongoing.", "We provided a draft of this report to the Departments of Education, HHS, and Justice for review and comment. Education, HHS, and Justice provided technical comments, which we incorporated as appropriate.\nAs agreed with your office, unless you publicly announce the contents of this report earlier, we plan no further distribution until 30 days from the report date. At that time, we will send copies to the Secretary of Education, HHS, and the Attorney General and interested congressional committees. The report will also be available at no charge on the GAO Web site at www.gao.gov.\nIf you or your staff members have any questions about this report, please contact me at (202) 512-7215 or [email protected]. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix II.", "This appendix discusses in detail our methodology for addressing two research questions for athletic programs aimed at developing high performing athletes: (1) What role do federal agencies play in preventing and responding to the sexual abuse of youth participating in these programs? and (2) What steps do selected athletic programs take to prevent and respond to the sexual abuse of youth athletes?\nTo address these questions, we reviewed relevant federal laws, regulations, and guidance. We conducted interviews with officials from the Departments of Education, Health and Human Services, and Justice, representatives of youth sports and education associations, and experts. We also conducted site visits to a nongeneralizable sample of youth sports camps on university campuses and private athletic programs in three states, which were selected based on the popularity of sports among youth, gender participation, college rankings in selected sports, and geographic diversity. We conducted this performance audit from February 2014 through May 2015 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 that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives.", "To determine the federal role in preventing and responding to the sexual abuse of youth athletes in these programs, we reviewed relevant federal laws, including the Child Abuse Prevention and Treatment Act (CAPTA); Title IX of the Education Amendments of 1972 (Title IX); and the Jeanne Clery Disclosure of Campus Security Policy and Campus Crime Statistics Act (Clery Act), among others. In addition, we reviewed Education’s regulations and guidance on Title IX and Clery Act requirements, and the agency’s policies and procedures for ensuring compliance with these requirements. However, we did not evaluate the effectiveness of Education’s policies and procedures to assess compliance with Title IX or the Clery Act. We also reviewed documents on suggested practices for preventing and responding to child sexual abuse in youth-serving organizations from the Centers for Disease Control and Prevention and the National Center for Missing and Exploited Children, an organization that receives grant funding from Justice.", "To examine the federal role in addressing the sexual abuse of these youth athletes, we also interviewed officials from Education, HHS and Justice, as well as experts on coaching, athletics administration, and sexual abuse. At Education, we spoke with officials in the Office for Civil Rights, the Office of Postsecondary Education, and the Federal Student Aid office. At HHS, we spoke with officials at the Administration for Children and Families and the Centers for Disease Control and Prevention. At Justice, we interviewed officials from the Office on Violence Against Women, the Office of Justice Programs, the Civil Rights Division, and the Federal Bureau of Investigation. Additionally, we interviewed officials from a range of relevant organizations, including the National Collegiate Athletic Association (NCAA), the Association of Title IX Administrators, the National Center for Missing and Exploited Children, the National Sexual Violence Resource Center, and the Pennsylvania Coalition Against Rape.", "To gather more in-depth information on the policies and practices selected private athletic clubs and university sports camps use to protect youth athletes from sexual abuse, we conducted site visits to a total of 11 athletic programs located in three states: California, Florida, and Texas. University sports camps were selected based on a sequence of steps, which included identifying the most popular sports among youth, identifying universities that offered youth camps and clinics and that had NCAA division I rankings in these sports, and geographic diversity. First, we identified the 10 most popular athletic programs for high school students during the 2012-2013 school year. We then identified universities that offered youth sports camps in five sports: basketball, football, gymnastics, swimming and diving, and volleyball. Our final selection took into account sport popularity, Division I rankings in these sports during the 2013-2014 school year, gender participation, camp and clinic operations, camp type (overnight, day, and commuter camps), and geographic diversity. We selected a total of three universities with youth sports camps and clinics in the above five sports. The university sports camps we selected were all run directly by the university. However, some sports camps on campuses may have a different operational structure; for example, they may be run by a private entity that is simply renting space on the campus.\nIn addition to university sports camps, we visited a total of eight local private athletic clubs implementing an athlete safety program based on the SafeSport program established by the U.S. Olympic Committee (USOC). To select the private athletic programs, we considered gender diversity, recommendations by experts and those who conduct research on the intersection of sports and athlete sexual abuse, and sport diversity. We selected eight local private athletic clubs in the sports of figure skating, hockey, and swimming, and located in proximity to the universities we visited. In addition, we met with four of their regional affiliates.\nWe also interviewed officials from the USOC, and the three NGBs of the Olympic sports we selected. At the local private athletic clubs we visited, we spoke with board members, athlete safety coordinators, and coaches; at the university campuses we visited we spoke with university compliance officials, university administrators, legal counsel, and camp directors. During each of these interviews, we collected information on policies, training materials, and other relevant documentation for preventing and responding to the sexual abuse of, and misconduct against, youth athletes by athletic personnel. We did not assess the sufficiency of these policies or how selected athletic programs implemented these policies. We also did not evaluate how selected athletic programs’ policies were applied to past cases of child sexual abuse as it was beyond the scope of this report. In addition, we did not evaluate whether any particular athletic program was in compliance with any state or federal requirements.\nInformation we gathered on our site visits represents the conditions present at the time of our visit. We cannot comment on any changes that may have occurred after our fieldwork was completed. Our site visit findings cannot be generalized to the larger youth athletics population.", "", "", "In addition to the contact named above, Sara Kelly and Debra Prescott (Assistant Directors), Claudine Pauselli (Analyst-in-Charge), Christina Cantor, and Aimee Elivert made key contributions to this report. Also contributing to this report were James Bennett, Rachel Beers, Sarah Cornetto, Helen Desaulniers, Holly Dye, Nisha Hazra, Kristen Jones, Kathy Leslie, Kristy Love, Sheila McCoy, and Andrew Stavisky.", "Child Welfare: Federal Agencies Can Better Support State Efforts to Prevent and Respond to Sexual Abuse by School Personnel. GAO-14-42. Washington, D.C.: January 30, 2014.\nChild Care: Overview of Relevant Employment Laws and Cases of Sex Offenders at Child Care Facilities. GAO-11-757. Washington, D.C.: August 19, 2011.\nChild Maltreatment: Strengthening National Data on Child Fatalities Could Aid in Prevention. GAO-11-599. Washington, D.C.: July 7, 2011.\nK-12 Education: Selected Cases of Public and Private Schools That Hired or Retained Individuals with Histories of Sexual Misconduct. GAO-11-200. Washington, D.C.: December 8, 2010.\nSeclusions and Restraints: Selected Cases of Death and Abuse at Public and Private Schools and Treatment Centers. GAO-09-719T. Washington, D.C.: May 19, 2009.\nResidential Facilities: Improved Data and Enhanced Oversight Would Help Safeguard the Well-Being of Youth with Behavioral and Emotional Challenges. GAO-08-346. Washington, D.C.: May 13, 2008.\nResidential Treatment Programs: Concerns Regarding Abuse and Death in Certain Programs for Troubled Youth. GAO-08-146T. Washington, D.C.: October 10, 2007." ], "depth": [ 1, 2, 3, 3, 2, 1, 2, 2, 2, 3, 3, 1, 2, 3, 3, 2, 3, 3, 3, 2, 3, 3, 1, 1, 2, 2, 2, 1, 2, 2, 1 ], "alignment": [ "h1_title", "h1_title", "h1_full", "", "", "h0_title h2_title", "h0_full h2_full", "h0_full", "h0_full", "h0_full", "h0_full", "h2_title h1_title", "h1_title", "h1_full", "", "h1_title", "", "h1_full", "", "h2_title h1_title", "h2_full h1_full", "h2_full h1_full", "", "h0_title h1_title", "h0_full", "", "h1_full", "", "", "", "" ] }
{ "question": [ "What federal agencies prevent and respond to sexual abuse of youths?", "What are these suggested practices?", "How is Justice involved in responding to sexual abuse cases?", "How does Education prevent and respond to youth sexual abuse?", "What methods did the reviewed programs employ to prevent and respond to sexual abuse?", "How prevalent was the use of fingerprint-based checks?", "How did staff training address the risk of sexual abuse cases?", "How would the programs discipline a sexual offender?", "What recent development have taken place in these policies?", "To what extend did GAO evaluate the policies?", "Why has there been increased concern as to how youth athletic organizations handle sexual abuse?", "Why are youth athletes especially vulnerable?", "How is the federal government involved in sexual abuse legislation?", "What was GAO asked to review?" ], "summary": [ "Several federal agencies have roles in preventing and responding to the sexual abuse of a broad population of youth under age 18, which may include youth athletes. For example, the Department of Health and Human Services (HHS) and the National Center for Missing and Exploited Children, a nonprofit organization that receives Department of Justice (Justice) funding, published suggested practices for preventing child sexual abuse in youth-serving organizations.", "These suggested practices include defining and prohibiting misconduct; screening staff using fingerprint-based criminal background checks and other tools; and training staff on how to recognize, report, and respond to abuse. The National Center for Missing and Exploited Children also makes available information on child protection policies in youth sports settings, such as defining appropriate coach-athlete relationships.", "In addition, Justice may investigate alleged youth athlete abuse if there is a possibility the case constitutes a federal crime. These efforts may apply to youth in a range of settings. In addition, the Departments of Education (Education) and Justice oversee compliance with a civil rights law that protects individuals from sex discrimination, including sexual abuse, at schools that receive federal funding, which would generally include youth participating in sports camps on university campuses.", "Education also oversees postsecondary school compliance with a federal law requiring reporting of crimes, including sex offenses, that occur on or near campus. To ensure schools are meeting their obligations under these laws, Education and Justice conduct compliance reviews and investigations, and Justice participates in federal litigation involving claims of sex discrimination. Education also provides guidance and training to schools in areas such as developing codes of conduct, offering prevention and awareness training, and establishing reporting procedures.", "The 11 athletic programs GAO reviewed all reported using methods, such as screening and training staff, to help prevent and respond to the sexual abuse of youth athletes. For example, the selected athletic programs, which included 8 private athletic clubs and 3 universities operating youth sports camps, all reported using name-based background checks to screen staff members for a criminal history.", "Two universities that operated sports camps reported they sometimes used fingerprint-based checks, while officials from other athletic programs cited the high cost of fingerprint checks as a barrier.", "Training for athletic staff in the programs GAO visited included how to identify signs of, respond to, and report suspected incidents of sexual abuse. Policies for all of these athletic programs also require staff to report suspected abuse to law enforcement.", "Further, the selected programs had response policies that generally included removing the suspected offender from the program and conducting their own investigations, which could result in lifetime bans from the program. Athletic programs' policies also included a variety of possible disciplinary actions, such as warning letters or required leave, for addressing inappropriate behavior that falls short of sexual abuse.", "Some of these policies have been created or revised in recent years, including the policies that private athletic clubs are implementing based on the United States Olympic Committee's athlete safety program, SafeSport, which prohibits various forms of misconduct, including child sexual abuse.", "GAO did not assess the effectiveness of any of the selected athletic programs' policies.", "Media reports of the sexual abuse of youth athletes by their coaches have raised questions about how athletic organizations protect against such abuse.", "Research shows that the power dynamic between coaches and athletes aiming for high performance makes those athletes uniquely vulnerable to abuse.", "Although states are primarily responsible for addressing abuse, federal laws may apply, such as those that prohibit sex discrimination, including sexual abuse, in federally-funded education programs, require reports of campus crimes, and set minimum standards for state child abuse reporting laws.", "GAO was asked to review efforts to prevent and respond to the sexual abuse of youth athletes under age 18." ], "parent_pair_index": [ -1, 0, 0, 0, -1, 0, 0, 0, 0, 0, -1, 0, -1, -1 ], "summary_paragraph_index": [ 2, 2, 2, 2, 3, 3, 3, 3, 3, 3, 0, 0, 0, 0 ] }
GAO_GAO-19-147T
{ "title": [ "Long-Term Strategic Planning in Acquisitions Enables Better Tradeoff Decisions", "Successful Acquisition Programs Begin with Sound Business Cases", "Leveraging Navy’s Shipbuilding Experience May Create Efficiencies", "Estimated Savings and Requirements Stability Should be Considered When Selecting Contracting Mechanisms", "Multiyear Contracting Requirements and Considerations", "Block Buy Contracting Considerations", "GAO Contact and Staff Acknowledgments" ], "paragraphs": [ "Key elements of strategic planning include establishing long-term goals and strategies for how those goals are to be achieved. Specifically for managing Coast Guard acquisitions, we have noted that a long-term plan that includes acquisition implications would enable tradeoffs to be addressed in advance, which leads to better informed choices and makes debate possible before irreversible commitments are made to individual programs. Without this type of plan, decision makers do not have the information they need to better understand and address an agency’s long-term outlook. Similarly, according to the Office of Management and Budget’s capital planning guidance referenced by the Coast Guard’s Major Systems Acquisition Manual, each agency is encouraged to have a plan that justifies its long-term capital asset decisions. This plan should include, among other things, (1) an analysis of the portfolio of assets already owned by the agency and in procurement, (2) the performance gap and capability necessary to bridge the old and new assets, and (3) justification for new acquisitions proposed for funding.\nIn June 2014, we found that the Coast Guard—a component within the Department of Homeland Security (DHS)—did not have a long-term fleet modernization plan that identified all acquisitions needed to meet mission needs over the next two decades within available resources. Without such a plan, the Coast Guard repeatedly delayed and reduced its capabilities through its annual budget process and did not know the extent to which it could meet mission needs and achieve desired results. We recommended that the Coast Guard develop a 20-year fleet modernization plan that identifies all acquisitions needed to maintain the current level of service and the fiscal resources necessary to build the identified assets. DHS agreed with our recommendation but it has not yet approved a 20-year plan.\nFurther, in July 2018, we found the Coast Guard continues to manage its acquisitions through its annual budget process and the 5-year Capital Investment Plan, which is congressionally mandated and submitted to Congress annually. Coast Guard officials told us the Capital Investment Plan reflects the highest priorities of the department and that trade-off decisions are made as part of the annual budget process. However, the effects of these trade-off decisions, such as which acquisitions would take on more risk so others can be prioritized and adequately funded, are not communicated in the Capital Investment Plan to key decision makers. Over the years, this approach has left the Coast Guard with a bow wave of near-term unfunded acquisitions, negatively affecting recapitalization efforts, and limiting the effectiveness of long-term planning. As a result of this planning process, the Coast Guard has continued to defer planned acquisitions to future years and left a number of operational capability gaps unaddressed that could affect future operations. We recommended that the annual Capital Investment Plans reflect acquisition trade-off decisions and their effects. DHS concurred with this recommendation and plans to include additional information in future Capital Investment Plans to address how trade-off decisions could affect other major acquisition programs. According to Coast Guard officials, the Coast Guard plans to implement this recommendation by March 2020.\nExamples of other fleet modernization plans include the Navy’s annual naval vessel construction plan (also known as the Navy’s long range shipbuilding plan), which reflects the quantity and categories of assets that the Navy needs to buy as well as the total number of assets in operation for each year. While we found in March 2006 that the Navy faced challenges associated with its long range shipbuilding plan, we also observed that such a plan is beneficial in that it lays out a strategic approach for decision making. In October 2016, NOAA—which is within the Department of Commerce—approved a fleet plan that is intended to identify an integrated strategy for long-term recapitalization, including acquisition of up to eight new ships. In March 2017, NOAA indicated that long-term recapitalization of the NOAA fleet requires an annual, stable funding profile on the order of its fiscal year 2016 appropriations—about $80 million. NOAA noted that it will continue to proceed on schedule, as laid out in its fleet plan, or make adjustments based on available funding.", "Our prior work has repeatedly found that successful acquisition programs start with solid, executable business cases before setting program baselines and committing resources. A sound business case requires balance between the concept selected to satisfy operator requirements and the resources—design knowledge, technologies, funding, and time— needed to transform the concept into a product, such as a ship. At the heart of a business case is a knowledge-based approach—we have found that successful shipbuilding programs build on attaining critical levels of knowledge at key points in the shipbuilding process before significant investments are made (see figure 1).\nWe have previously found that key enablers of a good business case include firm, feasible requirements; plans for a stable design; mature technologies; reliable cost estimates; and realistic schedule targets. Without a sound business case, acquisition programs are at risk of experiencing cost growth, schedule delays, and reduced capabilities.\nIn September 2018, we found the Coast Guard did not have this type of sound business case when it established the cost, schedule, and performance baselines for its polar icebreaker program in March 2018. This was primarily due to risks in four key areas:\nTechnology. The Coast Guard intends to use proven technologies for the program, but did not conduct a technology readiness assessment to determine the maturity of key technologies—which include the integrated power plant and azimuthing propulsors— prior to setting baselines. As a result, the Coast Guard does not have full insight into whether these technologies, which we believe are critical technologies and merit such an assessment, are mature. Without a technology readiness assessment, the Coast Guard is potentially underrepresenting technical risk and increasing design risk.\nCost. The cost estimate that informed the program’s $9.8 billion cost baseline—which includes lifecycle costs for the acquisition, operations, and maintenance of three polar icebreakers—substantially met our best practices for being comprehensive, well-documented, and accurate, but only partially met best practices for being credible. The cost estimate did not quantify the range of possible costs over the entire life of the program, such as the period of operations and support. As a result, the cost estimate was not fully reliable and may underestimate the total funding needed for the program.\nSchedule. The Coast Guard’s planned delivery dates of 2023, 2025, and 2026 for the three ships were not informed by a realistic assessment of shipbuilding activities, but rather were primarily driven by the potential gap in icebreaking capabilities once the Coast Guard’s only operating heavy polar icebreaker—the Polar Star— reaches the end of its service life (see figure 2).\nThe Polar Star’s service life is estimated to end between fiscal years 2020 and 2023. This creates a potential heavy polar icebreaker capability gap of about 3 years, if the Polar Star’s service life were to end in 2020 and the lead polar icebreaker were to be delivered by the end of fiscal year 2023 as planned. If the lead ship is delivered later than planned in this scenario, the potential gap could be more than 3 years. The Coast Guard is planning to recapitalize the Polar Star’s key systems starting in 2020 to extend the service life of the ship until the planned delivery of the second polar icebreaker (see figure 3).\nFurther, our analysis of selected lead ships for other shipbuilding programs found the icebreaker program’s estimated construction time of 3 years is optimistic. An unrealistic schedule puts the Coast Guard is at risk of not delivering the icebreakers when promised and the potential gap in icebreaking capabilities could widen.\nDesign. The Coast Guard set program baselines before conducting a preliminary design review—a systems engineering event that is intended to verify that the contractor’s design meets the requirement of the ship specifications and is producible—which puts the program at risk of having an unstable design, thereby increasing the program’s cost and schedule risks. Although the Coast Guard set the program baselines prior to gaining knowledge on the feasibility of the selected shipbuilder’s design, it has expressed a commitment to having a stable design prior to the start of lead ship construction. This is consistent with shipbuilding best practices we identified in 2009.\nTo address these four areas and other risks, we made six recommendations to DHS, Coast Guard, and the Navy in our September 2018 report. DHS concurred with all six recommendations and identified actions it planned to take to address them.\nIn its October 2016 fleet plan, NOAA indicated the need to construct up to eight new ships by 2028 to maintain its capabilities for at-sea requirements. Ensuring a sound business case for each acquisition will be important as NOAA moves forward.", "Given the Navy’s experience in shipbuilding, agencies have partnered with the Navy to take advantage of its expertise. For example, in April and September 2018, we found examples of how the Coast Guard had leveraged the Navy’s resources and acquisition approaches when acquiring the polar icebreakers, including:\nEstablishing an integrated program office and potentially using funding from both organizations. In 2016, in response to a congressional report, the Navy and the Coast Guard established an integrated program office to acquire the icebreakers for Coast Guard operations. This relationship was officially memorialized through three memorandums in 2017.\nGiven potential plans to fund the polar icebreaker program with both Navy and Coast Guard appropriations, the Navy and the Coast Guard had a memorandum of agreement with a budgeting and financial management appendix. In September 2018, however, we found that the Coast Guard and the Navy interpreted the meaning of “cost overruns” differently in the context of their agreement. We also found that the agreement itself did not address how the Coast Guard and the Navy plan to handle any cost growth stemming from changes to the scope, terms, and conditions of the detail design and construction contract. We recommended that the Coast Guard, in collaboration with the Navy, revise the agreement to clarify and document how cost growth in the polar icebreaker program, including changes in scope, will be addressed between the two organizations. The Coast Guard concurred with this recommendation and plans to update the agreement by March 2019.\nEstablishing an integrated ship design team. The ship design team includes Coast Guard and Navy technical experts who develop ship specifications based on the polar icebreaker program’s operational requirements document. The ship design team is under the supervision of a Coast Guard ship design manager, who provides all technical oversight for development of the polar icebreaker’s design.\nLeveraging Navy cost estimating and contracting functions. With input from the integrated program office and ship design team, Navy cost estimators developed the polar icebreaker program’s cost estimate, which informed the program’s cost baselines and affordability constraints. In addition, the Navy plans to award the polar icebreaker’s detail design and construction contract under the Navy’s contracting authority and use a tailored DHS acquisition process.\nSupplementing the DHS acquisition process with the Navy’s gate review process. Coast Guard and Navy agreed to manage the polar icebreaker program using a tailored acquisition approach that supplements DHS acquisition decision event reviews with additional “gate” reviews that were adopted from Navy’s acquisition processes. The gate reviews allow both Coast Guard and Navy leadership to review and approve key documents before proceeding to the acquisition decision events. Each acquisition decision event is also overseen by acquisition oversight board with members from both the Coast Guard and the Navy (see figure 4).\nBy collaborating with the Navy, the Coast Guard is leveraging the Navy’s experience in ship design, cost estimating, contracting, and other shipbuilding processes. This partnership may allow the Coast Guard to more efficiently manage the polar icebreaker program.\nIn March 2017, NOAA indicated that it had partnered with the Navy through an interagency agreement to leverage the Navy’s acquisition expertise for Auxiliary General Purpose Oceanographic Research Vessels, which will be the basis for a new class of NOAA ships. In April 2018, the Navy released the request for proposal for the preliminary contract design of this new class of ships.", "When acquiring multiple quantities of a product, agencies generally have several options for contracting mechanisms. Annual contracting, which can be considered the typical method, refers to awarding a contract for one year’s worth of requirements. Annual contracting allows for the use of options for subsequent requirements. Options give the agency the unilateral right to purchase additional supplies or services called for by the contract, or to extend the term of the contract. Besides annual contracting with options, agencies may also be able to choose among other contracting mechanisms—multiyear contracting and “block buy” contracting, which are discussed in more detail below.", "Multiyear contracting allows agencies to acquire known requirements for up to 5 years under a single contract award, even though the total funds ultimately to be obligated may not be available at the time of contract award. Before DOD and Coast Guard can enter into a multiyear contract, certain criteria must be met. Table 1 provides some of the multiyear contracting requirements for DOD and the Coast Guard.\nMultiyear contracts are expected to achieve lower unit costs compared to annual contracts through one or more of the following sources: (1) purchase of parts and materials in economic order quantities, (2) improved production processes and efficiencies, (3) better utilized industrial facilities, (4) limited engineering changes due to design stability during the multiyear period, and (5) cost avoidance by reducing the burden of placing and administering annual contracts. Multiyear procurement also offers opportunities to enhance the industrial base by providing contractors a longer and more stable time horizon for planning and investing in production and by attracting subcontractors, vendors, and suppliers. However, multiyear procurement entails certain risks that must be balanced against the potential benefits, such as the increased costs to the government should the multiyear contract be changed or canceled and decreased annual budget flexibility for the program and across an agency’s portfolio of acquisitions.\nIn February 2008, we found that it is difficult to precisely determine the impact of multiyear contracting on procurement costs. For example, for three multiyear procurements (Air Force’s C-17A Globemaster transport, the Navy’s F/A-18E/F Super Hornet fighter, and the Army’s Apache Longbow helicopter), we identified unit cost growth ranging from 10 to 30 percent compared to original estimates, due to changes in labor and material costs, requirements and funding, and other factors. In some cases, actual costs for the multiyear procurement were higher than original estimates for annual contracts. We noted that we could not determine how cost growth affected the level of savings achieved, if any, because we did not know how an alternative series of annual contracts would have fared. Although programs using annual contracts also have unit cost growth, it is arguably more problematic when using multiyear contracting because of the up-front investments and the government’s exposure to risk over multiple years.", "Block buy contracting generally refers to special legislative authority that agencies seek on an acquisition-by-acquisition basis to purchase more than one year’s worth of requirements, such as purchasing supplies in economic order quantities. Unlike multiyear contracting, block buy contracting does not have permanent statutory criteria and, therefore, can be used in different ways.\nWe have previously analyzed several cases where block buy contracts were considered or used and have not found evidence of savings. For example: In September 2018, we found that for the polar icebreaker program, the Navy gave offerors an opportunity to provide the estimated savings that the government could achieve if it were to take a “block buy” approach in purchasing the ships or purchasing supplies in economic order quantities. The Navy told us that they did not receive any formal responses from industry on potential savings from block buys or economic order quantities.\nIn April 2017, we found that the Navy’s Littoral Combat Ship contracts’ block buy approach could affect Congress’s funding flexibility. Specifically, the block buy contracts provided that a failure to fully fund a purchase in a given year would make the contract subject to renegotiation, which provides a disincentive to the Navy or Congress to take any action that might disrupt the program because of the potential for the government to have to pay more for ships.\nIn February 2005, we found that the Navy believed that a block-buy contract contributed to increased material costs for the Virginia class submarine. Under this block-buy contract, subcontracts for submarine materials were for single ships spread over several years. According to the Navy, this type of acquisition approach did not take advantage of bulk-buy savings and incurred the risk that funding will not be available in time to order the material when needed.\nBased on our prior work, it is important for agencies to consider multiple factors such as estimated savings, the stability of the requirements, quantities required, and potential contract terms and conditions before committing to a contracting mechanism approach.\nIn conclusion, as the Coast Guard and NOAA continue investing taxpayer dollars to modernize their fleets, they could benefit from the lessons learned from prior recapitalization and acquisition efforts. It is important for agencies to develop strategic and comprehensive approaches for managing their respective portfolios so that future requirements and capability gaps can be addressed in a timely manner. For each acquisition within their portfolios, agencies should ensure that they have established a sound business case before committing significant resources. Additionally, leveraging the Navy’s resources and expertise in shipbuilding, such as by establishing integrated teams, could be beneficial by helping agencies be more efficient. Finally, when it comes to contracting mechanisms, factors such as estimated savings and program risks should be assessed before committing to a particular approach.\nChairman Sullivan, Ranking Member Baldwin, and Members of the Subcommittee, this concludes my prepared statement. I would be pleased to respond to any questions.", "If you or your staff have any questions about this statement, please contact Marie A. Mak, (202) 512-4841 or [email protected]. In addition, contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this statement. Individuals who made key contributions to this testimony include Rick Cederholm, Assistant Director; Peter Anderson; Laurier Fish; Kurt Gurka; Claire Li; and Roxanna Sun.\nThis is a work of the U.S. government and is not subject to copyright protection in the United States. The published product may be reproduced and distributed in its entirety without further permission from GAO. However, because this work may contain copyrighted images or other material, permission from the copyright holder may be necessary if you wish to reproduce this material separately." ], "depth": [ 1, 1, 1, 1, 2, 2, 1 ], "alignment": [ "h0_full h2_full", "", "h2_full h1_full", "h2_title", "", "h2_full", "" ] }
{ "question": [ "How can long-term strategic planning benefit acquisition programs?", "How does the Coast Guard manage its acquisitions?", "How does this affect the Coast Guard's planned acquisitions?", "How could additional planning help the Coast Guard implement their changes?", "Why do agencies partner with the Navy?", "What is the nature of the relationship between the Coast Guard and Navy?", "How do these teams collaborate with the Navy?", "What does this statement address?", "What specific information does this testimony cover?", "How did GAO collect information for its previous work?", "How does this compare to how GAO collected information for this testimony?" ], "summary": [ "GAO has found that acquisition programs can benefit from long-term strategic planning that identifies how tradeoff decisions would affect the future of the acquisition portfolio.", "In July 2018, GAO found the Coast Guard continues to manage its acquisitions through its annual budget process and the 5-year Capital Investment Plan.", "As a result of this planning process, the Coast Guard has continued to defer planned acquisitions to future years and left a number of operational capability gaps unaddressed.", "Incorporating the use of a long-term strategic plan and additional tradeoff discussion into the Capital Investment Plan could lead to more informed choices before irreversible commitments are made.", "Agencies have partnered with the Navy to take advantage of its resources and shipbuilding expertise, including the Coast Guard when acquiring the polar icebreakers.", "For example, in September 2018, GAO found that the Coast Guard and the Navy had established an integrated program office and a ship design team.", "These teams provided input to Navy cost estimators, who developed the polar icebreaker program's cost estimate.", "This statement summarizes lessons that GAO has identified from its prior reviews of Coast Guard and Navy acquisitions, which can be applied to the Coast Guard's and NOAA's shipbuilding efforts.", "Specifically, this testimony provides information on, among other things, (1) long-term strategic planning for acquisitions, (2) the need for a sound business case, and (3) the leveraging of the Navy's acquisition resources and shipbuilding expertise.", "In its prior work, GAO reviewed Coast Guard and Navy programs and interviewed officials.", "For this testimony, GAO obtained publicly available information on NOAA's ship acquisition efforts." ], "parent_pair_index": [ -1, 0, 1, 0, -1, 0, 1, -1, 0, 0, 2 ], "summary_paragraph_index": [ 2, 2, 2, 2, 5, 5, 5, 1, 1, 1, 1 ] }
CRS_R41107
{ "title": [ "", "Recent Developments", "Overview of the ACTA", "Evolution of ACTA Negotiations", "Entry-into-Force of the ACTA", "Characteristics of Participants in the ACTA Negotiation", "Summary of Key Provisions of the ACTA", "Initial Provisions", "Legal Framework for Enforcement", "General Obligations", "Civil Enforcement", "Border Measures", "Criminal Enforcement", "Enforcement of IPR in the Digital Environment", "Enforcement Practices", "International Cooperation", "Institutional Arrangements", "Final Provisions", "U.S. Involvement and Objectives", "Involvement of Administration and Congress", "U.S. Motivations for Negotiating the ACTA", "Economic Rationale", "Health and Safety Rationale", "Security Rationale", "U.S. Trade Policy and Building Blocks for the ACTA", "WTO TRIPS Agreement", "Regional and Bilateral Free Trade Agreements", "Points of Debate: Issues for U.S. Policy", "Scope of the Proposed Agreement", "Transparency of and Stakeholder Input in Negotiation", "Range of Participants", "Impact on Legitimate Trade and Consumer Activity", "Negotiation of ACTA as Stand-Alone Agreement", "Effectiveness of a New Agreement on IPR", "Congressional Outlook" ], "paragraphs": [ "", "Negotiating parties of the proposed Anti-Counterfeiting Trade Agreement (ACTA) have from May 1, 2011, until May 1, 2013, to sign the agreement. Subsequently, the ACTA would enter into force after the sixth instrument of ratification, acceptance, or approval (\"formal approval\") is deposited by the ACTA participants. Participants to the ACTA negotiation are submitting the treaty to their respective domestic authorities to undertake relevant domestic processes for ratification, acceptance, or approval. To date, no negotiating party, including the United States, has submitted a formal instrument of approval. On July 11, 2012, Mexico signed the ACTA. The ACTA requires ratification in the Mexican Congress. On July 4, 2012, the European Parliament voted against the ACTA, meaning that neither the EU nor its individual member states can join the agreement in its current form. Amid widespread protests by advocates of Internet free speech, several EU member states decided in early 2012 to suspend or not initiate their domestic adoption of the ACTA, including Bulgaria, the Czech Republic, Germany, Latvia, Poland, and Slovakia. On February 22, 2012, the European Commission placed the ACTA ratification process on hold and submitted the agreement to the European Court of Justice to determine if the ACTA is compatible with EU law. On January 25, 2012, the European Union and 22 EU member states signed the ACTA. At that time, five EU member states (Cyprus, Germany, Estonia, the Netherlands, and Slovakia) did not sign the agreement, reportedly due to procedural issues. On October 1, 2011, the governments of Australia, Canada, Japan, Korea, Morocco, New Zealand, Singapore, and the United States signed the ACTA. At that time, representatives from the European Union, Mexico, and Switzerland \"confirmed their continuing support for and preparations to sign the Agreement as soon as practicable.\" In addition, all participants affirmed their goal \"to work cooperatively to achieve the Agreement's prompt entry into force, and to actively support its goals.\" In May 2011, ACTA negotiating parties publicly released a final version of the agreement text. In October 2010, the 11 th and final round of negotiation for the ACTA concluded, nearly three years after the negotiation began.", "The proposed Anti-Counterfeiting Trade Agreement (ACTA) is a new agreement for combating intellectual property rights (IPR) infringement. Negotiated by the United States, Australia, Canada, the European Union and its 27 member states, Japan, South Korea, Mexico, Morocco, New Zealand, Singapore, and Switzerland, the ACTA is intended to build on the standards of IPR protection and enforcement set forth in the 1995 World Trade Organization (WTO) Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS Agreement) and to address emerging IPR issues believed to be not addressed adequately in the TRIPS Agreement, such as IPR infringement in the digital environment.\nThe ACTA, which was negotiated outside of the WTO, focuses primarily on enforcement of trademarks and copyrights; enforcement of patents generally is outside of the agreement's scope. The ACTA establishes a legal framework for IPR enforcement, which contains provisions on civil enforcement, border measures, criminal enforcement in cases of willful trademark counterfeiting or copyright piracy on a commercial scale, and enforcement for the infringement of copyrights or related rights over digital networks. It also provides for enhanced enforcement best practices and increased international cooperation.\nThe ACTA negotiation concluded in October 2010, nearly three years after it began. Countries have from May 1, 2011, until May 1, 2013, to sign the agreement. All negotiating parties, except Mexico and Switzerland, have signed the agreement. ACTA signatories are to proceed with domestic ratification procedures. The ACTA would enter into force after the sixth instrument of ratification, acceptance, or approval (\"formal approval\") is deposited. No negotiating party has submitted a formal instrument of approval to date.", "The idea of negotiating the ACTA was conceived in 2006 by the United States and Japan as a new tool for combating counterfeiting and piracy. During 2006 and 2007, a group of interested parties—Canada, the European Union, Japan, Switzerland, and the United States—held preliminary talks about the proposed ACTA. In October 2007, this group of participants, perceived as \"like-minded\" by the Office of the U.S. Trade Representative (USTR), announced their intention to begin negotiating this new agreement. By the time that formal negotiations were launched in June 2008, the number of parties involved in the ACTA negotiation had grown to also include Australia, Canada, South Korea, Mexico, Morocco, New Zealand, and Singapore. At that time, the United States sought to conclude the agreement by the end of that year. However, participants to the ACTA held 11 rounds of negotiation, discussing various aspects of the agreement (see Table 1 ). The final round was held in Japan in October 2010, during which ACTA participants resolved nearly all substantive issues, and produced a consolidated and largely finalized text of the proposed agreement, which was to be submitted \"ad referendum\" to their respective authorities.", "On October 1, 2011, the governments of Australia, Canada, Japan, Korea, Morocco, New Zealand, Singapore, and the United States signed the ACTA. Representatives from the European Union, Mexico, and Switzerland \"confirmed their continuing support for and preparations to sign the Agreement as soon as practicable.\" In addition, all participants affirmed their goal \"to work cooperatively to achieve the Agreement's prompt entry into force, and to actively support its goals.\" Subsequently, on January 25, 2012, the European Union and 22 of its member states signed the ACTA, and on July 11, 2012, Mexico also signed the agreement. The signatories to the agreement have announced that they \"will proceed with domestic ratification procedures and strive to put the Agreement into effect at an early date.\"\nThe agreement would enter into force after the sixth instrument of ratification, acceptance, or approval is deposited by the ACTA participants. To date, no country has deposited an instrument of approval. Negotiating parties are now submitting the ACTA through their domestic approval processes, which differ across countries. For example:\nThe USTR, which conducted the ACTA negotiation on behalf of the U.S. government, negotiated the ACTA as an executive agreement. Accordingly, the ACTA would not be subject to congressional approval, unless it were to require statutory changes to U.S. law. The USTR maintains that the ACTA is consistent with existing U.S. law and does not require the enactment of implementing legislation. It is not clear if the United States has a timetable for submitting a formal instrument of approval for the ACTA. The European Commission negotiated the ACTA on behalf of EU member states. In contrast to the United States, in order for ACTA to enter into force in the EU, the European Parliament and all 27 member states must sign and ratify the ACTA. On July 4, 2012, the European Parliament voted against the ACTA, meaning that neither the EU nor its individual member states can join the agreement in its current form. EU member states have been undertaking national ratification processes. In recent months, amid widespread protests by advocates of Internet free speech, several EU member states decided to suspend or not initiate their domestic adoption of the ACTA, including Bulgaria, the Czech Republic, Germany, Latvia, Poland, and Slovakia. On February 22, 2012, the European Commission placed the ACTA ratification process on hold and submitted the agreement to the European Court of Justice to determine if the ACTA is compatible with EU law. There is the possibility that the European Commission may try to revive the ACTA following the court ruling. Certain ACTA participants, such as the United States, EU, and Switzerland, claim that implementation of the ACTA will not require changes to their domestic legal systems. However, other countries may have to pass new laws in order to implement the enforcement standards of the ACTA, including granting ex-officio authority to customs officials to initiate criminal investigations in cases of trademark infringement and copyright piracy and providing legal remedies for circumventing technological protection measures (TPM). Some of the digital enforcement standards of the ACTA are contained in the World Intellectual Property Organization (WIPO) Copyright Treaty and Performance and Phonograms Treaty (\"WIPO Internet treaties\"). For example, on June 29, 2012, Canada finalized passage of a copyright bill, C-11, that incorporates the WIPO Internet treaties into Canadian domestic law, among other things. Canada signed the WIPO Internet Treaties in 1997, but had not entered the treaties into force. Previous copyright reform bills failed to advance before prior dissolutions of Parliament.", "Most countries that were involved in the ACTA negotiation are economically advanced countries. They generally consider IPR-based industries to be important to their economies. Together, these countries constitute roughly half of total world merchandise exports. Participants to the ACTA negotiation generally have been part of major international trade liberalization efforts (see Table 2 ). All of the countries have acceded to the WTO TRIPS Agreement, most have implemented the WIPO Internet treaties, and several have implemented or are negotiating free trade agreements (FTAs) with the United States.", "The ACTA establishes a legal framework for IPR enforcement, increased international cooperation, and enhanced enforcement measures. What follows is a summary of key provisions of the ACTA.", "The initial provisions chapter of the ACTA discusses the nature and scope of the agreement, its relationship to existing agreements (including the TRIPS Agreement) and domestic laws, provisions on privacy and disclosure of information, and definitions of terms used in the agreement. Among other things, the chapter:\nstates the ACTA shall not derogate from each Party's obligations under existing agreements; provides for the flexibility of each Party to implement more extensive IPR enforcement than is required by the ACTA; provides for the flexibility of each Party to determine the appropriate method of implementing provisions of the ACTA within its own legal system and practice; notes that the objectives and principles set forth in Part 1 of the TRIPS Agreement, in particular Articles 7 (technology transfer) and 8 (public health), apply to the ACTA; and stipulates that the Agreement does not require each Party to apply the obligations under the ACTA to an intellectual property that is not protected under its domestic laws and regulations.", "The legal framework chapter includes general obligations for enforcement, civil enforcement, border measures, criminal enforcement, and enforcement of IPR in the digital environment.", "The general obligations section commits ACTA Parties to effective IPR enforcement action that provides expeditious and deterrent remedies, avoids creating barriers to legitimate trade, and provides for fair and equitable treatment for participants subject to enforcement procedures. The section also requires that, in implementing the enforcement provisions, the Parties take into account the proportionality of the seriousness of the infringement, the infringement of third parties, and the applicable measures, remedies, and penalties.", "The civil enforcement section requires each Party to make civil judicial procedures concerning IPR enforcement available. Among other provisions, this section requires each Party to provide its judicial authorities with the authority to:\nissue injunctions against a party to desist from an infringement and to prevent the entry of infringing goods into the channels of commerce; order the infringer to pay the right holder damages adequate to compensate the right holder for losses from infringement (section includes formulas for calculating damages); order recovery of costs and attorneys' fees at the conclusion of civil judicial proceedings concerning IPR infringement; order the infringer, or alleged infringer, to provide information related to the infringement to the right holder or judicial authorities; destroy infringing goods, as well as the materials used to manufacture or create the infringing goods; and order provisional measures, such as seizures, to prevent an infringement from occurring.\nA footnote to the civil enforcement section states that Parties may exclude patents and protection of undisclosed information from the scope of this section.", "The border measures section concerns effective border enforcement of IPR in a manner that does not discriminate among different forms of IPR and avoids creating barriers to legitimate trade. Under this section, among other provisions, each Party:\nshall adopt or maintain procedures with respect to import and export shipments, under which customs authorities may act upon their own initiative to suspend the release of suspect goods and, where appropriate, a right holder may request its customs authorities to suspend the release of suspect goods; may adopt or maintain procedures with respect to suspect in-transit goods or in other situations where the goods are under customs control, under which customs authorities may act upon their own initiative to suspend the release of, or to detain, suspect goods, and, where appropriate, a right holder may requests its competent authorities to suspend the release of, or to detain, suspect goods; shall adopt or maintain procedures by which its competent authorities may determine IPR infringement in a reasonable period of time; shall provide its competent authorities with the authority to order the destruction of infringing goods and to impose administrative penalties; and may authorize its competent authorities to provide a right holder with information about specific shipments of goods to assist in detecting infringing goods.", "The criminal enforcement section requires that each Party provide for criminal procedures and penalties to be applied at least in cases of willful trademark counterfeiting or copyright (or related rights) piracy on a commercial scale (including the willful importation or exportation of such goods). This section requires each Party to:\nprovide penalties, including imprisonment and monetary fines, that serve as deterrents to future acts of infringement; provide its competent authorities with the authority to order the seizure of suspected counterfeit trademark or pirated copyright goods, as well as related materials; provide its competent authorities with the authority to order the forfeiture or destruction of counterfeit trademark and pirated copyright goods, as well as of the materials used to create the goods and the assets derived from the infringing activity; provide its judicial authorities with the right to order the seizure and forfeiture of equivalent assets derived from, or obtained directly or indirectly through, the infringing activity; and provide that, in appropriate cases, its competent authorities may act upon their own initiative to initiate investigation or legal action with respect to the criminal offenses for which the Party provides criminal procedures and penalties.", "The digital enforcement section discusses obligations for enforcement of copyrights and related rights over digital networks. Among other provisions, this section provides that:\neach Party shall ensure that enforcement procedures, to the extent set forth in the civil and criminal enforcement sections of the agreement, permit effective enforcement action against IPR infringement in the digital environment, including for infringement of copyright or related rights over digital networks; the enforcement procedures shall be enacted in a manner that avoids the creation of barriers to legitimate activity and preserves the fundamental principles of freedom of expression, fair process, and privacy; a Party may provide, in accordance to its laws and regulations, its competent authority with the authority to order an online service provider to disclose to a right holder identifying information related to a subscriber whose account was allegedly used for infringement; and each Party shall provide adequate legal protection and effective legal remedies against the circumvention of effective technological measures (used by right owners to prevent the use of their copyrighted works in unwanted ways) and to protect electronic rights management information, and also may adopt limitations and exceptions in implementing these remedies.", "The enforcement practices chapter focuses on the methods used by Parties to apply IPR enforcement laws. This chapter provides that:\neach Party shall promote the development of enforcement expertise within its competent authorities, the collection and analysis of statistical data and other information concerning IPR infringement and best practices for preventing/combating infringement, and the development of formal and informal mechanisms whereby competent authorities may receive input from right holders and other relevant stakeholders; the competent authorities of each Party may consult with relevant stakeholders and the competent authorities of other Parties to manage IPR infringement risks at the border and share information with the competent authorities of other Parties on border enforcement of IPR (including relevant information to better identify and target shipments); each Party shall take appropriate measures to promote transparency in its administration of its IPR enforcement system; each Party shall, as appropriate, promote public awareness of the importance of respecting IPR and the negative effects of IPR infringement; and in the destruction of infringing goods, each Party shall take environmental considerations into account.", "The international cooperation chapter discusses how Parties may work together to address challenges in cross-border trade in counterfeit and pirated products. The chapter provides that:\nthe Parties shall promote cooperation, where appropriate, among their competent authorities responsible for IPR enforcement; each Party shall endeavor to exchange information, including statistical data and information, best practices, information on IPR-related legislative and regulatory measures, with other Parties; each Party shall endeavor to assist in capacity building and technical assistance to other Parties in enhancing IPR enforcement; and each Party shall strive to avoid unnecessary duplication in international cooperation activities.", "The institutional arrangement chapter establishes an ACTA Committee to review the implementation and operation of the agreement, proposed amendments to the agreement, and the terms of accession to the ACTA of any WTO Member. Among other provisions, the committee shall take decisions by consensus (except as decided by the ACTA Committee by consensus) and shall establish a mechanism for consultations on any matter affecting the implementation of the ACTA.", "The ACTA shall remain open for signature by participants in its negotiations and by any other WTO Members the participants may agree to by consensus from May 1, 2011, until May 1, 2013. The agreement shall enter into force 30 days after the date of deposit of the sixth instrument of ratification, acceptance, or approval by participants. WTO Members may apply to join the agreement after May 1, 2013.", "", "The United States conducted the ACTA negotiation through the Office of the United States Trade Representative (USTR), which is located in the Executive Office of the President (EOP). The USTR has the lead on negotiating U.S. trade agreements in international forums. It crafts U.S. trade policy through an interagency process that includes the Departments of Commerce, Justice, State, and the Treasury, among other agencies. The USTR also consults its formal trade advisory groups; key congressional committees; and various private sector, non-governmental, and civil society stakeholder groups.\nThe Bush Administration began, and the Obama Administration continued, negotiation of the ACTA as an executive agreement, meaning that the agreement would not be subject to congressional approval, unless it were to require statutory changes to U.S. law. According to the USTR, the United States negotiated the ACTA under a premise of consistency with U.S. law. The USTR further states that the ACTA is consistent with existing U.S. law—including U.S. copyright, patent, and trademark laws—and does not require a change to U.S. law for its implementation in the United States. As such, the USTR maintains that ACTA does not require the enactment of implementing legislation from Congress, and contends that the United States may enter into and carry out the requirements of the ACTA under existing legal authority, as it has done with other trade agreements.\nThe congressional role in the ACTA is rooted in the U.S. Constitution. ACTA concerns both the regulation of foreign commerce and IPR, which are subject to congressional power under the Constitution. Article 1, Section 8 of the Constitution provides Congress with the power to \"regulate Commerce with foreign Nations\" and to \"promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries.\" In addition, it empowers Congress to \"make all Laws which shall be necessary and proper for carrying into Execution the foregoing Powers, and all other Powers vested by this Constitution in the Government of the United States, or in any Department or Officer thereof.\" Although Congress has established a consultative role for itself in statute with regard to certain trade agreements in the past, it has not done so with the ACTA. However, Congress has played an oversight and consultative role during the ACTA negotiation process, and also can engage in oversight of the implementation of the ACTA.\nThe use of an executive agreement to conduct the ACTA negotiations may be considered a departure from the way that the United States has pursued IPR goals in other international trade negotiations. In general, the United States has advanced IPR goals internationally as part of congressional-executive trade agreements or treaties, subject to congressional approval.", "The United States has had long-standing concerns about the rise in global IPR infringement, which can impose substantial costs to U.S. firms and pose risks to U.S. consumers. The costs of research and development are high for many IPR-based industries. In contrast, IPR infringement is characterized by low risks, little initial capital investment, and a high profit margin. The development of technologies and products which can be easily duplicated, such as digital media, has led to an increase in piracy. Growing Internet usage also has contributed to the distribution of counterfeit and pirated products. Additionally, in some countries, civil and criminal penalties often are not sufficient deterrents for counterfeiting and piracy.\nThe protection and enforcement of IPR internationally is a major component of U.S. trade policy, due to the importance of IPR to the U.S. economy and the potentially negative commercial, health and safety, and security consequences associated with counterfeiting and piracy. What follows is a survey of some of these key rationales—economic, health and safety, and security—cited by the United States as motivations for negotiating the ACTA.", "One major rationale for U.S. participation in the ACTA negotiations is the economic importance of IPR in the U.S. economy and the adverse impact of counterfeiting and piracy on the U.S. economy. Adequate protection and enforcement of IPR are considered to play a key role in promoting innovation, which is viewed as an important source of the competitiveness of many industries in the United States and the other knowledge-based economies involved in the ACTA negotiations. Advocates of a strong international IPR regime claim that counterfeiting and piracy inflict billions of dollars of revenue and trade losses annually on legitimate IPR-based industries.\nWhile the United States and other participants to the ACTA claim that the magnitude of trade in counterfeit and pirated goods and the associated economic losses are substantial, it is difficult to quantify these assertions. The very nature of IPR infringement—secretive and illicit—makes it difficult to track production and trade in counterfeit and pirated goods. Compared to infringement of \"tangible\" goods, infringement of digital media may be even more difficult to track, as such goods increasingly are disseminated by the Internet, further complicating data collection efforts. In some cases, companies may be reluctant to release information about IPR infringement problems that they face with their branded products, out of concern that such public information may affect the marketing of their products.\nOn the opposing side, some question the commercial rationale for the ACTA. Some observers point out that many of the estimates for losses associated with IPR infringement are generated by industry groups, which may have self-interested motivations. Some analysts question the proposition that sales of pirated goods translate directly into revenue losses for legitimate firms. For example, some consumers who purchase an IPR-infringing product may not be able or willing to purchase the legitimate version of the product at the market price offered absent IPR infringement. In addition, some advocates of civil liberties assert that government discussions about ACTA may not be fully evaluating the economic and commercial benefits of exceptions and limitations to exclusive rights, such as \"fair use\" exceptions in U.S. copyright law.\nMoreover, some public interest groups argue that IPR protection and enforcement have tilted disproportionately in favor of private rights at the expense of broader economic and social welfare. Some critics assert, for example, that while IPR protection and enforcement may promote innovation, unbalanced IPR rules may stifle the free flow of information.", "A second major rationale of U.S. participation in the ACTA negotiation is health and safety concerns stemming from counterfeiting and piracy. Advocates of the ACTA argue that counterfeit products, such as fake medicines or auto parts, may be substandard and pose threats to the health and safety of consumers. In contrast, some public health advocates maintain that there has been a conflation of counterfeiting of goods with the health threats posed by those goods. It is conceivable that a medicine can be legitimate, not be infringing on an IPR, and still pose health and safety threats if it is substandard. Conversely, it also is conceivable that a medicine can be counterfeit—for instance, violating a trademark—and not pose health and safety threats. In addition, some express concern that increasing IPR protection and enforcement, while providing long-term incentives for innovation and research and development in new medicines, may pose challenges for public health, such as access to affordable medicines.", "A third rationale for the U.S. involvement in the ACTA centers on security concerns. Counterfeiting and piracy may be associated with broader forms of criminal activity. Organized crime syndicates may find the immense profits derived from copyright infringement to be highly attractive. Some have linked copyright piracy to other illicit activities conducted by organized crime syndicates, such as drug smuggling, trade in illegal arms, and money laundering. Others argue that such claims are tenuous and based more on anecdotal information than quantifiable data. They also argue that, while there may be isolated incidences of IPR tied to organized criminal syndicates, this is not a widespread problem.", "The United States pursues IPR objectives using a range of trade policy mechanisms, including multilaterally through the WTO; regionally and bilaterally through the negotiation of FTAs; and domestically through U.S. trade laws. What follows is a discussion of some of the building blocks for the ACTA found in U.S. trade policy.", "The ACTA is intended to build on the commitments set forth by the WTO Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS Agreement), the prevailing multilateral framework for creating international rules on protection and enforcement of IPR. The United States has posited that the negotiation of a new agreement, that is, the ACTA, could fill in gaps in the TRIPS Agreement for addressing IPR challenges. For example, some contend that the 1995 TRIPS Agreement does not adequately address IPR infringement issues associated with new and emerging technologies or provide effective tools for combating the proliferation of piracy in digital media.\nThe TRIPS Agreement seeks a balance of rights and obligations between private rights and the public obligation \"to secure social and cultural development that benefits all.\" Although the TRIPS Agreement has been in existence for more than a decade, there remain a number of ongoing debates about the legitimacy and fairness of the agreement in balancing these rights.", "The United States pursues international IPR protection through regional and bilateral FTAs. In negotiating recent FTAs, the USTR frequently has sought levels of protection that exceed the TRIPS Agreement, in areas such as patents and copyrights. The pursuit of these so-called \"TRIPS-plus\" provisions has generated an ongoing debate about the appropriate balance of rights and obligations under an IPR regime. Following the May 10, 2007, Bipartisan Trade Agreement between congressional leadership and the Bush Administration, some IPR provisions in the U.S. FTAs with Peru, Panama, and Colombia were revised, particularly for pharmaceutical-related IPR provisions.\nU.S. FTAs have served as models for the ACTA. The United States has stated its interest in modeling the ACTA on the IPR enforcement provisions found in the U.S. FTAs with Australia, Morocco, Singapore, and South Korea. These agreements include provisions on \"criminal penalties and procedures in cases of willful trademark counterfeiting or copyright piracy on a commercial scale; border measures in cases involving trademarks and copyrights; and civil remedies for all intellectual property rights (e.g., patent, trademark, copyright), with appropriate limitations that ensure consistency with U.S. law.\" For the United States, the ACTA represents an opportunity to expand the stronger IPR commitments found in these bilateral agreements to a broader set of countries.\nWhile the title of the proposed agreement denotes it as a \"trade agreement,\" the ACTA differs in nature from U.S. regional and bilateral FTAs, which aim to comprehensively eliminate and reduce barriers to trade. In contrast, the ACTA is a plurilateral agreement that is narrowly focused on IPR and has been portrayed by the USTR as a leadership and standard-setting agreement.", "The ACTA negotiation has spurred debates among various stakeholder groups within and among the various countries on both process and substance. Certain stakeholders have voiced concerns about the negotiation's scope, transparency, and inclusiveness. Members of the U.S. business community, such as the entertainment, pharmaceutical, luxury goods, and high technology industries, largely have been supportive of the ACTA. They assert that stronger international IPR protection and enforcement through the ACTA are critical for their competitiveness. Other business groups, including Internet service providers, have expressed concerns about the digital enforcement provisions of the proposed agreement. In addition, various civil society groups, such as public health and consumer rights advocates, have voiced concerns about the implications of the ACTA for trade in legitimate goods, consumer privacy, and free flow of information. With the existence of the WTO TRIPS Agreement and other international agreements on IPR, some question the rationale behind creating a new agreement to combat counterfeiting and piracy. The following section discusses in greater detail some of these key points of debate.", "As titled, the ACTA would suggest a focus exclusively on combating counterfeit goods. While definitions of \"counterfeiting\" vary, the term tends to refer to trademark infringement of physical goods. For example, in the WTO TRIPS Agreement, the term \"counterfeiting\" is used in conjunction with trademark infringement. As a result, when the agreement was proposed initially, many observers believed that it would focus primarily on combating trade of fake medicines, toys, auto parts, computer parts, and the like. However, as ACTA negotiations progressed, the scope of IPR in the agreement broadened from beyond traditional notions of \"counterfeiting,\" to also include piracy. While definitions of \"piracy\" vary, the term generally refers to infringement of copyrights.\nAccording to press reports, ACTA negotiating parties differed on the range of intellectual property that should be covered in the various provisions of the agreement. For example, the European Union reportedly advocated for the inclusion of patents in the civil enforcement section. The EU argued that exclusion of patents from civil remedies would limit the extent to which certain industries, such as the automotive, machinery, pharmaceutical, and agro-chemical industries, may be able to take advantage of the ACTA. The United States opposed the inclusion of patents in the civil enforcement section; some have speculated that the opposition was due to a concern that the inclusion would contradict U.S. patent law. The final ACTA text includes a footnote to the civil enforcement section which states, \"A Party may exclude patents and protection of undisclosed information from the scope of this Section.\" Given this exemption, it remains to be seen which countries exclude patents from the scope of their civil enforcement. The United States has said that its implementation of the ACTA would exclude patents.\nAs another example, the EU and the United States also took differing positions regarding the inclusion of trademarks in the digital enforcement section of the ACTA. The EU supported the inclusion of trademarks, along with copyrights, in the scope of the digital enforcement section, expressing concern about the volume of Internet sales of goods infringing on European trademarks. In contrast, the United States opposed the inclusion of trademarks in this section; some have speculated that the opposition was due to a concern that the inclusion would contradict U.S. law. For instance, some U.S. stakeholders argued that inclusion of trademarks in this section would go beyond the U.S. Digital Millennium Copyright Act (DMCA), which focuses only on copyright piracy. The digital enforcement section of the final ACTA text largely excludes trademark counterfeiting, focusing primarily instead on infringement of copyright or related rights over digital networks. However, it does include a provision stating that a Party may provide its competent authorities with the authority to order an online service provider to disclose information to a right holder sufficient to identify a subscriber whose account was allegedly used for trademark or copyright infringement and where such information is being sought to protect or enforce those IPR.", "The ACTA negotiation has spurred debates about the transparency of the negotiation process. Among some groups, there is a perception that the ACTA negotiation lacked sufficient public transparency and meaningful public input. Some critics assert that the negotiating governments engaged in close consultation with right holders, including representatives of the entertainment, software, apparel, and pharmaceutical industries, but did not engage in extensive consultations with consumer and public interest groups. Some observers have commented that the level of secrecy in the ACTA negotiations was unprecedented, compared to other international trade negotiations. They point out that draft texts for other international trade treaties, such as the WTO TRIPS Agreement, were released during their respective negotiation. Some Members of Congress and a range of stakeholders have called on USTR to enhance the transparency of the ACTA negotiations. For instance, in a letter addressed to USTR, Senators Bernard Sanders and Sherrod Brown called on USTR to allow the public to review and comment on substantive proposals for the proposed ACTA.\nDuring the early negotiating rounds, USTR refrained from publicly circulating draft text of the ACTA, citing security reasons. U.S. Trade Representative Kirk has defended the ACTA negotiation process, maintaining:\nAs is customary during negotiations among representatives of sovereign states, the negotiators agreed that they would not disclose proposals or negotiating texts to the public at large, particularly at earlier stages of the negotiation. This is done to allow participants to exchange views in confidence, facilitating the negotiation and compromise that are necessary to reach agreement on complex issues.\nUSTR reportedly shared a draft of the digital enforcement chapter with cleared advisors in the USTR formal trade advisory system and selected industry and public interest groups, who were required to sign non-disclosure agreements in order to view the negotiating text. Moreover, the ACTA negotiation process became more transparent as the negotiation advanced. USTR publicly released a summary of key elements under discussion in November 2009, following the 6 th round of negotiations; a draft text in April 2010, following the 8 th round of negotiations; a consolidated text in October 2010, following the 11 th and final round of negotiations; a finalized text on November 15, 2010, subject to legal verification; and a final text in May 2011. As additional examples of increasing transparency, USTR pointed to a number of steps it took in 2009, including establishing a dedicated ACTA web page on the USTR website; releasing a public summary of issues under negotiation; and releasing public agendas on the ACTA web page prior to each negotiating round.\nUSTR also contends that it consulted sufficiently with Congress and outside stakeholders. It has stated that the ACTA is the \"product of close collaboration between the Administration and Congress as well as intensive consultations with U.S. industry and nongovernmental organizations.\" In terms of congressional consultation, USTR has pointed to ACTA-related meetings and conference calls it has held with congressional staff and Members to provide updates on ACTA developments and to solicit views to ensure that the ACTA reflects congressional perspectives. In terms of consulting with other stakeholders, USTR has noted it solicited advice from a broad range of experts, including representatives of right holders, Internet intermediaries, and non-government organizations. Additionally, it issued a Federal Registrar notice in February 2008 requesting public comments on the ACTA and subsequently invited stakeholders to a public meeting that it would hold, in conjunction with the Department of Commerce, to discuss the ACTA.", "The range of participants included in the ACTA negotiation was subject to controversy. One element of debate was the absence of developing country participation. Some groups are critical that the ACTA was negotiated as a plurilateral agreement primarily among largely advanced industrialized countries. Some developing country advocates express concern that the ACTA negotiation did not sufficiently take into account the interests, views, and needs of developing countries. For instance, during WTO TRIPS Council meetings, China and India have stated that the ACTA, among other things, could weaken the balance of rights, obligations, and flexibilities that have been negotiated in WTO agreements; create barriers to trade; constrain flexibilities in the TRIPS Agreement, such as for public health and trade in generic medicines; limit government's freedom to allocate resources for IPR by compelling them to focus on enforcement; and lead to the incorporation of ACTA standards in future regional and other agreements. Other developing countries not party to the ACTA negotiation also have espoused similar views.\nThe selection of certain countries as participants in the ACTA has been another element of debate. Some observers have questioned why countries designated in the USTR's Special 301 report for having inadequate IPR protection and environment are involved in the ACTA. The 2012 Special 301 Report included Canada on the Priority Watch List, and Mexico and certain European Union members (Finland and Romania) on the Watch List. According to the USTR, participation in the ACTA may help countries identified in the Special 301 report to attain their goals of enhancing IPR enforcement. At the same, some observers also have questioned the effectiveness of an agreement that does not include countries like China and Russia (both designated in the Special 301 Report), which are considered to be major sources of counterfeiting and piracy.\nACTA negotiation parties have discussed expanding the ACTA to include other interested countries in the future. The final text of the agreement includes accession terms, stating that after the May 1, 2011-May 1, 2013, signatory period for parties to the ACTA negotiation, any member of the WTO may apply to accede to the agreement. The ACTA Committee, which oversees the agreement and accession of new members, is to decide upon the terms of accession for each applicant. USTR has expressed hope that other countries will join the ACTA over time, \"reflecting the growing international consensus on the need for strong IPR enforcement.\" However, some critics speculate that developing countries would be invited to join the ACTA at a point when the agreement has largely been \"locked-in\" and when significant changes could not be introduced. Some groups voice concern that developing countries will feel pressured to adhere to the ACTA in order to obtain trade benefits from ACTA participants.", "The ACTA negotiation has generated debate about the potential impact of increasing IPR protection and enforcement standards on legitimate trade and consumer activities. This speaks to a long-standing broader debate about the perceived trade-off between the protection of IPR and the facilitation of trade. IPR-based industries have voiced strong support for the ACTA, contending that its enhanced standards will contribute to greater economic growth and employment. Other stakeholders, including some consumer rights, public health, and civil liberty groups, contend that ACTA provisions may interfere with trade in legitimate goods and consumer activity. Negotiating parties maintain that the ACTA respects the WTO Doha Declaration on Public Health, is not intended to interfere with citizens' fundamental rights or undermine civil liberties, and contains safeguards to protect against creating barriers to legitimate trade. Following the 9 th round of negotiation, USTR released a statement saying:\nACTA will not interfere with a signatory's ability to respect fundamental rights and liberties. ACTA will be consistent with the WTO Agreement on Trade Related Aspects of Intellectual Property Rights (TRIPS Agreement) and the Declaration on TRIPS and Public Health. Participants reiterated that ACTA will not hinder the cross-border transit of legitimate generic medicines, and reaffirmed that patents will not be covered in the Section on Border Measures. ACTA will not oblige border authorities to search travelers' baggage or their personal electronic devices for infringing materials.\nOne flashpoint in the debate has been the ACTA's potential impact on consumer privacy and the free flow of information. For example, some critics charge that digital enforcement provisions of the ACTA would require Internet Service Providers (ISPs) to terminate customers' Internet accounts after repeated allegations of copyright infringement, a provision akin to a \"three-strikes\" law introduced by the French government. Such provisions reportedly have been controversial in the European Union, where some members of Parliament consider Internet access to be a fundamental human right that should only be terminated by judges. While many IPR-based industries argue that increasing ISP involvement in IPR enforcement is critical to combating online piracy, critics contend that requiring ISPs to filter communication places undue burdens on ISPs. Some civil liberties groups have expressed concern about what they perceive as a low threshold for terminating consumers' Internet access; they assert that proof of online piracy, not allegations, should be the requirement for termination of Internet accounts.\nIn recent months, the debate about ISP obligations related to IPR infringement has been heightened by legislation introduced in the 112 th Congress—the Prevent Real Online Threats to Economic Creativity and Theft of Intellectual Property Act (PROTECT IP Act, S. 968 ) and the Stop Online Piracy Act (SOPA, H.R. 3261 )—to address online piracy, which include some provisions similar to the ACTA. Following opposition by civil society groups and several Internet-based companies, congressional consideration of these bills has been postponed.\nIn addition, some commentators have been concerned with the extent to which U.S. \"fair use\" practices would be maintained under an agreement. There has been speculation about potential ACTA provisions on providing remedies against circumvention of technological protection measures (TPM) used by right owners to prevent the use of their copyrighted works in unwanted ways. Such provisions may have implications for the free flow of information.\nThe final ACTA text does not include provisions similar to a \"three-strikes\" rule, or similar \"notice-and-takedown\" rules. Rather, the final text requires ACTA participants to give their competent authorities the ability to order ISPs to disclose expeditiously to a right holder sufficient information to identify a subscriber whose account was allegedly used for infringement. The ACTA does contain provisions on TPM. However, the ACTA text broadly states that the digital enforcement procedures \"shall be implemented in a manner that avoids the creation of barriers to legitimate activity, including electronic commerce, and consistent with that Party's law, preserves fundamental principals such as freedom of express, fair process, and privacy.\"\nAnother flashpoint has been concerns that the ACTA could undermine trade in legitimate goods. One prominent aspect of this debate are border enforcement provisions in the ACTA under which governments may give customs officials ex-officio authority to seize and detain goods suspected of infringing IPR. Some countries that are participants to the ACTA negotiation currently do not empower their customs officials with such ex-officio authority. Others grant this authority in limited cases. In the United States, the U.S. Customs and Border Protection (CBP) is authorized to make determinations that goods violate copyrights and trademarks and seize such goods. However, the CBP is not authorized to make determinations of patent violations. In the case of patents, CBP enforces exclusion and cease-and-desist orders issued by the U.S. International Trade Commission (ITC) against patent-infringing goods.\nMany business groups assert that granting customs officials ex-officio authority is critical to preventing the flow of counterfeit and pirated goods across borders. This would ensure that customs officials can engage in more proactive efforts to combat trademark counterfeiting and copyright piracy, without having to wait for a formal complaint from a private party or right holder. Some critics, such as public interest and civil liberties groups, assert that such measures would impose unnecessary or burdensome delays on the movement of goods across borders, raise the costs of trade, and result in undue impediments of personal travel.\nThe ACTA negotiation included discussion of whether or not to include patents in the border enforcement section, which led to concerns that the ACTA could undermine legitimate trade in generic medicines and public health. As patent inclusion was debated, some public health advocates expressed concern that empowering customs authorities to make determinations about patent violations could lead to the prevention or delay of exports and imports of legitimate generic drugs. For instance, some groups contended that the ACTA may \"interfere with legitimate parallel trade in goods, including the resale of brand-name pharmaceutical products.\" They point to recent seizures in Europe of legitimate generic medicines in-transit based on industry concerns of counterfeiting.\nIn the end, the border enforcement section of the ACTA's final text specifically states in a footnote that patents and the protection of undisclosed information are excluded from the scope of that section. Thus, the border enforcement section applies to other forms of IPR, such as trademarks and copyrights. The applicability of trademarks to the border enforcement section has continued to raise concerns among some public health advocates about access to medicines, such as generic medicines.", "The ACTA was negotiated as a stand-alone agreement outside of the WTO, WIPO, and other multilateral institutions involved in international IPR protection and enforcement. This approach to the ACTA has generated debate. On the one hand, advocates suggest that negotiating the ACTA outside of existing multilateral frameworks allowed the United States and other like-minded countries to advance global IPR protection more efficiently and with greater flexibility. The advancement of trade negotiations in multilateral venues has stalled in recent years. For example, the WTO Doha Round of multilateral trade negotiation is at a standstill over country differences on agricultural, industrial tariffs, and services. Meanwhile, WIPO members have not been able to reach an agreement on potential new elements for discussion on the WIPO global patent agenda. ACTA negotiating parties also assert that the ACTA is an innovative agreement that would not have fit under current multilateral frameworks. A fact sheet released by the USTR stated: \"We feel that having an agreement independent of a particular organization is an appropriate way to pursue this project among interested countries. We fully support the important work of the G8, WTO, and WIPO, all of which touch on IPR enforcement.\" On the other hand, some critics charge that the decision by ACTA participants to hold these negotiations outside of existing multilateral frameworks was intended to bypass the concerns of developing countries or other stakeholders representing various public interests.\nSome observers question the status of the ACTA in the long term: Would the ACTA continue to exist as a stand-alone agreement, or would the WTO or other international bodies incorporate the ACTA? Negotiating parties have expressed hope that the WTO may incorporate ACTA standards in the future. For example, Japanese trade officials have stated, \"We very much want to make ACTA a model for forming international rules within the WTO framework.\" Some speculate that if the ACTA becomes a part of the WTO, signing on to the ACTA could become a requirement for WTO accession.", "In light of the numerous existing international trade agreements and economic forums that address global protection and enforcement of IPR, there are some questions about the \"value-added\" of creating a new IPR agreement. Supporters point out that the ACTA builds on the WTO TRIPS Agreement to establish enhanced standards of IPR protection and enforcement. They also maintain that the ACTA is intended to fill in the gaps between current legal frameworks and enforcement practices and emerging IPR infringement concerns, particularly in the case of IPR infringement in the digital environment. In addition, they argue that establishing a contingency of a sizeable group of countries that support stronger efforts to combat counterfeiting and piracy could send a clear, powerful signal to the rest of the world about the importance of global IPR protection and apply pressure on countries where counterfeiting and piracy continue to be serious problems. A larger group of countries also may dispel the perception that the global advancement of IPR efforts is primarily a unilateral U.S. initiative. Since the advent of the TRIPS Agreement, the United States often has been perceived as a key champion of IPR.\nCritics view the ACTA as potentially duplicative, arguing that the proposed elements of the ACTA suggest significant overlap with the WIPO Internet treaties and the WTO TRIPS Agreement. Some observers note that some countries have not fulfilled their obligations under these international frameworks completely. From this perspective, they question the effectiveness of pursuing new trade agreements and potentially directing greater financial or staff resources when mechanisms currently exist to address the issues, but are not being utilized effectively.\nStill others question how much \"teeth\" an executive government-to-government agreement on IPR protection and enforcement can have if it does not increase legal protections. Some counter that, for many countries, IPR laws \"on the books\" are adequate, but shortcomings arise in enforcement of those laws. The ACTA, they argue, can play a critical role in addressing these gaps. Others point out that while the ACTA may not result in a statutory change in U.S. law, it could have a significant impact on the global protection of intellectual property by resulting in the need for other countries to change or enforce their laws. For instance, adhering to ACTA provisions may result in Canada's enforcement of IPR in the digital environment, a long-standing issue between the United States and Canada.", "The 112 th Congress may examine the role of Congress in the ACTA approval process beyond oversight. Congress may choose to examine whether implementation of the ACTA without congressional approval could raise constitutional issues, given that U.S. approval of international agreements concerning foreign commerce and intellectual property rights falls under the Article 1, Section 8 powers of Congress in the U.S. Constitution. The ACTA may raise a range of questions for Congress:\nWhat is the role of Congress in the ACTA approval process? Will congressional activity regarding the ACTA extend beyond oversight? How would the ACTA affect congressional action in areas covered by the agreement? How does protection and enforcement of IPR rank among other national priorities? Within the realm of combating counterfeiting and piracy, there also are questions about what forms of IPR infringements should be given priority in addressing. Rationales cited for the ACTA include the commercial losses sustained by legitimate businesses from IPR infringement, as well as health and safety concerns associated with counterfeit and pirated products. Among these numerous concerns, what forms of infringement should be given priority if resources are limited? What implications does the proposed ACTA have for the allocation of federal funds? Would implementation of the ACTA require the appropriation of federal funds, even though changes in federal laws are not necessarily required? What implications does the proposed ACTA have for the future of U.S. trade policy? Does the ACTA set a precedent for conducting future efforts on IPR protection and enforcement primarily or increasingly outside of multilateral frameworks? How might provisions in the ACTA coincide or conflict with negotiating objectives set by Congress in any future trade promotion authority given to the President? Would accession to the ACTA be a requirement for signatories to future U.S. regional and bilateral FTAs? And would a country's fulfillment of ACTA commitments affect USTR determinations for its Special 301 watch lists? Given the European Parliament's rejection of the ACTA, what are the prospects for the ACTA entering into force?" ], "depth": [ 0, 1, 1, 2, 2, 2, 2, 3, 3, 4, 4, 4, 4, 4, 3, 3, 3, 3, 1, 2, 2, 3, 3, 3, 1, 2, 2, 1, 2, 2, 2, 2, 2, 2, 1 ], "alignment": [ "h0_title h2_title h1_title h3_title", "h1_full", "h0_full h1_full", "", "h1_full", "", "", "", "", "", "", "", "", "", "", "", "", "", "h2_title h3_title", "h2_full", "h3_full", "h3_full", "", "", "", "", "", "h3_full", "", "", "", "h3_full", "", "h3_full", "h2_full" ] }
{ "question": [ "What is ACTA?", "What is the purpose of ACTA?", "What is ACTA's main focus?", "How does ACTA affect IPR enforcement?", "What is the current status of the ACTA?", "What is the EU's stance on the ACTA?", "What does the ACTA require in order to enter into force?", "What parties have submitted a formal instrument of approval?", "How did the U.S. negotiate the ACTA?", "What is the U.S. Trade Representative's stance towards the ACTA?", "What role can Congress play in he ACTA?", "What debates have surrounded the implementation of the ACTA?", "How important is IPR enforcement to the U.S. government?", "What challenges face policymakers?", "What debates have been raised about the ACTA negotiations?", "What alternatives to a new IPR agreement have been proposed?" ], "summary": [ "The proposed Anti-Counterfeiting Trade Agreement (ACTA) is a new agreement for combating intellectual property rights (IPR) infringement.", "Negotiated by the United States, Australia, Canada, the European Union and its 27 member states, Japan, South Korea, Mexico, Morocco, New Zealand, Singapore, and Switzerland, the ACTA is intended to build on the IPR protection and enforcement obligations set forth in the 1995 World Trade Organization (WTO) Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS Agreement). It also is intended to address emerging IPR issues believed to be not addressed adequately in the TRIPS Agreement, such as IPR infringement in the digital environment.", "The ACTA, which was negotiated outside of the WTO, focuses primarily on trademark and copyright enforcement.", "It establishes a legal framework for IPR enforcement, which contains provisions on civil enforcement, border measures, criminal enforcement in cases of willful trademark counterfeiting or copyright piracy on a commercial scale, and enforcement in the digital environment for infringement of copyrights or related rights. It also provides for enhanced enforcement best practices and increased international cooperation.", "The ratification (\"formal approval\") of the ACTA is in a state of uncertainty, despite the fact that most negotiating parties (Australia, Canada, the EU and 22 of its member states, Japan, South Korea, Mexico, Morocco, New Zealand, Singapore, and the United States) have signed the proposed agreement.", "Following months of controversy over the ACTA in the EU, on July 4, 2012, the European Parliament voted against the ACTA, meaning that neither the EU nor its individual member states can join the agreement in its current form.", "The ACTA would enter into force after the sixth instrument of ratification, acceptance, or approval is deposited by ACTA negotiating parties.", "No party has submitted a formal instrument of approval to date.", "The Bush Administration began, and the Obama Administration continued, negotiation of the ACTA as an executive agreement, meaning that the ACTA would not be subject to congressional approval, unless it were to require statutory changes to U.S. law.", "The U.S. Trade Representative maintains that the ACTA is consistent with existing U.S. law and does not require the enactment of implementing legislation.", "Congress could play an oversight role in the implementation of the agreement.", "Some Members and other groups have debated whether implementation of the ACTA without congressional approval would raise constitutionality issues.", "The U.S. government has made the enforcement of IPR a top priority in its trade policy, due to the importance of IPR to the U.S. economy and the potentially negative commercial, health and safety, and security consequences associated with counterfeiting and piracy.", "Policymakers face a challenge of finding an appropriate balance between protecting private rights and promoting broader economic and social welfare.", "The ACTA negotiation has spurred various policy debates. While governments involved in the negotiation and IPR-based industries have voiced strong support for the ACTA, other groups have expressed concern about the ACTA's potential impact on trade in legitimate goods, consumer privacy, the free flow of information, and public health. There also have been concerns about the negotiation's scope, transparency, and inclusiveness.", "Some have questioned the rationale behind creating a new IPR agreement and have advocated, instead, for better enforcement of existing agreements, such as the WTO TRIPS Agreement." ], "parent_pair_index": [ -1, 0, 0, 0, -1, 0, -1, 2, -1, 0, 0, 0, -1, 0, 0, 2 ], "summary_paragraph_index": [ 0, 0, 0, 0, 1, 1, 1, 1, 2, 2, 2, 2, 3, 3, 3, 3 ] }
GAO_GAO-13-473
{ "title": [ "Background", "SSA Has Taken Some Steps to Address the Current Challenges It Faces in Identifying, Selecting, and Monitoring Representative Payees", "SSA Has Done Little to Position Itself to Address the Program’s Long-Term Challenges", "Changing Demographics and Resource Constraints Pose Long-Term Challenges for the Representative Payee Program", "SSA Has Not Engaged in Long-Term Planning for the Representative Payee Program", "Others Have Identified a Range of Options That Could Address SSA’s Long- Term Challenges", "Conclusions", "Recommendations for Executive Action", "Agency Comments", "Appendix I: Methodology for Identifying Options and Their Strengths and Weaknesses", "Appendix II: Comments from the Social Security Administration", "Appendix III: GAO Contact and Staff Acknowledgments", "GAO Contact", "Staff Acknowledgments", "Related GAO Products" ], "paragraphs": [ "Beneficiaries needing a payee fall into one of three basic categories: (1) child beneficiaries—almost all children under age 18 have payees,those who are legally incompetent or mentally incapable of managing benefit payments, and (3) beneficiaries who are physically incapable of managing or directing the management of their benefit payments. SSA claims representatives determine whether a beneficiary needs a representative payee by reviewing court determinations of legal incompetency, medical evidence, or statements of relatives, friends, or others who know and observe the beneficiary concerning the beneficiary’s ability to manage or direct the management of his or her benefits. In December 2012, over 8.6 million individuals had a representative payee—over 5.3 million received only OASDI benefits, almost 2.5 million received only SSI benefits, and over 830,000 received (2)\nOASDI and SSI concurrently. See figure 1 for an overview of the percentage of beneficiaries with a payee, by benefit type and age.\nAccording to SSA data, about 76 percent of SSI recipients and Disability Insurance beneficiaries who had a payee in 2011 suffered from a mental health condition. The most prevalent condition for each of these beneficiary groups was intellectual disability. As of January 2013, family members served as representative payees for about 85 percent of beneficiaries who had a payee.\nSSA may appoint an individual or organization to be a representative payee. Organizational payees—which can include social service agencies, state mental institutions, and state or local government agencies—may offer their services free of charge or they may collect a capped fee, provided they meet certain conditions. Certain individuals are not eligible to serve as representative payees. For example, in order to be eligible to serve as a representative payee, an individual cannot be a fugitive felon or have been convicted of certain felonies, including those related to Social Security fraud, misuse of SSA benefits, or concealing or failing to disclose knowledge of events affecting entitlement to or payment of Social Security benefits.\nSSA administers the Representative Payee Program through a network of over 1,200 field offices located across the country. According to SSA and NRC officials, the process for administering the program consists of many time-consuming and often complicated steps, guided largely by requirements in statute and SSA regulations. These steps are primarily completed by field office claims representatives who are also responsible for other work processes, such as interviewing individuals to determine their eligibility for OASDI and SSI benefits. According to SSA’s guidance,payee, SSA staff perform the following activities: once a beneficiary is determined to need a representative 1. Identify Potential Payees SSA claims representatives use a variety of approaches to identify prospective payees, including asking the beneficiary if there is an individual whom he or she trusts; reviewing beneficiary claims files and any available medical records; and consulting with local government, social service, and other providers who can often provide payee contacts. If no payee is readily available, the claims representative tries to find a payee by consulting the list of payee sources (e.g., local organizations with volunteers who can serve as payees) that each field office is required to maintain. 2. Screen Potential Payees After identifying prospective payees, claims representatives interview them to assess their suitability, considering factors such as the nature of their relationship to the beneficiary and whether they are knowledgeable about the beneficiary’s needs. In addition, claims representatives receive automated messages during the screening process that show whether a prospective payee is a fugitive felon or otherwise prohibited by law from serving as a representative payee. 3. Appoint a Payee SSA’s guidance includes preference lists to assist claims representatives in selecting a payee when more than one candidate is available. For example, the preference list for adults is as follows: (1) a spouse, parent or other relative with custody or who shows (2) a legal guardian/conservator with custody or who shows strong (3) a friend with custody; (4) a public or nonprofit agency or institution; (5) a federal or state institution; (6) a statutory guardian; (7) a voluntary conservator; (8) a private, for-profit institution with custody and is licensed (9) a friend without custody, but who shows strong concern for the beneficiary’s well-being, including persons with power of attorney; (10) anyone not listed above who is qualified and able to act as payee, and who is willing to do so; and (11) an organization that charges a fee for its service.\nAlthough claims representatives are generally expected to select payees in the order in which they are listed, they may deviate from this order based on their assessment of the beneficiary’s individual circumstances. In selecting a payee, claims representatives are primarily concerned with identifying someone who will best serve the beneficiary’s interest.\nSSA staff monitor payees to identify potential misuse—the use of SSA funds for purposes other than the needs of the beneficiary. SSA field office and other staff monitor payees by reviewing the annual accounting reports that payees submit to document how the payee spent Social Security funds on behalf of the beneficiary. Certain payees are also subject to periodic site reviews. For example, individuals serving as a payee for 15 or more beneficiaries and certain organizational payees, including agencies that serve 50 or more beneficiaries, are subject to these reviews.", "SSA has faced challenges identifying, selecting, and monitoring representative payees. For example, field office managers said that some field offices have been struggling to keep up with payee program workloads due to staff attrition and that managers themselves sometimes have to perform payee program duties that claims representatives typically handle, such as processing payee applications. In addition, SSA has experienced an increasing number of beneficiaries, such as persons suffering from mental health conditions or the elderly, who may not have a suitable payee readily available. Recognizing the challenges associated with finding payees for some beneficiaries, SSA attempted to identify and recruit individuals and organizations who would be willing to serve as payees. For example, SSA partnered with the National Alliance on Mental Illness in 2012 to host a webinar to recruit additional payees for beneficiaries suffering from mental health conditions. However, as of April 4, 2013, SSA officials said this effort did not result in the addition of any new payees. SSA officials told us that they posted the webinar to YouTube in an effort to reach a larger segment of the population.\nSSA has also taken steps to address challenges it has had with ensuring that payees who are assigned are suitable for the task. For instance, in June 2012, SSA initiated a pilot in its Philadelphia region to screen and block payee applicants who have been convicted of any 1 of 12 types of felonies. Under the pilot, SSA field staff are required to bar certain payee applicants who have committed one or more of these crimes. According to SSA officials, as of January 23, 2013, SSA staff in the Philadelphia region barred 108 out of 10,291 applicants from serving as payees as a result of the pilot. SSA said that the pilot primarily relies on self-reported information from payee applicants. In our past work, we found that reliance on self-reported information alone can be problematic because it may not be accurate. In April 2013, SSA published a notice in the Federal Register that agency officials said would allow them to collect data necessary to use Lexis/Nexis Accurint, a database that contains state-level felony and misdemeanor information, to perform criminal background checks on payee applicants. According to SSA officials, the agency is currently testing an automated tool to query the Accurint database as well as developing field office procedures and training materials. SSA plans to begin using the database to screen payee applicants in the summer of 2013. Although the database could help SSA staff in the Philadelphia region better screen payee applicants, it is limited because it does not contain data from every state. It is not clear how, if at all, SSA is going to address these limitations. SSA said the focus of the pilot is to determine how easily these additional controls can be implemented. For example, SSA is interested in determining how difficult it is for field staff to find a suitable alternative payee after they bar a payee applicant.implemented nationwide in fiscal year 2014.\nAccording to SSA, if the pilot is successful it will be SSA has also taken steps to improve its ability to monitor payee activities. Generally, all representative payees are required to file an annual accounting report that shows how they spent beneficiaries’ SSA funds. According to SSA officials and the OIG, obtaining these reports, reviewing them, and following-up on delinquent reports is extremely time-consuming for staff. For example, the OIG found that SSA staff expend considerable effort to obtain accountings, which sometimes required multiple mailings, telephone calls, and face-to-face meetings, and, in some instances, took several months to complete. process that allows payees to submit reports online, which saves SSA time on handling the reports and scanning paper reports. However, it does not lessen the need for SSA staff to review some of these reports.\nSSA OIG, Annual Representative Payee Accounting Report Non-responders, A-06-10- 11069 (March 2011). (nearly 40 percent of all reviews). Based on their testing of the model, SSA officials expect it to identify many more instances of payee benefit misuse than random reviews. However, SSA officials said they have not yet completed a sufficient number of reviews to determine whether the model is performing as expected.\nSSA has taken other steps to help it improve the management and operations of the Representative Payee Program. For example, SSA is in the process of redesigning its Representative Payee System—the electronic system used to record payee applications, payee performance, and any significant information about the payee, among other things. SSA has also provided additional guidance and training to payees and field office staff to help them better understand their roles and responsibilities, as well as implemented other actions to address numerous recommendations made by the SSA OIG. Nonetheless, the OIG continues to identify the program as a major management challenge facing SSA.", "", "Changing demographics will challenge SSA’s ability to effectively administer its Representative Payee Program in the future. The proportion of elderly individuals is projected to grow to nearly 20 percent of the total population over the next two decades. As a result, it is estimated that not only could the number of SSA beneficiaries grow by as much as 55 percent, but that the number of aged beneficiaries could increase from over 38 million in 2012 to over 72 million in 2035. This projected growth in the number of beneficiaries, especially the increase in the proportion of aged beneficiaries, will have implications for the Representative Payee Program (see fig. 2).\nWhile age alone does not determine one’s capability to manage personal finances, research shows that the incidence of Alzheimer’s and other forms of dementia that undermine judgment increases with age.Researchers estimate that, by 2025, the number of people aged 65 years and older with Alzheimer’s could increase by as much as 30 percent— from the 5.2 million persons affected in 2012 to 6.7 million. Given the projected growth in the aged population, SSA will likely be challenged to locate more payees as well as monitor a greater number of them in the future.\nStaff and resource constraints also present challenges for the future administration of the Representative Payee Program. For example, the impacts of a hiring freeze and anticipated retirements of SSA staff will further impair the agency’s ability to effectively manage the program—a problem common to other SSA workloads, such as claims processing. In fact, in 2009 we reported that staffing constraints were having adverse effects on SSA field office services and that field office staff were having to defer some of the work they considered of lower priority. More recently, field office managers we spoke with said that, to the extent that SSA field offices are required to do progressively more with limited staff and resources, they will be less likely to identify and address instances of payee benefit misuse.", "SSA has not developed a comprehensive plan for addressing the challenges the Representative Payee Program faces over the long term. SSA’s Strategic Plan notes the future challenges, including growing workloads and limited resources, facing all of its programs. Even though representative payee activities are not specifically mentioned in the plan, according to SSA, these activities align with the plan’s goal to preserve the public’s trust in its programs by (1) simplifying and streamlining how SSA does its work and (2) protecting programs from waste, fraud, and abuse. SSA officials said, for example, the Philadelphia criminal bar pilot and the application of a misuse predictive model to select payees for review using selected beneficiary and payee characteristics are steps the agency is taking to better safeguard beneficiaries. While SSA plans to assess how easily the pilot can be implemented, it has no plans to determine whether the pilot actually reduces the incidence of benefit misuse by payees in the long-run. We have previously reported that program evaluation can play a key role in long-term planning efforts by providing feedback on both program design and execution, including whether an agency’s efforts are effective in resolving a problem or filling a need.\nFurthermore, SSA has done little long-term planning to address the workload challenges the Representative Payee Program faces. SSA acknowledged the need to better understand the future needs of the program, but it has not determined how many beneficiaries will likely need payees in the future and their characteristics. GAO’s standards for internal control state that an agency should assess the risks it faces from both external and internal sources. While the reasons for the potential growth in the program fall beyond SSA’s control, such as an increase in older beneficiaries, assessing this growth can affect the program’s chances for success. Agencies can use such assessments to assist them in determining how to best manage risk, as well as the staff skills and resources needed to address operational challenges for the short- and long-term. Some experts have suggested that the payee program does not garner attention from SSA because the agency considers it a lower priority than other SSA activities such as claims processing.", "GAO, Standards for Internal Control in the Federal Government, GAO/AIMD-00-21.3.1 (Washington, D.C.: November 1999). each of the options, mostly related to balancing SSA’s efforts to streamline and simplify the program while adequately protecting beneficiaries from fraud and abuse. Additionally, more than one programmatic change may be necessary to best position SSA to meet its growing workload demands. These options, as well as interviewees’ views on them, are described below.\nAs noted earlier, SSA’s most recent efforts to recruit more payees have not been very successful. The lack of additional payee volunteers may be because local service providers, such as those that serve individuals with developmental disabilities or the elderly, are facing similar resource constraints as SSA. Many interviewees said that it might not be cost- effective for SSA to invest its scarce resources on an effort that would likely yield few volunteers. Two interviewees suggested that, if SSA were to pursue this option, the agency should pilot it first. Most interviewees agreed that contracting out responsibility for developing and maintaining a pool of payees would be more cost-effective for SSA than performing these activities itself. Using an outside entity would also allow SSA staff to focus on other tasks, and the agency could hold the contractor accountable for maintaining a pool of qualified payees. For example, SSA could require the contractor to find qualified payees who would commit to serving as payees for a specified amount of time. Additionally, SSA could structure the contract so that it emphasizes the need to find payees for certain beneficiary groups such as the elderly or persons with developmental disabilities.\nUnder federal law, a payee can only qualify to collect a fee from a beneficiary if the payee is (1) a state or local government agency with fiduciary responsibilities whose mission is to carry out income maintenance, social service, or health care-related activities or (2) a tax- exempt community-based nonprofit social service organization that is bonded and licensed (provided licensing is available) in the state where they serve as a payee. The organization must also regularly provide payee services concurrently to at least five beneficiaries and generally may not be a creditor of the beneficiary. In 2013, fee-for-service payees could collect up to 10 percent of a beneficiary’s benefit up to a maximum of $39 per month, and up to $76 if they serve as a payee for a person suffering from drug addiction or alcoholism. Changing the law to allow more organizations to collect a fee could enable SSA to access a larger pool of potential payees. Some interviewees cautioned that permitting a broader range of organizations to collect a fee could, however, create a perverse incentive for organizations to create a payee “business” where the focus would be on serving a larger number of beneficiaries rather than the best interests of beneficiaries. Lastly, this option could negatively affect beneficiaries since the fee is deducted from their SSA benefit. Some interviewees suggested that SSA could offset this potentially negative effect on beneficiaries by paying the fee from SSA funds, although SSA noted that this would require a statutory change.\nCourts in each state have the authority to appoint a guardian or conservator for individuals the court determines to be incapacitated. Generally, guardianships are legal relationships created when a state court grants one person or entity the authority and responsibility to make decisions in the best interest of an incapacitated individual concerning his or her person or property. Automatically selecting a person legally designated to manage the beneficiary’s assets, such as a guardian, to serve as a representative payee would not only lessen the time staff spend on screening payees, but could also reduce potential redundancies in screening procedures between SSA and state courts. However, the potential benefit of this option cannot be fully assessed because SSA officials said they do not have data on the number of guardians who currently serve as payees. Despite its potential benefits, this option could also face implementation challenges because some guardians may not want to serve as payees due to administrative program requirements. Further, automatically appointing individuals to serve as payees without screening them could be problematic because screening and eligibility criteria for guardians vary by state with some states having more stringent procedures than others.\nIn 2009, SSA submitted a legislative proposal to Congress to eliminate the statutory requirement that payees who are custodial parents of children who receive benefits, or spouses who live with a beneficiary, file annual accountings. If enacted, such a change could reduce SSA’s workload because, as noted earlier, SSA spends a considerable amount of time obtaining and reviewing accounting reports and family members, primarily parents and spouses, serve 85 percent of beneficiaries who have payees. Nonetheless, annual accounting reports serve as an important reminder that SSA funds should be used for the beneficiary. An alternative that would lessen SSA’s workload burden while maintaining a level of accountability would be for SSA to reduce the frequency of accountings for custodial parents and spouses. To date, Congress has not enacted SSA’s legislative proposal.\nEliminating or limiting monitoring practices for payees who already oversee a beneficiary’s assets by virtue of their status as a guardian or power of attorney could create many of the same challenges that might exist if SSA were to automatically appoint these groups without screening them. For example, although SSA initially might be able to save resources by not monitoring selected categories of payees, there could be long-term costs resulting from increased instances of payee fraud, waste, and abuse. Relying on state court monitoring also replaces a national framework with a variety of state practices, which could result in different standards for oversight and potentially make some beneficiaries more vulnerable to having their funds misused. Further, we previously reported that states face challenges adequately monitoring guardians and that persons with power of attorney can easily exploit beneficiaries.\nAs previously noted, all payees are generally required by law to submit annual accounting reports for review by SSA. To better target its accounting reviews to payees who are most likely to misuse benefits based on the misuse predictive model described earlier, SSA could seek legislative changes to this requirement. This could allow SSA to focus its attention on areas of greater risk. During our review, SSA said that it is too soon to determine whether expansion of the risk-based targeting approach would be effective.\nSSA currently contracts with the National Disability Rights Network (NDRN) to coordinate and oversee the completion of onsite reviews of selected organizational payees by state protection and advocacy agencies.review reports from the protection and advocacy agencies under this contract. As a result of these reviews, SSA referred 356 cases to the field offices to follow up on a range of payee issues, including incorrect bank account titling and payees not properly documenting beneficiary expenses. SSA also began investigating 13 payees for benefit misuse. Some experts have suggested that expanding NDRN’s contract to have it conduct site reviews for other payees, such as individuals, could help lessen the challenges SSA faces in conducting these reviews. Another alternative, which is being used by some courts are volunteer guardianship monitoring programs, would be to identify and train a pool of As of November 2, 2012, SSA had received 557 payee volunteers to assist with monitoring. Under such an approach, SSA could work with volunteer organizations to train and certify individuals to monitor payees. With both of these options, SSA would still have to devote some level of staff and resources to addressing any findings identified during the reviews.\nMore than half of all beneficiaries with a payee are under the age of 18 and nearly 90 percent of these beneficiaries had their parent as a payee in 2011. According to SSA, custodial parents generally serve appropriately as payees for their children. Allowing custodial parents to automatically receive benefits on behalf of their children would reduce SSA staffs’ responsibility to screen and monitor parent payees, thus potentially freeing up staff and program resources to focus on aspects of the program SSA considers high need or high risk. This option would also decrease the burden on parents by not requiring them to apply to be their child’s payee or file annual accounting reports. According to a Department of Veterans Affairs’ (VA) official, the department does not require custodial parents to serve as payees for minors who receive monthly benefits. Nonetheless, eliminating the requirement that parents be assigned as payees also eliminates any safeguards—screening and monitoring—that would help to ensure that children’s benefits are being used on their behalf.\nGAO and various experts have long recognized the need for better coordination and exchange of information between SSA and other entities that serve SSA beneficiaries and have made recommendations for SSA to share information with these entities to the extent permitted by law. For example, we reported in 2004 that the lack of systematic coordination weakens the oversight of incapacitated people and may leave them at risk of not being assigned a payee or guardian despite having been identified as needing one. We further reported that insufficient interagency coordination may leave incapacitated people more vulnerable to abuse or neglect. Interviewees generally agreed that developing better relationships on payee matters with state and local entities is an important step toward helping SSA manage the program and leverage its constrained resources; however, several interviewees said there may be some challenges to sharing information on payee matters such as privacy issues and developing a data sharing mechanism. Sharing information could lessen the time SSA staff spend on screening payees and following up on delinquent accounting reports. For example, SSA could use information from state courts to determine whether or not to appoint a guardian as a payee or to better target its monitoring practices.\nSSA has acknowledged that changes to the Representative Payee Program are needed to address its growing workloads and effectively manage the program, but told us that few of the options identified are currently under consideration by the agency. For example, SSA has recognized the potential benefits of some of these options, such as limiting parental accounting requirements and developing a pool of payees for hard to serve beneficiaries, and has taken steps toward implementing them. Nonetheless, SSA officials said they cannot implement several options, such as automatically assigning payees without screening them or limiting accounting requirements for certain groups of payees because they are statutorily required to conduct these activities. They also indicated that some of these options would not help SSA administer the program more effectively or would be too costly. For example, SSA said that creating a data sharing mechanism with state courts would cost too much; however, it has not formally or systematically estimated the cost of sharing this information. Some experts we spoke with highlighted the need for SSA to examine alternatives to manage the payee program. Further, GAO’s internal controls guidance states that agencies should determine what actions they should take to manage program risk. GAO has also reported that without effective short- and long-term planning, which takes into account the changing environment, federal agencies risk delivering programs and services that may not meet critical needs.feasibility of these options or begun to explore other alternatives that could help it address the current and growing demands of the program. Such an assessment would inform the types of actions that SSA should take, including whether the agency should pursue developing legislative proposals for changes.", "Given the significant role that payees play in the lives of many SSA beneficiaries, it is imperative for SSA to take a long-term strategic approach to position itself to administer the Representative Payee Program effectively in the future. Over the years, SSA has taken important steps to improve the program in an effort to prevent misuse of benefits by payees. However, if SSA fails to evaluate the effectiveness of these changes, such as those in its Philadelphia pilot, in actually preventing misuse, SSA runs the risk of wasting its scarce resources on activities that may be ineffective over the long term.\nSSA’s lack of long-term planning could also render it unable to effectively administer the program and expose an already vulnerable population to misuse of their benefits. Without a clearer assessment of the future need for payees, SSA runs the risk of not being prepared to serve a growing number of aged beneficiaries whose needs often differ from those of beneficiaries typically served by SSA staff. In addition, SSA may be unable to ensure that there are enough payees available and that beneficiaries’ funds will be adequately protected from misuse. Lastly, because of its lack of long-term planning, SSA may be limited in its ability to make effective decisions about how to modify the program going forward.\nWhile there are no simple fixes to help SSA manage its growing program workloads, SSA has demonstrated that it cannot effectively administer the program within its current resources and structure. Experts have identified a range of possible options that SSA could consider to meet its goals of streamlining the program and protecting beneficiaries from misuse. Nonetheless, if SSA does not assess the potential costs and benefits of different alternatives and pursue operational and program design changes the agency deems to be feasible and cost-effective, it will miss an opportunity to better position itself to meet its service delivery challenges in the future.", "To better position itself to address its growing challenges with administering the program while protecting individuals’ benefits from misuse, we recommend that the Commissioner of SSA direct the Deputy Commissioner, Retirement and Disability Policy, to work with relevant SSA offices to 1. systematically evaluate the effectiveness of SSA’s criminal bar pilot to help ensure that it meets its intended purpose of preventing misuse; 2. estimate the long-term increase in the number of individuals who will need a payee and their demographic characteristics, as well as the resources that will be needed to meet this increase in demand; and 3. develop a long-term strategy for addressing these challenges that includes developing and testing a range of alternatives that could streamline program processing to determine and compare their feasibility and their potential impact on processing times and risk of benefit misuse.", "We provided a draft of this report to the Commissioner of SSA for review and comment. In its written comments, reproduced in appendix II, SSA agreed with all three of our recommendations. In responding to our draft report, SSA noted that the agency expects to complete an evaluation of the criminal bar pilot in fiscal year 2014, before implementing the policy nationwide. In addition, SSA said that it is currently working to estimate the number of beneficiaries who will need a payee and will use this information to develop long-term strategies for addressing Representative Payee Program challenges. Finally, SSA said it is considering alternatives to streamline its processes and improve its monitoring. SSA also provided technical comments that we have incorporated, as appropriate.\nAs agreed with your offices, unless you publicly announce the contents of this report earlier, we plan no further distribution until 30 days from the report date. At that time, we will send copies to the Commissioner of Social Security. In addition, the report will be available at no charge on the GAO website at http://www.gao.gov.\nIf you or your staff have any questions about this report, please contact me at (202) 512-7215 or [email protected]. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this reported are listed in appendix III.", "We identified options that the Social Security Administration (SSA) could consider to address the Representative Payee Program’s long-term challenges by reviewing prior reports on the program such as the National Research Council’s 2007 review of the program; Social Security Advisory Board reports, SSA Office of the Inspector General, and GAO reports; and other reports. We also sought input from experts, members of organizations familiar with the program, and SSA field office managers from 6 of the 10 regions (interviewees). These sources offered numerous options to address long-term challenges facing SSA’s Representative Payee Program. We selected options that could assist SSA in managing its growing workload, including options that directly address the growing need for payees and SSA’s challenges in monitoring these payees. We combined some options that were similar in nature to reduce the number of options to a reasonable amount for interviews. We also eliminated actions that SSA has already implemented.\nWe selected a nongeneralizable sample of experts who had conducted research on the Representative Payee Program (or similar programs such as guardianship programs), served on Advisory panels, or who are affiliated with an organization that represents persons who may need payee services (see table 2 for a list of entities). In addition, we selected a group of interviewees to help ensure a range of viewpoints. Specifically, we interviewed persons who work with different beneficiary groups such as the aged, persons with developmental disabilities, persons with substance abuse, and others. They also represented different interactions with the program such as the court perspective, SSA’s field office perspectives, beneficiary perspectives, and payee perspectives. Although many points of view were represented by our interviewees, they may not represent the complete range of views on the options.\nWe conducted 14 semi-structured interviews to identify strengths and weaknesses of the options, including the likelihood that the option would help SSA address the growing demand for payees and increased staff workloads, their cost-effectiveness, and feasibility. In some instances, these interviews included several members from the organization and the views expressed were those of the individuals who participated in the interview, not those of their organizations. We did not conduct an independent review of the feasibility or potential impact of any of these options. GAO is not recommending or endorsing the adoption of any of these policy options in this report.\nWe conducted this performance audit from April 2012 to May 2013 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 findings and conclusions based on our audit objectives.", "", "", "Daniel Bertoni, (202) 512-7215 or [email protected].", "In addition to the contact named above, Clarita Mrena (Assistant Director), Sherwin Chapman, and Nyree Ryder Tee made significant contributions to this report, in all aspects of the work. Also contributing to the report were Rachel Beers, Gary Bianchi, David Chrisinger, Brittni Milam, Mimi Nguyen, Almeta Spencer, Vanessa Taylor, Roger Thomas, and Walter Vance.", "Human Services: Sustained and Coordinated Efforts Could Facilitate Data Sharing While Protecting Privacy. GAO-13-106. Washington, D.C.: February 8, 2013.\nElder Justice: National Strategy Needed to Effectively Combat Elder Financial Exploitation. GAO-13-110. Washington, D.C.: November 15, 2012.\nSupplemental Security Income: Better Management Oversight Needed for Children’s Benefits. GAO-12-497. Washington, D.C.: June 26, 2012.\nDesigning Evaluations: 2012 Revision. GAO-12-208G. Washington, D.C.: January 2012.\nIncapacitated Adults: Oversight of Federal Fiduciaries and Court- Appointed Guardians Needs Improvement. GAO-11-678. Washington, D.C.: July 22, 2011.\nElder Justice: Stronger Federal Leadership Could Enhance National Response to Elder Abuse. GAO-11-208. Washington, D.C.: March 2, 2011 Guardianships: Cases of Financial Exploitation, Neglect, and Abuse of Seniors. GAO-10-1046. Washington, D.C.: September 30, 2010.\nSocial Security Administration: Service Delivery Plan Needed to Address Baby Boom Retirement Challenges. GAO-09-24. Washington, D.C.: January 9, 2009.\nGuardianships: Collaboration Needed to Protect Incapacitated Elderly People. GAO-04-655. Washington, D.C.: July 13, 2004." ], "depth": [ 1, 1, 1, 2, 2, 2, 1, 1, 1, 1, 1, 1, 2, 2, 1 ], "alignment": [ "h2_full", "h0_full h3_full", "h2_title h1_title h3_title", "h2_full h1_full", "h2_full h1_full", "h3_full h1_full", "h1_full", "", "", "h0_full h3_full h2_full h1_full", "", "", "", "", "h3_full" ] }
{ "question": [ "How effectively does the SSA administer its Representative Payee Program?", "What challenges does SSA face due to increasing number of beneficiaries?", "How did SSA address this challenge?", "How successful was this effort?", "How did SSA address payee selection?", "What limitations exist in this database?", "What challenges does SSA face regarding payee monitoring?", "How did SSA address this problem?", "What is OIG's stance regarding SSA?", "How well has SSA prepared for the future?", "What factors will cause issues for the SSA in the future?", "What steps has the SSA taken?", "How does the SSA plan to assess the pilot?", "What alternative solutions exist for the SSA?", "In what ways has SSA considered these suggestions?", "How important are Representative Payees for the SSA?", "How large was the payee role in FY2012?", "What concerns has Congress raised?", "What does this report examine?", "What documents did GAO review?", "What officials did GAO interview?", "How did GAO review program data?", "What potential plans did GAO review?" ], "summary": [ "The Social Security Administration (SSA) struggles to effectively administer its Representative Payee Program, despite steps taken to address its challenges in identifying, selecting, and monitoring representative payees. For example, due to increasing workloads and staff attrition, SSA field office managers in some offices said they sometimes have to perform payee program duties that lower level staff typically handle.", "SSA has also experienced an increasing number of beneficiaries who may not have a suitable payee available.", "In an effort to address this challenge, SSA hosted a webinar to recruit additional payees.", "However, SSA officials said this effort did not result in the addition of any new payees.", "SSA also faces challenges ensuring that payees who are selected are suitable for the task. To help address this challenge, SSA implemented a pilot program in its Philadelphia region to screen and bar payee applicants who have been convicted of certain crimes. The pilot relies on self-reported information from payee applicants, but SSA plans to screen applicants by accessing a commercial database that contains state-level criminal information.", "This database, however, does not contain information from every state and it is not clear how SSA will address this limitation.", "SSA also faces challenges monitoring payees' use of beneficiaries' SSA funds--a time-consuming process.", "SSA developed an electronic accounting process that allows payees to submit reports online, which saves SSA time on handling the reports and scanning paper reports. However, it does not lessen the need for SSA staff to review some of these reports.", "SSA has also taken other steps to improve the administration of the program, but the SSA Office of the Inspector General (OIG) nonetheless continues to identify the program as a major SSA management challenge.", "Although changing demographics and resource constraints will challenge the future administration of the Representative Payee Program, SSA has done little to position itself for the long term.", "The projected growth in the aged population, as well as the incidence of individuals with dementia, will have implications for the program, as SSA will have to spend more resources finding and monitoring payees. These challenges are exacerbated by staff and resource constraints, which could make SSA less able to identify and address payee benefit misuse.", "Some of the steps SSA has taken align with goals in the agency's Strategic Plan. For example, SSA's piloting of a new payee screening and selection process is an effort to better protect the program from fraud, waste, and abuse--one of the objectives included in the plan.", "Nonetheless, SSA does not plan to assess whether the pilot actually reduces the incidence of benefit misuse in the long run. Further, SSA has not projected the future need for payees, the likely characteristics of beneficiaries, or the resources needed to administer the program.", "Others have identified a range of options that could help SSA address its long-term challenges by increasing its pool of payees and better targeting its monitoring practices. Experts and stakeholders we interviewed identified trade-offs for each of these options, citing the need to balance the potential benefit of reducing SSA's workloads with the possible increased risk of benefit misuse by payees.", "SSA has considered some options, but it has not fully assessed and compared the potential benefits and feasibility of implementing these options.", "Representative Payees—persons who SSA staff appoint to manage Social Security benefits for those unable to do so for themselves—play an important role in ensuring that beneficiary needs are met.", "In fiscal year 2012, about 5.9 million payees managed $72 billion in annual benefits for nearly 8.4 million beneficiaries, a number that is likely to grow as the population ages.", "Congress and others have expressed concerns that SSA may not be well positioned to administer the Representative Payee Program, as currently structured, in the future.", "This report examines (1) administrative challenges facing the program and steps SSA has taken to address them and (2) long-term challenges and actions SSA has taken or could take to address them.", "To answer these objectives, GAO reviewed relevant research, policies, federal laws and regulations, and other documents.", "GAO interviewed SSA officials and other parties, and visited the Philadelphia Regional Office.", "GAO also reviewed program trend data and studies on challenges associated with an aging population.", "GAO reviewed options SSA could consider to address program challenges and conducted interviews to identify the strengths and weaknesses of these options." ], "parent_pair_index": [ -1, 0, 1, 1, 0, 4, 0, 6, 0, -1, 0, 0, 2, 0, 4, -1, 0, -1, -1, -1, 0, 0, 0 ], "summary_paragraph_index": [ 2, 2, 2, 2, 2, 2, 2, 2, 2, 3, 3, 3, 3, 3, 3, 0, 0, 0, 0, 1, 1, 1, 1 ] }
GAO_GAO-19-197
{ "title": [ "Background", "Patient Record Matching", "Importance of Accurate Patient Record Matching", "ONC Responsibilities and Patient Record Matching", "Stakeholders Described Patient Record Matching Approaches and Associated Challenges", "Providers and HIE Organizations Described Using Both Manual and Automated Approaches to Patient Record Matching", "Stakeholders Said That Inaccurate, Incomplete, and Inconsistently Formatted Data Can Pose Challenges for Patient Record Matching", "Stakeholders Identified Efforts Underway to Improve Patient Record Matching as Well as Additional Efforts ONC and Others Could Undertake", "Stakeholders Have Undertaken Efforts to Improve the Demographic Data and Methods Used to Match Records", "Efforts to Improve Demographic Data Used for Matching", "Assessing and Improving Matching Methods", "Stakeholders Identified Additional Efforts That ONC or Others Could Undertake to Improve Patient Record Matching", "Implementing Common Standards for Recording Patients’ Demographic Data in Health IT Systems", "Developing a Data Set to Test the Accuracy of Methods Used to Match Patients’ Medical Records", "Sharing Best Practices and Other Resources Used in Matching Patients’ Medical Records", "Implementing a National Unique Patient Identifier", "Developing a Public-Private Collaboration Effort to Improve Patient Record Matching", "Agency Comments", "Appendix I: GAO Contact and Staff Acknowledgments", "GAO Contact", "Staff Acknowledgments" ], "paragraphs": [ "", "Patient record matching is the process of comparing patient information in different health records to determine if the records refer to the same patient. This matching generally relies on the use of demographic information such as a patient’s name, date of birth (DOB), sex, Social Security number (SSN), or address, among other information.\nMany types of stakeholders can be involved in patient record matching. Examples of stakeholders include the following:\nHealth care providers, such as physicians, hospitals, and their staffs may receive records from another provider that need to be matched to existing patient records. When treating a new patient, for example, a provider might obtain records from other providers that previously cared for the patient. Similarly, a provider caring for a patient with multiple chronic conditions (e.g., heart disease, diabetes) might obtain information from other providers that are also caring for the patient. The providers must ensure that the records they obtain from other providers are matched to the correct patient and therefore properly linked with the patient’s existing records.\nHIE organizations match patient records as part of their role in facilitating the electronic exchange of health information among hospitals, physicians, and other organizations. They can offer a range of services, such as allowing providers to access the medical records for a patient who has received care from other providers in the HIE organization’s network. They may also obtain information from hospitals when a patient is admitted or discharged, and they then notify the patient’s other providers when those events occur. In these cases, HIE organizations must accurately match records from multiple organizations to the correct patient. HIE organizations generally serve a specific state or region and match records among a network of local or state-wide providers and other entities; some, however, operate nationally.\nHealth IT vendors also play a role in matching patient records. Some IT vendors, for example, provide record matching tools as part of their EHR systems; these tools allow providers to electronically search for patient records that are available from other providers that use the same IT vendor. Other IT vendors offer tools that allow providers or HIE organizations to leverage third-party data, such as credit-bureau data, when matching patients’ medical records.", "ONC and others have reported that the ability to accurately match patient medical records across different providers is a critical part of effective health information exchange, which can benefit patient care. For example, accurate record matching can help ensure that providers have current information about patients’ laboratory or other diagnostic test results; their medications; their diagnosed medical conditions, such as allergies; and their family medical histories.\nIn contrast, when a patient’s records are not accurately matched, it can adversely affect the patient’s care. There are two ways in which records can fail to be accurately matched.\nRecords for different patients are mistakenly matched. When medical records for different patients are mistakenly matched (known as a “false positive”), it can present safety and privacy concerns for patients. For example, a provider may inadvertently use information about the wrong patient, such as diagnoses or medication lists, to make clinical decisions. In addition, if the wrong patient’s medical information is added to a patient’s record, it could result in disclosure of that information to a provider or patient who is not authorized to view it.\nRecords for the same patient are not matched. When medical records for the same patient are not matched (known as a “false negative”), it can affect patient care. For example, providers may not have access to a relevant part of the patient’s medical history—such as current allergies or prior diagnostic test results—which could help them avoid adverse events and also provide more efficient care, such as by not repeating laboratory tests already conducted.", "ONC leads federal efforts to promote interoperability, including setting requirements for the information that EHRs and other health IT systems should collect. ONC developed certification criteria for EHRs and other health IT systems that include the ability for health IT systems to capture and exchange various types of information, including clinical data such as information on patients’ allergies, as well as the patient’s name, sex, and date of birth. ONC also compiles an Interoperability Standards Advisory, which suggests certain standards that developers should incorporate into their products.", "", "All seven provider representatives we interviewed described manual matching as one of the ways that they match patient records when exchanging health information with other providers. With manual matching, an individual reviews a medical record in order to match it to the correct patient. For example, an outpatient practice representative said that to match records that the practice receives by fax, a staff member must manually review information such as name and DOB to identify the correct patient and add the new information to the correct patient’s electronic record. All of the provider representatives we interviewed told us that they receive health records from other providers by fax.\nSix provider representatives told us they also use health IT tools to help automatically identify and match patients’ records stored in other data systems. These tools generally use algorithms that compare demographic data in a patient’s separate electronic records. For example, representatives from four of the six providers told us they used a module offered by their EHR system vendor to match records and exchange information with other providers that use the same vendor’s EHR systems. The module includes an algorithm that compares patients’ demographic information and, if the information in two or more records is identical or very similar, can automatically link the records. Automated matching can also involve some degree of manual review, as algorithms can identify potential matches by providing information about the likelihood that two records with similar information refer to the same individual. Afterwards, provider staff manually review the demographic information in the records and assess whether these potentially matching records should be linked as belonging to the same patient.\nRepresentatives from the five HIE organizations we spoke with said they use a range of automated and manual approaches to match patients’ records when exchanging information. Representatives from all five of the HIE organizations said that they use software with algorithms to locate and match records using demographic information provided by the providers in their networks. Though these HIE organizations’ algorithms vary, they all use name, sex, DOB, and address to match patients’ records. Representatives said that when the patients’ records contain similar but not identical demographic information, the HIE organizations rely on staff or additional software to review potential matches and determine whether the records belong to the same patient. For example, one HIE organization representative said that his organization leverages third-party data, such as credit databases that store past names or addresses, to update demographic information for records that cannot be matched automatically.\nWhen describing their approaches to patient record matching when exchanging information, six of the seven provider representatives said that they sometimes used HIE organizations to exchange and match records. However, none of them relied on HIE organizations as their primary way to match records and exchange health information. Five of the provider representatives we spoke with, including one provider that does not participate in an HIE organization, noted that they only exchange health information with a few providers. They explained that they were able to connect to these providers in ways other than through an HIE organization.\nAccording to stakeholders we interviewed, it is difficult to determine the accuracy of the health IT tools used to match patients’ medical records automatically. While the algorithms typically match records belonging to a patient and identify potential matches that need to be manually reviewed, users of these algorithms do not know how many matches the algorithm may have failed to make. These stakeholders expressed concern that it is not possible to assess the accuracy of algorithms without independent testing to identify matches that the algorithm may have missed. HHS stated that the proprietary nature of many patient matching algorithms makes it difficult to assess their effectiveness.", "Representatives from providers, HIE organizations, and the other stakeholders we interviewed emphasized the importance of using quality patient demographic data when matching patients’ medical records. These stakeholders noted that inaccurate, incomplete, or inconsistently formatted demographic information in patients’ medical records can make it challenging to identify and match all the records belonging to a single patient. Figure 1 illustrates how the demographic information for a hypothetical patient can be recorded inaccurately, incompletely, and inconsistently across the patient’s providers.\nStakeholders described the ways in which providers or their staff can collect inaccurate demographic information from patients. According to stakeholders, provider staff sometimes make transcription errors when entering information into electronic records, patients do not always provide correct information (e.g., they register with a nickname rather than a legal name), and patient demographic information can change, such as when a patient moves to a new address or changes her last name, but this information is not consistently updated in all of the patient’s medical records.\nProvider representatives identified several reasons that patients’ demographic information can be incomplete or contain different data elements across the medical records maintained by multiple providers. In particular, provider representatives explained that providers collect different information from their patients, and health IT systems can collect demographic data differently. Examples include the following:\nTwo provider representatives said that their organizations do not collect patients’ SSN because many patients choose not to provide that information or the information is not available. However, other provider representatives said they do collect SSNs. A health IT vendor said that the algorithms in its software do not rely on SSN as a key factor for matching records because SSN is not consistently available.\nOne provider representative explained that the IT system used by the provider’s laboratory does not contain fields for the same demographic information that the provider’s EHR system contains. As a result, laboratory results often contain too little information to reliably match records, even if the tests were ordered using complete information.\nOne provider representative explained that they do not collect patients’ mothers’ maiden names, though other organizations collect and use this information for patient matching.\nAccording to stakeholders, the inconsistencies in formatting across medical records can reflect differences in health IT systems or the policies of the health care organization creating the records:\nA 2014 ONC report noted that one health IT system may list addresses in a single field, while another may separate street names from the city and state.\nA 2018 report noted that providers use different standards for recording names with spaces, hyphens, or apostrophes, and that some health IT systems include special characters in phone numbers (i.e., (123) 456-7890), whereas others only allow for numbers (i.e., 1234567890).\nRepresentatives from one HIE organization explained that providers handle missing data for fields differently; for example, one provider may enter all 9s into an SSN field when it is not available for a patient and another will enter all 0s.\nProvider representatives and other stakeholders identified some patient populations for which matching is particularly challenging, due in part to data issues. Three provider representatives said that medical records for newborns often contain temporary names that are not updated with the child’s legal name after it is determined, which makes it difficult to locate these records. Further, provider representatives and other stakeholders said that multiple births (e.g., twins) result in record matching challenges, as these children can have the same DOB and address, and may be named similarly. A few provider representatives said that records can be inaccurate across providers for patients from certain nationalities. For example, according to stakeholders, some east-Asian cultures use the “family name” as the first name, and some Hispanic cultures use multiple last names. Another provider representative said that a few times a month, a transgender patient’s photo ID lists the wrong gender, yet the organizational policy is to record the gender exactly as it appears on a state-issued photo ID.", "", "Officials from ONC, selected provider representatives, and other stakeholders we interviewed described a variety of efforts they have undertaken or are currently undertaking to improve the ability to match patients’ medical records accurately. In general, these efforts focus on improving demographic data and improving the methods used for matching. These efforts are discussed in more detail below.", "ONC has reported that quality demographic data is important for effectively matching patients’ medical records, and in 2017 the agency published the Patient Demographic Data Quality Framework. The Framework is a tool to help providers and other organizations assess their processes for managing data quality and improve the quality of the demographic data they use in matching. It includes, for example, questions that providers can use to identify any gaps in how they manage their demographic data. In 2016, before ONC published the Framework, the agency began a pilot study to assess how the Framework could work in a clinical setting. As part of this pilot study, ONC provided training on demographic data quality to staff from two community health centers, during which it shared best practices for collecting these data. After the training, researchers who collaborated on the pilot with ONC found that there were improvements at the community health centers in indicators of how they managed data quality. According to ONC officials, this pilot highlighted the effect that data quality and training have on effective patient record matching. In addition, officials said it underscored difficulties in implementing data quality improvement efforts when health care organizations have limited resources and high staff turnover. ONC officials plan to issue a final report on the pilot study; however, they said ONC is not currently planning to assess the impact of the Framework or to conduct future studies on how it works in clinical settings.\nSeveral stakeholders told us they have worked to improve the consistency with which they record and format demographic data in their EHRs. According to ONC officials and hospital representatives, as well as other stakeholders with whom we spoke, implementing common standards for how certain demographic data should be formatted—such as names and addresses—could improve the consistency of data across providers and thus make it easier to match records. Representatives from four hospitals told us that they collaborated with other providers in their regions to implement common standards for recording patients’ demographic data. They told us the following: In 2017, 23 providers in Texas reached agreement on, and then implemented, standards for how staff should record patients’ names, addresses, and other data in order to improve record matching and facilitate health information exchange. We spoke with representatives from three hospitals that were part of this effort, who all told us that the effort resulted in an increased ability to accurately match patients’ medical records automatically without the need to manually review the records. (See text box.) For example, representatives from one hospital said that when patient records are not matched automatically or when there are questions about the accuracy of record matching, staff must then conduct a manual review to resolve the issue. They said that they have seen a significant decrease in the need for those manual reviews since implementing the data standards. Representatives from all three hospitals estimated that the amount of manual review to resolve matching issues and match incoming records to the right patient had decreased by about 90 percent. Representatives from one hospital added that they are now better able to prevent records from being matched to the wrong patient.\nOne children’s hospital in California worked with other local hospitals in recent years to implement a standard for how staff should record a temporary name for newborns who do not have their own name at birth. According to representatives from this hospital, after implementing this standard, clinical staff are able to more easily match patients’ records and therefore have access to real-time information on the care newborns received in other hospitals.\nLessons Learned from One Regional Effort to Standardize Patient Demographic Data across Multiple Providers In 2017, 23 providers in Texas implemented agreed-upon standards for capturing patient name, address, and other data. Representatives from three participating hospitals shared with us lessons for others interested in standardizing data, such as:\nAllow sufficient time to get buy-in from staff and test for any downstream effects on\nCommunicate the benefits of standardizing data to clinical and administrative staff; and\nTrain staff on how to enter data, and then assess compliance to identify any opportunities for improvement.\nIn a related 2017 effort, Pew Charitable Trusts sponsored a study to measure how standardizing specific types of patient demographic data could improve patient record matching. As part of this study, researchers used four data sets to test the effect that standardizing patient names, addresses, DOBs, telephone numbers, and SSNs had on record matching accuracy. As of September 2018, the full findings from this study had not been published; however, according to Pew, the findings indicated that standardizing some demographic data, such as address, shows promise for increasing the likelihood that patients’ records will be matched.\nTwo stakeholders we spoke with have examined ways to boost patients’ ability to electronically share data with their providers using smartphone applications or other tools. According to these stakeholders, these types of tools could improve the accuracy of the demographic data providers receive from patients, reduce manual data entry errors by providers’ staff, and allow patients to update their information as changes occur, such as if they move.\nIn 2015, the Workgroup for Electronic Data Interchange (WEDI) initiated a “Virtual Clipboard” project to explore the development of a mobile tool to automate the transmission of demographic, insurance, and clinical information to providers. WEDI representatives told us that they had engaged with stakeholders such as providers, vendors, patient advocates, and health plans about the potential benefits of such a tool, but had not yet identified organizations prepared to move forward with developing specific applications.\nIn 2017, Pew Charitable Trusts funded a RAND study on “patient- empowered” patient record matching approaches—specifically, to identify ways that patients could play an additional role in patient record matching and to select a promising solution for further development. In its August 2018 report, RAND proposed a solution in which patients could verify their mobile phone number and other identifying information with providers and then use a smartphone application to share this information with providers.\nRepresentatives from both WEDI and Pew told us that, when developing these types of tools, it is important to consider the practical implications for the providers that would need to be able to accept data in this way. For example, Pew representatives said that it would be important to understand whether these tools present any workflow challenges in provider settings, such as with any IT tools that providers would need to access the data stored via smartphone applications, or with the steps needed to incorporate that data into their EHR systems. Representatives from both organizations also noted that not all patients would be willing or able to use these types of tools to share data with providers. In addition, RAND reported on a range of security considerations for these types of tools. For example, RAND noted that a smartphone app that gathers health data—like its proposed patient matching solution—would introduce risk because it would contain private demographic and health information and would therefore be a target for individuals looking to steal data.", "Officials from ONC and other stakeholders described various efforts to assess and improve the effectiveness of the methods used in matching patients’ medical records. These efforts include hosting competitions, conducting studies, and issuing guidance. For example, ONC officials described the following two efforts to improve patient record matching methods: In 2017, ONC held a Patient Matching Algorithm Challenge in which participants competed to develop an algorithm that most accurately matched patient records in a test data set. According to ONC officials, the goals of the exercise were to bring about greater transparency on the performance of existing patient record matching algorithms, spur the adoption of performance metrics for algorithm developers, and improve other aspects of patient record matching, such as resolving duplicate patient records. Over 140 teams used varying methods to match patient records using an ONC-provided test data set, and ONC selected six winning submissions based on various measures of matching accuracy. As of July 2018, ONC was analyzing data from the challenge to learn more about algorithm performance. Officials told us that the challenge highlighted limitations of commonly used matching algorithms and demonstrated that extensive manual review is often needed to accurately match patients’ medical records. ONC officials told also us they plan to publish a report on their analysis of the challenge data.\nIn 2017, ONC also conducted a patient record matching Gold Standard and Algorithm Testing pilot study. According to ONC officials, there is no widely used standard for assessing the accuracy of patient record matching algorithms, so the pilot was intended to create a data set with known duplicate records (that is, multiple records for the same individual) and then use it to evaluate how well a commonly-used algorithm matched those records. ONC officials told us that the pilot demonstrated how much effort is needed to evaluate the matching algorithms providers and others use, as well as the importance of using standard metrics to assess matching accuracy. ONC expects to issue a final report on the results of the study.\nAmong the examples other stakeholders described were the following efforts to improve patient record matching methods: In 2018, the Sequoia Project published A Framework for Cross- Organizational Patient Identity Management to provide guidance to help providers and other types of health care entities improve patient record matching across organizations. The report, for example, suggests ways organizations can improve their matching algorithms, and it identifies practices that organizations can use to improve how they use patient demographic data and other information when matching records. Representatives from the Sequoia Project told us they plan to speak with organizations that have voluntarily adopted this guidance to learn how doing so affects record matching. These representatives also said they are looking into how ONC’s Patient Demographic Data Quality Framework relates to their own framework, as it may be beneficial if there were a way to link these two efforts.\nHHS’s Agency for Healthcare Research and Quality funded a study that began in 2017 to evaluate patient record matching approaches, with the goal of identifying different approaches to improving the accuracy of patient record matching algorithms. As part of this ongoing study, researchers are measuring how different changes to matching methods—including changes that have and have not been recommended or evaluated previously—improve matching accuracy. The study is expected to run through 2022. According to researchers, their initial work tested the use of different combinations of demographic data elements, among other things. They identified a modest improvement in the accuracy of matching algorithms, and determined that further research was needed.\nIn 2016, CHIME sponsored a National Patient ID Challenge that offered a monetary award for the development of a tool that matched patients’ medical records with 100 percent accuracy. Although the challenge was not specific to matching patient records across providers, several CHIME members who were involved with the challenge told us that they hoped to identify a patient record matching approach that could be widely adopted and easily integrated into existing EHR and HIE platforms without significant cost. They noted the challenge also was an opportunity to encourage organizations to develop effective matching methods, and to identify a matching method that did not rely solely on demographic patient information. CHIME assessed submissions from a range of organizations, but suspended the challenge in November 2017, reporting that the effort did not achieve the results it had sought. CHIME members said that the challenge nonetheless helped draw attention to patient record matching issues.\nIn addition, several stakeholders have worked to improve the matching of medical records specifically for newborns and multiple-birth siblings such as twins, for whom matching can be particularly challenging:\nRepresentatives we spoke with from one children’s hospital told us they have implemented indicators in their EHR to highlight when a child has a twin or other multiple-birth sibling, so that staff know that another child has similar demographic information. Representatives said that this helps prevent medical records from one child being incorrectly matched with the medical records of a sibling. In 2017, this hospital began working with its health IT vendor to explore the broader use of a multiple birth indicator to improve the probability of accurate matching for the multiple birth population between different vendors’ EHRs. The representatives said that while there is a standard indicator that can be used for multiple births, many organizations are not aware of it.\nIn addition, one researcher we spoke with is studying how using information such as physicians’ names and parents’ demographic data could help address record matching challenges for newborns. As noted earlier, one children’s hospital worked with other local hospitals to implement a standard for how staff record a temporary name for newborns.", "Stakeholders we spoke with said more could be done to improve the ability to accurately match patients’ medical records. The stakeholders identified several efforts that could improve matching, and had varying views on the roles ONC and others should play in these efforts. Among the examples of efforts stakeholders identified that could improve matching were implementing common standards for demographic data; developing a data set to test the accuracy of matching methods; sharing best practices and other resources; implementing a national unique patient identifier; and developing a public-private collaboration effort to improve patient record matching. Multiple stakeholders noted that no single effort would be sufficient to improve matching, given the factors that contribute to matching challenges. These potential additional efforts are described below.", "Several stakeholders told us that implementing common standards for recording patients’ demographic data in health IT systems could improve the ability of providers to match patients’ medical records. Stakeholders said that if providers implemented such standards, it could increase the extent to which they collect the same types of demographic data or use the same format for names and addresses as other providers, for example. However, stakeholders had differing views on how to reach agreement on and implement common standards among providers, as well as how feasible it would be to do so. Some said it would be helpful if ONC established requirements regarding demographic data—such as the types of data collected, and how it is formatted—potentially through the EHR certification process. In contrast, other stakeholders saw an opportunity for industry organizations to voluntarily agree to implement standards for demographic data. Some stakeholders advocated for EHR vendors to take steps to standardize the data their products allow providers to collect. A representative with one hospital said that having demographic data standards built into EHRs could minimize the amount of time needed to train staff on how to format the data they collect—and then to monitor whether they format the data correctly. A number of stakeholders said that ONC could play a role in getting industry groups to agree on and implement common data standards. ONC officials noted that as part of their role in coordinating health IT efforts, they have worked with industry groups in a number of ways and expect to continue their coordination efforts.\nSome stakeholders we spoke with told us that efforts to implement common demographic standards could face challenges, such as the following:\nSeveral said it could be difficult to reach consensus across various industry organizations on what standards to adopt and implement.\nMultiple stakeholders noted that patient preferences could affect the effectiveness of efforts to standardize data. Patients might not always be willing to provide some types of data even if providers wanted to collect it. For example, one provider noted that patients may want to use their middle name instead of their legal name.\nSome stakeholders said it could be time-intensive for providers to train their staff on how to collect data in accordance with standards, or that staff might not always follow the standards. For example, a representative from one hospital that implemented demographic standards told us that they continuously train staff and perform audits to ensure that staff follow those standards.\nSome said that EHR systems differ in how they allow staff to record demographic data, which can affect providers’ ability to implement standards. Some stakeholders said it can be costly for providers to update or upgrade their EHRs.\nStakeholders cited other potential limitations of data standardization efforts. Several, for example, said that standardizing data would not prevent inaccurate or outdated data. In addition, some stakeholders did not think that data standardization would yield significant improvements.", "Several stakeholders told us that developing a standard data set that organizations could use to evaluate matching methods would be helpful. Stakeholders noted that such a data set would allow health IT vendors, providers, or others to assess matching methods independently (instead of relying on vendors’ reported accuracy rates, for example) and in a standardized way (by using the same data source). While stakeholders did not always specify who should develop such a data set, an official from one stakeholder involved with patient record matching and data sharing efforts said that the most useful thing ONC could do to address patient record matching would be to develop a master data set to allow testing in a uniform way. This official added that without a way to accurately and uniformly test patient record matching methods, efforts to improve patient record matching are hindered. A number of stakeholders did not specifically mention the utility of a data set, but nonetheless highlighted the importance of testing how well matching methods work.\nFor its part, ONC officials said that the lack of a data set for evaluating matching methods is a challenge to efforts to improve matching, and that developing such a data set would be difficult. They noted that the agency’s 2017 Patient Matching Algorithm Challenge had highlighted the difficulties of creating a test data set that closely mimics real world patient data and that could be used to assess the accuracy of matching algorithms. ONC officials cited a number of challenges to developing one test data set for assessing a range of patient matching algorithms. For example, they said the data set would need to be very large; would require an extensive and expensive effort to develop; could be difficult to implement from a practical perspective; and that, because data varies widely across patient populations and organizations, might have limited application for assessing algorithms that are designed to match specific data sets. HHS also stated that the development of a data set would need to include a “key” of known duplicate patient records—that is, an indicator of which records in the data set should be matched to the same individual.", "According to a number of stakeholders we spoke with, more could be done to encourage the sharing of best practices and other patient record matching resources. For example, representatives from some HIEs said it would be beneficial to bring organizations together to share lessons learned and collaborate on best practices for using patient data to match records. Representatives from one industry association noted that disseminating information on patient matching errors could help organizations better understand the extent of matching errors and what causes them; for example, if information were shared about whether certain data elements are more likely to cause matching errors or problems, then organizations could work to prevent the errors or problems related to those data elements. A few stakeholders said that efforts to identify and share effective matching algorithms could expand resources to a broader range of providers. While stakeholders did not always specify who they thought should identify and share matching resources, several stakeholders saw the potential for ONC to play a role in these types of efforts. For example, representatives from one industry association said that ONC could provide information about the types of identifiers that could be used to facilitate matching, such as cell phone numbers or driver’s license numbers. These representatives also said that ONC could provide information on how to address matching patient records for children and other individuals who might not have those types of identifiers. ONC officials noted that they have shared information and resources about patient matching in a number of ways, such as through the agency’s Patient Demographic Data Quality Framework. They added that other organizations, such as the Sequoia Project and Pew Charitable Trusts, have worked to communicate best practices in this area.", "A number of stakeholders noted that implementing a new national, unique patient identifier specifically for use in health care settings could improve the ability to match patients’ medical records. For example, having a new unique number assigned to an individual would reduce the reliance on demographic data for record matching, according to several stakeholders.\nHowever, stakeholders had differing views on the potential benefits and feasibility of implementing a new unique patient identifier for health care:\nSome stakeholders said that it is unlikely that any new identifier could be implemented nationwide; they cited reasons such as the prohibition on federal funds being used to develop a national unique health care identifier, as well as potential privacy concerns.\nMultiple stakeholders cited potential limitations to using a national patient identifier, noting for example that—as with SSNs—patients may not be willing to share their identifier, and identifiers could still be subject to manual data entry errors, data breaches, or fraud.\nSome stakeholders said that a unique identifier would be the most effective way to improve matching. However, others said they did not believe a new identifier was needed, or did not think a new identifier would significantly improve matching, given the potential limitations.\nHHS stated that health care systems currently rely on a number of identifiers to match patient records and that a new government- generated identifier would improve matching only if other technical and non-technical challenges were solved before it was implemented. The creation, transmission, and capture of a single national patient identifier across many systems could take decades and would encounter implementation difficulties, according to HHS.\nIn addition, a few stakeholders said that patients might be willing to voluntarily obtain a unique identifier to use across health care settings if one were available. A representative from one provider association, for example, said that people with chronic conditions who obtain care from multiple providers might opt to obtain a unique identifier, if available, to help match their records. In its 2018 report on patient-empowered approaches to matching, RAND described various considerations for implementing a voluntary unique identifier issued by a non-federal entity. The report cited, for example, one organization’s work to develop a tool to allow health care providers to offer patients a unique identifier. RAND stated that although this solution would greatly improve matching if adopted, there is uncertainty that providers or patients would adopt it. Representatives from the organization that developed this tool told us that they had tested it in one location, but that it had not yet been adopted by providers.", "Multiple stakeholders we spoke with saw a need for a collaborative public-private effort to help identify and implement efforts to improve patient record matching. For example, several stakeholders saw a specific need for a national strategy or approach for addressing patient record matching issues. Representatives from the Pew Charitable Trusts, for example, stated that a national strategy—led by the private sector, with the federal government providing support—could help reach consensus on ways to improve matching. In addition, one researcher said that ONC should help facilitate a strategy for addressing patient record matching at the provider, vendor, and national levels—and that it would be beneficial for ONC to foster collaboration among private sector organizations to address matching issues. More generally, representatives from several provider associations stated that ONC could play an important role by convening stakeholders to identify ways to improve patient record matching. As noted earlier, some stakeholders said that ONC could help industry groups agree on common data standards for EHRs. While some stakeholders we spoke with said that ONC should collaborate by supporting private-sector efforts to improve matching instead of directing those efforts, others said that ONC could potentially play more of a leadership role. Representatives from one HIE, for example, said that ONC could lead an overall effort to improve patient record matching and that private-sector organizations could lead specific actions within that larger effort.\nFor their part, ONC officials said that public and private stakeholders should play a role in efforts to improve patient record matching. According to ONC officials, while the agency does not have sufficient resources to support broad implementation of efforts to improve patient record matching, ONC has collaborated with other stakeholders on various patient record matching issues.\nONC’s August 2018 Interoperability Forum included a “patient matching track” where industry stakeholders, such as providers, health IT vendors, and researchers, discussed matching challenges and potential solutions. According to ONC officials, this track covered topics such as patient-empowered solutions to matching, including smartphone applications; issues when matching patient medical records across organizations; the development of consensus on patient matching definitions and metrics; and issues when matching records for pediatric patients. The outcomes of this track, according to ONC officials, were increased awareness of a range of patient matching issues; information sharing among speakers and participants; and an opportunity to network and potentially collaborate with individuals on patient matching issues. ONC officials told us that a takeaway for them was that while various approaches to patient matching—including technical approaches such as biometrics and referential matching; efforts regarding unique identifiers; and non- technical approaches such as data quality improvement efforts—may enhance the capacity for matching, additional research is needed.\nONC participated in the Sequoia Project’s development of that organization’s Framework for Cross-Organizational Patient Identity Management. During the 2018 Interoperability Forum, ONC officials and Sequoia Project representatives presented together about developing consensus on patient record matching definitions and metrics. They discussed definitions outlined in the Framework and encouraged participants to work toward consensus and transparency when measuring and reporting matching metrics, such as by forming local and national workgroups, ONC officials said.\nLooking forward, ONC and some stakeholders said that the agency’s current effort to establish a national framework for exchanging health information electronically is an opportunity for the agency to address patient record matching challenges. As required by the 21st Century Cures Act, ONC is taking steps to develop or support a framework for ensuring the full exchange of health information among health information networks. ONC has referred to this effort as establishing a “network of networks,” and it includes the development of a common agreement among health information networks nationally, which providers and others can use to facilitate the exchange of electronic health information, including patients’ health records. As part of this effort, in January 2018, ONC issued a draft Trusted Exchange Framework that included principles for the trusted exchange of information, as well as minimum required terms and conditions for the Common Agreement. ONC plans to provide funding for an industry entity to incorporate these terms and conditions into a single Common Agreement that participating Qualified Health Information Networks (QHIN) and their participants voluntarily agree to adopt.\nWhile it is too soon to tell how this ONC effort will be implemented, several stakeholders said that it could potentially improve patient record matching if, for example, it results in new guidance or standards about demographic data elements. One HIE organization, for example, said that it would be beneficial if this effort leverages non-governmental work on matching and synthesizes this work into guidance for the industry. According to ONC officials, the framework is expected to affect patient record matching by requiring participating QHINs to use ONC’s Patient Demographic Data Quality Framework to evaluate their data practices. The agency plans to release a second draft Trusted Exchange Framework and then release a draft Common Agreement and an updated Trusted Exchange Framework for public comment.", "We provided a draft of this report to HHS for review and comment. HHS provided technical comments, which we incorporated as appropriate.\nWe are sending copies of this report to the appropriate congressional committees, the Secretary of Health and Human Services, and other interested parties. In addition, the report is available at no charge on the GAO website at http://www.gao.gov.\nIf you or your staff members have any questions about this report, please contact me at (202) 512-7114 or [email protected]. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report.", "", "Jessica Farb, (202) 512-7114 or [email protected].", "In addition to the contact named above, individuals making key contributions to this report include Thomas Conahan (Assistant Director), Robin Burke (Analyst-in-Charge), A. Elizabeth Dobrenz, Krister Friday, Monica Perez-Nelson, Vikki Porter, and Andrea Richardson." ], "depth": [ 1, 2, 2, 2, 1, 2, 2, 1, 2, 3, 3, 2, 3, 3, 3, 3, 3, 1, 1, 2, 2 ], "alignment": [ "h5_title h0_title h4_title", "h0_full h4_full h5_full", "h4_full", "h4_full", "h0_title", "h0_full", "h0_full", "h5_title h2_title h1_title h3_title", "h5_title h2_title h1_title", "h1_full", "h5_full h2_full", "h5_title h3_full", "h5_full h3_full", "", "", "", "h5_full", "h5_full", "", "", "" ] }
{ "question": [ "How do the interviewed stakeholders approach matching patient records?", "What techniques are common for matching records?", "In what ways do stakeholders utilize software for matching?", "What factors can complicate matching?", "To what extent have stakeholders improved their data consistency?", "What standards did stakeholders implement?", "How did these changes affect hospital operations?", "What actions have stakeholders taken regarding patient records?", "How did ONC attempt to improve patient matching?", "What resulted from the competition?", "How could patient matching be improved?", "What were the stakeholders' views on ONC's role?", "What possible roles could ONC take?", "How feasible is a single-effort solution?", "How are most patient records shared now?", "Why is record matching important?", "What federal entity is in charge of health IT implementation?", "How did GAO make use of prior reports?", "How did GAO collect information from stakeholders?", "How were stakeholders selected?", "How did HHS respond to the draft report?" ], "summary": [ "Stakeholders GAO interviewed, including representatives from physician practices and hospitals, described their approaches for matching patients' records—that is, comparing patient information in different health records to determine if the records refer to the same patient.", "Stakeholders explained that when exchanging health information with other providers, they match patients' medical records using demographic information, such as the patient's name, date of birth, or sex. This record matching can be done manually or automatically.", "For example, several provider representatives said that they rely on software that automatically matches records based on the records' demographic information when receiving medical records electronically. Stakeholders said that software can also identify potential matches, which staff then manually review to determine whether the records correspond to the same patient.", "Stakeholders also said that inaccurate, incomplete, or inconsistently formatted demographic information in patients' records can pose challenges to accurate matching. They noted, for example, that records don't always contain correct information (e.g., a patient may provide a nickname rather than a legal name) and that health information technology (IT) systems and providers use different formats for key information such as names that contain hyphens.", "Several stakeholders told GAO they worked to improve the consistency with which they format demographic data in their electronic health records (EHR).", "In 2017, 23 providers in Texas implemented standards for how staff record patients' names, addresses, and other data.", "For example, one hospital's representatives said they had seen a significant decrease in the need to manually review records that do not match automatically.", "Stakeholders also described efforts to assess and improve the effectiveness of methods used to match patient records.", "For example, in 2017 the Office of the National Coordinator for Health Information Technology (ONC) hosted a competition for participants to create an algorithm that most accurately matched patient records.", "ONC selected six winning submissions and plans to report on their analysis of the competition's data.", "Stakeholders said more could be done to improve patient record matching, and identified several efforts that could improve matching. For example, some said that implementing common standards for recording demographic data; sharing best practices and other resources; and developing a public-private collaboration effort could each improve matching.", "Stakeholders' views varied on the roles ONC and others should play in these efforts and the extent to which the efforts would improve matching.", "For example, some said that ONC could require demographic data standards as part of its responsibility for certifying EHR systems, while other stakeholders said that ONC could facilitate the voluntary adoption of such standards.", "Multiple stakeholders emphasized that no single effort would solve the challenge of patient record matching.", "Health care providers are increasingly sharing patients' health records electronically.", "When a patient's records are shared with another provider, it is important to accurately match them to the correct patient. GAO and others have reported that accurately matching patient health records is a barrier to health information exchange and that inaccurately matched records can adversely affect patient safety or privacy.", "At the federal level, ONC is charged with coordinating nationwide efforts to implement and use health IT.", "To do its work, GAO reviewed reports by ONC and others about patient record matching.", "GAO also interviewed various stakeholders that play a role in exchanging health records, including representatives from physician practices, hospitals, health systems, health information exchange organizations, and health IT vendors. GAO also interviewed other stakeholders, such as ONC officials, provider and industry associations, and researchers.", "GAO selected stakeholders based on background research and input from other stakeholders, and interviewed 37 stakeholders in total.", "HHS provided technical comments on a draft of this report, which GAO incorporated as appropriate." ], "parent_pair_index": [ -1, 0, 0, 0, -1, 0, 1, -1, 0, 1, -1, -1, 1, -1, -1, 0, 0, -1, -1, 1, -1 ], "summary_paragraph_index": [ 3, 3, 3, 3, 5, 5, 5, 6, 6, 6, 7, 7, 7, 7, 0, 0, 0, 2, 2, 2, 2 ] }
CRS_R42942
{ "title": [ "", "Introduction", "Oil Spill Response Activities", "The Fate of the Oil", "Gulf Restoration: NRDA and the RESTORE Act", "Natural Resource Damage Assessment", "Gulf Restoration and the RESTORE Act20", "BP's Potential Clean Water Penalties26", "Economic Claims and Other Payments", "Civil and Criminal Settlements", "BP Criminal Settlement", "BP Civil SEC Settlement", "Transocean Civil and Criminal Settlement", "MOEX Civil Settlement", "DOI Safety Reforms and Regulatory Developments", "DOI Structural Changes", "DOI Regulatory Developments", "EPA Dispersant Regulations", "Congressional Activity", "Activity in the 111th Congress64", "Activity in the 112th Congress66", "Activity in the 113th Congress", "Activity in the 114th Congress", "Investigations and Reports", "Selected CRS Reports for Further Reading", "Legislation", "2010 Deepwater Horizon Oil Spill", "Background" ], "paragraphs": [ "", "In the wake of the explosion of the Deepwater Horizon offshore drilling rig on April 20, 2010, federal agencies, state and local government agencies, and responsible parties faced an unprecedented challenge. Never before had a subsea drilling system discharge of this magnitude, or an oil spill of this size—estimated at approximately 206 million gallons (4.9 million barrels)—occurred in U.S. waters.\nThe incident tested the public and private response capabilities, as well as the legal framework of liability and compensation under the Oil Pollution Act. The oil spill cleanup, natural resource damage assessment (NRDA), and compensation processes continue today.\nThis report provides a summary update of selected issues related to the 2010 Deepwater Horizon oil spill:\nOil spill response, Fate of the oil, Gulf Coast restoration, Economic claims and other payments, Civil and criminal settlements, Department of the Interior regulatory developments, Dispersant regulations, Congressional activity, and Investigations and reports.\nMore detailed analysis of these and other issues is addressed in other CRS products, some of which are listed at the end of this report.", "The uncontrolled discharge from the Deepwater Horizon continued for approximately 87 days until, following several attempts, responders gained control of the release on July 15, 2010. The response involved multiple agencies. As this spill occurred in the coastal zone, an on-scene coordinator from the U.S. Coast Guard continues to direct and coordinate the on-site activities of federal, state, local, and private entities (e.g., BP and its contractors). This framework of multiple parties working together under the leadership of the federal government is referred to as the Unified Command.\nDuring the height of operations in the summer of 2010,\nresponse personnel levels reached 47,000, and response vessel numbers approached 7,000 ; and the maximum extent of shoreline oiling involved almost 1,100 miles of shoreline.\nResponse activities specific to the 2010 incident have diminished substantially:\nIn June 2013, the Coast Guard announced that the shorelines of Alabama, Florida, and Mississippi returned to the pre-spill reporting system via the National Response Center. In April 2014, the Coast Guard announced that Louisiana shoreline activities will transition to a \"Middle Response\" process, akin to the process in Alabama, Florida, and Mississippi. At that time, the federal on-scene coordinator stated that \"this response is not over—not by a long shot. The transition to the Middle Response process does not end clean-up operations.\" In February 2015, a Coast Guard memorandum announced that in March 2015, the Gulf Coast Incident Management Team would \"transition from Phase III (Operations) ... and reconstitute as a Phase IV Documentation Team.\" As part of that transition, Coast Guard field unit commanders would respond to reports of oil spills in their respective areas of responsibility. The local commanders are to use their discretion to decide if sampling is needed to identify the source of the oil (i.e., related to the Deepwater Horizon incident). As of April 2015, 30 response personnel, including federal officials and civilians, are working on activities related to the Deepwater Horizon incident.", "Following the containment of the Macondo well in July 2010, satellite data began to reveal decreasing daily quantities of oil on the ocean's surface. Many stakeholders wondered where the oil went. In November 2010, the federal government released a peer-reviewed publication that provided an estimate of what happened to the oil. The study concluded that approximately 50% of the oil had evaporated, dissolved, or been effectively removed from the Gulf environment through human activities. Thus, at the time of the study, a substantial portion—over 100 million gallons—remained, in some form, in the Gulf.\nSubsequent research has offered some insights into the fate of this \"remaining\" oil. Some research suggests that microbial organisms (bacteria) consumed a considerable amount of the oil in the water column. Other studies have found evidence indicating that a considerable amount of the oil settled on the sea floor.", "", "When a spill occurs, natural resource trustees conduct an NRDA to determine the extent of the harm. Trustees may include officials from federal agencies designated by the President, state agencies designated by the relevant governor, and representatives from tribal and foreign governments. Natural resource damages are intended to be compensatory, not punitive. Collected damages cannot be placed into the general treasury revenues of the federal or state government but must be used to restore or replace lost resources.\nThe National Oceanic and Atmospheric Administration (NOAA) oversees the NRDA process. The trustees' work occurs in three steps: a pre-assessment phase, the restoration planning phase, and the restoration implementation phase. The Deepwater Horizon NRDA process is in the restoration planning phase.\nIn 2011, BP agreed to provide $1 billion toward early restoration projects in the Gulf of Mexico to address injuries to natural resources caused by the spill. \"Early restoration\" projects may be developed prior to the completion of the injury assessment, which may take months or years to complete. Distribution of early restoration funds has been divided into three phases. The first two phases of early restoration, announced in 2012, were completed and resulted in 10 projects at an estimated cost of approximately $71 million. In May 2013, the trustees proposed additional projects under a third phase. The plan for these projects, finalized in June 2014, proposes funding an additional 44 early restoration projects at a cost of approximately $627 million.\nThus, as of March 2015, the total funding allocated or spent on early restoration projects was $698 million for 54 projects. The funding for the early restoration projects will be credited against BP's liability for natural resource damages resulting from the spill.", "In addition to natural resource damages that were a direct result of the spill, the Deepwater Horizon incident generated interest in natural resource issues in the region that were present before the spill occurred. On June 15, 2010, the Administration committed to developing a long-term Gulf of Mexico restoration plan for post-spill recovery needs as well as long-term restoration. In contrast to the environmental damages addressed by NRDA, the Administration's plan would address a broader array of restoration needs, many of which predate the oil spill. To further this objective, the President established the Gulf Coast Ecosystem Restoration Task Force in October 2010 to develop a restoration strategy, which was released in December 2011. With the enactment of the RESTORE Act (discussed below) in July 2012 and the creation of the Gulf Coast Ecosystem Restoration Council, the President disbanded the task force.\nOn July 6, 2012, the President signed P.L. 112-141 (MAP-21), which includes a subtitle referred to as the RESTORE Act. The RESTORE Act establishes the Gulf Coast Restoration Fund in the General Treasury. Eighty percent of any administrative and civil Clean Water Act (CWA) Section 311 penalties paid by responsible parties in connection with the 2010 Deepwater Horizon oil spill will provide the revenues for the trust fund. Amounts in the fund will be available for expenditure without further appropriation.\nThe RESTORE Act distributes monies to various entities through multiple processes:\n35% divided equally among the five Gulf of Mexico states to be applied toward one or more of 11 designated activities; 30% provided to a newly created Gulf Coast Ecosystem Restoration Council to finance ecosystem restoration activities in the Gulf Coast region; 30% disbursed by the council to the five Gulf states based on specific criteria: shoreline impact, oiled shoreline distance from the Deepwater Horizon rig, and coastal population. Each state must submit a plan for approval documenting how funding will support one or more of the 11 designated activities; and 5% to support marine research and related purposes.\nAs a result of a CWA civil settlement with Transocean—the owner of the Deepwater Horizon drilling rig and an identified responsible party—a total of $800 million, plus interest, is expected to be deposited into the trust fund. Potential CWA civil penalties against BP, which could be considerable, are discussed below.", "Section 311 of the CWA authorizes certain civil judicial penalties for the owner, operator, or person in charge of a vessel, onshore facility, or offshore facility for violations of that provision. A civil judicial penalty applies to a violation of the CWA prohibition on discharging oil into navigable waters of the United States. The monetary penalty for this violation may be up to $37,500 per day of violation, or up to $1,100 per barrel discharged. If the violation is deemed a result of gross negligence or willful misconduct, the penalty is not less than $140,000 for the violation or more than $4,300 per barrel discharged.\nA federal judge for the Eastern District of Louisiana has issued rulings on two factors that may play a critical role in the ultimate penalty determination: the degree of negligence and the volume of the spilled oil. On September 4, 2014, the judge determined that, within the context of the civil penalty provisions, the discharge of oil in the 2010 Deepwater Horizon incident was the result of BP's \"gross negligence\" and \"willful misconduct.\" BP has appealed this ruling.\nOn January 15, 2015, the same judge determined that the oil spill resulted in a discharge of 3.19 million barrels (134 million gallons) of oil into the Gulf of Mexico. Reportedly, both BP and the Department of Justice have appealed or plan to appeal the judge's determination.\nBased on the January 2015 and September 2014 court decisions, the maximum potential CWA civil penalty that could be assessed to BP would be $13.7 billion—calculated by multiplying 3.19 million barrels by $4,300/barrel. By comparison, the penalty ceiling would likely be $3.5 billion if a court, through the appeals process, ultimately determines that the discharge was not a result of gross negligence or willful misconduct.\nIn addition, when determining the amount of the judicial penalty, CWA Section 311(b)(8) states that \"the Environmental Protection Agency (EPA) Administrator, the Secretary [of Homeland Security], or the court, as the case may be,\" must consider other factors, including \"the degree of culpability involved\" and \"the nature, extent, and degree of success of any efforts of the violator to minimize or mitigate the effects of the discharge.\" Therefore, the judicial civil penalty for the incident could be less than the low end of the above range ($3.5 billion), even if gross negligence or willful misconduct is determined.", "As an identified responsible party, BP is liable for cleanup costs, natural resource damages (discussed in a subsequent section), and various economic damages. The total payments associated with the 2010 Gulf spill have already surpassed those of the 1989 Exxon Valdez oil spill. As of December 2014, BP has spent over $14 billion in cleanup operations. Further payments made by BP to different parties for various purposes are identified in Table 1 .\nAs noted in Table 1 , the \"Court Settlement Program\" is still ongoing. In August 2010, multiple lawsuits involving over 100,000 private claims against BP and the other defendants (e.g., Transocean and Haliburton) were consolidated before the U.S. District Court in New Orleans. On April 18, 2012, BP and many of the plaintiffs reached a settlement agreement, which was approved by the court on December 21, 2012. The settlement establishes a court-supervised program to evaluate and award various economic claims from individuals and businesses but does not involve governments, shareholders, or claims related to the drilling moratorium. Except for a limit of $2.3 billion for seafood compensation, the settlement is not capped. As indicated in Table 1 , the settlement program had awarded over $5 billion as of March 31, 2015.\nBP pursued legal action to suspend payments from the settlement program, arguing that parties are receiving payment for losses \"not traceable to the Deepwater Horizon accident and oil spill.\" In March 2014, the Fifth Circuit Court of Appeals upheld a federal district ruling, allowing the court-supervised program to continue paying claims. BP asked the U.S. Supreme Court to review this decision, but in December 2014 the Court declined to review the case.\nOther components of the consolidated litigation are still pending, such as claims against BP not included in the above settlement and claims involving the other defendants, including Transocean and Haliburton.", "The Department of Justice (DOJ) has announced criminal and/or civil settlements with several parties involved in the 2010 oil spill. Settlements from various parties, to date, total almost $6 billion. Other settlements may be forthcoming. As discussed below, the settlement payments will support several objectives.", "On November 15, 2012, BP and DOJ announced a criminal penalty settlement of approximately $4 billion, which was approved by the U.S. District Court in the Eastern District of Louisiana on January 29, 2013. In accordance with the settlement, BP has agreed to plead guilty to 11 felony counts of misconduct or neglect of ships officers for the deaths of 11 people in the disaster, as well as misdemeanor counts under the CWA and the Migratory Bird Treaty Act and a felony count of obstruction of Congress.\nThe $4 billion would be distributed as follows:\n$2.394 billion to the National Fish and Wildlife Foundation (NFWF) to support restoration efforts in the Gulf states, $1.15 billion to the Oil Spill Liability Trust Fund, $350 million to the National Academy of Sciences for oil spill prevention and response research, $100 million to the North American Wetlands Conservation Fund, and $6 million to the General Treasury.", "On November 15, 2012, BP and the Securities and Exchange Commission (SEC) announced a settlement involving civil securities fraud charges, including statements concerning the estimated flow rate of the leaking well. The U.S. District Court in the Eastern District of Louisiana approved the settlement on December 10, 2012. BP agreed to pay $525 million to settle the charges. The SEC stated it would use this payment to establish a fund \"to provide harmed investors with compensation for losses they sustained in the fraud.\"", "On January 3, 2013, DOJ announced civil and criminal penalty settlements with Transocean, the company that owned and operated the Deepwater Horizon drilling rig. The U.S. District Court in the Eastern District of Louisiana approved the settlements on separate occasions in February 2013.\nIn the civil settlement, Transocean agreed to pay $1 billion, of which 80% ($800 million) will go into the newly created Gulf Coast Restoration Trust Fund (pursuant to the RESTORE Act in P.L. 112-141 ). The remaining 20% goes into the Oil Spill Liability Trust Fund.\nIn the Transocean guilty plea agreement for criminal charges, Transocean agreed to pay $400 million. The amount is to be distributed as follows:\n$150 million to the NFWF; $150 million to the National Academy of Sciences for oil spill prevention and response research; and $100 million to the Oil Spill Liability Trust Fund.", "On February 17, 2012, DOJ and MOEX Offshore 2007 LLC agreed to a $70 million civil penalty settlement, with an additional $20 million in supplemental environmental projects. The U.S. District Court in the Eastern District of Louisiana approved the settlement on June 8, 2012. At the time of the 2010 oil spill, MOEX owned approximately 10% of the lease for the Macondo well. Of the penalty amount, $45 million goes to the Oil Spill Liability Trust Fund, and $25 million is to be distributed in various amounts among the five Gulf states.", "The 2010 Deepwater Horizon oil spill generated considerable interest in offshore drilling safety and related issues. Agencies within DOI have the lead regulatory authority for offshore oil and gas development activities, including operational safety and environmental considerations. This section highlights DOI regulatory developments and other activities that have addressed some of the safety concerns and other issues raised during and after the 2010 oil spill.", "Prior to the oil spill, DOI and congressional investigations had identified a number of management shortcomings, ethical lapses among personnel, and conflicts of interest in the former Minerals Management Service (MMS). Specific concerns involving agency reorganization and regulatory policies toward safety reforms had been raised in oversight hearings and in reports, including reports by the DOI inspector general.\nOn May 19, 2010, Secretary of the Interior Ken Salazar replaced the MMS with the Bureau of Ocean Energy Management, Regulation and Enforcement (BOEMRE). On October 1, 2011, DOI divided BOEMRE into three separate entities: the Bureau of Ocean Energy Management, the Bureau of Safety and Environmental Enforcement, and the Office of Natural Resources Revenue.", "DOI agencies have issued several regulatory and policy changes related to offshore activities. In addition to rulemaking activity, DOI agencies issued several notices to lessees (NTLs) to address related issues through policy guidance. In general, these efforts are intended to reduce accidents, injuries, and spills during offshore drilling activities. However, some have argued that more changes are needed.\nThe following is a timeline of relevant regulatory actions:\nOctober 14, 2010: interim final rule implementing certain safety measures that were identified in a June 2010 report from the Secretary of the Interior. October 15, 2010: final rule requiring operators on the outer continental shelf (OCS) to implement a Safety and Environmental Management Systems (SEMS) program. August 22, 2012: final rule amending and clarifying several safety provisions in the October 14, 2010, interim final rule. April 5, 2013: final rule adding new requirements to the existing SEMS regulations. December 12, 2014: final rule increasing the Oil Pollution Act liability limit for damages applicable to offshore facilities from $75 million to approximately $134 million. February 24, 2015: proposed rule that would revise existing regulations for exploratory drilling and associated activities on the OCS in the Arctic region. April 13, 2015: proposed rule that would alter the requirements for blowout preventers and specific drilling practices/procedures.", "EPA issued a proposed rule on January 22, 2015, that would amend the existing dispersant regulations (40 CFR Part 300, Subpart J). Dispersants are chemical agents that enhance the breakup of oil into small oil droplets that mix with the water column. Dispersants received considerable attention during the Deepwater Horizon oil spill response. During the 2010 oil spill, responders used, in aggregate, 1.8 million gallons of dispersants on both the surface water and (for the first time) at the site of the uncontrolled well approximately 5,000 feet below the surface. While dispersants have proven effective in breaking up the oil on the surface, stakeholders raised questions about the fate of the dispersed oil and the chemical dispersants and their short- and long-term environmental impacts.\nCWA Section 311(d) requires EPA, in cooperation with the states, to prepare a schedule of dispersants, other chemicals, and other spill-mitigating devices and substances. This product schedule includes dispersants and other chemical or bioremediation products that may be authorized for use on oil discharges in accordance with the procedures set forth in the National Contingency Plan (NCP).\nEPA may add products to the NCP product schedule after companies submit specific data to the agency. Data requirements include results from effectiveness and toxicity testing. Although EPA reserves the right to verify testing data (and to require additional information), the regulations do not establish a toxicity threshold for placement on the schedule.\nEPA's January 2015 proposed rule would, among other provisions:\nrevise and expand the testing requirements that must be performed to determine eligibility for EPA's product schedule; establish minimum criteria for toxicity and revise the minimum criteria for efficacy for a dispersant to be listed on the product schedule; amend and clarify the process for pre-authorization of dispersant use; and require monitoring of various environmental parameters when dispersants are used in specific situations (e.g., subsurface application or extended surface application).", "This section provides information about oil spill-related legislative activity from the 111 th Congress to the 114 th Congress. Interest and activity in oil spill matters was substantial during and soon after the 2010 oil spill response (111 th Congress). As time progressed, oil-spill-related legislative activity decreased and, in general, addressed topics not directly related to the Deepwater Horizon incident.", "During the immediate aftermath of the oil spill, Senate and House committees in the 111 th Congress held more than 60 hearings on a variety of oil-spill-related issues. Members introduced more than 150 legislative proposals related to oil spill matters. The 111 th Congress enacted three of these proposals into law ( P.L. 111-191 , P.L. 111-212 , and P.L. 111-281 ). Provisions in the first two laws generally concerned short-term matters that will not have a lasting impact on oil spill governance. However, H.R. 3619 , the Coast Guard Authorization Act for Fiscal Years 2010 and 2011, which the President signed October 15, 2010 ( P.L. 111-281 ), included more substantial changes.\nIn addition to the enacted legislation, the House in the 111 th Congress passed several bills, including H.R. 3534 (the Consolidated Land, Energy, and Aquatic Resources Act, or CLEAR Act), that included multiple oil spill provisions. The Senate had comparable bills on its legislative calendar under General Orders but did not vote on their passage.", "Although interest arguably diminished in the 112 th Congress (relative to interest in the 111 th Congress—see below), some Members continued to express concerns regarding various oil-spill-related policy matters. Members proposed over 50 bills that contained oil-spill-related provisions.\nThe 112 th Congress enacted two statutes that contain oil-spill-related provisions. The RESTORE Act, enacted on July 6, 2012, is discussed above. On January 3, 2012, the President signed P.L. 112-90 (the Pipeline Safety, Regulatory Certainty, and Job Creation Act of 2011), which\nincreases civil penalties for violating safety requirements and requires automatic and remote-controlled shutoff valves on newly constructed transmission pipelines; directs the Department of Transportation to analyze leak detection systems and, after a review by Congress, issue requirements based on this analysis; and requires the Pipeline and Hazardous Materials Safety Administration to review whether current regulations are sufficient to regulate pipelines transmitting \"diluted bitumen\" and analyze whether such oil presents an increased risk of release.\nOn December 23, 2011, the 112 th Congress enacted one bill with provisions that affect OCS development: P.L. 112-74 (Consolidated Appropriations Act, 2012). Among other provisions, this act transferred air emission regulatory authority in the OCS off Alaska's north coast from EPA to DOI. Some stakeholders would contend that DOI's program has less stringent requirements than EPA's program.\nIn addition, the House passed several bills that intended to encourage oil and gas development on the OCS: H.R. 1230 , H.R. 1229 , H.R. 1231 , and H.R. 2021 . The Senate did not report analogous legislation.", "Compared to prior Congresses, oil-spill-related legislation received less attention in the 113 th Congress. Members proposed approximately 20 bills that include oil-spill-related provisions. The 113 th Congress enacted one bill that, among other provisions, encourages the development of agreements among Arctic nations to coordinate oil spill prevention and response capabilities: P.L. 113-281 (Howard Coble Coast Guard and Maritime Transportation Act of 2014). In addition, the House passed two bills with oil-spill-related provisions. On June 28, 2013, the House passed the Offshore Energy and Jobs Act ( H.R. 2231 ), which would accelerate domestic oil and gas production by providing for, among other statutory changes, a reorganization of the current DOI subdivisions responsible for domestic oil and gas operations. On September 18, 2014, the House passed the American Energy Solutions for Lower Costs and More American Jobs Act ( H.R. 2 ), which, among other provisions, would require the Keystone pipeline owner/operator to provide the oil spill response plan to the governors of each state in which the pipeline operates.", "As of the date of this report, Members in the 114 th Congress have introduced one bill that contains oil-spill-related provisions.", "Several investigations and commissions—both federal and private—were initiated to examine issues surrounding the Deepwater Horizon incident. The following includes a list of the more prominent studies, investigations, and inquiries that have been completed or are underway (listed in order of report publication date):\nThad Allen, National Incident Commander's Report: MC252 Deepwater Horizon , October 2010. U.S. Coast Guard, BP Deepwater Horizon Oil Spill: Incident Specific Preparedness Review , January 2011. National Commission on the BP Deepwater Horizon Oil Spill and Offshore Drilling, Deep Water: The Gulf Disaster and the Future of Offshore Drilling , report to the President, January, 2011. Joint Investigation of Bureau of Ocean Energy Management, Regulation, and Enforcement and U.S. Coast Guard. Volume I: U.S. Coast Guard, Report of Investigation into the Circumstances Surrounding the Explosion, Fire, Sinking and Loss of Eleven Crew Members Aboard the Mobile Offshore Drilling Unit Deepwater Horizon , April 2011. Volume II: Bureau of Ocean Energy Management, Regulation, and Enforcement, Report Regarding the Causes of the April 20, 2010 Macondo Well Blowout , September 2011. U.S. Coast Guard, On Scene Coordinator Report: Deepwater Horizon Oil Spill , September 2011. National Academy of Engineering and National Research Council, Macondo Well — Deepwater Horizon Blowout: Lessons for Improving Offshore Drilling Safety , December 2011. Government Accountability Office, Interior Has Strengthened Its Oversight of Subsea Well Containment, but Should Improve Its Documentation , February 2012. Oil Spill Commission Action, Assessing Progress: Implementing the Recommendations of the National Oil Spill Commission , April 2012. Gulf Coast Ecosystem Restoration Council, The Path Forward to Restoring the Gulf Coast: A Proposed Comprehensive Plan , January 2013. U.S. Chemical Safety and Hazard Investigation Board, Investigation Report: Explosion and Fire at the Macondo Well , two volumes, June 2014.", "", "CRS Report R41684, Enacted and Proposed Oil Spill Legislation in the 112 th Congress , by [author name scrubbed].\nCRS Report R41453, Oil Spill Legislation in the 111 th Congress , by [author name scrubbed].", "CRS Report R43380, Gulf Coast Restoration: RESTORE Act and Related Efforts , by [author name scrubbed], [author name scrubbed], and [author name scrubbed].\nCRS Report R41679, Liability and Compensation Issues Raised by the 2010 Gulf Oil Spill , by [author name scrubbed].\nCRS Report R41531, Deepwater Horizon Oil Spill: The Fate of the Oil , by [author name scrubbed].\nCRS Report R41972, The 2010 Deepwater Horizon Oil Spill: Natural Resource Damage Assessment Under the Oil Pollution Act , by [author name scrubbed] and [author name scrubbed].\nCRS Report R41234, Potential Stafford Act Declarations for the Gulf Coast Oil Spill: Issues for Congress , by [author name scrubbed].", "CRS Report RL33705, Oil Spills in U.S. Coastal Waters: Background and Governance , by [author name scrubbed].\nCRS Report R43251, Oil and Chemical Spills: Federal Emergency Response Framework , by [author name scrubbed] and [author name scrubbed].\nCRS Report R41266, Oil Pollution Act of 1990 (OPA): Liability of Responsible Parties , by [author name scrubbed].\nCRS Report RL34209, Commercial Fishery Disaster Assistance , by [author name scrubbed].\nCRS Report RL33404, Offshore Oil and Gas Development: Legal Framework , by [author name scrubbed].\nCRS Report RS22022, Disaster Unemployment Assistance (DUA) , by [author name scrubbed]." ], "depth": [ 0, 1, 1, 1, 1, 2, 2, 2, 1, 1, 2, 2, 2, 2, 1, 2, 2, 1, 1, 2, 2, 2, 2, 1, 1, 2, 2, 2 ], "alignment": [ "h0_title h2_title h1_title", "", "", "", "h0_title h1_title", "h1_full", "h0_full", "", "h0_full", "h0_full", "", "", "", "", "", "", "", "", "h2_full", "h2_full", "h2_full", "", "", "", "", "", "", "" ] }
{ "question": [ "What is the scale of BP's spending in the aftermath of the spill?", "What was the legal outcome of the BP oil spill?", "What outstanding legal questions exist?", "What phase of the damage assessment process is currently underway?", "How are early restoration projects being funded?", "How will future projects be funded?", "What is the total scale of the restoration projects?", "How did interest in the spill changed as time went on?", "What specific laws illustrate this shift?", "To what extent have bills addressed the Deepwater Horizon incident?" ], "summary": [ "As one of the responsible parties, BP has spent over $14 billion in cleanup operations. In addition, BP has paid over $15 billion to the federal government, state and local governments, and private parties for economic claims and other expenses, including reimbursements for response costs related to the oil spill.", "BP and other responsible parties have agreed to civil and/or criminal settlements with the Department of Justice (DOJ). Settlements from various parties, to date, total almost $6 billion.", "BP's potential civil penalties under the Clean Water Act (CWA), which could be considerable, are not yet determined.", "The natural resources damage assessment (NRDA) process, conducted by federal, state, and other trustees, is ongoing and is now in its restoration planning phase.", "BP agreed to pay $1 billion to support early restoration projects.", "In December 2013, the trustees proposed an additional $627 million to fund 44 restoration projects.", "Ten such projects have been funded to date, with aggregate estimated costs of approximately $71 million.", "During and soon after the spill response, congressional interest was high, but it has since decreased.", "Although previous Congresses (111th-113th) enacted several oil-spill-related bills, the provisions in these laws (other than the RESTORE Act) generally concern short-term matters that did not have a lasting impact on oil spill governance.", "In general, oil-spill-related bills in recent years have addressed issues not directly related to the Deepwater Horizon incident." ], "parent_pair_index": [ -1, 0, 1, -1, 0, 0, 0, -1, 0, 0 ], "summary_paragraph_index": [ 3, 3, 3, 4, 4, 4, 4, 9, 9, 9 ] }
CRS_R42112
{ "title": [ "", "Introduction", "Brief Overview of Federal Laws That Apply to Particular Unlawful Online Activity", "Digital Millennium Copyright Act (DMCA)", "Prioritizing Resources and Organization for Intellectual Property Act of 2008 (PRO-IP Act)", "Anticybersquatting Consumer Protection Act (ACPA)", "Unlawful Internet Gambling Enforcement Act (UIGEA)", "Ryan Haight Online Pharmacy Consumer Protection Act", "Legislative History of Online Copyright Infringement and Counterfeiting Legislation", "Summary of PROTECT IP Act Provisions", "Action by the Attorney General", "Action by a \"Qualifying Plaintiff\"", "Due Process, Safeguards, and Limitations on Liability", "Reports to Congress", "Summary of SOPA Provisions", "Title I of SOPA, \"Combating Online Piracy\"", "Action by the Attorney General", "Actions by a \"Qualifying Plaintiff\"", "Notification Process (No Court Involvement)", "Civil Actions for Injunctive Relief", "Due Process, Safeguards, and Limitations on Liability", "Reports to Congress", "Title II of SOPA, \"Additional Enhancements to Combat Intellectual Property Theft\"", "Streaming of Copyrighted Works in Violation of Criminal Law", "Trafficking in Inherently Dangerous Goods or Services", "Protecting U.S. Businesses From Foreign and Economic Espionage", "Amendments to Sentencing Guidelines", "Defending Intellectual Property Rights Abroad", "Debate Over the Legislation", "Impact on Free Speech", "Technical Integrity of the Internet", "Private Cause of Action", "Conflict with the DMCA \"Safe Harbors\" and Potential Impact on Internet Innovation (Referring to SOPA Only)", "Manager's Amendment to H.R. 3261 (SOPA)", "Summary of the OPEN Act", "International Trade Commission Enforcement", "Applicable Scope of New Section 337A, as added by the OPEN Act", "Violation", "Complaint", "ITC Determination", "Remedies", "Section 337 Judges", "OPEN Act Compared to PROTECT IP Act and SOPA" ], "paragraphs": [ "", "The Internet has become a central part of the American economy, delivering innovative products while eliminating the need for inefficient middlemen. However, the free flow of information facilitated by the Internet has also created problems with copyright and trademark infringement. The problem is significant; as much as 6% of the U.S. gross national product is generated by industries supported by intellectual property laws. A recent report contends that nearly 24% of all Internet traffic worldwide is infringing. Piracy of the content created by movie, music, and software companies, and the sale of counterfeit goods that include inauthentic clothing, pharmaceutical drugs, and consumer electronics, negatively impacts the American economy. Although the Government Accountability Office cautions that it is difficult to precisely quantify the economy-wide impacts of piracy, it is believed to be a serious problem.\nHowever, many websites trafficking in copyrighted content or counterfeit goods are registered and operate entirely in foreign countries. These foreign \"rogue sites\" often provide creative content and physical goods protected by U.S. intellectual property law to people located within the United States. S. 968 , the Preventing Real Online Threats to Economic Creativity and Theft of Intellectual Property Act (PROTECT IP Act), and H.R. 3261 , the Stop Online Piracy Act (SOPA), are legislative responses to the jurisdictional problem of holding foreign websites accountable for piracy and counterfeiting. The bills also authorize new enforcement mechanisms against domestic sites that facilitate infringing activities. These bills would create new obligations for U.S.-based domain name servers, Internet advertisers, search engines, and financial transaction providers to address such harm to intellectual property rights holders. There has been considerable public debate about the changes to existing law that are proposed by these two bills. An alternative legislative measure, the Online Protection and Enforcement of Digital Trade Act (OPEN Act; S. 2029 , H.R. 3782 ) has been introduced in response to the concerns raised about the PROTECT IP Act and SOPA.", "", "Congress passed the Digital Millennium Copyright Act (DMCA) in 1998 in an effort to adapt copyright law to an evolving digital environment. Title II of the DMCA added a new Section 512 to the Copyright Act (Title 17 of the U.S. Code) in order to limit the liability of service providers against claims of copyright infringement relating to online materials. This \"safe harbor\" immunity is available only to parties that qualify as a \"service provider\" as defined by the DMCA, and only after the provider complies with certain eligibility requirements. In exchange for immunity from liability, the DMCA requires service providers to cooperate with copyright owners to address infringing activities conducted by the providers' customers. The DMCA's safe harbors greatly limit service providers' liability based on the specific functions they perform. The safe harbors correspond to four functional operations of a service provider that might otherwise constitute copyright infringement: (1) transitory digital network communications, (2) system caching, (3) storage of information on systems or networks at direction of users, and (4) information location tools.\nOne safe-harbor-qualifying condition common to three of the four categories is the requirement that upon proper notification by the copyright owner of online material being displayed or transmitted without authorization, a service provider must \"expeditiously\" remove or disable access to the allegedly infringing material. This \"notice and takedown\" obligation does not apply when the service provider functions as a passive conduit of information under 17 U.S.C. Section 512(a) (offering transitory digital network communications), but is a condition that must be met to obtain shelter under the remaining three safe harbor provisions. As indicated by the eligibility conditions in each subsection of Section 512(b)-(d), the notice and takedown procedure varies slightly for each. To prevent abuse of the notice and take-down procedure, Section 512(f) provides damages, costs, and attorneys' fees to any service provider that is injured by a knowing, material misrepresentation that an item or activity is infringing. For example, any person who sends a \"cease and desist\" letter to a service provider, with the knowledge that the claims of copyright infringement are false, may be liable to the accused infringer for damages.\nAs noted earlier, the DMCA's safe harbor provisions do not confer absolute immunity from legal liability for copyright infringement. Although they ensure that qualifying service providers are not liable for monetary relief, they may be liable for limited injunctive relief. For example, a service provider that provides \"transitory digital network communications\" may be subject to the following injunctive relief:\nan order restraining the service provider from providing access to a subscriber or account holder of the service provider's system or network who is using the provider's service to engage in infringing activity and is identified in the order, by terminating the accounts of the subscriber or account holder that are specified in the order; an order restraining the service provider from providing access, by taking reasonable steps specified in the order to block access, to a specific, identified, online location outside the United States.\nIn the case of service providers that provide either (1) system caching, (2) storage of information on systems or networks at direction of users, or (3) information location tools, the court may grant injunctive relief with respect to a service provider in one or more of the following forms:\nan order restraining the service provider from providing access to infringing material or activity residing at a particular online site on the provider's system or network; an order restraining the service provider from providing access to a subscriber or account holder of the service provider's system or network who is engaging in infringing activity and is identified in the order, by terminating the accounts of the subscriber or account holder that are specified in the order; such other injunctive relief as the court may consider necessary to prevent or restrain infringement of copyrighted material specified in the order of the court at a particular online location, if such relief is the least burdensome to the service provider among the forms of relief comparably effective for that purpose.\nOne public interest group has praised the importance of the DMCA's safe harbor provisions to the development of the Internet:\nWithout these protections, the risk of potential copyright liability would prevent many online intermediaries from providing services such as hosting and transmitting user-generated content. Thus the safe harbors have been essential to the growth of the Internet as an engine for innovation and free expression.\nSome have called for Congress to pass legislation that would expand the DMCA to include notice and takedown provisions regarding trademark infringement and other illegal conduct such as spam, phishing, and fraud.", "The Prioritizing Resources and Organization for Intellectual Property Act of 2008 (PRO-IP Act) strengthened existing forfeiture provisions for use in cases involving criminal copyright infringement and trademark counterfeiting. The PRO-IP Act allows civil forfeiture of \"[a]ny property used, or intended to be used, in any manner or part to commit or facilitate the commission of [criminal copyright infringement or trafficking in counterfeit goods].\" The Department of Justice and U.S. Immigration and Customs Enforcement (ICE) have recently begun to use this civil forfeiture authority in an innovative way—to seize and forfeit domain names of websites that are being used for criminal activity, in this case websites that are involved in selling counterfeit goods and distributing pirated merchandise and copyrighted digital materials. Domain name registrars redirect traffic from the seized domains to a government website explaining that the domain name has been seized by ICE. However, the sites remain online and accessible through their Internet protocol addresses.\nBetween June 30, 2010, and November 28, 2011, ICE seized 350 domain names associated with Internet piracy in its initiative called \"Operation In Our Sites.\" Of these 350 seized domain names, 116 have been forfeited to the U.S. government. In order to obtain domain name seizure warrants, ICE agents present evidence of criminal trademark violations or criminal copyright infringement that is occurring on the website to a federal magistrate judge. In order to issue the warrant, the judge must determine, by a standard of probable cause, that the domain name is being used in violation of federal criminal laws. Due process protections are part of this process, as described by the ICE Director:\nAs with all judicially authorized seizure warrants, the owners of the seized property have the opportunity to challenge the judge's determination through a petition. If a petition is filed, a hearing is held in a federal court to determine the validity of the affidavit supporting the seizure, at which point the government would have the burden of proof.… Under existing federal law, the website owner may also choose to demand return of the property through the law enforcement agency itself, by writing a letter to ICE.… Further, if the website owner determines he or she does not wish to pursue either of these avenues of due process, a challenge may be filed directly with the law enforcement agency conducting a forfeiture action under administrative processes.\nThe assistant deputy director of ICE has explained that several factors are taken into account before the agency decides which domain name should be seized, including\nthe popularity of the website, which often correlates with its profitability; whether the website is commercial in nature and earns a substantial amount of money—those that run advertisements, sell subscriptions, or sell merchandise; and whether seizing a site will have a substantial impact on piracy.\nHowever, the global nature of the Internet presents problems to the civil forfeiture approach used by ICE. Only domain names registered within the United States and subject to ICE's jurisdiction may be seized.", "The Anticybersquatting Consumer Protection Act (ACPA) includes two provisions that provide individuals with remedies against abuses of the domain name system. First, it provides a means to protect against trademark dilution through the domain name system. Second, it provides anticybersquatting protections for individuals.\nACPA allows trademark owners to file a lawsuit against domain name registrants and their licensees for trademark dilution. Such suits are permissible if the domain name is identical or confusingly similar to a mark that was distinctive or famous at the time the domain name was registered, or infringes upon names or insignias of the American Red Cross or United States Olympic Committee. If the registrant is found to have registered the domain name in bad faith, ACPA authorizes a court to order that the domain name be forfeited, canceled, or transferred to the trademark owner.\nACPA also authorizes in rem actions directly against a domain name that infringes upon a trademark, where personal jurisdiction cannot be obtained over the owner of the infringing domain name or if the owner cannot be identified by the trademark owner.\nACPA also allows individuals to sue cybersquatters, defined as one who intends to profit by registering and subsequently selling a domain name that is comprised of or confusingly similar to the first individual's name without consent. The court may award injunctive relief to the plaintiff, \"including the forfeiture or cancellation of the domain name or the transfer of the domain name to the plaintiff.\"", "The Unlawful Internet Gambling Enforcement Act (UIGEA), which Congress passed in 2006 as Title VIII of the SAFE Port Act, seeks to cut off the flow of revenue to unlawful Internet gambling businesses. UIGEA prohibits gambling-related businesses from accepting checks, credit card charges, electronic transfers, and similar payments in connection with unlawful Internet gambling. Anyone who violates this prohibition of UIGEA is subject to a criminal fine of up to $250,000 (or $500,000 if the defendant is an organization), imprisonment of up to five years, or both. In addition, upon conviction of the defendant, the court may enter a permanent injunction enjoining the defendant from making bets or wagers \"or sending, receiving, or inviting information assisting in the placing of bets or wagers.\" The Attorney General of the United States or a state attorney general may bring civil proceedings to enjoin a transaction that is prohibited under UIGEA.\nUIGEA directed the Board of Governors of the Federal Reserve System and the Treasury Department to promulgate regulations that require \"each designated payment system, and all participants therein, to identify and block or otherwise prevent or prohibit restricted transactions through the establishment of policies and procedures\" reasonably calculated to have that result. The final rule adopted by the Federal Reserve and the Treasury Department identifies five relevant payment systems that could be used in connection with, or to facilitate, the \"restricted transactions\" used for Internet gambling: Automated Clearing House System (ACH), card systems, check collection systems, money transmitting business, and wire transfer systems. The rule defines a \"restricted transaction\" to mean any transactions or transmittals involving any credit, funds, instrument, or proceeds that the UIGEA prohibits any person engaged in the business of betting or wagering from knowingly accepting, in connection with the participation of another person in unlawful Internet gambling. The rule directs participants in the designated systems, unless exempted, to \"establish and implement written policies and procedures reasonably designed to identify and block or otherwise prevent or prohibit restricted transactions,\" and then provides non-exclusive examples of reasonably compliant policies and procedures for each system.\nSome Members of Congress have criticized UIGEA for being, in their view, ineffective at stopping Internet gambling by millions of Americans.", "\"Rogue\" Internet pharmacies engage in practices that are illegal, such as selling unapproved or counterfeit drugs or dispensing drugs without a prescription. In response to the problem of rogue Internet pharmacies and the illegal sale of prescription controlled substances over the Internet, the 110 th Congress passed the Ryan Haight Online Pharmacy Consumer Protection Act of 2008 (hereinafter called \"Ryan Haight Act\"), which amends the federal Controlled Substances Act to expressly regulate online pharmacies that dispense controlled substances by mandating that the pharmacy post specific information on its website, and that the pharmacy register with and submit certain reports to the Drug Enforcement Administration. The Ryan Haight Act requires that delivery, distribution, or dispensing of controlled substances over the Internet must be pursuant to a \"valid prescription\" (defined by the statute as a prescription that is issued for a legitimate medical purpose in the usual course of professional practice, by a practitioner who has conducted at least one medical evaluation of the patient in the physical presence of the practitioner). The Ryan Haight Act also clarifies and enhances the penalties for illegal distributions of controlled substances over the Internet. According to the White House 2010 National Drug Control Policy, the Ryan Haight Act has \"already had a significant impact on reducing the number of illegal Internet pharmacies.\"", "On September 20, 2010, Senator Leahy with Senator Hatch introduced the Combating Online Infringement and Counterfeits Act (COICA). The Senate Judiciary Committee voted to report COICA favorably to the Senate, with an amendment in the nature of a substitute. However, no public hearing was held to consider COICA before the end of the 111 th Congress, and the full Senate did not act on the legislation before the end of the congressional term.\nAt the request of Senator Coburn, the Senate Judiciary Committee in the 112 th Congress held a hearing February 16, 2011, on the topic of \"Targeting Websites Dedicated To Stealing American Intellectual Property.\" This hearing considered the scope of intellectual property theft over the Internet and the problem of \"rogue websites\" that exclusively traffic in infringing material, issues that COICA was designed to address.\nOn May 12, 2011, Senator Leahy introduced S. 968 , the PROTECT IP Act. On May 26, 2011, the Senate Committee on the Judiciary voted to report the legislation to the full Senate, with an amendment in the nature of a substitute. Senator Wyden then placed a hold on the bill, indicating his intent to object to any unanimous consent request to proceed, a sentiment that has been since joined by Senators Moran, Cantwell, and Paul. The Senate Judiciary Committee held a hearing on June 22, 2011, entitled \"Oversight of Intellectual Property Law Enforcement Efforts\" that included testimony from ICE and other agencies charged with enforcement of intellectual property laws online. On July 22, 2011, Senator Leahy filed a written report. On December 17, 2011, Senator Reid presented a cloture motion on a motion to proceed to S. 968 , the PROTECT IP Act, with a roll call vote scheduled to be held on January 24, 2012. Senator Wyden expressed his intent to filibuster the bill.\nOn October 26, 2011, Representative Lamar Smith, chairman of the House Judiciary Committee, introduced H.R. 3261 , the Stop Online Piracy Act (SOPA). The House Judiciary Committee held a hearing on SOPA on November 2, 2011. On December 12, 2011, Representative Smith released a manager's amendment in the nature of a substitute to H.R. 3261 . On December 15 and 16, the House Judiciary Committee held markup sessions in which the committee considered 60 amendments that were filed to the manager's amendment. However, the committee did not complete the markup and postponed continuation of the SOPA markup \"due to House schedule.\"\nOn January 14, 2012, the White House responded to an online petition submitted under the Obama Administration's \"We the People\" initiative that urged the President to veto the SOPA bill. In an online post written by the Intellectual Property Enforcement Coordinator Victoria Espinel, the U.S. Chief Technology Officer Aneesh Chopra, and Cybersecurity Coordinator Howard Schmidt, the White House explained that it would support online piracy legislation that \"provides prosecutors and rights holders new legal tools to combat online piracy originating beyond U.S. borders.\" However, the White House stated that it \"will not support legislation that reduces freedom of expression, increases cybersecurity risk, or undermines the dynamic, innovative global Internet.\"\nSeveral websites, including Wikipedia, Reddit, and Mozilla, participated in a 24-hour shutdown of their webpages on January 18 in order to express their opposition to the PROTECT IP Act and SOPA. The online protests, increased public awareness and negative opinions concerning the bills, and largely unfavorable media coverage, contributed to several Members of Congress withdrawing their support for the legislation in its current form. On January 20, 2012, Senator Reid announced that, \"in light of recent events,\" he was postponing the cloture vote that had been scheduled for the PROTECT IP Act on January 24, although he expressed his hope that a compromise could be reached between supporters and opponents of the legislation \"in the coming weeks.\" Moments after Senator Reid's announcement, Chairman Smith released a statement that the House Judiciary Committee would similarly postpone consideration of SOPA \"until there is wider agreement on a solution\" to the online piracy problem.", "The following is a brief summary of the key provisions of S. 968 , as reported in the Senate.", "S. 968 focuses on Internet sites that are \"dedicated to infringing activities.\" An \"Internet site dedicated to infringing activities,\" as defined by the bill, is an Internet site that has no significant use other than engaging in, enabling, or facilitating (1) copyright infringement; (2) circumvention of copyright protection systems; or (3) the sale, distribution, or promotion of goods, services, or materials bearing a counterfeit mark. The term also encompasses websites that facts or circumstances suggest are used primarily as a means for engaging in or enabling those activities. The PROTECT IP Act also defines \"nondomestic domain name\" as a domain name for which the domain name registry is not located in the United States.\nThe PROTECT IP Act would authorize the Attorney General to file a civil action against a person who registers a nondomestic domain name used by an Internet site dedicated to infringing activities, or against a person who owns or operates such an Internet site. This provision is unlikely to be invoked often because these individuals are rarely located in the United States and are therefore difficult to prosecute domestically.\nIf through due diligence the Attorney General cannot find such a person, the Attorney General may commence an in rem action against a nondomestic domain name used by an Internet site dedicated to infringing activities. In such an action, a federal court may issue a temporary restraining order, a preliminary injunction, or an injunction against the domain name if the domain name is used within the United States to access the Internet site and the Internet site harms U.S. intellectual property rights holders. A federal law enforcement officer (with prior court approval) may serve a copy of such court order (to cease and desist from undertaking any further activity as an Internet site dedicated to infringing activities) to the following entities that would be required to take the specified actions:\nOperators of non-authoritative domain name servers: Non-authoritative domain name servers are intermediary servers used to resolve a domain name to its Internet protocol address. They do this by retaining a copy of information stored on an authoritative domain name server. Operators of these servers, generally Internet service providers, are directed to prevent access to seized domain names through the least burdensome technically feasible means. Financial transaction providers: Companies that facilitate online transactions, such as credit card companies, are required to prevent their service from completing transactions between customers located within the United States and the Internet site. Internet advertising services: Internet advertising services are required to stop selling advertising to and providing advertising for the Internet site. Information location tools: Search engines such as Google and Yahoo must take technically feasible measures to remove or disable access to the Internet site.\nThe PROTECT IP Act authorizes the Attorney General to bring an action for injunctive relief against any of the third parties that receive this court order and knowingly and willfully fail to comply with the obligations described above. A defendant in such an action may establish an affirmative defense by showing that it does not have the technical means to comply without incurring an unreasonable economic burden.", "A qualifying plaintiff may bring suit for civil injunctive relief against a person who registered a domain name used by an Internet site dedicated to infringing activities, or the owner/operator of such an Internet site. Because this provision does not use the term \"nondomestic\" to limit the term \"domain name,\" this action by a qualifying plaintiff is available against the owner/operator of any Internet site dedicated to infringement (whether domestic or foreign) or the registrant of such domain name. This provision gives a new \"private right of action\" to intellectual property rights holders who are harmed by the activities occurring on the domestic or foreign Internet site dedicated to infringing activities.\nIf through due diligence a qualifying plaintiff is unable to find such a person (or no such person has an address within the United States), the qualifying plaintiff may bring suit against a domain name used by an Internet site dedicated to infringing activities. In response, a federal court may issue a temporary restraining order, a preliminary injunction, or an injunction, against the domain name if the domain name is used within the United States to access the Internet site and the site harms U.S. intellectual property rights holders. Should the court grant the injunctive relief, the qualifying plaintiff (with prior court approval) may serve a copy of the court's cease and desist order to the following entities, which would then be responsible for taking the specified actions:\nFinancial transaction providers: Companies that facilitate online transactions, such as credit card companies, are required to prevent their service from completing transactions between customers located within the United States and the Internet site. Internet advertising services: Internet advertising services are required to stop selling advertising to and providing advertising for the Internet site.\nThe PROTECT IP Act authorizes a qualifying plaintiff to bring an action for injunctive relief against any party receiving this court order that knowingly and willfully fails to comply with such order. A defendant in such an action may establish an affirmative defense by showing that it does not have the technical means to comply without incurring an unreasonable economic burden.", "The PROTECT IP Act specifies that Rule 65 of the Federal Rules of Civil Procedure (FRCP) will govern how a federal court may issue injunctive relief in either an action brought by the Attorney General against a nondomestic entity, or an action brought by a qualifying plaintiff against domestic or nondomestic parties. Rule 65 of the FRCP provides that a \"court may issue a preliminary injunction only on notice to the adverse party,\" and that a \"court may issue a temporary restraining order without written or oral notice to the adverse party or its attorney only if (1) specific facts in an affidavit or a verified complaint clearly show that immediate and irreparable injury, loss, or damage will result to the movant before the adverse party can be heard in opposition; and (2) the movant's attorney certifies in writing any efforts made to give notice and the reasons why it should not be required.\" Thus, Rule 65 requires that, prior to the issuance of a preliminary injunction, the party that is the target of the injunction is entitled to notice and an opportunity to be heard. However, an ex parte temporary restraining order (with no notice to the adverse party) may be granted if the party seeking the order satisfies the stringent requirements described above.\nThe Attorney General is also required by S. 968 to provide notice of the alleged violation and intent to proceed under the act to the registrant of the domain name or to the owner/operator of the Internet site, by using the postal or email address of the registrant/owner or by some other means that the court finds necessary. The PROTECT IP Act places a similar notice requirement upon the quantifying plaintiff.\nAny person bound by a court order (registrant of the domain name, owner/operator of the Internet site, financial transaction provider, Internet advertising service) may file a motion with the court to modify, suspend, or vacate the order; the court may grant such relief if the court finds that either (1) the Internet site associated with the domain name is no longer, or never was, dedicated to infringing activities, or (2) the interests of justice require it.\nTo encourage financial transaction providers and Internet advertising services to \"self-police,\" the PROTECT IP Act makes them immune from liability for voluntarily taking action against an Internet site, so long as they act in good faith on credible evidence that the Internet site is dedicated to infringing activities.\nS. 968 provides immunity from liability to more actors when they refuse to provide services to \"infringing Internet sites that endanger the public health.\" An \"infringing Internet site that endangers the public health\" is an Internet site that sells, dispenses, or distributes counterfeit prescription medicine. Domain name registries, domain name registrars, financial transaction providers, search engines, and Internet advertising services may refuse to provide services to such Internet sites when they have a good faith belief that the site is infringing.", "The PROTECT IP Act requires reports to Congress regarding the effectiveness of the act and its effect on Internet technologies, from the following government entities: the Attorney General, the Register of Copyrights, the Secretary of Commerce, and the Government Accountability Office.", "As introduced, SOPA contains two titles: (1) Combating Online Piracy and (2) Additional Enhancements to Combat Intellectual Property Theft. Prior to the titles are savings and severability clauses. The first savings clause pronounces that \"Nothing in this Act shall be construed to impose a prior restraint on free speech or the press protected under the 1 st amendment to the Constitution.\" The second savings clause explains that nothing in Title I of this act shall be construed to enlarge or diminish copyright infringement liability for any cause of action under the Copyright Act, including any limitations on liability that the Copyright Act provides. The severability clause explains that if any provision of this act is held to be unconstitutional, the other provisions of the act are not to be affected by that determination.", "", "Whether an Internet site may be subject to an action by the Attorney General under SOPA depends on if it qualifies as a \"foreign infringing site.\" Section 102(a) of SOPA provides a definition of a \"foreign infringing site\" to mean\n1. the Internet site (or portion thereof) is a U.S.-directed site and is used by users in the United States, 2. the owner/operator of such Internet site \"is committing or facilitating the commission of\" criminal trademark and copyright infringement, and 3. the Internet site would be subject to seizure in the United States by the Attorney General if such site were a domestic Internet site.\nSection 102(b) of SOPA authorizes the Attorney General to commence either an in personam action against a registrant of a domain name used by a foreign infringing site (or the owner/operator of such site), or an in rem action against a foreign infringing site or the foreign domain name used by such site. An in rem action is only permitted where, after diligence by the Attorney General, the domain name's registrant or the site's owner cannot be found.\nFederal district courts are authorized by SOPA, following the commencement of these actions, to issue a temporary restraining order, a preliminary injunction, or an injunction against the registrant of the domain name used by the foreign infringing site, or the owner/operator of the foreign infringing site, to cease and desist from undertaking any further activity as a foreign infringing site.\nA process server on behalf of the Attorney General, who obtains prior approval of the court, may serve a copy of the court's cease and desist order on third parties that fall within the following four categories; these parties that receive the court order are then required to take the actions specified below.\nA service provider is required to take \"technically feasible and reasonable measures designed to prevent access by its subscribers located within the United States to the foreign infringing site (or portion thereof) that is subject to the order, including measures designed to prevent the domain name of the foreign infringing site (or portion thereof) from resolving to that domain name's Internet Protocol address. Such actions shall be taken as expeditiously as possible, but in any case within 5 days after being served with a copy of the order, or within such time as the court may order.\" An Internet search engine is required to \"take technically feasible and reasonable measures, as expeditiously as possible, but in any case within 5 days after being served with a copy of the order, or within such time as the court may order, designed to prevent the foreign infringing site that is subject to the order, or a portion of such site specified in the order, from being served as a direct hypertext link.\" A payment network provider is required to \"take technically feasible and reasonable measures, as expeditiously as possible, but in any case within 5 days after being served with a copy of the order, or within such time as the court may order, designed to prevent, prohibit, or suspend its service from completing payment transactions involving customers located within the United States or subject to the jurisdiction of the United States and the payment account\" that is used by the foreign infringing site and through which the payment network provider would complete such payment transactions. An Internet advertising service is required to \"take technically feasible and reasonable measures, as expeditiously as possible, but in any case within 5 days after being served with a copy of the order, or within such time as the court may order, designed to prevent its service from providing advertisements to or relating to the foreign infringing site that is subject to the order or a portion of such site specified in the order; cease making available advertisements for the foreign infringing site or such portion thereof, or paid or sponsored search results, links, or other placements that provide access to such foreign infringing site or such portion thereof; and cease providing or receiving any compensation for advertising or related services to, from, or in connection with such foreign infringing site or such portion thereof.\"\nSOPA authorizes the Attorney General to bring an action for injunctive relief against any party that receives this court order and knowingly and willfully fails to comply with the obligations described above. A defendant in such an action may establish an affirmative defense by showing that it does not have the technical means to comply without incurring an unreasonable economic burden.\nSOPA also authorizes the Attorney General to bring an action for injunctive relief against \"any entity that knowingly and willfully provides or offers to provide a product or service designed or marketed for the circumvention or bypassing of measures\" that were taken by any of the parties that received the court order.", "Whether an Internet site (that may be either domestic or foreign) may be subject to a private right of action by a \"qualifying plaintiff\" under SOPA depends on if the Internet site is one that is \"dedicated to theft of U.S. property.\" An intellectual property right holder who is \"harmed by\" the activities of such an Internet site is classified by SOPA as a \"qualifying plaintiff.\" SOPA provides a definition of the term \"Internet site is dedicated to theft of U.S. property\" to mean\n1. an Internet site, or a portion thereof, that is a U.S.-directed site and is used by users within the United States; and 2. either: a. \"the U.S.-directed site is primarily designed or operated for the purpose of, has only limited purpose or use other than, or is marketed by its operator or another acting in concert with that operator for use in, offering goods or services in a manner that engages in, enables, or facilitates:\" (1) copyright infringement, (2) circumvention of copyright protection systems, or (3) the sale, distribution, or promotion of goods, services, or materials bearing a counterfeit mark, or b. the operator of the U.S.-directed site: i. \"is taking, or has taken, deliberate actions to avoid confirming a high probability of the use of the U.S.-directed site to carry out acts that constitute\" copyright infringement or circumvention of copyright protection systems, or ii. \"operates the U.S.-directed site with the object of promoting, or has promoted, its use to carry out acts that constitute\" copyright infringement or circumvention of copyright protection systems, \"as shown by clear expression or other affirmative steps taken to foster infringement.\"", "Subsection 103(b) of SOPA authorizes a qualifying plaintiff to send written notifications to payment network providers and Internet advertising services regarding an Internet site that is dedicated to the theft of U.S. property. Such notification must, among other things, include the following items:\nIdentify the Internet site that is allegedly dedicated to the theft of U.S. property, including the domain name or Internet Protocol address of such site. Identify specific facts to support a claim that the Internet site is dedicated to theft of U.S. property, and that \"clearly show that immediate and irreparable injury, loss, or damage will result to the holder of the intellectual property right harmed by the activities\" of such Internet site \"in the absence of timely action by the payment network provider or Internet advertising service.\" \"Information reasonably sufficient to establish that the payment network provider or Internet advertising service is providing payment processing or Internet advertising services for such site.\" \"A statement that the holder of the intellectual property right has a good faith belief that the use of the owner's works or goods in which the right exists, in the manner described in the notification, is not authorized by the holder, its agent, or law.\"\nA payment network provider or Internet advertising service is required to \"take technically feasible and reasonable measures, as expeditiously as possible, but in any case within 5 days after\" delivery of the notification, that are, respectively, \"designed to prevent, prohibit, or suspend its service from completing payment transactions involving customers located within the United States and the Internet site\" or \"prevent its service from providing advertisements to or relating to the Internet site.\"\nThe owner/operator of the Internet site may file a \"counter notification\" to the payment network provider or Internet advertising service that states (under penalty of perjury) that the owner/operator/registrant of the Internet site \"has a good faith belief that it does not meet the criteria of an Internet site dedicated to theft of U.S. property.\"\nSOPA provides liability (in the form of damages, costs, and attorneys' fees) for any provider of a notification or counter notification who, respectively, knowingly materially misrepresents that a site is an Internet site dedicated to the theft of U.S. property, or that such site does not meet the criteria of an Internet site dedicated to the theft of U.S. property.", "If a counter notification is filed, or if a payment network provider or Internet advertising service fails to comply with its obligations upon receiving the notification, Section 103(c) of SOPA allows the qualifying plaintiff to commence an in personam action against the registrant of the domain name used by the Internet site, or the owner/operator of the Internet site. If the qualifying plaintiff cannot find these individuals through due diligence, he or she may bring an in rem action against the Internet site or the domain name used by such site.\nSOPA authorizes federal district courts, following the commencement of this action by the qualifying plaintiff, to issue a temporary restraining order, a preliminary injunction, or an injunction against the registrant/owner/operator of the Internet site, to cease and desist from undertaking any further activity as an Internet site dedicated to theft of U.S. property.\nA qualifying plaintiff who obtains prior approval of the court may serve a copy of the court's cease and desist order on payment network providers and Internet advertising services, which are then required to take the same measures as required of these parties under the action brought by the Attorney General described above. If the qualifying plaintiff demonstrates to the federal court probable cause to believe that any of these third parties that received the court order has not complied with its obligations, the court shall require the entity to explain why an order should not be issued directing it to comply with the obligations and to impose a monetary sanction. An entity against whom this relief is sought may establish an affirmative defense by showing that it does not have the technical means to comply without incurring an unreasonable economic burden.", "SOPA would require courts to follow Rule 65 of the Federal Rules of Civil Procedure (FRCP) in deciding whether to issue injunctive relief in either an action brought by the Attorney General against a nondomestic entity, or an action brought by a qualifying plaintiff against domestic or nondomestic parties. Rule 65 of the FRCP provides that a \"court may issue a preliminary injunction only on notice to the adverse party,\" and that a \"court may issue a temporary restraining order without written or oral notice to the adverse party or its attorney only if: (A) specific facts in an affidavit or a verified complaint clearly show that immediate and irreparable injury, loss, or damage will result to the movant before the adverse party can be heard in opposition; and (B) the movant's attorney certifies in writing any efforts made to give notice and the reasons why it should not be required.\" Thus, Rule 65 requires that, prior to the issuance of a preliminary injunction, the party that is the target of the injunction is entitled to notice and an opportunity to be heard. However, an ex parte temporary restraining order (with no notice to the adverse party) may be granted if the party seeking the order satisfies the stringent requirements described above.\nSOPA requires the Attorney General to provide notice of the alleged violation and intent to proceed under the act to the registrant of the domain name or to the owner/operator of the Internet site, by using the postal or email address of the registrant/owner or by some other means that the court finds necessary. The bill requires qualifying plaintiffs to provide similar notice.\nSOPA provides immunity from liability to third parties for their actions taken to reasonably comply with the court order.\nAny person bound by the court order (registrant of the domain name, owner/operator of the Internet site, service provider, Internet search engine, payment network provider, Internet advertising service) may file a motion with the court to modify, suspend, or vacate the order; the court may grant such relief if the court finds that either (1) the Internet site associated with the domain name is no longer, or never was, a foreign infringing site, or (2) the interests of justice require it.\nTo encourage certain third parties to \"self-police,\" SOPA provides immunity from any cause of action for service providers, payment network providers, Internet advertising services, Internet search engines, domain name registries, or domain name registrars, that voluntarily take action against an Internet site, so long as they act in the reasonable belief that (1) the Internet site is a foreign infringing site or is dedicated to theft of U.S. property, and (2) the action is consistent with the entity's terms of service or other contractual rights.\nSOPA also provides immunity from liability to service providers, payment network providers, Internet advertising services, advertisers, Internet search engines, domain name registries, or domain name registrars, when they, in good faith and based on credible evidence, stop providing or refuse to provide services to \"an Internet site that endangers the public health.\" \"An Internet site that endangers the public health\" is defined by subsection (c) to mean an Internet site that is primarily designed or operated for the purpose of, has only limited purpose or use other than, or is marketed by its operator for use in (1) offering/selling/dispensing/distributing prescription medicine without a valid prescription, or (2) offering/selling/dispensing/distributing prescription medicine that is adulterated or misbranded.", "SOPA requires the Register of Copyrights to \"conduct a study on the enforcement and effectiveness of this title and on any need to amend the provisions of this title to adapt to emerging technologies.\"\nSOPA also requires the Intellectual Property Enforcement Coordinator (IPEC), in consultation with the Secretaries of the Treasury and Commerce, the United States Trade Representative, the Chairman of the Securities and Exchange Commission, and the heads of other departments and appropriate agencies, to identify and conduct an analysis of notorious foreign infringers whose activities cause significant harm to holders of intellectual property rights in the United States. The IPEC is required to submit a report to Congress that includes, among other things, \"an examination of whether notorious foreign infringers have attempted to or succeeded in accessing capital markets in the United States for funding or public offerings,\" and \"whether notorious foreign infringers that engage in significant infringing activity should be prohibited by the laws of the United States from seeking to raise capital in the United States, including offering stock for sale to the public.\"", "", "Section 201 of SOPA would amend the criminal copyright statutes (17 U.S.C. §506, 18 U.S.C. §2319) to provide additional criminal penalties for unlawful public performances of copyrighted works over the Internet using technology such as \"streaming.\" This section authorizes a maximum five-year prison sentence for those who, without authorization, willfully stream commercially valuable copyrighted material for purposes of commercial advantage or private financial gain. In addition, this section would authorize misdemeanor and felony penalties for non-commercial willful public performance by means of digital transmission, during any 180-period, of 1 or more copyrighted works, where the total retail value of the public performance exceeds $1,000. For a detailed analysis and discussion of the changes that Section 201 would make to existing law, see CRS Report R41975, Illegal Internet Streaming of Copyrighted Content: Legislation in the 112 th Congress , by [author name scrubbed].", "Section 202 of SOPA would amend 18 U.S.C. Section 2320 (the criminal offense of trafficking in counterfeit goods or services) to include the intentional importation, exportation, or trafficking of counterfeit drugs. This section also provides penalties if this criminal offense involves a good or service that, \"if it malfunctioned, failed, or was compromised, could reasonably be foreseen to cause\" (1) serious bodily injury or death, (2) disclosure of classified information, (3) impairment of combat operations, or (4) other significant harm, to a member of the Armed Forces, law enforcement agency, or national security or critical infrastructure. In order for a person to be liable under this new provision, the person must possess \"knowledge that the good or service is falsely identified as meeting military standards or is intended for use in a military or national security application, or a law enforcement or critical infrastructure application.\"", "Section 203 of SOPA would increase the penalties for the criminal offense of theft of trade secrets by someone who intends or knows that the offense will benefit any foreign government (18 U.S.C. §1831(a)), from the existing 15 years in prison to 20 years, and from a $500,000 fine to \"not less than $1,000,000 and not more than $5,000,000.\" If this offense is committed by organizations, the penalty is changed from the existing fine of \"not more than $10,000,000\" to \"not more than the greater of $10,000,000 or 3 times the value of the stolen trade secret to the organization (including expenses for research and design or other costs of reproducing the trade secret that the organization has thereby avoided).\"", "Section 204 of SOPA directs the U.S. Sentencing Commission to review and, if appropriate, amend the Federal Sentencing Guidelines and policy statements applicable to persons convicted of intellectual property offenses, trafficking in counterfeit goods or services, and economic espionage.", "Section 205 of SOPA directs the Secretary of State and the Secretary of Commerce, in consultation with the Register of Copyrights, to \"ensure that the protection in foreign countries of the intellectual property rights of United States persons is a significant component of United States foreign and commercial policy in general, and in relations with individual countries in particular.\" This section also requires the Secretary of State and the Secretary of Commerce, in consultation with the Register of Copyrights, to \"appoint at least one intellectual property attaché to be assigned to the United States embassy or diplomatic mission (as the case may be) in a country in each geographic region covered by a regional bureau of the Department of State.\"", "Numerous concerns have been raised about the provisions of the PROTECT IP Act and SOPA by a variety of organizations, including human rights and civil liberties groups, technology companies, law professors, public interest groups, and consumer organizations. These concerns, and the responses by the legislation's supporters (the bills' sponsors as well as organizations representing intellectual property rights holders, labor unions, and small and large businesses that manufacture and sell goods), can be organized broadly into the following categories.", "Some commentators are concerned that the expansive definitions used by the bills to describe an Internet site that is \"dedicated to infringing activity\" (PROTECT IP Act) or an Internet site that is \"dedicated to theft of U.S. property\" (SOPA) could impact non-infringing content that is legitimate speech protected by the First Amendment. Editorials from several major newspapers have also expressed serious reservations about the overly broad definitions. Others claim that the legislation will give owners of copyrighted content \"broad censorship powers.\" These concerns are heightened by fears that the act provides insufficient legal process.\nOpponents of the legislation argue that repressive foreign regimes could cite U.S. domain name seizures to justify online suppression of speech. Eric Schmidt, executive chairman of Google, compared the domain name blocking approach to China's attempts to stifle free speech. He warned that any legislative measure that authorizes domain name blocking could set a disastrous precedent if done the wrong way. There is concern that backing away from an open and global Internet could set \"a precedent for other countries ... to use DNS [domain name system] mechanisms to enforce a range of domestic policies, erecting barriers on the global medium of the Internet. Non-democratic regimes could seize on the precedent to justify measures that would hinder online freedom of expression and association.\"\nHowever, supporters of the legislation note that \"[a]ll existing copyright protections are applicable to the Internet\" and that \"injunctions are a longstanding, constitutionally sanctioned way to remedy and prevent copyright violations.\" The Register of Copyrights also has stated that she does not believe that shutting down a website that is devoted to infringing activity would violate the First Amendment or that it constitutes censorship, yet she also stressed that \"[c]are must be taken to ensure that noninfringing expression is not unnecessarily suppressed and that the relief is effective but narrowly tailored.\" Supporters also point to Supreme Court precedents in favor of injunctions for copyright infringement, even when the copyrighted material is a matter of public debate. Nevertheless, these supporters concede that \"the most troublesome First Amendment concerns\" would be raised \"where an entire website could be blocked or seized for a single, or just a few, [infringing] offenses.\" Yet they assert that neither the PROTECT IP Act nor SOPA would permit such an result.\nIn addition, supporters of the legislation argue that the legislation provides sufficient procedural protections by incorporating Rule 65 of the Federal Rules of Civil Procedure as the basis for governing the process by which federal judges may issue a temporary restraining order, preliminary injunction, or injunction. As explained earlier in this report, Rule 65 provides certain procedural safeguards, including requiring notice to the allegedly infringing website and providing an opportunity for that party to be heard and defend themselves before an order is issued. Foreign entities would be entitled to these same procedural safeguards as U.S.-based website operators.", "Opponents of the legislation have raised concerns that the bills, if either is enacted into law, may affect the integrity of the Internet. They claim that \"DNS blocking itself could affect the Internet's reliability, security, and performance.\" Other commentators have called the domain name blocking approach ineffective, noting that the Internet sites will still remain available through their Internet protocol addresses:\n[D]omain name address resolution takes place throughout the Internet, not just by larger ISPs and registries. Indeed, there are as many as a million worldwide domain names \"resolvers,\" and it is unlikely U.S. courts could or would order all of them to comply with a blocking order. But incomplete blocking could seriously undermine the integrity of this key feature of the Web's architecture, incentivizing truly rogue Web site operators to use shadow registration systems or simply forgo domain names and rely solely on IP addresses.\nA group of Internet network engineers have argued that DNS filtering requirements under both bills \"is incompatible with\" implementation of the new security protocols known as DNS Security Extensions (DNSSEC), which have been promoted and supported by the federal government to further national cybersecurity goals. They warn that \"[a] legal mandate to operate DNS servers in a manner inconsistent with end-to-end DNSSEC would therefore interfere with the rollout of this critical security technology and stifle this emerging platform for innovation.\"\nSupporters respond that taking down infringing Internet sites is akin to \"whac-a-mole\" and that the law must provide sufficient authority to combat this problem. Furthermore, supporters believe the DNS blocking provisions of the legislation are key to preventing foreign sites from infringing American intellectual property rights:\nReaching sites originating outside the U.S. is critical to fighting a worldwide epidemic that is destroying the ability of the [content owners] to obtain the financing needed to produce future [content].... Internet sites that steal and distribute American intellectual property are often foreign-owned and operated, or reside at domain names that are not registered through a U.S.-based registry or registrar, setting them outside the scope of U.S. law enforcement. The Justice Department and rights holders are currently limited in their options for legal recourse, even when the website is directed at American consumers and steals American-owned intellectual property.\nSupporters also observe that site blocking and filtering technology that is often used to combat spam, malware, and viruses, have had \"no adverse impact on the Internet.\" Furthermore, they argue that there is no technical reason why DNS filtering and DNSSEC need to be incompatible; rather, network engineers can and will find a way to make the required changes to the DNSSEC code to ensure no such conflict occurs.", "There is considerable consternation from opponents of the legislation that the problems they have identified will be exacerbated by including the new enforcement mechanisms available to intellectual property rights holders. They worry that content owners will use the private right of action to stifle Internet innovation and protect outdated business models. \"[T]he Internet and digital technologies can be highly disruptive of traditional business models for reasons having nothing to do with infringement.\" Additionally, technology companies are concerned that they will be unable to cope with thousands of suits from content owners. They argue that these suits will overwhelm their ability to handle requests and ultimately increase costs for consumers. \"We believe that the currently proposed private litigation-based process will, however unintentionally, become a one-sided litigation machine with rights owners mass-producing virtually identical cases against foreign domain names for the purpose of obtaining orders to serve on U.S. payment and advertising companies.\"\nProponents of the legislation argue that online infringement is rampant and that law enforcement lacks the resources to deter infringing activities. Additionally, they point out that in an action brought by a qualifying plaintiff, the court order may only be served on payment processors and online advertisers to require them to cut off financial ties to the Internet site; therefore, content owners lack the power under either bill to block domain names or websites. In contrast, the Attorney General can serve the court order on DNS operators (PROTECT IP Act), service providers (SOPA), and search engines to require them to prevent access to infringing websites (in addition to having the authority to serve the court order on the financial intermediaries). As the Register of Copyrights has explained, the enforcement structure provided by the bills:\nappropriately provides much broader tools and flexibility to the Attorney General than it provides to copyright owners. This is a sound policy choice at this time. The Department of Justice has experience fighting online infringers, will use resources carefully, must exercise prosecutorial discretion in bringing actions, and must plead its case to the court and obtain a court-issued order before proceeding. Put another way, while the copyright industries are extremely important (and certainly a point of pride with respect to the U.S. economy), [the legislation] recognizes that many sectors rely on, invest in, and contribute to the success of the Internet.\nIt is for this reason that [the legislation] puts only limited tools in the hands of copyright owners, and provides the Attorney General with the sole authority to seek orders against search engines and Internet service providers.", "Section 512(m) of the Digital Millennium Copyright Act (DMCA) (17 U.S.C. §512(m)) explains that a service provider that seeks a safe harbor from liability (as described earlier in this report) is not required to \"monitor[] its service or affirmatively seek[] facts indicating infringing activity\" as a condition of enjoying such safe harbor.\nCritics of SOPA note that, unlike the PROTECT IP Act, SOPA appears to effectively repeal 17 U.S.C. Section 512(m) and erode the safe harbor protections available to many Internet companies under the DMCA with its definition of an \"Internet site [] dedicated to theft of U.S. property\" (applicable to actions by qualifying plaintiffs). Such definition includes an operator of a U.S.-directed site that \"is taking, or has taken, deliberate actions to avoid confirming a high probability of the use of the U.S.-directed site to carry out acts that constitute\" copyright infringement or circumvention of copyright protection systems. In the view of SOPA's critics, this definition would mean that companies that host user-generated content websites (such as YouTube) and operators of cloud computing storage services (such as Dropbox) would need to monitor, filter, and otherwise police user behavior for infringing activities, in order to avoid being covered by the definition. In addition, while SOPA does not directly modify the DMCA safe harbor provisions, SOPA \"creates uncertainty about whether court orders issued against 'foreign infringing sites' and 'sites dedicated to theft' might disqualify an online service provider from the DMCA safe harbors.\" This \"legal uncertainty for Internet companies\" means that \"SOPA will significantly deter current and future Internet businesses from investing in new ventures.\"\nOthers point out that although the \"notice and takedown\" provisions of the DMCA may be abused by content owners making erroneous claims, the consequence is the blocking or removal of such content, whereas under SOPA's notification process available to qualifying plaintiffs, the consequence for false claims is that the money to the website is stopped. They note that such funds (that the website may depend on to exist) may be cut off merely \"based on an allegation of harm that falls short of an allegation of infringement.\"\nSupporters of SOPA observe that while the DMCA has worked well for copyright holders and service providers to address online infringement, the DMCA's \"notice and takedown\" procedures are ineffective against foreign rogue sites; furthermore, the DMCA does not apply to trademark infringement and does not address the use of financial intermediaries such as payment processors and Internet advertising services. Other supporters contend that SOPA's notification process is less likely to be misused than the DMCA's \"notice and takedown\" procedure, because under the latter, a service provider has an incentive to remove infringing content in order to preserve its safe harbor from liability. In contrast, Internet advertisers and payment processors \"don't have business incentives to comply with bad faith notices under SOPA. Each site they are ordered to block is, presumably, a paying customer or revenue source.\" Thus, not many such companies would be willing to \"rubber-stamp any and every order that cuts into their bottom line without some way of making sure the site at issue is one that genuinely falls within the scope of\" SOPA.\nOther supporters disagree that SOPA will diminish investment in new technology ventures or stifle innovation. They believe that \"strong copyright law promotes innovation,\" and observe that \"[m]any of the loudest voices opposing rogue sites legislation are the same critics who predicted disaster in the wake of the DMCA, the NET Act (No Electronic Theft Act), and the unanimous Supreme Court decision in Grokster . Yet since those events occurred, the Internet has grown by leaps and bounds, innovation is off the charts and access to technology is at an all time high.\"", "As noted earlier in this report, House Judiciary Chairman Lamar Smith released a manager's amendment in the nature of a substitute to H.R. 3261 on December 12, 2011. The manager's amendment offers several substantial changes to SOPA, several of which would more closely align the provisions of SOPA with those in the PROTECT IP ACT, including the following:\nAdds additional savings clauses, including one that clarifies that nothing in title I of SOPA shall be construed to impose a duty on service providers to monitor activity on their network or service. Another savings clause specifies that service providers are not required take actions that would impair the security or integrity of the domain name system. Removes the non-judicial \"written notification procedure\" that was originally available to rights holders, leaving only one private enforcement mechanism for rights holders under SOPA (the same one provided by the PROTECT IP Act)– they must seek the authorization of a court in order to create a legal obligation on the part of payment processors and Internet advertisers to cease doing business with the offending website. Revises SOPA's definition of a \"U.S.-directed site\" to expressly require that the website be a foreign Internet site, thus removing domestic websites from the scope of the act's provisions. (Note that the PROTECT IP Act permits private plaintiff actions against domestic websites). Changes the definition of \"foreign infringing site\" (which applies to the Section 102 action by the Attorney General) to remove the requirement that the owner/operator of the site is committing or facilitating the commission of criminal trademark and copyright infringement. Instead, the definition of a \"foreign infringing site\" is a website that \"is being operated in a manner that would, if it were a domestic Internet site, subject it (or its associated domain name) to seizure or forfeiture in the United States\" under exiting law. Changes the definition of an \"Internet site dedicated to theft of U.S. property\" (which applies to the Section 103 action by private plaintiffs) to require that in order for a website to meet such definition, the website's violation of copyright must be for purposes of commercial advantage or private financial gain. (The PROTECT IP Act does not contain such a requirement). In addition, the revised definition eliminates SOPA's original language that would have encompassed a website offering goods or services in a manner that \"engages in, enables, or facilitates\" infringement. (The PROTECT IP Act uses these three verbs in its definition of an Internet site dedicated to infringing activities.). Finally, the revised definition drops language that would have included a website that \"is taking, or has taken, deliberate actions to avoid confirming a high probability of the use of the U.S.-directed site to carry out acts that constitute\" copyright infringement or circumvention of copyright protection systems. Provides a new section (Section 104) that states: \"In any case in which only a specifically identified portion of an Internet site is identified by the court as a foreign infringing site or as an Internet site dedicated to theft of U.S. property, and made subject to an order [under section 102 and 103], the relief granted under such subjection, and the obligations of any entity served with a copy of an order … shall be confined to that specified portion so identified and made subject to the order. Nothing in the order shall be interpreted to impose obligations on any entity served with a copy of the order with respect to any other portion of an Internet site not specified in the order.\" Deletes SOPA's original requirement that service providers take \"measures designed to prevent the domain name of the foreign infringing site (or portion thereof) from resolving to that domain name's Internet Protocol address.\" Instead, the manager's amendment allows a service provider to take \"such measures as it determines to be the least burdensome, technically feasible, and reasonable means designed to prevent access by its subscribers located within the United States to the foreign infringing site that is subject to the order.\" Deletes SOPA's \"5 day\" time limit within which third parties would have had to satisfy their obligations to take actions against the foreign infringing site; rather, the manager's amendment provides that \"[s]uch actions shall be taken as expeditiously as possible.\"", "On December 17, 2011, Senator Wyden, along with Senators Cantwell and Moran, introduced S. 2029 , the Online Protection and Enforcement of Digital Trade Act (OPEN Act), to serve as an alternative to the PROTECT IP Act and SOPA. S. 2029 has been referred to the Senate Committee on Finance. On January 18, 2012, Representative Darrell Issa introduced a version of the OPEN Act in the House, H.R. 3782 , which is nearly identical to S. 2029 . H.R. 3782 has been jointly referred to the House Ways and Means Committee and to the House Judiciary Committee.\nThe following is a brief summary of the key provisions of the OPEN Act.", "Section 337 of the Tariff Act of 1930 (19 U.S.C. §1337), as amended, prohibits unfair methods of competition or other unfair acts in the importation of products into the United States. It also prohibits the importation of articles that infringe valid U.S. patents, copyrights, processes, trademarks, or protected design rights. The International Trade Commission (ITC) is an independent, quasi-judicial federal government agency responsible for investigating and arbitrating complaints of unfair trade practices under section 337. The primary remedy employed by the ITC is to order the U.S. Customs and Border Protection (CBP) to stop imports from entering the border. Additionally, the ITC may issue cease and desist orders against individuals determined to be violators of intellectual property rights. The majority of unfair competition acts asserted under Section 337 involve allegations of patent infringement.\nThe OPEN Act would amend the Tariff Act of 1930 to insert after Section 337 a new section 337A, entitled \"Unfair Trade Practices Relating to Infringement of Copyrights and Trademarks By Certain Internet Sites.\"", "The OPEN Act defines \"infringing activity\" to mean an activity that constitutes copyright infringement; circumvention of copyright protection systems; or the sale, distribution, or promotion of goods, services, or materials bearing a counterfeit mark. It defines an \"Internet site dedicated to infringing activity\" to mean an Internet site that is (1) foreign, (2) conducts business directed at U.S. residents, and (3) \"has only limited purpose or use other than engaging in infringing activity and whose owner or operator primarily uses the site\" to willfully commit copyright infringement, circumvent copyright protection systems, or use counterfeit marks on products and services (emphasis added). The OPEN Act provides several exclusions from this definition of an \"Internet site dedicated to infringing activity,\" including (1) if the Internet site has a practice of complying with DMCA notice and takedown requests, (2) if the Internet site qualifies for a Section 512 DMCA safe harbor from liability, or (3) if the Internet site distributes content and goods that do not infringe a copyright or trademark.", "The OPEN Act declares that it is an unfair practice in import trade, and thus a violation of the new section 337A that it would add to the Tariff Act of 1930, for an Internet site dedicated to infringing activity to facilitate imports into the United States. The ITC would be empowered to make the determination as to whether there has been such a violation. The only websites that may be investigated by the ITC are ones that have a nondomestic domain name; if the ITC discovers that the accused domain name is a domestic one, the ITC is required to terminate or not initiate the investigation and then refer the matter to the Attorney General for further proceedings as the Attorney General determines is appropriate. In addition, the OPEN Act requires the ITC to terminate, or not initiate, an investigation of a domain name if the operator of the associated Internet site provides a legal notice on the site that states that the operator consents to the jurisdiction and venue of the U.S. district courts.", "The OPEN Act charges the ITC with the power and duty to investigate an alleged violation on its own initiative or upon receiving a complaint filed by a rights holder. An owner of a copyright or trademark that is the subject of the infringing activity on a nondomestic website may file a complaint with the ITC alleging, under oath, that the Internet site dedicated to infringing activity is being operated or maintained in violation of section 337A. The OPEN Act requires the complainant to send a notice of the complaint to the registrant of the domain name at its postal and e-mail addresses, if they are reasonably available. In addition, the OPEN Act specifies that the complaint must identify (and notify) any financial transaction provider or Internet advertising company that may be required to take measures against the offending website, if the ITC determines that there has been a section 337A violation.", "The OPEN Act requires the ITC to determine, with respect to each section 337A investigation, whether or not the Internet site is operated or maintained in violation of section 337A. Final ITC determinations may be appealed to the U.S. Court of Appeals for the Federal Circuit.\nThe Senate version of the OPEN Act also provides the President with an opportunity to disapprove of any ITC determination \"for policy reasons\" no later than 60 days after the determination is made; such presidential disapproval nullifies the determination. In contrast, the House version of the OPEN Act allows the President to disapprove of any ITC determination \"for policy reasons\" at any time after the ITC has made a determination regarding a foreign website.\nThe OPEN Act permits the ITC, in administering a section 337A proceeding, to allow the submission of information electronically, hold hearing electronically or obtain testimony electronically, or \"by such means as the Commission determines allows participation in proceedings … at as low a cost as possible to participants in the proceedings.\"", "The OPEN Act provides the ITC with the power to issue an order against the Internet site dedicated to infringing activity to cease and desist such activity, after the ITC makes the determination that such Internet site is in violation of the new section 337A. The ITC may grant a temporary or preliminary cease and desist order against the Internet site if the complainant files with the ITC chairperson (or his designee) a petition requesting such order. The OPEN Act mandates that the ITC chairperson, prior to issuing a temporary or preliminary cease and desist order, must give the owner/operator of the Internet site an opportunity to be heard (which may include submitting information electronically). The ITC chairperson may issue such an order if he determines that \"there is reason to believe\" that an Internet site dedicated to infringing activity is operated or maintained in violation of section 337A. The OPEN Act specifies that the ITC chairperson follow the provisions of rule 65 of the Federal Rules of Civil Procedure in deciding whether to issue the temporary or preliminary cease and desist order. If the complainant makes a showing of \"extraordinary circumstances,\" the ITC chairperson may make a determination regarding the petition for a temporary cease and desist order on an expedited basis; otherwise, the ITC chairperson is required to make a determination within 30 days. The cease and desist order may last no longer than 14 days after its issuance, although the ITC chairperson may extend the order for additional periods of 14 days for good cause or with consent of the entity against which the order is issued. In order to discourage the filing of frivolous petitions for temporary or preliminary cease and desist orders, the ITC chairperson may require the complainant to post a bond; such bond may be forfeited to the owner of the Internet site if the ITC later determines that the Internet site was not in violation of section 337A.\nIf the ITC \"reasonably believes that a financial transaction provider or an Internet advertising service\" is supplying services to an Internet site that is subject to a cease and desist order, the ITC may allow the complainant to serve a copy of the order upon the financial transaction provider or Internet advertising service. Upon receipt of the order, financial transaction providers must take measures, as expeditiously as reasonable, to prevent or prohibit completion of payment transactions by the provider to the Internet site, and Internet advertising services must take technically feasible measures, as expeditiously as reasonable, to cease serving advertisements to the Internet site. The OPEN Act confers immunity from civil actions for these third parties that take any act reasonably designed to comply with these obligations (or that make a good faith effort to comply).\nThe Attorney General may bring an action for injunctive relief against any person subject to a cease and desist order who knowingly and willfully fails to comply with the order. A defendant in such an action may assert an affirmative defense that the defendant lacks the technical means to comply with the order without incurring an unreasonable economic burden.\nThe OPEN Act also confers immunity from liability (under any federal or state law) to a financial transaction provider or Internet advertising service for ceasing or refusing to provide services to an Internet site that the providers believe (in good faith and based on credible evidence) to be an Internet site that is primarily designed for the purpose of offering, selling, dispensing, or distributing any prescription medication without a valid prescription. (The PROTECT IP Act and SOPA contain a similar provision, although the two bills would extend such immunity to service providers, search engines, domain name registries and registrars in addition to financial transaction providers and Internet advertising companies.).", "The OPEN Act allows the ITC to appoint hearing officers, to be called \"section 337 judges,\" to preside at the taking of evidence at section 337 and 337A hearings and to make initial and recommended decisions in investigations brought under section 337 and 337A of the Tariff Act of 1930. A section 337 judge is required to possess a minimum of seven years of legal experience and be licensed to practice law; the OPEN Act allows the ITC to promulgate regulations regarding other qualifications of the section 337 judges, including technical expertise and experience in IP matters.", "While the PROTECT IP Act and SOPA rely primarily on the authority of federal judiciary for their enforcement measures, the OPEN Act places the responsibility of addressing online piracy and counterfeiting upon the International Trade Commission. In addition, the OPEN Act does not apply to Internet service providers and search engines and thus does not require or encourage domain name system filtering as a potential action against offending websites. The OPEN Act also only applies to foreign websites, whereas the PROTECT IP Act (as reported) and SOPA (as introduced) could apply to domestic websites in certain circumstances. Finally, the OPEN Act does not provide rights holders with a private right of action against rogue websites in federal courts; rights holders instead must seek relief through the ITC." ], "depth": [ 0, 1, 1, 2, 2, 2, 2, 2, 1, 1, 2, 2, 2, 2, 1, 2, 3, 3, 4, 4, 3, 3, 2, 3, 3, 3, 3, 3, 1, 2, 2, 2, 2, 1, 1, 2, 2, 2, 2, 2, 2, 2, 2 ], "alignment": [ "h0_title h2_title h4_title h3_title h1_title", "h0_full h1_full", "", "", "", "", "", "", "h3_full h2_full", "h1_title", "", "h1_full", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "", "h3_full h2_title", "h3_full", "h3_full", "h3_full", "h2_full", "", "h4_full", "", "", "", "", "", "h4_full", "", "h4_full" ] }
{ "question": [ "What is a problem accompanying the global nature of the Internet?", "What risk does piracy pose?", "Why do law enforcement agencies and rights holders struggle to enforce IP laws?", "Why do these foreign actors pose a threat?", "What is one possible solution to this problem?", "What legislation has taken up this cause?", "What capacities did the PROTECT IP Act give IP rights holders?", "What other legislation has been introduced in the fight against online piracy?", "How is SOPA different than the PROTECT IP Act?", "What has been the public reaction to these laws?", "Why do some people criticize PROTECT IP Act and SOPA?", "What was the result of lobbying against the legislation?", "What is the nature of the support for PROTECT IP Act and SOPA?", "What is the Online Protection and Enforcement of Digital Trade Act?", "What powers does the OPEN Act award the ITC?", "How are the PROTECT IP Act and SOPA different from the OPEN Act?" ], "summary": [ "The global nature of the Internet offers expanded commercial opportunities for intellectual property (IP) rights holders but also increases the potential for copyright and trademark infringement.", "Piracy of the content created by movie, music, and software companies and sales of counterfeit pharmaceutical drugs and consumer products negatively impact the American economy and can pose risks to the health and safety of U.S. citizens.", "Although rights holders and law enforcement agencies currently have some legal tools to pursue domestic infringers, they face difficult challenges in enforcing IP laws against actors located abroad.", "Many websites trafficking in pirated copyrighted content or counterfeit goods are registered and operate in foreign countries. These foreign \"rogue sites\" sell subject matter that infringes U.S. copyrights and trademarks to U.S. consumers, yet the website operators remain beyond the reach of U.S. courts and authorities.", "Some believe that legislation is necessary to address the jurisdictional problem of holding foreign websites accountable for piracy and counterfeiting.", "On May 12, 2011, Senator Leahy introduced S. 968, the Preventing Real Online Threats to Economic Creativity and Theft of Intellectual Property Act (PROTECT IP Act), that would allow the Attorney General to seek an injunction from a federal court against a domain name used by a foreign website that engages in, enables, or facilitates infringement; such court order may then be served on U.S.-based domain name servers, Internet advertisers, search engines, and financial transaction providers, which would be required to take actions such as preventing access to the website or suspending business services to the site.", "IP rights holders may also sue to obtain a cease and desist order against the operator of an Internet site dedicated to infringement (whether domestic or foreign) or the domain name itself.", "On October 26, 2011, Representative Lamar Smith introduced H.R. 3261, the Stop Online Piracy Act (SOPA).", "SOPA is similar to the PROTECT IP Act yet is broader in scope by including several provisions not found in S. 968, such as those that increase the criminal penalties for online streaming of copyrighted content, create criminal penalties for trafficking in counterfeit drugs, and require the appointment of dedicated IP personnel in U.S. embassies.", "There has been considerable public debate about the PROTECT IP Act and SOPA.", "Critics claim these measures amount to \"Internet censorship\" and that they would impair free speech. There are also concerns that the legislation will disrupt the technical integrity of the Internet.", "After intense lobbying against the legislation, Senator Reid on January 20, 2012, postponed a cloture vote that had been scheduled for the PROTECT IP Act, and Representative Smith announced that the House Judiciary Committee would similarly postpone consideration of SOPA, until a compromise could be reached between supporters and opponents of the legislation.", "Supporters of the bills argue that in order to reduce digital piracy and online counterfeiting, new enforcement mechanisms are vital for U.S. economic growth and needed to protect public health and safety.", "An alternative to these bills is the Online Protection and Enforcement of Digital Trade Act (OPEN Act; S. 2029, H.R. 3782) that would authorize the International Trade Commission (ITC) to investigate foreign websites that allegedly engage in willful IP infringement.", "The ITC may issue a cease and desist order against the infringing foreign website; such an order may be used by the rights holder to oblige financial transaction providers or Internet advertising services to stop doing business with the website.", "Unlike the PROTECT IP Act and SOPA, the OPEN Act does not apply to domestic websites and also would not require search engines or domain name servers to block access or disable links to foreign websites." ], "parent_pair_index": [ -1, 0, 0, 2, -1, 0, 1, -1, 0, -1, 0, 1, 0, -1, 0, 0 ], "summary_paragraph_index": [ 0, 0, 0, 0, 1, 1, 1, 2, 2, 3, 3, 3, 3, 4, 4, 4 ] }
GAO_GAO-18-69
{ "title": [ "Background", "Technology Sector", "Federal Requirements Related to Equal Employment Opportunity and Affirmative Action", "U.S. Equal Employment Opportunity Commission", "Office of Federal Contract Compliance Programs", "Technology Workforce Grew between 2005-2015, but Women and Some Minority Groups Continued to be Less Represented", "Compared to General Workforce, the Technology Workforce Grew at a Higher Rate and Continued to be More Educated and Better Paid", "Women and Certain Minority Groups Continued to be Less Represented in the Technology Workforce and Sector", "Comparison of Technology Workforce to General Workforce, by Gender and Race", "Several Factors May Contribute to the Lower Representation of Women and Certain Minority Groups in the Technology Workforce", "EEOC and OFCCP Have Taken Steps to Oversee Equal Employment Opportunity and Affirmative Action Requirements, but Face Limitations", "EEOC and OFCCP Have Taken Steps to Oversee Compliance in the Technology Sector", "EEOC Cannot Analyze Charge Data by Industry to Identify Priorities and OFCCP Faces Challenges to Oversight of Technology Companies", "Conclusions", "Recommendations for Executive Action", "Agency Comments and Our Evaluation", "Appendix I: Objectives, Scope, and Methodology", "Definition of Technology Sector and Technology Occupations", "American Community Survey (ACS) Data", "Employer Information Report (EEO-1) Data", "Integrated Postsecondary Education Data System (IPEDS)", "Analysis of EEOC and OFCCP Oversight", "Appendix II: Technology Occupations", "Appendix III: North American Industry Classification System (NAICS) Codes Identified as Technology-Related Industries", "Appendix V: Comments from the Department of Labor", "Appendix VI: GAO Contact and Staff Acknowledgments", "GAO Contact", "Staff Acknowledgments" ], "paragraphs": [ "", "The technology sector has major employment hubs across the country, including the San Francisco Bay area, the greater New York City region, and the Washington-Arlington-Alexandria region (see fig. 1). In addition, technology workers are employed at companies outside the technology sector, such as in the retail or financial services industries. For example, a large retail company may require technology workers to create and manage their online sales activities, but the company itself would be considered part of the retail industry.", "Private companies are generally prohibited by federal law from discriminating in employment on the basis of race, color, religion, sex, national origin, age, and disability status. Additionally, federal contractors and subcontractors are generally required to take affirmative action to ensure that all applicants and employees are treated without regard to race, sex, color, religion, national origin, sexual orientation, and gender identity, and to employ or advance in employment qualified individuals with disabilities and qualified covered veterans. EEOC is responsible for enforcement of federal antidiscrimination laws, and OFCCP enforces affirmative action and nondiscrimination requirements for federal contractors. EEOC and OFCCP have some shared activities and have established a memorandum of understanding (MOU) to minimize any duplication of effort. For example, under the MOU, individual complaints filed with OFCCP alleging discrimination under Title VII are generally referred to EEOC. In addition, on occasions when EEOC receives a complaint not within its purview, such as cases that involve veteran status, but over which it believes OFCCP has jurisdiction, it will refer the complaint to OFCCP.", "The EEOC, created by Title VII of the Civil Rights Act of 1964, enforces federal laws that prohibit employment discrimination on the basis of race, sex, color, religion, national origin, age, and disability. As the nation’s primary enforcer of antidiscrimination laws, EEOC investigates charges of employment discrimination from the public, litigates major cases, and conducts outreach to prevent discrimination by educating employers and workers. In fiscal year 2016, EEOC received about 91,500 charges, secured more than $482 million for victims of discrimination, and filed 114 lawsuits.\nAccording to EEOC, many states, counties, cities, and towns have their own laws prohibiting discrimination, usually similar to those EEOC enforces, as well as agencies responsible for enforcing those laws, called Fair Employment Practices Agencies. However, in some cases, these agencies enforce laws that offer greater protection to workers. An individual can file a charge with either the EEOC or with a Fair Employment Practices Agency. When an individual initially files with a Fair Employment Practices Agency that has a worksharing agreement with the EEOC, and the allegation is covered by a law enforced by the EEOC, the Fair Employment Practices Agency will dual file the charge with EEOC (meaning EEOC will receive a copy of the charge), but will usually retain the charge for processing. If the charge is initially filed with EEOC and the charge is also covered by state or local law, EEOC dual files the charge with the state or local Fair Employment Practices Agency (meaning the Fair Employment Practices Agency will receive a copy of the charge), but EEOC ordinarily retains the charge for processing.\nEEOC also pursues a limited number of cases each year designed to combat systemic discrimination, defined by the agency as patterns or practices where the alleged discrimination presented by a complainant has a broad impact on an industry, profession, company, or geographic location. EEOC can also initiate a systemic investigation under Title VII with the approval of an EEOC commissioner, called a “commissioner charge”, provided the commissioner finds there is a reasonable basis for the investigation. In addition, EEOC district directors can approve systemic investigations, called “directed investigations” which are initiated by EEOC field office directors under the Age Discrimination in Employment Act and the Equal Pay Act.\nUnder Title VII, EEOC generally requires that large employers and non- exempt federal contractors file Employer Information Reports (EEO-1 reports) annually, which collect employees’ demographic data by business location on sex, race, and ethnic group for 10 occupational job categories. According to EEOC documentation, EEO-1 data are used in investigations of Title VII violations, litigation, research, comparative analyses, class action suits, and affirmative action plans.", "The OFCCP is responsible for ensuring that the nearly 200,000 federal contractor establishments comply with federal nondiscrimination and affirmative action requirements. Under Executive Order 11246 and other federal laws and regulations, covered federal contractors and subcontractors are prohibited from discriminating in employment on the basis of race, color, religion, sex, sexual orientation, gender identity, or national origin and are required to take affirmative action to help ensure that all applicants and employees are treated without regard to these factors. In general, OFCCP’s regulations require covered contractors to comply with certain recordkeeping and reporting requirements, and provide for enforcement procedures such as compliance evaluations and complaint investigations to assist OFCCP in ensuring federal contractor compliance with these regulations.\nAmong other provisions, OFCCP’s regulations generally require that covered contractors prepare and maintain an affirmative action program (AAP). Under OFCCP’s regulations, an AAP is a management tool that is designed to ensure equal employment opportunity, with an underlying premise that the gender, racial, and ethnic makeup of a contractor’s workforce should be representative of the labor pools from which the contractor recruits and selects. Companies must create an AAP for each business establishment—generally, a physical facility or unit that produces the goods or services, such as a factory, office, or store for the federal contractor. An AAP will also include any practical steps to address underrepresentation of women and minorities, such as expanding employment opportunities to underrepresented groups. Covered contractors must also comply with certain recordkeeping requirements, including records pertaining to hiring, promotion, lay off or termination, rates of pay, and applications, among other records.\nOFCCP’s enforcement program represents the majority of the agency’s activity and is carried out primarily by using compliance officers, who evaluate contractors’ compliance with various requirements, according to agency officials. In addition to conducting compliance evaluations, OFCCP also conducts investigations in response to complaints. In 2016, we reported that according to OFCCP officials, responding to complaints accounted for close to 16 percent of OFCCP’s enforcement activities. OFCCP selects contractor establishments for evaluations based on a number of neutrally applied factors, such as employee count at the establishment, contract value, or contract expiration date. We previously found that OFCCP reviews, on average, 2 percent of federal contractor establishments annually.\nAs we previously reported, as part of its compliance evaluations, OFCCP is to review the selected contractor’s hiring, promotion, compensation, termination, and other employment practices to determine whether contractors are maintaining nondiscriminatory hiring and employment practices. OFCCP conducts evaluations at the establishment level. When a contractor establishment is selected for evaluation, OFCCP sends the contractor a “scheduling letter” requesting the AAP and supporting data, such as the percentage of women and minority staff at the workplace by job group. Then, a compliance officer is to conduct a desk audit, which is an off-site review of the submitted materials. If necessary, the compliance officer may also conduct an on-site review or further off-site analysis to make a final determination as to whether the contractor is in compliance. In addition to looking at whether federal contractors maintain nondiscriminatory hiring and employment practices, which can result in finding discrimination violations, OFCCP also frequently finds other types of violations, such as failure to keep necessary records or conduct annual reviews of equal employment and affirmative action efforts. These findings by the agency often require administrative changes on the part of the contractor, such as improved record-keeping. There are many different forms of remedies for discrimination violations, including financial, employment, and organizational change remedies. Although rare, under some circumstances, OFCCP may bar a contractor from doing business with the government.", "", "From 2005 to 2015, the estimated number of workers in the technology workforce—people who worked in mathematics, computing, or engineering occupations—increased at a higher rate (24 percent) than the estimated number of workers in the general workforce (9 percent), according to ACS data. In 2015, the technology workforce comprised an estimated 7.5 million workers, an increase of slightly over 1.4 million workers since 2005. (For a complete list of the occupations we include as technology occupations, see appendix II).\nMost technology workers have a college degree and have a higher median income than workers in the general workforce. Specifically, in 2015, an estimated 69 percent of technology workers held at least a bachelor’s degree, compared to 31 percent of workers in the general workforce. In 2015, the estimated median income for technology workers was $81,000 compared to $42,000 for the general workforce.", "", "From 2005 to 2015, the percentage of women in the technology workforce remained flat and women remained a smaller proportion of the technology workforce compared to their representation in the general workforce. In 2015, women represented 22 percent (about 1.6 million workers) of workers in technology occupations, compared to 48.7 percent of workers in the general workforce (see fig. 2).\nAlthough the estimated percentage of minority technology workers as a whole had grown since 2005, we found that this trend did not apply to Black technology workers. Specifically, from 2005 through 2015, although the number of Black workers increased as the technology workforce grew, there was no statistically significant change in their representation as a percentage of the entire technology workforce. In contrast, from 2005 to 2015, Hispanic and Asian technology workers had statistically significant increases in their representation in the technology workforce.\nEven with the increase in their numbers in the technology workforce, Black and Hispanic technology workers remained a smaller proportion of these workers compared to their representation in the general workforce. In contrast, Asian workers were an increasing share of the technology workforce, where they remained more represented than they were in the general workforce (see fig. 3).\nWe found that when we examined gender representation for each minority group, both Black and Hispanic men and women were less represented in the technology workforce compared to their representation in the general workforce. The same was true for White women, whereas White men, Asian men, and Asian women were more represented in the technology workforce compared to their representation in the general workforce (see fig. 4).\nWe defined the technology sector as those companies that have the highest concentration of technology workers and are in such industries as computer systems design and software publishing. Companies categorized as outside the technology sector, for example, retail or finance companies, may still employ some technology workers. However, we found differences in median incomes for technology workers within and outside the technology sector. In 2015, technology workers employed in the technology sector earned an estimated median income of $89,000 compared to median incomes of $78,000 for those working outside the technology sector.\nWe also compared the characteristics of technology workers within the technology sector and outside the technology sector, and found male and Asian technology workers were relatively more represented in the technology sector than outside the technology sector. Similar to the lower representation of female, Black, and Hispanic technology workers in technology occupations, we found technology workers from these groups were also more likely to work outside the technology sector than in the technology sector. For example, according to our analysis of 2015 ACS data, women represented an estimated 18 percent of all technology workers employed in the technology sector, compared to 25 percent of all technology workers employed outside the technology sector (see fig. 5). White technology workers were also more represented outside the technology sector than within the technology sector.\nCompanies in the technology sector also employ non-technical workers such as sales people, and the lower representation of women and certain minorities in the technology sector was also present in such non-technical job categories. According to our analysis of EEO-1 data, women were less represented across the full range of management and non- management positions at companies within the technology sector, including at leading technology companies, compared to their representation in companies outside the technology sector. We determined this by comparing specific occupations at companies both within and outside the technology sectors using 2015 EEO-1 data. For example, women held about 19 percent of senior-level management positions at companies in the technology sector compared to nearly 31 percent of such positions at companies outside the technology sector in 2015. Women were also less represented in all of the remaining job categories (mid-level managers, professionals, technicians, and all other jobs) in the technology sector. (See fig. 6.)\nComparing EEO-1 data at three points in time for 2007, 2011, and 2015, we found women’s representation in management positions as well as among professionals and technicians at companies within the technology sector remained at about the same level, and decreased for “all other jobs” (see table 1).\nSimilar to women, Black and Hispanic workers were less represented across multiple job categories in companies within the technology sector compared to those outside the technology sector (see fig.7). For example, 1.8 percent of senior level managers in the technology sector were Black compared to 3.4 percent of senior level managers in all other sectors. Appendix IV provides percentages for each minority group in different job categories within and outside the technology sector. The lower representation of Black workers in the technology sector relative to their representation in other sectors was consistent across all job categories (mid-level managers, professionals, technicians, and “all other jobs”). Hispanic workers were less represented in the technology sector compared to outside the technology sector across all job categories (senior and mid-level managers, professionals, technicians, and “all other jobs”). Compared to their representation across job categories within the technology sector in general, Black and Hispanic workers had slightly greater representation at the leading technology companies in senior management and technician categories, and lower representation among mid-level managers, professionals, and holders of “all other jobs.”\nAsian workers comprised a greater proportion of managerial and professional roles in the technology sector than in other sectors, according to our analysis of 2015 EEO-1 data. Asian workers represented 11.0 percent of senior level managers in the technology sector compared to 4.3 percent in industries outside the technology sector. This higher representation of Asian workers in the technology sector was consistent among mid-level managers, professionals and technicians. Asian workers were more represented in the same categories at the leading technology companies. However, a lower proportion of Asian workers held senior management positions compared to their representation in professional positions in both the technology sector and leading technology companies. Further, the proportion of Asian workers in mid-level management positions was also lower than their representation in professional positions, from which mid-level managers might be selected, in both the technology sector and leading technology companies. In contrast, a higher proportion of White workers were in senior and mid- level management positions compared to their representation in professional positions in both the technology sector and leading technology companies.\nComparing EEO-1 data at three points in time—2007, 2011, and 2015— we saw varied representation across job categories in the technology sector by race/ethnicity. For example, Black workers decreased in their representation in all job categories in the technology sector from 2007 to 2015. In contrast, Hispanic and Asian workers increased in their representation in all job categories we examined from 2007 to 2015 (see table 2).", "Several factors may contribute to the lower representation of female, Hispanic, and Black workers in the technology workforce and at companies in the technology sector, based on research and interviews with researchers and representatives from workforce and industry organizations and technology companies. These include the lower diversity of degree earners in technology-related fields, and company- based factors such as hiring practices and retention of women and underrepresented minorities.\nThe smaller proportion of women in the technology workforce may reflect the number of women earning technology-related degrees. Slightly over two-thirds of technology workers report having earned their bachelor’s degree in a computer, engineering, mathematics, or technology field. However, according to our analysis of 2014 IPEDS data, the percentage of technology-related bachelor’s and master’s degrees earned by women is far less than for men, although women were comparable to men in their receipt of science, technology, engineering, and math (STEM) degrees, and surpassed men in obtaining degrees in all other fields. In 2014, about 60,000 women were awarded technology-related bachelor’s or master’s degrees (compared to about 50,000 in 2004) and about 190,000 men were awarded such degrees (compared to about 147,000 in 2004). (See fig. 8.) An estimated 218,000 technology workers were added to the technology workforce in 2015, according to our analysis of 2015 American Community Survey data from the U.S. Census Bureau. In addition, technology degrees are also issued at the associate’s level.\nTwo researchers told us that women often have the academic preparation to enter into technology-related degree programs, but they may choose not to pursue such degrees because of instances of gender bias within technology classes. Our prior work reported on studies that found women leave STEM fields at a higher rate than their male peers, citing one study that found women leave STEM academic positions at a higher rate than men in part due to dissatisfaction with departmental culture, faculty leadership, and research support. Further, a 2012 consulting firm report found that businesses viewed as male-dominated tended to attract fewer women at the entry level.\nIn addition, according to our analysis of 2014 IPEDS data, three minority racial or ethnic groups each constituted 10 percent or fewer of bachelor’s and master’s degree earners in a technology-related field. Specifically, among the 202,200 earners of degrees in a technology-related field in 2014, there were about 20,000 Hispanic recipients, 13,000 Black recipients, and 18,000 recipients who were Multiracial or other race, which includes American Indian or Alaska Native, Other or Unknown Race, and Two or more Races, i.e. respondents who selected one or more racial designations. Among all minority groups, Asian students, including Pacific Islander, earned the highest proportion of technology- related degrees (about 24,000 individuals). (See fig. 9).\nOne barrier to entry into technology degree paths for Black and Hispanic students may be lower likelihood of access to preparatory academic programs in secondary school. In 2016, we reported that the K-12 public schools in the United States with students who are mostly Black or Hispanic offered disproportionately fewer math and science classes for their students. One researcher told us some colleges and universities, to help these students be academically successful, provide additional academic support such as tutoring to help bridge knowledge gaps. To address the uneven access to preparatory math and science classes, representatives from five technology companies told us they have started to invest in exposing Black and Hispanic children to technology occupations by, for example, developing online resources targeted to them and their parents and creating partnerships with secondary schools to improve their academic preparation in computer science.\nHowever, we have previously also reported that the number of students graduating with STEM degrees may not be a good measure of the supply of STEM workers because students often pursue careers in fields different from the ones they studied. For example, a lower percentage of women who obtained technology-related degrees became technology workers compared to men who earned the same degrees, according to our analysis of 2015 ACS data. Specifically, among women who earned technology degrees, an estimated 33 percent worked as a technology worker compared to 45 percent of men who earned technology degrees.\nSeveral representatives we interviewed from workforce and industry organizations and technology companies told us that recruitment practices may also have affected diversity in the technology workforce. For example, representatives from three workforce and industry organizations said technology companies tend to recruit from a select number of universities and colleges, thereby limiting their pool of potential applicants. To address this, representatives from several of the technology companies we interviewed told us they had changed recruitment practices and offered internships targeted to underrepresented groups. For example, representatives of four technology companies told us that their companies had expanded recruitment to include more schools. Representatives from two companies told us they offer programs such as summer and semester internships for which the company actively recruits from Historically Black Colleges and Universities and other specific schools to increase its pool of diverse candidates.\nIn addition, representatives from workforce organizations and technology companies discussed concerns and strategies to address companies’ hiring practices and internal cultures that may limit workforce diversity.\nFor example, one of these representatives said that technology companies often offer financial incentives to current employees to make referrals for new hires, which can result in reliance on social networks. These networks may be largely comprised of the same race and this practice therefore makes it harder for potential candidates from demographically different groups to have their resumes reviewed. Another workforce organization representative reported that some hiring managers filter out eligible candidates if their background and qualifications are not the same as those of previously successful employees. To address these concerns, representatives from one technology company told us that they had moved away from depending on referrals since this practice may result in leaders hiring people within their own networks, which generally does not increase diversity of gender or race/ethnicity. In addition, representatives from another company said they plan to begin reviewing resumes with names removed to limit bias by the reviewer. Further, representatives we interviewed from three technology companies told us they offer training to employees to help employees identify their own, unconscious biases.\nOther factors may affect retention of women and underrepresented minorities. For example, a representative from a workforce organization said that women leave technology occupations at a higher rate than men because they feel as if they have not been given the same opportunities for promotion and advancement within the company. A 2016 study that examined women in engineering and science found that women’s concerns about pay and promotion are often an issue in male-dominated fields regardless of the industry. Further, this study found that retention difficulties become more severe as the share of men in the workforce increased and that affected women’s pay and promotion.\nRepresentatives from one company told us another challenge is the lack of Black workers at the top levels, which might make it more difficult for Black employees in particular to see a leadership path. Representatives we interviewed from five technology companies told us they had implemented efforts to increase retention and promotion rates among minority and female workers, for example, by developing a diversity and inclusion newsletter, employee resource groups with executive sponsors, and internal training and classes for employees to improve their readiness to be promoted.\nRepresentatives from five technology companies told us that commitment of top leadership is an important factor that can help women and underrepresented minorities in the technology sector. For example, representatives from one company told us that top management support for diversity efforts, such as setting hiring goals, can help move a company in the direction of achieving representation goals and that leadership is very important to this effort. Representatives from several companies told us that there is often a business case for such changes: These companies work in a diverse, global environment and strive to make better products for diverse users. However, our prior work on workforce diversity in the financial services sector found that some diversity initiatives faced challenges gaining the \"buy-in\" of key employees, such as the middle managers who are often responsible for implementing such programs.", "", "According to EEOC officials, EEOC primarily oversees compliance with equal employment opportunity requirements by investigating workers’ individual charges of employment discrimination filed against companies. EEOC has publicly acknowledged the low levels of diversity in the technology sector. However, we were unable to identify a specific number of charges received by EEOC against companies in industries that are part of this sector because EEOC does not require investigators to record the industry of the charged company. EEOC’s database of charges and enforcement actions—the Integrated Mission System (IMS)—has a data field for the North American Industry Classification System (NAICS) industry code, the standard used by federal statistical agencies in classifying business establishments. However, we found that it is completed for only about half the entries in the system. EEOC officials in both the San Francisco and New York district offices told us that, while they cannot readily identify individual charges against technology companies, they believe they have received far fewer charges against technology companies than they would have expected given the public attention to the issue of diversity in the technology sector. In terms of systemic cases, according to EEOC, as of June 2017, the commission had 255 systemic cases pending since fiscal year 2011 involving technology companies (13 of these were initiated as commissioner charges and 8 were directed investigations involving age discrimination or pay parity issues). Officials from the New York region reported that they had seen an increase in systemic cases against technology companies in the past 3 years, largely involving practices of information technology staffing firms.\nSeveral EEOC officials we interviewed noted that technology workers may be initiating few complaints at the federal level due to factors such as fear of retaliation from employers or the availability of other employment or legal options. According to EEOC officials, fear of retaliation can affect charges across sectors and, given the growth in the technology workforce, an individual who feels discriminated against may simply leave the company because there are many other opportunities for individuals with technical skills. They also said that technology workers may generally have greater wealth and can afford to hire private attorneys to sue in state court rather than go through the EEOC. Moreover, they said that some states, including California, have stronger employment discrimination laws that allow for better remedies than federal laws, which could lead employees to file charges at the state level rather than with the EEOC.\nIn addition, EEOC has acknowledged in a 2016 report that binding arbitration policies, which require individuals to submit their claims to private arbiters rather than courts, can also deter workers from bringing discrimination claims to the agency, leaving significant violations in entire segments of the workforce unreported. The report stated that an increasing number of arbitration policies have added bans on class actions that prevent individuals from joining together to challenge practices in any forum. The report concluded that the use of arbitration policies hinders EEOC’s ability to detect and remedy potential systemic violations. Researchers report that the use of such clauses has grown and data on federal civil filings for civil rights employment cases reflect a marked reduction in the number of such filings.\nBeyond pursuing charges, EEOC has taken some steps to address diversity in the technology sector including research and outreach efforts. In May 2016, citing the technology sector as a source for an increasing number of U.S. jobs, EEOC released a report analyzing EEO-1 data on diversity in the technology sector in tandem with a commission meeting raising awareness on the topic. In addition, EEOC’s fiscal year 2017- 2021 Strategic Enforcement Plan identified barriers to hiring and recruiting in the technology sector as a strategic priority. EEOC has also been involved in outreach efforts with the technology sector. For example, the EEOC Pacific Region described more than 15 in-person or webinar events since 2014 in collaboration with OFCCP and local organizations focused on diversity in the technology sector. The topics of these events included equity in pay and the activities of these two agencies in enforcing nondiscrimination laws. Finally, in fall 2016, EEOC initiated an internal working group to identify practices to help improve gender and racial diversity in technology, but as of June 2017 had no progress to report.\nOFCCP’s regulations require covered federal contractors to take proactive steps to ensure equal employment opportunity. OFCCP annually conducts routine evaluations of selected federal contractors, which includes those in the technology sector, for compliance with federal nondiscrimination and affirmative action requirements. To the extent that technology contractors are selected for evaluation through OFCCP’s normal selection process, these contractors are assessed for compliance with nondiscrimination and affirmative action laws as are other selected contractors. While evaluation of technology contractors occurs in the course of OFCCP’s routine activities, OFCCP does not currently use type of industry as a selection factor, according to officials. We also found that few (less than 1 percent) of OFCCP’s 2,911 closed technology contractor evaluations from fiscal years 2011 through 2016 resulted in discrimination violations, though 13 percent resulted in other violations, such as record- keeping violations and failure to establish an affirmative action program (AAP). An AAP is a key tool OFCCP requires contractors to complete to ensure equal employment opportunity. The remaining 86 percent of evaluations either found no violations or ended in administrative closure. Technology contractor evaluations that had discrimination violations resulted in back pay, salary adjustments, or other benefits totaling more than $4.5 million for 15,316 individuals (averaging about $300 per award) for fiscal years 2011 through 2016. The vast majority of discrimination violations were on the basis of gender or race/ethnicity rather than disability or veteran status. Corrective actions OFCCP identified for federal technology contractors over this timeframe also included requiring contractors to fill a total of 410 job vacancies as they arise with applicants who had been denied employment on the basis of discrimination. In addition, OFCCP recently filed three complaints against technology companies.\nAccording to our analysis, OFCCP conducted evaluations on 36 of the 65 leading technology companies from fiscal year 2011 through fiscal year 2016. During this timeframe there were 272 reviews of establishments— physical business locations—affiliated with these 36 companies. Based on these evaluations, 15 of the 36 companies had administrative violations, and 2 of the 36 also had discrimination violations. As a result of the discrimination findings against these leading technology companies, 541 individuals received monetary benefits totaling $783,387 (an average of $1,448 per award).\nIn terms of other steps to conduct oversight of the technology sector, OFCCP officials in the Pacific Region said they are hiring compliance officers with legal training to be better able to address needs for reviews in the technology sector, such as responding to lawyers representing technology contractors. Officials in both the Pacific and Northeast regions work closely with statisticians and labor economists on their cases, an effort officials said has increased over the past few years. OFCCP has also requested funding in its fiscal year 2018 congressional budget justification to establish centers in San Francisco and New York that would develop expertise to handle large, complex compliance evaluations in specific industries, including information technology.", "We found that by not requiring an industry code in its investigations data, EEOC cannot analyze charge data by industry to help identify investigation and outreach priorities, in contradiction to EEOC strategic planning documents and EEOC Inspector General reports, which have emphasized the importance of doing so. By not requiring the use of the NAICS code for each entry in IMS, EEOC is limited in its ability to use these data for the purposes of identifying charges by industry sector and conducting sector-related analyses. Officials were aware of substantial gaps in coding of charges by industry and acknowledged limitations in the commission’s ability to analyze its investigations data by industry. However, officials expressed concern that routinely creating more complete records of the companies against which charges had been filed would require investigators to divert attention from their efforts to investigate charges. EEOC officials explained that the charging party provides initial information on the respondent company and requiring EEOC personnel to generate this information would slow down the process. They said their priority is to investigate individual charges, not to address larger trends or target specific industries. “The Strategic Enforcement Plan recommends using EEOC data to allow our enforcement and outreach efforts to focus on areas of significant concern. This might include tailoring outreach efforts for industries that experience greater likelihood of certain charges or informing enforcement decisions based on knowledge that certain industries have persistent problems, such as harassment. The data maintained in IMS provide a rich resource of information that can be used to explore the characteristics of industries that appear to have higher levels of certain allegations than comparative industries.”\nIn addition, reports completed by the Urban Institute for the EEOC Office of Inspector General in 2013 and 2015 similarly recommended analysis of charge data, including by industry, to help identify priorities and measure performance.\nWhile EEOC has plans to review a year of IMS data to clean it and determine how best to add missing industry codes, among other objectives, officials could not provide a specific timeframe for when this review would begin and end. Standards for internal control in the federal government state that management should use quality information to achieve the agency’s objectives and objectives should be defined in specific terms so they are understood at all levels of the entity. This involves clearly defining what is to be achieved, who is to achieve it, how it will be achieved, and the time frames for achievement. Efforts to scrub these data and identify missing codes could help EEOC determine how to collect industry information on an ongoing basis for all entries. Doing so would also help EEOC determine the level of NAICS code that would be feasible and useful for investigators to identify and input into IMS. Without analyzing its data on charges across industries, EEOC’s ability to proactively identify priorities for its outreach and enforcement resource use is limited.\nWe found that OFCCP also faces challenges that may hinder the agency’s oversight of technology companies. Specifically, OFCCP reported facing delays in receiving information from federal contractors, including technology companies, but has not yet evaluated whether its own policies and practices also impede its efforts to hold federal technology contractors responsible for the legal requirements to take affirmative action and not discriminate against protected groups. In addition, OFCCP regulations do not require federal contractors to disaggregate data for the purpose of determining placement goals for hiring, which may hinder contractors’ efforts to implement effective affirmative action programs.\nOFCCP has not analyzed delays in obtaining information from contractors OFCCP officials told us that they face delays in obtaining complete, accurate, and timely documentation from federal contractors, including technology companies, as part of the compliance review process. They said this limited their access to critical information and hindered OFCCP’s ability to determine whether discrimination had occurred. Officials in the Pacific Region reported that when issues are identified during OFCCP’s initial review that will require additional data, the data requests can be extensive. Consequently, technology contractors are taking longer to submit complete and accurate data that are needed to conduct analyses of the contractor’s workforce. In addition, officials in both the Pacific and Northeast regions reported that companies may not provide raw data as requested, or provide access to employees for OFCCP to interview, which is part of the compliance review process. Using 2015 OFCCP compliance evaluation data, we previously reported that close to 85 percent of contractor establishments across all sectors did not submit an AAP within 30 days of being scheduled for an OFCCP compliance evaluation, as required by OFCCP policy. Officials told us of the potential need for a more flexible set of investigatory tools or sanctions, such as subpoena power to speed up data-gathering or penalties for delays in providing information, in order to obtain accurate and timely information. In the case of incomplete data, OFCCP officials said one option is to enter into an agreement with the contractor whereby the contractor will gather the missing data, and OFCCP will monitor the contractor’s efforts and review detailed records at a later date. However, they said that such an agreement could give the contractor an opportunity to modify the data in the contractor’s favor. Currently, OFCCP’s primary sanction is the threat of debarment, which makes a company ineligible to receive future federal contracts.\nAt the same time, OFCCP officials acknowledged there may additionally be delays in their own review processes. In prior work, we’ve reported concerns by contractors and industry groups about lengthy and expansive OFCCP evaluations. However, OFCCP has not analyzed its data on closed evaluations to assess the cause of delays, which would help determine whether changes should be made to its internal processes or if stronger sanctions to obtain information from contractors are needed. Internal control standards state that management should identify, analyze, and respond to risks related to achieving its objectives. Further, it states that management should design appropriate mechanisms to enforce its directives to achieve those objectives and address related risks. Without more information on the root cause of the delays, these delays may continue, straining resources and inhibiting OFCCP’s efforts to identify potential discrimination. “An affirmative action program is a management tool designed to ensure equal employment opportunity. A central premise underlying affirmative action is that, absent discrimination, over time a contractor’s workforce, generally, will reflect the gender, racial and ethnic profile of the labor pools from which the contractor recruits and selects. Affirmative action programs contain a diagnostic component which includes a number of quantitative analyses designed to evaluate the composition of the workforce of the contractor and compare it to the composition of the relevant labor pools. Affirmative action programs also include action- oriented programs. If women and minorities are not being employed at a rate to be expected given their availability in the relevant labor pool, the contractor’s affirmative action program includes specific practical steps designed to address this underutilization.” “The placement goal-setting process . . . contemplates that contractors will, where required, establish a single goal for all minorities. In the event of a substantial disparity in the utilization of a particular minority group or in the utilization of women or women of a particular minority group, a contractor may be required to establish separate goals for those groups.”\nAccording to OFCCP officials, a contractor may be required to establish separate goals for particular minority groups as part of a compliance review. We found, however, that OFCCP’s regulations do not require federal contractors to disaggregate demographic data for the purpose of establishing placement goals in their AAP. This may hinder their efforts to implement effective AAPs, which are designed to assist the company in achieving a workforce that reflects the gender, racial, and ethnic profile of the labor pools from which the contractor recruits and selects. OFCCP officials in headquarters and in the field said, based on their experience evaluating companies’ compliance, it was not common for companies to have placement goals disaggregated by race and ethnicity in their AAPs. A diversity and inclusion officer we interviewed from one large technology contractor noted that the requirement in the AAP to identify the need for placement goals for minorities as a whole does not address underrepresentation in certain minority groups. According to the officer, the company does not count Asian workers in setting the company’s diversity goals because Asians are well represented and the company believes it should set a placement goal for groups for which the company knows it needs to make progress. Citing comments received during development of other regulations, OFCCP officials cautioned that an analysis of utilization disaggregated by race/ethnicity may be more challenging for smaller companies with fewer employees.\nFurther, looking at trends in diversity for minorities as a whole may not assist a company’s affirmative action efforts to identify groups that need particular outreach or support. Specifically, our analysis of workforce data found differences in representation for Black and Hispanic workers in the technology workforce compared to Asian workers. Under the current AAP regulations, companies may opt not to detect and address underrepresentation of particular minority groups since OFCCP does not require placement goals disaggregated by race/ethnicity. While OFCCP may be able to detect underrepresentation of particular minority groups during its reviews, the office reviews only 2 percent of federal contractor establishments each year. OFCCP officials said that they would need to amend their regulations in order to require disaggregated race/ethnicity information for placement goals on AAPs. The officials said disaggregating race in placement goals could help an establishment determine how to tailor outreach accordingly or better identify impediments to its equal employment opportunity efforts. However, they have not pursued this regulatory change because of competing priorities on their regulatory agenda. OFCCP’s mission includes holding federal contractors responsible for the legal requirements to take affirmative action and not discriminate against protected groups. However, not requiring contractors to set placement goals for each minority group may hinder OFCCP’s ability to effectively achieve this mission.\nOFCCP has not reviewed key aspects of its current approach to evaluations OFCCP officials report the agency intends to incorporate additional information on gender, racial, and ethnic disparities by industry into its compliance evaluation selection process, but we found the methodology to determine the disparities may have weaknesses. We have previously reported on the challenges OFCCP faces with its enforcement efforts, and identified additional areas that may limit OFCCP’s enforcement of federal contractors’ equal employment and affirmative action efforts. For example, our 2016 report found that OFCCP’s weak compliance evaluation selection process, reliance on voluntary compliance, and lack of staff training create several challenges to its enforcement efforts. This report found that because OFCCP was not able to identify which factors are associated with risk of noncompliance, the agency does not have reasonable assurance that it is focusing its efforts on those contractors at greatest risk of not following nondiscrimination or affirmative action requirements. OFCCP agreed with recommendations we made to address these areas and detailed steps the agency would take. In particular, to strengthen its compliance evaluation process to select contractors at greatest risk of potential discrimination, the agency stated that it planned to incorporate information on pay disparities and employment disparities. OFCCP officials indicated this information would be based on analysis of gender and race/ethnicity by industry using ACS data and EEO-1 compensation data that was to be collected beginning March 2018. However, in August 2017, the Office of Management and Budget issued a memo suspending the pay-related data collection aspects of the EEO-1 form. Despite this change, OFCCP officials said they are exploring other options for focusing on compensation disparities by industry, including through the use of ACS data, administrative data, a previous study conducted by the Department of Labor, as well as options proposed by contractors.\nWe also found OFCCP’s current methodology for identifying disparities by industry with the ACS data may have some weaknesses that could affect the accuracy of the outcomes. For example, its reliance on the broadest industry level available may not sufficiently identify specific industries at elevated risk. Further, the methodology includes future plans to conduct the analysis for metropolitan areas. Given the importance of regional and local labor markets for assessing affirmative action efforts, regional and local analysis should also be completed before OFCCP incorporates this analysis into its selection process. It is important that OFCCP use reliable information in modifying its basic processes and setting priorities. For the reasons cited earlier regarding the importance of using quality information to make management decisions, it is important that OFCCP assess the quality of the methods for its analysis of employment disparities among industries. Without doing so, OFCCP may not accurately identify industries at greatest risk of potential noncompliance with nondiscrimination and affirmative action requirements so it can focus its limited investigation resources most effectively.\nFurther, according to OFCCP officials, although the agency has made slight changes to various thresholds and factors for its selection process, the agency has not made any significant changes to the selection process for about 10 years, and has made no changes to its establishment-based approach since OFCCP was founded in 1965. While OFCCP currently grounds its review of a contractor in a particular physical establishment, OFCCP officials acknowledged the changing nature of a company’s work can involve multiple locations and corresponding changes in the scope of hiring and recruitment. Officials we interviewed from five of our eight selected technology companies discussed their work spread across locations, including the United States or overseas, and the related challenges they face with OFCCP’s establishment-based approach to reviews. One company representative said the AAP is not useful because site specific plans do not connect to business decisions. However, OFCCP has not reviewed the implications for the effectiveness of its mission of continuing with its establishment-based approach to conducting compliance evaluations.\nIn addition, OFCCP officials acknowledged their inability, in identifying establishments for review, to consistently identify and include all subcontractors to which OFCCP rules should apply. They said the agency has not assessed the potential significance of any omissions of subcontractors from the oversight process. Internal control standards state that management should identify risks throughout the entity related to achieving its defined objectives to form a basis for designing risk responses, as well as the importance of periodically reviewing policies, procedures and related control activities for continued relevance and effectiveness in achieving the agency’s objectives. OFCCP officials said they have informally discussed how to adjust their work based on how work is performed in today’s economy—with virtual sites, workplace flexibilities, and nontraditional forms of employment. However, due to competing priorities, they have not conducted a formal review of these key aspects of its current approach to selecting entities for review. They acknowledged such a review would be useful. Without assessing its current approach to its establishment-based reviews and identification of all relevant subcontractors, OFCCP does not have reasonable assurance that its approach can identify discrimination occurring within the companies it oversees and may be missing opportunities to identify more effective practices or adjust its methods to external changes.\nWhile OFCCP has offered an option—the Functional Affirmative Action Program (FAAP)—for companies to move away from establishment- based reviews and which may be more appropriate for some multi– establishment contractors, uptake has been low and the agency has not conducted an evaluation of this program. Since 2002, OFCCP has allowed companies to create FAAPs, with OFCCP approval, which are based on a business function or unit that may exist at multiple establishments. As of May 2017, 73 companies across all industries had FAAPs in place. Further, some of the companies we interviewed were unaware that the FAAP was an option or believed it was cumbersome to establish given the complexity of their workforce. Asked why the FAAP has not been more broadly adopted, OFCCP officials hypothesized it could have to do with a requirement intended to ensure that companies with FAAPs would be reviewed at least as often as others, but that may result in these companies being reviewed more often than most. Standards for internal control for government agencies state that management should periodically review policies, procedures, and related control activities for continued relevance and effectiveness in achieving the entity’s objectives. Reviewing and refining the FAAP program could help OFCCP improve its ability to achieve its objectives and may provide broader insight for OFCCP’s overall enforcement approach.", "Jobs in the high paying technology sector are projected to grow in coming years. Female, Black, and Hispanic workers, however, comprised a smaller proportion of technology workers compared to their representation in the general workforce from 2005 through 2015, and have also been less represented among technology workers inside the technology sector than outside it. Both EEOC’s and OFCCP’s mission is to combat discrimination and support equal employment opportunity for U.S. workers; however, weaknesses in their processes impact the effectiveness of their efforts. When conducting investigations, EEOC has not been consistently capturing information on industry codes. This impedes its ability to conduct industry sector analysis that could be used to more effectively focus its limited enforcement resources and outreach activities. Similarly, OFCCP faces delays in its compliance review process but it has not analyzed its closed evaluations to understand the causes of these delays and whether its processes need to be modified to reduce them. In addition, as part of their affirmative action programs federal contractors are only required to set placement goals for all minorities in general. By not requiring contractors to disaggregate demographic data for the purpose of establishing placement goals, OFCCP has limited assurance that these contractors are setting goals that will address potential underrepresentation in certain minority groups.\nFurther, OFCCP plans to incorporate information on disparities by industry into its process for selecting establishments for compliance evaluations, but has not fully assessed its planned methods. Without such assessment, OFCCP may use a process that does not effectively identify the industries at greatest risk of potential noncompliance with nondiscrimination and affirmative action requirements. In addition, key aspects of OFCCP’s approach to compliance reviews of contractors’ affirmative action efforts have not changed in over 50 years, whereas the structure and locations of these companies’ work have changed. Finally, although OFCCP has developed an alternative affirmative action program for multi-establishment contractors, few contractors participate in this program. Because OFCCP has not evaluated the program, it does not have information to determine why there has not been greater uptake and whether it provides a more effective alternative to an establishment-based AAP.", "We are making a total of six recommendations, including one to EEOC and five to OFCCP. Specifically:\nThe Chair of the EEOC should develop a timeline to complete the planned effort to clean IMS data for a one-year period and add missing industry code data. (Recommendation 1)\nThe Director of OFCCP should analyze internal process data from closed evaluations to better understand the cause of delays that occur during compliance evaluations and make changes accordingly. (Recommendation 2)\nThe Director of OFCCP should take steps toward requiring contractors to disaggregate demographic data for the purpose of setting placement goals in the AAP rather than setting a single goal for all minorities, incorporating any appropriate accommodation for company size. For example, OFCCP could provide guidance to contractors to include more specific goals in their AAP or assess the feasibility of amending their regulations to require them to do so. (Recommendation 3)\nThe Director of OFCCP should assess the quality of the methods used by OFCCP to incorporate consideration of disparities by industry into its process for selecting contractor establishments for compliance evaluation. It should use the results of this assessment in finalizing its procedures for identifying contractor establishments at greatest risk of noncompliance. (Recommendation 4)\nThe Director of OFCCP should evaluate the current approach used for identifying entities for compliance review and determine whether modifications are needed to reflect current workplace structures and locations or to ensure that subcontractors are included. (Recommendation 5)\nThe Director of OFCCP should evaluate the Functional Affirmative Action Program to assess its usefulness as an effective alternative to an establishment-based program, and determine what improvements, if any, could be made to better encourage contractor participation. (Recommendation 6)", "We provided a draft of this report to the Departments of Labor (DOL), Commerce, the Equal Employment Opportunity Commission (EEOC) and the National Science Foundation (NSF).\nWe received written comments from DOL that are reproduced in appendix V. In addition, DOL, Commerce, EEOC, and NSF provided technical comments which we incorporated into the report as appropriate.\nDOL agreed with 4 of the 5 recommendations we made to improve oversight of federal contractors, and identified some steps it plans to take to implement them. Specifically, the department agreed with our recommendations to analyze internal process data to better understand the cause of delays that occur during compliance evaluations, assess the quality of methods used to incorporate consideration of disparities by industry into the process to select contractors for review, and to evaluate its current approach to identifying entities for review in light of changes in workplace structures, as well as its Functional Affirmative Action Program.\nDOL stated that it appreciated, but neither agreed nor disagreed, with our recommendation to take steps toward requiring contractors to disaggregate demographic data for the purpose of setting placement goals in the AAP rather than setting a single goal for all minorities. The department said this would require a regulatory change with little immediate benefit as contractors are already required to collect demographic data on each employee and applicant, and must conduct in- depth analyses of their total employment processes to identify where impediments to equal opportunity exist. While we acknowledge these data collection requirements for federal contractors, we remain concerned that without requiring contractors to also establish placement goals to address any underrepresentation for specific minority groups, contractors may not develop objectives or targets to make affirmative action efforts work. We maintain, therefore, that DOL should take steps toward requiring contractors to develop placement goals disaggregated by race/ethnicity.\nEEOC provided us a memo that it characterized as technical comments on the draft report. In these comments, EEOC neither agreed nor disagreed with our recommendation to develop a timeline to complete its planned effort to clean IMS data for a one-year period, which would include adding missing industry codes, but stated that it was taking some actions to enhance these data. We continue to maintain a timeline should be developed to complete this review, which is needed for the commission to conduct industry sector analysis that could be used to more effectively focus its limited resources and outreach activities. EEOC also emphasized the importance of systemic investigations, noting that while outreach may be somewhat useful in generating charges, individual charges are unlikely to make a substantial impact on a systemic practice affecting an entire employment sector. We maintain that the ability to analyze IMS data by industry could help EEOC to focus its resource use, including for systemic investigations. EEOC also noted staffing and resource constraints as issues faced by the commission.\nAs agreed with your office, unless you publicly announce the contents of this report earlier, we plan no further distribution until 30 days from the report date. At that time, we will send copies to the appropriate congressional committees, the Secretary of Labor, the Chair of the Equal Employment Opportunity Commission, the Secretary of Commerce, and the Director of the National Science Foundation. In addition, the report will be available at no charge on GAO’s website at http://www.gao.gov.\nIf you or your staff should have any questions about this report, please contact me at (202) 512-7215 or [email protected]. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix VI.", "Our two objectives were to: (1) identify the demographic trends in the technology workforce over the past 10 years, and (2) assess the efforts by the U.S. Equal Employment Opportunity Commission (EEOC) and the Department of Labor’s Office of Federal Contract Compliance Programs (OFCCP) to oversee technology companies and technology contractors’ compliance with equal employment opportunity and affirmative action requirements. This appendix provides details of the data sources used to answer these questions, the analyses we conducted, and any limitations we encountered.", "There is no commonly accepted definition of the technology sector or technology-oriented occupations. To arrive at our definition for the technology sector, we identified industries with the highest concentration of technology-oriented occupations, a similar approach to what other federal agencies have used recently to analyze trends within this sector. To identify technology-oriented occupations, we reviewed relevant research and interviewed researchers and other individuals knowledgeable about the technology sector. Based on this research, we defined technology-oriented occupations to include all computer, engineering and mathematical occupations, including managers. We selected our occupations using Bureau of Labor Statistics (BLS) Standard Occupational Classification (SOC) System codes, and crosswalked those occupations to the corresponding U.S. Census Bureau occupation codes to conduct our analysis. (For a complete list of the occupations we included as technology occupations, see appendix II).\nWe defined the technology sector as a group of industries with the highest concentration of technology workers. Using data from the American Community Survey, an ongoing national survey conducted by the U.S. Census Bureau that collects information from a sample of households, we identified the 15 industries with the highest concentration of technology workers. For this analysis, we used Census industry codes since we used this dataset for many of our analyses. The concentration of technology workers in these industries ranged from a high of 62.2 percent in the computer systems design and related services industry to a low of 19.33 percent in the wired telecommunications carriers industry (see table 3). Companies in the technology sector also employ non-technical workers, such as sales people.\nWe cross-walked the industries we identified in the American Community Survey with corresponding industry codes from the North American Industry Classification System (NAICS), which is the standard used by federal statistical agencies in classifying business establishments. The other data sets used in this review use NAICS codes to identify industry. The NAICS system has six levels of industry classification, with the smallest level (2-digit code) providing the most general industry classification, and the largest (6-digit) providing the most specific classification. In total, we identified 55 6-digit NAICS industry codes that comprise the technology sector using this method. (See appendix III for a list of the 6-digit NAICS codes and industry names that correspond to the Census industries we identified.)\nWe compared our list of industries to those included in the 2016 reports by EEOC and the BLS on the technology sector. While each report includes a somewhat different set of industries depending on the authors’ particular definition of technology occupations, most of the 15 industries we selected overlap with industries selected in these other reviews. Stemming from their particular focus, these reports included some additional industries and/or occupations excluded from our analysis, such as those in the life sciences. We also compared our findings on the demographic trends in the technology workforce to 2016 EEOC and Census Bureau reports that reviewed diversity in the technology sector. Despite the definitional and methodological variations, the demographic trends found in these other reports were generally comparable to our findings.", "To determine the demographic trends in the technology workforce over the past decade, we analyzed quantitative data on technology workers within and outside the technology sector from 2005 through 2015 from the Census Bureau’s Public Use Microdata Sample of the American Community Survey (ACS) for the years 2005, 2007, 2009, 2011, 2013, and 2015. ACS is an ongoing national survey that collects information from a sample of households. We analyzed trend data for gender, race, and ethnicity, and median salary by occupation and sector, and analyzed point-in-time data on educational background by occupation.\nWe analyzed the percentage of technology workers who earned bachelor’s degrees in computer, engineering, mathematics, and technology fields. For median salary, we analyzed data for workers who were employed full-time, which included those who, over the past 12 months, reported usually working 35 hours or more per week and 50 weeks or more per year, and those with wages greater than zero.\nTo account for the sample representation and design used in the ACS, we used the person weight present in the ACS data. We used the successive difference replication method to estimate the standard errors around any population estimate. For each comparison, we tested the statistical significance of the difference for men and women and for specific racial and ethnic groups at the p-value <0.05 level. In addition, we tested the statistical significance of the change between 2005 and 2015 for each gender and racial/ethnic group.\nFor race categories using ACS data in this report, we included only non- Hispanic members of White, Black, Asian, and Other categories. For the Asian category, we included Asian American, Native Hawaiian or Other Pacific Islander. The Hispanic category incorporated Hispanics of all races. Our analysis included American Indian or Alaskan Native, and Two or More Races, in the category reported as “Other.”\nWe assessed the reliability of the ACS generally and of data elements that were critical to our analyses and determined that they were sufficiently reliable for our analyses. Specifically, we reviewed documentation on the general design and methods of the ACS and on the specific elements of the ACS data that were used in our analysis. We interviewed Census Bureau officials knowledgeable about the ACS data and completed our own electronic data testing to assess the accuracy and completeness of the data used in our analyses.", "To determine workforce trends in companies within the technology sector and at leading information technology companies, we analyzed data from EEOC’s Employer Information Reports (EEO-1) for the years 2007, 2011, and 2015. We report EEO-1 data starting in 2007 because EEOC made significant changes to its requirements related to the reporting of EEO-1 data over time. For example, beginning in 2007, EEOC changed its requirements related to the reporting of data on managers and changed its practices for collecting certain racial/ethnicity information. EEO-1 reports contain firm-level data that is annually submitted to EEOC, generally by private-sector firms with at least 100 employees or federal contractors with at least 50 employees that have a contract, subcontract or purchase order amounting to $50,000 or more. Companies that fit the above criteria submit separate EEO-1 reports for their headquarters as well as each establishment facility. EEOC requires employers to use the North American Industry Classification System (NAICS) to classify their industry.\nTo identify trends using EEO-1 data for workers, we analyzed data for companies with the NAICS codes we initially identified as technology industries. We selected the leading information technology companies using Standard & Poor’s (S&P) 500 Information Technology Index list, which identifies the largest public information technology companies at a given time. In October 2016, this list consisted of 67 companies in the world that have stocks trading with the United States, and we analyzed EEO-1 data from 65 of these companies. For both analyses, we analyzed EEO-1 data from all job categories by gender, race and ethnicity, and industry sectors. For job categories, the EEO-1 form collects data on 10 major job categories including 1) Executives, Senior Level Officials and Managers; 2) First/Mid-Level Officials and Managers; 3) Professionals; 4) Technicians; 5) Sales Workers; 6) Administrative Support Workers; 7) Craft Workers; 8) Operatives; 9) Laborers and Helpers; and 10) Service Workers. In our analysis, “all other jobs” combines sales workers, administrative support workers, craft workers, operatives, laborers and helpers, and service workers. We used the race/ethnicity categories used by the EEOC as follows: White, Black or African American, Asian (including Native Hawaiian or Other Pacific Islander), Hispanic or Latino, and “Two or more Races” (including American Indian or Alaska Native).\nWe assessed the reliability of the EEO-1 data and determined that despite limitations, they were sufficiently reliable for our analyses. To determine the reliability of the EEO-1 data that we received from EEOC, we interviewed knowledgeable EEOC officials, reviewed relevant documents provided by agency officials and obtained on its website, and performed manual data testing for missing variables.", "For our analysis of technology degree earners, we used degree completion data tabulated by the National Science Foundation from the National Center for Education Statistics’ Integrated Postsecondary Education Data System (IPEDS) for the year 2014. Using a variety of sources, such as academic research and interviews with representatives from academia, we defined technology-related fields as degree programs in computer science, engineering, and mathematics. We analyzed IPEDS data by race and gender and who had obtained a bachelor’s or master’s degree in technology-related fields. We determined that the potential external candidates for technology positions generally had obtained either a bachelor’s or a master’s degree in a technology-related field. We used the race/ethnicity categories used by IPEDS as follows: White, Black, Asian (including Pacific Islander), Hispanic, and Multiracial or other (which includes American Indian or Alaska Native, Other or Unknown Race, and Two or more Races, i.e. respondents who selected one or more racial designations). Race and ethnicity breakouts are for U.S. citizens and permanent residents only, and thus do not include data on temporary residents. The analysis by gender includes temporary residents.\nTo determine the reliability of IPEDs data, we reviewed relevant documents obtained on the National Center for Education Statistics website, such as annual methodology reports and the handbook of NCES survey methods. We determined that data from IPEDs were sufficiently reliable for our purposes.", "To identify how EEOC and OFCCP have overseen technology companies’ compliance with federal equal opportunity and affirmative action requirements, we reviewed relevant federal statutes and regulations, EEOC and OFCCP policies, strategic planning documents, and operational manuals. We interviewed EEOC and OFCCP officials in headquarters, and in two regional locations selected based on the large proportion of technology companies in those areas. At EEOC, we met with officials from the San Francisco and New York district offices. At OFCCP, we met with officials from the Pacific and Northeast regional offices.\nTo explore charges of discrimination filed with the EEOC against technology companies, we planned to analyze data from the EEOC Integrated Mission System (IMS), which contains records on EEOC charges and enforcement activities. However, since industry code is not a mandatory field for investigators to complete, roughly half the entries did not have an industry code. Therefore, we could not reliably identify technology companies that have faced charges or enforcement. We attempted to match information we had developed on federal technology contractors with charges filed in the IMS database. Depending on the matching method we used, this yielded very different results and we determined this was not a sufficiently reliable method. Further, any matching method we used would have excluded technology companies that did not hold a federal contract.\nTo obtain information on evaluations of technology contractors completed by OFCCP and complaints received against technology contractors, we took a two-step approach. First, using the Federal Procurement Data System–Next Generation (FPDS-NG), we developed a list of company establishments and their subsidiaries that received federal contract obligations in fiscal years 2011-2015 under any of the 55 NAICS codes we included above as technology industries. We selected only company establishments that received 50 percent or more of their total federal contract obligations under these NAICS codes. Each establishment was counted only once regardless of how many federal contracts it received during the time period. Using this method, we identified 43,448 establishments in our pool of “technology contractors.” To identify subsidiaries, which are also subject to OFCCP requirements and evaluations, we identified any other establishments that shared the global vendor code with the contractors we identified, regardless of their NAICS code. This yielded 2,116 additional contractors. Second, we matched the names (removing suffixes) of the technology contractors and their subsidiaries that we identified in FPDS-NG against OFCCP’s data on their evaluations of contractors to identify the evaluations of technology contractors that OFCCP opened and completed from fiscal year 2011 through fiscal year 2016. We conducted a similar matching exercise to identify the complaints OFCCP received against technology companies. In addition, we identified which of the leading technology companies had completed evaluations between fiscal year 2011 through 2016.\nWe obtained information during interviews with researchers, and representatives of workforce and industry organizations and associations. In addition, we interviewed diversity and compliance representatives of eight of the leading information technology companies located in the San Francisco Bay area which were also federal contractors to discuss their efforts to increase diversity and to gain their perspectives on the federal role in overseeing compliance with nondiscrimination laws. These companies were:\nCisco Systems, Inc.\nFacebook, Inc.\nGoogle Inc.\nHewlett Packard Enterprise Company Intuit Inc.\nOracle America, Inc.", "This is the list of technology occupations that we used in our analyses. We selected our occupations using Bureau of Labor Statistics (BLS) Standard Occupational Classification (SOC) System codes, and cross- walked those occupations to the corresponding U.S. Census Bureau occupation codes.", "This is the list of the 55 6-digit North American Industry Classification System (NAICS) codes we identified as technology-related industries. To develop this list, we identified the 15 industries with the highest concentration of technology workers using U.S. Census Bureau industry codes and then used the U.S. Census Bureau’s 2012 Industry Code List for Household Surveys to crosswalk the Census codes with NAICS codes.", "", "", "", "In addition to the contact named above, Betty Ward-Zukerman (Assistant Director), Kate Blumenreich (Analyst-in-Charge), Sheranda Campbell, Julianne Hartmann Cutts, Clarita Mrena, Moon Parks, Alexandra Rouse, and John Yee made significant contributions to all phases of the work. Also contributing to this report were Rachel Beers, James Bennett, Hedieh Fusfield, Julia Kennon, Jean McSween, Jessica Orr, Dae Park, James Rebbe, Almeta Spencer, and Alexandra Squitieri." ], "depth": [ 1, 2, 2, 3, 3, 1, 2, 2, 3, 2, 1, 2, 2, 1, 1, 1, 1, 2, 2, 2, 2, 2, 1, 1, 1, 1, 2, 2 ], "alignment": [ "", "", "", "", "", "h0_title", "", "h0_title", "h0_full", "h0_full", "h1_title", "h1_full", "h1_full", "", "h3_full", "h3_full h2_full", "h2_full h3_title h1_full", "", "", "h2_full", "", "h3_full h2_full", "", "", "", "", "", "" ] }
{ "question": [ "What were GAO's findings regarding minority workers in technology?", "What were the factors GAO found explaining their findings?", "What characterizes the EEOC workforce analyses?", "What is the current status of EEOC's actions?", "To what extent has EEOC addressed this problem?", "What are the weaknesses of OFCCP?", "Why is it necessary to address these problems?", "How are the EEOC and OFCCP examined in this report?", "How did GAO arrive at its findings?", "What populations did GAO interview?", "What recommendations did GAO make?", "What were EEOC's and OFCCP's responses to this recommendation?", "What is GAO's stance regarding these reactions?" ], "summary": [ "The estimated percentage of minority technology workers increased from 2005 to 2015, but GAO found that no growth occurred for female and Black workers, whereas Asian and Hispanic workers made statistically significant increases (see figure). Further, female, Black, and Hispanic workers remain a smaller proportion of the technology workforce—mathematics, computing, and engineering occupations—compared to their representation in the general workforce. These groups have also been less represented among technology workers inside the technology sector than outside it. In contrast, Asian workers were more represented in these occupations than in the general workforce.", "Stakeholders and researchers GAO interviewed identified several factors that may have contributed to the lower representation of certain groups, such as fewer women and minorities graduating with technical degrees and company hiring and retention practices.", "Both the U.S. Equal Employment Opportunity Commission (EEOC) and the Department of Labor's Office of Federal Contract Compliance Programs (OFCCP) have taken steps to enforce equal employment and affirmative action requirements in the technology sector, but face limitations.", "While EEOC has identified barriers to recruitment and hiring in the technology sector as a strategic priority, when EEOC conducts investigations, it does not systematically record the type of industry, therefore limiting sector-related analyses to help focus its efforts.", "EEOC has plans to determine how to add missing industry codes but has not set a timeframe to do this.", "In addition, OFCCP's regulations may hinder its ability to enforce contractors' compliance because OFCCP directs contractors to set placement goals for all minorities as a group rather than for specific racial/ethnic groups. OFCCP also has not made changes to its establishment-based approach to selecting entities for review in decades, even though changes have occurred in how workplaces are structured.", "Without taking steps to address these issues, OFCCP may miss opportunities to hold contractors responsible for complying with affirmative action and nondiscrimination requirements.", "This report examines (1) trends in the gender, racial, and ethnic composition of the technology sector workforce; and (2) EEOC and OFCCP oversight of technology companies' compliance with equal employment and affirmative action requirements.", "GAO analyzed workforce data from the American Community Survey for 2005-2015 and EEOC Employer Information Reports for 2007-2015, the latest data available during our analysis. GAO analyzed OFCCP data on compliance evaluations for fiscal years 2011-2016. GAO interviewed agency officials, researchers, and workforce, industry, and company representatives.", "GAO interviewed agency officials, researchers, and workforce, industry, and company representatives.", "GAO makes 6 recommendations, including that EEOC develop a timeline to improve industry data collection and OFCCP take steps toward requiring more specific minority placement goals by contractors and assess key aspects of its selection approach.", "EEOC neither agreed nor disagreed with its recommendation, and OFCCP stated the need for regulatory change to alter placement goal requirements.", "GAO continues to believe actions are needed, as discussed in the report." ], "parent_pair_index": [ -1, 0, -1, 0, 1, 0, 3, -1, -1, 1, -1, 0, 1 ], "summary_paragraph_index": [ 2, 2, 3, 3, 3, 3, 3, 1, 1, 1, 4, 4, 4 ] }
GAO_GAO-14-850
{ "title": [ "Background", "Overview of Election Administration", "Federal Roles and Responsibilities", "State and Local Roles and Responsibilities", "The Voting Process", "Voting before Election Day", "In-person Voting on Election Day", "Election Administration Research and Data Sources on Voter Wait Times", "On the Basis of Our Survey, We Estimate That Most Jurisdictions Did Not Collect Data for Calculating Wait Times or Have Long Voter Wait Times on Election Day 2012", "Most Jurisdictions Did Not Collect Data for Calculating Wait Times, Primarily because Wait Times Have Not Been an Issue, but Some Have Made Estimates Using Various Practices", "We Estimate That a Small Percentage of Jurisdictions Had Long Voter Wait Times at More than a Few Polling Places on Election Day 2012, and Wait Times Were Believed to Be the Same or Shorter than Those in 2008", "Analysis of Our Survey of Local Jurisdictions", "Our Analysis of Cooperative Congressional Election Study Data and Review of Other Wait Times Studies", "A Number of Factors Affected Voter Wait Times on Election Day 2012, and Their Impacts Varied across Jurisdictions", "Various Factors Affected Voter Wait Times", "Impact of Factors Varied across Jurisdictions", "Jurisdiction 2", "Jurisdiction 3", "Jurisdiction 4", "Jurisdiction 5", "Agency and Third- Party Comments", "Appendix I: Objectives, Scope, and Methodology", "2014 Survey of Local Election Jurisdictions", "Analysis of 2012 Cooperative Congressional Election Study Data", "Interviews with State and Local Jurisdiction Election Officials", "Interviews with Election Administration Researchers", "Appendix II: Aggregated Results from Nationwide Survey of Local Election Jurisdictions", "Response", "Response", "Response", "Response", "Response", "Response", "Appendix III: Estimates of Average Wait Times by State on Election Day 2012 Based on Nationwide Public Opinion Survey", "Appendix IV: Comments from the Supervisor of Elections for Lee County, Florida", "Appendix V: GAO Contact and Acknowledgments", "GAO Contact", "Acknowledgments" ], "paragraphs": [ "", "Election authority is shared by federal, state, and local officials in the United States, but election administration is highly decentralized and varies among state and local jurisdictions. Federal election laws have been enacted that include provisions pertaining to voter registration, protecting the voting rights of certain minority groups, and other areas of the elections process. States regulate various election activities, including some requirements related to these laws, but generally delegate election administration responsibilities to local jurisdictions.", "Congressional authority to regulate elections derives from various constitutional sources, depending upon the type of election, and Congress has passed legislation in major functional areas of the voting process, such as voter registration, as well as prohibitions against discriminatory voting practices. For example, the Help America Vote Act (HAVA)—enacted in October 2002—includes a number of provisions related to voter registration, voting equipment, and other election administration activities, and authorized the appropriation of funds to be The act authorized used toward implementing the law’s requirements. funding for states and jurisdictions to, among other things, meet the act’s requirements, including replacing punch card and mechanical lever voting equipment and creating and maintaining a centralized state voter registration database.\nPub. L. No. 107-252, 116 Stat. 1666 (2002) (codified as amended at 42 U.S.C. §§ 15301-545).\nHAVA also established the EAC, an independent federal agency, to help improve state and local administration of federal elections. The EAC is charged with providing voluntary guidance to states regarding implementing certain HAVA provisions and serving as a national clearinghouse and resource for information with respect to the administration of federal elections, among other things. For example, the EAC issued guidelines that identified data that would be helpful in conducting postelection analysis, such as the average wait time for polling place voters by precinct, and best practices for designing ballots and voter information materials.\nIn addition to HAVA, federal laws have been enacted in other areas of the voting process. For example, the National Voter Registration Act of 1993 expanded the opportunities for eligible citizens to apply to register to vote in federal elections by requiring states to allow registration by mail using the federal voter registration form and at state motor vehicle agencies and Also, the Voting Rights Act of 1965, as other specified public agencies. amended, contained, among other things, provisions designed to protect the voting rights of U.S. citizens of certain ethnic groups whose command of the English language may be limited. Language minority provisions in the act require covered states and covered jurisdictions to provide written materials—such as sample ballots or registration forms—in the language of certain “language minority groups” in addition to English, as well as other assistance, such as bilingual poll workers.", "The responsibility for the administration of elections resides at the state and local levels. States regulate various aspects of elections including, for example, registration procedures, absentee and early voting requirements, and Election Day procedures. Further, states are required by HAVA to implement a single, uniform, centralized, computerized statewide voter registration list to serve as the official voter registration list for conducting all elections for federal office in each such state.\nWithin each state, responsibility for managing, planning, and conducting elections is largely a local government process, residing with about 10,500 local election jurisdictions nationwide. mandated statewide election administration guidelines and procedures that foster uniformity among the ways local jurisdictions conduct elections. Others have guidelines that generally permit local election jurisdictions considerable autonomy and discretion in the way they run elections. Although some states bear some election costs, local jurisdictions generally pay for elections. Local jurisdictions have discretion over such activities as training election officials and the purchase of voting technology (if not mandated by the state). Among other things, local election officials register eligible voters and maintain voter registration lists; design ballots; educate voters on how to use voting technology and provide information on the candidates and ballot measures; arrange for polling places; recruit, train, organize, and mobilize poll workers; prepare and test voting equipment for use; count ballots; and certify the final vote count.\nStates can be divided into two groups according to how election responsibilities are delegated. The first group contains 41 states that delegate election responsibilities primarily to the county level, with a few of these states delegating election responsibilities to some cities, and 1 state that delegates these responsibilities to election regions. The District of Columbia is included in this group of states. The second group contains 9 states that delegate election responsibilities principally to subcounty governmental units. These local election jurisdictions vary widely in size and complexity, ranging from small New England townships to Los Angeles County, whose number of registered voters exceeds that of many states.", "", "States have established alternatives for voters to cast a ballot other than at the polls on Election Day, including absentee voting and early voting. All states and the District of Columbia have provisions allowing voters to cast their ballots before Election Day by voting absentee, with variations on who may vote absentee, whether the voter needs to provide an excuse for requesting an absentee ballot, and the time frames for applying for and submitting absentee ballots. Some states also permit registered voters to apply for an absentee ballot on a permanent basis so that those voters automatically receive an absentee ballot in the mail prior to every election without providing an excuse or reason for voting absentee. In addition to absentee voting, some states allow early voting. In general, early voting allows voters from any precinct in the jurisdiction to cast their vote in person without providing an excuse before Election Day either at one specific location or at one of several locations.", "For the purposes of in-person voting on Election Day, election authorities subdivide local election jurisdictions into precincts. Voters generally cast their ballots at the polling places for the precincts to which they are assigned by election authorities. Within the polling place, there are three stages in the voting process—arrival, check-in, and marking and submitting ballots—and poll workers have roles and responsibilities associated with each of them.voting process.", "Various studies and research have been conducted on voter wait times. In general, these studies and research have used voter surveys, data on voter check-in and polling place closing times in individual jurisdictions, and the experiences of local jurisdictions to examine issues of voter wait times. For example, the Presidential Commission on Election Administration (Presidential Commission)—established by executive order in March 2013—issued a report in January 2014 identifying best practices in election administration and making recommendations to improve the voting experience and ensure that all eligible voters have the opportunity to cast their ballots without undue delay. In conducting its work, the Presidential Commission held public hearings that included academic researchers in the field of election administration and state and local election officials, among others, and surveyed local election officials nationwide regarding a number of issues, including voter wait times.\nMoreover, various researchers have used postelection voter survey data to examine wait time issues, as there is currently no comprehensive set of data that tracks Election Day wait times across precincts nationwide. Two nationwide postelection public opinion surveys in particular have included questions on wait times experienced by voters. The Survey of the Performance of American Elections (SPAE), conducted in 2008 and 2012, is an Internet survey of 200 registered voters in each of the 50 states and the District of Columbia. their experiences voting—in person on Election Day, in person prior to Election Day, and absentee—including, for those who reported voting in person, the length of time they recalled waiting in line to vote. The CCES, an Internet survey of U.S. citizens aged 18 and over, has been administered since 2006.surveys to estimate individual voter wait times by state, the effect of wait times on the voter experience, and the relationship between demographic characteristics and wait times, among other things.\nResearchers have used data from these In addition, some researchers have conducted postelection studies of wait time issues for specific states. For example, researchers have assessed the extent of long voter wait times in Maryland, Florida, and other states using data such as voter check-in times, polling place closing times, and information from voter surveys.\nThe SPAE is conducted by Charles Stewart III, Professor of Political Science at the Massachusetts Institute of Technology. The total sample size for the 2012 SPAE survey was 10,200 people.", "Estimates from our nationwide survey of local election jurisdictions indicate that most jurisdictions did not collect data that would allow them to calculate voter wait times at individual polling places on the November 2012 General Election Day. Our survey found that jurisdictions did not collect these data primarily because wait times have not been an issue. However, some jurisdictions nationwide did collect selected types of wait time data that election officials and researchers have identified would be helpful in measuring wait times. Officials in the jurisdictions we selected for interviews and researchers have measured wait times using various practices, such as the length of time polling places remained open after designated closing times. In addition, estimates from our survey indicate that a small percentage of jurisdictions nationwide had long voter wait times at more than a few polling places on Election Day 2012.", "On the basis of our survey, we estimate that 78 percent (from 74 to 83 percent) of local jurisdictions nationwide did not collect, receive, or have available information that would allow them to calculate voter wait times that occurred at individual polling places on Election Day 2012. Of these jurisdictions, we estimate that 79 percent (from 73 to 84 percent) did not collect this information because, as discussed later in this report, voter wait times have not been an issue.\nSome jurisdictions did collect some types of wait-time-related information that election administration researchers and state and local officials have said could be helpful in measuring wait times. On the basis of our survey, we estimate that officials in jurisdictions nationwide most commonly collected, received, or had available the types of information for Election Day 2012 shown in table 1, such as the number of votes cast at a precinct during a specified time period. These jurisdictions may not have collected these data across all individual polling places. In addition, most of these data may need to be used together or with other information to measure wait times. We estimate that data collection, where it did occur, varied across jurisdictions, with large jurisdictions more likely than small jurisdictions to collect these data. For example, 43 percent of large jurisdictions—those with populations greater than 500,000—collected data on voter complaints about wait times, while 14 percent (from 9 to 19 percent) of small jurisdictions—those with populations between 10,001 and 100,000—collected the same type of data.\nIn addition to surveying local election jurisdictions nationwide, we also discussed data collected and practices used for estimating wait times with officials from the 5 jurisdictions we selected for interviews. Officials from these jurisdictions told us that they have estimated wait times at some or all polling places using the data discussed above and other information. For example,\nOfficials we interviewed at 4 selected jurisdictions stated that they used the time between when the polls closed and when the last voter cast a ballot to estimate wait times. While this technique does not provide information on wait times for the entire voting period, according to researchers we interviewed and studies we reviewed, it could provide reasonable wait time estimates for a small group of voters.\nOfficials from 1 of the jurisdictions said that they also surveyed polling place supervisors on election night regarding the length of voter wait times. Officials from another jurisdiction said that they used election officials traveling across polling locations and precinct poll worker observations to monitor and estimate wait times. Officials from this jurisdiction told us that if these officials or poll workers report problems with voter wait times, actions are taken to address the issue, such as providing additional poll workers or other resources.\nOfficials at 2 of the 5 selected jurisdictions said that, since the 2012 general election, they have collected wait time data by distributing time-stamped cards to voters upon arrival. In at least one election, 1 of these jurisdictions distributed time-stamped cards to every 15th voter upon arrival. Poll workers then recorded the time on each card at various stages of the voting process and collected the cards when voting was complete. In the other jurisdiction, officials stated that they began measuring wait times from arrival to check-in in the August 2014 election by distributing cards to voters upon arrival and then collecting those cards at the check-in station, where they recorded the time of check-in in an electronic poll book.\nSome researchers have noted that the study of voter wait times is relatively new because measures of times spent waiting to vote are still being developed. These researchers have used a variety of practices to measure wait times, such as polling place closing times—similar to 4 of our 5 selected jurisdictions—or surveys of voters, and primarily have relied on a single type of data.\nOther researchers have measured wait times using multiple sources of data. For example, Maryland’s State Board of Elections commissioned a study of Election Day 2012 wait times in jurisdictions within the state, which used available electronic poll book and DRE systems data combined with historical voter turnout information to estimate voter wait Specifically, the study used the average time to check in voters times.(recorded via electronic poll books), the number of votes cast per voting machine at a polling place over a fixed time period, and other variables such as expected voter turnout at different times of the day and ballot length to perform a simulation of wait times at all polling places in the state. According to the study’s authors, election administrators with access to these types of data could use the simulation results, which provided precinct-level information, to see where there are potential problem areas and move resources accordingly when planning for future elections. However, on the basis of our survey, we found that the technologies to generate these types of data are either not available or not being used in many jurisdictions. For example, from our survey, we estimate that electronic poll books were used in 29 percent (from 24 to 34 percent) of local jurisdictions nationwide for the 2012 general election and DRE systems were used in 51 percent (from 45 to 57 percent) of jurisdictions on Election Day.", "", "Estimates from our nationwide survey of local election jurisdictions indicate that a small percentage of all jurisdictions had long voter wait times at more than a few polling places or long average wait times across polling places on Election Day 2012. In our survey, we defined wait time as the time from when a voter entered the first line to when he or she began filling out a ballot, and we asked jurisdiction officials to estimate (1) how many polling places had wait times that officials considered to be too long, (2) the average voter wait time for all polling places at three times of day, and (3) how many polling places had wait times of greater than 60 minutes at any time during Election Day. Because there is no comprehensive set of data on voter wait times across jurisdictions nationwide and we estimate that most jurisdictions did not collect data on wait times based on our survey of election jurisdictions, we relied on election officials in the jurisdictions we surveyed to estimate wait times for these measures based on their perspectives, data, or other information on wait times.\nOur survey asked jurisdiction officials what amount of time they considered to be too long for voters to wait to begin filling out a ballot. On the basis of our survey, we estimate that officials in 24 percent (from 19 to 29 percent) of local jurisdictions nationwide believe that a voter wait time of more than 10 minutes on Election Day is too long, officials in 30 percent (from 24 to 35 percent) of jurisdictions believe that a wait time of more than 20 minutes is too long, and officials in 21 percent (from 17 to 26 percent) of jurisdictions believe that a wait time of more than 30 minutes is too long. We then asked jurisdiction officials how many of their polling places had wait times that they considered too long on Election Day 2012. The results are shown in figure 3. On the basis of election officials’ survey responses, we estimate that 78 percent (from 73 to 83 percent) of jurisdictions nationwide had no polling places with wait times they considered too long on Election Day 2012, 19 percent (from 15 to 23 percent) had a few polling places, and 3 percent (from 1 to 5 percent) had more than a few polling places.\nWe also asked jurisdiction officials nationwide to estimate the average voter wait time for all polling places at three times of day on Election Day 2012. The results are shown in figure 4. On the basis of election officials’ survey responses, we estimate that the percentage of jurisdictions with wait times of 0 to 10 minutes during the first hour after the polls opened, around lunchtime, and during the last hour before the polls closed were 51 percent (from 45 to 56 percent), 49 percent (from 43 to 55 percent), and 45 percent, (from 39 to 51 percent) respectively. In addition, we estimate that the percentage of jurisdictions nationwide with wait times of over 20 minutes ranged from 5 percent (from 3 to 8 percent) around lunchtime to 8 percent (from 5 to 12 percent) during the first hour after the polls opened and the last hour before the polls closed. According to our survey, in about a third of jurisdictions, officials did not know average voter wait times for these times of day.\nIn addition, we asked jurisdiction officials nationwide to estimate how many polling places had wait times of greater than 60 minutes at any time on Election Day 2012. As shown in figure 5, on the basis of officials’ survey responses, we estimate that 79 percent (from 75 to 84 percent) of local jurisdictions nationwide had no polling places, 9 percent (from 6 to 13 percent) had a few polling places, and 3 percent (from 1 to 5 percent) had more than a few polling places with wait times of greater than 60 minutes on Election Day 2012.\nAmong the 338 jurisdictions that responded to our survey, 18 jurisdictions reported having wait times of greater than 60 minutes at more than a few polling places on Election Day 2012. We assessed these 18 jurisdictions to determine the extent to which they shared any common selected demographic characteristics by analyzing demographic data on these jurisdictions from the U.S. Census. We selected the demographic characteristics to include in our analysis based on those identified in our interviews with researchers and the election administration literature we reviewed as potentially affecting voter wait times. This analysis does not indicate that these demographic characteristics caused voter wait times because there could be other reasons why wait times occurred in these jurisdictions. In addition, the common characteristics we identified apply only to the 18 jurisdictions that reported wait times of greater than 60 minutes and cannot be generalized to the broader election jurisdiction population. On the basis of our analysis, we identified that these 18 jurisdictions tended to have larger populations with lower median ages than survey respondents overall and to have higher proportions of residents who are nonwhite and speak English as a second language. For example,\nTwelve of the 18 jurisdictions had large populations (greater than 500,000), 5 had medium-sized populations (100,001 to 500,000), and 1 had a small population (10,001 to 100,000). All but 1 of these 18 jurisdictions had population sizes above the median population size of all respondent jurisdictions.\nThe median age of the populations of respondent jurisdictions was 38.4 years. Fifteen of the 18 jurisdictions reporting voter wait times of greater than 60 minutes at more than a few polling locations had median ages that were lower than this median.\nThe median percentage of white residents for the respondent jurisdictions in our sample was 76.4 percent, and 17 of the 18 jurisdictions reporting wait times of greater than 60 minutes at more than a few polling places had white populations below that level, with the lowest being less than 8 percent white. In addition, with regard to the primary language spoken by residents in the jurisdiction, 11 of the 18 jurisdictions reporting long wait times had populations where English is a second language for more than 20 percent of the population, with the highest being 48 percent. The median value for all respondent jurisdictions was a little over 10 percent of residents who spoke English as a second language.\nLast, we asked jurisdiction officials nationwide to compare typical voter wait times in 2012 and 2008. Our survey results indicate that, according to jurisdiction officials, typical voter wait times for the majority of jurisdictions nationwide on Election Day 2012 were not longer than typical voter wait times on Election Day 2008. We estimate that officials in 44 percent of jurisdictions (from 38 to 50 percent) believed typical wait times were the same in 2012 as 2008, 19 percent (from 14 to 24 percent) believed wait times were shorter in 2012, and 6 percent (from 3 to 9 percent) believed wait times were longer in 2012. In addition, we estimate that in 31 percent (from 26 to 37 percent) of jurisdictions nationwide, officials did not know or were unsure about how wait times in 2012 compared with those in 2008.", "In addition to analyzing the results of our survey of a nationally representative stratified random sample of local election jurisdictions, we analyzed voter survey data categorized by state on estimated voter wait times from the CCES. Data from the CCES are segmented by state to allow for the comparison of individual voter wait times among states. Our analysis of CCES data demonstrates that, as with the results from our survey of local jurisdictions, long voter wait times were limited on Election Day 2012. Specifically, our analysis of CCES data found that average voter wait times on Election Day 2012 varied across the nation, but few states had average voter wait times of more than 20 minutes. On the basis of this analysis, we estimate that average voter wait times ranged from 1.4 minutes (from 0.7 to 2.1 minutes) in Alaska to more than 34 minutes (from 25 to 43 minutes) in Florida. Further, we estimate that in 3 states—Florida, Maryland, and Virginia—about 12 percent or more of voters waited 61 minutes or more to vote. Appendix III provides more detailed information on the results of our analysis of CCES data on voter wait times in states.\nIn addition, some studies we reviewed that measured wait times at national and state levels reported that national and statewide average wait times in 2012 generally were not longer than those reported in 2008, and may have been shorter in many cases. For example, one study that used data from two nationally representative surveys of voters indicated that the average wait times for early and Election Day voting combined were lower in 2012 than in 2008 both nationally and in many states. Furthermore, this study estimated that the percentage of respondents reporting wait times of less than 10 minutes increased, while the percentage of voters reporting wait times of greater than 60 minutes decreased over the same period. Similarly, in a study conducted for the Maryland State Board of Elections following the 2012 general election, the study’s authors found that Maryland residents who reported voting in previous presidential elections and 2012 in a statewide survey were more likely to say that it took less time to vote in 2012 than in earlier elections.", "On the basis of our survey of local election jurisdictions, interviews with election officials and researchers, and review of relevant literature, we found that various factors, such as voting before Election Day and ballot characteristics, affected voter wait times at different stages in the voting process on Election Day 2012. These factors interacted to affect wait times in the five jurisdictions we selected for interviews, and their impacts varied depending on the unique circumstances in each of the jurisdictions. This variation resulted in targeted approaches by these jurisdictions for reducing wait times where needed and where resources allowed.", "A combination of factors generally affected wait times on Election Day 2012, and these factors may interact to create unique effects on wait times within a jurisdiction or polling place. For instance, one jurisdiction or polling place may be able to manage lines caused by long ballots by increasing the number of voting stations (booths or machines), whereas another jurisdiction or polling place may be unable to set up additional voting stations because it does not have any in reserve, or because there is not enough room at one or more polling places. As a result, the presence of a factor that could contribute to wait times does not necessarily mean wait times will occur. Further, some factors may be present in one election but not another, such as new types of voting equipment, and some factors may be outside the control of local jurisdictions, such as state laws allowing or limiting early in-person voting. It is useful to consider the causes of and solutions for long wait times across jurisdictions to identify common factors; however, it is also important to consider causes and solutions within the unique circumstances of each jurisdiction. The Presidential Commission reported that election administration problems overlap and intersect, and literature we reviewed and researchers we spoke with noted that multiple factors may contribute to long lines, depending on the circumstances of local jurisdictions.\nAs discussed earlier, on the basis of officials’ responses to our survey, most local jurisdictions nationwide did not experience long voter wait times on Election Day 2012, and we primarily focused on those that did in assessing the factors involved. For example, we estimate that 22 percent (from 17 to 27 percent) of all jurisdictions nationwide had wait times that officials considered too long at a few or more polling places on Election Day, and we asked officials in these jurisdictions to select which factors they believed contributed to long voter wait times at polling places in their jurisdiction. The studies we reviewed have also focused on the effect of long wait times on voters in the 2012 and previous elections. For example, studies found that some individuals were deterred from voting in 2012 and 2008 because of long wait times.\nOn the basis of our survey, interviews with state and local election officials and election researchers, and review of literature related to voter wait times, we identified nine key factors that affected wait times on Election Day 2012: opportunities for voting before Election Day, type of poll books, determining voter eligibility, ballot characteristics, amount and type of voting equipment, number and layout of polling places, number and training of poll workers, voter education, and resource availability and allocation.\nThese factors can affect voter wait times at different stages in the voting process on Election Day—(1) arrival, (2) check-in, and (3) marking and submitting the ballot. In addition, some of these factors, such as resource availability and allocation, can cut across multiple stages in the process. Figure 6 shows the voting process and factors that we identified.\nA key factor that could affect wait times at the arrival stage is\nOpportunities for voting before Election Day. The availability of opportunities to vote before Election Day, such as in-person early voting and mail-in absentee voting, may have affected voter turnout on Election Day 2012. Twenty-seven states and the District of Columbia had laws in effect for the November 2012 election to allow voters to cast an absentee ballot by mail without an excuse. These states and the District of Columbia—as well as 6 additional states— also had laws providing for early voting.\nPerspectives on Voting before Election Day\nOn the basis of our survey results, of the jurisdictions nationwide that had wait times officials considered too long at a few or more polling places on Election Day, we estimate that in 24 percent (from 15 to 37 percent), officials believe no or limited opportunities for voting outside of Election Day was a contributing factor. Election officials in 23 states reported that the availability of alternative voting options, such as voting by mail or early voting can affect wait times.\nOf the jurisdictions nationwide making changes to address the causes of long wait times, we estimate that 30 percent (from 18 to 45 percent) are revising polices or procedures related to options for voting outside of Election Day.\nKey factors at the check-in stage that could affect wait times include\nType of poll books. A poll book is a list of eligible voters assigned to a jurisdiction and is commonly organized alphabetically or by the address of the voters. Poll workers use poll books, whether paper or electronic, at polling place check-in stations to ensure voters are registered, eligible to vote, and at the correct voting precinct. The extent to which a poll book is easily and quickly searched affects the poll worker’s ability to efficiently check in voters. On the basis of our national survey of local jurisdictions, we estimate that 29 percent (from 24 to 34 percent) of jurisdictions used electronic poll books and 77 percent (from 72 to 82 percent) used paper poll books on Election Day 2012.\nPerspectives on Poll Books\nOn the basis of our survey results, of the jurisdictions nationwide that had wait times officials considered too long at a few or more polling places on Election Day, we estimate that in 35 percent (from 26 to 47 percent), officials believe the use of paper poll books was a contributing factor, and in 15 percent (from 7 to 26 percent), officials believe the use of electronic poll books was a contributing factor. Election officials in 10 states reported that either the state or jurisdictions within the state used or planned to use electronic poll books in an effort to minimize wait times. The studies we reviewed and researchers we interviewed provided varying perspectives on electronic poll books. For example, According to a report by the Presidential Commission, electronic poll books can provide several benefits, such as the ability to search for voter information using a variety of fields. Some researchers noted that electronic poll books may not help with voter wait times or may contribute to them. In particular, one researcher we spoke with said that poll books with limited search capabilities may cause delays in finding voters’ registration information. Another researcher noted that older poll workers may not be comfortable with or proficient using the technology.\nDetermining voter eligibility. Poll workers must spend additional time determining voter eligibility if the information they are provided at check-in does not match the information in the poll book. This could be due to first-time voters, voters with inactive registration status, voters going to the wrong polling place, or inaccurate voter registration information, among other things. First-time voters may be more likely to arrive at the wrong polling place or be unfamiliar with the check-in process. Voters may also arrive at the wrong polling place because redistricting or precinct consolidations led to changes to their polling place locations from previous years.determining voter eligibility can lengthen the transaction time at check-in because poll workers may need to investigate the source of Issues with the problem and provide additional assistance, such as administering a provisional ballot.\nPerspectives on Determining Voter Eligibility\nOn the basis of our survey results, of the jurisdictions nationwide that had wait times officials considered too long at a few or more polling places on Election Day, we estimate that in 44 percent (from 32 to 56 percent), officials believe processing provisional voters was a contributing factor. Some studies we reviewed noted that the provisional ballot process resulted in longer wait times on Election Day 2012. For example, one study found that voters who cast provisional ballots were at the check-in table twice as long as voters using traditional ballots.\nOf the jurisdictions nationwide that had wait times officials considered too long at a few or more polling places on Election Day, we estimate that In 49 percent (from 37 to 61 percent), officials believe a large number of first- time voters was a contributing factor. In 35 percent (from 24 to 48 percent), officials believe that a large number of inactive voters was a contributing factor. In 35 percent (from 24 to 46 percent), officials believe redistricting and in 28 percent (from 18 to 40 percent), officials believe that consolidation or changes to polling places were contributing factors. In 24 percent (from 14 to 36 percent), officials believe incorrect or inaccurate voter registration information was a contributing factor.\nResearchers and jurisdiction officials we spoke with said that modernizing voter registration would reduce the potential for delays at the polling place. Suggestions include using electronic registration and allowing voters to register and change information online.\nKey factors at the mark and submit stage that could affect wait times include\nBallot characteristics. Ballot characteristics, such as their length and design, vary across jurisdictions. These characteristics are subject to state and federal requirements, such as the minority language provisions of the Voting Rights Act and the type of the voting equipment used.\nPerspectives on Ballot Characteristics\nOn the basis of our survey results, of the jurisdictions nationwide that had wait times officials considered too long at a few or more polling places on Election Day, we estimate that in 71 percent (from 59 to 82 percent), officials believe a long ballot was a contributing factor.\nOfficials in 15 of the 18 jurisdictions in our survey that reported wait times of greater than 60 minutes at more than a few polling places believed a long ballot was a contributing factor. Election officials in 16 states and the District of Columbia reported that ballot characteristics could affect wait times.\nAmount and type of voting equipment. The amount of voting equipment allocated to polling places can depend on the level of funding available to jurisdictions to purchase equipment or replace or repair broken equipment and resource planning by jurisdictions. Further, the type of voting equipment can affect how efficiently voters mark and submit their ballots, among other things. On the basis of our survey, we estimate that 73 percent (from 68 to 78 percent) of jurisdictions used paper ballots with optical/digital scan counting devices, 51 percent (from 45 to 57 percent) used DRE machines, and 18 percent (from 13 to 24 percent) used paper ballots that were hand- counted on Election Day. Some jurisdictions combined methods.\nTwenty-nine percent (from 17 to 44 percent) have revised or are revising polices or procedures related to the number of voting machines. Eighteen percent (from 9 to 31 percent) have revised or are revising policies or procedures related to the type of voting method or machine used.\nOfficials in 18 states said that they used policies associated with voting equipment on Election Day 2012 to minimize wait times. In particular, officials in 5 states noted their decision to use optical scan machines to address wait times. According to officials in 1 of these states, using such machines gave them additional flexibility in managing wait times because they could set up additional privacy booths if needed.\nA number of factors could affect voter wait times across more than one stage of the voting process. Such crosscutting factors include\nNumber and layout of polling places. Polling places need to meet numerous requirements, including being sizable enough to accommodate the expected number of voters; having sufficient parking available; and complying with federal and state accessibility requirements, including those in the Americans with Disabilities Act.In addition, polling places can have differing layouts for moving the voter from arrival to ballot submission.\nPerspectives on Number and Layout of Polling Places\nOn the basis of our survey results, of the jurisdictions nationwide that had wait times officials considered too long at a few or more polling places on Election Day, we estimate that in 14 percent (from 6 to 24 percent), officials believe not having enough polling places was a contributing factor, and in 33 percent (from 22 to 45 percent), officials believe the design or layout of polling places was a contributing factor.\nOf the jurisdictions making changes to address the causes of long wait times, we estimate that 65 percent (from 50 to 78) have revised or are revising policies or procedures related to the design or layout of polling places. Election officials in 13 states and the District of Columbia reported that issues associated with the polling place, such as location, size, and layout, contributed or could contribute to longer than expected wait times on Election Day. Some researchers have suggested that schools be used as polling places. For example, the Presidential Commission recommended that states authorize the use of schools as polling places because they typically are large, conveniently located, and comply with federal accessibility requirements. The commission stated that security concerns could be addressed by making Election Day an in-service day for students and teachers.\nNumber and training of poll workers. Effective polling place management requires having a sufficient number of poll workers to serve voters and training these workers to efficiently move voters through the voting process and resolve problems. According to our survey, almost all jurisdictions provided standardized training for poll workers. We estimate that the average training jurisdictions provided for typical first-time poll workers was 2.9 hours (from 2.7 to 3.1 hours), and the average training they provided for typical returning poll workers was 2.6 hours (from 2.4 to 2.7 hours) for Election Day 2012.\nPerspectives on Number and Training of Poll Workers\nOn the basis of our survey results, of the jurisdictions nationwide that had wait times officials considered too long at a few or more polling places on Election Day, we estimate that in 36 percent (from 25 to 48 percent), officials believe training of poll workers was a contributing factor, and in 26 percent (from 16 to 38 percent), officials believe not enough poll workers was a contributing factor.\nOf the jurisdictions making changes to address the causes of long wait times, we Seventy-four percent (from 60 to 86 percent) have revised or are revising policies or procedures related to training of poll workers. Sixty-seven percent (from 52 to 80 percent) have revised or are revising polices or procedures related to the number of poll workers at polling places.\nElection officials in 29 states and the District of Columbia said they used or plan to use policies associated with poll workers to minimize wait times. In particular, officials in 21 states emphasized poll worker training as something they used to minimize wait times on Election Day 2012.\nVoter education. Voter education encompasses providing voters with the information they need to efficiently navigate the voting process. According to our survey, the most common types of information that jurisdictions provided to educate the public prior to the November 2012 general election were specific polling place location information, sample ballots, and information about options to vote before Election Day.\nPerspectives on Voter Education\nOf the 291 jurisdictions that responded to our open-ended survey question regarding what policies and procedures were most important to minimizing wait times, 44 cited practices related to voter education. Election officials in 15 states and the District of Columbia reported that, in an effort to minimize wait times, either the state or jurisdictions within the state took steps to educate voters by, for example, providing sample ballots, polling place information, or real-time information about wait times on Election Day 2012.\nResource availability and allocation. The amount of resources available to jurisdictions and how these resources are allocated relate to the other factors we have identified. For example, resource availability and allocation influence the number of voting machines and poll workers in each polling place, as well as jurisdictions’ voter education efforts. Jurisdictions’ resource planning efforts can encompass preparing for expected voter turnout and requesting and distributing resources to help reduce voter wait times. According to our survey, most jurisdictions had enough resources on Election Day 2012 and resource shortages were rare. We estimate that in 81 percent (from 77 to 85 percent) of jurisdictions, officials believe they had enough resources to comfortably conduct operations on Election Day; in 17 percent (from 13 to 22 percent), officials believe that resources were tight but Election Day operations were conducted as planned; and in 2 percent (from 1 to 4 percent), officials believe there were resource shortages and some Election Day operations were affected by these shortages. Our survey results also show that most jurisdictions tended to use general types of data, such as the number of registered voters, to inform their resource allocation among polling places, and typically did not use more specific measures, such as the estimated average time needed to check in voters. For example, we estimate that 89 percent (from 84 to 92 percent) of jurisdictions used the number of registered voters in each polling place to inform their resource allocation, and 31 percent (from 25 to 36 percent) used the estimated average time needed to check in voters.\nPerspectives on Resource Availability and Allocation\nOf the 291 jurisdictions that responded to our open-ended survey question regarding what policies and procedures were most important to minimizing wait times, 168—or over half—indicated areas related to Election Day resources, such as better allocation or increasing the number of poll workers or voting machines. In addition, of the 173 jurisdictions that responded to our open-ended question regarding what the federal government could do to help address long voter wait times, 100 mentioned providing funding or enacting policies related to additional election resources, such as voting equipment. Studies we reviewed and researchers we interviewed noted a relationship between the allocation of resources and wait times. For example, The Presidential Commission noted that it is usually the allocation of resources between polling places, rather than the total resources available, that causes long lines. The Presidential Commission and researchers with whom we spoke suggested jurisdictions seeking to reduce voter wait times use resource allocation methods that incorporate targeted inputs—such as estimated turnout by hour and estimated average service times for voter check-in and ballot completion. The Brennan Center for Justice noted relationships between resource shortages and voter wait times at the end of the day on Election Day 2012 after analyzing relevant data for studied counties in Florida, Maryland, and South Carolina. The Brennan Center reported that for the selected counties in Florida and South Carolina, the 2 states they examined that had data on how poll workers were allocated, lines were generally longer when poll workers had to serve more voters. The Brennan Center also reported that, in general, for studied counties across all 3 states, the more registered voters a machine had to serve, the longer the delay.", "Multiple factors affected wait times on Election Day 2012 in the 5 local jurisdictions we selected for interviews. We selected these jurisdictions based on wait times, election administration policies, and demographic characteristics, among other things, to reflect a range of local experiences and illustrate how factors affected wait times in practice. While the nine factors we identified apply generally across all jurisdictions, their specific impact on Election Day 2012 wait times depended on the unique circumstances in each of our selected jurisdictions, leading to targeted approaches for reducing wait times where needed and where resources allowed. Table 2 summarizes reported wait times and election administration characteristics related to these nine factors across our 5 selected jurisdictions.\nJurisdiction 1 reported in our survey that more than half of all its polling places had wait times of greater than 60 minutes on Election Day 2012. In addition, the last voter checked in over 2 hours after the precinct’s designated closing time at 10 of the jurisdiction’s 77 precincts, according to data provided by jurisdiction officials. The jurisdiction reported that Election Day wait times in 2008 were about the same as those in 2012, but officials said that the lines in 2008 were concentrated in the morning with few lines at closing. Officials stated that the long lines on Election Day 2012 were caused by a variety of factors.\nAccording to jurisdiction officials, an insufficient number of voting machines was a primary cause of long voter wait times. Officials said that state laws (1) prohibited the jurisdiction from purchasing additional DRE voting machines and (2) did not allow for the use of on-hand emergency paper ballots that could be hand-counted in addition to the use of DRE machines.DRE machines in 2012 as in 2008 despite a 14 percent increase in Election Day votes cast, and was unable to deploy paper ballots to help mitigate long lines. Officials stated that they were limited in their ability to add voting capacity at polling places with the longest lines because all DRE machines were already deployed and it was not practical to reprogram the machines for use at precincts that may have had greater needs.\nAs a result, the jurisdiction used roughly the same number of Issues with determining voter eligibility, primarily resulting from the large number of inactive voters, was another key factor that contributed to long wait times. Voters marked as inactive on the jurisdiction’s registration rolls were required to fill out Affirmation of Eligibility forms to verify their addresses, and the number of these forms filled out by voters on Election Day 2012 was more than 12 times higher than in 2008. Further, according to the jurisdiction’s postelection report, available data indicate that every voter requiring an address confirmation using this process resulted in three additional voters checking in after precinct closing time.\nJurisdiction officials explained that their policy was to move all voters with check-in problems out of the main line and direct them to the precinct supervisor for resolution. Officials said that this helped to alleviate wait times at the main check-in line to some extent, but there were still delays because of the time it took to identify issues and direct voters to the supervisor, among other things. In addition, officials noted that these voters diverted resources from voters without difficulties. Officials also said that according to an analysis performed by the former Acting Registrar and a postelection task force established by the jurisdiction, the biggest factor in late precinct closing times was the number of voters with issues requiring assistance from the precinct supervisor. In addition to issues with determining voter eligibility, other matters that required assistance from the supervisor included voters with disabilities or voters over the age of 65 who chose to vote from their vehicles outside the polling place (curbside voters), as allowed by state law, and voters who brought their absentee ballots to precincts on Election Day. Officials noted that when precinct supervisors called the registrar’s office to resolve issues that required additional assistance, the office could not keep up with demand.\nThe large numbers of voters in each precinct also contributed to long lines. Specifically, according to the jurisdiction’s postelection report, there was a high correlation between large precincts and the number of citizens voting after precinct closing time, and two of the four precincts with over 5,000 registered voters checked in their last voter over 2-1/2 hours after closing time.\nFinally, jurisdiction officials said that recruitment and retention of poll workers was challenging. According to these officials, poll worker experience is important for managing polling locations on Election Day, but there is a roughly 50 percent drop in retention from election to election, and presidential elections generally require a large number of poll workers to handle greater levels of voter turnout.\nJurisdiction officials stated that one precinct in particular faced a confluence of factors that contributed to its remaining open nearly 4 hours after its official closing time on Election Day 2012.\nExample of How Factors Combined to Create Long Wait Times in an Individual Precinct Jurisdiction officials and a precinct official cited several factors that combined to create long wait times: Total turnout increased by 63 percent—from 2,104 in 2008 to 3,425 in 2012. Large number of first-time and inactive voters who can take longer to check in and vote. Large number of curbside voters, which under state law required the assistance of two poll workers when a portable electronic voting device was used. Large number of voters needing language assistance. Such assistance required that both the voter and the assisting poll worker fill out separate forms before the poll worker provided translation services.\nAccording to officials, jurisdiction 1 has made or is in the process of making several changes to address the causes of long voter wait times on Election Day 2012. The jurisdiction reported that it is replacing its DRE voting machines with optical scanners (for scanning paper ballots), which allow for more flexibility in adding voting station capacity. The jurisdiction also plans on maintaining adequate scanners and personnel in reserve to handle any equipment failures that might arise, and officials noted that scanners can be easily transferred among precincts. In addition, the jurisdiction reported that it is purchasing more electronic poll books to help check in voters more efficiently and that its Electoral Board has tested scanners (capable of scanning driver’s licenses and voter cards) to be used with the electronic poll books for instantaneous and accurate voter check-in. Additionally, the jurisdiction has added 14 precincts and reduced the largest precincts to fewer than 4,000 registered voters, according to jurisdiction officials. The jurisdiction’s Electoral Board believes that these and other changes will allow it to meet the jurisdiction’s newly established goal of having no voters expend more than 30 minutes from the time they arrive at the polling place until they cast their ballots.", "Jurisdiction 2 reported in our survey that more than half of its polling places had wait times of greater than 60 minutes on Election Day 2012. In addition, it reported average wait times of more than 120 minutes in the hour after polls opened and the hour before polls closed. Jurisdiction officials stated that despite the long voter wait times in 2012, things went more smoothly than in 2008. This was in part because of measures implemented to address the issue, such as voter education and increasing the number of voting stations at polling places, as advised by state guidance distributed shortly before the 2012 presidential election.\nAccording to jurisdiction officials, the length of the ballot—four 22-inch pages—was the primary cause of long voter wait times. Officials noted that ballot length, including the number of elected offices and ballot questions, is outside of the jurisdiction’s control. Prior to the election, the jurisdiction tested the time required to complete the ballot on a variety of constituencies and found that it took voters unfamiliar with the ballot between 12 and 15 minutes to complete it. implemented measures to try to alleviate the expected congestion at the voting booths, such as increasing the number of booths at polling locations, mailing sample ballots to registered voters, and employing line monitors to help ensure that voters were prepared to vote immediately after check-in.\nAccording to jurisdiction officials, when they became aware of the length of the ballot for the 2012 presidential election, testing was conducted on different constituencies, including the elderly and groups with varying education levels, to determine the length of time it might take voters in the jurisdiction to mark their ballots. line an average of 16 to 30 minutes to turn in their ballots after completing them.\nAccording to officials, the jurisdiction does not plan to make any changes to its policies and procedures to address long wait times. They noted that the long wait times in the 2012 election were primarily caused by a lengthy ballot, which is outside of their control.", "Jurisdiction 3 reported in our survey that about half of its polling places had wait times of greater than 60 minutes on Election Day 2012, and that typical wait times in 2012 were less than those in 2008. According to jurisdiction officials, the additional time spent determining voter eligibility, and issuing provisional ballots, as necessary, was the primary cause for long lines in their jurisdiction. Key factors contributing to delays in determining voter eligibility were\nRedistricting. Jurisdiction officials stated that redistricting increased the number of voters who went to the wrong polling location because their polling place had changed from the previous election. These officials explained that redistricting changed the location of all but one of the voting precincts in their jurisdiction.Inactive voters. According to jurisdiction officials, there was a large number of inactive voters who had not voted in at least two general elections. Officials stated that delays were caused by time spent assisting these voters—by, for example, calling the election office to request further research—and updating their status on voter registration lists. Inaccurate voter registration information. According to jurisdiction officials, inaccurate voter registration information may have also caused delays in determining voter eligibility. An official stated that poll workers directed most voters who said they were registered but were not included in the state’s list of registered voters to the jurisdiction’s central office, where Election Day registration was conducted.found that some voter registration forms had not been forwarded to An investigation initiated by the state after Election Day the election office and a number of voter requests for registration information had not been processed by a third-party state agency. Jurisdiction officials believe that this contributed to the number of individuals who thought they had submitted registration materials but were not registered, leading to delays in checking in voters on Election Day. In addition, officials noted that many voters were unaware of the need to update their registration information with each address change. This led to voters arriving at the wrong polling places and requiring additional assistance during check-in.\nFurther, jurisdiction officials stated that redistricting required locating new polling places to serve the new precincts and noted the challenges they faced in doing so. Specifically, they said that it was difficult to find polling places that had the necessary space and parking and were compliant with federal and state polling place accessibility requirements. They noted that they primarily try to use churches, community centers, and schools as polling places. However, they said that while schools tend to have the necessary space and layout to help process voters efficiently, using schools has become more challenging in recent years because of security concerns. In addition, principals are concerned about the potential disruptions that the polling activities might have on students. Jurisdiction officials noted that 9 schools were used as polling places in 2012, down from the 14 generally used during previous elections.\nJurisdiction officials said that their elections budget limits the changes they can implement to address wait times. For example, officials stated that additional voter education could help address some of the issues with determining voter eligibility that were experienced on Election Day 2012, such as voters arriving at the wrong polling place, but their jurisdiction lacks the resources to provide this education.", "Jurisdiction 4 reported in our survey that less than half, but more than a few, of its polling places had wait times of greater than 60 minutes on Election Day 2012. In addition, 26 percent of its precincts remained open over 3 hours after the designated closing time, according to data provided by jurisdiction election officials. These officials stated that the jurisdiction did not have wait time issues in 2008 of which they were aware and that a confluence of factors created the long wait times in 2012.\nAccording to jurisdiction officials, lengthy ballots—an average of eight 17- inch pages—were the primary cause of long voter wait times. Factors contributing to the long ballots included (1) 12 state constitutional amendments that spanned five pages; (2) state requirements to include special district races, such as fire control, mosquito control, and community development districts, on the ballots; and (3) the Voting Rights Act requirement to include both English and Spanish on the ballots. Officials said that voters took a significant amount of time to fill out their ballots, which resulted in congestion at voting booths in some polling places. In addition, these officials stated that the long ballots led to paper jams when voters scanned their ballots, contributing to average wait times of more than 30 minutes to turn in ballots after completing them. According to jurisdiction officials, the length of the ballot for the November 2012 election was not determined until mid-June because of the timing for determining qualifying candidates and state amendments. Officials said that they sent out sample ballots to help educate voters, but did not have sufficient time to effectively plan or take additional actions to help mitigate the effects.\nJurisdiction officials said that the second key cause of long wait times on Election Day was state-wide reductions in the number of days and limited locations available for in-person early voting. State legislation changed the number of allowable early voting days from 14 days in 2008 to 8 days In addition, officials said that existing state law limited the sites in 2012.that could be used for early voting to a few types of public buildings, which created challenges with finding locations that could conveniently and effectively serve voters. Election officials reported that while there were about 5,500 fewer total voters in 2012 compared with the 2008 general election (a 2 percent decrease), approximately 14,500 fewer people voted early (a 22 percent decrease). As a result, more voters than expected came to the polls on Election Day and the jurisdiction did not have enough resources to effectively accommodate them, according to officials. For example, officials stated that there was an insufficient number of voting booths and scanners in some polling locations because of both the larger than expected turnout and the time needed to fill out and scan long ballots.\nJurisdiction officials said that other factors also contributed to wait times. For example, they stated that redistricting and precinct consolidations may have increased the number of voters who went to the wrong polling location because their polling place had changed from the previous election.number from 171 in 2008 to 125 in 2012—in an effort to lower election expenditures, but that this may have contributed to long lines by increasing the number of voters in certain polling locations. Further, officials said that heavy rain on Election Day led to line management issues in some locations because poll workers were checking in more voters than their polling place could accommodate to get voters out of the rain. This contributed to the congestion at the voting booths and scanning machines.\nOfficials stated that they consolidated precincts—reducing the Jurisdiction officials said that a number of changes have been made since the 2012 election to address long wait times. For example, state laws established additional word limits to state constitutional amendments on the ballot, restored the allowable number of early voting days to 2008 levels, and expanded the types of sites that can be used for early voting locations. In addition, the jurisdiction has replaced the paper poll books used in 2012 with electronic poll books, which officials anticipate will help expedite the check-in process; better estimate voter turnout for resource allocation; and allow them to post current wait times for each precinct online, which would help voters identify times to go to the polls if they do not want to wait. According to officials, the jurisdiction also purchased an additional 100 optical scanners so that each precinct will have 2 scanners. In addition, officials said that they have launched voter education efforts, such as public service announcements on radio, television, and other forms of media, to encourage mail-in voting and inform voters about how to access voter registration and polling place information. Further, these officials noted that as of 2014, the jurisdiction began paying the return postage on mail-in ballots.", "Jurisdiction 5 reported in our survey that it had no polling places with wait times of greater than 60 minutes on Election Day 2012 and that typical wait times in 2012 were less than those in 2008. This jurisdiction had ballots that were seven pages long on average and a high percentage of provisional voters but reported that it did not experience long voter wait times.\nJurisdiction officials said that the county provided sufficient resources for conducting the 2012 general election, which helped ensure that long wait times did not occur. According to officials, this allowed election planners to include a safety margin when allocating resources in case of a larger than expected turnout and deploy large amounts of additional resources to polling places that were expected to have higher numbers of voters or substantial issues with determining voter eligibility on Election Day 2012.\nJurisdiction officials reported that provisional voting accounted for 12 percent of total in-person voting on Election Day 2012. These officials said that the jurisdiction’s practice of taking individuals whose eligibility to vote is unclear out of the main check-in line and administering provisional ballots, if needed, in another area of the polling place was important to reducing wait times. They also noted that the jurisdiction’s policy of permitting all voters experiencing eligibility issues to vote provisionally and not adjudicating these issues at the polling place reduced the time and resources expended on problems at check-in. In addition, state law allowed individuals to vote provisionally in precincts other than the one to which they were assigned and have applicable votes on their ballots This helped expedite the processing of individuals whose counted.eligibility to vote was unclear and reduced wait times, according to jurisdiction officials.\nJurisdiction officials stated that a number of other policies and practices helped minimize wait times on Election Day 2012. For example,\nOfficials said that limiting the number of voters in each precinct helped prevent overcrowding and congestion at polling places. State law mandates a maximum of 1,000 registered voters per precinct. Officials noted that they need to ensure the jurisdiction has sufficient polling places, poll workers, and voting equipment to support the number of precincts required to meet this requirement.\nAccording to jurisdiction officials, mailing sample ballots to registered voters helped to shorten the time it took to fill out ballots in the voting booth. A polling place inspector—who supervises polling place operations and staff—we interviewed said that the lengthy ballot did not result in long wait times at her polling place on Election Day 2012 because many voters brought in their sample ballots and knew how they would vote. She also noted that this helped facilitate check-in because voters’ names and addresses were on the sample ballot.\nOfficials said that permanent absentee voting and no-excuse absentee voting by mail, permitted by state law, reduced the number of voters on Election Day.\nOfficials also stated that poll worker training, which includes how to assist provisional voters and what to do if wait-time-related issues arise, and having experienced poll workers were important to ensuring minimal lines at polling places. According to officials, the majority of poll workers have served in previous elections. In addition, officials said that having a pool of reserve poll workers who can fill in at locations that need additional staff was essential to reducing wait times.\nThe jurisdiction deployed mobile units that travel to polling places and distribute additional ballots and other supplies if needed, according to officials.", "We provided a draft of this report to the EAC for review and comment. The EAC had no comments on the draft report, as noted in an e-mail received on September 17, 2014, from the commission’s Acting Executive Director. We also provided excerpts of the draft report to the chief election officials of each of the 5 local election jurisdictions that we selected for interviews. The excerpts for each of these jurisdictions included findings that pertained specifically to the individual jurisdiction and a description of the methodology we employed to select the 5 jurisdictions. One jurisdiction provided written comments on the excerpts provided for review, which are reproduced in full in appendix IV. The chief election official from this jurisdiction stated that our description of the jurisdiction’s experiences was accurate, noted that a series of issues contributed to the long wait times in the jurisdiction on Election Day 2012, and noted the actions the jurisdiction had taken to address them. One jurisdiction provided technical comments, which we incorporated in the report as appropriate. Three jurisdictions reviewed the excerpts and indicated that they had no comments in e-mails received from the jurisdictions’ chief election officials on September 8, September 17, and September 22, 2014.\nWe are sending copies of this report to the Election Assistance Commission, election offices in the 5 selected local jurisdictions that participated in our research, appropriate congressional committees and members, and other interested parties. In addition, this report is available at no charge on GAO’s website at http://www.gao.gov.\nIf you or your staff have any questions, please contact Rebecca Gambler at (202) 512-8777 or [email protected]. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made significant contributions to this report are listed in appendix V.", "This report addresses the following questions: 1. To what extent did local election jurisdictions collect data to measure voter wait times and have long voter wait times on Election Day 2012? 2. What factors affected voter wait times on Election Day 2012, and what were the impacts of these factors across jurisdictions?\nFor both objectives, we (1) conducted a web-based survey of election officials from a nationally representative stratified random sample of 423 local election jurisdictions, excluding jurisdictions with populations of 10,000 or fewer and jurisdictions in Oregon and Washington; (2) analyzed responses from the 2012 Cooperative Congressional Election Study (CCES), a survey of U.S. citizens aged 18 and over; (3) interviewed state election officials from 47 states and the District of Columbia, as well as local election administration officials, on-site or by phone, from 5 selected local jurisdictions—Detroit, Michigan; Hartford, Connecticut; Lee County, Florida; Los Angeles County, California; and Prince William County, Virginia; and (4) interviewed officials from the Election Assistance Commission (EAC) and 14 researchers and representatives from research organizations in the field of election administration. We also reviewed relevant literature on voter wait times, such as studies on wait times by various researchers and reports completed or sponsored by state or local governments in our 5 selected jurisdictions.studies whose findings we cite in this report and determined that the design, implementation, and analyses of the studies were sufficiently A GAO social scientist and a GAO statistician reviewed the sound to support the studies’ results and conclusions based on generally accepted social science principles.", "To obtain national information from local election officials on voter wait times on Election Day 2012, we conducted a web-based survey of election officials from a stratified random sample of 423 local election jurisdictions. We surveyed officials about any data their jurisdictions collected related to wait times on Election Day 2012, voter wait times in their jurisdictions on this day, and their views on factors that affected long voter wait times, among other things. We defined wait time as the time from when a voter entered the first line to when he or she began filling out a ballot. Reported wait times may be based on officials’ perspectives, data, or other information on wait times. Our survey period was from March 20, 2014, through June 6, 2014, and we received 338 completed surveys for an overall response rate of 80 percent.\nOverall, there are about 10,500 local government jurisdictions responsible for conducting elections nationwide. States can be divided into two groups according to how they delegate election responsibilities to local jurisdictions. The first group is composed of 41 states that delegate election responsibilities primarily to counties, with a few of these states delegating election responsibilities to some cities, and 1 state that delegates these responsibilities to election regions. We included the District of Columbia in this group of states. The first group contains about one-fourth of the local election jurisdictions nationwide. The second group is composed of 9 states that delegate election responsibilities to subcounty governmental units, known by the U.S. Census Bureau as minor civil divisions (MCD). This group of states contains about three- fourths of the local election jurisdictions nationwide. The categorization of the 50 states and the District of Columbia by how election responsibilities are organized is as follows (states in bold delegate election responsibilities to some cities independently from counties):\nCounty-level states: Alabama, Alaska (four election regions), Arizona, Arkansas, California, Colorado, Delaware, the District of Columbia, Florida, Georgia, Hawaii, Idaho, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maryland, Mississippi, Missouri, Montana, Nebraska, Nevada, New Jersey, New Mexico, New York, North Carolina, North Dakota, Ohio, Oklahoma, Oregon, Pennsylvania, South Carolina, South Dakota, Tennessee, Texas, Utah, Virginia, Washington, West Virginia, and Wyoming\nMinor civil division–level states: Connecticut, Maine, Massachusetts, Michigan, Minnesota, New Hampshire, Rhode Island, Vermont, and Wisconsin While only about one-fourth of election jurisdictions nationwide are in states that delegate election responsibilities primarily to counties, according to the 2010 Census, 88 percent of the U.S. population lived in these states. The U.S. population distribution between the two state groups is shown in table 3.\nOur sampling unit was the geographically distinct local election jurisdiction at the county, city, or MCD level of local government (or, in Alaska, the election region). The initial list of jurisdictions for each state group above was constructed from the 2010 decennial Census data. Census population data were available for all counties, county equivalents, and MCDs.\nWe excluded the states of Oregon and Washington because, as of the November 2012 general election, they both were vote-by-mail states where individuals generally do not go to polling places to vote. As a result, our sample frame included jurisdictions in 48 states and the District of Columbia. In addition, we excluded about 7,600 jurisdictions with populations of 10,000 or fewer because, on the basis of our review of wait time research, jurisdictions of this size were unlikely to have experienced long voter wait times.\nWe divided each state group—county-level and MCD-level—into strata according to jurisdiction population size. We used jurisdiction population size, rather than the number of eligible or registered voters, to define sample strata because these Census data were readily available for all counties and MCDs nationwide. County-level states were divided into six strata, and MCD-level states were divided into five strata. The allocation of units, or jurisdictions, to strata is shown in table 4. We included all 108 jurisdictions in strata with populations of greater than 500,000—strata 1, 2, and 7—in our sample because, on the basis of our review of wait time research, the largest jurisdictions were most likely to have experienced long voter wait times. We then selected random samples of jurisdictions in each of the remaining strata, applying a minimum allocation of 20 jurisdictions per stratum. This resulted in a total sample of 423 jurisdictions. Our sample allocation also allowed us to have a random sample of local jurisdictions nationwide according to population size— large, medium, and small. To group jurisdictions by population size, we combined jurisdictions in like-sized population strata in county-level and MCD-level states. We defined large jurisdictions as those with a population greater than 500,000 (strata 1, 2, and 7), medium jurisdictions as those with a population of more than 100,000 to 500,000 (strata 3 and 8), and small jurisdictions as those with a population of more than 10,000 to 100,000 (strata 4, 5, 6, 9, 10, and 11). Upon completion of the survey, we adjusted the sampling weights for nonresponse.\nWe analyzed survey responses to provide nationwide estimates for Election Day 2012 of any data collected on wait times, voter wait times, views on the factors that affected long wait times, policies and practices used, and any revisions to policies to address the possible causes of long wait times, among other things.sampling error—that is, the extent to which the survey results differ from what would have been obtained if the whole population had been observed. Because we followed a probability procedure based on random selections, our sample is only one of a large number of samples that we might have drawn. As each sample could have provided different estimates, we express our confidence in the precision of our particular sample’s results as a 95 percent confidence interval (e.g., from x to y percent). This is the interval that would contain the actual population All sample surveys are subject to value for 95 percent of the samples we could have drawn. As a result, we are 95 percent confident that each of the confidence intervals based on our survey includes the true values in the sample population.\nIn addition to the reported sampling errors, the practical difficulties of conducting any survey may introduce other types of errors, commonly referred to as nonsampling errors. For example, differences in how a particular question is interpreted, the sources of information available to respondents, or the types of people who do not respond can introduce unwanted variability into the survey results. We took numerous steps in questionnaire development, data collection, and the editing and analysis of the survey data to minimize nonsampling errors. For example, a social science survey specialist designed the draft questionnaire for local jurisdictions in close collaboration with GAO subject matter experts. We also utilized information from prior GAO reports, our review of studies on wait times, and interviews with election administration researchers, discussed below, to help inform the development of the questionnaire. In addition, we pretested the survey in person or by telephone with officials in 7 election jurisdictions of various sizes in 5 states and made revisions, as necessary. The survey questionnaire and aggregated responses for each question are included in appendix II. Further, we omitted responses on all completed surveys that fell outside of specified limits, such as when the reported number of ballots cast was greater than the reported number of registered voters in a jurisdiction, and called respondents in some cases to obtain information where clarification was needed.", "We analyzed responses from the 2012 CCES, a survey of U.S. citizens aged 18 and over, to obtain state-level estimates of wait times reported by voters for in-person voting on Election Day 2012. Specifically, CCES respondents were asked to estimate wait times within specified response categories for the 2012 general election. To estimate voter wait times on Election Day 2012, we replicated an approach used by another researcher and estimated average wait times by first recoding the response categories to the midpoint of the category—for example, the “none at all” response was coded as 0 minutes, and the “1-10” response Respondents who waited more than category was coded as 5 minutes.an hour were asked to provide wait times in minutes. To assess the reliability of these data, we reviewed documentation related to the 2012 CCES and interviewed researchers knowledgeable about the survey. We determined that the CCES data used in this report were sufficiently reliable for our purposes.", "We interviewed state election officials from 47 states and the District of Columbia to obtain such information as the availability of data on voter wait times in their states for Election Day 2012 and their views on policies and procedures that may have affected voter wait times. Because of differences in election administration across states, these officials were located in various state offices, including state secretary of state or commonwealth offices, boards of elections, and lieutenant governors’ offices. We corroborated the information we gathered through these interviews by reviewing any documentation that these states provided, such as guidance on planning elections and voter wait time reports.\nWe also interviewed local election officials, on-site or by phone, from 5 local jurisdictions—Detroit, Michigan; Hartford, Connecticut; Lee County, Florida; Los Angeles County, California; and Prince William County, Virginia—to perform a more detailed examination of their experiences on Election Day 2012, including how, if at all, they measured wait times, their views on the factors that affected wait times in their respective jurisdictions on Election Day 2012, and their perspectives on the specific impacts of these factors, among other things. We selected these jurisdictions (1) to reflect variation in geographic location and demographic characteristics, and (2) based on our survey results, CCES results, and our review of the wait time literature, to include a range of voter wait times and election administration policies and practices. For example, in our survey, 4 of the 5 selected jurisdictions reported having varying extents of long wait times and 1 reported not having long wait times. In each jurisdiction, we interviewed the chief election official; other officials from the elections office; and, if available, individuals who had served as poll workers at polling locations in the jurisdiction on Election Day 2012. While these 5 jurisdictions are not representative of all election jurisdictions nationwide and their responses cannot be generalized to other local election jurisdictions, officials in these locations provided a range of perspectives on voter wait times and information on how factors affected wait times in practice and allowed us to compare Election Day 2012 experiences across jurisdictions. We corroborated the information we gathered through these interviews by reviewing postelection reports, relevant state statutes, and documentation that these jurisdictions provided to us, such as data relating to voter wait times and poll worker training materials. We interviewed officials from these jurisdictions between May and July 2014.", "We also interviewed officials from the Election Assistance Commission and 14 researchers and representatives from research organizations in the field of election administration to discuss their research and perspectives on wait time measurement and voter wait times. We selected these researchers and representatives based on our review of voter wait time literature, their expertise and work in this area, and recommendations from these and other researchers. The information that we obtained cannot be generalized to other researchers; however, these interviews provided a range of views on such areas as practices for measuring wait times, the frequency of long voter wait times, and factors affecting wait times.\nWe conducted this performance audit from July 2013 to September 2014 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 that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives.", "The questions we asked in our survey of local election jurisdictions are shown below. Our survey was composed of closed- and open-ended questions. In this appendix, we include all survey questions and aggregate results of responses to the closed-ended questions; we do not provide information on responses provided to the open-ended questions. For a more detailed discussion of our survey methodology, see appendix I.\nThroughout this questionnaire, we use certain terms. For example: The term \"your jurisdiction\" means your local election jurisdiction.\nAlso, when we refer to \"voter wait time\", we mean the time from when a voter entered the first line to when they began filling out a ballot. We recognize that the time spent filling out or submitting a ballot may affect the wait time of later voters in line, but we would like you to consider the voter wait time to be only the time a voter waits prior to filling out a ballot. We have also included additional questions in this questionnaire about the time it took to turn in a ballot. 1. What is the name, title, and telephone number of the primary person completing this questionnaire so that we may contact someone if we need to clarify any responses?\nTelephone number: ( )\nPart I: Local Jurisdiction Characteristics 2. Approximately how many polling places and precincts were there in your jurisdiction on the November 2012 General Election Day? [open ended] ____Number of precincts 3. On the November 2012 General Election Day, what was the total number of all registered voters in your jurisdiction? ____Number of all registered voters 4. Did your jurisdiction collect, receive, or have available information that would allow you to calculate or estimate voter wait times that occurred at individual polling places on the November 2012 General Election Day? (Please check one response.)\n5. IF NO: Which of the following, if any, were reasons your jurisdiction did NOT collect, receive, or have available information on voter wait time? (Check all that apply.)\nFor what other reason(s) did your jurisdiction not collect, receive, or have available information on voter wait times? 6. Did your jurisdiction collect, receive, or have available any of the following information for the November 2012 General Election Day? (Check one response on each row.)\n95 percent confidence interval–lower bound (percentage)\n95 percent confidence interval–upper bound (percentage) 7.1 95 percent confidence interval–lower bound (percentage)\n95 percent confidence interval–upper bound (percentage)\nWhat other information did your jurisdiction collect, receive, or have available on voter wait time? 7. Did your jurisdiction make a formal calculation of voter wait times that occurred on the November 2012 General Election Day? (Please check one response.)\n8. How did you calculate voter wait times? Please include the types of data you collected that you used to calculate voter wait times as well as the method you used to analyze the data. 9. What type of polling place level data, if any, did your jurisdiction use when allocating resources for the November 2012 General Election Day? (Check one response on each row.)\n95 percent confidence interval–lower bound (percentage)\n95 percent confidence interval–upper bound (percentage)\nSpecific data for each polling place Estimate for each polling place Specific data for each polling place Estimate for each polling place Specific data for each polling place Estimate for each polling place Specific data for each polling place Estimate for each polling place Specific data for each polling place Estimate for each polling place 10.0 95 percent confidence interval–lower bound (percentage)\n95 percent confidence interval–upper bound (percentage)\nWhat other polling place level data did your jurisdiction use?\nPart II: Voter Wait Time on General Election Day November 2012 10. On average for all of the polling places in your jurisdiction for the November 2012 General Election Day, how long did it typically take for a voter to wait to begin filling out a ballot during the following times of day? Please consider the time from when a voter entered the first line to when they began filling out a ballot. (Please check one response on each column.)\n95 percent confidence interval–lower bound (percentage)\n95 percent confidence interval–upper bound (percentage)", "95 percent confidence interval–lower bound (percentage)\n95 percent confidence interval–upper bound (percentage)\n11. Would you say that the voter wait times you described in the previous question were greater than, about the same as, or less than the typical voter wait times for the November 2008 General Election Day? (Please check one response.)\n12. In your opinion, what would you consider to be a voter wait time on Election Day that is too long? (Please check one response.)\n13. How many polling places in your jurisdiction had voter wait times that were too long on the November 2012 General Election Day? (Please check one response.)\n95 percent confidence interval–lower bound (percentage)\n95 percent confidence interval–upper bound (percentage)\n14. In thinking about the November 2012 General Election Day, how much of a factor, if any, do you believe each of the following was to long voter wait times at polling places in your jurisdiction?\n95 percent confidence interval–lower bound (percentage)", "", "95 percent confidence interval–lower bound (percentage) 0 95 percent confidence interval–upper bound (percentage) 2.8 2.8 95 percent confidence interval–lower bound (percentage)", "What other aspect was a factor? 15. Does your jurisdiction have a formal goal for the maximum time that a voter should wait to begin to fill out a ballot? (Please check one response.)\n16. IF YES: What is the maximum wait time goal? (Please check one response.)\n17. At about how many polling places did wait times of greater than 60 minutes occur at any time on either the November 2012 or November 2008 General Election Day? (Please check one response.)\n18. On the November 2012 General Election Day, did any voters have to wait in line to turn in their ballot to a machine, poll worker, or ballot box after completing their ballot? We understand that for DRE machines, voters submit their ballots immediately after completing them, but for other methods, such as optical/digital scan or paper ballots, voters may have to wait in line to turn in their ballot to feed through a machine or submit their ballot to a poll worker or ballot box. (Please check one response.)\n19. IF YES: On average, for all of the polling places in your jurisdiction for the November 2012 General Election Day, how long did voters typically have to wait in line to turn in their ballots for counting after completing them? (Please check one response.)\n20. Which of the following, if any, were reasons voters had to wait to turn in ballots for counting after voters completed their ballots? (Please check one response for each row.)\n95 percent confidence interval–lower bound (percentage)\n95 percent confidence interval–upper bound (percentage)", "What was the other reason that voters had to wait to turn in ballots for counting?\nPart III: Policies and Practices in Your Jurisdiction 21. Did your jurisdiction use any of the following policies or practices for the November 2012 general election? (Please check one response for each row.)\n95 percent confidence interval–lower bound (percentage)\n95 percent confidence interval–upper bound (percentage) 0.9 95 percent confidence interval–lower bound (percentage)", "What other policies or practices did your jurisdiction use? 22. Did your jurisdiction conduct a formal audit or investigation of the possible causes of long voter wait times on the November 2012 General Election Day? (Please check one response.)\n23. Has your jurisdiction revised or is it in the process of revising any of its Election Day policies or procedures since the November 2012 general election specifically to address any of the possible causes of long voter wait times? (Please check one response.)\n24. IF YES: which policies or procedures were revised or are in the process of being revised specifically to address any of the possible causes of long voter wait times on the November 2012 General Election Day? (Please check one response on each row.)\n95 percent confidence interval–lower bound (percentage)\n95 percent confidence interval–upper bound (percentage) 17.9 95 percent confidence interval–lower bound (percentage)\n95 percent confidence interval–upper bound (percentage) 18.7 95 percent confidence interval–lower bound (percentage)\n95 percent confidence interval–upper bound (percentage)\nWhat other policies or procedures were revised or are in the process of being revised? 25. What policies and procedures are most important to minimize or reduce voter wait time in your jurisdiction? Please answer this question whether or not your jurisdiction has experienced long voter wait times. 26. Which of the following best describes the resources that were available to your jurisdiction for the November 2012 General Election Day? (Please check one response.)\n95 percent confidence interval–lower bound (percentage)\n95 percent confidence interval–upper bound (percentage)\n27. Which of the following activities, if any, were impacted by the availability of resources? (Check all that apply.)\n95 percent confidence Interval–lower bound (percentage)\n95 percent confidence Interval–upper bound (percentage)\nN/R 95 percent confidence Interval–lower bound (percentage)\n95 percent confidence Interval–upper bound (percentage)\nWhat other activities were impacted?\nPart IV: 2012 General Election Characteristics 28. For the November 2012 General Election Day, which types of voting methods were used? For those that were used, please provide the numbers of machines and/or ballots cast. (Please check at least one response on each row.)\n95 percent confidence interval–lower bound (percentage)\n95 percent confidence interval–upper bound (percentage)\nWhat other type of voting method was used? ____Number of ballots cast 29. For the November 2012 general election, how many votes were cast through the following methods? ____In-person voting on Election Day at a polling place (excluding provisional voting) ____Provisional voting on Election Day at a polling place (both accepted and rejected ballots) ____All voting that occurred outside of Election Day (e.g., any type of early, absentee, and mail-in ballots, including mail-in ballots that were submitted in person on Election Day) 30. On the November 2012 General Election Day, how many poll workers were used in your jurisdiction? By poll workers, we mean those individuals recruited specifically for the purpose of working at polling places on Election Day. ____ Number of poll workers 31. How many hours of election administration training did poll workers in your jurisdiction receive in preparation for the November 2012 general election? Providing an estimate is fine. ____Hours of election administration training for typical first-time poll worker ____Hours of election administration training for typical returning poll worker ____Hours of election administration training for typical polling place supervisor or presiding judge 32. What was the total number of ballot questions (propositions) and elected offices (races) that your jurisdiction was asked to put on applicable ballots in the November 2012 general election? [open ended] ____Ballot questions (propositions) ____Elected offices (races) 33. How many pages or screens was an average ballot in your jurisdiction? 34. Which of the following information, if any, did your jurisdiction provide to educate the public prior to the November 2012 general election? (Please check at least one response in each row.)\n95 percent confidence interval–lower bound (percentage)\n95 percent confidence interval–upper bound (percentage)\nOther method(s)\nOther method(s)\nOther method(s)\nOther method(s)\nOther method(s)\n11.6 95 percent confidence interval–lower bound (percentage)\n95 percent confidence interval–upper bound (percentage)\nOther method(s)\nOther method(s)\nOther method(s)\n35. What, if anything, could the federal government do to help address long voter wait times?\nPart V: Other Comments 36. Do you have any other comments you feel are important about Election Day 2012 processes that were not included above that may be related to voter wait times?", "The Cooperative Congressional Election Study (CCES) has been conducted since 2006 to study congressional elections and representation using large-scale national surveys. The 2012 CCES surveyed 54,535 U.S. citizens aged 18 and over by Internet about their views and experiences before and after Election Day 2012. Respondents who reported voting in person (either prior to Election Day or on Election Day) were asked about the length of time they recalled waiting in line to vote. Figure 7 shows estimated average wait times by state on Election Day 2012 based on the data collected through the 2012 CCES survey.", "", "", "", "In addition to the contact named above, Tom Jessor (Assistant Director), David Alexander (Assistant Director), Carl Barden (Assistant Director), Susan Czachor, Tony DeFrank, William Egar, Eric Hauswirth, Susan Hsu, Jeff Jensen, Elizabeth Kowalewski, Amanda Miller, Jan Montgomery, Rebecca Kuhlmann Taylor, Janet Temko-Blinder, Jeff Tessin, and Johanna Wong made significant contributions to this report.\nWe gratefully acknowledge the substantial time and cooperation of the state and local election officials and researchers whom we interviewed." ], "depth": [ 1, 2, 3, 3, 2, 3, 3, 2, 1, 2, 2, 3, 3, 1, 2, 2, 3, 3, 3, 3, 1, 1, 2, 2, 2, 2, 1, 2, 2, 2, 2, 2, 2, 1, 1, 1, 2, 2 ], "alignment": [ "", "", "", "", "", "", "", "", "h0_title h3_title", "h0_full h3_full", "h0_title", "h0_full", "", "h0_title h2_title h1_title", "h0_full h2_full", "h1_full", "", "", "h1_full", "h1_full", "", "h3_full h2_title", "h2_full", "", "h3_full", "h3_full", "h3_full h2_title", "h2_full", "h2_full", "h2_full", "h2_full", "h2_full", "h2_full", "", "", "", "", "" ] }
{ "question": [ "Why did most jurisdictions not collect data that allowed wait time calculation?", "What was the breakdown among polling places with regards to wait time?", "How did different officials define wait time?", "How did GAO determine wait times?", "Why was it necessary to target wait-time reduction approaches?", "What was one cause of lengthy wait time?", "What is one specific example of this problem?", "To what extent was this finding consistent across jurisidctions?", "What were the conditions of the 2012 general election?", "Who conducts federal elections?", "Who was in charge of examining wait times for the November 2012 election?", "What does this report address?", "How did GAO collect its data?", "How were the local jurisdictions selected?", "What insight do these jurisdictions provide?" ], "summary": [ "On the basis of GAO's nationwide generalizable survey of local election jurisdictions, GAO estimates that 78 percent (from 74 to 83 percent) of jurisdictions did not collect data that would allow them to calculate wait times, primarily because wait times have not been an issue, and most jurisdictions did not have long wait times on Election Day 2012.", "Specifically, GAO estimates that 78 percent (from 73 to 83 percent) of local jurisdictions nationwide had no polling places with wait times officials considered to be too long and 22 percent (from 17 to 27 percent) had wait times that officials considered too long at a few or more polling places on Election Day 2012.", "Jurisdiction officials had varying views on the length of time that would be considered too long—for example, some officials considered 10 minutes too long, while others considered 30 minutes too long.", "Because there is no comprehensive set of data on wait times across jurisdictions nationwide, GAO relied on election officials in the jurisdictions it surveyed to estimate wait times based on their perspectives and any data or information they collected on voter wait times.", "The specific impact of these nine factors depended on the unique circumstances in each of the 5 local jurisdictions GAO selected for interviews, leading to targeted approaches for reducing wait times where needed.", "For example, according to election officials in 2 jurisdictions, lengthy ballots were the primary cause of long wait times.", "In 1 of these jurisdictions, state constitutional amendments accounted for five of its eight ballot pages on average, and since the 2012 election, a state law was enacted that established additional word limits to such amendments, which officials said could help reduce wait times.", "Another jurisdiction that had ballots of similar length did not report long wait times.", "Millions turn out to vote in U.S. general elections, and there were reports of long wait times at some polling places on Election Day in 2012.", "The authority to regulate elections is shared by federal, state, and local officials; however, responsibility for conducting federal elections primarily resides with about 10,500 local election jurisdictions.", "GAO was asked to examine voter wait times for the November 2012 election.", "This report addresses (1) the extent to which local election jurisdictions collected data to measure voter wait times and had long wait times on Election Day 2012, and (2) the factors that affected wait times and their impacts across jurisdictions.", "GAO surveyed officials from a nationwide generalizable sample of 423 local election jurisdictions, excluding jurisdictions with populations of 10,000 or fewer and in the vote-by-mail states of Oregon and Washington, to obtain information on voter wait times (80 percent responded). GAO also interviewed election officials from 47 of 50 states and the District of Columbia to obtain their views on wait time issues. GAO also reviewed literature on wait times and interviewed 14 election researchers selected based on their work on election wait times.", "GAO also selected 5 local jurisdictions based on, among other things, demographic characteristics and estimated wait times to examine in more detail their Election Day 2012 experiences.", "The results from these 5 jurisdictions are not generalizable, but provide insights into jurisdictions' experiences." ], "parent_pair_index": [ -1, 0, 0, 0, -1, 0, 1, 1, -1, 0, -1, -1, -1, 1, 2 ], "summary_paragraph_index": [ 2, 2, 2, 2, 4, 4, 4, 4, 0, 0, 0, 1, 1, 1, 1 ] }