Background The CSBG program is intended to focus on three overall (national) goals: reducing poverty, empowering low-income families and individuals to become self-sufficient, and revitalizing low-income communities. The program is administered by OCS within the Administration for Children and Families (ACF) at HHS. CSBG was an outgrowth of the War on Poverty of the 1960s and 1970s, which established the Community Action program under which the nationwide network of local community action agencies was developed. The federal government had direct oversight of local agencies until 1981, when the CSBG program was established and states were designated as the grant recipients. OCS and states now share responsibility for oversight of CSBG grantees. In fiscal year 2019, states received approximately $700 million of the total $725 million CSBG appropriation. Appendix II provides the funding amounts for each state. OCS distributes CSBG funding to states and they, in turn, distribute funds to over 1,000 local agencies. Most of these local agencies receive funding from a variety of federal, state, and private sources. In fiscal year 2017, the latest data available, local agencies received about $9 billion from all federal sources, including about $700 million from CSBG. Other federal programs providing funding include Head Start, the Low Income Home Energy Assistance Program (LIHEAP), the Community Development Block Grant (CDBG), the Child Care and Development Block Grant, Temporary Assistance for Needy Families, and the Social Services Block Grant (see fig. 1). Programs administered by ACF contributed about $6.6 billion of the funds provided to local agencies. CSBG funding can be used broadly, allowing state and local agencies flexibility to provide services tailored to organizational and community needs. CSBG funds can be used by local agencies to provide services to participants in their programs and fill gaps in the funding provided by other means. For example, local agencies may use CSBG funds to support a position for a staff member who determines the service needs of potential participants and connects them with the appropriate services—a position that would not be an allowable expense under the funding rules of other federal programs, according to a local agency official we interviewed. Local agencies have also used CSBG funding to leverage other public and private resources to support a variety of initiatives, such as Head Start programs, low-income energy assistance programs, and low-income housing. Federal Role OCS monitors all states receiving grant funds to ensure that they are meeting the standards for federal grant programs set by the Office of Management and Budget (OMB) and the specific expenditure requirements for the program. The CSBG Act requires that states submit plans to OCS describing how they intend to use the funds to address the needs of the local community and annual reports detailing the actual use of funds, including information on state performance results and populations served. OCS is required by the CSBG Act to conduct compliance evaluations of several states each fiscal year to review the states’ use of CSBG funds, report to states on the results of these evaluations, and make recommendations for improvements. However, the CSBG Act does not specify the number of states subjected to an evaluation each year or the timeframe each state must undergo such evaluations. Following a compliance evaluation, states are required to submit a plan of action in response to any OCS recommendations. In addition to conducting compliance evaluations to assess states’ use of CSBG funds, OCS is required to submit an annual report to Congress. This annual report must include a summary of how states and local agencies had planned to use CSBG funds; how funds were actually spent, data on the number and demographics of those served by local agencies, and other information. The CSBG Act requires OCS to provide training and technical assistance to states and to assist them in carrying out corrective action activities and monitoring. OCS must reserve 1.5 percent of annual appropriations (in fiscal year 2019, this percentage totaled about $11 million of the total appropriation) for many activities, including training and technical assistance; planning, evaluation, and performance management; assisting states with carrying out corrective action activities; and oversight including reporting and data collection activities. The CSBG Act also requires that states complete several steps before terminating an underperforming entity. The state agency is required, among other things, to provide training and technical assistance, if appropriate, to help the agency correct identified deficiencies, review the local agency’s quality improvement plan, and provide an opportunity for a hearing. The entity can request a federal review of the state’s decision to reduce or terminate funding, which must be completed within 90 days of OCS’s receipt. During this period, the state is required to continue funding the entity until OCS responds to the request. State and Local Agencies’ Roles The CSBG Act requires each state to designate a lead state agency to administer CSBG funds and provide oversight of local agencies that receive funds. States are required to award at least 90 percent of their federal block grant allotments to eligible local agencies, and to determine how CSBG funds are distributed among local agencies. States may use up to $55,000 or 5 percent of their CSBG allotment, whichever is higher, for administrative costs. States may use remaining funds for the provision of training and technical assistance, and other activities. In addition, states and local agencies that expend $750,000 or more in total federal awards are required to undergo an audit annually and submit a report to the Federal Audit Clearinghouse. The CSBG Act requires states to determine if local agencies meet the performance goals, administrative standards, and financial management requirements for the CSBG program. For each local agency, the CSBG Act requires the state to conduct: a full onsite review at least once during each 3-year period; an onsite review of each new local agency following the completion of the first year receiving CSBG funds; followup reviews including prompt return visits to local agencies that fail to meet goals, standards, and requirements established by the state; and other reviews as appropriate, including reviews of local agencies found to have had other grants terminated for cause. For states to receive CSBG funding, they must submit an application and state plan at least biennially describing, among other things, how they will use CSBG funds to accomplish various things such as helping families and individuals to achieve self-sufficiency, find and retain meaningful employment, and obtain adequate housing. Within their state plan, states must attest that (1) funds will be used to address the needs of youth in low-income communities; (2) funds will be used to coordinate with related programs; and (3) local agencies will provide emergency food-related services. States must also complete annual reports that include fiscal, demographic, and performance data. In their state plans, states must provide an assurance that all local agencies will submit a community action plan that includes a community needs assessment for the community served. In addition, local agencies must administer the CSBG program through a three-part board, consisting of one-third elected public officials and at least one-third representatives of the low-income community, with the balance drawn from officials or members of the private sector, labor, religious, law enforcement, education or other groups in the community served. Performance Measurement The Government Performance and Results Act of 1993 (GPRA) as enhanced by the GPRA Modernization Act of 2010 (GPRAMA) focuses federal agencies on performance by, among other things, requiring agencies (including HHS) to develop outcome-oriented goals and a balanced set of performance indicators, including output and outcome indicators as appropriate, to assist agencies in measuring or assessing their progress toward goals. OMB provides guidance to federal executive branch agencies on how to prepare their strategic plans in accordance with GPRA requirements. We have reported that strategic planning requirements established under GPRA and GPRAMA can also serve as leading practices for strategic planning at lower levels within federal agencies. Federal standards for internal control help to ensure efficient and effective operations, reliable financial reporting, and compliance with federal laws. Internal controls help government program managers achieve desired results through effective stewardship of public resources. Such interrelated controls comprise the plans, methods, and procedures used to meet missions, goals, and objectives. Internal controls support performance-based management and should provide reasonable assurance that an organization achieve its objectives of (1) effective and efficient operations, (2) reliable reporting, and (3) compliance with applicable laws and regulations. With regard to performance measurement for state and local agencies, the CSBG Act requires OCS, in collaboration with states and local agencies, to facilitate the development of one or more model performance measurement systems which may be used by states and local agencies to measure their performance in fulfilling CSBG requirements. Each state receiving CSBG funds is required to participate in and ensure that all local agencies in the state participate in either a performance measurement system whose development was facilitated by OCS or in an alternative system approved by OCS. OCS developed the Results Oriented Management and Accountability (ROMA) performance management approach that states and local agencies follow when overseeing programs and measuring their performance in achieving their CSBG goals. In 2012, OCS began four initiatives to update how it oversees the performance of the CSBG program, and as of April 30 2019, OCS had implemented all four of the initiatives, which include: an updated ROMA process for program management, 58 organizational management standards for local agencies, new federal and state accountability measures, and an updated annual report format where oversight and performance information from states is collected in an automated online data system. In addition, OCS developed the CSBG Theory of Change which illustrates how the core principles of the CSBG program, the performance management framework, and services and strategies offered with CSBG funds relate. The three national goals established under the CSBG Theory of Change are similar to the three national goals identified in the CSBG Act, but are not identical. The three goals under the CSBG Theory of Change are: 1. individuals and families are stable and achieve economic security, 2. communities where low-income people live are healthy and offer 3. people with low incomes are active in their community. OCS and Selected States Conducted Onsite and Routine Oversight Activities and Provided Training and Technical Assistance to CSBG Grant Recipients OCS and states are responsible for conducting oversight activities to ensure that CSBG recipients use the funds in accordance with the CSBG Act, which includes ensuring that the funds are used in line with the grant’s three national goals related to addressing the causes and conditions of poverty. Our review of oversight efforts during fiscal years 2016 and 2017 for the select states showed that OCS and states conducted required oversight activities, as well as additional oversight activities, and provided training and technical assistance to help CSBG recipients meet CSBG program requirements. Our review of file documentation for six selected states where OCS conducted compliance evaluations during fiscal years 2016 and 2017, and six selected states where OCS conducted routine oversight, showed that OCS identified primarily administrative issues, but in some instances identified non- compliance and other more serious issues that required corrective actions that states took action to resolve. We largely found similar results in our review of the selected states’ onsite and routine oversight activities for local CSBG funds recipients for the same time period. Beyond findings of an administrative nature, a fiscal year 2017 OCS compliance evaluation found that one state did not conduct required monitoring of its eligible entities during fiscal year 2015. Also, one state identified financial mismanagement, which resulted in termination of a local grantee from the CSBG program. Additionally, we found that OCS and states provided training and technical assistance to help CSBG recipients meet requirements. OCS and Selected States Conducted Onsite and Routine Oversight Activities, and Identified Issues Requiring Corrective Actions OCS’s Onsite Compliance Evaluations OCS officials conducted onsite compliance evaluations, in addition to other oversight activities, for 12 states using a risk assessment and prioritization process during fiscal years 2016 and 2017. We reviewed six of these 12 states and found that a majority of errors identified by OCS were administrative. The CSBG Act requires OCS to conduct compliance evaluations for several states each year. Since fiscal year 2009, OCS has conducted onsite compliance evaluations in five to seven selected states each year, in addition to the routine oversight it conducts for all the states. According to OCS officials, the number of states visited each year depends upon available resources. OCS primarily bases its selection of states for onsite compliance evaluations on a risk assessment conducted using a scoring tool. The scoring tool generates a risk score of 1 to 5 for each state using a number of measures, as shown in figure 2. The various factors used in developing the total risk score are weighted to ensure the most significant risk indicators and prioritization factors have the most impact on the selection of states for onsite monitoring. The list of risk factors was developed by OCS in response to a recommendation from our 2006 report in which we found that OCS did not systematically use available information to assess risk to focus its monitoring resources on states with the highest risk. According to OCS officials, OCS rarely visits states that they identify as low risk or states that have very few local agencies as grantees, and they try to not visit the same state within 3 years of their last visit. OCS officials told us that monitoring resources limit their ability to reach all of the states for onsite review. We found that, since fiscal year 2008, eight states have not received an onsite evaluation and 10 had been visited twice. According to agency officials, the risk assessment is part of a larger risk assessment and prioritization process designed to direct monitoring resources over multiple years. After determining risk under the scoring tool, OCS considers several other factors and may place a higher priority on states with lower risk scores when selecting states for onsite compliance evaluations. Agency officials said such factors include: size of the CSBG award, findings from single audits, the rate at which the state spends its CSBG funds, time since the last OCS visit, and feedback from the OCS program manager using information gathered from the quarterly calls with the states. For states selected for onsite compliance evaluations, we found that OCS conducts a comprehensive review of each of the state’s plan and annual reports and examines the state’s supporting documents to determine if that state is meeting the requirements of the CSBG program. Although OCS reviews the plans for all 56 states as part of its routine oversight efforts, during the onsite visit the agency also conducts interviews with staff and examines state statutes or regulations and supportive information, such as financial ledgers and oversight procedural manuals. OCS also reviews the state’s grant funding to determine if the state allocated the funds in accordance with the requirements of the CSBG program. Additionally, OCS reviews each state’s fiscal controls and accounting procedures and associated documents to assess the financial integrity of the state’s process for drawing down federal funds, providing funds to local agencies, and reporting financial information. For example, OCS officials may review the state agency’s bookkeeping system and accounting software. In our review of OCS’s file documentation for the six selected states, we found OCS generally identified administrative errors, but in some instances identified issues of non-compliance and other issues that the states took action to resolve. For example, during its fiscal year 2017 onsite visit to Louisiana, OCS found that Louisiana did not implement procedures to monitor and track prior year single audit findings for corrective action and issue management decisions as required. To address this concern, the state assigned a member of its staff to execute these duties and submitted a copy of the Single Audit Process and audit log to OCS. Additionally, OCS found that Louisiana did not visit any of its 42 local agencies in fiscal year 2015 because of limited capacity such as staffing shortages, among other non-compliance issues. OCS determined that Louisiana addressed this issue by visiting all of the local agencies before the end of fiscal year 2017. Also, in a fiscal year 2016 onsite visit to Indiana, OCS found that the state agency did not submit a required financial report to account for CSBG expenditures within established timeframes in two consecutive fiscal years—2014 and 2015—due to the lack of a process to ensure the timely submission of the report. OCS also found that the financial report for fiscal year 2014 contained incorrect amounts for certain expenditures. The Indiana state agency responded to the issues by developing formal written procedures regarding the preparation and submission of financial reports. In addition, for the six selected states, we found that OCS had assessed state plans and annual reports to ensure that the states were complying with the programmatic, financial, and administrative requirements of the CSBG program, as outlined in the CSBG Act. OCS’s Routine Oversight Activities In our review of the selected states, we found that during fiscal years 2016 and 2017, OCS conducted routine reviews and other oversight activities to assess states’ use of CSBG funds. We selected six states (Alaska, Colorado, Kentucky, Mississippi, North Dakota, and Rhode Island) for our review of file documentation of OCS’s routine reviews. We found that for these six states, the routine reviews consisted of OCS reviewing all state plans and annual reports to determine if the state completed all sections of the plan and provided information about how it would achieve the goals of the program. In our review of file documentation for the six states, we found that OCS requested states to provide additional details about their plans; however, like the issues identified in the onsite compliance evaluations, the issues on which OCS commented were primarily administrative. For example, in fiscal year 2016, OCS reviewed Colorado’s 2016 annual plan and requested that the state provide additional details on plans to modify its organizational standards. Also, in its fiscal year 2017 review, OCS requested that Alaska provide additional information in its annual plan to explain how the state would prioritize providing services to individuals based on their income. We found that the states addressed OCS’s comments. OCS officials told us that they used quarterly calls as a part of their routine oversight. Agency officials told us that they generally use quarterly calls to discuss the state plans and the CSBG program broadly, and review the annual reports. OCS officials also told us that OCS uses these calls to update states on issues that have significant impact or importance on the successful operation of the CSBG grantees. In some cases, OCS program specialists may use the quarterly calls to identify areas where the state may be struggling and to discuss ways to address those issues. In addition, OCS officials stated that OCS program specialists will work with states to assist with developing work plans or reviewing corrective action procedures for high-risk local agencies. Selected States’ Onsite Visits All three states we visited (New York, North Dakota, and Texas) conducted onsite visits to local agencies at least once every 3 years as required by the CSBG Act, and conducted routine oversight activities. In response to our June 2006 recommendation, OCS issued guidance clarifying that states must conduct an onsite review of each local agency at least once every 3 years. Besides the triennial onsite reviews, the law requires states to conduct: (1) follow up reviews including prompt return visits to local agencies that fail to meet state goals, standards, and requirements, (2) an onsite review of new local agencies following the completion of the first year receiving CSBG funds, and (3) other reviews as appropriate, including reviews of local agencies found to have had other grants terminated for cause. Each of the states we visited had developed oversight policies and procedures that included information on how often CSBG programs should be reviewed onsite and what program operations should be covered during onsite visits; two states provided sample forms or instructions on what forms to use to record findings. For example, each state’s policies and procedures established the frequency of onsite visits: New York and Texas conduct the visits at least once every 3 years and North Dakota conducts them once every 2 years (see table 2). The selected states’ policies and procedures also specified that state officials assess local agency financial controls, review financial records and client files, and review local agency governance. They also described information about actions state officials were required to take when they identified deficiencies in a local agency’s operations. For example, in all three of the states we visited the policies and procedures required state officials to notify local agencies of deficiencies in writing. Our findings from the two local agencies we visited in each of the three states showed that state officials identified a variety of issues during their reviews, but none that required those local agencies to lose their CSBG funding (see table 3). Generally, we found that the issues identified could be characterized as fiscal, governance, or administrative. Fiscal issues included improper use of funds. For example, state officials in one selected state found that a local agency had improperly used a small amount of CSBG funds to purchase a grill for agency activities. Governance-related findings included issues with both the composition and manner of selecting the local agency’s CSBG Board of Directors members. For example, in Texas, state officials cited one local agency for not complying with the CSBG Act’s requirement regarding the structure of its Board. Also, North Dakota cited a local agency for not having the required representation of low-income individuals on its Board. Administrative issues included recordkeeping of information on participants. For example, Texas cited a local agency for inaccurately reporting a program participant as having transitioned out of poverty. The state agency found that the participant’s file did not contain all of the required documentation needed to show that the participant had maintained a certain income level for a 90-day period. The state agency officials we spoke with told us that their reviews sometimes identified more serious issues that resulted in local agencies being terminated from the program. For example, Texas terminated two local agencies’ CSBG funding due to financial mismanagement that was uncovered during state monitoring of the local agencies. Texas officials noted that the process for terminating local agencies with deficiencies was, for them, a prolonged process, in part because of the steps they took to provide technical assistance and work with agencies in an attempt to resolve issues before terminating them from the program. They told us they found it difficult to establish sufficient grounds for termination and, for one of the terminations, Texas officials continued to work with the agency for two years while also working with OCS. Texas officials told us that they found the guidance on terminations to be unclear. OCS officials acknowledged that the information memorandum they have developed on terminations provides broad guidance that covers a range of issues states might encounter, and may not have detailed guidance covering each situation. However, they noted that they work with states on a case by case basis, as they did with Texas, to provide guidance that is specific to each situation. State officials in the selected states told us that local agencies identified as having deficiencies are notified of those deficiencies and provided information on how to correct them. Further, our review of corrective actions required of selected local agencies by the states we visited showed that the local agencies addressed the concerns raised by the states. For example, Texas required a local agency that it found did not comply with CSBG Board requirements concerning membership to fill the vacancies on the Board and to provide the state a timeline for completing the required corrective actions. In addition to taking corrective actions, local agencies may be required to submit fiscal and programmatic reports more frequently when monitoring uncovers problems. For example, North Dakota’s policies and procedures indicate that monthly reports may be required of local agencies that have been found to have financial recordkeeping problems. We also found that state agency officials in our three selected states conducted onsite reviews more frequently than the once every 3 years requirement, as well as routine offsite reviews. For example, New York conducted quarterly onsite visits to all local agencies, where each quarterly visit involved a targeted review of a specific aspect of a local agency’s CSBG program. For example, during the third quarterly visit of the year, state officials focused on local agency planning efforts for the next funding year, including the community needs assessment, while during the last quarterly visit of the year, state officials focused on grant closeout activities. New York, like North Dakota and Texas, also conducted routine offsite reviews of local agencies’ activities and finances. In our three selected states, these reviews included examining fiscal and program reports periodically submitted by local agencies to state officials, periodic meetings and conference calls between state and local agency staff, and reviewing audit reports. These oversight activities also included fiscal audits conducted by the state auditor or independent auditors when a local agency’s funding met the threshold for such review. Our review of single audits and interviews with each state’s auditor’s office in the three states we visited showed that none of the state audit agencies focused specifically on CSBG funding during the period of our review. Texas last conducted an audit focusing on CSBG in 2014 and North Dakota did so in 2011; neither state reported findings as a result of those audits. Officials from the state auditor offices in North Dakota and Texas said CSBG funding levels are below the federally-established threshold for programs that must be audited. New York state audit officials told us that they had not conducted any audits focused on CSBG. OCS and States Provided Training and Technical Assistance to CSBG Recipients OCS and states provided training and technical assistance through a variety of methods to help CSBG recipients meet program requirements. In fiscal years 2016 and 2017, OCS designated nearly $14 million over the 2-year period for such efforts. OCS officials told us that they determine what training is needed through input from OCS program specialists, information obtained through a data task force, and requests from state and local agencies. OCS officials stated that the OCS’s program specialists use the quarterly calls to identify the types of support that states need. For example, a specialist may notice that the states need additional guidance on using their customer survey results. In response, the specialist may share a guide on how states can use the survey results to set reasonable performance improvement goals. In addition, OCS sponsors a CSBG Data Task Force to recommend strategies for building network capacity for collecting, analyzing, reporting and using performance data as well as identifying on-going training and technical assistance needs. OCS officials told us that they also conducted focus groups in 2016 to gather states’ perspectives on their training and technical assistance needs. From these focus groups, OCS issued guidance stating its technical assistance priorities and strategy for meeting identified needs for training and technical assistance in areas including: performance management, governance, effective state oversight, and results-oriented services and strategies. In 2017, OCS issued guidance laying out the agency’s 3-year training and technical assistance strategy to guide the development and delivery of training and technical assistance for the CSBG network. OCS officials said that once they establish the standards for the training and technical assistance and identify specific training needs, the agency awards cooperative agreements to organizations that focus on developing and providing training to build upon guidance already provided. During the period of our review, we found that each agreement focused on a specific type of training. For example, the National Association for State Community Services Programs (NASCSP) has a cooperative agreement with OCS to provide the orientation and oversight training for new state officials overseeing the CSBG program, and collects and coordinates the analysis of the data provided in the state plans and annual reports. OCS has also worked closely with NASCSP in the transition to the new performance framework. OCS officials told us that they are currently reviewing their training and technical assistance portfolio and may issue additional guidance on its strategy and coordination efforts during fiscal year 2020. In addition, OCS uses various methods to provide guidance to states to help them meet CSBG requirements, but state officials differed in their views on the usefulness of the guidance. OCS provides guidance to states through informational memorandums, letters, webinars, and communications with program specialists. Some of the state agency officials in two of the states we visited said that the guidance that OCS has provided to help states ensure compliance with program requirements is not always clear and up to date. For example, officials in North Dakota said that they did not understand the information requirements for a form used to gather information from applicants for local programs. State agency officials in Texas said that OCS issued guidance on the new information requirements just weeks before the reporting deadline, and that this did not allow states sufficient time to set up their data systems to meet the new requirements. OCS officials acknowledged that they were aware of the issues raised by state agency officials and explained that some states have difficulty with the guidance because it is written at a high level so that it can apply to all states. They also acknowledged the delays in getting new information requirements to states and said that such delays were related to troubleshooting the new smart forms and online database. They said that they do not anticipate such delays in the future. As previously discussed, Texas state officials also said that they found the guidance for terminating a deficient agency’s CSBG funding confusing. However, officials in New York said that they found the guidance to be clear. They said that the informational memorandum on terminating agencies’ CSBG funding is more prescriptive than previously issued CSBG guidance. OCS officials stated that the agency is continuously seeking opportunities to work with its technical assistance centers to identify the best means of delivering guidance to states and to eligible entities. OCS officials also said that they must continue to refresh training efforts when there is turnover among key staff in a state agency and work with new state administrators to transition into their new roles. State agency officials in all three states we visited told us that they used some of their state’s discretionary funding for training and technical assistance to help local agencies meet CSBG requirements. The CSBG Act allows states to use a maximum of 10 percent of their CSBG funds for training and technical assistance and other specified purposes. In the selected states, officials spent from $65,000 to over $400,000 for training and technical assistance for local agencies (see table 4). Across the three selected states, we found that the training provided to local agencies addressed what local agencies need to do to meet a wide variety of CSBG requirements, from planning community needs assessments to implementing performance management requirements. In addition, some funds states provided for training were used by local agencies to send their staff to regional or national conferences for training (see table 5). State officials in two of the three states we visited said that they determine what training they need to offer based on analysis of feedback and specific requests from local agencies. For example, Texas identified training needs for local agencies through a Training and Community Affairs group that gathered information from local agencies about their training needs. Texas officials said they analyzed assessment results, feedback, and requests from local agencies and other sources to determine the training needs of individual state and local agencies. State officials said that they then met with the state association to develop the Joint State Training and Technical Assistance Plan and, ultimately, to provide trainings at the annual state conference, and to identify workshops, webinars, and online resources (guides, tools, best practices, and links to other training resources) that need to be added or changed. Similarly, state officials in North Dakota reported working closely with the state association of community action agencies to plan and conduct training for local agency staff. State and local agency officials also said that they have relied on the OCS-funded national resource centers for assistance. Officials in the states we visited all reported being helped by information provided by the national centers on topics such as the new organizational standards and how to submit data in the new annual report. Local agency officials told us that they send staff to the conferences sponsored by the national resource centers to obtain training when funding is available for that purpose. In addition to training, state officials in the states we visited cited a variety of practices that contribute to effective oversight. Both New York and North Dakota officials emphasized the importance of frequent, ongoing communication with local agencies as crucial to successful oversight. New York also identified frequent visits to local agencies and immediate action in response to problems as additional key factors for effective oversight. OCS Reports on CSBG’s National Effectiveness, but Several Elements of Its Redesigned Performance Management Approach Do Not Align with Leading Practices OCS Uses State Outcome Data to Report on the National Effectiveness of CSBG, but the Performance Measure Used for this Purpose is of Limited Use OCS uses outcome data from state agencies that collect and aggregate data from local CSBG recipients to provide an indication of CSBG’s progress in meeting the three national program goals. As previously discussed, the three national goals of the CSBG program as established under the CSBG Act are to (1) reduce poverty, (2) empower low-income families and individuals to become self-sufficient, and (3) revitalize low- income communities. State agencies report data from a menu of more than 100 performance measures established by OCS and grouped by service types such as employment, early childhood programs, and education. OCS sets annual targets for the overall performance of the CSBG program and uses the aggregated state data as an indicator of CSBG’s national effectiveness to inform budget decisions consistent with federal requirements for performance management. Until fiscal year 2018, OCS used one performance measure—the number of barriers to economic security that the local agencies receiving CSBG funds eliminated for individuals, families, and communities—to provide an indication of CSBG’s national effectiveness. To do this, OCS combined the outcome data from 10 of the more than 100 performance measures from the state annual reports to derive a cumulative total number of barriers overcome. OCS selected the 10 measures as a way to track outcomes from services that range from emergency services to more comprehensive and coordinated services. The 10 measures included outcomes such as the number of participants who obtained a job, maintained employment, maintained an independent living situation, reached the goals of enrichment programs, or obtained emergency assistance. While this one performance measure of barriers eliminated was intended to provide OCS with an indication of how the program was meeting CSBG national goals, several weaknesses with this measure limited OCS’s ability to do so. First, the measure included duplicative counts. For example, an individual may overcome a number of different barriers to reach the outcome of obtaining a job. As a result, by tracking the number of barriers, an outcome may be counted multiple times when combining data from multiple measures. Second, it is also difficult to know which CSBG funded program or service caused the positive outcome or if one service helped achieve multiple outcomes. Third, OCS officials clarified that when calculating this and other outcome measures, the removal of barriers to economic security is not solely the result of CSBG funds, but of all funding administered to local agencies that received CSBG funds. As such, they said that it is difficult to isolate the effects of CSBG funding. In its agency wide budget justification for fiscal year 2020, HHS reported that in fiscal year 2017 local agencies eliminated 32.2 million barriers to economic security, well above the 27.6 million it set as its goal for the year. In the same year, 16.2 million individuals received support through local agencies receiving CSBG funds. While the performance measure aided OCS in providing some indication of how the CSBG program contributes to the goal of improving self-sufficiency, it still did not provide information on the program’s progress in meeting the other two national program goals. Leading practices in performance management stress that performance measures should be tied to the specific goals of the program. However, no such linkage existed between the performance measure OCS used to report on the progress of the CSBG program and the program’s three national goals. required to annually report, among other things, a summary of certain information the states provide and its findings on state compliance to Congress. While OCS does submit such reports, we found that there has historically been a multi-year lag in OCS providing these reports to Congress. In May of 2019, OCS released its fiscal year 2015 CSBG report to Congress (see sidebar on data reported in the CSBG fiscal year 2015 report to Congress). Over the last decade, this type of reporting lag has been common and OCS has taken an average of more than 3 years from the end of the federal fiscal year until the time the Congress received the final report. OCS officials told us that they submitted the draft annual report for fiscal year 2016 for internal review by HHS in October 2018, but said that they could not project when the final report would be issued to Congress. They said they are currently drafting the fiscal year 2017 report. Several Elements of OCS’s Redesigned Performance Management Approach Do Not Align with Federal Leading Practices, Limiting OCS’s Ability to Report on CSBG’s National Progress OCS has taken steps to redesign its performance management approach, but several elements of the new approach do not align with federal performance management and internal control standards. OCS has been redesigning how it oversees and manages the performance of the CSBG program to better align with GPRAMA, according to OCS officials. Since fiscal year 2016, OCS has been implementing new performance management tools for the CSBG program, including updating what data it collects and how it collects it on the services and outcomes, or performance measures, of the CSBG program. OCS officials stated that the changes are necessary to be able to provide more information and analysis on CSBG funded programs and their outcomes. They also noted the importance of these updates given a tightening federal budget. As part of these changes, OCS updated its more than 100 performance measures by revising the language of some and adding new measures that state and local agencies can report on, including measures more focused on outcomes in the communities they serve. State and local agency officials told us that the increased emphasis on outcomes in the new measures was an improvement and increased their own focus on connecting CSBG funds to traceable results. In addition, OCS transitioned to an online data reporting system that allows state agencies to directly report and access CSBG program data. However, OCS is still revising how it will use the data provided by state and local agencies to reflect nationwide results. OCS is using the data collected in state annual reports to develop a new national measure intended to provide a national total count of individuals who achieve at least one positive outcome through programs and services offered by local agencies that receive CSBG funds. Unlike the prior measure on the number of barriers to economic security eliminated by local CSBG recipients that could include duplicative counts, the new measure will be a count of individuals. OCS stopped using the prior measure after fiscal year 2017. Until OCS finalizes the new measure, it does not have a performance measure in place with targets and results that it can report to Congress. As such, it is unclear if OCS will report national performance outcomes for fiscal year 2018 or how useful the new measure will be while it is still in development through fiscal year 2022. While OCS has taken steps to redesign its performance management approach, several elements of the new approach do not align with federal performance management and internal control standards. Specifically, OCS has not established (1) how the new national measure will be used to assess CSBG goals, (2) the relationship between state and local measures and program goals, and (3) how OCS will monitor the reliability of state and local agencies’ program data. How the newly developed national measure will assess CSBG program goals. As discussed, OCS is developing a new national measure intended to provide a total number of individuals who achieved at least one positive outcome from CSBG funded program or services. However, it is unclear which of the three program goals—reducing poverty, empowering low-income families and individuals to become self- sufficient, or revitalizing low-income communities—the new national measure is being used to assess. As noted previously, OCS officials have stated that they are working to establish ways to provide more information and analysis on programs and their outcomes. OCS officials also told us that they are using GPRAMA as a guide for these changes and in our prior work we have reported that these requirements can serve as leading practices for strategic planning at lower levels within federal agencies. GPRAMA requires agencies to establish performance goals and a balanced set of performance indicators, including output and outcome indicators as appropriate, in measuring or assessing progress toward those goals. Additional leading performance management practices state that performance measures should be tied to the specific goals of the program. However, OCS’s new measure which is intended to provide a count of the number of individuals that achieve one or more positive outcomes does not specify which of the three national program goals the new measure will address, nor how the other two national program goals will be addressed. OCS officials told us that the new measure is related to two of the three goals because it is aggregated data from some of the outcome measures focused on individual and family outcomes. However, officials acknowledged that the agency has not yet developed a national measure for revitalizing low-income communities. Officials stated they plan to report on progress toward developing these measures and that it will provide examples of community-level outcomes in upcoming reports to Congress. Without clearly linking the measure to the goals, there is no way to tell if, and to what degree, the services local agencies are providing through CSBG grant funds are having the desired effect on their communities, even if examples are included in the shared results. How state and local performance measures are related to the three program goals. It is unclear how the large number of updated state and local performance measures under OCS’s redesigned approach aligns with CSBG’s three national program goals. OCS still collects data on more than 100 measures but it is unclear which of these measures will be analyzed at a national level. According to OCS officials, these data are most useful to state and local agencies for assessing outcomes against their unique goals and numerous measures are necessary to capture the variety of services and outcomes across the 1,000 local agencies. In our prior work on ways that agencies could improve performance management, we have stated that using a minimal number of critical measures is a leading practice. We have found that organizations that seek to manage an excessive number of performance measures may risk creating confusing, excess data that will obscure rather than clarify performance issues. The large number of measures can also further complicate OCS’s efforts to align the measures with CSBG’s three national program goals. How OCS will assess data reliability long-term. Although OCS is taking steps to assess data collected from state and local agencies for its new national measure, it does not have a written plan for how it will assess the data’s reliability for future years. As previously discussed, OCS is using a new data reporting system to collect the data it will subsequently use for its new national measure and this data will now be received directly by OCS instead of a third party. However, OCS does not have written plans in place for how the agency will determine if the new data collected will be a valid measure of the national program’s effectiveness or if the data will be reported reliably by the states into OCS’s online data system. OCS received its first round of performance data for the new measure for fiscal year 2018 on April 30, 2019, and is working with its cooperative agreement grantees and contactors to compile results and conduct quality assurance tests for the new performance data using a multi-step process that involves: OCS staff comparing data provided in the annual report to information previously provided in the state plans; OCS conducting quality assurance reviews, with assistance from the organizations the office has cooperative agreements with, that include checks for discrepancies and identifying items requiring clarification, and conducting follow-up with the states; and, OCS soliciting feedback from state officials and consulting with performance management experts within HHS about refinements to assist OCS in establishing a baseline that will be used in setting future targets. OCS officials also told us that the next steps will be to make any necessary modifications to the measure, such as adjusting how states calculate positive outcomes, and establishing a baseline to set future targets. On October 2, 2019, OCS announced via a Federal Register Notice that it was requesting a three year extension with minor changes of the CSBG Annual Report. OCS plans to make only minor changes to the current data collection tool for 2 years to allow state and local agencies time to assess current information and intends to begin a longer term planning process starting in fiscal year 2020. OCS officials told us that they plan to implement and maintain a quality assurance process to ensure the accuracy of the data based on data from previous years. While the process OCS has put in place to ensure data reliability for the first round of data collected for the new measure is a step in the right direction, OCS does not have a plan for assessing future years’ data. OCS officials told us that they will use selected cooperative agreements and contracts to develop a written plan for how the agency will monitor state and local agency data reliability going forward, but did not provide a timeframe for when this would be completed. Leading practices established by federal internal control standards state that agencies should use quality information that is appropriate, current, complete, and accurate to make informed decisions and evaluate the entity’s performance in achieving key objectives. OCS officials reported that they and contractors are working with the states to adjust and finalize data for fiscal year 2018 by November 2019. By not aligning its redesigned performance management approach with federal performance management leading practices related to program goals, performance measures, and data reliability, OCS cannot properly assess its progress in meeting CSBG’s three national goals. Conclusions Poverty erodes the well-being of individuals, families, and communities. The CSBG program is intended to reduce poverty, empower low-income individuals and families to become self-sufficient, and revitalize low- income communities. The CSBG program allows local agencies to use funds in a wide variety of ways to reduce the causes of poverty in the communities they serve. However, the inherent flexibility of the program also makes it difficult to assess the program’s performance. OCS recently redesigned its performance management approach to better understand how well the CSBG program is progressing toward meeting national goals. However, several elements of the redesigned approach do not align with leading practices in federal performance management. Inconsistencies with these practices, such as having an excessive number of performance measures and lacking a plan for assessing the reliability of state and local performance outcome data, limit OCS’s ability to demonstrate the national effectiveness of the CSBG program. As such, OCS cannot assure the Congress and the American public that the funding is meeting its intended purpose to reduce the causes of poverty. Recommendation for Executive Action The Director of OCS, in developing the new performance management approach for the CSBG program, should ensure that its performance framework includes information on (1) details for how the national measure is linked to and used to assess the three national program goals, (2) descriptions of how the updated state and local performance outcome measures align with national program goals, and (3) a written plan for how OCS will assess the reliability of state performance outcome data. (Recommendation 1) Agency Comments We provided a draft of this report to HHS for review and comment. We received written comments from HHS, which are reprinted in appendix III. HHS concurred with our recommendation, and stated that it plans to take actions to better align its performance measures with the three national performance goals outlined in the new CSBG Theory of Change. While we commend HHS for its plans to address our recommendation, we urge HHS to focus on aligning its performance outcomes with the three national goals of the CSBG program as established by the CBBG Act, which are similar but not identical to the three goals outlined in the new CSBG Theory of Change. HHS also stated that it would implement additional actions to assess the reliability of state performance outcome data. In addition, HHS provided technical comments which we incorporated as appropriate. As 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 and the Secretary of HHS. In addition, the report is available at no charge on the GAO website at https://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-7215 or larink@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff that made key contributions to this report is listed in appendix IV. Appendix I: Objective, Scope, and Methodology This appendix discusses in detail our methodology for addressing our two research objectives examining (1) the activities that the Department of Health and Human Services (HHS) and states conduct to oversee the state and local agencies that receive Community Services Block Grant (CSBG) funds and (2) the extent to which HHS assesses the outcomes of the CSBG program. We scoped our review of the CSBG program to include the 50 states, American Samoa, the District of Columbia, Guam, Northern Mariana Islands, Puerto Rico, and the United States Virgin Islands, which are defined as states under the CSBG Act. In addition to the methods we discuss below, to address both our research objectives, we reviewed relevant federal laws, federal grants management guidance, and agency documents that describe the federal requirements and responsibilities for overseeing states’ CSBG programs and assessing program outcomes. We interviewed HHS, Office of Community Services (OCS) officials; and reviewed relevant research from OCS and the HHS Office of Inspector General, as well as our prior work on the CSBG and other federal grant programs. Further, we interviewed representatives of the National Association for State Community Service Programs (NASCSP); state officials from state agencies that oversee the CSBG program in New York, North Dakota, and Texas; and six local agencies that receive CSBG funds. We also analyzed CSBG annual reports to Congress and NASCSP data on local agency allocations. Federal Oversight of the CSBG Program To address the federal oversight aspect of our first objective, we reviewed available information on OCS’s policies and procedures, including the risk assessment criteria OCS uses to select states for onsite compliance evaluations and interviewed OCS officials about their oversight efforts. We also selected 12 states for an in-depth review of OCS’s oversight activities. These included six states (Indiana, Louisiana, Michigan, New York, North Carolina, and Texas) for which OCS conducted onsite compliance evaluations during fiscal years 2016 and 2017. We selected the six states where OCS had conducted onsite compliance evaluations based on which of the visited states OCS had prioritized as those in highest need of onsite reviews for fiscal years 2016 and 2017. We also randomly selected five states (Alaska, Colorado, Kentucky, Mississippi, and Rhode Island) where OCS did not conduct such evaluations, but conducted routine reviews. We also selected a sixth state—North Dakota—because OCS had not visited the state in several years. We compared the results to see if there were any notable differences between the two sets. While our findings are non-generalizable, they provide insight into the different levels of review OCS conducts and examples of OCS oversight actions. Our file documentation reviews included a review of: OCS’s comments on each section of the states’ program documents, including the state plan and annual reports; actions the states took to address OCS’s comments; and state’s fiscal controls, financial and program oversight documents. Table 6 provides a summary of the characteristics of the 12 states we selected for review. State and Local Oversight of the CSBG Program To address the state and local oversight aspect of objective one, for a more in-depth look at state oversight practices, including promising practices and challenges, we visited three states: two states (New York and Texas) for which OCS conducted onsite compliance evaluations and one (North Dakota) for which OCS conducted a routine review. We selected these states using several criteria, including state grant amounts, number of local agencies, whether the HHS Office of Inspector General findings had reviewed the state’s use of CSBG funds, the time since the state was last visited by OCS for a compliance evaluation visit, and recommendations from experts at NASCSP and at OCS, who based their recommendations, in part, on states that had promising practices for overseeing local agencies (see table 7). Our final state selections comprise a diverse sample based on these criteria. For example, our selected states include a state with a low number of local agencies, one with a large number of local agencies, states with high and medium amounts of funding, and a state with a low amount of funding. During our state site visits, we interviewed and collected information from state and local agency officials about state oversight efforts from fiscal years 2016 through 2017. For each of the three states, we interviewed state program officials and reviewed related documentation including state policies and procedures, state single audits, onsite oversight guides and reports, and reporting forms for local agencies. We also visited two local agencies in each state and interviewed staff to learn more about state oversight efforts, including fiscal and performance reporting, onsite visits, training and technical assistance, and promising practices and challenges to such oversight. We conducted these visits in November and December 2018. In each state we visited, we reviewed program files for the two local agencies we visited, including oversight, financial, and performance reports; and follow up correspondence concerning the findings from state agency visits to those local agencies. Information collected from state and local agency officials during our site visits are not generalizable to all state CSBG programs. In addition, we obtained information on state audit findings related to CSBG and met with state auditors during site visits to learn more about additional state oversight of CSBG and local agencies to learn whether any coordination occurred between the different federally funded programs offered by the local agencies to support state oversight efforts. We reviewed the Single State Audit findings for fiscal years 2016 through 2017 for each of three states and six local agencies we visited. We reviewed these audit reports to determine if there were findings pertaining to CSBG and if so, the nature of those findings. Assessment of Program Performance for the CSBG Program To address our second objective, we reviewed the program performance indicators OCS uses to measure program outcomes in relation to the stated goals of the CSBG program. We also reviewed OCS’s design and implementation plans for a new performance management approach, including revised performance measures for assessing program outcomes. We compared OCS’s previous performance management approach to its new one, including the types of data it collected and its methods of collecting data from state and local agencies. In conducting our work, we also interviewed OCS officials about the goal of, and changes to, the performance management approach and reporting requirements. Additionally, we interviewed state officials on their experience with CSBG program performance. We reviewed leading practices in grant performance management identified in federal guidance and in GAO reports and assessed OCS’s approach against federal performance and internal control standards. We conducted this performance audit from to May 2018 to November 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. Appendix II: Table of Federal Community Services Block Grant (CSBG) Allocations to States, Fiscal Years (FY) 2016 through 2019 State Name Alabama Total Allocations for States Included in GAO’s Review This table includes all states as defined by the CSBG Act, which was the focus of our review. Appendix III: Comments from the Department of Health and Human Services Appendix IV: GAO Contact and Staff Acknowledgments GAO Contact Staff Acknowledgments In addition to the contact named above, Mary Crenshaw (Assistant Director), Melissa Jaynes (Analyst-In-Charge), Sandra Baxter and Stacy Spence made key contributions to this report. Also contributing to this report were James Bennett, Grace Cho, Alex Galuten, Danielle Giese, Corinna Nicolaou, Monica Savoy, and Almeta Spencer.


Background The Cannon Building, completed in 1908, is the oldest congressional office building and occupied by Members and their staffs. (See fig. 1.) The Cannon Building houses 142 office suites, five conference rooms, four hearing rooms, and the Caucus Room, which can accommodate large meetings. The building also includes a library, food servery, and a health unit. AOC began developing the scope for the Cannon project in approximately 2004 when its consultant conducted a facility condition assessment that identified the building’s deficiencies. This condition assessment identified, for example, that the hot water heating and air-handling systems had components dating back to the 1930s that are in need of replacement. In addition, the assessment identified deficiencies such as an outdated fire alarm system for which repair parts were difficult to obtain, worn and damaged marble tile in corridors, and original windows that were damaged and often nonfunctional. AOC continued its planning and design work through 2014 to establish the final scope of the Cannon project, which entailed correcting most of the identified deficiencies and addressing current requirements such as for energy conservation, physical security, hazardous materials abatement, and historic preservation. Key components of the project, among other things, include: substantial reconfiguration of member suites and the reconstruction of the building’s top floor to convert storage space into new suites, refurbishment of windows and installation of a new roof, preservation of the building’s stone exterior, replacement of all plumbing, heating and cooling, fire protection, electrical, and alarm systems, and refurbishment of restrooms to make them more accessible to people with disabilities. As part of the development process for the Cannon project, AOC established a budget of approximately $753 million. Key components of the budget include costs for the construction contract; architect and engineering (A/E) design services; construction management support; security; furniture and fixtures; swing space design and construction; contractor incentive bonuses; and contingency. AOC is using the Construction Manager as Constructor (CMc) delivery method to implement the Cannon project. Under this approach, AOC: contracted with a construction contractor that consulted on the project’s design, and negotiated with the construction contractor to set a “guaranteed maximum price” for the construction work based on the completed design. AOC also contracted with an A/E firm, which produced the design for the project and is providing consultation during construction, and with a Construction Manager as Agent (CMa), that provides administrative and technical support to AOC in managing the construction work. AOC scheduled the Cannon project’s construction in five sequential phases with an initial phase (Phase 0) for utility work and four subsequent phases (Phases 1 through 4) to renovate the north-, south-, east-, and west-facing sides of the building. Each phase is scheduled around a 2- year congressional session. As the project progresses, tenants displaced during construction (Phases 1 through 4) are to move to temporary offices while other occupants are to remain in the building sections not affected by construction. AOC Has Completed Two of Five Phases of the 10-Year Cannon Project Currently, AOC has substantially completed Phase 0 and Phase 1 of the five phases planned for the Cannon project and is progressing with work on Phase 2, which it expects to complete in November 2020. (See fig. 2.) AOC completed Phase 0, as planned and under its budget estimate, from January 2015 through December 2016. This work primarily included the construction contractor’s replacement of the utility infrastructure and distribution systems in the basement, garage, and courtyard. During this time, AOC also managed the work of its Construction Division to build 31 additional Member Suites to offset the suites that would be inaccessible when sections of the building were under construction. From January 2017 through December 2018, AOC managed the renovation of the first of four building sections, consisting of the building’s west side (facing New Jersey Avenue) and Rotunda (Phase 1). AOC substantially completed Phase 1 to enable occupancy of the building section, as planned, on January 3, 2019, at the start of the 116th Congress. However, it is continuing to address “punch-list” items of incomplete or corrective work from Phase 1. AOC expects to complete the punch-list items by December 2019. Further, AOC encountered several issues during the Phase 1 renovation that have prevented it from settling the costs for this phase and that will affect the cost of the project’s later phases. According to AOC’s most current (July 2019) Executive Summary, unforeseen conditions, design issues, and scope changes have increased both the estimated cost for Phase 1 and the project’s three remaining phases. For example, AOC found that more extensive exterior stone restoration was needed than planned and encountered some unforeseen asbestos-containing materials in the roof that it needed to mitigate. Further, AOC needed to provide additional security features to address U.S. Capitol Police requests. Collectively, these issues are creating cost pressures that have caused AOC to reassess the cost to complete the project. We discuss the project’s costs in greater detail later in this testimony. AOC is currently progressing, as planned, in renovating the north side of the building (facing Independence Avenue), which is the second of the four building sections to be renovated (Phase 2). Because the work in this phase and the Cannon project’s remaining phases is similar to work completed in Phase 1, AOC expects to benefit from its application of lessons learned. For example, AOC reported that its construction contractor experienced challenges installing the temporary roof enclosure that it used in Phase 1. Based on this experience, AOC officials told us that the contractor developed a new design for the temporary roof enclosure that the contractor expects to install more rapidly in the project’s remaining phases than in Phase 1. Further, because the materials in Phases 2 through 4 are the same as in Phase 1, AOC officials expect that the process of approving the construction contractor’s use of these materials should proceed faster in these later phases and enable construction to progress more efficiently. AOC Had Consistently Estimated the Cannon Project Cost to be $753 Million, But Recently Increased Its Estimate In 2009, we reported that AOC expected to request approximately $753 million for the Cannon project. At the time, AOC expected the project to be in five phases over 5 years. Because the project was in an early development stage at that time, we said: that AOC’s estimate should not be considered sufficiently accurate for funding purposes, that the cost and scope were likely to change, and that it would be important for AOC to continue to refine the project’s scope and cost estimate to provide Congress with the information it needed to make decisions about the project. When we next reported on the Cannon project in 2014, AOC had completed most of the planning and design and was preparing to award the contract for construction, which was to begin in January 2015. As part of our 2014 review of AOC’s cost estimating policies and guidance, we compared AOC’s cost estimate for the Cannon project—still $753 million—to our leading practices for developing high-quality, reliable cost estimates. We found the AOC’s cost estimate reflected several, but not all, of our leading practices. In particular, we found that AOC’s estimate included ground rules and assumptions; provided a reasonable explanation of the basic estimation methodologies; and integrated separately produced estimates from AOC’s architect, construction manager, and construction contractor to enable a reasonably accurate assessment of estimated costs. Further, we found AOC had conducted a cost risk and uncertainty analysis in accordance with a key leading practice. This analysis concluded that based on AOC’s inputs and assumptions, there was a high probability (over 90 percent) that actual costs would be equal to or less than AOC’s $753 million estimate. This estimate included contingency factors to account for risks and uncertainties. However, our review of AOC’s guidance for developing cost estimates found that the guidance did not provide documented reasons explaining how the actual contingency amounts were developed. In addition, we found that the method AOC used to model the project’s risks in its cost risk and uncertainty analysis (1) resulted in an unusually narrow range of estimated costs and (2) provided managers limited ability to understand the effects of individual risks. We recommended that AOC improve its cost-estimating process, such as by incorporating leading practices we identified as lacking for cost estimating into its cost- estimating guidance and policies. AOC has since implemented our recommendations. In January 2018, while Phase 1 of the Cannon project was in progress, AOC updated its analysis of risks by undertaking a study (termed an integrated cost-schedule risk analysis) to determine the potential effects of these risks on the project’s cost and schedule. Updating risk analyses and their effect on project cost estimates is consistent with leading practices for developing both a high-quality, reliable cost estimate and schedule. AOC’s 2018 analysis arrived at the same conclusion as its 2014 analysis—that the estimated $753 million total project cost was adequate and that there was a high probability (over 80 percent) that actual costs would be equal to or less than the $753 million estimate. However, this analysis was qualified on the assumption that AOC and project stakeholders are able to adequately mitigate risks identified through the analysis. Additionally, the analysis indicated that inaccurate estimates of costs for risk mitigations, currently unknown risks, and optimistic assumptions about the impact of risk mitigations on the project’s cost and schedule could affect the project’s total cost. As noted previously, the project is experiencing cost pressures from the greater-than-anticipated risks and ineffective mitigations stemming from unforeseen conditions, design issues, and scope changes. In June 2019, AOC reported that it expects that the cost to complete the Cannon project will increase by 10 to 15 percent over its initial estimate of $753 million, resulting in a final cost between approximately $828 million and $866 million. AOC reported that the following key factors affect the project’s cost: Phase 1 completion costs. While Phase 1 work has been substantially completed, AOC has yet to settle all outstanding change proposals. AOC reported that the cost to complete Phase 1 is greater than it initially planned and that it will not know the final cost for this phase until it completes negotiations of the cost of unsettled change proposals. Phase 2 modifications. While Phase 2 work has begun, AOC is awaiting the contractor’s proposal on the costs to address the requirements outlined in four “design bulletins” issued by AOC that, in part, describe changes to the project’s scope based on lessons learned in Phase 1. AOC estimates that the contract modifications described by the design bulletins will increase the cost of Phase 2. Phase 3 and 4 modifications. AOC expects that it will award these future phases of the project at higher amounts than it initially planned based, in part, on the estimated cost of incorporating the additional work described in the design bulletins. In August 2019, AOC began updating its integrated cost-schedule risk analysis, with the aim of more accurately determining the extent to which the project’s costs are increasing and its estimated cost at completion. By updating the analysis, AOC should be better able to make informed decisions as construction progresses. Further, updating the analysis should enable AOC to more precisely estimate the Cannon project’s cost at completion and better position AOC to make a more accurate budget request to Congress for remaining costs. Chairperson Lofgren, Ranking Member Davis, and Members of the Committee, this concludes my prepared statement. I would be pleased to respond to any questions that you may have at this time. GAO Contacts and Staff Acknowledgments If you or your staff has any questions concerning this testimony, please contact Terrell Dorn at (202) 512-6923 or dornt@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this statement. In addition to the contacts named above: Michael Armes (Assistant Director); George Depaoli (Analyst-in-Charge); Geoffrey Hamilton; Malika Rice; Kelly Rubin; Steve Schluth; and Amelia Michelle Weathers made key contributions to the testimony. Other staff who made contributions to the reports cited in the testimony are identified in the source products. This 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.


Background The Coast Guard owns or leases more than 20,000 facilities consisting of various types of buildings and structures. The Coast Guard’s shore infrastructure is organized into five product lines and 13 asset types, known as asset lines. For example, within its shore operations asset line, the Coast Guard maintains over 200 stations along U.S. coasts and inland waterways to carry out its search and rescue operations, as well as other missions such as maritime security. Much of the Coast Guard’s infrastructure is vulnerable to the effects of extreme weather and can be costly to repair or replace after major storms. From December 2005 through June 2019, the Coast Guard received about $2 billion in supplemental appropriation funds to, among other things, rebuild or relocate 15 facilities damaged by hurricanes. During this time, the Coast Guard relocated facilities further inland or to higher ground, upgraded facilities to be more resilient, and designed new facilities with features to protect them from natural disasters. For example, after being damaged by Hurricane Ike in 2008, the Coast Guard relocated a regional facility in Houston, Texas further inland to help protect the new facility from extreme weather. The facility was also designed to withstand wind speeds of up to 115 miles per hour. In February 2017, the Coast Guard’s Civil Engineering program also issued guidance intended to increase the likelihood that new or recapitalized buildings would be designed to withstand natural disasters, and to enable the Coast Guard to better manage risks to its operations and personnel, among other things. Almost Half of the Coast Guard’s Shore Infrastructure is Beyond Its Service Life, and Project Backlogs Will Cost at Least $2.6 Billion to Address We found in February 2019 that the condition of the Coast Guard’s shore infrastructure was deteriorating and almost half of it was past its service life—resulting in (1) recapitalization and new construction and (2) deferred maintenance backlogs of at least $2.6 billion as of 2018. In 2018, the Coast Guard graded its overall shore infrastructure condition as a C minus based on criteria it derived from standards developed by the American Society of Civil Engineers. Table 1 shows information about the number of assets, replacement value, service life of, and condition grades assigned by the Coast Guard for each of its asset lines for fiscal year 2018. The aging and deteriorating condition of the Coast Guard’s shore infrastructure has led to at least $2.6 billion in deferred construction projects and maintenance backlogs. With almost half of its infrastructure past its service life, and given recent Coast Guard funding requests for its shore infrastructure, it will take many years for the agency to address these backlogs. For example, in 2018 the Coast Guard estimated that it would take almost 400 years to address just the $1.774 billion recapitalization and new construction backlog—assuming an overall 65- year service life and that funding would continue at the fiscal year 2017 appropriations level. This time frame estimate excludes the Coast Guard’s $900 million deferred depot-level maintenance backlog. Table 2 provides information on the Coast Guard’s two shore infrastructure backlogs as of August 2018. Nevertheless, the size and estimated costs of the Coast Guard’s backlogs may be understated. We found in February 2019 that the Coast Guard’s estimated costs did not include hundreds—or the majority—of the projects on the recapitalization and new construction backlog. For example, we reported that there were 205 projects on the backlog without cost estimates. Officials explained that they had not prepared cost estimates for these projects because they were in the preliminary stages of development. Coast Guard Has Taken Initial Steps toward Improving Its Management of Its Shore Infrastructure Our previous reports have identified various steps the Coast Guard has taken to begin to improve how it manages its shore infrastructure. Some of the steps the Coast Guard has taken align with leading practices for managing public sector backlogs and key practices for managing risks to critical infrastructure, including identifying risks posed by the lack of timely investment, identifying mission-critical facilities, disposing of unneeded assets, and beginning an assessment of shore infrastructure vulnerabilities. Specifically, the Coast Guard has: Identified risks posed by lack of timely investment. In February 2019, we found that the Coast Guard had a process to identify, document, and report risks to its shore infrastructure in its annual shore infrastructure reports for fiscal years 2015 through 2018. These reports identified the types of risks the Coast Guard faces in not investing in its facilities, including financial risk, capability risk, and operational readiness risk. The Coast Guard met this leading practice to identify risk in general terms—for example, in terms of increased lifecycle costs, or risk to operations. Identified mission-critical and mission-supportive shore infrastructure. In February 2019, we found that since at least 2012, the Coast Guard had documented its process to classify all of its real property under a tier system and established minimum investment targets by tier as part of its central depot level maintenance expenditure decisions. These tiers—which range from mission- critical to mission-supportive assets—were incorporated into guidance that Coast Guard decision makers are to follow in their deliberations about project funding, and to help them determine how to target funding more effectively. For example, Coast Guard guidance for fiscal years 2019 through 2023 prioritized expenditures on shore infrastructure supporting front line operations, such as piers or runways, over shore infrastructure providing indirect support to front line operations, such as administrative buildings. Assessed selected buildings for vulnerabilities. We issued a report today that discusses the Coast Guard Civil Engineering program’s efforts to conduct a vulnerability assessment of its owned and occupied buildings, which the Coast Guard initiated in 2015 and aims to complete in 2025. The Coast Guard calls this infrastructure review the Shore Infrastructure Vulnerability Assessment. The focus of Phase I of this assessment, completed in 2019, was to determine the vulnerability of certain occupied buildings to 10 natural disasters. Further, the assessment results are intended to assist with contingency planning by identifying which Coast Guard facilities are likely to remain operational after a natural disaster. During Phase I of this assessment, completed in 2019, the Coast Guard analyzed 3,214 buildings, almost 16 percent of its infrastructure, for vulnerabilities to disasters such as floods, earthquakes, and hurricanes. The analysis identified Coast Guard- wide infrastructure vulnerabilities to coastal risks such as shoreline loss, coastal erosion and earthquakes, as well as tsunami risks on the West Coast of the United States, Alaska, Guam, and Hawaii, and immediate and serious flood risks in Puerto Rico and the Gulf and East Coasts. The Phase I report recommended that Coast Guard units and contingency planners consider these vulnerabilities when preparing contingency plans or making capital investments. The Coast Guard has also initiated a follow up effort involving structural analyses for buildings it believes to be more susceptible to damage from earthquakes and wind. Officials involved said their aim is to complete this effort in 2025. Coast Guard Has Not Fully Applied Leading Practices and Key Risk Management Steps in Managing its Shore Infrastructure The Coast Guard has taken actions to begin to improve its shore infrastructure management. However, as we previously reported, the Coast Guard has not fully applied leading practices and key risk management steps to improve its shore infrastructure management. Specifically, we found, among other things, that the following actions could help improve the Coast Guard’s shore infrastructure management efforts: Employ models for predicting the outcome of investments and analyzing tradeoffs. In February 2019, we found that a 2017 Coast Guard Aviation Pavement Study employed a model that found that the Coast Guard could more efficiently prioritize investment in aviation pavement. A subsequent Coast Guard aviation pavement plan recommended actions to use the study results and potentially save $13.8 million. However, we found that the Coast Guard had not fully implemented its own recommended actions to achieve the cost savings. Additionally, we found that while a similar analytical approach to efficiently prioritizing investments in aviation pavement could be applied to all of the shore infrastructure asset lines, the Coast Guard had not applied the approach to other asset lines. By not employing similar models across its asset lines for predicting the outcome of investments, analyzing tradeoffs, and optimizing decisions among competing investments, the Coast Guard is missing opportunities to potentially identify and achieve cost savings across other asset lines. We recommended that the Coast Guard employ models for its asset lines that would predict the investment outcomes, analyze tradeoffs, and optimize decisions among competing investments. The Coast Guard agreed with our recommendation but as of August 2019 had not addressed it. The Coast Guard stated that it plans to assess the use of modeling tools used by the Department of Defense as well as other alternatives to enhance its real property asset management capability. We will continue to monitor its actions. Dispose of unneeded assets. In October 2017, we found that disposing of unneeded assets, such as closing unnecessarily duplicative boat stations, based on a sound analytical process, could potentially generate $290 million in cost savings over 20 years. Specifically, the Coast Guard identified 18 unnecessarily duplicative boat stations with overlapping coverage that could be permanently closed without negatively affecting the Coast Guard’s ability to meet its mission requirements, including its 2-hour search and rescue response standard. In 2017, the Coast Guard affirmed that its leadership believes the study remains valid, but as of September 2019 it has not closed any stations. Figure 1 depicts the extent of the Coast Guard’s overlapping boat and air station search and rescue coverage, as identified by the Coast Guard, some of which the Coast Guard determined to be unnecessarily duplicative. In February 2019, we found that 5 of the 18 boat stations recommended for closure had projects listed on the Coast Guard’s current project backlog. For example, Station Shark River, in New Jersey, was recommended for recapitalization in fiscal year 2017, despite Coast Guard recommendations to close the station in 1988, 1996, 2007, and 2013. Notably, the Coast Guard has made multiple attempts in previous years to close such stations but was unable to due to congressional intervention, and subsequent legislation prohibiting closures. In October 2017, we recommended that the Coast Guard establish and implement a plan with target dates and milestones for closing boat stations that it has determined provide overlapping search and rescue coverage and are unnecessarily duplicative. In February 2019, we further recommended disposing of unneeded assets to more efficiently manage resources and better position the Coast Guard and Congress to address shore infrastructure challenges. The Coast Guard agreed with our recommendations. As of September 2019, the Coast Guard reported that it was considering changes in the operational status of several stations, such as closing the stations during the winter months when they conduct few, if any, search and rescue cases. The Coast Guard estimated that it will continue to consider changes until March 2020. These are positive steps, but we continue to believe that it is important for the Coast Guard to dispose of unneeded assets. Given the Coast Guard’s competing acquisition, operational, and maintenance needs, and its existing $1.774 billion project backlog of recapitalization and new construction projects, these actions may help to mitigate some of its resource challenges. We will continue to monitor the Coast Guard’s efforts to implement these recommendations. Report shore infrastructure project backlogs accurately. In February 2019, we found areas in which the Coast Guard could increase budget transparency for shore infrastructure by accurately reporting project backlogs and costs in Congressionally-required plans. Specifically, we found that the Coast Guard had not provided accurate information to Congress necessary to inform decision- makers of the risks posed by untimely investments in maintenance and repair backlogs. For example, the Coast Guard had not provided complete information to Congress in its Unfunded Priorities Lists of shore infrastructure projects, including information about tradeoffs among competing project alternatives, as well as the impacts on missions conducted from shore facilities in disrepair. We also found that Coast Guard budget requests related to shore infrastructure for fiscal years 2012 through 2019 generally did not identify funding to address any backlogs of deferred maintenance or recapitalization, except for one fiscal year—2012—when the Coast Guard requested $93 million to recapitalize deteriorated/obsolete facilities. We also found that the Coast Guard had not provided accurate information about its requirements-based budget targets for shore infrastructure in its budget requests. According to Coast Guard officials, a requirements-based budget is an estimate of the cost to operate and sustain its shore infrastructure portfolio of assets over the lifecycle of the asset, from initial construction or capital investment through divestiture or demolition. Further, we found that Coast Guard recapitalization targets showed a far greater need than was reflected in the appropriations it requested from fiscal years 2012 through 2019. Specifically, Coast Guard targets for recapitalization of shore assets indicated the Coast Guard needs $290 to $390 million annually for its recapitalization efforts. However, its budget requests for fiscal years 2012 through 2018 have ranged from about $5 million to about $99 million annually. We recommended that the Coast Guard include supporting details about competing project alternatives and report tradeoffs in Congressional budget requests and related reports. Without such information about the Coast Guard’s budgetary requirements, the Congress will lack critical information that could help to prioritize funding to address the Coast Guard’s shore infrastructure backlogs. While the Coast Guard agreed with our recommendation, in August 2019 officials reported that they will continue to develop budgets as the agency has done but will include additional information in future required reports to Congress. We will continue to monitor these actions. Fully implement DHS’s Critical Infrastructure Risk Management Framework. In September 2019, we found that the Coast Guard has taken some steps to improve the resilience of its shore infrastructure by rebuilding storm-damaged facilities and initiating a vulnerability assessment, but its processes to improve shore infrastructure resilience are not fully aligned with the five steps DHS has identified for critical infrastructure risk management (DHS Critical Infrastructure Risk Management Framework). The five steps include: (1) setting goals and objectives, (2) identifying critical infrastructure, (3) assessing and analyzing risks and costs, (4) implementing risk management activities, and (5) measuring the effectiveness of actions taken. We found that the Coast Guard is not positioned to provide decision makers with complete details of which infrastructure facilities are critical, and the type of information the DHS Critical Infrastructure Risk Management Framework recommends for making cost effective risk management decisions. The Coast Guard identified occupied buildings that may be important to operations and assessed their vulnerability through its Shore Infrastructure Vulnerability Assessment process, but this process did not identify all shore infrastructure assets that are critical to its missions—such as aircraft runways—or screen them for all vulnerabilities, such as flooding. Similarly, we found that while the Coast Guard identified almost 800 buildings that may be vulnerable to tornadoes and another 1,000 buildings vulnerable to hurricanes, it has not analyzed the potential consequences, such as economic losses, costs for rebuilding, and impact on mission, should this infrastructure suffer damage from those vulnerabilities. Without a complete understanding of both the vulnerabilities of its infrastructure and the consequences to its mission operations if its infrastructure is damaged, the Coast Guard risks questionable recapitalization investments for improving resilience when selecting projects to fund. Such an understanding is especially important given its existing project backlogs of at least $2.6 billion. The five steps of the DHS Critical Infrastructure Risk Management Framework are intended to guide decision making and prioritize actions to more effectively achieve desired outcomes. Therefore, in September 2019 we recommended that the Coast Guard implement risk management processes that more fully align with the five key steps outlined in DHS’s Critical Infrastructure Risk Management Framework to better guide its shore infrastructure investment decisions. The Coast Guard agreed with our recommendation. It stated that it plans to make progress towards implementing the recommendation while developing and implementing its Component Resilience Plan, in accordance with the recently mandated DHS Resilience Framework. It intends to complete these efforts by the end of 2021. The Coast Guard also intends to develop, by July 2020, goals and objectives for measuring the effectiveness of actions taken to identify resilience readiness gaps and resource needs. We will continue to monitor these efforts. Chairman Maloney, Ranking Member Gibbs, and Members of the Subcommittee, this completes my prepared statement. 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